Construction firms should be wary following the Office of Fair Trading's completion of its investigations into bid rigging.

It was the OFT's biggest and involved some 57 companies, including several in the Midlands, and it uncovered evidence that £3 billion worth of tenders had been unfairly bid for.

Many did not realise that they were even subject to any investigation, and there were a number of them which have recently been written to stating that there is unspecified evidence of their involvement.

The letter gives the companies involved a short timescale within which to own up, even though in many situations they have very little information in relation to the claims against them, in return for a reduction in the penalty of up to 25 per cent.

The penalties can be very significant, up to ten per cent of a company's turnover.

Andrew James, construction and engineering lawyer and partner at West Midlands law firm Harrison Clark, said: "Whilst everyone in the industry realises that deliberate price fixing is wrong, there are still many who do not realise that 'giving a cover' - where a company is asked by a competitor what it will be tendering for a job so, if it is already too busy, it can put in a bid at a higher price to ensure it does not win the work but in doing so does not give the impression that it is uninterested - is unlawful for both parties involved.

"It is irrelevant that the parties concerned do not gain any financial benefit - for example if neither of them win the tender - and it is also irrelevant whether the ultimate client ends up no worse off as a result.

"Similarly, many in the industry mistakenly think that the OFT are just focusing on large contracts, whereas in fact relatively minor works can be subject to a penalty. For example, in one recent reported case, a company was found guilty of collusive tendering, and was fined £526,500, even though the contract in question was only worth £300,000.

"Companies should give staff training and have in place procedures and policies making it clear that the practice of cover pricing is unlawful and could render employees liable to disciplinary action.

"Those involved could also face criminal penalties if it is shown that they have acted dishonestly, and any directors implicated are at risk of disqualification action."

Mr James said there was also some concern that competitors who had colluded could seek to take advantage of the situation by tipping off the OFT and applying for leniency and then leaving the other party to face a larger penalty. n Failing to meet health and safety regulations already costs the construction industry millions of pounds each year and new regulations which came in earlier this month could see this figure rise even further in 2007.

At a conference in Birmingham on May 8 law firm Hammonds and the Midlands branch of the Institute of Occupational Safety & Health will join forces to help businesses keep on the right side of the changes.

The one-day conference will see experts from both organisations advising on managing the potential impact of the new regulations and issues such as occupational health, asbestos and associated risks.