Collusion found on Durban tunnel

Prequalified tenderers for the award-winning multimillion-rand Durban undersea tunnel project met and agreed to add a fixed margin of R3 million to their bid prices for the project and to also pay a fixed amount of R1m to the losing bidders. This project and the Goedgevonden Colliery project for Xstrata Coal were the projects involved in a provisional settlement agreement concluded this month between listed Stefanutti Stocks and the Competition Commission. In terms of this agreement, Stefanutti Stocks agreed to pay R55.8m in additional penalties for bid-rigging and collusive tendering infringements. The agreement has not yet been confirmed by the Competition Tribunal.

Both these projects were excluded from the fast-track settlement process because the commission had already initiated investigations into them. Stefanutti Stocks agreed to pay a fine of R306.89m in terms of the fast-track process. The Durban undersea tunnel project involved the construction of a new tunnel to carry pipelines transferring the sewage generated by Durban to a wastewater treatment works situated at the Bluff. The eThekwini municipality put out a tender for the project during 2004 but only invited prequalified tenderers to submit bids for the contract. They were Stefanutti Stocks in a joint venture with Nishimatsu Construction, Dura Soletanche-Bachy and Group Five, which joined the joint venture later; Aveng subsidiary Grinaker LTA; and Germany-based Hochtief Solutions in a joint venture with Concor. Murray & Roberts (M&R) acquired Concor in 2006.

The commission’s investigation revealed that in about February 2005 representatives of all the prequalified bidders met and agreed to add the fixed margin to their bids and pay a fixed sum to the losing bidders. The tender was awarded to the Hochtief/Concor joint venture and Hochtief, the joint venture leader, paid the agreed sum to some of the losing bidders in 2006. The project cost R210m and was completed in June 2007. The tunnel was subsequently awarded the SA Institution of Civil Engineering’s national award in the category of technical excellence.

The commission launched its investigation into the Durban undersea tunnel project in August 2009 following leniency applications received from Grinaker LTA. Prior to this, the commission had initiated a complaint into alleged collusion against Stefanutti Stocks and Grinaker LTA related to a then new colliery known as Goedgevonden Colliery close to Emalahleni, formerly Witbank. This investigation revealed that in about August 2007 Stefanutti Stocks reached agreement with Grinaker LTA in terms of which Grinaker LTA would submit an uncompetitive bid to ensure that Stefanutti Stocks won this tender. Grinaker contacted Stefanutti Stocks and confirmed its price was “safe” to ensure it would not be awarded the tender. Stefanutti Stocks was awarded the tender. The project was completed in July 2008.

None of the other construction firms implicated in infringements related to these two projects have reached settlement agreements yet. Ed Jardim, M&R’s group communications executive, said it was unable to comment in any specific detail at this stage about any discussions with the commission. Jardim said there were four historical outstanding transgressions that were excluded from the fast-track settlement process that it wanted to settle as part of the fast-track settlement process but the commission did not include them. “We are not able to name the projects/transgressions as we are bound by a confidentiality agreement with the commission. We are sufficiently advanced in the negotiations and are now waiting to hear from the commission on the next steps. We believe any possible penalties on these four transgressions are not material compared to the penalty paid on the conclusion of the fast-track settlement process,” he said.

M&R agreed to pay a fine of R309m in terms of its fast-track settlement process. Group Five is involved in discussions with the commission about four projects it did not disclose as part of the fast-track settlement process. It indicated it was unable to comment while it was involved in these discussions. Aveng failed to respond to a request for comment.