Competition Tribunal unearths more construction price rigging

Murray & Roberts will have to cough up a further R64-million in penalties to competition authorities for its involvement in colluding on major construction projects, including the Cape Town Stadium.

The competition authorities continue on the trail of colluding construction firms, probing their role in rigging bids for various projects. On Wednesday the Competition Tribunal confirmed a consent agreement in which Murray & Roberts agreed to pay a fine of a further R64-milllion in relation to tender collusion. The company has in the past settled with the Competition Commission as part of a fast-track settlement process in 2013 in which it paid R309-million in administrative fines.

The consent agreement concerned three complaints involving four projects: the Sishen-Saldanha railway line, the Durban undersea tunnel project, civil works at Tati Nickel in Botswana and the construction of the Cape Town Stadium roof.

In its recommendations to the tribunal, the Competition Commission explained how Concor, a subsidiary of Murray & Roberts, and two other companies are said to have entered into a collusive tendering agreement for the construction of the Sishen-Saldanha ore export line.

In 2006 the three parties prequalified for the tender put out by Transnet, and agreed to rig their bids so that particular parties could win.

In the second matter, Concor and seven other companies were involved in price rigging on the Durban undersea tunnel – a pipeline that transfers sewage to a waste- water treatment plant. In early 2005 representatives of the companies met and agreed to add a fixed amount of R3-million to their respective bid prices. They also agreed that the firm that won the tender would pay R1-million to each of the losing bidders.

After it first uncovered widespread collusion in South Africa’s construction industry, the Competition Commission invited implicated construction firms to apply to settle on favourable terms.

As part of this process, initiated in 2011, Murray & Roberts settled 17 counts with the commission.

But information received from three other firms – Stefanutti, Grinaker and Aveng – in terms of the settlement process implicated Murray & Roberts in two further collusive projects: the Tati Nickel Mining Company’s mine in Botswana and the steel fabrication for the Cape Town Stadium.

The third matter before the tribunal combined these two projects.

In 2007 Murray & Roberts Botswana agreed with two other firms to rig bids to ensure that Murray & Roberts was awarded the tender for the civil works at the nickel mine near Francistown.

Also in 2007, a division of Murray & Roberts and another firm were invited to tender to subcontract the steel fabrication for the main roof of the new Cape Town Stadium. The Murray & Roberts division indicated to its competitor that it had decided not to tender, but would be interested in subcontracting to the competitor. It provided the competitor with its completed offer. The competitor won the tender, but did not subcontract any work to the Murray & Roberts subsidiary. The commission found that this overture still amounted to collusive conduct and was in contravention of the Competition Act.

In an effort to settle the matter quickly and efficiently, all these contraventions were included in one consolidated settlement agreement in which Murray & Roberts consented to pay R64-million in administrative penalties.

The full amount will have to be paid to the Competition Commission by August 31 next year, accruing no interest.

Announcement of the settlement did little to the Murray & Roberts share price on Wednesday – it closed at around the R8 level, where it has been for over a week, but the company has lost almost 80% in market value since 2010.

Since then, these collusive activities have come to light and the slowdown in China has resulted in more sluggish growth in commodity-based economies, affecting major construction companies in general.

Last month, the Competition Commission referred the last of 19 cases – in which construction firms implicated in collusive practices did not settle – to the Competition Tribunal for prosecution. Some of these cases involve the six 2010 World Cup stadiums, and all South Africa’s largest construction firms have been implicated. Collusion on these stadium projects is estimated by the South African Local Government Association to have added R14-billion to the construction costs borne by municipalities.

As part of its consent agreement, Murray & Roberts has agreed to co-operate fully with the commission in its investigations and possible prosecutions. The firm has also agreed to prepare and circulate a statement summarising the content of the agreement to its managers and directors, and to refrain from engaging in further collusive tendering.

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