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SANRAL sues construction firms

SANRAL is suing construction companies for work relating to the Gauteng Freeway Improvement Project and other projects. Photo: JMK

SANRAL is suing construction companies for work relating to the Gauteng Freeway Improvement Project and other projects. Photo: JMK

The South African National Roads Agency (SANRAL) is suing construction firms found guilty of collusion where the agency was affected.

The roads agency has confirmed that it has lodged civil damages claims with the Gauteng Local Division High Court against the construction firms that were found guilty of collusive conduct by the Competition Authorities.

According to the agency’s spokesperson Vusi Mona, the claims are for work relating to the Gauteng Freeway Improvement Project as well as works that were carried out in other parts of the country.

The agency is arguing that it suffered damages and overcharges as a result of the companies’ collusive conduct and has put in for claims totalling between R600 and R760 million. Seven construction firms and the joint ventures they formed have been served papers.

“This follows months of hard work in quantifying the damages we suffered. Some of our detractors doubted our intention to file for damages, accusing us of delays, with some going to the extent of suggesting the agency was colluding with the industry. But we had to be thorough in our assessment of the damages and were not going to be rushed into this action ill-prepared,” the agency’s spokesperson Vusi Mona said.

This statement comes after OUTA’s chairperson Wayne Duvenage accused SANRAL of procrastinating and “kicking the can down the road on this serious issue for the past two and a half years.”

Duvenage has since further criticised SANRAL, saying that the agency’s response to collusion is insufficient and “a slap in the face of the people of South Africa.” OUTA has argued that SANRAL overpaid between R10 and R11 billion on the Gauteng Freeway Improvement Project due to overpriced construction costs – a much larger sum than the agency is suing for.

 

Firms to oppose claims

SANRAL is reportedly taking action against Murray & Roberts, Basil Read, Concor, Wilson Bayly Holmes-Ovcon, Group Five, Stefanutti Stocks and Raubex.

Murray & Roberts and Basil Read told Reuters that they will oppose damages claims by the national roads agency.

Basil Read spokesperson Andiswa Ndoni told the news agency, “The claim is for 84 million rand, on a joint and several liability with two other construction companies. Basil Read has filed a notice of intention to defend the matter,” said Ndoni.

 

Collusion in the construction sector

Investigations into the construction sector began in 2009 after the Competition Commission received evidence that collusion was pervasive in the sector. The Commission subsequently launched the Construction Fast Track Settlement Process in February 2011 to expedite the resolution of these cases given their magnitude.

In 2013, the Commission settled with 15 out of 18 firms that participated in and were found liable under the Fast Track Settlement. Settlement agreements with these firms were confirmed in July 2013 and a combined total of R1.4 billion in penalties was levied against them.

“The construction sector remains one of the key sectors of the economy which government is prioritising to drive infrastructure development. It is therefore necessary to address any collusive conduct which might inflate the costs of rolling out infrastructure development,” said the Competition Commission’s Commissioner Tembinkosi Bonakele.

The Commission finalised its investigation of the construction sector in October last year. Its final case arising out of its investigation of bid rigging in the construction sector was against WBHO Construction which was found to have colluded with Group Five Construction by fixing contractual conditions relating to the N17 link road between New Canada and Soccer City.

The commission’s investigation found that, at a meeting of the South African Federation of Civil Engineering Contractors Association (SAFCEC), WBHO and Group Five agreed on a preferred set of contractual conditions for the N17 project tender issued by SANRAL.

On the basis of this agreement, they requested SAFCEC approach SANRAL on their behalf to demand that SANRAL change its tender conditions and issue the tender with the conditions they had agreed on.

“This amounts to fixing of trading conditions which contravenes section 4(1)(b)(i) of the Act. WBHO was notified of this project during the Construction Fast Track Settlement Process and was invited to settle but rejected the offer,” the commission said in a statement.

The table below lists firms that settled with the Commission and the amount of the penalty levied:

No. Firm Settlement amount (ZAR)
1. Aveng 306 576 143
2. Basil Read 94 936 248
3. Esorfranki 155 850
4. G Liviero 2 011 078
5. Giuricich 3 552 568
6. Haw & Inglis 45 314 041
7. Hochtief 1 315 719
8. Murray & Roberts 309 046 455
9. Norvo 714 897
10. Raubex 58 826 626
11. Rumdel 17 127 465
12. Stefanutti 306 892 664
13. Tubular 2 634 667
14. Vlaming 3 421 662
15. WBHO 311 288 311
TOTAL   1 463 814 392

 

There were 24 firms that did not participate in the Fast Track Settlement but were implicated in collusive tendering by the firms that participated. These firms were implicated in 31 projects or cases.

These firms, together with firms that participated in and settled under the Fast Track Settlement but refused to settle certain projects – namely Basil Read, WBHO, Raubex, and Murray & Roberts – were part of the Phase Two Construction Investigations.

The Commission settled with some of the firms investigated under the phase two, and referred to the Tribunal for prosecution cases against those firms that did not settle. The Commission decided not to prosecute cases against certain firms where there was insufficient evidence against them or where the firms had been liquidated.

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