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Salga to explore damage claims from construction companies involved in bid rigging

The South African Local Government Association (Salga) intends to explore damage claims from construction companies involved in bid rigging for the 2010 FIFA World Cup infrastructure in some host municipalities.

Briefing reporters in Pretoria on Friday, Salga’s chief of operations, Lance Joel, said: “As the voice of local government, we’ve been mandated by the affected municipalities to get back what is due to them.

“We had a meeting earlier today with municipalities, where we’ve all agreed to take the matter forward through negotiating with the firms and reaching an agreement on damages before the finalisation of the Competition Tribunal proceedings.

“The second option will be to pursue civil claims for damages based on the ruling of the Tribunal.”

The affected municipalities are City of Tshwane, Johannesburg, eThekwini, Mbombela, Rustenburg, Polokwane, Nelson Mandela Bay, City of Cape Town and Mangaung.

Joel said although representatives from the Cape Town, Mbombela and Nelson Mandela Bay were not present at today’s meeting, they, however, similarly directed how Salga should approach the matter.

He said the municipalities gave Salga a directive to file the Intervening Application at the Tribunal, scheduled for 17 and 18 July.

“Salga is further exploring opportunities to obtain the necessary authority from municipalities to engage in settlement discussions. Failing which, we will institute civil proceedings against the identified respondents.

“We are doing all this in line with our mandate to protect the interests of local government,” Joel said.

Settlement on collusive tendering

Last month, the Competition Commission announced that it had reached settlement with 15 construction firms for collusive tendering, in contravention of section 4 of the Competition Act.

The settlement agreements have been tabled before the Competition Tribunal for confirmation. Three of the 15 firms did not accept the Competition Commission settlement.

As a result, the Commission will proceed with the prosecution of the three companies which are Group Five, Construction ID and Power Construction.

The settlements were reached in terms of the Construction Fast Track Settlement Process, launched in February 2011. The firms who accepted the settlement have agreed to penalties collectively totalling R1.46 billion.

The fast-track process incentivised firms to make full and truthful disclosure of bid rigging in return for penalties lower than what the Commission would seek if it prosecuted these cases.

Twenty-one firms responded to the Commission’s offer of a fast-track settlement.

While over 300 instances of bid rigging were revealed through this initiative, the settlements were reached only with respect to projects that were concluded after September 2006, before which transgressions are beyond the prosecutorial reach of the Competition Act.

The responses to the settlement offer revealed various ways in which firms historically determined, maintained and monitored collusive agreements.

These included meetings to divide markets and agree on margins. Different combinations of firms coordinated tenders over different projects.

Firms agreed that whoever won a tender would pay the losing bidders a “loser’s fee” to cover their costs of bidding. Sub-contracting was also used to compensate losing bidders.

According to the Commission, the construction firms that have not used the opportunity to disclose or settle contraventions will be investigated and prosecuted.

With the evidence gathered during this process, the Commission will investigate and prosecute firms that have not disclosed any projects, but are implicated by others or those that have elected to settle only some of the projects that they are implicated in

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