DPWI on Beitbridge border fence procurement; with Ministry

Meeting report

The Chairperson welcomed Ms Patricia de Lille, Minister, and Ms Noxolo Kiviet, Deputy Minister of the Department of Public Works and Infrastructure (DPWI) to the meeting, which had been called to discuss the deviation from proper procurement processes regarding the tender issued to a contractor, Magwa Construction. The company had been appointed by the DPWI to install a borderline fence spanning 40 kilometres alongside Beitbridge at a cost of R37 million. The DPWI and National Treasury would be invited to present, followed by an interaction with the Committee.

Minister’s opening remarks

Minister De Lille acknowledged that the matter had generated a lot of public interest. She provided the chronological order of what had happened since the inception of the project up until now.

On 15 March, President Ramaphosa had addressed the nation on the outbreak of COVID-19, following the World Health Organisation’s (WHO) declaration of a global pandemic. In this announcement, he had called for the closure of 35 of the country’s 53 land borders. This had required the DPWI to evaluate the fencing at the Beitbridge border post between South Africa and Zimbabwe.

On the following day, 16 March, she had issued a ministerial directive stating the urgency of securing the border post. She had engaged with Ms Nosiviwe Mapisa-Nqakula, Minister of the Department of Defence (DoD), and issued an instruction to the DPWI to begin emergency procurement processes. The team was led by Mr Batho Mokhothu, Deputy Director General (DDG): Construction Project Management, and a senior official from the DOD. An appeal was made to the Chief Financial Officer (CFO) of the DPWI to secure the necessary funds, and for the Director-General (DG) to ensure the appointment of competent site managers.

On 20 April, Minister De Lille had written to the Auditor-General (AG) requesting an external audit of the emergency procurement and implementation of the 40km border fence. This was because of increased public concern over the project. On 30 April, the AG had accepted the Department’s request and indicated that the outcome of the investigation would potentially be delayed due to the limited availability of relevant staff as a result of the lockdown. The Department was still awaiting the final report.

On 25 April, she wrote the Deputy Director-General (DDG): Governance and Risk Management, and the Department’s internal anti-corruption unit, to launch an internal investigation, as well as to work alongside the AG’s office. This report was currently still outstanding. The Department committed itself to providing all reports and relevant communications to the Committee once the matter was finalized, and to return for further engagement if required.

DPWI: Procurement processes

Mr Batho Mokhothu; DDG: Construction Project Management, DPWI, reported that DPWI was required to secure national land ports of entry following the President’s address on the COVID-19 pandemic and simultaneous declaration of a National State of Disaster. The primary aim was to safeguard citizens from the spread of the pandemic. He reiterated that the directive issued by the Minister on 16 March to secure all South African Border posts had been done in accordance with the Disaster Management Act, No 57 of 2002. The Beitbridge Border Post was identified as an area to be prioritised in this process.

Emergency Procurement Approach

The emergency procurement instituted in this case was in line with National Treasury regulations, which permit deviations from procurement processes given certain conditions. Under normal circumstances, it would have taken the DPWI three months to secure the appointment of a contractor.

The negotiated procurement strategy taken up by the DPWI was the most appropriate, given the timebound circumstances the country was operating under. A market analysis was premised on the fact that the bills of quantities were baselined from 2014 scheduled rates, which were determined through a competitive bidding process. The contractor had tendered a sum of R37 million, which was lower than expected according to the Contract Price Adjustment Provision (CPAP) value. The DPWI saw this procurement strategy as a fair process.

The motivation for the appointment of the contractor was based on the DPWI’s view that it was an experienced and qualified company, with a Construction Industry Development Board (CIDB) Grade 8 CE. Additionally, the contractor was already working on the repair and maintenance programme at the Beitbridge land port of entry. This would ensure that the mobilisation required for the emergency procurement would be seamless and timely.

Mr Raymond Naidoo, Acting DDG: Supply Chain Management, DPWI, provided an overview of the supply chain management (SCM) process undertaken during the border fence project.

When initiating the procurement process, the DPWI had considered all available options to best accomplish the issued directive. Given the urgent nature of the circumstances, the DPWI had decided to employ a restricted or closed bidding process whereby it entered into a negotiated procurement strategy. The strategy went through the mandated Bid Adjudication Committee (BAC) processes and was presented to the committee, following which the award to the contractor was approved in line with the emergency procurement powers. As per the prescripts of the National Treasury, this was reported to the National Treasury and Auditor-General as a deviation from normal procurement processes. This was done within the stipulated reporting period.

National Treasury: Bidding process

Ms Estelle Setan, Acting Chief Procurement Officer, National Treasury (NT), reported that the NT was currently in the middle of investigating the bidding process leading up to the appointment of the contractor. It asked to reserve comments until its investigation had been concluded. A draft report had been completed, but it had received additional information it would like to evaluate further. A full and finalised report was expected by Friday, 12 June.

Discussion

The Chairperson indicated that in alignment with protocol, Members of SCOPA would be allowed to pose questions first, following which colleagues from other committees would be given an opportunity.

Ms T Marawu (ATM) asked if the Minister had tried to engage the DPWI’s internal audit and risk management before requesting the AG to perform an external audit. What had prompted the Minister to pursue the independent external audit first? What internal monitoring mechanisms were in place by the DPWI to assess the entire process of the project? Did the Director-General report the deviation from proper procurement to the Provincial Treasury and the Auditor General within the mandatory ten days? She asked what processes had been followed in the appointment of sub-contractors, as these were mentioned in the DPWI’s report.

Mr A Lees (DA) observed that in its motivation for the appointment, the DPWI had reported that the contractor was already working on the repair and maintenance at Beitbridge. Given the before and after pictures provided by the DPWI, from a performance point of view the contractor was not doing a good job at maintaining the fence. How did the Department justify appointing the same contractor for the border fence installation? What arrangements had been made by the DPWI to monitor and make sure that the fence was not cut?

Mr S Somyo (ANC) said the report indicated that the DPWI had started with a variation order (VO) to acquire the services of a contractor to be engaged for the installation of the fence. This process appeared to have been abandoned following the declaration of the National State of Disaster, although the content had not changed as far as the job of the contractor went. What then had differentiated the initial process which had been started from the use of emergency procurement in finalising the appointment of the contractor?

Ms N Mente-Nqweniso (EFF) asked the Minister and National Treasury what had prompted the investigations into the project. Without information from NT regarding the price determination and prescripts guiding procurement processes of this nature, it was difficult to engage sufficiently on the matter. This information was necessary, as it would guide the Committee’s discussion on the appropriateness of the pricing, and would allow Members to ascertain if any corruption had occurred in the issuing of the R37 million tender. She asked who in the DPWI had done due diligence on the company around quality, maintenance and a mock presentation of the finished product. Had the DPWI been provided with a mock-up to indicate what the final fence would look like? The pictures provided in the presentation clearly indicated that the fence was of poor quality and could easily be destroyed. What quality standards had been applied in passing the mock-up presented by the appointed contractor? In its preliminary cost comparison, the DPWI had presented several examples of fences that could be utilised, including what had been labelled a COVID-19 fence. What exactly did a COVID-19 fence look like and how was this determination made? She asked if the Minister could indicate when the Department would return, following the report from the AG’s office.

Mr B Hadebe (ANC) said the President had addressed the nation on 15 March, and the ministerial directive had been issued on 16 March. What was the content of this directive? Following that, the DPWI had conducted a site visit on 17 March, during which the decision to embark on the variation order had been made. At this point, the instruction had not been issued -- this was done only between 18-19 March. Once the decision for a variation order was taken, a detailed scope of work with a priced bill of quantities had been received. On 18 March, the variation order had been aborted and on the same day, an urgent meeting had been convened to look at alternative means. The NT had also issued instructions at the same meeting, and a decision was taken to follow the directives of the Treasury.

Whether or not a decision was made to deviate from proper procurement processes, there were certain principles and prescripts of transparency, equity, fairness and cost effectives which could not be abandoned, as they were enshrined in the Constitution (Section 217). The company ultimately appointed had initially been earmarked on the basis of the variation order, which was not in line with the scope of work of the borderline fence. It appeared as if the DPWI had done everything in its power to ensure that the tender was given to that company. Were the principles enshrined in Section 217 of the Constitution applied in the appointment of the contractor? Was rationality applied as far as procedural fairness and competitiveness in the public’s interest was concerned? Whether or not emergency procurement was required, all processes still needed to uphold these principles. The before and after pictures provided by the DPWI were dated 2007 and 2004. What was the reason for this, and what were the current visuals?

Ms S Graham-Mare (DA) asked if the DPWI had received value for money in the project. The pricing used was based on a market analysis performed in 2016 and extrapolated for 2020. In defence of the cost of the fence, the Minister had cited logistical reasons, including the site location and the urgency of the timeframe. Why were extra costs associated with the construction of the fence in 2016, if the additional logistical issues experienced now were not in place? This indicated that the initial price projections were incorrect. The materials used for the project were off the shelf -- nothing was specifically constructed, as the fence was very basic. Was value for money received if the project had used off the shelf material at a cost of R1 million per kilometer? An engineer was part of the scoping of the project, which was an exact replica of the fence that had previously been removed. Irrespective of the time constraints, was it a sensible decision to install the same kind of fence which had been completely destroyed by people? If the contractor had already been appointed to do work at the border post, did this not include maintenance and repair of the fence on either side of the border?

Ms M Siwisa (EFF) raised similar concerns as Mr Lees. She asked the Minister and the DG what had informed the appointment of the same contractor, given a proven record of poor performance. Had this not disadvantaged other contractors which could have done a better job? The fence that had been installed was the same as the one that had previously been erected. Was the appointed contractor responsible for the fence which was initially in place? The DPWI often spoke of its commitment to transformation in the CIDB, yet its actions in appointing the same contractor indicated otherwise. She asked the Minister if it was time the country had a state-owned building company to address the many issues surrounding over-expenditure in construction.

Ms B Swarts (ANC) raised concern over the pictures which had been presented by the DPWI. Who from the Department had taken the pictures? She acknowledged that the fence was constructed under emergency circumstances, but did this mean that the DPWI had done away with its normal procedures of deploying a project manager to monitor progress on site? As far as project management was concerned, what measures had been put in place to make sure the contractor was delivering what it was supposed to deliver?

Minister’s response

Minister De Lille responded that the DPWI had initiated an internal audit prior to appealing to the AG to perform an external audit. The reason for initiating the external audit was to ensure greater assurance and full oversight to address the widespread public concern over the matter.

She said she was not involved in the monitoring of procurement processes – this was the responsibility of the DG and DDG. During the lockdown restrictions, the DPWI had convened daily meetings during which progress reports were delivered. The Beitbridge project was a standing item on the agenda, and minutes from the meetings were available. She committed the DPWI to providing all communications with the AG and full reports once the investigations were finalised. These would be made available to the Committee, Parliament and the greater public. Additionally, the directive issued would be made available to SCOPA.

The DPWI’s investigations were prompted by thousands of questions asked by the public, and growing media interest in the matter. The investigations were in line with the accountability owed to public.

The Minister said she had also raised similar questions regarding the cost of the project. The DDG had responded that conditions, including rain, had made construction difficult.

The development of a state-owned construction company was a policy decision for government. However, the government was currently in the process of addressing state owned enterprises (SOEs) which had become a liability, rather than an advantage

She stressed that no Member of Parliament or Minister was allowed to get involved in procurement processes, and that she had not appointed any service provider.

The DPWI would address all questions related to the pictures provided and the specifications of the COVID measures. The DPWI had required the contractor to provide all necessary personal protective equipment (PPE) to workers, and would be willing to provide a report on this. It was unfortunate that they were meeting today, but the DPWI was ready to return to SCOPA once all the investigations had been finalised.

Department’s response

Adv Sam Vukela, DPWI DG, said that the deviation had been reported to the National Treasury and Auditor-General within the mandated period. The work was new and additional, to the extent that procedural processes had to be followed. A variation order could be used only if it was a continuation of an existing project, so the VO was not going to be relevant to the installation of the borderline fence, as this was new work.

Mr Mokhothu responded that sub-contractor information had been included in the presentation for the purpose of transparency to Parliament. Usually, the work of appointing sub-contractors was left to the primary contractor -- this was a known practice within the construction industry. The employer had a relationship only with the primary contractor.

He replied that the latest presentation he had showed pictures from 2020. He apologised if Members had an old presentation and asked for the updated version to be provided.

He highlighted the sequence of events leading up to the appointment of the contractor.

On 16 March, the DPWI had received a directive from the Minister of Public Works. On 17 March, the directive was used as a guide to process the variation order as per the directive. The scope of work was determined and the market analysis was done. On 18 March, the DPWI did due diligence, which was followed by the initiation of the negotiated procurement strategy.

He made a correction that the previous contract for the Beitbridge land port of entry had been for 2016, and not 2014. The DWPI’S reference to the remoteness of the site informed the conditions under which the project was operating. The 2016 rates had gone through a competitive bidding process, which was why they were benchmarked. These rates were complex, because they were not itemised and included all the expected costs, such as labour, material and profit.

The contractor had been appointed for work at the Beitbridge border, but this had not included the maintenance of the fence. The direction was to maintain what already existed on the site.

Second round of questions

Mr Hadebe said Members were presented with a challenge if they were issued with updated versions of presentations only in the middle of engagements. However, the updated version still spoke to a market analysis and bill of quantities completed in 2014. He reiterated his initial question, stating that whether or not emergency procurement processes had been initiated, there were still procedural principles of transparency and fairness which had to be abided by as per Section 217 of the Constitution. Again, on the basis that the bill of quantity and scope of work were done through a variation order, and the appointment was done through a deviation after the NT had issued notice, the same company had been appointed. As far as rationality, transparency and fairness went, had the DPWI’s procurement process fulfilled these Constitutional principles? He asked the DPWI to provide the report submitted to NT detailing the conditions of the deviation.

During the presentation, the DPWI had mentioned that it had received daily progress reports, but it had presented a letter of concern regarding progress that had been made only eight days after construction had begun, which was 14 days after the contract had been initiated. What had the DPWI’s representative on project management been doing all along, and why had it taken so long for concern to be raised? Given that the project had exceeded its projected completion time by eight days, what were the associated costs? Was the quality of fence best suited for its intended purpose and the amount of money which had been invested?

Ms Mente emphasised that her question was on due diligence. She was aware that the DPWI had done due diligence, but wanted the specific name(s) of those involved. Who had determined the appropriateness of the company for the project, and what was the scope of this due diligence as far as quality and quantity were concerned? Due diligence measures were precisely for the purpose of providing a before and expected after picture. In the Minister’s opinion, was the fence suitable for the purpose it had been designed for? Had proper due diligence been done, as it would have been clear that the fence would be easily cut and that it could easily be removed. The due diligence scope was designed to clearly detail quality, quantity, construction and pricing.

When distinguishing between emergency procurement versus normal procurement, it was crucial to look at the bill of quantity. Once the bill of quantity was huge, this necessitated one to look at the scope of work. The bill of quantity provided by the DPWI already showed irregularities. Had the 40km construction and appointment of a pre-existing contractor indicated an emergency?

Mr Lees commented that the DDG had now stated that the contractor had not been responsible for the fence prior to the project. What exactly did the maintenance entail if it did not include the fence? Based on this, it appeared as if the company had done a limited amount of work on the fencing, so why appoint them? Was it appropriate to appoint a contractor who did not have a demonstrated expertise in fencing? What had the contractor’s work been prior to the emergency? His question on what plans had been made to ensure the maintenance of the fence had not been answered. Was this an indication that no arrangements had been made? He asked if the fence was currently intact, and if it was fulfilling the intended function? R37 million had been spent to prevent people from crossing illegally -- were people still crossing illegally?

Ms Marawu followed up on the Minister’s statement that an internal audit had been conducted. What had the findings of this investigation been? She acknowledged the DDG’s response concerning the appointment of sub-contractors being the responsibility of the primary contractor, but the Department still had a critical role in monitoring that small, medium and micro enterprises (SMMEs) were appointed. Had the DPWI played this role? If yes, how many sub-contractors had been appointed? Were allegations that the fence had already been vandalised true? If so, how was the cost of the fence warranted?

Mr Somyo said there had been few answers provided by the DPWI, and that the discussion had been constrained. This was probably because the investigations were still in process. The said there had been five salient points in the directives issued by the Minister for the procurement, which clearly outlined the expectations and provided an indication of who was responsible for what. Therefore, was the Minister satisfied that her directives had been met?

Ms Swarts requested that the DPWI provide responses in writing, because the engagement so far had not been sufficient. It was unacceptable to provide updated presentations while the meeting was already in session, as the Committee had prepared based on what had been circulated earlier. SCOPA was not getting the necessary information to engage sufficiently. The assigned project manager must write a report detailing what had transpired at the site. If it had taken 14 days for concerns to be raised on progress, who had been monitoring the implementation prior to that?

Ms Graham-Mare said it had been indicated that the appointed Magwa construction was not a preferred service provider, but they had worked on 14 projects, 11 of which were land ports of entry. Why was this the case?

Ms Siwisa again asked the Minister if she did not think the DPWI had disadvantaged other contractors by appointing the same company for an additional project. Did the Minister rely only on the public and media interest to determine when to initiate an investigation? Did the DPWI not have monitoring and evaluation processes governing every project it undertook? If the DPWI did not have consistent oversight over its projects and relied on public opinion, by the time information reached them it was likely that irreparable damage had already occurred. She expressed surprised that rates were based on the remoteness of the site, and not on the type and cost of materials.

The Chairperson said that it was very clear that the Committee was not being given the answers it required. This was an indication that something was amiss. At the heart of the matter, the fundamental question was why had this particular contractor been appointed. Was this contractor suitable for the task? Had they delivered value for money? The final product of the fence installed at Beitbridge did not warrant the amount of money that had been spent.

Minister’s response

The Minister clarified that the daily reports she had mentioned were on border security, theft and the vandalism of the fence. As enshrined in the Constitution, it was the duty of the South African National Defence Force (SANDF) to secure borders. She had written a report to the Minister of Defence detailing the theft and vandalism occurring at the port, asking her to enhance patrols. Three days later, the border patrol was enhanced through helicopter surveillance and the deployment of motorbikes, but theft and vandalism still occurred on a daily basis.

Value for money was one of the main issues the Minister had asked the AG to determine. Details on the current market rate for fences, suppliers and whether the DPWI got value for money, would all be revealed by the outcomes of the investigation.

She agreed with Ms Mente that this issue had to be resolved. This was why the DPWI had initiated all of the investigations currently being done. These would assist all the parties involved and the public to get the real facts and truth of the matter.

Even after completion of the project, there were still obligations on the part of the contractor. The DPWI would speak further on this.

The directive she had issued was intended to serve as a guideline, and to ensure that all involved understood the urgency of the project. The actual length of the border was 700km, but only 40 km was commissioned under this project, which she admitted was not enough. The Department needed to return to the Committee to present its medium and long-term plans on how to secure the borders.

The Minister said she took a direct interest in what the public demanded of public servants. Prior to any concerns being raised by the public, she had already questioned the value of the project from its inception. At this point, the DPWI had paid R21 million to the contractor, and she had directed the Chief Financial Officer (CFO) not to make any further payments till the investigations had been concluded.

Department’s response

Adv Vukela responded that the DPWI had reported to the National Treasury and Auditor-General within the required time. He emphasised the Minister’s point that the task of monitoring the security of the fence had been handed over to the DoD. He said the fence was serving its purpose and that he had not received any contrary view. The DWPI was satisfied that the fence was serving its purpose.

He accepted that the deviation, in its very nature, would disadvantage other contractors as it limited the process of identifying which contractor had been awarded a project.

Mr Naidoo gave a commitment that the DWPI would provide the report submitted to the National Treasury and Auditor-General, detailing the conditions of the deviation.

Mr Mokhothu confirmed that a project manager from the DWPI had been assigned to work alongside the project team. Daily reports had indeed been made and issued to the office of the Minister. These reports were lengthy, as they covered the course of events from the first week of the project to the last week. These would be provided to SCOPA. Weekly progress meetings had also been held on site to discuss contractual agreements. The effectiveness of the monitoring would be demonstrated by these reports. It was uncommon for a project of this nature to be achieved in the timeframe that it had been done. The reports that would follow would indicate the effort put in to deliver on the project, including the long hours the team had been subjected to, the daily checking by engineers on site, and some of the issues raised as far as regular monitoring was concerned.

The DWPI had not paid the full amount of R37 million. All payments that had been made were based on work done. When a site visit was done in the future, a bill of quantity would indicate what had been paid for, to demonstrate if value for money was achieved.

Regarding maintenance of the fence, as far as security was concerned, the DoD was responsible and had been involved in the project since its inception. In December 2019, both Departments had started engaging, and the DoD had been part of the meetings which took place in March. The DoD was part of the signing off of the completed project and offered assurance on the satisfactory nature of the fence.

Further information on the due diligence of the company, including its work history, would be provided in writing to the Committee. Records from the CIDB would be included to demonstrate how the company had grown over the years and successfully completed various projects. If there was any wrongdoing done by the company in the history of its work with the DPWI, this would be included in the report.

Concluding remarks

The Chairperson said the Committee was still not getting answers to the questions it had asked. The story presented by the DPWI still did not make sense. He failed to understand what the Department was satisfied with, because the fence was a mess. The engagement was indicative of the extent of the mess which the DWPI had not been forthcoming about. He would liaise with the AG to establish the projected timeline of the report, and to determine future engagements. He said the Special Investigating Unit (SIU) had visited the project site and done an assessment on value for money. He expressed surprise that this detail had not been mentioned by the Department, and asked for this report to be provided.

He said SCOPA would first engage with the report submitted by the DPWI to the National Treasury. In his view of what had been presented, he was not satisfied with the competence of the company. In the next engagement, it was crucial to have the DoD and Department of Home Affairs present to determine their involvement in the matter. At this point, he disagreed that the fence was fulfilling its intended purpose.

Going forward, it was important to schedule a visit to Beitbridge border. This, along with the findings of the Auditor-General and the report submitted to the National Treasury, would inform the recommendations made and the resolutions taken. In his view, there was no doubt that the procurement process had been done to favour the appointed contractor, and that funds were being diverted elsewhere. Until proven otherwise, he would hold on to this view, as there was no way the fence had cost R37million. The DPWI’s inability to provide conclusive answers was in part due to the ongoing investigations, but also indicative that a lot had gone wrong during this project.

Mr Hadebe said the Department should indicate if it was unable to answer SCOPA’s questions. The Minister was the one who had issued the initial directives, which should have clearly indicated the expected quality and cost of the project. The project had since been completed, so there should be no further invoices.

The Minister assured SCOPA she had been unaware of the involvement of the SIU in the matter. In order for the SIU to get involved, the Minister had to write to the President to seek a proclamation to be gazetted. She would find out who had approached the SIU.

She said the DPWI was committed to getting to the bottom of the matter. In initiating the investigations and appearing before the Committee, it had demonstrated this commitment. She appealed to the Committee for patience, and said the Department would provide all relevant reports and communication as already expressed.

The Chairperson said it was important for the project manager to be present at the next engagement to present and field questions. The abuse of deviations and virements during the period declared as a national disaster had to be dealt with. SCOPA would engage further, and use this case to set a precedent on the expected standard where oversight was concerned. The Committee would consolidate all outstanding questions, which would be sent to the DPWI by the following day. It expected the Department to provide written responses within the following week.

Committee matters

The Chairperson announced that South African Airways’ (SAA’s) responses had still not been received. On 5 June, the Committee would be meeting with National Treasury, the Auditor-General, the Department of Water and Sanitation and the Water Boards to discuss matters outstanding from the previous engagement. Documentation for the meeting would follow.

He thanked the Minister, Deputy Minister and the Department’s team for their presence. Ultimately, the South African people had every right to complain and the Committee was duty bound to respond to all public claims, especially where there was legitimacy and merit. What had occurred in so far as the construction of the fence was concerned was a disgrace, to say the least. It was all anchored in corruption, wrongdoing, favouritism and the abuse of the disaster. He had been shocked when he saw the conditions at the Beitbridge border. It was imperative that the Committee exercise its duty in resolving the matter. A failure to do so would set a precedent of normalising the abuses which were prevalent in the public service.

He would engage with the House Chair for Committees to establish which standard operating procedure (SOP) was most appropriate to visit the site, to make sure that SCOPA’s resolutions were anchored in facts, as the presented pictures had discrepancies.

The meeting was adjourned.