Eight construction companies – which were among 15 firms that reached settlement agreements with the Competition Commission on (2010 infrastructure) bid fixing, price fixing and collusion fees – are exempt from disciplinary action planned by the Construction Industry Development Board (CIDB).
The CIDB planned to take disciplinary action if these companies did not become part of the Voluntary Rebuilding Program (VRP) settlement agreement with the government, which was signed on October 11, 2016.
Sanctions the CIDB can impose for violations of its code of conduct include banning companies from operating in the public sector for up to 10 years and a fine of up to R100,000.
However, CIDB Director of Corporate Communications Kotli Molise confirmed the following to Moneyweb last week:
“It was concluded that the CIDB does not have the legal mandate to take disciplinary action against these companies as the action was taken prior to its code of conduct.”
The VRP Agreement has outstanding and pending civil claims for damages against seven publicly traded companies – Aveng Grinaker-LTA, Basil Read, Group Five, Murray & Roberts, Raubex, Stefanutti Stocks and WBHO – from government agencies including the SA National Roads Agency (Sanral) , attached. resulting from their admissions of collusion and bid rigging.
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Off the hook
The eight companies targeted by the CIDB for violating its code of conduct were G Liviero & Sons Building, Giuricich Bros Construction, Haw & Englis, Hochtief Solutions, Norvo Construction, Rumdel Construction, Tubular Technical Construction and Vlaming.
The CIDB confirmed in September 2017 that it intends to engage the remaining construction companies not party to the VRP agreement for a possible settlement similar to the VRP.
“Should the engagement not result in an agreement, the CIDB will resume its disciplinary investigation under Rule 29 of the CIDB Rules 2004, as amended,” it said.
Ebrahim Patel, then Minister for Economic Development and now Minister for Trade, Industry and Competition, confirmed at a media conference in February 2017 announcing the signing of the VRP by the listed companies that it could now be extended to other parties.
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“We will work with the other companies to say to them, ‘This is the framework, you have been implicated and there are outstanding issues affecting you and it would be good for you to come on board.’
“If these talks go nowhere, we will look into it,” Patel said at the time.
A further 24 companies that did not take part in the accelerated settlement procedure were involved in the tender agreements by the companies involved.
These firms were involved in 31 projects or cases, and seven of them settled with the Commission in the second phase of their investigations, resulting in them paying a total of 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 Nahla (Civilcon) Close Corporation.
The Commission referred a further 19 cases to the Competition Court for prosecution, two of which resulted in fines. Delatoy Investments agreed to pay a fine of R4.1 million, while GCP was fined R900,000 after being found guilty of engaging in cover pricing.
It appears that all of these companies are now exempt from any disciplinary action from the CIDB.
Other parties may still take action…
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Webster Mfebe, CEO of the SA Forum of Civil Engineering Contractors (Safcec), said over the weekend it was understandable that the CIDB code of conduct could not be applied retrospectively and that the cases of collusion related to infrastructure in 2010 were prior to enactment this code.
Mfebe said that if the CIDB code of conduct is not legally enforceable in these cases, societal organizations focused on protecting the country from taxpayer money abuse, such as Undoing Tax Abuse (Outa) organization, might show interest in these cases .
“Such societal organizations or even individual citizens could sue through other avenues, such as the Prevention and Suppression of Corrupt Activities Act, if warranted [Precca] and Organized Crime Prevention Act [Poca]because collusion is not only anti-competitive but also organized crime – and bringing a case with the National Treasury to blacklist convicted felons from public procurement for a period of time.
“These legal instruments could serve as deterrent and additional support measures, regardless of whether the crimes committed were committed before the CIDB Code of Conduct was adopted or not,” he said.
However, Mfebe emphasized that all companies involved have legal rights that must be respected.
It must also be understood that citizens, for whom infrastructure is intended, also have rights that must be protected and that no bidder for public infrastructure purchases should be left out at taxpayers’ expense.
Mfebe added that some industry associations such as Safcec include the CIDB code of conduct and their own code of conduct in their statutes as obligations to be strictly observed by all members, and sanctions for violations are also included in these statutes.
He said the majority of Safcec members subscribe to these codes as they are constantly reminded of them under the self-regulatory mechanism, in line with Safcec’s ongoing commitment to promoting the image of the civil engineering industry in South Africa.
As part of the VRP settlement agreement, the seven listed construction companies have agreed:
Financial contributions totaling R1.5 billion over 12 years to a socio-economic development fund, on top of R1.4 billion in fines paid by 15 construction companies to the Competition Commission;
Commitments to promoting transformation and black South African ownership and participation in this sector, either through equity transactions or through partnership with and development of smaller black-owned construction companies, resulting in black-owned companies with a market value of approximately R5 billion in the year 2024 ; Spirit
Integrity commitments by the CEOs of the signing companies to take all steps to avoid collusion and corruption in their dealings with the state, their competitors and their customers and to work with the government to detect all forms of corruption and bidding irregularities.
This article first appeared on Moneyweb and has been republished with permission. Read the original article here
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