Construction companies that did not sign the VRP settlement agreement are off the hook



Eight construction firms, which were among 15 firms that reached deals with the Competition Commission over bid-rigging (infrastructure 2010), price-fixing and collusion charges, are freed from the measures disciplinary measures provided by the Construction Industry Development Board (CIDB).

The CIDB planned to initiate disciplinary action when these companies were not part of the Voluntary Reconstruction 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 doing work in the public sector for up to 10 years and a fine not exceeding 100,000 rupees.

However, CIDB’s director of corporate communications, Kotli Molise, confirmed to Moneyweb last week that:

“It was concluded that the CIDB does not have the legislative mandate to take disciplinary action against these companies as the actions predate its code of conduct.”

The VRP settlement resolved outstanding and pending civil damage claims against seven listed companies: Aveng Grinaker-LTA, Basil Read, Group Five, Murray & Roberts, Raubex, Stefanutti Stocks and WBHO, from state entities, including the National Agency de Carreteres SA (Sanral), derived from their admissions about collusion and the manipulation of offers.

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off the hook

The eight companies CIDB is looking at for breaches of 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 contract the remaining construction companies that were not part of the VRP agreement, for a possible liquidation along similar lines to that of the VRP.

“Should the engagement fail to reach agreement, the CIDB will reinstate its disciplinary inquiry in terms of regulation 29 of the CIDB Regulations 2004, as amended,” it said.

Ebrahim Patel, then Minister for Economic Development and now Minister for Trade, Industry and Competition, confirmed at a press conference in February 2017 to announce the signing of the VRP by listed companies, which could now be extended to other parties .

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“We will engage with the rest of the companies to say, ‘This is the framework, you have been involved and there are still outstanding matters involving you and it would be good if you came on board.’

“If those talks don’t go anywhere, then we’ll deal with them,” Patel said at the time.

Another 24 companies that did not participate in the fast-track liquidation process were involved in collusive bidding by companies that did participate.

These firms were involved in 31 projects or cases, and seven of them settled with the commission in the second phase of its 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 Nahla (Civilcon) Close Corporation.

The commission referred a further 19 cases to the Competition Tribunal 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 hedge price fixing.

It appears that all these companies are now on the sidelines of any CIDB disciplinary action.

Other parties could still take action…

READ ALSO: Sanral cancels tenders for 17.47 billion rand

SA Civil Engineering Contractors Forum (Safcec) chief executive Webster Mfebe said at the weekend that it was understandable that the CIDB code of conduct could not be applied retrospectively and that cases of collusion against to the infrastructure in 2010 are prior to the promulgation of this code.

Mfebe said that if the CIDB code of conduct is not legally enforceable in such cases, social organizations that focus on protecting the country from abuses of taxpayers’ money, such as the Organization to Undo Tax Abuse (Outa) , could show interest in these cases.

“These social organizations, or even individual citizens, could, where appropriate, litigate using other avenues, such as the Prevention and Combating of Corrupt Activities Act. [Precca] and Organized Crime Prevention Act [Poca]because collusion is not only anti-competitive, it is also organized crime – and present a case to the National Treasury to blacklist those convicted of public procurement for a period of time.

“These legal instruments can serve as additional deterrent and support measures, whether or not the crimes committed predate the promulgation of the CIDB code of conduct,” he said.

However, Mfebe emphasized that all the companies involved have legal rights that must be respected.

He said that it must also be understood that the citizens for whom the infrastructure is intended also have rights that must be protected, and that no tenderer for the procurement of public infrastructure should be found lacking at the expense of taxpayers

Mfebe added that some industry bodies, such as Safcec, incorporate the CIDB’s code of conduct and its own code of conduct into their constitutions as obligations to be strictly adhered to by all members, and penalties for non-compliance they are also enshrined in these constitutions.

He said that most Safcec members are committed to these codes, because they are constantly reminded as part of the self-regulatory mechanism in line with Safcec’s continued commitment to promote the image of the civil engineering construction sector of SA.

the deal

Regarding the VRP settlement agreement, the seven listed construction companies agreed:

Financial contributions totaling R1.5 billion over 12 years to a socio-economic development fund, in addition to R1.4 billion in fines paid by 15 construction companies to the Competition Commission;

Commitments to promote transformation and black South African ownership and participation in the sector, either through equity transactions or by partnering with and developing smaller black-owned construction companies that would result in black-owned companies with a market value of about R5 billion by 2024. . ; i

Integrity commitments by the CEOs of the signatory companies to take all measures to avoid collusion and corruption in their dealings with the state, their competitors and their customers, and to cooperate with the government in exposing all the forms of corruption and irregularities in tenders.

This article first appeared on Moneyweb and has been republished with permission. Read the original article here

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