CompCom names CEOs involved in stadia collusion

How they allegedly allocated projects and set high margins.

The current chairperson and CEO of WBHO, Mike Wylie and Louwtjie Nel were personally present at the meetings where construction companies colluded about contracts relating to the 2010 World Cup stadia, the Competition Commission alleges.

Elphus Mudimeli, the commission’s chief investigator in the case, alleges in an affidavit that representatives of Murray & Roberts, Aveng, Group Five, WBHO, Stefanutti Stocks and Basil Read met twice to conclude unlawful agreements.

Mike Lomas, at the time CEO of Group 5, was also in attendence, Mudimeli said.

The affidavit forms part of the documents submitted for the referral of the complaints to the to the Competition Tribunal. The commission is seeking penalties of 10% of annual turnover against Group 5, WBHO, Stefanutti Stocks and Basil Read. The companies are contesting the charges.

The first meeting allegedly took place on September 27 2006 and the second on October 6 of the same year. Both meetings were held at the offices of WBHO, Mudimeli stated. He said the first meeting was convened by Wylie, Lomas and Schalk Ackerman who was at that stage managing director of Aveng’s civils division.

Other people present at the first meeting included Ackerman, Phillip Taylor, then senior estimator at Murray & Roberts, Trevor Robinson, then managing director of Concor’s civils division and Kobus van Biljon, then chief operating officer at Basil Read, Mudimeli stated.

He said with the exception of Nel the same people attended the second meeting. This meeting was allegedly convened by Wylie.

The meetings followed a meeting with large contractors (CIDB grade 9) and construction industry stakeholders called by the Fifa Local Organising Committee LOC in July 2006 to discuss stadia constrcution. The LOC wanted assurance that the industry, in spite of a heavy work load at the time had the capacity and skills to deliver the stadia and wanted an indication of the geographical spread of the contractors, Mudimeli said.

He declared that representatives of WBHO, Grinaker-LTA and Group Five stated that the projects could be delivered on time subject to certain conditions.

The parties at the meeting allegedly agreed that deviation from standard procurement processes was necessary.

According to Mudimeli the companies discussed at the meetings the allocation of the projects among them, which companies would submit tenders, which would submit cover tenders, which companies not in attendance could upset the scheme and with which companies the successful bidders would partner.

He alleges that the following decisions were taken at the second meeting:

  • They would review the bids and cover bids before submission to ensure that the cover bid was less competitive than the allocated tenderer’s bid and that the tender price of each lead bid was lower than the cover prices for that project;
  • Who would be the successful bidder in each case for the Moses Mabhida stadium in Durban, the FNB stadium in Johannesburg, the Green Point stadium in Cape Town, the Mbombela stadium in Nelspruit, the Peter Mokaba stadium in Polokwane and the Nelson Mandela stadium in Port Elizabeth and which company would provide the cover bid in each case.
  • The net profit margin on all the projects would be 17.5% and any risk contingencies would be factored in to prevent the agreed upon margin from being diluted.

According to Mudimeli Ackerman undertook to communicate the agreements reached to Stefanutti Stocks.

Mudimeli lists the companies that submitted tenders on each project, the tender amounts and which company was successful.

Mudimeli states that WBHO disclosed the conduct as part of the commission’s invitation to construction companies to come forward with information about uncompetitive conduct. The company however chose not to settle this matter, as it did not believe it ammounted to a contravention of the Competition Act.

Group Five, who was the main industry whistle blower, was implicated, but did not apply for a settlement in relation to the stadia contracts. Stefanutti Stocks and Basil Read did not diclose the alleged collusion and both decided not to settle this matter, Mudimeli said.

Aveng did settle it and Murray & Roberts received conditional immunity in this regard, with a result that no penalties are sought against the two companies, Mudimeli stated.

As part of the commission’s fast-track settlement process construction companies were collectively charged penalties of R1.4 billion in June last year. Group Five was the only among the companies implicated in collusion realting to the stadia contracts that has not been penalised so far, due to its early co-operation with the commission.

The latest case is expected to be heard by the tribunal only in 2016.

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