Durban to nail tender riggers

Multibillion-rand contracts awarded by Durban to some of the biggest and most respectable construction companies, were intentionally inflated, which cost the taxpayer extra. This money will now have to be recouped. In what could be one of the biggest collusion scandals, it emerged in a Competition Commission report that Group Five, Grinaker-LTA, WBHO, Murray & Roberts, Concor, Basil Read and Stefanutti had failed to disclose a collusive agreement regarding the construction of the 2010 World Cup stadia, including the R3.1 billion Moses Mabhida stadium. Last night officials from eThekwini were digesting the news that the city had been “robbed” on the building of some of Durban’s most notable landmarks.

Other projects include Khangela Bridge and the International Convention Centre (ICC). The commission said the companies had disclosed the ICC and Khangela Bridge tender-bid agreements. However, they had met twice and agreed to divide the Mbombela, Peter Mokaba, Moses Mabhida, Soccer City, Nelson Mandela Bay and the Green Point stadiums’ tenders and exchanged their prices. “They further agreed that they should all aim to obtain a 17.5 percent profit margin on all World Cup stadium projects,” it said. Some of the construction companies have already reached settlements with the commission and agreed to penalties collectively totalling R1.46bn.

Ethekwini Speaker Logie Naidoo said the city would “definitely” take action to recoup money. Mike Sutcliffe, city manager during the World Cup preparations, said he was following the findings of the commission with interest. “If anything happened that we were unaware of, and if the city has been short-changed, then the full might of the law must take its course,” he said. ”We would have awarded the tender fairly and to the best price. However, if there had been collusion between the companies we would have been none the wiser.” Sutcliffe said most of the 2010 World Cup stadiums had independent quantity surveyors who should have worked on market prices rather than tender prices. “Perhaps there are questions that should be asked here as well.”

He confirmed that originally the Moses Mabhida stadium was budgeted by the treasury to cost R1.8bn but, when the tenders and costs came in, the price had escalated to R2.6bn. The price escalated to R3.1 bn after steel and cement prices soared in 2008/09. The R200 million contract for the Bayhead Road extension and Khangela Bridge was awarded to Basil Read in a joint venture with Stefanutti who reached an agreement with Group Five, in September 2006, according to the report. “They agreed Group Five should submit a cover price in respect of the Bayhead Road Extension Khangela Bridge project to ensure the joint venture between Basil Read and Stefanutti was awarded the tender.” The firms agreed that Group Five would share the profit.

To implement the profit-sharing agreement, the Basil Read/Stefanutti joint venture sub-contracted a portion of the project to Group Five. It was concluded in 2010. Durban’s R1bn convention centre was completed in 2008 with the arena extension completed in 2010. The work was awarded to Masinya JV, namely WBHO, Group Five and the Masinya Empowerment Group. The first phase of the ICC project cost R600m while the arena extension exceeded R350m. The arena tender was also awarded to WBHO and Group Five. “WBHO, in a joint venture with Group Five, reached an agreement with Grinaker-LTA and Stefanutti on or about October 29, 2004. “In terms of the agreement, Grinaker-LTA (which was in a joint venture with Sivukile) reached a cover price and loser’s fee agreement with Group Five, WBHO and Stefanutti.”

Group Five and WBHO were in a joint venture known as Masinya JV and Stefanutti was in a joint venture with Fikile Construction known as Stocks Fikile C&R JV. Group Five, acting on behalf of the Masinya JV, requested a cover price from Grinaker-LTA to enable Grinaker-LTA to win the tender. “It was agreed between the joint ventures that a loser’s fee should be included in the tender price as part of a so-called “compensation payment” to the losing bidders.” Group Five spokesman Heidi Geldenhuys said the group was in negotiations with the commission. The Mercury was unable to contact the other firms.