Construction firms banned over cartel

THE STATE highway company has excluded four construction giants – Doprastav, Strabag, Skanska and Inžinierske Stavby – from the public tender process in the wake of a cartel scandal from 2005 that also involved two other firms.

THE STATE highway company has excluded four construction giants – Doprastav, Strabag, Skanska and Inžinierske Stavby – from the public tender process in the wake of a cartel scandal from 2005 that also involved two other firms.

Last December, the Supreme Court upheld a decision of the Antitrust Office (PMÚ), which imposed on six construction firms one of the heaviest fines ever: a cumulative €45 million. With the deadline for paying the fines having passed, three of the companies are now challenging the Supreme Court ruling with the Constitutional Court.

The four banned firms have the option to challenge their expulsion by the National Highway Company (NDS) with the procurement authority, the Public Procurement Office (ÚVO). According to the Sme daily, Skanska and Strabag are considering such a move.

The ban hits Doprastav and Skanska the hardest as they are bidding for the largest highway tenders, according to the Trend economic weekly, which broke the story in mid-April. Meanwhile, Skanska has already paid its €9 million share of the fine.

“So far we register a payment from the company Skanska, which paid the total amount of the fine imposed on it,” Silvia Šramelová of the antitrust authority said, as quoted by Sme on April 23.
The Supreme Court verdict upholding the decision of the PMÚ became valid on March 20, 2014, giving the firms 30 days to pay the fine.

Doprastav head Dušan Mráz has already said his firm does not have enough money to pay their share. Moreover, the company has asked the courts to accept its restructuring plan, which means they will not have to pay the whole amount, Sme reported.

Previously, the highway company requested a stance from the PMÚ on what the Supreme Court verdict meant for the firms’ further participation in tenders, but has not received a clear answer. The NDS has not yet explained how it made the decision, arguing that it cannot comment on ongoing tenders.
The procurement authority has started a proceeding which should result in a list of companies not wanted in public tenders. Observers suggest that a number of other construction firms stand to benefit from the situation.

The cartel

The PMÚ fined the companies Doprastav, Strabag, Skanska, Inžinierske Stavby, Mota–Engil and Betamont in 2006 for forming a cartel when competing for a highway construction order in a public tender over the Mengusovce-Jánovce stretch of the D1 cross-country highway. The heaviest fine was handed to Portuguese firm Mota–Engil (€13.88 million), followed by Strabag (€12.21 million), Skanska (€8.98 million), Doprastav (€6.57 million), Inžinierske Stavby (€3.02 million) and Betamont (€131,150).

The fine was the result of a lengthy investigation by the PMÚ and affected firms that bid within three consortiums for the construction of the 26-kilometre section of freeway under the High Tatras mountains.

Between 2005-2006 the state was determined to invest around €330 million in road construction and made plans for the period of 2005 to 2015 to complete 295 kilometres of freeway, roughly four times the amount built in the preceding decade. Many of the projects have since run vastly over budget, due both to the challenging nature of the terrain and suspicions that funds have been siphoned off.
The PMÚ justified the high fines by noting that cartel agreements on bidding prices are among the most serious violations of competition rules.

“The case [of the construction firms] is interesting because it was the first cartel agreement uncovered in public procurement,” PMÚ officials told The Slovak Spectator back in 2006.

The affected tenders

Currently tenders are running for the construction of three more highway stretches: part of the D1 highway from Lietavská Lúčka through Višňové up to Dubná Skala. The consortium of Skanska and Strabag submitted the lowest bid at €338 million. The second lowest bid was submitted by Doprastav at €383 million, the TASR newswire reported.

Skanska bid the lowest price in a tender for the construction of the R2 motorway from central Slovakia’s Zvolen to Pstruša, offering to build it for €88 million. An association of firms involving Corsan Corviam Construccion and Chemkostav bid €98 million with the tender still under review.

Skanska is also excluded from the competition for the construction of a stretch of the D3 highway between Žilina, Strážov-Žilina and Brodno, which the company wanted to build for €190 million before VAT. Again, that was the lowest bid, about 66 percent of the estimated price, according to Sme. The second lowest bid came from firms Eurovia and Hochtief, at €255 million. That tender also remains incomplete.

“I can confirm that we received a notification on the exclusion of the group from the tender and we are analysing it,” Skanska SK General Director Magdaléna Dobišová told the SITA newswire.

Back in court

Constitutional Court spokeswoman Anna Pančurová confirmed for SITA on April 17 that Strabag, Skanska and Doprastav have challenged the recent Supreme Court verdict with the Constitutional Court while also requesting to delay the application of the verdict as well as the payment of the fine.

Doprastav objects to what it calls a violation of basic rights not to have its case withdrawn from a legal judge and dealt with in a timely manner. The other two firms filed similar objections, SITA reported.

Pančurová said she is not able to say at this point whether the appeals meet the necessary conditions to progress.

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