Infrastructure / capital works challenges in Justice & Correctional Services Department: briefing by Public Works & Independent Development Trust

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Justice and Correctional Services

04 August 2015
Chairperson: Ms C Pilane-Majake (ANC) (Acting)
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Meeting Summary

The Department of Public Works (DPW) first briefed the Committee on its work relating to the Department of Justice and Constitutional Development. The allocation for the present financial year was R433 million and to date, with 25% of the time period having lapsed, 12% had been spent. The entire programme had 509 projects, and many were still in the preliminary planning stage, with construction not having begun. Only 67 projects were in construction and post construction.

The challenges experienced with these infrastructure projects included the unavailability of suitable sites for courts, sites identified which did not have bulk services, delays due to by-laws, and changes of scope by a client which resulted in the need to re-embark on the site clearance process. The Department of Public Service and Administration had experienced increased costs when there had been a termination of contracts due to non-performance. Where a contractor did not perform and their contract was terminated, additional costs were built up through additional consultative requirements regarding design.

Members raised concerns about the manner in which due diligence was conducted prior to the appointment of contractors. They asked for information on how the Department of Public Works intended to deal with problems associated with the performance of liquidators and delays in projects. An update was sought on the reasons for the delays in construction at the Limpopo and Mpumalanga high courts.

The DPW indicated that in appointing a contractor, a risk assessment was conducted, but it was conceded that in reality this did not give Public Works the calibre of contractor it sought. Where a contract had been terminated due to poor performance, the Department sought to negotiate with the guarantor for the completion of the work. Where there had been a shortfall in the costs, the DPW would previously have waited until the work had been completed, and then seek to recover costs, but this was now being conducted upon default. Where liquidation occurred, the Department was forced to negotiate with the liquidator and this introduced delays into the project. When the response from the liquidator was not positive, the DPW now intended to terminate the contract immediately and embark on the process of appointing a new contractor and recovering the costs. With the Polokwane high court, the major challenge had been parking, and it had been confirmed that the construction of the court was complete. Regarding Mpumalanga, the court’s construction was proceeding well, but the municipality, in terms of its by-laws, had requested the DPW to identify, finance and construct an access road to the court. The DPW had submitted all the technical documents required by the municipality, and was monitoring the situation.

The DPW then briefed the Committee on infrastructure projects for the Department of Correctional Services (DCS). In 2014/15, 81% of its expenditure had been achieved. Presently, it was performing well, having spent 30% of its allocation as at end of June 2015. The factors which had contributed to under-expenditure included under-performance by the contractors. There were six prison contracts where contractors had experienced cash flow problems leading to liquidation and contract cancellations, or resorting to the guarantor completing the project. A breakdown of the progress at these six prisons was also presented.

There was a total of 246 projects for the DCS. 108 of these were in the planning stage and 138 were committed, meaning they were in construction and beyond. Therefore, most of the money was dedicated to construction and unless projects were cancelled, the budget would be spent. The challenges also involved contractors being placed into liquidation, or contractors failing to properly plan the work, causing problems with mechanical and electrical installations on site. Public Works had begun to deal with the problems by changing supply chain management policies. To overcome the problem of poor planning, the DPW intended to implement measures at the tender stage, so that such problems could be picked up and dealt with through the procurement process.

The Independent Development Trust briefed the Committee on the installation of security fencing at 27 prisons at 13 facilities, as well as the associated integrated security systems. The programme had been under way since 2012 and the last site should be completed by May 2017. Of the 13 facilities, eight had been completed. The challenges which had been experienced had included difficulty in accessing “as-built information” and access to the work space, because of the facilities being in use. An assessment had been done at the Zonderwater Prison, where the IDT had been tasked with looking into whether the facility should be rehabilitated or whether a completely new structure should be constructed. This report had been submitted to the DCS for a way forward. The IDT was also running a programme for generator and kitchen upgrades for the DCS. Assessments had been conducted in Kwa-Zulu Natal and the Eastern Cape, with the reports submitted to the DCS.

Members queried the relationship between the IDT and the DPW. They asked whether the R100 000 delegated to client departments by the DPW was sufficient for the effective carrying out of maintenance work at client departments’ facilities. It was enquired whether the state had to bear the cost when a contractor was liquidated and another contractor had to be appointed, and this was confirmed by the Department.  

Meeting report

The meeting began with the election of an acting Chairperson. Ms G Breytenbach (DA) nominated Mr S Swart (ACDP), while Ms C Pilane-Majake (ANC) was nominated by Mr M Maila (ANC). The decision was put to a vote, and the majority of Members elected Ms Pilane-Majake. The Chairperson apologised for the absence of Dr M Motshekga (ANC) and for the late start of the meeting.

Department of Justice and Correctional Services infrastructure and maintenance projects: briefing by Department of Public Works

Mr Nkosi Vilakazi, Acting Deputy Director General: Projects. Department of Public Works (DPW), said the presentation highlighted the projects being implemented on behalf of the Department of Justice and Correctional Services (DoJ), including new construction, the upgrading of existing courts, improvement of security and fire detection, and maintenance of mechanical and electrical services. In the DPW’s operations, service providers in the form of contractors were being made use of to perform the actual delivery and to conduct the design aspects.

In 2013/14, the budget had been R211 million for capital expenditure, and 101% of this had been spent. The allocation for the present financial year was R433 million and to date, with 25% of the time period having lapsed, 12% had been spent. The entire programme had 509 projects and of these, many were still in the preliminary planning stage, with construction not having begun. Only 67 projects were in construction and post construction.

Mr Vilakazi said the majority of the expenditure for the current financial year was planned for Port Elizabeth, Cape Town, Durban and Johannesburg. Site acquisition was an important matter, with DPW through its town planning identifying sites where municipal services were accessible and site clearance would be obtainable for the needs of the client. Once the municipality had been engaged, the most important factor was whether it would be willing to provide bulk services such as sewerage, electricity and parking.

Some of the challenges encountered had been the unavailability of suitable sites for courts, sites identified which did not have bulk services, delays due to by laws, and changes of scope by the client which had resulted in the need to re-embark on the site clearance process. This process included determining whether the site would be able to handle the additional load on services, such as increased demand for electricity or sewerage services. The occupation of courts had also caused delays. There had also been an instance were infrastructure had been damaged due to fire.

The DPW had experienced increased costs where there had been termination of contracts due to non-performance. Where a contractor did not perform and their contract was terminated, additional costs were built up through additional consultative requirements regarding design. The norm was to recover such costs from the defaulting contractor. In the detailed report, there was a list of projects which were cost drivers, where the DPW had to monitor spending.

Discussion

The Chairperson asked why the allocations to projects in Cape Town and Port Elizabeth were so comparatively high, at R42 million and R71 million respectively. Further, how did the DPW conduct due diligence given the number of instances where there was non-performance and termination of contracts? How did the DPW streamline its business when working with government departments to ensure there were not areas where the DPW claimed the problem was not its responsibility, such as the parking concerns at certain courts?

Mr Vilakazi replied that the budget for particular regions was based on the projects requested by the client department. Regarding Cape Town, the biggest project was the Justicare Building, which had a total budget of R107 million, and along with other projects made up the total allocation. Similarly, in Port Elizabeth there was a list of projects which made up the R71 million. At Port Shepstone, the total budget for the project was R256, but the allocation for the present year was R84 million.

On due diligence in employing contractors, the DPW agreed that there was a challenge in this area. Normally what was done was to conduct a risk assessment, but in reality this did not give Public Works the calibre of contractor it sought. The projects where contractors were either in liquidation or being terminated had seen supply chain management (SCM) reforms between DPW and National Treasury, dealing with construction procurement. Further, DPW had reintroduced the issue of functionality to make sure that people contracted were going to deliver. Things such as past experience and the capacity of contractors had on hand, were being used to inform due diligence at present.

Ms G Breytenbach (DA) said following on the last point by the Chairperson, that she would like more detail on how DPW conducted its tender processes and what due diligence was in fact done, because the majority of the problems related to poor choices of contractors. She was unsure how this could come about, or how a contractor with cash flow problems, who generally under-performed or who subcontract, could be appointed. Added to this were the concerns regarding contractors going through the tedious process of liquidation -- surely contractors were appointed off of a list of preferred contractors?

Mr Vilakazi said that what normally happened, where a contractor was not performing to the point that the DPW terminated, the contract was terminated and another contractor appointed. In some instances during the poor performance, contractors would go through liquidation. The DPW would then have to negotiate with the liquidator on completing the contract. This was a long process which did not benefit the government, and often would take eight months to a year. At times, the DPW would also have to call up the guarantor to complete the contract. Going forward, Public Works was looking to streamline this process so that where a contractor was not performing and the guarantor was not willing to come in speedily to complete the work, the contract would be cancelled. The aim was to deal with these situations in a legal manner which did not require long negotiations with the liquidator or guarantor.

Mr M Maila (ANC) said the presentation had shown many challenges, but had not indicated how they were to be resolved. Therefore, he was unsure of the aim of highlighting these challenges. Was the assistance of the Committee being sought, or were they an indication of why DPW was not performing?

Ms M Mothapo (ANC) asked to be briefed on the progress made regarding the Mpumalanga and Polokwane high courts. As per the budget of 2013/14, there had been a negative amount of R749 257, and she understood that the delay in constructing the Polokwane high court had cost a lot. Therefore she asked for more information, especially relating to the parking at the Polokwane high court and the access road at the Mpumalanga high court. Lastly, she wanted to know the status of efforts to improve communications between the DPW and the DoJ.

Mr Mandla Mabuza, Deputy Director General: Key Accounts Management, DPW, said the major challenge at the Polokwane high court was parking. It had been confirmed that the construction of the court was complete. One of the requirements which had to be complied with was the issue of additional parking space. Two challenges were faced – firstly, the availability of the parking and secondly, the monetary value of the land for parking. Initially the municipality had appointed an evaluator and the outcome was that the land was worth R6 million. The DPW had appointed its own evaluator and the valuation was R5.6 million. It was agreed that an independent evaluator would be appointed, and the valuation was R4.5 million. The DPW had then made an offer to the municipality which had to be processed through the council. This was the only matter remaining to be finalised at Polokwane, and construction of the parking would begin in September.

Regarding Mpumalanga, the court’s construction was proceeding well, but the municipality, in terms of its by-laws, had requested the DPW to identify, finance and construct an access road to the court. In terms of the by-laws, certain technical specifications had to be submitted. He confirmed that Public Works had submitted all the technical documents required by the municipality. The DPW was intensely monitoring its technical compliance for this project.

Mr Samuel Thobakgale, Director: Projects, on lines of communication, said a system of joint task teams had been introduced between senior management of the DPW and the client. These task teams met twice a month to discuss a focused group of projects, generally with a high budget allocation, which had stagnated at a certain point of progress or where clients had specific concerns. This assisted with implementation, but also ensured that decisions which were taken by the DPW were in consultation with the relevant client. These joint task teams briefed the relevant Directors General and Ministers on a monthly basis. Therefore, they assisted with ensuring that the DPW had its finger on the pulse of projects being implemented for various clients. There was a project on reviewing the business service delivery model, which included augmenting the information technology systems to enable on-time access to information, including uploading visuals of projects. The business plan and detailed progress reports were the measures which had been put in place to correct the situation

Mr S Swart (ACDP) said it was good for the Committee to have the DPW present, because infrastructure service delivery matters continually came up. While he appreciated that the DPW was involved in a turnaround strategy, he was concerned with various capital works projects, where things were behind schedule. First, he wanted to deal with the DoJ issues, because he was sure that it was appreciated that this impacted on service delivery. The South Gauteng high court had been visited by the Committee several years previously, and it seemed that every year the deadline kept getting extended further. The project had started in 2009 and the judges who sat at that court were asking by when the issue would be resolved. The revised expected completion date was now only the end of 2016 and despite noting the explanation in the presentation, he wanted some specifics on that project. Ms Breytenbach had referred to the problem regarding the appointment of contractors and he asked for an explanation of DPW’s involvement with the liquidator where a contractor underwent liquidation, to help the Committee understand the principles involved. There could be a case where a contractor went into liquidation, but the work was only half way complete -- what reasons would Public Works have to continue dealing with the liquidator, and why could a new contractor not be appointed?

Mr Vilakazi said the delays with the South Gauteng high court related to occupation. DPW management had begun to visit the site in person to make sure that problems were closely monitored. Usually if there were challenges which were justified, there would be a deadline extension which went through processes, including going through evaluation committees. If the problems related to occupation of an existing building, the contractor could not be penalised, because it was government which needed to allow space for the work to be done. He acknowledged that the project had begun a long time ago, but the DPW and DoJ were closely monitoring the situation.

Mr Thobakgale said Mr Vilakazi had already referred to some of the reforms being implemented on the supply chain management side, which was the implementation of a functionality criterion. This dealt with the financial capacity of a contractor or consultant, their technical capacity and their experience, specifically regarding implementing projects of a certain level of specialisation, given the portfolio being dealt with. There were specific forms of expertise required by clients such as the Department of Correctional Services (DCS), and the contractor ought to be able to handle these timeously. This was being done with the guidance of Treasury, and one area which was nearly complete was a procurement dispensation for construction, which would allow the DPW to appoint preferred contractors on the basis of all three factors listed above. The other matter being dealt with was the requisite skills within the DPW, including matters such as project management and professional services, such as engineers and technicians. Public Works had introduced an initiative to help such professionals register as candidates and professionals. This would help ensure that people in the DPW augmented the skills within the Department.

Ms Breytenbach said her question regarding a database for preferred contractors had not really been answered. She wanted to point out that in the longer presentation, on page 11, the contractor at Tzaneen Correctional Centre had been liquidated. On page 13, the Kgos̆i-Mampuru contract had been terminated due to poor performance. On page 15, at Vanrhynsdorp Correctional Centre, the initial contractor had been liquidated.

 

The Chairperson interrupted, saying that the meeting had not begun to deal with the DCS and was still with the DoJ.

Ms Breytenbach said the question was still being directed at the DPW.

The Chairperson replied that first the Committee would deal with the DoJ and then with the DCS. She asked what criteria the DPW used to decide which projects it would fund, with 509 projects under way. Also, she wanted an idea of the status of the asset register, because this was something which should assist with leasing premises where a lot of money was spent by government departments. At the same time, a lot of money was devoted to erecting buildings. As it was Women’s Month, looking at the delegation, she noticed only two women and wanted to know if male domination was characteristic of Public Works in general, particularly as she would like to see a 50/50 representation of men and women in all spheres of life, which was an aspect of democracy in South Africa. Lastly, she wanted an indication of whether all DPW management had passed a security clearance.

Mr Vilakazi said the comments on representation were taken to heart, and pointed out that the delegation from DPW had had to be split up, because there were other commitments in Parliament on the day.

Mr Mabuza said the point of departure regarding infrastructure plans in South Africa was the Government’s Immovable Asset Management Act (GIAMA). Under this Act, departments were supposed to submit User Asset Management Plans (UAMPs) to the DPW. The UAMPs contained the comprehensive infrastructure plans for all government departments. For example, for the South African Police Service (SAPS), it would contain how many police stations were to be built over the next financial year or over the medium term expenditure framework (MTEF). The UAMPs were then expressed in the estimates of national expenditure (ENE) of all government departments. The DPW then executed the instructions of government departments, as contained in the ENE. This included both capital works and leasing, which had been budgeted for by the relevant department.

Mr Dhaya Govender, Head: Facilities Management, DPW, said the Deputy Director General in charge of the real estate information and registry services, which was responsible for the asset register, was a woman. The work which had been done on the asset register was fairly extensive. The DPW’s report to Cabinet and the Portfolio Committee on Public Works showed that of the assets identified in July 2013, 99% had been verified and were now contained in the asset register. The process to procure an asset register module to house this information was under way. There was a comprehensive list of approximately 33 000 land parcels, which contained 108 structures. Outside of the meeting, a list of the DoJ’s land and structures could be provided. The work on the asset register was on-going and as the Deeds Registry updated its information, the state-owned land was updated. Automatically any land which was not registered to a municipality or other entity defaulted to the DPW. It then had to account for these assets, either nationally or through the appropriate entity in provincial government. To a large measure, South Africa had achieved what very few other countries had, and that was to account for its land parcels and structures. It was true that not all buildings were utilised, but there were different types of buildings and as the needs of government departments changed, some buildings were no longer of use. There was a strategy to deal with those buildings.

The business case established for the Property Management Trading Entity (PMTE) and its operationalisation was founded on the basis that government wanted to move away from leasing, to ownership of its buildings. It made no sense to lease a court or to lease a police station, but at the time those decisions were made the government did not have funds readily available to engage in its own capital expenditure. The cost of doing so was astronomical, and therefore Public Works had explored different funding models to assist. One was to look at financed leasing, which would see government renting on a lease-to-own basis. As Mr Mabuza had pointed out, the UAMPs which came from departments identified their needs, but equally there was a serious discussion on buildings which were leased, that should be owned through a lease-to-own, or build and operate. This was a long term exercise -- at present approximately 3 000 facilities were being leased for various government departments, and to convert these to ownership would take quite some time. The economic crisis in which South Africa and the world found themselves meant that how government went about converting its leased properties would have to be thought about creatively. To this extent, the DPW’s discussions with the DoJ, DCS and other major departments was an on-going one, which sought to emphasise the ownership programme over the next few years.

The Chairperson said she was hopeful, because this was an important area which directly affected the ENE and impacted the fiscus negatively. One other area which needed to be looked at seriously, across the board was the delays in projects, because these resulted in drastic cost escalations. Such reports came from various departments through the Committees. These departments did not want to accept responsibility, but rather shifted the blame on to Public Works. She was saying that the country depended on the DPW to take it forward.

Mr Swart picked up on the Chairperson’s point regarding the escalation of costs, saying he understood that unforeseen circumstances arose. The Limpopo court had initially been estimated at R60 million in 2012, and three years later it was at R87.6 million. How did the DPW deal with such escalations and how was this avoided? He asked for Public Works to comment on the delegation of maintenance to the value of R100 000 at the moment, with the DoJ having indicated that discussions were underway to possibly increase that. This was particularly relevant, because if maintenance was not done, this could lead to increased capital works expenditure. What was the DPW’s concern about delegation beyond that level? Lastly, he was concerned about specific magistrates’ courts where maintenance was not done, leading to such large capital works expenditures, as at the Mthatha Mdtzana court. He understood that there was even a magistrate’s wife who was litigating with the state, alleging that a magistrate had died due to dust, droppings and feathers caused by pigeons. This was obviously something which courts had to deal with, but it indicated the severe maintenance deficiencies. He was pleased to hear about the joint task team, and would like to know if it met regularly, and whether it dealt with all the issues relating to the DoJ -- from the smallest court, or whether it was only for major capital works projects. This information would enable the Committee to enquire from the DoJ whether they were happy with the progress from these meetings.

Mr Mabuza, on the issue of cost escalations, said where the delays were due to reasons such as those mentioned by Members earlier, these were subject to the interventions raised by Mr Thobakgale regarding the entire supply and value chain. This spread to the DPW’s own understanding of its legal options. For example, there were times when guarantors were part of the process, so the DPW needed to ensure that its processes led to it exercising its rights to see that the contract continued as quickly as possible. Being as quick as possible was critical, because the longer a site stood empty, the more costs it accrued.

Mr Vilakzi said the maintenance delegation level of R100 000 was intended for day to day maintenance, such as broken windows, doors or burst pipes. For now, this was the cap which had been placed on how much a client could spend. Next would be the issue of planned maintenance, which the DPW had budgeted for at approximately R230 million for different facilities. The discussions had identified the concern that once the delegated amount was increased, then a department would be interfering with a facility which belonged to Public Works, and there were issues such as norms which now had to be taken into account. If the client department began to do things such as installing generators, it became a problem even though there was a need. The discussions had been around what could be put in place to ensure that if the amount was increased, capacity existed within the client department. These discussions were still on-going. The joint task team’s work was confined to larger, more problematic projects, but this did not exclude any other problems to be discussed at this forum. At the regional level, there was also discussion on infrastructure, led by the head of Key Accounts Management.

Mr L Mpumlwana (ANC) said his concerns were mainly around the capacity of the DPW to move away from tenders, and to have its own personnel to do the work. Would this not be cheaper, and when would it be likely to start with such an endeavour, as he was aware that qualified engineers were hired only to appoint other engineers? Secondly, did the DPW depend solely on a client department to bring their needs forward – did the DPW not have its own staff to proactively check on problems which may arise? He knew, for example, that at Mthatha high court the lights had been switched off and there was no water because Public Works had not paid the municipal fees, causing the court to wait for three days. Would it not be better to have someone in each area appointed to check on each building owned by Public Works, so that any problems could be sorted out speedily? He asked what the ratio was between ownership and leased buildings. He understood it had been said that 3 000 buildings were being leased. He knew that there was a plan in the former bantustans for almost all government buildings to be leased from private companies. What were the plans to move away from that, and arrangements such as Public Private Partnership buildings? Who were the private entities being engaged in such partnerships, and were they South Africans?

Mr Mabuza, on the issuer of in-house capacity, said this debate was important for the DPW. Creating capacity for the state was an initiative which it had been resolved on, to be able to construct, manage leases and make investment decisions. There were two major challenges -- building capacity with professional skills and secondly, retention of professional skills through appropriate remuneration. There was serious competition from the private sector for such skills, because they were able to pay more and provide more attractive opportunities. This was to be mitigated through the DPW’s massive endeavour to recruit young professionals and artisans. Bursaries had been provided for students in the built environment, who were to be deployed at the regional and head offices. They were being put into projects which would enable their registration with the professional council.

The second intervention regarding in-house capacity involved Public Works’ responsibility to manage major events for the state, such as official funerals and presidential inaugurations. The challenge experienced in the past was that reliance was placed on service providers to provide things such as marquees and chairs, which cost the state a lot of money. A conscious decision had been taken that the DPW should procure and own such articles, to create a de facto state-owned events management company. The dome used at the Presidential inauguration and former President Mandela’s funeral was owned by the state. This had significantly reduced costs to the state at such events.

On whether DPW waited for clients to raise problems or whether it proactively sought them out, he said Mr Thobakgale had already spoken to the matter of joint task teams. These task teams did not operate only for the DoJ and DCS -- there were six task teams led by senior officials at the deputy director general level. Until recently, SAPS was one of the DPW’s biggest clients, with a portfolio of about R1.9 billion, but with the reconfiguration of the DoJ and DCS, the Committee’s portfolio was now the single biggest client of the DPW. These teams discussed all matters and beyond these meetings at the director level, people liaised with clients to touch base and determine whether there were significant or minor problems. There was a client liaison forum every month which was managed by the Key Accounts Management directorate. This unit had client and DPW representatives, and at these meetings matters beyond what had been discussed in the joint task teams were interrogated.

Mr Govender said approximately 3 000 facilities were leased in throughout the country, but over 85 000 government buildings were being utilised. Therefore, the ratio of buildings leased was very small. However, this cost money and it last stood at R3.7 billion, and was likely to increase to R4 billion. This money could be better utilised in an ownership programme. As this money was not readily available, Public Works had embarked on lease-to-own and build, operate and transfer schemes. In the 3 000 facilities being leased were specialised facilities, like courts, police stations, forensic laboratories and record centres. Because these facilities were specialised, they were not readily available on the market. Premises which were leased had to be significantly adapted to fulfil these functions. The idea was to contain the amount of leasing being done and moving towards ownership.

Regarding the specific example of lights being cut at the Mthatha High Court, it was true and it last occurred over a weekend period. He had had to negotiate with the Chief Financial Officer and the Municipal Manager to see what facilities could be kept open. Two were prioritised, being the prison and the SAPS stations. The dispute was not clear cut in the sense that one could simply blame Public Works. The difficulty found with some municipalities was reconciling accounts and making appropriate payments. In the case of the Mthatha Municipality, this had been at the heart of the problem. A similar problem had been encountered with rates and charges, because the DPW had not been allowed to pay unless it was clear that it was the amount owed. Mthatha was a reflection of a problem which may be found with many other municipalities. The Mthatha Municipality had used the tool most readily available to it to enforce, and that was to cut services to the facilities. A programme had been begun with the municipality in Mthatha to ensure that the accounts were properly reconciled. There was still a dispute about what was claimed and what DPW believed was owed.

As far as maintenance of the 85 000 owned facilities went, the cost as a whole was astronomical and these funds were not readily available. Public Works did not possess the billions necessary to maintain all the buildings. The R100 000 delegation to client departments was to begin a process of sharing the burden of maintenance, and the request to entertain a higher amount was being seriously considered. However, there had to be agreement on what this would be used for, and with load shedding there was the issue of the requirement for generators. It would have to be agreed what the quality, standards and specifications were that client departments could procure. The difficulty was that while clients may want to procure generators, they may purchase equipment of inferior quality which could break down.

There had been a fundamental review, and as part of operationalising the PMTE, a specialist facilities management branch had been established to initiate an open discussion. There was also the issue of transferring to the client departments the maintenance staff, as part of the overall sharing of the responsibility. The user therefore would have a large responsibility to ensure the maintenance was conducted, to ensure that if minor problems occurred they could deal with the matter. There was no centralised system at the moment, and the DPW did not have the number of inspectors required to check every single building to see whether they were properly maintained. To this end, an area-based model was being developed. Public Works had just come out of an engagement with the provincial Public Works departments, to see how best an area-based property management model could be created, in which there were property managers in various parts of the country who could monitor a number of buildings and visit them with a degree of regularity, and also monitor the facilities maintenance schedule and standards which the users had to comply with. So when the clients received the R100 000 or increased amount, they would indeed be fixing broken windows or changing the broken locks.

In this way, the DPW would have to ensure that the current stock’s life was extended for the government’s use, because the 85 000 buildings being used could not be replaced in a decade or two. Their lifespans had to be extended for far longer. Given that if Public Works was to replace the 3 000 facilities being leased, the build programme would take a number of decades. Overall if one looks at the facilities maintenance, it was going to require a cooperative relationship between the user departments and the DPW to find joint solutions. and to encourage user departments to take on a significant responsibility.

Ms Mothapo asked for clarity on an instance in Limpopo, where it had been said that construction had been stopped since 2009, with costs escalating from R9 million to R45 million. Further, had the handover of the Polokwane high court, which had been scheduled for 15 May, occurred?

Mr Stephen Ntsandeni, Executive Head: Development Services, Independent Development Trust (IDT), said the requirement for the additional parking was due to the town planning requirements based on the size of the building being constructed. The number of parking bays required could not be accommodated in the two basement levels, because of the ground conditions and the height restriction imposed on the building. Luckily there had been an adjacent piece of land which could be used to put up a parkade, which would mainly accommodate the public making use of the court building, as there was enough parking for the staff of the court. The municipality had agreed to provide a temporary occupation certificate while the parkade was being constructed. This would begin during September, but the client was now finalising preparations to move furniture into the building, pending occupation.

Mr Vilakazi said that security clearance was done by the South African Security Agency prior to any work being awarded to a service provider.

On the handover of the Polokwane high court, he said this project was still in the planning stage, because there was a problem with a sufficient water supply, even after the installation of boreholes. This went back to the issue of site clearance, which ensured that the DPW did not move forward with problematic designs. To date, the designs had been done and submitted in July to the relevant committee which checks for appropriateness and norms and standards. The DPW intended to go out for tender in October.

The Chairperson said that the Polokwane court was beautiful and it made one wonder why parking was not thought of in the initial planning. Further, the idea of property managers was a good one. Lastly, the security at courts needed to be looked into and reported on in future reports to ensure it was properly addressed.

Department of Correctional Services infrastructure and maintenance projects: Briefing by DPW

Mr Mabuza said the issues which were affecting delivery on the infrastructure programme included under-spending, contractors’ cash flow and liquidations, and at times disputes with sub-contractors. The matters raised regarding planned maintenance and the R100 000 delegation to the client departments were also applicable to the DCS. Further, as part of the turnaround strategy mentioned regarding the DoJ, there were also joint task teams in place.

Mr Mabuza said the DPW’s performance was gauged both in terms of finances and delivery on critical projects and maintenance. In the 2013/14 financial year, the DPW had not spent its allocation for the DCS, achieving only 47% expenditure. In 2014/15, there had been an improvement, with 81% expenditure being achieved. Presently, the DPW was performing well, having spent 30% of its allocation as at the end of June 2015. The factors which had contributed to under-expenditure included under-performance by the contractors. There had been six prison contracts where contractors had experienced cash flow problems leading to liquidation and contract cancellations, or resorting to the guarantor completing the project.

Mr Mabuza provided an update on the six above-mentioned prison contracts. At the Tzaneen Correctional Centre, the issue was the liquidation of the contractor and unfortunately the DPW had had to undergo the painful process of negotiating with the liquidator to complete the contract. These discussions had been concluded by the end of July 2015. The DPW’s position on these matters was thatif there was no positive feedback from the liquidator or guarantor, the contract was terminated and another contractor was found. A directive had been received from the Director General of the Department of Public Works indicating that if the feedback received was not positive, then the contract was to be terminated. There was a detailed report of the history of the project, including the figures. Initially the contract value had been R191 million, over a 32-month period, with completion expected in 2012.

Mr Mabuza said the project for the Parys Correctional Centre had been advertised. When problems were encountered, the project was at 57% completion. The project was worth R200 million, and when the project was re-advertised, the bids were higher than this amount. Therefore, the re-advertising process had been embarked on again. The advertisement went out on 31 July and would run for a month. Thereafter the tender process would ensue, including matters such as security clearance and this process was anticipated to be completed by the end of October 2015.

Mr Mabuza said at the Kgos̆i-Mampuru C-Max Correctional Centre, the problem was one service provider being awarded more work, and this was a legacy issue. This contractor had also gone into liquidation and the contract needed to be terminated. Fortunately this contract had been terminated before the lengthy process of liquidation. The claims of what would be recovered from the initial contractor were being investigated and preparations for the next contractor were under way. What normally happened was that the site would have to be visited and stock taken, and thereafter the documents would be prepared for the tender process. The DPW was aiming for the completion contractor to be appointed by mid-November 2015, to complete the remaining 30% of the work. The joint task team had visited the site, to ensure proper reporting.

Mr Mabuza said the Vanrhynsdorp Correctional Centre was intended to be completed by October 2015 and the guarantor had been on site since February. 1% of the work remains to be completed and this translates to about R20 million worth of work. The total project value was approximately R282 million. The history of this project was that the contractor went into liquidation in 2013 and the guarantor stepped in in February 2015.

The Ceres Correctional Centre had also been completed, despite the contractor being liquidated. The guarantor had appointed a contractor who had completed the work in April 2015, with delivery completed in July 2015. There was no need for recovery of costs in this instance, because the work had been completed at no extra cost. Normally, if there was a shortfall between the first contract and the replacement contract, then costs were recovered, which was not the case here.

Mr Mabuza said a similar process of the contractor being liquidated had occurred at the Estcourt Correctional Centre. However, the contractor had managed to appoint another contractor to complete the project and the work was at the 42% stage to date. Here the problem encountered was the sourcing of materials needed for the construction, specifically window and doorframes made out of manganese. This was a security measure, preventing inmates from cutting through the bars. This had caused delays, but it had now been resolved with the batches of materials delivered. This project was anticipated to be completed in January 2017.

At the North End Correctional Centre, the work was at 48% and was expected to be completed by March 2016. Work included the refurbishment of ablution facilities, installation of generators and security features. The DPW was convinced that the contractor would be able to complete the work by the deadline.

At Matatshe Correctional Centre, the initial contract had been terminated due to poor performance and the new contractor had been on site since June 2015. The work and maintenance were scheduled to run for 24 months.

Mr Mabuza said Glencoe Correctional Centre had caught fire in May 2015. The DPW had then visited the prison and put forward plans with various options before the client department. The problem here was simply that the structure was old -- built before 1977 -- and the concern over fires had not been properly taken care of. Therefore, the work had not only to rebuild what had been destroyed, but had also to ensure the rest of the structure was up to standard. The sense was that the client was in approval of the plan, and hopefully by the end of November the contractor would be on site.

Regarding overall performance, the DPW had spent its budget for the period. There were a total of 246 projects for the DCS. 108 of these were in the planning stage and 138 were committed, meaning they were in construction and beyond. Therefore, most of the money was dedicated to construction and unless projects were cancelled, the budget would be spent. The challenges being faced were similar to what had been discussed above, with contractors being placed in liquidation. In addition, contractors failing to plan the work properly caused problems, for example, with mechanical and electrical installations on site. Lastly, the DPW had begun to deal with the problems relating to the appointment of contractors in the same manner as had been discussed for the DoJ, and revolved around the changing of SCM policies. To improve the problem of poor planning, the DPW intended to implement measures at the tender stage, so that such problems could be picked up and dealt with through the procurement process.

DCS Infrastructure Portfolio with the Independent Development Trust: Briefing by IDT

Mr Ntsandeni said the Independent Development Trust (IDT) was running a programme for the DCS encompassing the installation of security fencing at 27 prisons on 13 facilities, as well as associated integrated security systems. The current status was that the programme had been under way since 2012, and the last site should be completed by May 2017. Of the 13 facilities, eight had been completed. The challenges experienced had included difficulty in accessing “as-built information” and access to the workspace, because of the facilities being live.

 

An assessment had been done at the Zonderwater Prison, where the IDT had been tasked with looking into whether the facility should be rehabilitated or whether a completely new structure should be constructed. This report had been submitted to the DCS for a way forward.

The IDT was also running a programme for generator and kitchen upgrades for the DCS. Assessments had been conducted in Kwa-Zulu Natal and the Eastern Cape, with the reports submitted to the DCS.

Discussion

The Chairperson said she would open the floor for comments and questions, but also asked for DCS to give its impression of the work performed by the IDT.

 

Ms Breytenbach said she was confused, because it appeared that the IDT was doing the DPW’s work for it, particularly with the large budgets allocated to both entities and the lack of finalisation of projects. She still had a problem with the absence of a database of preferred contractors, because she could not see how such a large number of projects could have liquidated contractors and terminated contracts. She said it was “completely and utterly unacceptable.” She did not see an indication of how much this cost the state, and wanted to know who was responsible for finalising a project if the contract was terminated. Further, what was the financial implication of the matter being delayed and who paid this cost. She presumed that the contractor would be paid, go into liquidation, and the money had to come from somewhere.

Mr Mabuza said the database was a problematic issue, and the DPW would be sharing the database where tenders were awarded to show the contractors which had defaulted. The database was being put in place. A related problem was having one contractor awarded a number of contracts, and when the contractor went into liquidation then a number of projects suffered. On the financial implications of liquidation, the contracts being used were clear that the shortfall of amounts following the contractors’ default must be collected from them. However, in practice the DPW had been seeking to collect such funds at the end of the contract, so that it would know exactly how much was owed. The future directive was that immediately upon termination the losses were to be quantified and taken through the process of the state attorney, seeking to recover the costs.

Mr Swart said there were a number of issues which the Committee needed to engage DPW on, although there was not sufficient time presently. He appreciated the IDT’s mandate to deal with developmental projects, but wanted to know how it liaised with the DPW and the nature of the relationship. Further, what was the relationship with client departments and was there also a structure like the DPW’s joint task teams which regularly met with client departments? The issues with the DCS’s capital works were issues which the DCS had complained to the Committee about. He appreciated that there was a turnaround strategy, but there had been numerous instances of delays. Hopefully some of the solutions which were being implemented would alleviate this. The projects were major contracts and he presumed that the joint task team would be meeting regularly with the DCS. The delay due to the availability of the manganese windows required should surely have been predicted by the contractor? He did not understand how, when one was embarking on such a project, there could be delays of this nature. He understood that this was the fault of the contractor, but such problems were foreseeable and therefore the question arose as to how due diligence was done regarding the appointment of these contractors. He asked for the role of the guarantor to be explained in instances of liquidation. Surely the guarantor would have to put up money, or stand in for the contractor? He asked the DoJ to consider the allocation to the DPW of R433 million for consultants and contractors and an IDT allocation of R630 million for consultants and contractors. He did not want an answer presently, but would like the reasoning to be clarified in future.

Mr Ntsandeni said the relationship between the IDT and DPW was that IDT was a Schedule 2 state-owned entity that reported to Parliament under the DPW. Currently it was undergoing a restructuring process driven by the DPW, which was looking at the IDT’s mandate. Initially the IDT had been set up as a trust. This was being reviewed, as well as looking into how it could be brought closer into the DPW. The IDT was also a member of the joint task teams which had been mentioned and therefore it did interact with client departments under the leadership of Public Works.

Mr Mabuza said the role of the guarantor was to provide financial surety regarding the contractor. Upon either termination or default, the guarantor would appoint someone to complete the work. This was another area where practices were being reviewed, because the process was taking too long. He agreed that some of the delays with material supply were foreseeable, and lessons had been learnt regarding how procurement was handled. The DPW and client departments were looking at widening their specifications so that monopolies were allowed, because problems with one service provider could lead to issues at a number of projects.

Mr Mpumlwana said he now understood that the blame for delays was not with Public Works. He understood that clients determined their requirements, and then the DPW or IDT simply implemented. There was a correctional centre near Mthatha which had been built three to five years ago, but it was a white elephant which was not being used. A decision had been taken, money spent and good work done, but yet it was not operational. He had looked at the security fencing at St Albans, and felt that this was a high risk endeavour. Further, he had seen the fencing in Mthatha, and he had not seen anything wrong with the old fence. There was a problem with “tender-preneurship,” and this was a problem which manifested itself on the side of the clients. He wanted to know whether the DPW or IDT made assessments of whether the capital works were necessary, or whether they simply implemented. When tenders prices were set, the actual costs were often escalated because they were state funded. Were these prices simply accepted, or did the DPW check whether these prices were reasonable?

Mr Ntsandeni referred to the scope of the work regarding the security fencing, and said the IDT did look at the needs of the client. Experts would assess the security requirements and consult with the facility users themselves, because it had been found that a top-down approach did not translate well at the lower levels. There was a steering committee where the facility users participated in voicing what their needs were, to avoid the IDT proposing a solution to the client’s day to day needs.

Ms Mothapo said perhaps it was high time that Public Works looked into its service delivery model, because it might have been an inherited system which was designed to cater for a South Africa divorced from the former Bantustans. She proposed that DPW create additional agencies, because the Repair and Maintenance Programme (RAMP) did not do much. Perhaps if an agency was created to deal specifically with maintenance, and another specifically for leases, then some of the challenges being faced could be alleviated. The DPW was overworked in having to manage properties all over the country. Therefore, Public Works should look into developing a model and delegating some of its functions to the provincial branches. She felt the R100 000 delegated to the client departments for maintenance was very minimal. Duties such as minor works could be delegated to client departments because capping the amount may impede a department from carrying out certain projects which would be beyond this amount. She reiterated that the Committee was aware that the DPW was overloaded and that it was short of scarce skills such as engineers, due to competition with the private sector.

Mr Thobakgale said the DPW had four entities which reported to it -- the IDT, the Council for the Built Environment, the Construction Industry Development Board (CIDB) and Agrément South Africa (ASA). ASA was a quality assuring agency for all construction materials. One of the decisions taken to reinforce the capacity of the state to deliver infrastructure was that the DPW would use the maintenance budget to appoint exempt micro-enterprises, which were emerging contractors whose annual cash flow was below R10 million per year. This was to use the muscle of the state to deliver infrastructure, while supporting emerging contractors. If this was not so, then only large contractors would be able to access state funds to deliver infrastructure. Looking at the CIDB ratings, there were more than 60 000 contractors which were under grades one or two, and these were contractors whose cash flow was far below R10 million. These contractors would not be able to survive on their own unless the state deliberately put in place an amount which could be contested for only by the emerging contractors. The DPW’s view was that using the multiplicity of this initiative, young people and emerging contractors would be able to better benefit from the muscle of the state.

Mr Vilakazi said the service delivery model was being looked into and the process had just kicked off. The DPW was being guided by the framework developed by the Department of Public Service and Administration, and was one of the projects it was engaged with in the realm of efficiency enhancement.

The Chairperson asked whether the fence installed by the IDT had security features such as cameras and detection devices, because security was one of the challenges with Correctional Services. The same applied within the buildings themselves, because whenever the Committee met with the DCS it emphasised the need for such security features within correctional centres, because a lot of crime happened due to a lack of such security measures, including gangsterism, rapes and escapes. This was something which needed to be looked at urgently to allow Correctional Services to be run in a manner which was conducive to rehabilitation. There was also a lot of land available to the DCS to utilise for inmates to produce their own food, or even to plough back into the communities. Here the concern was that it had been said that the equipment was obsolete, and she wanted to know whose responsibility that would be, because the Committee had been informed that it was the responsibility of Public Works. Millions and millions were spent on projects, and yet simply buying new equipment would lead to correctional centres operating better. The Committee had been impressed with the state of the art correctional facilities such as Kutama Sinthumule Correctional Centre, where the facility was better than the conditions many South Africans lived in. The concern with the Public Private Partnerships was whether South Africa would be able to comfortably afford them, going forward. She understood such a facility was being built in the Free State.

Mr Ntsandeni said the security fences provided were high security fences, which included features such as cameras and motion detection. There were different levels of security, and the type of facility would determine the nature of the fencing -- for example, on agricultural land the fencing would be low security. The closer to the facility itself, the more sophisticated the fencing became. Cell phone detection systems had also been implemented at eight facilities.

Mr Thobakgale said the problem with public private partnerships was that they were extremely expensive and for a period of 25 to 30 years, the state would not own the building. It would be owned by the landlord and revert to the state only upon the end of the asset’s life cycle. This was recognised as financed leasing in the DPW’s balance sheet. The Department of International Relations and Cooperation (DIRCO) had one of the most expensive buildings in South Africa based on square meterage. The state would not be able to use these partnerships as a construction methodology to sustain itself. The type of approach being taken in terms of investment decisions was through the establishment of the PMTE. One of the components of its work was around investment decisions and there were three different options. The first was the traditional construction method, financed by the fiscus. The second option was that in the event that the state was unable to build, the government should acquire buildings through purchasing. The third option, which was the least preferred, was leasing, which cost the state about R3.2 billion and this was unsustainable. This was the Department’s attitude towards public private partnerships and therefore the DPW was reluctant to use this investment option. It was expensive, as it only led to the state owning the building after 30 years while having had to pay for its use the entire time.

The Chairperson said it was good that the DPW was also concerned about liquidations and the involvement of sureties, so that the process could be dealt with effectively by government departments. Perhaps people had thought that doing the job and being liquidated in the process was a way of making money, because there was no retribution. Whoever contracted with the DPW to do a job should be expected to deliver, because this problem had wasted a lot of time and money.

Ms Breytenbach said she still had a difficulty with the process where a contractor got liquidated, because whether the collection of the shortfall was attended to immediately upon default or at the end of the project, the fact of the matter was that the contractor had been liquidated and therefore had no money. Who then carried this cost?

Mr Mabuza said this was the reality, but there were guarantees in place which the DPW could utilise. These were set at 10%, and were at times not sufficient, but they were made use of.

Ms Breytenbach asked whether this meant that whenever a contractor was liquidated, the state picked up the cost.

Mr Mabuza said this was true.

The Chairperson said that in future the Committee expected a report which indicated how many liquidations had been experienced in a particular area, who was responsible for the due diligence in these instances, and what action had been taken against the culpable people. The DPW needed to develop a mechanism to create an environment which denied an opportunity to engage in types of behaviour which wasted money for Public Works. She thanked the DPW for appearing before the Committee and said this would not be the last time it appeared, because capital works were an area of concern when other departments presented their own reports. She felt the engagement had been meaningful and the Committee’s concerns had been taken up, so that when the DPW appeared in future it would be able to indicate the action taken in those areas.

The meeting was adjourned.  

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