Report: Progress made in the completion of Ceres, Vanrhynsdorp & Brandvlei New-Generation Correctional Centres currently under construction in the Western Cape- dated 20 June 2012

REPORT OF THE PORTFOLIO COMMITTEE ON CORRECTIONAL SERVICES ON PROGRESS MADE IN THE COMPLETION OF CERES, VANRHYNSDORP AND BRANDVLEI NEW-GENERATION CORRECTIONAL CENTRES CURRENTLY UNDER CONSTRUCTION IN THE WESTERN CAPE- DATED 20 JUNE 2012

1. INTRODUCTION

1.1. A delegation of the Portfolio Committee on Correctional Services (the Committee) visited the site of the new-generation correctional centre under construction in Ceres, to investigate the reasons for the delay in its completion, as well as the delays in the completion of the Vanrhynsdorp and Brandvlei projects.

1.2 Overcrowding is one of the Department of Correctional Services’ (DCS) major challenges: in the Western Cape the level of overcrowding averages 180%. Given that the old Ceres, Brandvlei and Vanrhynsdorp centres were not designed for rehabilitation and also could not accommodate the large inmate population, the decision was taken to entirely rebuild them.

1.3 The visit comprised a briefing by the department of public works and correctional services’ regional and area management, a tour of the Ceres site, interactions with the construction company responsible for the Ceres and Vanrhynsdorp projects, and finally a debriefing session.

1.4 A series of questions for written response were forwarded to the DCS, the Department of Public Works (DPW) and the construction company responsible for the Ceres and Vanrhynsdorp projects,. The DPW and DCS’ written responses were discussed during a follow-up meeting held on 22 February 2012.

1.5 None of the three centres were completed on time. In a meeting held on 23 May 2012 the Committee was informed that all three would be operational by the end of the 2012/13 financial year.

1.6 The delegation paid a brief visit to remand detainees accommodated at the Ceres centre. Though the observations made during that interaction are not recorded here, concerns are similar to those raised elsewhere: the need to separate those in remand for the first time, and habitual offenders; the effectiveness of the Judicial Inspectorate for Correctional Services’ (JICS) indepedendent correctional centre visitors; and the impact of delayed police investigations and court proceedings. The Committee had in the past made numerous recommendations in this regard and, though not repeated here, those remain relevant.

2. BACKGROUND

2.1 Ceres project

2.1.1 The old Ceres Correctional Centre could accommodate 238 inmates. Once renovated, its capacity will be doubled. The new centre will accommodated 500 inmates and will comprise two housing units, single cells, a hospital and a kitchen. Each housing unit will comprise four communal cells accommodating 60 inmates each. The remaining bedspaces will be for those inmates who will be assisting with the delivery of nutrition services and will be accommodated in cells near the kitchen.

2.1.2 The contract, which initially valued R 212, 5 million. was awarded in 2008, and construction commenced on 11 July of that year. The renovations were meant to have been completed by 10 July 2010, but, at the time of the visit, construction was still under way.

2.1.3 ,Scope changes resulting from experience accumulated during the construction of the Tswelopele Correctional centre, and the inclusion of a solar-heating system, offender-management system and PMC flooring resulted in an approximately R30,4 million escalation in the cost of the project. At the time of the visit, penalties to the amount of R3,63 million had already been charged to the contractor for falling behind schedule.

2.1.4 The DCS listed inclement weather, soil conditions, public holidays, construction delays, strike action, electricity shortage and builders’ holidays for the 287-day delay in the completion of the project.

2.2 Vanrhynsdorp project

2.2.1 The old Vanrhynsdorp Correctional Centre could accommodate 327 inmates. Once completed, its capacity too will be doubled. The new centre will accommodate 540 inmates. Upon completion it will accommodate both male and female offenders. Male offenders will be accommodated in two units comprising four communal cells each, while the women will be accommodated in four communal cells. The centre will also have a segregation unit accommodating eight inmates.. Like the Ceres centre, the centre will have its own kitchen and hospital.

2.2.2 The contract was awarded on 12 October 2007, and initially valued R220 million. The project was meant to have been completed by 12 October 2009.

2.2.3 Scope changes resulting from experience accumulated during the construction of the Tswelopele Correctional centre, the extension granted by DPW, the construction of a see-through passage that would make the heritage building visible from the street, and the inclusion of a solar-heating system, offender -management system and PMC flooring resulted in an approximately R90 million escalation in the cost of the project.

2.2.4 The DCS listed inclement weather, additional public and builders’ holidays, unexpected land formations, late delivery of materials and additional scope changes for the 366-day delay in the completion of the project.

2.3 Brandvlei project

2.3.1. The old Brandvlei Correctional Centre could accommodate 654 inmates. The new centre will have 1 000 bed spaces and will comprise four housing blocks. Each block will comprise units accommodating 240 offenders in six 10-bed communal cells. Each unit will have two single cells. There will also be a segregation unit for those offenders who will need special care. In addition to the state-of-the-art kitchen, which will provide meals to the surrounding medium, maximum and youth centres, the centre will also have its own hospital rendering primary health care (including dental care) as well as a dispensary. The new centre will provide facilities for formal education and skills development.

2.3.2 At 64 degrees Celsius the Brandvlei Thermal Spring is the hottest in South Africa , and delivers 126 litres of water per second. The new correctional centre, as well as the staff quarters, will be provided with hot water through an energy-saving project that had just been completed at the time of the visit.

2.3.3 The contract, initially valued at R315,6 million, was awarded on 3 October 2008, and was scheduled for completion by 2 June 2010. As projected in March 2011, the centre was eventually completed in September that year. At the time of the visit, however, the date for it becoming fully operational was still unknown owing to IT installations that had not been completed.

2.3.4 At the time of completion, the cost of the project had escalated by approximately R89,5 million. The escalation resulted from scope changes i.e. the late addition of the laundry, a linking passage, extension of time granted to the contractor, and the prison management system .

2.3.5 The DCS listed extensions of the completion date, electricity shortages, and builders’ holidays as the main reasons for the 365-day delay in the completion of the project. Extensions granted accounted for 308 of these days.

3. OBSERVATIONS

3.1 Reasons for the delay in completion

The reasons provided for the delays in completion were mostly unsatisfactory. Some of them are elaborated on below.

3.1.1 The delegation was particularly perturbed by astonishing claims that builders’ holidays, which could be predicted and factored into planning, were listed among the unforeseen causes of delay. The DPW explained that the contract period was calculated in working days, and included the builders’ holidays. Once a contract extends over a builders’ holiday, that time is added to the contract, because extensions too are calculated in working days.

3.1.2 The contractor claimed that, because the Ceres and Vanrhynsdorp projects were basically Extended Public Works Programme (EPWP) projects, delays were caused by the use of about 500 inexperienced and “unsophisticated” labourers who, prior to their involvement in the project, were “nothing more than farm-workers”. In a written response to the Committee’s initial observations, the contractor added that, whilst it supported the aims and objectives of the National Youth Service (NYS), those it had to employ on the project in terms of its contract with the DPW, “have not always been beneficial” to the project, mainly owing to lack of motivation, absenteeism and lack of experience. The DPW denied most of the claims regarding the extent to which labour-related challenges had contributed to the delays. The value of the EPWP/NYS initiative totaled only 1% of the anticipated final cost of the Ceres and Vanrhynsdorp projects. The contractor was not prevented from employing additional, qualified artisans and/or labourers. The contractor had been aware at tender stage that the NYS initiative was a mandatory component of the contract and could have made due allowance for it.

3.1.3 The contractor’s claims that the two projects’ were in “rural farming communities” and that, therefore, the building material, skilled labour and “specifically construction capacity” demanded by the “extremely high specifications and quality of workmanship required by the employer” were also refuted as credible explanations for the delays, particularly because the location of the centres and labour requirements of the projects were known to the contractor at the time tenders were submitted, and could therefore have been factored in.

3.1.4 The contractor’s responses to concerns voiced, and the long delays associated with both contracts awarded to the company in question, raised concerns about its shareholding, suitability and about the reasons why it had been awarded a second contract, when it had failed to deliver in terms of the first. According to the DPW, the second contract was awarded only nine months after the first project had commenced. At that time the contractor had only been approximately five days behind schedule, and was not considered a risk. The company’s shareholding was provided to the Committee in writing.

3.1.5 The Committee was amazed that the DCS, despite having claimed that the Tswelopele Correctional Centre, which itself had been subject to many expensive delays, would serve as the blueprint for future new-generation correctional centres, had apparently abandoned this blueprint in the case of the three correctional centres. The DPW denied that the blueprint had been completely abandoned and explained that the Ceres and Vanrhynsdorp projects had started 12 months before the Kimberley project was completed, and that, although the generic plan was used in the planning of the two Western Cape facilities, changes came about as a result of knowledge and experience acquired during the Tswelopele construction.

3.1.6 The contractor responsible for the Ceres and Vanrhynsdorp projects, in a written submission to the Committee, bore some responsibility for the delays, but claimed that the ‘professional team’ had some responsibility too. They claimed that, as a broad-based black economic empowerment enterprise (BBBEE), they had not been treated fairly but had been isolated at every opportunity by the ‘professional team’, and that the latter’s failure to acknowledge their own role in the delays had severely prejudiced the contractor’s rights and the “due fulfillment of the contract”. These claims were not made during the visit, but were submitted in writing after, and the DCS and DPW have therefore not had an opportunity to respond.

3.2 Reasons for escalations

3.2.1 The DPW acknowledged that it faced professional capacity challenges which impacted on how it managed its projects. That notwithstanding, the DPW explained that, once a project has been initiated and changes of scope resulting in escalations are requested by the client department, that department is made aware of the cost implications and has to give the go-ahead to continue with the changes in scope. Feasibility studies were done for each of the three projects. All variation orders were discussed with the DCS. The DPW confirmed that escalation clauses were contained in all contracts exceeding six months, and therefore such clauses were included in all three contracts. The Contract Price Adjustment Provisions (CPAP) allow for contracts to be adjusted in accordance with the Joint Building Contracts Committee’s (JBCC) 2000 Principal Building Agreement Edition 4.1 (March 2005).

3.2.2 The Committee noted that letters were sent to contractors that were underperforming, and thought this intervention meaningless as it did not force contractors to adhere to their contractual obligations. It was suggested that contractors who habitually underperformed should be blacklisted. The DPW explained that only National Treasury could blacklist companies. According to the JBCC and General Conditions of Contract for Construction Works (GCC), should a contractor underperform or fail to perform and complete the project on time without justification, that contractor should first be placed on terms in line with conditions of contract i.e. the JBCC or GCC. In cases where contracts had to be reviewed for the above-mentioned reasons, the chief financial officer (CFO) or supply chain manager (SCM) was obligated to supply National Treasury with their details.

3.2.3 It was noted that additional excavations, which had resulted in additional costs, had to be done owing to trial holes that misrepresented the soil condition. Ground conditions recorded during the investigation phase of a construction project were the basis and gave direction to the design of, for example, foundations, floors and walls. According to submissions made by the DPW and DCS, additional excavations had to be performed because trial holes dug during the investigation phase of the three projects had ‘misrepresented the soil conditions”. At Ceres different ground conditions were discovered after construction had commenced, at Brandvlei unexpected underground structures required changes, and at Vanrhynsdorp “underground structures” were encountered, which the DPW claimed could not have been detected during planning. The Committee questioned the legitimacy of these explanations, and thought the additional excavations were the result of poor planning on the part of the contractors, and poor monitoring by the DPW.

3.2.4 Scope changes to the Vanrhynsdorp and Ceres contracts had resulted in escalations of about R40 million. The DCS ascribed the scope changes to lessons learnt during the Tswelopele project, the inclusion of solar-heating systems as per the DPW requirement, and increased electricity tariffs. The DPW indicated that the DCS had provided it with a generic layout of what their requirements were for the “new-generation” facilities. This layout could not be implemented exactly in any of the three projects, but had to be adapted to accommodate conditions specific to each of the sites. As shortcomings were identified, changes recommended were approved by the DCS. All of the scope changes were DCS-approved.

3.3 Role of the Accounting Officer in ensuring compliance with contracts

3.3.1 The Committee was unconvinced that the DPW and DCS’ accounting officers had done enough to ensure that the contractors adhered to the terms of their contracts. The delays, and associated cost escalations, might have been avoided had greater caution been exercised during the tender process, and greater control and management of the project once contracts were awarded.

3.4 Electricity supply

3.4.1 The DPW indicated that the three facilities had been constructed within the confines of existing correctional facilities and therefore had power connections to the supplier grid. Eskom could meet the Brandvlei centre’s maximum power requirements, but additional supply would have to be applied for. Although an application to increase the power supply had been submitted, the project also provides for energy-saving measures such as the use of hot spring water and the use of only one kitchen for cooking. The power to the Vanrhynsdorp site had been increased to the maximum that the local municipality could provide. Shedding devices have been installed to control peak consumption. The Ceres facility was connected to the supply-authority grid and therefore power is available. Each centre will have generators for use in the event of a power failure.

3.5 Projects’ contribution to job creation

3.5.1 At the time of the visit, the Ceres, Vanrhynsdorp and Brandvlei correctional centres reported 125, 135 and 200 vacancies respectively. According to the regional management, the excess vacancies had been created with the understanding that students would fill them once their learnerships had been completed in March and October 2012. As these could only be filled once the centres became operational, the delegation voiced its dissatisfaction that the delays in construction had resulted in a lack of meaningful job creation in the region.

3.6 Training and Development

3.6.1 The DPW explained that the EPWP/NYS initiative was a Government training initiative aimed at contributing to the artisan skills development programme and targets youth interested in careers in the built environment. While it had not formed part of the requirements of the initial Brandvlei contract, it was part of the Ceres and Vanrhynsdorp project documentation. Between 2007 and 2008, 104, 124 and 65 learners had received training as part of the Ceres, Vanrhynsdorp and Brandvlei projects respectively.

4. RECOMMENDATIONS

The Committee requests that the Minister of Correctional Services (the Minister) ensures that the following recommendations are considered, and where possible, implemented. The Minister should further ensure that responses on their feasibility and/or implementation progress reports are submitted within one month of the adoption of this report .

4.1 The DCS and DPW should provide clarity on how the delays could be justified /rationalised, particularly in relation to accounting officers’ obligations in terms of sections 38 and 39 of the Public Finance Management Act (PFMA), and the relevant National Treasury regulations.

4.2 The DCS should provide clarity on what the monies earmarked for the funded posts which had not been filled owing to the delays in the completion of the three projects had been spent on and/or would be spent on pending the coming into operation of the centres.

4.3 Despite the DCS’ continued complaints of the DPW’s failure to deliver services as per its mandate, the Committee has had no indication of the DCS’ commitment to ensuring that the DPW delivers, or that the working relationship is improved. At the time of the compilation of this report, the long outstanding DPW-DCS service-level agreement ( SLA ) had not yet been concluded. The DCS’ reasons for the delay are unacceptable to the Committee. While the Committee acknowledges the challenges experienced by the DPW in executing its mandate, it cannot be denied that the DCS has done little to ensure that services are delivered. As recommended in our report on the 23 January 2012 oversight visit to the Barberton management area, the DCS should provide the Committee with a written report on the reasons for the delay in concluding its SLA with the DPW.

4.4 The long delays in the above-mentioned projects, and the various claims made by the contractor, raised serious concerns about the integrity of the tender process, and, in particular, the composition of bid-adjudication committees. The DCS and DPW should ensure strict compliance with the relevant PFMA and National Treasury requirements. Every effort should be made to ensure that the integrity of the tender process is maintained. In addition, bid-adjudication committees should comprise individuals who are suitably experienced and qualified, and therefore able to identify unrealistic proposals, which, as in the case of the above-mentioned projects, inevitably lead to costly delays.

4.5 The Committee fully supports broad-based black economic empowerment (BBBEE) initiatives, but Government departments, in this case the DCS and DPW, should ensure that contracts are awarded to candidates that are able to provide quality services, on time and at reasonable prices. In addition those that are awarded contracts should have an understanding of Government priorities such as skills development and job creation. Contractors’ awarded Government projects should not use their obligations in this regard as an excuse for poor delivery. Action should be taken against those who repeatedly fail to deliver in terms of their contractual obligations.

5. ACKNOWLEDGEMENT

The Committee expresses its appreciation to the regional and area management of the the three centres, the DPW officials, the contractors, as well as the local authorities who had participated in the visit and the subsequent discussions.

Report to be considered.