Court sets aside R86-million border wall tender over fraud

Two companies who fraudulently acquired an R85-7-million tender for a border wall must now repay the profits. Illustration: Bronwyn Webb

• The Special Tribunal has set aside an R85.7-million KwaZulu-Natal tender for an 8km wall on the Mozambique border, after finding that the winning bid was a fake joint venture with a fraudulent B-BBEE certificate.
• The joint venture of ISF Construction Services and Shula Constructions was paid R84.3-million but never finished the wall.
• The companies must repay the profits.
• The judge called the companies’ conduct a “flagrant disregard” of tender rules and ordered the KZN Department of Transport to begin disciplinary action against the officials involved within 30 days.

The Special Tribunal has set aside an R85.7-million tender awarded for the construction of an 8km concrete wall between South Africa and Mozambique, and ordered the KwaZulu-Natal Department of Transport to take disciplinary action against the officials involved in the procurement process.

The successful bidder, a joint venture between ISF Construction Services and Shula Constructions, must declare its profits from the illegal contract and repay them to the department.

The joint venture did not complete the work on the wall, yet was paid about R84.3-million by the department which then issued a fresh tender to the value of R62.2-million for its completion.

The tender was issued after the community protested in 2016 about the smuggling of hijacked and stolen vehicles to Mozambique.

Out of 14 bids, most did not meet the B-BBEE requirements. The ISF Shula joint venture bid was one of three that progressed to evaluation on price. It was awarded the contract in July 2018.

Special Tribunal Judge Chantel Fortuin said it was common cause that the department eventually cancelled the contract when the wall was not completed and all the concrete required to bind and erect the wall panels was not poured.

In its application to the tribunal, the Special Investigating Unit said the contract ought to be set aside, citing fraudulent documents and misrepresentations regarding the workings of the joint venture.

Judge Fortuin ruled that the B-BBEE certificate used was false and fraudulently issued and this was not seriously disputed. Instead the two companies had argued innocence, blaming a third party for it, and saying the bid adjudication and evaluation committees should have picked it up.

Judge Fortuin said this was a “flagrant disregard of a basic requirement” of the tender and it was “astonishing that they had failed to take responsibility for it”.

“An invalid certificate amounted to no certificate being submitted,” she said.

On this ground alone, the tender award was unlawful.

The companies had also submitted an expired letter of Good Standing from the Compensation Commissioner. Again they blamed the committees for not picking this up and disqualifying their bid.

The SIU also alleged that the companies had made fraudulent misrepresentations regarding the intention to operate collectively, with combined skills and capacity, in order to increase their Construction Industry Development Board (CIDB) rating.

Judge Fortuin said Shula had admitted this in its answering affidavit. It said it was part of the joint venture “in name only”, and the joint venture had been formed so that the companies could tender for higher value projects, which they would then divide between them.

“The joint venture was therefore a sham,” the judge said. However, this issue had only been raised by the SIU in its heads of argument and not in its founding papers, and the judge would make no finding on this ground of review.

Turning to the remedy, she said it seemed, from the two companies’ responses, that they considered the “basic principles which are the cornerstones of our democratic state as being optional”.

“It seems as if they consider that finding loopholes in the system, even if there are none, is the way in which private individuals and companies should be contracting with the state.

“Following proper procedures is not a choice. It’s a constitutional obligation.”

She reviewed and set aside the award of the tender and ordered that the companies pay the profits through a process which includes submitting income, expenditure and profit statements to the SIU. Should a dispute arise, the matter must be referred back to the tribunal.

With regards to the officials, she said, they too should be held responsible. She ordered the department to start disciplinary procedures within 30 days.

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