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Submission to Joint Bid Adjudication Committee and Finance Committee 30 November 2015 Review of Contracts and Variation Orders and Corrective Stops 4, Introduetion During 2014 @ number of Infrastructure Contracts were entered into. It nas come to management's attention that for a number of them the initial budgets and the Council approved contracts were not aligned and these are submitted to the joint committee of Bid Adjudication and Finance for consideration and correction. Secondly this submission also include variations orders which were entered into whilst the Supply Chain Management Policy at the time was silent on the procedure of approving variation orders. 2. Background 2.4 Budgets vs Contracts Initial estimates were done by Facilities Management. When the bids closed, they were assessed by the Bid Evaluation Committee who in turn recommended the bids to the Bid ‘Adjudication Committee who in tun considered and approved @ successful bidder. Council ratified the bids and the contracts were awarded at the contacted values. Unfortunately the Bid Evaluation Committee did not also indicate that the initial budget estimates also had to be corrected to be in line with the bid amounts. See paragraph 3.2 below. The main reason why the Director: Finance chairs the Bid Evaluation Committee is to ensure that estimates, budgets contracted amounts and end of job costs are in aligned. This oversight resulted in the fact that certain contracts exceeded the initial budget allocations and it is recommended that this be corrected by utilising the interest eamed on infrastructure investments. 2.2 Variation Orders ‘The second matter that needs to be corrected is the fact that certain variation orders have been entered into without proper approval. These variation orders were approved by the Director Facilities Management without proper delegation to do so, In paragraph 3.3 below is a detailed analysis of the various variation orders are given and it is recommended that they also be corrected with the undertaking from management that variation orders in future will fully conform to the conditions of the newly approved Supply Chain Management Policy will be follow to the letter, Facilities Management explained that when a variation order was done, they followed the following process: «The Architects scoped the variation; «QS Estimated the work and drafted Bill of Quantities. «Contractor on site requested to provide tender based on Bill of Quantities if rates were not in original scope of work. . « ifrates were available in original scope of work, same rates were applied ‘+ Project Managers managed the variation. The following steps were followed: Step 1 | Variation order arise Consultant / Discipline invelved is to compile the design and specification with sufficient details for the production of Bill of Quantities (BoQ) / Schedule of Rates. Consultant is to also issue a motivation report as to what resulte Variation Order (VO). if VO is building related, design and specifications are to be issued to the QS step 3 | to compile a BoQ otherwise the relevant Consultant / Engineer is to produce the BoQ Completed oO Is to be issued to the Contractor to price / issue a quotation based on the itemized BoQ and the relevant drawing and specifications. Priced B00 Is issued to the QS / Engineer by the Contractor for checking the step 5 _| rates correctness and that they are market related. Where items are applicable in the original BQ, the rates in the original 80 are to be utilized. Step 2 Step 4 SS is to issue the proper VO application with supporting documentation to the Step 6 Client for approval Client approves or rejecis the VO and the process reverse flow until Step 7 implementation by the contractor or re-application by QS. In both the above, the Audit Committee will also consider the reports and determine whether there was any negligence which require further attention “Table A: Approved contracts and the i jl budgets not aligned Project Budget | Contract | Difference Reasons Proposed Funding of Description | _amount_| amount Shortfall, Seng [7800000 | 4914 696] 3414 60 | Svamming pool - scope of work was Thaled before ia 600 fom poo! {going out ch tender and included ablionichange room _|Counel funded interest facities and security fence forthe pool. (R3,7m —R3 414 699) =| 282 301 remaining) “The scope of work was finalized ater the budgot has been approved or confirmed by funders and ths Mes les ‘othe budget short on most of the council controlled funds projets because previously on Counel eortolled funds projets Quantity Surveyors were not involved in the preparation of the preliminary estimate for budgeting purpose. However the recent approved projects approved Counc funded projecte Quantty Surveyors ‘were involved to avold similar discrepancy, Spats EO TOSCO | —TOTISDSZ] 1 OTS 2 | Spon tls Project (Tw new soccer Tals an abuton Ri 013252 fort feclites) june funded interest : (292301 -R 1013 “The ecope of Work Was finalized after the budget has =R-720851 been approved or confemed by funders ané this hasied_ femaining) te the budget shortfall on most of the council conolleg : funds projects beoause previously on Counct controled funds projeots Quantity Surveyors were not involved in the preparation of the preliminary estimate for budgeting ‘purpose, However the recent approved projects Approved Counc funded projects Quantiy Surveyors were involved to avold similar discrepeney. Spartecout ]1 50000 | S5SES2A] — 22BZIIA Sports Cours Project (Four new sports cour), 2a saa Fo uno funded interest “The scope of workwas fnsized aterthe budpethas _[R25690¢0+