Some builders may be in hot water

Some construction companies that signed consent agreements with the Competition Commission for collusive tendering and bid-rigging contraventions face possible prosecution by the Competition Tribunal for further contraventions. An appendix compiled by the commission indicates that 16 implicated projects were not being settled in terms of the construction fast-track process, including one case implicating Murray & Roberts (M&R), four cases implicating Wilson Bayly Holmes-Ovcon (WBHO), Basil Read (four) and Raubex (two). Trudi Makhaya, the deputy commissioner, said on Friday that all these cases were part of the fast-track process. They were cases where companies had not disclosed their involvement but had been implicated by the admissions made by other firms.

Makhaya confirmed there were also “a few” legacy cases. These are cases excluded from the fast-track process because the commission had initiated these investigations before it launched the fast-track process. She said there were some further cases involving mostly small companies that had failed to respond to the commission’s fast-track process invitation but were implicated in the submissions by other firms. The tribunal heard details last week of bid-rigging and collusive tendering by 15 construction firms in more than 100 projects. The tribunal has not yet confirmed any of these settlement agreements. All 15 firms have signed consent agreements with the commission in terms of which they agreed to pay penalties collectively amounting to R1.46 billion.

Group Five, which disclosed 25 rigged projects and was granted conditional immunity for all of them, did not conclude a consent agreement related to four prohibited practices it did not disclose. Construction ID and Power Construction also failed to sign consent agreements related to one prohibited practices case each. They all face being prosecuted by the commission although they might still enter into settlement agreements. However, Makhaya stressed that, if they did, these agreements would not be in terms of the fast-track settlement process. This process incentivised firms to make full and truthful disclosure of bid rigging in return for penalties lower than the commission would seek if it prosecuted these cases.

The consent agreement signed by WBHO involved 11 non-prescribed prohibited practices or contraventions but excluded the World Cup stadium meeting and four of the five prohibited practices it was allegedly implicated in but did not disclose. WBHO refused to settle the World Cup stadium meeting contravention because it believed it was not a contravention of the Competition Act. The World Cup stadium meeting was also excluded from the consent agreements signed by M&R and Basil Read but included in the consent agreement signed by Aveng. The commission claimed that in about 2006, Aveng subsidiary Grinaker LTA, WBHO, M&R, Group Five, M&R subsidiary Concor and Basil Read met twice and reached agreement about the allocation among themselves of the construction tenders for the Mbombela, Peter Mokaba, Moses Mabhida, Soccer City, Nelson Mandela Bay and Cape Town stadiums; cover prices for these tenders; and that they should all aim to obtain a 17.5 percent profit margin on all these projects.

Cover pricing involves creating the illusion of competition by some firms submitting non-competitive bids to enable a fellow conspirator to win a tender. Details about the other alleged contraventions by WBHO that were not part of its consent agreement are unknown. Attempts to obtain comment from WBHO were unsuccessful. The filing notices to the tribunal about both Basil Read’s and M&R’s consent agreements do not mention any cases they were not settling but there is a reference to them in the appendix compiled by the commission. Attempts to obtain comment from Basil Read were unsuccessful. Ed Jardim, an M&R spokesman, said on Friday the case that had not been settled was “not material”. M&R had reported it to the commission before the fast-track process was launched and did not believe the commission had jurisdiction over it.