REPORT ON THE WESTERN CAPE LEASE 1 PRESENTATION TO PARLIAMENTARY PORTFOLIO COMMITTEE ON LABOUR 12 MAY 2015 PRESENTATION TO PARLIAMENTARY PORTFOLIO COMMITTEE ON LABOUR 12 MAY 2015

OVERVIEW APPLICATION TO HIGH COURT TO SET TENDER AWARD MOTIVATED BY FINDINGS OF A FORENSIC AUDIT – TENDER HAD BEEN AWARDED TO WRONG BIDDER - AND LEGAL OPINION FORENSIC AUDIT CONDUCTED DUE TO DELIVERY PROBLEMS AND OWNERSHIP CONCERNS 27 AUDIT FINDINGS ACTION TAKEN AGAINST RESPONSIBLE OFFICIALS FINANCIAL IMPACT ON ORGANISATION

BACKGROUND  Tender for CCMA Western Cape office premises awarded to Potlako Investments CC following a competitive bidding process on the 7 January 2013  Beneficial occupation date was originally 01 March 2014  Successful bidder was to complete specified tenant installation

HIGH COURT APPLICATION CCMA Governing Body resolved on the 28 August 2014 to submit an application to the High Court to set aside the tender award based on a Legal Opinion and Findings of a Forensic Investigation  Forensic Investigation had essentially found that the tender had been awarded to the wrong bidder  Legal Opinion recommended the High Court application and indicated that if the CCMA did not approach the Court to review and set aside the tender award, the CCMA will knowingly be a party to implementing the consequences of a bid which it knows to have been awarded irregularly and unlawfully

REASONS FOR FORENSIC INVESTIGATION  Bidder failed to deliver beneficial occupation as originally or subsequently agreed.  Potential to deliver beneficial occupation was confirmed by an external quantity surveyor.  Ethical concerns as Bidder did not meet commitments in terms of what they had promised on their bid submissions such as parking and lifts amongst others.  Attempts to remedy the breach via the financier (Nedbank) proved unsuccessful  Ownership of the proposed building was not clear - Potlako Investments CC converted from a close corporation to a private company with the name change to Milestone Property Group (Pty)  Although the CTN lease was audited by both the AG and the IA, the CCMA felt it necessary to get the opinion of an external independent service provider to ensure the credibility and impartiality of the investigation.  (refer pages 6 to 9)

FORENSIC INVESTIGATION FINDINGS  The Forensic Investigation made twenty-seven (27) findings  Critical findings included: Functionality points applied incorrectly Perceived BEC bias in favour of Potlako (the preferred bidder) Functionality Ratings applied inconsistently Segregation of duties-Supply Chain Manager Change of specification  (refer pages 9 to 11)

ACTION TAKEN AGAINST RESPONSIBLE OFFICIALS  The Supply Chain Manager was suspended and charged. Service subsequently left employment by mutual agreement.  Action against other officials (BEC and BAC members) involved in procurement is in process.  (refer pages 2 to 4)

FINANCIAL IMPACT DESCRIPTIONTOTAL Forensic AuditR 931, Building AssessmentR 28, Attorney’s Fees - Lease Contract ReviewR 505, Attorney’s Fees - High Court Proceedings - Tender Set AsideR 418, Attorney’s Fees – Labour Court Proceedings 289, Attorney’s Fees – Disciplinary ProceedingsR 689, TOTAL R 2,862,

IN CONCLUSION  CCMA needed to do the right thing when independent advice showed that the tender was awarded to the wrong bidder  There was no corruption  No money exchanged hands  No money was paid to bidder