Salga takes on construction cartel

2013-07-06 09:25

The SA Local Government Association (Salga) filed papers 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 yesterday 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 leniency had been shown 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 had the cases been prosecuted.

Twenty-one firms responded to the offer, and 300 instances of bid rigging were revealed. According to Salga, the projects were estimated at R47 billion.

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.

Subcontracting 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.

Joel said yesterday Salga would speak to other provincial and national government institutions about launching a joint intervention at the tribunal.

“Indications are that provincial and national governments are also having their own difficulties in this regard. In our view, we will have to go and speak with a collective voice will be better than going there (to the tribunal) as individuals.”

He said Salga’s intervention in the tribunal was aimed at having the implicated companies pay up adequately.

“The main idea is to get the money back. There is a strong emphasis on getting back what is due to our member municipalities,” he said.

The quantification of the actual damages owed to the municipalities will be the difficult part of the settlement process.

“It is not going to be a thumb-sucking process [of quantification]. As we prepare for this case, we will ensure that we get the expertise to help us appropriately quantify the claims for our municipalities.”

Salga’s legal counsel John Ngcebetsha said the Competition Commission would have to clarify its basis for reaching the fines settlements with the companies.

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