#3075095-v3

1. PRESENTATION TO THE STANDING COMMITTEE ON PUBLIC ACCOUNTS (SCOPA) ON IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE by SANRAL29 November 2016 #3075095-v3

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

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

4. Routine Road Maintenance (RRM)

5. Developing SMMEs Main contractor is the managing contractor • Must sub-let a min of 60% to 80% of which 90% to black companies • Identifies training requirements • Arranges accredited training • Mentoring function after training completed in order to support SMMEs to grow into independent entrepreneurs • Quality Control

6. Tender evaluation process • Threshold for technical proposal • Independent statistical analysis of all responsive tenders by UP • Bench mark prices are calculated statistically using Gamma distribution for Management and Operational cost • Financial scores awarded for management price and operational price in terms of bench mark price

7. Pricing to protect SMMEs • Optimum provision for competitive tendering of SMMEs • Approximates best value for money • Promotes sustainability • NOT a statistical threshold to reject tenders • Prevent manipulation and collusion

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

9. SMME development

10. Routine Road Maintenance (RRM)

11. SMMEs on RRM

12. SMMEs on RRM (cont)

13. Three quotations A Women's Day Speaker • Was procured for a specific topic on which she was considered an expert Office Supplies • Were procured from one quotation due to no other invited tenderers responding Mobile phone covers • Were procured without requesting three quotes The total amount involved was R 27 413 • The implicated employees are under investigation Action taken • Warning letters have been issued

14. Conflict of interest • An employee failed to declare conflict of interest on three projects which had a combined value of R 1 323 860 Action taken • Charges preferred for the employee. The service provider served with a notice of intention to bar and due legal processes will be followed to cancel the contract

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

16. Urgent procurement (cont.) • A similar situation arose where another contract was terminated due to lack of performance by the contractor but the latter commenced legal action to prevent termination • The Accounting Authority resolved not to award any further contracts to this contractor until the legal matter is concluded • This necessitated urgent procurement which was approved by the Accounting Authority as a deviation • The combined amount is R 2 408 000 Action taken • From the outcome of the investigation it was established that there was no malice and/or intent and due process was followed

17. BEE certificates • Due to some rating agencies issuing electronic BEE certificates, it was not possible for tenderers to submit original or certified BEE certificates • Four tenderers were awarded contracts without submitting original or certified BEE certificates (but electronic copies were received) • The combined value of the contracts was R 39 530 882 Action taken • Warning letters have been issued

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

19. Deviations not done under emergency, sole provider or impractical to go out on competitive bidding ICT Governance • A contract was awarded without following competitive bidding process due to the natural continuation of the previous engagement as allowed for in the National Treasury Regulations • No expenditure was incurred in the current year • The combined amount is R 941 000 Action taken • From the outcome of the investigation it was established that there was no malice and/or intent and due process was followed.

20. Procurement approved not in line with delegations • Two projects were not approved in line with delegations - they related to a materials testing laboratory not performing to required standards • After following contractual mitigation measures, it was agreed with all parties to cede the contract to a new laboratory able to perform the work • The new laboratory started with the work before finalising the cession agreement and obtaining officials approval • The amount involved is R 2 350 378 Action taken • Warning letter has been issued

21. Thank You