The procurement practices of Rand Water have come under a harsh spotlight after the Gauteng High Court interdicted a R168-million tender for steel pipes. The judgment found that Rand Water brushed aside a lower bid that would have saved the parastatal millions of rand. By Amil Umraw for AMABHUNGANE.
The excuse used by Rand Water was a policy called the “financial tolerance principle” (FTP), which the utility claimed entitled it automatically to disqualify bids of more than 25% below its own estimate of the contract price.
Based on the FTP, it awarded the tender to Africa Pipe Industries (API) – whose bid was R14-million higher than that of a rival supplier that met the tender specifications, Hall Longmore.
AmaBhungane has since established that even after the tender was set aside by the court in October last year, API and Hall Longmore reached a deal to split the work at the higher price of R168-million.
Both companies failed to respond to amaBhungane’s questions over a two-week period.
The saga began in October 2015 when Rand Water put out a tender for the supply, delivery and storage of 16km of steel pipes to augment its S1 pipeline route, which feeds water from the Vlakfontein reservoir to Midrand, the eastern suburbs of Pretoria, Mamelodi and the Thembisile Hani Municipality.
With Rand Water’s estimate for the tender at R225-million, Hall Longmore put in a bid of R154-million and API R168-million.
The court documents reveal a curious pattern of delays and lack of information in regard to the award of the tender, which was advertised in October 2015 and slated for award in December that year:
Rand Water spokesperson Justice Mohale said that as a public entity, Rand Water “cannot automatically disclose information and a PAIA process must be followed to protect third party information”.
In May last year Hall Longmore lodged an urgent application in the Gauteng High Court to have the tender set aside. This was ultimately granted in October.
In her judgment, the Judge Sharise Weiner found:
Hall Longmore told the court that an interdict was needed because a review tribunal was unlikely to cancel the tender even if it was unlawfully awarded, because the contract would have been completed by that stage.
In its response, Rand Water pleaded that any further delays would adversely affect water supply to communities.
API argued that it would suffer “catastrophic losses” because steel supplier AcelorMittal would hold it accountable for the full cost of the order.
Judge Weiner rejected these arguments, noting: “Having regard to the information now obtained from ArcelorMittal, it appears that Rand Water is compelling API to continue with the order despite ArcelorMittal’s offer to suspend same.
“This seems to be a clear stratagem on Rand Water’s part to oppose the review on the basis that the contract has already been carried out, despite the lack of urgency in the implementation of this particular tender.”
She found that no one would be irreparably prejudiced by an interdict.
Despite the court ruling, amaBhungane has learnt that the parastatal – and ultimately consumers – will still pay the higher price for the work in question.
Rand Water confirmed that subsequent to the judgment it had accepted an agreement under which API and Hall Longmore would split the work.
It did not directly answer a question about the final contract price, saying only that it had awarded the contract to API. However, amaBhungane understands it will be done at the higher price.
Rand Water would also not discuss details of how the proceeds and the workload will be distributed, suggesting that amaBhungane should seek such information from the companies themselves.
Defending the FTP policy, Mohale said it was a “widely acceptable practice in the supply-chain environment … It is not contrary to either the Public Finance Management Act, the Constitution … nor the Preferential Procurement Policy Framework Act.”
He said the policy assists Rand Water “in determining the reasonableness of tendered prices at which tenders must be considered, and bidders are made aware of this principle on the outset.
“Tenders that are under-priced for what is required pose a significant risk to Rand Water of contracts not being completed at all or requiring price increases and adjustments in order to complete the scope of work”.
Mohale said the exclusion of Hall Longmore was not only based on the FTP.
“Rand Water is not obliged to assess the price of steel against that of any service provider. The rate applied in this instance was obtained from the Rand Water estimation database which is updated on a yearly basis and monitored by Rand Water Quantity Surveyors.
“Rand Water was also not advised by Hall Longmore of the alleged discounts and rebates. rendering it impossible to determine the actual market price of the steel.”
Numerous e-mails and phone calls from amaBhungane to API and Hall Longmore went unanswered. DM
This story was provided by:
Photo by Tim Chen via Flickr.
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