Durban’s R35 000 shack shame

A damning forensic investigation has found that city officials fraudulently colluded with bidders who eventually spent about R35 000 per shoddy 2m x 2m room in a 700-unit temporary housing project. The price of the unit is roughly R10 000 less than what it would have cost the city to build a fully fledged low-cost house. It would have cost the city about R7 000 to buy a similar-sized wendy house and from R4 000 to R6 000 to buy a corrugated iron zozo hut. The audit was commissioned after a “suspicious” R31 million contract to build a 700-unit transit camp for Kennedy Road informal settlement victims after a devastating shack fire was issued without going to tender. Each prefabricated room (as shown in the pictures) cost R34 250 to build. Preparing the ground, storm water drainage, water and communal ablution facilities, and provision of electricity pushed up total budget of the temporary housing project to about R31 million.

The city’s municipal public accounts committee was told last year that it cost R45 000 to build a conventional low-cost house with two bedrooms, a kitchen and sitting room. The committee launching an investigation in January this year, questioned housing head Beryl Mphakathi on the rationale of spending R31 million on “temporary structures when permanent structures could have been built at a similar cost”. The contract was awarded through the controversial section 36 regulation in July last year. The explosive report was tabled at Thursday’s last full council meeting of the year, but for reasons unknown was deferred to the city’s first full council meeting in January. “We found that the invitation for bids has been advertised with the CIDB (construction industry development board) grading; the award could not be made to the lowest bidder; with the bid adjudication committee opting to award the contract to the second-lowest bidder,” read the report. “We were concerned that the invitation for bids had not been re-advertised in light of the incorrect grading and questioned whether value for money had been received by the municipality.”

The municipal public accounts committee then interviewed Mphakathi and Andre Petersen, the head of the supply chain management unit, and also had “an inspection in loco of the construction site”. Here the committee found shoddy workmanship “and felt that the municipality had not received value for money”. “While we were of the view that the bad workmanship was unacceptable and should be addressed immediately, we resolved that the work needed to be measured against the human settlement unit’s specifications to enable its fair assessment,” the report reads. The committee then asked the municipality’s city integrity and investigation unit to probe the matter further. The report states that the unit’s preliminary investigation revealed “the possibility of cover quoting by a group of companies which appeared to be interrelated”. “In examining the tender documents submitted by the companies for the project, it was found that some of the companies shared contact details and the handwriting appeared to be similar.”

But because of the “magnitude and complexities of the investigation”, the unit sought the assistance of private auditing firm KPMG. The KPMG investigation was mandated to investigate “allegations of potential collusion in respect of the submission of competing tenders to the municipality, in a manner that prevented or lessened competition”. It also investigated “any potential irregularities, including fraud or contravention of the municipal finance management act in respect of the submission of tenders by the six entities to the municipality”. According to the municipal public accounts committee report, investigations found “associations” between five of the identified contractors shortlisted. “Submissions of competing tenders by associated service providers” were established. It also found “irregularities in submission to the Construction Industry Development Board”. Misrepresentation in submissions and irregularities in the departmental evaluation of tenders were identified.

In the report, the municipal public accounts committee recommends the companies be blacklisted and a criminal case be reported to the police. It wants disciplinary action taken against officials “involved in collusive behaviour”. The report does not reveal the names of implicated companies and city officials. It wants “ensuring that no further contracts are awarded to the service providers involved”, and for the matter to be resubmitted to the Competition Commission.