Sanral: Questions and Answers

1) Sanral claims the two suspended staffers were suspended

because they refused to implement a board decision regarding
the division of the tender design engineering firm and the tender
adjudication engineering firm which the board regards as a
conflict of interest. My information is that this is not entirely
correct; the duo were suspended because they refused to
implement the board decision retrospectively, which they regard
as illegal. Comment?
Answer: Sanral does not manage employee relations in public or through
the media.
2) Could you clarify why the board decided there is a conflict of
interest between the designers and adjudicators? My
understanding is that that industry practice is not only that there
is no conflict, but that normally it makes economic sense for the
tender design firm to also adjudicate the tender because the
designers would have intimate knowledge of the engineering
requirements. If the tender designers were also an applicant for
the contract, obviously there would be a conflict, but this is
apparently not the case here, so the rationale for the board
decision is unclear to me.
Answer: On 23 May 2022 the Sanral Board issued a statement detailing
the reasons it had taken for cancelling the construction tenders that
included the N2 Wild Coast Mtentu Bridge, R56 Matatiele rehabilitation,
Ashburton Interchange and the EB Cloete Interchange upgrades.
In keeping with the obligations under the Public Finance Management Act
(PFMA), the Board decided to act after it discovered in January 2020 that
“the construction contractor bid evaluation process in the organisation had
a major, and potentially corruptive, flaw. The process allowed the same
service provider to do design drawings for an infrastructure project;
develop the technical specifications for the tender for that project; and
determine the technical bid to be recommended for award by the Bid
Evaluation Committee if it meets other criteria”.
The statement further explained that on 28 January 2020, the Sanral Board
adopted a resolution “that the consultants who are involved in the design
and the development of technical specifications should not be involved in
the evaluation of technical submissions by bidders. Previously, design
consultants were part of the Technical Evaluation Panel that made a
recommendation on the technical part of the tender to the Bid Evaluation
Committee. The rationale for the resolution was to ensure that there was a
separation and segregation of duties – which is a well-known governance
principle aimed at having more than one person/body, and not the same
person/body, completing a task in circumstances where irregularities could
arise. It is an appropriate control measure that is used to prevent collusion,
fraud, conflict of interest, misuse of information and corruption”.
The statement added that: “As an internal control to avoid possible
collusion and corruption between the design consultant and bidders; and in
line with its obligations to ensure adequate internal controls to protect the
organisation; in January 2020 the Board took the resolution referred to
above to separate the service provider who draws our designs and
specifications from the one who recommends the most appropriate
technical bid”.
“The Board instructed Management to ensure that, as an internal control,
these two processes – namely designing drawings and developing technical
specs on the one hand, and determining which bidder meets those specs on
the other hand – were carried out by two different service providers. This
was primarily to avoid the obvious conflict of interest and possible
corruption.”
The statement noted that “more than a year down the line the Board
discovered that that separation was not affected, thus violating an internal
control, and so effectively rendering irregular the awards the Board was
asked to note by MBAC (Management Bid Adjudication Committee).
Contrary to the Board’s instruction, in all the tenders at issue, the designer
of the projects and the developer of the technical specs was also the same
individual or entity which decided on the technical bid to be considered for
award. In the light of that violation of a crucial internal control, and in line
with its fiduciary responsibility, the Board had no option but to refuse to
sanction the planned awards. If the Board had sanctioned the proposed
awards, it would have ignored its own resolution and internal control, thus
attracting an adverse audit finding against the organisation.”
See:https://stop-over.co.za/sanral-board-statement-on-the-non-award-of-t
enders/
Your assertion that the Board’s decision was based on a “non-existent
conflict” is pure conjecture, without evidence or facts. Considering the clear
and unambiguous media statement issued by the Board on 23 May 2022,
there is no basis for your assumption. The Board has a fiduciary
responsibility to protect taxpayers’ money and it took concomitant action to
ensure that it reduced the risk of corruption in Sanral, a State-Owned
Company governed by the prescripts of the Public Finance Management
Act, amongst others. That was the rationale for the Board’s resolution and
there were no legal challenges to its decision.
Also of significance, National Treasury last year conducted its own
investigation into the issue of the five cancelled tenders and came to the
conclusion that the Board’s decision in this regard was correct. The story
was reported in the media and Daily Maverick might have missed it.
The latest on this matter, which you understandably would not be aware of,
is that the AGSA (Auditor General) has engaged National Treasury on the
same as well as appointed Senior Counsel to obtain a legal opinion on
whether non-compliance with a board resolution would result in
contravention of sections 56 and 57 of the PFMA and consequently
irregular expenditure. The legal opinion it received from Senior Counsel
concluded that the non-compliance with the Board Resolution of January
2020 constitutes non-compliances with section 56 and 57 of the PFMA and
the costs incurred as a result of such non-compliance constitutes irregular
expenditure. The concurrence of two independent organs of state on
non-compliance with a Board decision and the implications thereof is
particularly instructive and we would hope the significance is not lost to the
writer.
It should be further noted that on 30 June 2022, the Sanral Board,
announced its decision to appoint the Development Bank of Southern
Africa (DBSA) to act as an independent infrastructure procurement and
delivery management support agency on the cancelled tenders. The scope
of the services rendered by the DBSA included the evaluation of
compliance, technical and financial aspects of relevant tenders, as well as
providing independent construction management oversight throughout the
construction period of the projects emanating from the tenders. The
subsequent adjudication of the bids was carried out by the DBSA.
3) You make the point that Sanral has awarded 267 contracts,
which represents work to the value of R33-billion in 2022. What
proportion of that amount is constituted by contracts previously
awarded and then cancelled?
Answer: There were 267 contracts awarded during the 2021/22 financial
year. During that same financial year, 16 tenders were cancelled and not
re-awarded in 2021/22. In the 2022/23 financial year, five tenders were
cancelled and later re-advertised and awarded within the same financial
year. These are listed below:
a. N2 Wild Coast Mtentu Bridge
b. R56 Matatiele rehabilitation
c. Ashburton Interchange
d. EB Cloete Interchange Improvements
e. Consulting Engineering Services for the Indwe Erosion Stabilisation
on R56
The following tenders were awarded after re-adjudication by DBSA:
a. N2 Wild Coast Mtentu Bridge
b. R56 Matatiele rehabilitation
c. Ashburton Interchange
d. EB Cloete Interchange Improvements
No other tenders were cancelled and re-awarded in that year.
4) I understand two more senior staff members with master’s
degrees have left: would you deny that there is a large-scale exit
of skilled staff from Sanral?
Answer: Sanral endeavours to create an enabling environment where all
staff are given equal and fair opportunity to progress. From time to time
Sanrl, like any other public or private sector organisation, loses staff
members who pursue their careers outside of the organisation. This is the
natural career progression evident in all individuals and organisations. At
Sanral we value our staff, their work and their professional attitude in
meeting the many challenges that our organisation and indeed our country
faces.
Clearly the loss of two staff members does not represent “a large-scale exit”
in an organisation of more than 500 employees.
5) I understand the tender requirements incentivise 30%
subcontracting to SMMEs. I believe the cancelled contract for the
Mtenthu bridge had around R500-million in subcontracts for
roads surrounding the bridge, and the chairman personally
excluded these from the new tender. Does that not constitute
illegal interference and unprofessional conduct?
Your question here borders on defamation and in this regard the Chairman
reserves his rights. The fact is the new tenders were adjudicated by the
Development Bank of SA and were awarded in line with Sanral’s
procurement policy.
6) Furthermore, effectively around R1-billion of the new
R4.4-billion Mtenthu bridge contract has to be subcontracted.
Sanral staff members inform me that the scope for doing so in a
massive concrete viaduct bridge is in fact limited and that staff
argued against the board that doing so would risk the integrity of
the bridge. Comment?
Answer: There was an irregular exclusion of subcontracting in the Mtentu
tender and the reduction, by a massive 50%, of the routine 30%
subcontracting in the GFIP tender. This exclusion and reduction was
decided by unauthorised individuals and structures without Board
approval. This resulted in subcontractors, and these are SMMEs of
designated groups, being denied and deprived of business opportunities,
leading to thousands of South Africans denied job opportunities.
7) I believe the chairman was previously an English lecturer by
profession. Is that correct? What are his engineering
qualifications?
Answer: Mr Mhambi has several post-graduate qualifications, including a
master’s degree. An engineering degree is not a prerequisite for a board
position at Sanral or any organisation. In fact, previous chairpersons of
Sanral did not have an engineering degree. It would, therefore, be peculiar
to demand this prerequisite of Mr Mhambi.
What is required is leadership abilities and a commitment to and
understanding of good corporate governance, which Mr Mhambi has in
abundance. Also, his interaction with matters related to infrastructure did
not start with his tenure as Chairman of Sanral.
(Edited for brevity)