R2 billion Umgeni water tender set aside as judge questions process

The rehabilitation of the infrastructure that makes water drinkable for the greater Durban area had to be stalled following a multibillion rand tender scandal that has played out in court.

Construction companies in a joint venture, WBHO and Icon Construction, took the state-owned water board Umgeni Water which services Durban and Pietermaritzburg municipalities, to court, to have the tender which was awarded to Klomac Engineering, set aside. Klomac Engineering manufactures water treatment equipment.

Founding affidavits were filed in the Pietermaritzburg High Court on December 6, 2019. WBHO-Icon was one of four bidders for the tender to rehabilitate infrastructure within Umgeni Water’s 444km pipeline Nagle (Durban Heights) and Wiggins (Inanda) System, but was unsuccessful. Klomac, Bicacon and SSED JV were the other bidders.

The tender was advertised in March 2019. SSED JV was disqualified at the eligibility stage while the other bidders advanced to the next stage. After an assessment by the Bid Evaluation Committee (BEC), Bicacon and WBHO-Icon were found non-functional and did not score the requisite 80 points to proceed to the price and preference stage.

But Klomac scored 83.83 (which was later disputed), and passed the functionality stage. Klomac’s price for the tender was over R2 billion, about R1 billion more than WBHO-Icon’s bid and R514 million more expensive than Umgeni Water’s estimated construction costs for the project. Klomac’s bid was also R121 million more than Umgeni’s total budgeted project costs.

Concerns were raised at the time whether Umgeni Water would be able to implement the project in two-and-a-half years for R2 billion when cash flow for three years was R1 billion. WBHO-Icon attempted to internally appeal the decision, but found no joy and ultimately sought relief through the courts. Klomac argued that WBHO-Icon had failed to exhaust all internal appeal processes before approaching the court.

But the crux of the construction joint venturer’s argument was that their submission was not scored on a fair or equitable basis. The first round of scoring began in July and in August 2019. The BEC noted that Klomac was the sole successful bidder and that unopened priced envelopes and letters detailing reasons for the unsuccessful bid would be sent when the news was advertised and made public. But this was not done.

Notice of the successful bid was sent to Klomac in November 2019. The court papers outlined that scoring sheets dated July 10 and 17 reflected amended scores that opposed the actual scores which revealed that none of the bidders met the 80 point threshold. It was argued that, at this point, Umgeni Water should have started the tender afresh and repackaged the project.

Another issue with the scoring was that Klomac had listed alternatives to its key personnel who were scored by Umgeni Water to ensure they passed the functionality test. It highlighted the fact that Umgeni Water had failed to complete reference checks as some projects listed did not belong to Klomac or its sub-contractors. But in the BEC’s scoring sheet, it was unclear whether each bidder had their sub-contractors scored or if it was solely done for Klomac.

After reviewing the case, made up of over 7000 pages of court documents, Acting Judge Sushila Keshav questioned if the tender was tainted by fraud or corruption. “It was argued that a tender could be awarded while not in accordance with Umgeni Water’s requirements. As the bid was in excess of the water board’s budget and there was incorrect scoring for the bidders, could Umgeni Water innocently make two mistakes in one process?”

Judgement was handed down on Tuesday by Keshav to advocates Indhrasen Pillay and Carina Jacob for WBHO-Icon, advocates Thandanani Mthembu and Sbu Zondi for Umgeni Water and advocate Greg Harpur representing Klomac. The judge ordered that the decision to award Klomac the tender be set aside.