- Sanral will readvertise tenders for critical infrastructure projects cancelled over a "material irregularity" in the procurement process.
- The Sanral board does not know for certain that there was corruption in the previous procurement processes - but an internal control to prevent corruption was not "respected".
- An independent public institution with expertise in infrastructure procurement will evaluate the new bids.
The South African National Roads Agency's (Sanral) can't say for certain that there was corruption involved in billions of rands worth of tenders it cancelled - but internal controls meant to guard against corruption were not "respected", says board chairperson Themba Mhambi.
Mhambi and Transport Minister Fikile Mbalula on Monday addressed the media on critical road infrastructure project tenders which were cancelled.
The four tenders the board did not approve the awarding of were valued at R10.6 billion and a fifth tender - Open Road Tolling, valued at R6.8 billion and linked to the Gauteng Freeway Improvement Project, was cancelled because it lapsed. The total value of cancelled tenders amounted to R17.47 billion.
These tenders, however, will be readvertised and allocated within the next four months, and an "independent, public entity" with expertise in infrastructure procurement will handle the process. Mhambi could not name the entity yet, as it has not yet been approached by Sanral, nor has an agreement been reached.
'Not how we run this country'
Both Mhambi and Mbalula spoke out against repeating the same mistakes that contributed to state capture.
Addressing the matter, Mbalula said that he had been receiving calls from "tenderpreneurs", trying to get him to intervene in Sanral's board decision to cancel the tenders.
"There have been people calling me, some of them I believe are tenderpreneurs, who have tendered here. They are asking me to do things in the dark which were condemned in state capture.
"That is not how we run this country," said Mbalula.
But as a minister he has no role in procurement processes, and would not intervene to avoid a repeat of the events that contributed to state capture.
Mbalula directed aggrieved bidders to approach the courts to challenge board decisions. He said that he would not hesitate to act against the board if there were evidence the board had been derelict in executing its fiduciary duties.
Asked about whether there was corruption involved, Mhambi said that the board did not know if there had been any corruption, but an internal control designed to ensure no corruption was "not respected".
"… Therefore we cannot guarantee as this board that there was no corruption in the same way we cannot say conclusively that there was corruption."
Mhambi provided background on the circumstances that led to the decision not to approve the tenders.
He noted that the board is not usually involved in procurement processes. But contracts above R750 million - as is the case with these projects - are brought to the board's contracts committee for review.
The board in January 2020 found that the construction contractor bid evaluation process had a "major, potentially corruptive" flaw in that it created a situation for a conflict of interest to arise.
Specifically, the process allowed for the same service provider to design drawings for an infrastructure project, develop technical specifications for the tender and also determine the technical bid that should be recommended for award by the Bid Evaluation Committee.
To address this, the board, on 28 January 2020, adopted a resolution indicating that the consultants involved in the design of a project and developing the technical specifications for the tender should not be involved in the evaluation of the technical submissions by bidders. The aim was to have another independent engineering consultant look at the bids and make recommendations to the Bid Evaluation Committee.
The resolution aimed to ensure separation and segregation of duties - which is a well-known governance principle aimed at preventing conspiracy and fraud, explained Mhambi. The board wanted to avoid having the service provider also the determiner of who may get a Sanral tender as this would go against a fair, equitable, transparent, competitive and cost-effective procurement process, he said.
But more than a year down the line, the board discovered this resolution was not adhered to - and essentially, the internal control was violated. In light of this, the board decided not to approve the awards. If the board had sanctioned the proposed awards, it would have created a situation where an adverse audit finding would have been made against Sanral, Mhambi said.
A failure to adhere to the board resolution is at the heart of the problems with the tenders - the Mtentu Bridge, the Ashburton Interchange project, the EB Cloete Interchange Improvements, the R56 Matatiele rehabilitation, and the Open Road Toll tender.
But there are other matters the board flagged for some of the tenders.
In the case of the tender for the Mtentu Bridge - part of the N2 Wild Coast project - a bid that should have been disqualified, was accepted. Mhambi explained there were problems with the specifications of the bid - for example, it did not set aside 30% of the work for sub-contracting, which was required. This deviation was done without board approval, which is why it was irregular, Mhambi said.
Other concessions were made, which were not extended to other bidders. Ordinarily, Sanral would retain some of the money paid to contractors to insure it against shoddy work or non-completion. But instead, the bidder was allowed an unsecured guarantee.
"Fairness requires [that] all bidders are treated the exact same way," said Mhambi.
In the case of the Ashburton interchange project, a bidder was wrongfully disqualified. "It would be the height of imprudence for the board to allow awarding of such a tender when the litigation risks from the disqualified bidder are material," Mhambi said.
As for the Open Road Tolling tender - the sub-contracting requirement was reduced from 30% to 15% without the approval of the board.
Craig Lemboe, senior economist at Bureau for Economic Research, noted that confidence of civil contractors is already low and they are in need of work. The FNB/BER civil confidence index shows that confidence was at 9, out of 100. The tender cancellations typically means kicking a sector which is already down, Lemboe explained.
Cas Coovadia, CEO of Business Unity South Africa, noted that business and investors need certainty and transparency, particularly in relations between business and government agencies.
He noted that issues like this do exacerbate uncertainty.