Cancelled prison contracts may dampen PPP appetite

21st November 2011

By: Irma Venter

Creamer Media Senior Deputy Editor


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Master Builders South Africa (MBSA) says it is “seriously concerned” about the manner in which government cancelled the public–private partnership (PPP) projects for the design, construction and management of four new prisons in Paarl, East London, Nigel and Klerksdorp.

MBSA, the national federation of Master Builders Associations, says in a statement that the bidding process cost the construction industry “vast sums of money and resources in the preparation of bids”, and that it would like “more insight” into the decision to cancel these projects.

MBSA president Danie Hattingh says MBSA is seeking an “urgent meeting” with government to obtain clarity as to why the process was halted, as well as to establish what commitments or assurances government could provide to industry that future PPPs will not suffer the same fate.

“The cancellation has been a major setback for our industry. Had the process been taken to its natural conclusion, thousands of additional jobs would have been created at a time when the industry urgently requires such new employment,” Hattingh states.

He adds that MBSA is concerned last month’s cancellation could lead to a “lack of meaningful response” from industry for future projects of this nature, as “the risk of nonrecovery was simply too high”.

“We need to see these capital projects come to fruition – both for the industry and the country as a whole.”

Government’s prison procurement process was initiated in October 2003 when a transaction advisory team was appointed to study the feasibility of delivering the facilities in partnership with the private sector.

The request for qualifications was released in October 2007 and the final tender on September 30, 2008. The bids were submitted in May 2009.

However, Correctional Services Minister Nosiviwe Mapisa-Nqakula, who took over the position in May 2009, instituted a policy and operational review, during which the bids were “not opened or evaluated” and were kept in a secure facility.

Mapisa-Nqakula said last month that this review highlighted a number of financial and operational problems with the PPP model, including the fact that it conflicted with policy stipulating that security and custodial services of the State not be handed over to third parties.

She said additional prison facilities would still be built, but offered no specifics, save to say that it was a “myth” that construction jobs would be lost as a result of the cancellation of the PPP tenders.

Bidders had been give the option to revise their offers to confine their involvement to construction and maintenance, but indicated that the PPP projects would only be attractive if they were also involved with the custodial services.

Mapisa-Nqakula also lambasted two existing PPP prison contracts, noting that, while the Kimberley facility had been built at a cost of R300-million, government would end up paying R1.5-billion for the capital cost of construction over a 15-year period.

Cabinet, which endorsed the cancellation, also indicated that there would be a review of PPP models across government.

Edited by Creamer Media Reporter



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