Halting of public-private prison deals costs construction industry

Master Builders South Africa (MBSA) is concerned that the government’s halting of the public-private partnership (PPP) process for four proposed new prisons may lead to a lack of meaningful response from the industry for future projects. Danie Hattingh, the president of the MBSA, said yesterday that this could happen because the risk of not recovering the costs of submitting a bid was too high. Some construction companies indicated last month, when the government announced its decision to cancel the planned prison projects and order a review of the PPP model across government departments, that they might seek compensation for the costs they had incurred.

Hattingh said the MBSA was seeking an urgent meeting with the government to obtain clarity about why the PPP process for four proposed new prisons at Paarl, East London, Nigel and Klerksdorp had been halted. The organisation also wanted to establish what commitments or assurances the government could provide to the building industry that future PPPs would not suffer the same fate. The bidding process had cost the industry vast sums and resources in the preparation of bids in response to the call for participation in the PPPs. “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,” he said.

Hattingh said the MBSA had pledged its support to the government’s planned infrastructure spend and was continually seeking ways to ensure the industry could respond to the call in whatever format or model required. But he stressed the MBSA needed to see these capital projects come to fruition, for the sake of the industry and the country. Mike Upton, the chief executive of listed construction and engineering company Group Five, said that, when the PPPs were cancelled, the group felt “somewhat aggrieved” that it had taken so long for the correctional services minister to make a formal announcement. The cancellation had resulted in “tremendous waste”, he said.

Upton said Group Five and other consortiums had spent tens of millions of rand in the preparation of bids and in responding to the government’s call for the private sector to embrace PPPs. The procurement process for the planned new prisons commenced in 2003. The final tender was issued in September 2008 with bids to be submitted by May 2009. However, the bids were never opened because a review of the policy and process was instituted. Neville Gurry, the executive director of the SA Federation of Civil Engineering Contractors (Safcec), said Safcec and Consulting Engineers SA (Cesa) would be submitting a formal proposal to the government to suggest a way forward for infrastructure delivery because there was stagnation in the entire construction sector.

Graham Pirie, the executive director of Cesa, said this joint proposal was drawn up largely because budgets were not being spent. Pirie said unless PPPs were streamlined, they were not going to happen, although PPPs were the only way forward to enhance service delivery infrastructure.