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Pressure mounts on construction cartel

Jul 05 2013 19:03 Sapa

Fifteen construction companies were fined R1.46bn in June for collusion. (Picture: Lucky Nxumalo, City Press)

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Pretoria - The SA Local Government Association (Salga) filed papers on Friday to join the tribunal process of the Competition Commission’s settlement with major construction companies implicated in collusion.

Shortly after meeting several municipality representatives, Salga chief operations officer Lance Joel said it had received "overwhelming support" to intervene in the settlement discussions.

"The main reason is that there may be information that will become available during the proceedings that will be of benefit to our members," he said.

"Secondly, an opportunity may be granted to our members to try and engage, through Salga, with the construction firms with the view to settle some of the claims."

He said Salga hoped to be allowed to make presentations at the tribunal’s hearings on July 17 and 18.

Joel said there were shortcomings in the commission's processes.

"We want to be able to raise certain aspects that we think the Competition Commission may not have considered during its considerations for settlement negotiations with the construction firms," he said.

"The commission allowed companies to come forward and say I did X, Y, and Z. That indicates that the commission wholly relied on the companies coming forward. There may have been a need to test if those [companies] were the only ones and ascertain if there were some projects not included [divulged]."

Salga believed there was leniency in chastising the companies, he said.

Last month, the commission said 15 construction companies had agreed to pay fines totalling R1.46 billion for collusive tendering.

The settlements were reached in terms of the "construction fast-track settlement process" started in February 2011.

This process encouraged firms to make full and truthful disclosure of bid rigging, in return for penalties lower than what the commission would have sought if the cases were prosecuted.

Twenty-one firms responded to the offer, and 300 instances of bid rigging were revealed. According to Salga, the projects were estimated at R47bn.

Settlement fines

The settlements related to projects concluded after 2006. Projects before that were beyond the prosecutorial reach of the act.

The firms fined were: Aveng R306,576,143; Basil Read R94,936,248; Esorfranki R155,850; G Liviero R2,011,078; Giuricich R3,552,568; Haw & Inglis R45,314,041; Hochtief R1,315,719; Murray & Roberts R309,046,455; Norvo R714,897; Raubex R58,826,626; Rumdel R17,127,465; Stefanutti R306,892,664; Tubular R2,634,667; Vlaming R3,421,662; and WBHO R311,288,311.

At the time, the commission said the companies colluded to create the illusion of competition by submitting "sham tenders" or "cover pricing", to allow an alleged conspirator to win a tender.

Projects involved in the commission's probe included the building of major stadiums for the 2010 Fifa World Cup, the upgrading of airports, highway improvement projects, hospitals, dams, and bridges.

In other instances, firms agreed that whoever won a tender would pay the losing bidders a "losing fee" to cover the costs of bidding.

Sub-contracting was also used to compensate losing bidders, the commission said.

The three firms which did not accept the settlement offer were: Group 5, Construction ID, and Power Construction.

"Construction firms that have not used the opportunity [to] disclose or settle contraventions will be investigated and prosecuted," the commission said.

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