1. PRESENTATION TO THE STANDING COMMITTEE ON PUBLIC ACCOUNTS (SCOPA) ON IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE
by SANRAL 16 November 2016

2. Contents Routine Road Maintenance (RRM) Three quotations
Conflict of Interest
Urgent Procurement
BEE Certificates
Deviations not done under emergency, sole provider or impractical to go out on competitive bidding
Procurement approved not in line with delegations

3. Routine Road Maintenance (RRM)
Routine maintenance is performed on pavements as they begin to show signs of deterioration. Typical activities include:
Repairing cracks and potholes as they appear
Patching, edge repair, re-gravelling & grading
Clearing drains & culverts, vegetation control, line-marking, road sign & guard rail repair
Attending to flood damage & geotechnical failures

4. Routine Road Maintenance (RRM)

5. RRM cont. – discussion
Neither the PPPFA nor its regulations define the lowest acceptable price
The definition of the lowest price is therefore open to conjecture
SANRAL has found that when awarding tenders at the lowest price (at face value), SMMEs under-price and submit unviable tenders to get jobs or main contractors exploit sub-contractors
SANRAL therefore developed and introduced a statistical method to establish the lowest acceptable price for each RRM contract

6. RRM cont. – discussion
The mathematical model calculated independently by the University of Pretoria (UP) determines the lowest acceptable price that allows the appointment of a contractor with the most realistic rates at which SMMEs can do work and be financially viable
This method was in use for over 11 years, the AG was aware of the rationale, and there were no findings from the AG or complaints from contractors

7. Jobs created & contractors developed
Literally thousands of job have been created and skills developed through the programme
Many contractors have been developed

8. RRM cont. – discussion
In 2013 the AG declared the method non-compliant with the PPPFA, the total value of RRM was R 2,4bn
To our knowledge there is no regulation defining lowest acceptable price or that the method cannot be used
RRM contracts are awarded for 3 years, renewable for 2 years, subject to satisfactory performance
Contracts in place were left to run their course in order not to incur cancellation claims
New contracts were awarded to the lowest price
The value of remaining contracts is reducing, in 2015 the amount was R 1,5bn and 2016, R1,1bn
The last contracts expire in 2017

9. Three quotations A Women's Day Speaker
Was procured for a specific topic on which she was considered an expert
Office Supplies
Were procured from one quotation due to no other invited tenderers responding
Mobile phone covers
Were procured without requesting three quotes
The total amount involved was R
The implicated employees are under investigation

10. Conflict of interest
An employee failed to declare conflict of interest on three projects which had a combined value of R
The matter is under forensic investigation

11. Urgent procurement
SANRAL is exposed to public liability if a road user suffers loss including loss of life or vehicle damage due to the road condition
Therefore all SANRAL roads have a RRM contractor continuously on all national roads
Due to a contractor being under investigation for unethical practices, the extension to an RRM contract was not exercised, and to limit exposure to public liability, another contractor was appointed in the interim until a public tender could be concluded
The deviation was approved by the Accounting Authority

12. Urgent procurement (cont.)
A similar situation arose where another contract was terminated due to lack of performance by the contractor but the latter commenced legal action to prevent termination
The Accounting Authority resolved not to award any further contracts to this contractor until the legal matter is concluded
This necessitated urgent procurement which was approved by the Accounting Authority as a deviation
The combined amount is R

13. BEE certificates
Due to some rating agencies issuing electronic BEE certificates, it was not possible for tenderers to submit original or certified BEE certificates
Four tenderers were awarded contracts without submitting original or certified BEE certificates (but electronic copies were received)
The combined value of the contracts was R
The matter has been brought to the attention of National Treasury

14. Deviations not done under emergency, sole provider or impractical to go out on competitive bidding
Website
Due to the tender for a website and other communication platforms not being awarded, it was necessary to extend the existing website contract until a re-tender was concluded
The delay could not have been foreseen or planned and was approved as a deviation for urgent procurement to ensure the website continued to operate
HARDCAT
A contract was awarded as SANRAL regarded a service provider to be a sole provider based on its market analysis

15. No expenditure was incurred in the current year
Deviations not done under emergency, sole provider or impractical to go out on competitive bidding
ICT Governance
A contract was awarded without following competitive bidding process due to the natural continuation of the previous engagement as allowed for in the National Treasury Regulations
No expenditure was incurred in the current year
The combined amount is R
The matters are under investigation

16. Procurement approved not in line with delegations
Two projects were not approved in line with delegations - they related to a materials testing laboratory not performing to required standards
After following contractual mitigation measures, it was agreed with all parties to cede the contract to a new laboratory able to perform the work
The new laboratory started with the work before finalising the cession agreement and obtaining officials approval
The amount involved is R
The matter is under investigation

17. THANK YOU