Business

Tender collusion: Loser’s fee probed

2015-12-14 06:00

A R1 million “loser’s fee” that wound its way across international waters from German construction company Hochtief to South African construction company Grinaker-LTA, a subsidiary of Aveng, could cause further headaches for the companies.

A “loser’s fee”, as it was known in the South African construction cartel, is a fee a winning bidder pays collusive losing bidders when it wins a tender.

The Competition Tribunal has asked the Competition Commission to notify the German authorities about the payment after it was revealed during a tribunal hearing this week.

The tender collusion that resulted in the payment was over a project to build an undersea tunnel to house pipelines carrying sewage to a treatment plant on The Bluff in Durban.

The commission launched its investigation into the eThekwini municipality’s tender for the undersea tunnel project in August 2009.

The winning bidder of the 2004 tender was a joint venture between Hochtief and Concor, a Murray & Roberts (M&R) subsidiary.

Other competing construction firms were Nishimatsu Construction, Grinaker-LTA, Dura Soletanche-Bachy, Group Five and Stefanutti Stocks.

The commission says its investigation uncovered that in February 2004, representatives of the construction companies met and agreed to add R3 million to all their bids, so they could pay the losers R1 million each when they won the tender.

M&R spokesperson Ed Jardim said: “We have noted the processes recommended and to be followed by the South African competition authorities with the German competition authorities.”

Jardim said that M&R only became aware of the payment by Hochtief to Grinaker when Hochtief settled with the Competition Commission in 2013.

“M&R was not aware of, nor facilitated this payment,” said Jardim. “We are not aware that any other payments were made.”

Attempts to get comment from Hochtief and Aveng were unsuccessful.

The undersea tunnel was one of four cases settled this week before the tribunal by M&R.

None of them had been settled under the fast-track settlement process.

Murray & Roberts agreed to pay a fine of more than R64 million.

This was on top of the fine of R309 million it agreed to pay under the fast-track settlement process in 2013. The company settled 17 cases under this process.

The other three cases M&R was settling this week included tenders for fabricated steel for the roof of Green Point Stadium in Cape Town, a 2006 Transnet tender for the Sishen-Saldanha rail project and civil works for the Tati Nickel mine project in Botswana.

The commission’s investigation into the Sishen rail project was initiated in July 2009 after it received a leniency application from Lennings Rail Services, which is part of the Aveng Group.

It found that in November 2006, WBHO Construction had reached an agreement with Lennings and Concor, now part of M&R, to rig the tender.

WBHO was awarded the southern section of the railway line and Concor the north, while they both contracted the track workout to Lennings.

M&R were implicated in the 2007 tender for the Green Point Stadium roof and the 2007 tender for the nickel mine in Botswana through information received from Stefanutti and Aveng during the fast-track settlement process.

In 2007, Genrec, a subsidiary of M&R, shared its pricing for the fabricated steel roof of Green Point Stadium with Aveng subsidiary DSE Fabrication, hoping to get subcontracting work if it did not bid.

In February 2007, M&R Botswana and a joint venture between Stefanutti Stocks and Aveng subsidiary Grinaker-LTA rigged the tender for the nickel mine.

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