World Bank bans seven companies for price fixing
By Richard High15 January 2009
The World Bank has banned seven companies and one individual from future work following price fixing on a Bank-funded road project in the Philippines. Two of the debarments are permanent - the strongest sanction available to the Bank.
The bans against E. C. de Luna Construction Corp. and its owner Eduardo de Luna, China Road & Bridge, China State Construction, China Wu Yi, China Geo-Engineering, Cavite Ideal International Construction & Development and CM Pancho Construction follow an investigation by the Bank's Integrity (INT) vice president, Leonard McCarthy.
"This is one of our most important and far-reaching cases, and it highlights the effectiveness of the World Bank's investigative and sanctions process. As the World Bank Group continues to ramp up its anti-corruption work, INT will remain vigilant in investigating allegations and holding wrongdoers accountable, said Mr. McCarthy, adding that INT was in the process of conducting a worldwide review of the Bank's activity in the roads sector.
The investigation uncovered evidence of a cartel involving local and international companies bidding on contracts under Phase One of the Philippines National Roads Improvement and Management Program, known as NRIMP 1. Following investigations into the companies' procurement practices and interviews with individuals, the Bank froze US$ 33 million of funds for the project. It says none of the now barred companies received money from it as a result.
Its investigation found the companies colluded to fix bid prices at an artificially high level, and to deprive the Borrower - the Philippines Government - of the benefits of free and open competition.
NRIMP was designed to assist the Philippines Government to upgrade its roads network and was partially financed by a US$ 150 million loan from the World Bank. It aimed not just to build roads, but also to address weaknesses in project management, so that future roads projects would deliver more benefit at a lower cost. As a result of NRIMP 1, which closed in March 2007, 1400 km of roads were built or resurfaced.
Full details of the sanctions are as follows:
- E. C. de Luna Construction Corp. and Eduardo C. de Luna, owner and sole proprietor of the company, were both debarred indefinitely - the first permanent debarments since 2004.
- China Road and Bridge Corp. was debarred for eight years. The debarment can be reduced or terminated after five years if the company puts in place a compliance program satisfactory to the World Bank.
- China State Construction Corp. and China Wu Yi Co. Ltd. were each debarred for six years. In the case of each company, the debarment can be reduced or terminated after four years if that company puts in place a compliance program satisfactory to the World Bank.
- China Geo-Engineering Corp. was debarred for five years. The debarment can be reduced or terminated after three years if the company puts in place a compliance program satisfactory to the World Bank.
- Cavite Ideal International Construction and Development Corp. and CM Pancho Construction, Inc. were each debarred for four years. In the case of each company, the debarment can be reduced or terminated after two years if that company puts in place a compliance program satisfactory to the World Bank.
South Korea's Dongsung Construction was separately debarred in August 2008 for four years for fraudulent and corrupt practices in relation to the NRIMP 1 case, with the debarment subject to reduction or termination after two years if the company puts in place a compliance program satisfactory to the World Bank.