Construction companies off the hook

THE Construction Industry Development Board (CIDB) has decided – for now – against prosecuting the construction companies that entered into settlement agreements with the Competition Commission for collusion, bid-rigging and price fixing but were not part of the agreement between the government and seven listed construction firms.

Kotli Molise, communications manager at the CIDB, told Business Report the board had taken the view that the Voluntary Rebuilding Programme (VRP) agreement between the government and the seven construction companies involved in collusion “embodied the principles of development and growth of the emerging sector”.

Molise said the principles embodied in the agreement were also in line with the CIDB’s legislative mandate to advance national social and economic development objectives.

“It’s the intention of the CIDB, therefore, to engage the remaining construction firms which are not party to the VRP agreement, for a possible settlement along similar lines to the VRP.

“Should the engagement fail to yield agreement, the CIDB will re-instate its disciplinary inquiry in terms of regulation 29 of the CIDB regulations of 2004, as amended.

Economic Development Minister Ebrahim Patel told Business Report in February, when the VRP agreement was finalised, that the agreement with the listed companies was now capable of being extended to other parties.

“We will be engaging with the other companies to say to them: ‘This is the framework, you have been implicated and there are still outstanding matters involving you and it would be good for you to come on board’.

“If those talks don’t get anywhere, then we will deal with them,” he said.

Sanctions that can be imposed by the CIDB for contraventions of its code of conduct include prohibiting companies from doing public-sector work and a fine not exceeding R100 000.

In terms of the VRP agreement with the government, seven listed construction companies collectively agreed to contribute R1.5bn for development projects and committed to promote transformation and black participation and ownership in the sector to settle outstanding and potential civil claims by government entities.

This followed the companies entering into consent agreements with the Competition Commission in 2013 after admitting collusion and bid-rigging in contravention of the Competition Act.

Companies party to the VRP agreement are Aveng GrinakerLTA, Basil Read, Group Five, Murray & Roberts (M&R), Raubex, Stefanutti Stocks and WBHO.

However, the fast-track settlement process resulted in 15 companies, including the seven listed construction groups, concluding consent agreements with the commission in terms of which they agreed to pay penalties totalling R1.46 billion.

Settlement Eight other construction companies that were part of the fasttrack settlement process but not part of the VRP agreement are now in the CIDB’s spotlight.

These companies are G Liviero & Sons Building, Giuricich Bros Construction, Haw & Englis, Hochtief Solutions, Norvo Construction, Rumdel Construction, Tubular Technical Construction and Vlaming.

However, 24 firms that did not participate in the fast-track settlement process were implicated in collusive tendering by the firms that participated in the process.

These firms were implicated in 31 projects or cases and seven of these firms settled with the commission in the second phase of the commission’s investigations, resulting in them collectively paying R13.44 million in penalties.

These companies were Harding Allison Close Corporation, B&E International, Cycad Pipelines, N17 Toll Operators, Civcon Construction, Giuricich Coastal Projects (GCP) and Pele Kaofela (Civilcon) Close Corporation.

The commission referred a further 19 cases to the Competition Tribunal for prosecution, two of which subsequently resulted in a consent settlement agreement or successful prosecution.

Delatoy Investments entered into a settlement agreement in terms of which it agreed to pay a fine of R4.1m related to collusion on the Thabazimbi pipeline project while GCP was fined R900 000 after being found guilty by the tribunal of engaging in cover pricing on the Mondi Reel Handling project in KwaZulu-Natal.

Molise did not respond to a question from Business Report on whether the CIDB would be seeking to also enter into agreements similar to the VRP agreement with all the construction companies who were not part of the initial fast-track settlement process but had subsequently signed consent agreements or were successfully prosecuted by the tribunal.

The commission previously decided against prosecuting 20 cases against 14 firms because of insufficient evidence, the liquidation of some companies or the case had prescribed.