Another tender scandal hits Cape Town

Time of article published Apr 12, 2006

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By Anél Powell

In the latest multi-million rand tender scandal, former Cape Town city manager Wallace Mgoqi may have to explain why a R5-million contract, which was extended by R3-million and eventually totalled more than R12-million, was approved in a closed tender process and a series of allocations by-passing the tender process.

The contract included the payment of monthly fees of up to R140 000 for consultants.

Councillor Neil Ross, newly appointed chairman of the housing portfolio committee, on Tuesday called for an urgent forensic audit into the awarding of the N2 Gateway project management contract to Johannesburg-based Cyberia Technologies.

Ross questioned why more than R4-million was pumped into the project a month before the contract was terminated by the City in January this year.

He also said it was "outrageous" that the firm's programme director was paid R141 000 for work in January, more than the salary of the executive mayor or city manager.

"I move that this matter be referred to the mayoral committee for a forensic audit."

The matter angered housing committee members, with councillor Una Pick saying: "This is a scandal involving ratepayers' money."

She seconded Ross's motion for a thorough forensic audit to be conducted.

Referring to correspondence included in the meeting's agenda, Ross indicated that Cyberia did not comply with either the financial or technical criteria required to win a tender.

In a July 2004 report to the city manager, it was recommended that the UAI Consortium, headed by Africon, be appointed on a phased basis with a total tendered price of just over R3,5-million.

But five months later, a resolution passed by the supply chain management committee resolved that "in terms of the scoring and criteria used by the advisory body", Cyberia Technologies would manage the project for a total cost of R5-million.

According to the comments handwritten at the end of this resolution, the initial recommendation to appoint Africon was disregarded as Cyberia had a better price, BEE and previous public sector experience.

"But Cyberia had little or no experience in the public sector. Its experience was in IT," said Ross.

Peter Oscroft, project co-ordinator of the city, informed the director of finance Ike Nxedlana in a confidential email that: "On the basis of Cyberia's submission... the adjudication committee did not consider Cyberia sufficiently experienced in the housing and infrastructure field to consider them beyond the first stage and therefore did not open their financial proposal."

Oscroft's letter also states that the tender was awarded without knowing how much Cyberia would charge for phases 1 and 2 of the project - the only two phases for which the City had "secured sufficient funds".

Almost a year later, in November 2005, chief operations officer Rushj Lehutso requested an extension of Cyberia's contract after the "operational needs of the N2 Gateway project required that Cyberia upscale their office".

The firm had also spent its tendered amount of R5-million before the end of the year and Lehutso requested an additional R3-million be allocated.

Ross said this was not referred to the housing committee or council. In his letter to Mgoqi, Lehutso states that the additional funding would be approved, without calling for tenders, "in order that they (Cyberia) may complete the 12-month period envisaged in their tender".

In January this year, Mgoqi told the supply chain management committee that "the normal requirements of calling for tenders be dispensed with for the purposes of extending the contracts of Cyberia Technologies further".

In the letter, Mgoqi stated: "The City intends terminating the services of Cyberia" in a way "least damaging to the City" and requested an additional R4,6-million for work done by Cyberia until its contract expired on January 31.

Both Lehutso and Mgoqi stated in their correspondence that "it would be in the public interest" to bypass the tender process.

There were concerns that Cyberia was "threatening to bring a very large claim against the City" and the hope was expressed that this agreement, with the additional R7-million, would protect the City from future legal action.

Ross said Mgoqi could, in terms of delegated powers, push through a tender for less than R10-million. However, Cyberia's contract came to more than R12-million, and so should have been put to council.

Ross expressed concerns about the 11 articles pertaining to secrecy in the contract signed between the City and Cyberia. These included restrictions on the publication of business or financial information relating to the project.

In February, the role of developer for the N2 Gateway was transferred from the City to Province, and Thubelisha Homes was appointed as the project manager. But, as Ross noted, unlike the contract between the City and Cyberia, the contract with Thubelisha was not bound by extensive secrecy clauses.

While Ross said it was widely known that Cyberia failed to deliver on their agreement, a spokesperson for Cyberia's Gauteng office said allegations of underdelivery by the company were "never founded".

He said the company was still considering whether or not to take legal action against the City for the premature termination of its contract.

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