Construction companies may face a 10-year banning

2012-07-06 11:06

Construction companies found guilty of collusion and bid-rigging by the Competition Commission could be banned for up to 10 years from doing public sector work, said the Business Report.

The industry’s top listed companies, Aveng, Group Five, Murray & Roberts Holdings, Wilson Bayley Holmes-Ovcon and Basil Read Holdings could be left out of the government’s R844.5 billion infrastructure expenditure programme, it was reported.

Once the commission pronounces the outcome of its investigation, the Construction Industry Development Board (CIDB) has an obligation in terms of its code of conduct to remove guilty companies from its grading database, Ursula Ntsubane, the chief executive of the CIDB was quoted as saying.

Construction companies need a CIDB grading to bid for public sector work.

Treasury spokesperson Phumza Macanda confirmed that contractors could be restricted from doing business with government for a maximum period of 10 years if they failed to comply with procurement processes, it was reported.

The commission confirmed last year that all the top five listed construction companies had been implicated in anti-competitive practices during its probe into 65 bid-rigging cases in the sector involving more than 70 projects valued at R29 billion, the paper said.

Llewellyn Lewis, the principal consultant at BMI-Building Research Strategy Consulting, said it would be impossible to deliver on the infrastructure programme without using the top five construction groups.

He said if the CIDB had such a ruling, it would be a double punishment to preclude them from public sector work.

“Is the objective to put these companies out of business? The CIDB will have to change its rules.

“It will not only have serious implications for employment but for the economy. It could be a fatal blow to the industry,” he told the paper.

Group Five chief executive Mike Upton said if this happened, it would “take out most of the industry” and would be a case of “double jeopardy”.

Upton said that some form of charter was needed that required firms to sign a commitment for each tender that would be embedded in the contract.

Basil Read CEO Marius Heyns said it would be “a bit unrealistic” to preclude the top construction companies from all public sector work.

Recovery in the construction sector has been gaining momentum but still remains fragile, according to the June FNB/BER construction confidence index.

During the second quarter, construction activity jumped at a higher rate than in previous quarters as capital expenditure from provincial governments remained robust, the index found.

Private sector construction activity contributed less and mining production slowed as firms held back on expansion plans.

The construction companies’ share prices traded largely mixed on the JSE in early trade.

Murray & Roberts was down 0.28%, Wilson Bayley Holmes-Ovcon rose 1.54%, Group Five fell 0.98%, Aveng gained 0.49% and Basil Read traded flat.


– Business Report

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