The head of South African construction company Murray & Roberts (M&R) says it is incorrect to describe the R309-million penalty imposed on the group by the Competition Commission as a “slap on the wrist”.

Instead, Henry Laas has described the fine as “significant” and has added that it will serve as a “stark and long-term reminder” that anticompetitive behaviour is unaccept- able and will not go unpunished.

The JSE-listed group is one of 21 con- struction companies to have voluntarily submitted itself to the commission’s fast-track settlement process (FTSP), launched in February 2011.

M&R is also one of 15 firms to have concluded settlement agreements – collectively valued at R1.46-billion – with the commission on June 24, with three firms having rejected the settlement and the balance having been found not to be eligible.

The agreements still require ratification by the Competition Tribunal, which had hearings on the proposed settlement in the middle of July.

Breaking his silence on the matter earlier this month, Laas acknowledged that the people of South Africa deserved an explanation.

The group disclosed 21 prohibited practices to the commission and settled 17 through the FTSP, with settlement talks under way with the commission on four other projects where investigations had been concluded prior to the initiation of the 2011 process. Laas does not expect this second settlement to be in any way as material as the one finalised through the FTSP.

M&R won seven of the 17 tenders where prohibitive practices were uncovered, including instances of cover pricing, the payment of loser’s fees or the holding of price-setting meetings. It was directly implicated in two projects, with the balance of the cases involving Concor and Wade Walker, which were acquired during 2006 and 2007.

“I know the commission’s findings have disappointed South Africa,” he said.

But Laas also insisted that much of the postsettlement commentary had been misinformed, particularly suggestions that the costs associated with the 300 projects (collectively valued at R47-billion) covered by the FTSP had been inflated by between 10% and 30%. Had that been the case, construction companies would have earned “super margins”, evidence of which was lacking.

“To put the settlement amount of R309-million into perspective, the profit gene- rated by M&R from the seven projects on which we won the tenders was about R173-million,” he said, adding that the average margin across all projects tendered during the period was 13%, with 80% of projects failing to meet that margin at project completion. The group submitted 2 500 civil engineering, general building and mechanical and electrical tenders between 2001 and 2011.

Laas dismissed the argument that M&R was “rotten to the core”, reporting that the six individuals found to have been involved in prohibited practices were no longer in the employ of the group and would never be re-employed. The company was still considering its legal options with regard to possible action against the individuals, none of whom had been group executives, but some of whom had served as executives at subsidiaries.

He dismissed out of hand any sugges- tion that former CEO Brian Bruce had been culpable, noting that many of the actions taken to root out anticompetitive behaviour had been taken during Bruce’s tenure.

He said he was not overly concerned about possible further civil and criminal actions against M&R, or its current executives.

“I am not worried about any criminal proceedings for the simple reason that none for the executives in the group have been implicated,” Laas said, adding that he believes it will be difficult to prove and quantify damages in civil proceedings.

However, Economic Development Minister Ebrahim Patel has confirmed that government was considering a coordinated plan to file legal claims over and above the penalties, while the South African Local Government Association’s operations chief, Lance Joel, indicated recently that the six municipalities affected by private-sector bid rigging would seek some form of restitution.

“We realise that there is a lot of work to be done to restore trust in our sector, especially with government,” Laas said.

He added that rebuilding the relationship was vital for the sake of delivering on the multibillion-rand National Infrastructure Plan, which required the participation of experienced construction and engineering companies.