Punish bidding collusion

The Fair Trade Commission on Sunday slapped a record fine of 435.5 billion won ($424 million) on 28 construction companies for suspected collusion in bidding for a new high-speed railway route between Seoul and the southwestern port city of Mokpo. On top of the largest-ever fine on breach of fair competition in the construction sector, the antitrust agency said it will file criminal charges against accused companies and former and incumbent executives with the prosecution. Strong punitive actions are needed as collusion can lead to sloppy and unsafe construction of public infrastructure and waste taxpayers’ money.

The bidding collusion included all the industrial giants - Hyundai, Daewoo, SK, GS, Samsung, Daelim and Hyundai Industrial Development and Construction. Employees from Daewoo, Daelim and Samsung sat in a cafe and played a random game to decide on the bidding terms. Employees cross-checked and kept watch on one another to make sure none of the bidders betrayed the decided prices. The 21 companies, including the Big 7, were able to get an equal portion of railway at the lowest bid price. Through such fraudulent means, they saved as much as 3.6 trillion won. The final construction cost went up, and the design and building processes are suspected of being poorly executed.

Collusion in public pork-barrel projects is a long-held practice among builders. Companies were fined 200 billion won in the first four months of this year for colluding in subway construction in Incheon, Daegu, and Busan, as well as in new shipping routes in Incheon. Over the past two years, 46 construction companies had been fined 450 billion won for collusion. With the latest hit, major builders will have paid 1 trillion won in fines for unfair practices. They complain of harsh action. Chief executives and board members of large construction companies pleaded to the government to be more tolerant toward their business pacts to win bids, arguing that they have been plagued with poor business for years. But their blatant collusion in the Honam high-speed railroad project raises questions on business ethics regardless of financial problems.

Large-scale pork-barrel projects were partly designed to help construction companies amid a sluggish domestic real estate market and economy. Spending on large public infrastructure undertakings, including the four-rivers restoration project, has reached over 60 trillion won over the past five years. Builders have abused preferential treatment and public funding for their business interests. Authorities must come up with stronger actions such as business suspension to root out collusion.

JoongAng Ilbo, July 28, Page 30