Tribunal confirms settlement with WBHO over rail tender

A settlement agreement between Wilson Bayly Holmes-Ovcon (WBHO) and the Competition Commission related to collusive tendering on the Transnet tender project to upgrade a portion of the Sishen-Saldanha iron ore rail line has been confirmed by the Competition Tribunal. Under the settlement agreement confirmed yesterday, the listed construction and engineering group agreed to pay a fine of R10.24 million for collusive tendering on the project. The fine agreed constituted 0.3 percent of the annual turnover of WBHO’s civil engineering business. The commission said the penalty was so low because former commission employees had given WBHO a commitment that the case would be part of the fast-track settlement process.

However, this was one of several cases involving different companies where the commission had already concluded its investigation prior to launching the fast-track settlement process. All these so-called legacy cases were excluded from the fast-track settlement process. This was one of four cases implicating WBHO that it did not settle with the commission during the construction fast-track settlement process. The commission’s filing notice to the tribunal said the complaint was initiated after it received a leniency application by Lennings Rail Services, which is part of the listed Aveng group, in April 2009. Its investigation found that Transnet had invited eight companies in August 2006 to submit an expression of interest for the Sishen-Saldanha project, which involved civil earthworks, track laying and overhead traction equipment work.

The investigation found that in November 2006, WBHO had reached an agreement with Lennings and Concor, now part of Murray & Roberts (M&R), in terms of which Lennings would submit a tender for all the works related to the project at a bid price that was higher than those submitted by WBHO and Concor. It was agreed that the track work would be sub-contracted to Lennings, whose quote for this part of the work would be identical to those of WBHO and Concor. WBHO was awarded the southern section of the project while the northern section went to Concor. In terms of the fast-track settlement agreement reached by WBHO with the commission last year and later confirmed by the tribunal, it agreed to pay a R311m fine for 11 non-prescribed prohibited practices.

The fast-track settlement process was launched by the commission after it initiated a complaint in 2009 into alleged prohibited practices related to the construction of the World Cup soccer stadiums. It resulted in 15 firms agreeing to pay penalties totalling R1.46 billion for collusive tendering in contravention of the Competition Act. One of the three remaining cases that WBHO still has to finalise with the commission relates to alleged collusion and a meeting that took place between construction firms about the stadium projects. The commission alleged that staff at WBHO, Aveng subsidiary Grinaker-LTA, M&R, Group Five, Concor and Basil Read met twice in about 2006, and reached agreement about the construction of the stadiums, which constituted collusive tendering in contravention of the act. WBHO gained 0.29 percent to close at R140.30 on the JSE.