Water fight over R322m overspend

2018-08-19 10:09

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The bankrupt department of water and sanitation, which has had to shelve major projects, will pay a company more than R600m to handle a bulk water supply project which another service provider is willing to build for R278m.

Documents obtained by City Press indicate that the department, through Sedibeng Water, will pay Pro-plan Consulting Engineers more than R600m to design and supervise the construction of phase two of the Vaal Gamagara Water Project in the Northern Cape. The department has appointed Sedibeng to implement the project.

The project is aimed at increasing water supply to agriculture and industry, including mines and manufacturing companies in the Northern Cape, Free State and North West.

Blackhead Consulting, which has dragged Sedibeng Water to the High Court in Bloemfontein, told the court that it would have delivered the project for R278m. The company wants the court to review and set aside Sedibeng Water’s decision to appoint Pro-plan.

Blackhead Consulting is owned by Edwin Sodi, once a close associate of former water and sanitation minister Nomvula Mokonyane.

The R600m that Sedibeng Water will pay Pro-Plan is 7.5% of the Vaal Gamagara project’s R8bn cost, inclusive of construction fees. The Engineering Profession Act and the Engineering Council of SA (Ecsa) permit engineering companies to charge a maximum of 4% of the total cost of a construction project.

THE CURIOUS CANCELLATION

In February last year, Sedibeng’s procurement officials recommended the appointment of another company to design and supervise the construction of the Vaal Gamagara project for R255m. At the time, the project was estimated at R18bn.

However, the water utility was forced to cancel the tender because it lapsed before a service provider was appointed. By law, a lapsed tender cannot be awarded and has to be re-advertised.

After cancelling the initial tender, Sedibeng advertised another, also worth R18 billion. But in January, the company wrote to all 14 companies which submitted bids, informing them that officials had decided to cancel the project again.

Officials told the bidders that the water company had to withdraw the tender because the projected water demand had decreased dramatically and the estimated total cost of the project had decreased from R18bn to about R11bn.

However, documents City Press obtained suggest that Sedibeng Water had no intention of awarding the tender to Blackhead Consulting or any of the other 14 bidders.

On November 10 last year, the utility launched a parallel procurement process to find a firm of consulting engineers for the Vaal Gamagara project. On that day, the water utility’s acting chief executive, Mpinane Shasha, wrote to then acting water affairs director-general Sifiso Zulu, asking him to allow Sedibeng to appoint a consulting engineering firm from the department’s database of approved service providers to work on the Vaal Gamagara scheme.

To save time and money, Treasury’s regulations allow government entities to appoint a company already contracted by another department to deliver the same services without going out to tender. The only requirement is that the government entity which first contracted the service provider must have appointed it through an open public tender. Pro-plan is on the department’s database.

On November 28, Zulu approved Sedibeng’s use of its database of consulting engineers. About two weeks later, Sedibeng wrote to Pro-Plan, informing it of its intention to appoint it to design and supervise the construction of phase two of the Vaal Gamagara project.

On February 23, Sedibeng sent a letter to Pro-plan, informing it of its appointment at a cost of R600m to design and supervise the construction of the project, which was revised from R18bn to R8bn.

THE COURT BATTLES

In its defence against Sodi’s legal action, Sedibeng told the court that Blackhead was confusing two different tenders. Sedibeng argues that the tender it cancelled on January 22 and the one it handed to Pro-plan were very different.

“There are two distinct projects with fundamentally different scopes,” the utility said in court papers, adding that the original tender was cancelled because there was no need for such a big project and would have “constituted a massive misuse of state resources”.

In his founding affidavit, Sodi said he initially accepted Sedibeng’s reason for cancelling the tender, but challenged it after hearing it was awarded to Pro-plan.

He said the revision of the scope of phase two of the Vaal Gamagara scheme should have no bearing on the appointment of the engineering company tasked with designing and supervising its construction. He said this was because last year, Sedibeng told bidders that the successful service provider should prepare to adjust their fees should the scope be revised.

Sodi said his company’s initial pricing, based on an R11bn contract, would have been R217m less than the R600m Sedibeng will pay Pro-plan. But since the project was revised to R8bn, Sodi said Blackhead would also have revised its price to R278m, or less than half of what Sedibeng will now pay.

Sedibeng Water, Pro-plan and the department of water and sanitation refused to comment on the case.

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