Threat over cancelled tenders
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The hard-hit construction sector is seeking legal counsel after the City and the province cancelled tenders worth billions of rand which would have created thousands of jobs and provided a much-needed boost to the Covid-devastated economy.
The Western Cape Property Development Forum’s Deon van Zyl said it had held preliminary talks with legal counsel as most members had asked the body to investigate the best way to deal with the matter.
The move follows the cancellation of an Integrated Rapid Transport (IRT) related tender by the City of Cape Town worth R52 million, and another by the provincial government for the much-anticipated Klipfontein Hospital worth R1.2 billion.
The IRT tender was for the provision of professional services in respect of the design and construction of depots.
Currently, there are only three depots built as part of Phase 1 – in Dunoon, Green Point and Atlantis.
“Infrastructure for much-needed public transport facilities has been cancelled at a time when public transportation itself lies in tatters,” said Van Zyl.
He said the Western Cape government’s Klipfontein tender, advertised in 2019, was related to “multidisciplinary professional services” estimated to have a capital value of about R2.2bn, which would have been the cost of the construction of the initial 300-bed hospital.
Earlier this year, the national government also cancelled a professional services tender related to District Six, claiming that none of the 37 consortia bids “complied” with the process. But Van Zyl said many forum members refuted this, as they had followed “the application process to the letter”.
The City’s Mayco member for Finance Ian Neilson confirmed that the IRT tender was worth R52m.
Van Zyl said that before building projects could be tendered, the relevant professional design services must be acquired.
“All three tenders mentioned were for professional services. Without this work, there can be no construction tenders,” said Van Zyl.
He said the stalling of professional services had a domino effect on the eventual construction work.
“It is the construction phase from which the most benefits are derived from any stalled construction tender. Of a R1bn tender, approximately 17% of that R1bn, or R170m, goes directly to wages for construction workers – among the most economically vulnerable members of our society. A further 8% would have gone to salaries across the duration of the project,” explained Van Zyl.
The R2.2bn Klipfontein Hospital tender alone would have amounted to a total loss of R550m in wages and salaries, said Van Zyl.
Companies that had submitted tenders had lost money too.
Van Zyl said it was estimated that the 17 private consortia that tendered on the Klipfontein Hospital represented approximately 340 consultancy companies which collectively spent between R30m to R50m in professional hours and real costs preparing the submissions.
“If the cancellation of the tender does not equate to the government causing fruitless and wasteful expenditure by the private sector, then I am not sure what is. And these numbers exclude the costs incurred by the government in the first place, in preparing tender documents and adjudicating tenders,” he added.
He said despite the losses incurred, some companies did not raise concerns for fear of the possibility of being blacklisted against future tenders.
Neilson said in the case of the ITR tender, none of the bidders complied with the “functionality criteria” in order to be eligible for its award.
“The City received 15 offers from the market. However, none of the offers provided all the required resources in order to qualify as an acceptable bid,” he said.
The Western Cape Department of Public Works said the Klipfontein Hospital tender would be re-advertised after consultation with legal services and new documentation had been drawn up.
But former Mayco member for Transport Brett Herron found it “unusual” that none of the bidders for the IRT-related tender did not meet the criteria.
Herron, of the GOOD Party, said for every single job in the construction sector, seven more were created.
He said the cancellation of the tender also meant a delay in the My CiTi Phase 2A roll-out.
“It means there will be a delay in the construction of bus depots for operating companies. As part of the negotiations with taxi bodies on the MyCiTi N2 Express, they wanted a stand-alone depot for Khayelitsha, as there isn't one currently. So they would be the operators of the depot, and now this delay also compounds the breach of trust with the taxi industry,” said Herron.
He added that it took 135 days – almost half a year – to conclude a “perfect” tender.
An Economic War Room was established by Premier Alan Winde in 2019 to deal with the bureaucratic process and red tape experienced in the procurement processes.
The construction industry was identified as one of five key sectors for economic recovery and growth.
Van Zyl said to date the Economic War Room did not appear to have engaged with the topic of delayed or cancelled tenders.
“We call on all spheres of government to take the matter of delayed or cancelled tenders seriously, bearing in mind that this practice only delays service delivery and economic recovery further,” said Van Zyl.
The Chamber of Commerce and Industry (CCI) said the stalling of tenders imposed an unnecessary cost on society.
Chamber President Jacques Moolman said the body was not privy to the required criteria for the tenders, but could empathise with the construction sector’s frustration in the current climate.
“Although we understand that standards need to be met, and that the environment can change, requiring a re-specification of the tender, it must be remembered that behind every tender is the required completion of a necessary service to enable the effective public maintenance of society,” said Moolman.
He said that the tenders related to crucial requirements for the region, namely integrated transport, healthcare and redressing the societal imbalances prevalent with District Six.
However, Moolman said he understood that City was governed by strict rules because they handled public money, and this had made them nervous about making a wrong decision.
“Instead of concentrating on the needs of those who paid them, officials tend to focus on avoiding making decisions,” said Moolman.
“This has negatively affected the development of the city, causing unnecessary delays in project approvals, and, worst of all, making Cape Town less of an attractive place in which to invest,” he added.