Durban officials to pay after landmark judgment in botched tender scandal

2017-04-05 14:13


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Durban – In a groundbreaking judgment on Wednesday, 16 officials of the eThekwini municipality – including the city manager – have been ordered to pay from their own pockets the costs of litigation over a botched tender involving a three-year, R81m water loss insurance contract.

Among those being "punished" for "knowingly acting unlawfully, unconstitutionally and unethically" in the matter are the unnamed city manager who approved the awarding of the tender, and the named managers of contracts, water and sanitation, the deputy head of supply chain operations and some members of the bid evaluation committee and the bid adjudication committee.

Unless they successfully appeal the order granted by Durban High Court Judge Dhaya Pillay they will have to collectively share 50% of the costs of litigation in the matter.

The judge has ordered the current acting city manager to report back to her by the end of July on what steps have been taken to recover the money – and thereafter on the last day of the month until the costs are paid in full.

She has also ordered that the ruling be served on the Auditor General.

The matter came before Judge Pillay as an urgent application last year brought by an unsuccessful tenderer, Westwood Insurance Brokers, seeking to set aside the decision by the city to give the lucrative tender – to ensure ratepayers are covered for water losses – to a competitor, South West Brokers CC.

'Lack of transparency and accountability'

Westwood argued, and Judge Pillay ruled, that South West had not complied with an important condition of the tender because its bid was not underwritten by an insurance company licensed to operate in South Africa and, as it stood, it would effectively leave ratepayers uninsured.

While the city initially opposed the application, it finally consented to an order setting aside the awarding of the tender.

The judge went further, directing the city to appoint Westwood, which held the previous contract, and ordering South West to pay half of the legal costs.

She said during a previous hearing that ratepayers should not foot the bill for the litigation and called for the identities of and explanations from all involved.

"Their inefficiencies are unexplained and their unjustified preference for South West is unexplained. Whatever the reasons, be it bias, incompetence, negligence or fraud, the lack of transparency and accountability of public officials under the glare of the Constitution was decisive," she said.

In her ruling on the costs issue on Wednesday, Judge Pillay said she had trawled through the affidavits of the responsible officials and the "puzzling question" remained: How did the entire procurement team, including officials, financial experts, legal advisers and engineers get it wrong?

'They decided that chalk is cheese'

"They decided that a quotation was the equivalent of a letter of undertaking and that the provision of professional indemnity insurance qualifies as underwriting for underground leaks for individual dwelling units.

"Metaphorically speaking, they decided that chalk is cheese," the judge said.

"The possible explanations range from mistake, ignorance, incompetence, negligence, corruption or something else. However none of the deponents advance any of these possibilities.

"They persist in defending what is now manifestly indefensible to try to justify their conduct in order to avoid paying the costs.

"Their responses fortify their failure and continuing refusal to be not only accountable and transparent, but also remorseful for their manifestly inexplicable decision."

She said contrary to regulations, none of the committees or officials had exercised their independent impartial discretion and while a legal adviser had advised that the South West bid should be disqualified, they "cow-towed and capitulated" to the bid evaluation committee.

City urged to investigate further

A recurring theme, she said, was non-disclosure.

But, she said, she could not single out individuals as having committed acts of corruption "however, given how bizarre the decision is, I cannot exclude that possibility".

Judge Pillay encouraged the city to further investigate the awarding of the tender.

On the role of South West, she said it had the most to gain and its misrepresentations were not naive or innocent.

"No one tendering to provide underwriting insurance for water leaks can genuinely mistake professional indemnity insurance as compliance [with the tender], not when insurance for leaks is the core service for which the tender is issued, not when the potential reward is as high as R80m and definitely not when the risks of non-delivery for the residents of eThekwini would be catastrophic."

Read more on:    durban  |  corruption

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