Companies fined more than S$600,000 for rigging bids in F1 electrical services tender

Companies fined more than S$600,000 for rigging bids in F1 electrical services tender

The Competition Commission of Singapore issued an infringement decision against the Cyclect Group, HPH Engineering and Peak Top Engineering for rigging their bids in their submissions for a tender involving the provision of electrical services.

The Competition Commission of Singapore (CCS) has fined three parties more than S$600,000 for rigging bids in a tender involving the provision of electrical services for the Formula 1 Singapore Grand Prix from 2015 to 2017.

SINGAPORE: The Competition Commission of Singapore (CCS) has fined three parties more than S$600,000 for rigging bids in a tender involving the provision of electrical services for the Formula 1 Singapore Grand Prix from 2015 to 2017.

In a media briefing on Tuesday (Nov 28), CCS said it has determined that the Cyclect Group, HPH Engineering and Peak Top Engineering had infringed Section 34 of the Competition Act by colluding to rig the bids in their submissions for the F1 tender. The Cyclect Group comprises Chemicrete Enterprises, Cyclect Electrical Engineering and Cyclect Holdings.

CCS had found that Chemicrete is a wholly-owned subsidiary of Cyclect Holdings, and that both companies share common directors and a common managing director.

The competition watchdog also found that Cyclect Electrical and Cyclect Holdings are headed by the same managing director and share common shareholders.

It issued its infringement decision on the matter on Tuesday, following a proposed infringement decision in March, which laid out its findings and its reasons for arriving at its decision.

CCS said it started investigating the parties after it received a complaint in April 2015 about the alleged anti-competitive agreements.

The F1 tender was called in December 2014 and received four bids from Chemicrete, Cyclect Electrical, HPH and Peak Top. Cyclect Electrical, which submitted the lowest bid for the three-year contract, was awarded the tender in April 2015.

CCS’s investigations revealed that the Cyclect Group had approached and separately colluded with HPH and Peak Top to rig the bids in their submissions for the F1 tender, said CCS.

Instead of HPH and Peak Top independently preparing their own competitive bids, the Cyclect group had prepared different price schedules with final bid prices for HPH and Peak Top’s submissions for the F1 Tender.

The competition watchdog added that these bid prices were about 25 to 30 per cent higher than Cyclect Electrical’s final bid price for the F1 tender. The Cyclect Group also assisted in preparing HPH’s responses to the tender clarification questions.

For this, Cyclect Group was fined S$559,297, HPH was fined S$28,128 and Peak Top, S$21,693.

CCS noted that HPH had previously been a sub-contractor to the Cyclect Group. While Cyclect Group had no prior working relationships with Peak Top, CCS added that there was a personal relationship between a Cyclect Group employee and a Peak Top director.

CYCLECT GROUP, HPH ALSO FINED IN SEPARATE BID-RIGGING CASE

The Cyclect Group and HPH were also fined a total of S$17,000 for bid-rigging in a separate tender for the provision of asset tagging services for GEMS World Academy.

CCS found that Chemicrete had sought HPH’s assistance to support it in winning the GEMS tender. To this end, it had prepared a quote for HPH that was higher than Chemicrete’s own quote for the GEMS tender, which was submitted by HPH without any amendments.

The tender received three quotes including those from Chemicrete and HPH and was awarded to Chemicrete, which had the lowest quote. CCS added that HPH’s quote was about 50 per cent higher than Chemicrete’s quote.

For their actions in relation to the GEMS tender, the Cyclect Group was fined S$12,000, while HPH was fined S$5,000.

The companies were served notice on Tuesday, and have two months to file an appeal. If they do not file an appeal, they will have to pay the fine by Jan 29, 2018.

CCS added that debarment from future tenders will be considered only after all appeals are exhausted, and will be on a case by case basis.

 ‘LENIENCY DISCOUNT’ TO ENCOURAGE PEOPLE TO COME FORWARD

The competition watchdog said the Cyclect Group had received a discount on the fine,  as it had applied for leniency under CCS’ leniency programme.

The programme gives companies full immunity if they come forward before investigations begin.

As the Cyclect Group was the initiator of the anti-competitive conduct in both tenders, they were eligible for a reduction in the fine of up to 50 per cent, CCS said.

"So I think the earlier you come in, the better it is,” CCS chief executive Toh Han Li said.

But he added that the pre-condition for the leniency discount is cooperation.

“To what extent are you furnishing us with relevant documents, to what extent did you admit to your participation in the anti-competitive conduct ... these are all factors we take into account.”

Mr Toh also noted that bid-rigging is one of the “most harmful types of anti-competitive conduct” as it “distorts the competitive bidding process, thereby preventing businesses from getting the best value for their tenders.”

He added that it would be helpful for companies looking to open tenders to widen the pool of bidders as much as possible. “So rather than having a small set of bidders, if you do something like e-procurement and publish online, you can invite anyone who sees it to come in with a bid,” he said.

“I think this will defeat people who try to rig bids.” 

DECISION CAME AS A SHOCK TO US: CYCLECT GROUP

When informed of the decision, Cyclect Group said it had never intentionally worked against industry practices.  

"We have cooperated to the best of our ability during the investigations," said Cyclect Group's managing director Melvin Tan.  "Hence, this decision came as a shock to us."

"We are currently reviewing the decisions with our legal advisors and will be keeping all our options open, including an appeal.”

GOVERNMENT AGENCIES, STATUTORY BOARDS SHOULD RELOOK RULES SURROUNDING TENDER SUBMISSIONS: LAWYER

Robson Lee, a partner with Gibson, Dunn & Crutcher, said the issue of common directors among competitor firms vying for projects is one that needs to be looked at more carefully going forward.   

“Are the rules of the government agencies adequate to address the issue? If you have directors who are related as family members or sit on common boards, I think there is indeed a basis for concern that information could be shared in a way that is not envisaged by the spirit of public tender,” he said. 

Mr Lee said government agencies, statutory boards and ministries should come up with clear rules to define how tenders should be submitted under these situations.

He suggested that  persons responsible for submitting these tenders should be made to submit statutory declarations that they have not in any way shared any information among themselves and that they have not colluded and collaborated to engender a desired outcome.

"It will be important for Singapore as a nation where it is highly respected by many countries to have clarity and certainty of rules under such situations, and I think there is a need to allow it not to fester and become a real perception problem." 

Additional reporting by Brandon Tanoto.

Source: CNA/kc

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