World Bank and AfDB investigate construction bids

The World Bank and the African Development Bank (AfDB) are expected to be trawling through details of some of the construction projects won through collusive tendering by the 15 construction firms that were recently found guilty of contravening the Competition Act. If any of the 15 firms were engaged in collusive tendering for a project for which the World Bank or the AfDB provided some funding, they will face stiff sanction. If the collusive activity is considered to be sufficiently severe, the companies can be debarred from tendering for any projects involving the World Bank or the AfDB for three to five years. In the worst case scenario, they can be permanently banned. Analysts said yesterday that this was a major consideration for large construction firms that tended to operate globally and also worked on large projects that involved an element of funding from one of the major development banks.

The AfDB and the World Bank are two of the five multilateral development banks that signed an agreement on the mutual enforcement of debarment decisions in April 2010. The other three members are the Asian Development Bank, the Inter-American Development Bank and the European Bank for Reconstruction and Development. In terms of the agreement each of these banks will enforce each other’s debarment actions. There “sanctionable practices” that can lead to debarment are corruption, fraud, coercion, obstructive practice and collusion. The agreement reflected the growing awareness of the importance of the role these multilateral banks are required to play in combating corruption across the globe.

Because neither the World Bank nor the AfDB run the procurement processes involved in the projects they fund, the responsibility for ensuring the tender adheres to the requirements set down by the two development banks rests with the borrower. It has not been possible to identify what South African projects have been financed by the AfDB but the World Bank has revealed that it currently has seven “financed activities” in South Africa. By far the largest of these projects is the $3.7 billion (R35.9bn) Eskom Investment Support Project, which was approved in April 2010.

A spokesperson for Eskom, which is just one of the scores of clients of the construction firms, told Business Report earlier this week that it had requested all its suppliers to formally indicate whether their confessed collusion activities affected any Eskom contracts. “We will then decide on what course of action to take, if any,” the spokesperson said. Other high profile clients include the SA National Roads Agency, Pretoria Portland Cement, Sappi, PG Bison, Kumba and Anglo American Platinum. To date, no company has said that it would be taking action against the construction firms. They were all still considering their options. A World Bank spokesperson told Business Report yesterday that a company was debarred by the World Bank “if there is substantiated evidence of misconduct impacting a World Bank-financed project”.

The World Bank website contains a list of several hundred companies from across the globe that have been debarred from participating in World Bank projects. Some have been permanently debarred.