ECONOMY

‘Secret-society type deals going on in building projects’

A private written agreement, obtained by Kathimerini, among a number of construction companies for control of the auctioning mechanism for public projects reveals a maze of conspiratorial practices reminiscent of secret societies. The practice usually involves six-member groups of firms which submit bids in a «wholesale» fashion on behalf of dozens of others. The document illustrates that corruption in the sector has spread beyond the top of the pyramid, where the big barons marshalled the complicated and infamous «mathematical» formula – initially conceived by the government as a measure to prevent unrealistic underbidding – in order to allocate projects among themselves. Now that the Public Works Ministry has decided to abolish the formula for the big projects after it became aware of the distortions it causes, construction companies are taking advantage of its continuation to secure smaller projects. The agreement shows an example of the formation of such a «vehicle» group of Grade 3 companies (grades are from 1 to 7) for the submission of prearranged bids on the basis of the formula. The particular instance is not an isolated one, given the acquiesence of the ministry’s departments to the practice. Without such an acquiesence it would surely not be possible for one individual to submit together bids on behalf of 20 or even 30 companies based throughout Greece. The conditions for participation and the bidding procedure are described in detail in the agreement; so are the «penalties» for the members of the group that refuse to stick to the deal. «The group is divided into sub-groups of about equal numbers… Each group appoints a leader and a deputy… The representatives of the sub-groups, together with the group’s president and director, form the board of directors,» which ultimately decides which firm will undertake the project (the «manager»). Bids are prearranged accordingly. The agreement determines that «objections among the members of the group are ruled out.» They are only allowed by agreement between the «manager» and the board. Members of the group are obliged to participate in the collusion over bids. If they are found to have abstained in three cases, they are «expelled and lose their rights.» According to the deal, if something goes wrong and the project is assigned to a member of the group other than the «manager,» then this member is obliged to set up a consortium so that at least 70 percent of the job goes to the «manager.»