Report on the Challenges in the Planning and Procurement of Services

1. Report on the Challenges in the Planning and Procurement of Services for the Ceres and van Rhynsdorp Correctional Facilities Portfolio Committee on Correctional Services 5 September 2012

2. Purpose • To respond to observations made by the DCS Portfolio Committee during their meeting of 22 February 2012 regarding the procurement of the contractor and details of the contract for both Ceres and Van Rhynsdorp Correctional Facility .

3. Projects Initiation& Professional Team • DCS requested provision of additional accommodation for administration and inmates to address congestion in various prisons in the Western Cape and in the Country. Hence VAN RHYNSDORP AND CERES PRISONS were registered as projects by DPW. • Registered Departmental Project Manager was appointed to lead the professional team which comprises of Private Engineers, Architect and Quantity Surveyor .

4. Projects Initiation& Professional Team - continues • The appointment of the professional team was done through routine assignment of consultants – Roster • Each project had a dedicated professional team in order to maximize performance and focus • The professional team members involved on the project are registered with their relevant professional councils

5. Observation:PROCUREMENT PROCESS: VAN RHYNSDORP • DPW advertised this tender on open procedure on 27 July 2007. • Procurement Strategy included inter alia the following requirements: • CIDB grading of 8GB or 8CE • Minimum Contract Participation Goal percentage of 20% was required

6. Observation:Procurement Process: Van Rhynsdorpcontinue • Cost analysis and pre tender estimates were done by professionally registered Quantity Surveyor • Pre-tender Estimate was R 219,989,562.00 • The estimate was based Kimberley Prototype • Contract Price Adjustment was included • Tender Amount R 192,876,930.64 • Variance is R 27,112,631.36

7. Observation:Procurement Process: Van Rhynsdorp Continued • 3 Tenders were received on 12 September 2007 • 1 tenderer was declared non-compliant due to not meeting the minimum points for quality • 1 tenderer was disqualified as they did not have the required CIDB grading

8. Observation:Procurement Process : Van Rhynsdorp • Highest point scored tenderer was recommended as the bid adhered to all requirements set and the tenderer had the required cidb grading. • Cidb grading 8GBPE • Contract Participation Goal Percentage tendered 47.41% • Tender recommendation was accepted by the Bid Adjudication committee and tender was awarded on 12 October 2007 • The site was handed over to the contractor on 7 November 2007

9. Van Rhynsdorp - Cost Analysis • Actual Tender Amount is R 192,876,930.64 • Current Expenditure R 275 695 477.39 • Variance between tender Amount and Expenditure to date R 82,818,546.75 (30.04%) • Costing model applied by was based on Historical Information(Kimberley) and Cost for Resources The variance increased due to the following: • Additional work requested by the User Department, outside the original scope of works. • Change of specifications for materials to meet client needs and enhance compliance, post sign-off of project deliverables. • Failure to account for topography and geographical location of facilities

10. Observation:Procurement Process : Ceres • DPW advertised this tender on open procedure on 25 April 2008. • Procurement Strategy included inter alia the following requirements: • CIDB grading of 8 GB • Minimum Contract Participation Goal percentage of 20%

11. Observation:PROCUREMENT PROCESS: CERES- Continue • Cost analysis and pre tender estimates were done by professionally registered Quantity Surveyor. • Pre-tender Estimate was R 212,646,407.00 • The estimate was based Kimberley Prototype • Contract Price Adjustment was also included • Costing model applied by Historical Information (Kimberley) and Cost for Resources • Actual Tender Amount R 182 712 542.62 • Variance is R 29 933 864.38

12. OBSERVATION:PROCUREMENT PROCESS: CERES CONTINUED • 7 Tenders were received on 28 May 2008 • 3 Tenders were disqualified as they did not have the correct cidb grading • Highest point scored tenderer was recommended as the bid adhered to all requirements set and the tenderer had the required cidb grading.

13. Observation:Procurement Process: Ceres continued • CIDB grading of 8 GBPE • Contract Participation goal percentage tendered 43.7% • Tender recommendation was accepted by the Bid Adjudication committee and tender was awarded on 11 July 2008 • The site was handed over to the contractor on 5 August 2008

14. Ceres - Cost Analysis • Actual Tender Amount R 182 712 542.62 • Current Expenditure R 193 229 166.23 • Variance between tender Amount and Expenditure to date R 10 516 623.61 (5.44%) The variance increased due to the following: • Additional work requested by the User Department, outside the original scope of works. • Failure to account for topography and geographical location of facilities

15. Form of contractsDetails of contracts Most of the activities on both projects related to buildings and civil works. The form of contract found to be suitable and relevant to both projects was: • Standard JBCC 2000 Edition 4.1 March 2005 – this document is not part of the documentation, but is referred to as the basis of the contract • Special conditions of Contract DPW 04 EC

16. Shortcomings identified in contracts and how to overcome in future • Shortcomings in processes have been identified • Sketch plan approval was duly obtained before tenders were invited; user client changes still occurred due to the fact that these facilities were of the first new generation facilities to be built and lessons learnt at Kimberley was incorporated in the building during construction phase • Enough time must be allocated for the planning phase of a project • Risk assessment of tenders to be comprehensive as the cidb grading is correct, but experience in a specific field may be limited

17. Planning Phase Challenge: Time frame between approval of sketch plans and tender documentation is often too short. Often due to pressure to get on site and show an expenditure. The result is detail planning must be done during the contract Proposal: Realistic time frames must be set and communicated. Expectations must not be created where delivery cannot take place .

18. Planning Phase Challenge: The geotechnical survey completed at the beginning of the planning was not comprehensive enough to indicate problems on soil conditions resulting in delays and extras due to rock, high water table levels, etc. Proposal: The DPW must ensure a comprehensive geotechnical survey and increase the amount of trial holes required in order to ensure that surprises in site conditions do not occur.

19. Planning Phase Challenge: The standard drawings and documents that existed were not comprehensive enough to allow planning without changes required. The lessons learned from Kimberley was incorporated during the construction phase Proposal: The DPW with assistance of DCS must develop comprehensive standard drawings and specifications that must only be adapted to suite a specific site.

20. Procurement Phase Challenge: At time of the evaluation of these tenders the method of risk assessment of contractors implemented was restrictive mainly based on the CIDB grading of the contractor and quality criteria set that did not include for all issues Proposal: The DPW has introduced a risk assessment concentrating on technical and contractual ability as well doing a commercial risk in line with the CIDB prescriptions. This must be further enhanced by developing of quality (functionality) criteria that are fair and objective

21. Procurement Phase Challenge: Contractors that are responsive in all criteria and will pass a risk assessment, but can be over committed if too many projects are simultaneously awarded to such companies. Proposal: A difficult challenge to resolve! The DPW to engage with National Treasure and the CIDB to develop criteria that can be used to ascertain if a proposed contractor will be over committed if more projects are awarded

22. THANK YOU