The central and Tottori prefectural governments on Friday ordered 14 contractors to suspend business due to their involvement in illegal subcontracting in a public works project.
The scam emerged after the prefectural government granted the road-related project in fiscal 1999 to eight contractors in Tottori that lacked the capability to perform it, who then subcontracted a core part of the project to other general construction contractors.
Subcontracting entire public works projects is forbidden by a law regulating the construction industry. But it is said to have been a common practice for construction firms to seize on a loophole in the law and subcontract main parts of such projects.
The eight Tottori contractors received orders for the project for 501 million yen and then subcontracted it for 330 million yen.
The Land, Infrastructure and Transport Ministry said it ordered six of the 14 to stay out of business in the Chugoku area covering Tottori Prefecture for 10 to 22 days beginning June 14.
The prefectural government also said it ordered the remaining eight to stop operations for up to 15 days starting June 14. It also decided not to assign any public works projects to 13 of the 14 contractors for up to one month.
The project in question, completed in March 2000, was part of economy-boosting measures taken by the central government.
The objective of the project was to inject cement under an area of road that was to be rebuilt, to bolster its weak foundation.
The eight contractors that received the orders for the project claimed they did not subcontract the whole of it and thus did not violate the law, as they sent senior engineers to the project, a land ministry official said.
The official said the ministry judged that the contractors assigned the main part of the project to other construction companies and this amounted to a de facto subcontracting practice.
Also Friday, the land ministry ordered the Tottori government to strengthen its oversight of contractors and improve its methods of assigning public works projects.
It is the first case in the country in which the state government has given a disciplinary order to a local government while concurrently taking punitive action against contractors for their handling of a public works project.
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