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Joint Report to Select Committee on Appropriations

Joint Report to Select Committee on Appropriations. by Northern Cape Department of Health Northern Cape Department of Roads & Public Works supported by National Department of Health (Infrastructure) 08 August 2012. 1. PURPOSE.

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Joint Report to Select Committee on Appropriations

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  1. Joint Report toSelect Committee on Appropriations byNorthern Cape Department of HealthNorthern Cape Department of Roads & Public Workssupported byNational Department of Health (Infrastructure) 08 August 2012

  2. 1. PURPOSE • This report provides progress made on the construction of the Northern Cape Provincial Mental Health Hospital • It follows the visit to the project site by the Select Committee on Appropriations on the 24th January 2012

  3. 2. INITIAL CONTRACTOR • Aug 2005 Provincial Tender Board awarded contract to Vista Park/JOH Arch Investments, to commence Sept 2005 • Delays in bulk earthworks meant that contractor only commenced Feb 2006 • Revised completion date set at 20 March 2008 due to late start and bad weather • By 2007 slow construction was noted, including poor workmanship & incomplete remedial work • By August 2009 contractor 565 days behind schedule • Penalties totalling R11.3 million levied but not deducted • Contractor failed to submit revised construction program but instead submitted claim for extension of time and costs • Slow delivery compounded by water penetration caused structures to deteriorate • Non-payment to sub-contractors caused delays - cash flow • Poor supervision of workforce by contractor Report commissioned in 2011 by NC DRPW into the initial tendering and contracting process (Gobodo Forensic Investigative Accounting)

  4. 3. TERMINATION OF INITIAL CONTRACTOR • Poor performance • Feb 2008 contractor requested to provide definitive plan to complete project by 20 Mar 2008 • April 2008 contractor failed to complete project or submit required completion plan. Contractor informed they were in breach of contract • Feb 2009 contractor submitted claim for extension of time with costs • Revised program requested from contractor, who gave new completion date of May 2010 • Mar-Dec 2009 senior management tried to find solution to incessant delays • Dec 2009 NC DRPW terminated contract, subject to legal processes • The court process and liquidation of the contractor • Jan 2010 to Oct 2011 contractor repeatedly challenged NC DRPW through courts • Lengthy delay, with the construction site legally under the control of contractor, resulted in significant deterioration due to weathering, vandalism and theft • Oct 2011 contractor was liquidated before court could make final ruling • Surety or guarantee? • 2% (R5 million) of contract value was provided through Investec for a period of 24 months • 4% (R10.2 million) retention from contract was kept by the client after termination • Increase of the original contract amount • Significant variations in cost caused by averaging methodology used to estimate costs at outset • Design work continued while construction was underway • R420 million was spent on the initial part of this project

  5. 4. NEW CONTRACTOR • Appointment • Late 2011 Inyatsi Construction appointed using JBCC contract. Site hand-over 21 Dec 2011 • Contract value R400.57 million for the hospital, internal roads and guardhouse, excluding professional fees • 24-month project - completion Jan 2014 • Scope of work and latent deficiencies • Late 2011 structural reports commissioned to estimate remedial work and inform the bill of quantities - R6.78 million • Jun 2012 sample drilled courses to determine concrete strength conducted - two of three passed the tests • Aug 2012 further strength tests conducted on some surface beds and concrete slabs - preliminary findings indicate significant variation in strength. Load tests conducted - awaiting laboratory reports • Performance of the new contractor • CIDB down-graded contractor from 9GB to 7GB during final stages of awarding contract. • Advice sought from CIDB on how to proceed – 3 options under consideration, including cancelling the contract • Contractor already falling behind time schedule, monthly expenditure is 50% less than cash flow projections

  6. 5. CLIENT BUDGETARY CONCERNS • No capital budget currently available for this project - expenditure being paid from budget for another Hospital Revitalisation Project • Significant and unexpected increase in the capital cost of electric sub-station is being reviewed • Additional costs for prolongation fees not yet quantified

  7. 6. RECOMMENDATIONS • Strengthened quality assurance processes • Further independent evaluation of integrity of structure • Establish Joint Management/Consultative Committee • Professional service providers to provide reports on legacy issues, including architectural & engineering design, on-site monitoring and payments for work done • Resident engineer • Take necessary actions and agree on contractual way forward, including: • Possible contractual actions • Possible legal actions • Formulation of improved contract administration processes • Demolition of inappropriate construction • Revision of inappropriate design

  8. Thank you Northern Cape Department of Health Northern Cape Department of Roads & Public Works supported by National Department of Health (Infrastructure)

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