NEWS & ANALYSIS

How Gauteng toll tender was decided - Transport minister

Lowest bid won, all consortia had substantial foreign involvement

NATIONAL ASSEMBLY
FOR WRITTEN REPLY
QUESTION NO 372

DATE REPLY SUBMITTED: MONDAY, 28 MARCH 2011

DATE OF PUBLICATION IN INTERNAL QUESTION PAPER: FRIDAY, 18 FEBRUARY 2011 (INTERNAL QUESTION PAPER NO 2 - 2011)

Adv A de W Alberts (FF Plus) asked the Minister of Transport:

(1) Why the tender for the management of the collection of toll fees for the Open Road Tolling (ORT) system was (a) awarded to a consortium of which a foreign company (name furnished) is the majority shareholder and (b) not awarded to a local company in keeping with the Government's policy of empowering South African companies;

(2) (a) which (i) companies and (ii) consortiums applied for the tender for the management of the collection of toll fees for the ORT system and (b) what were the respective reasons why the tender was not awarded to the various companies;

(3) whether he has been notified that a certain company (name furnished) had not fulfilled its contractual obligations to the Department of Home Affairs and that this department consequently had to suspend that contract;

(4) whether he will consider taking steps to (a) reconsider the awarding of the tender to the company or (b) introduce specific measures that will ensure that the company will fulfil its contractual obligations; if not, why not; if so, what are the relevant details;

(5) what (a) is the total value of the contract that was awarded to the consortium and (b) what financial gain will the said company acquire from the tender?  NW403E

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REPLY:

The Minister of Transport:

(1)(a) and (b) The tender was awarded through a public tender process taking into account the available skills in South Africa.  An objective, inter alia, was to ensure that a quality product would be delivered.  The tender process consisted of two phases, namely a pre-qualification phase (1st phase), followed by a second phase for those qualified in pre-qualification.  Due to the specialist technical nature of the systems, operations and the equipment proponents had to demonstrate their experience and capabilities to implement a project of this nature, including their financial strength at the pre-qualification stage.  The equipment to be used, as well as the software for this type of toll system is not locally available.  However, local companies were not excluded from the pre-qualification phase as they brought their own unique knowledge to the table.  Local companies did provide bids for portions of the overall tender, and were members in the tender groupings that prequalified for the second phase. 

The process allows for the transfer of skills and the empowerment of South African companies.  This is in line with South Africa's commitment to attracting investment and skills into the country.  In this regard it is recorded that the South African National Roads Agency Limited (SANRAL) required the foreign parent companies of ETC to put up guarantees in excess of R1 billion in support of their ability to perform their obligations in respect of this important contract, which is far in excess of that which could be offered by any South African company in this sector.

The way the tender was structured distinguished between the toll system operations and maintenance, and the operations of the transaction clearing house and violation processing centre.  The contract period for the last two mentioned is five years, with the intention to re-tender it earlier than the operations and maintenance of the toll equipment and systems that is eight years and is aligned with the estimated lifespan of such equipment.   

The contract requires the contractor to continuously transfer skills and ownership and employ South Africans in all positions throughout the lifespan of the project.  These requirements are monitored and the contractor will receive stiff penalties if failing to adhere to the requirements of the tender and commitments made.  It can be reported that 99% of ETC JV staff for the operations of the system will be South Africans.  Furthermore, during the construction of the civil works, 20 000 direct jobs were created.  This project has therefore contributed to job creation and will continue to do so.

(2) (a) (i), (ii) and (b)

Table A

The tendering entities and make-up are listed above (table A).  A detailed tender evaluation process was followed, evaluating all aspects of the offer.  ETC JV submitted a compliant tender offer, and was more than R2 billion cheaper than the next lowest tender offer as shown in the table B above.

 (3) SANRAL has no contract with said company.  SANRAL has entered into a contract with ETC JV, whose members are shown in table A above. 

 (4) (a) and (b)

The tender was awarded in accordance with procurement policies and there is no reason to reconsider the award of the appointment.  The contract has very specific measures and penalties to ensure that the contractor fulfil its contractual obligations.  The nature of the contract is that it is a performance based contract.  In this regard we reiterate that the contractor has put up guarantees in excess of R1 billion.

(5) (a) and (b) 

The total value of the work for which the contractor tendered, and that which will be performed directly by the contractor, is shown in table B above.  The amount includes the costs for the design and built of the toll system, including the supply of all the equipment, the operations of the toll system for periods as indicated in my reply to part (1) (a) and (b) above, and an amount for the replacement of components of the toll system at the end of the design life of the equipment.

As for any tender received in a competitive tender environment, the tender is evaluated in terms of the overall tender amount.  Tenderers do not provide their margin for profit

Issued by Parliament, March 29 2011

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