PARTY

SAPS' dodgy lease: What the Public Protector found

Extracts from report of Adv Thuli Madonsela into leasing of accommodation in Pretoria (Feb 22)

Extract from "Against the rules" Report of the Public Protector, Adv Thuli Madonsela, on an Investigation into Complaints and Allegations of Maladministration, Improper and Unlawful Conduct by the Department of Public Works and the South African Police Service Relating to the Leasing of Office Accommodation in Pretoria, February 22 2011:

EXECUTIVE SUMMARY

(i) AGAINST THE RULES is the report of the Public Protector in response to complaints that were lodged with her office on 2 August 2010 in connection with the alleged improper procurement of the lease of office accommodation for the SAPS in the Sanlam Middestad building in the Pretoria Central Business District. These complaints originated from a newspaper article published on 1 August 2010 alleging improper conduct and maladministration by the National Commissioner of the South African Police Service (SAPS) and the Department of Public Works (DPW).

(ii) Primarily the complaints related to the alleged non-compliance with the requirements of section 217 of the Constitution of the Republic of South Africa, 1996 (the Constitution) by the SAPS and the DPW, and the alleged improper involvement the National Commissioner of the SAPS in the procurement of two buildings in Pretoria and Durban for office accommodation for the SAPS. The need for a second building to accommodate the SAPS Head Office in Pretoria was also questioned. Questions were also raised regarding the SAPS's relationship with the preferred service provider and the cost effectiveness of the transaction.

(iii) The Public Protector investigated the complaints with the cooperation of the Special Investigating Unit.

(iv) On 3 August 2010, the Public Protector requested the National Commissioner of the SAPS and the Director-General (DG) of the DPW not to proceed with the implementation of the lease, pending the finalisation of the investigation.

(v) On 10 August both parties responded with an undertaking not to proceed with the implementation of the said lease agreements until the investigation was completed. The DPW further indicated that the various role-players involved in the procurement process had been advised that "the implementation of the lease agreement shall be suspended pending the outcome of the aforementioned investigations." (Referring to the internal DPW investigation and the investigation of the Public Protector)

(vi) On 11 and 19 October 2010, the DG of the DPW informed the National Commissioner of the SAPS, on the basis of the findings of an internal inquiry and independent legal advice obtained, that the lease agreement between the DPW and Roux Property Fund (RPF) in respect of the Sanlam Middestad building, was invalid and that a new procurement process had to be initiated,

(vii) On 25 October 2010, the Public Protector issued a preliminary report on the investigation and informed the National Commissioner of the SAPS of her concurrence with the decision of the DPW to commence with an entirely new procurement process. The preliminary report was presented to the Executive Authorities and the accounting officers of the SAPS and the DPW.

(viii) The former Minister of Public Works, Mr G Doidge, was replaced by Ms Gwen Mahlangu-Nkabinde on 31 October 2010.

(ix) Shortly after Ms Mahlangu-Nkambinde's appointment, her office obtained informal advice from the Office of the State Attorney. The State Attorney's letter to the Minister's Special Advisor indicated that the lease agreement was enforceable. This advice was, however, given subject to a further legal opinion, to be obtained from senior counsel, at the request of the Minister's office.

(x) The opinion of senior counsel, dated 22 November 2010, concluded that the contract between the DPW and RPF was unlawful and the lease agreement therefore invalid. It supported the legal advice previously obtained by the DPW, also from senior counsel, that the High Court should be approached with an application seeking judicial review and setting aside of its decision to enter into the lease agreement, and for an order declaring that the lease agreement was invalid.

(xi) On 22 November 2010 the DPW advised Nedbank, the financiers of RPF, that it was continuing with the lease.

(xii) Minister Mahlangu-Nkabinde publicly announced on 7 December 2010, that the DPW was continuing with the implementation of the lease agreement. On the same day, the DG of the DPW was suspended.

(xiii) The investigation of the Public Protector was conducted over a period of five months and included interviews with officials of the SAPS, including the National Commissioner, officials of the DPW and Mr R Shabangu of RPF. Voluminous documentation relating to the procurement was perused and the relevant provisions of the Constitution, the Public Finance Management Act, 1999 (PFMA), Treasury Regulations and other procurement prescripts considered and applied.

(xiv) A copy of the draft report of the Public Protector on the investigation was distributed to the relevant parties. The National Commissioner, the Minister of Finance, the Minister of Public Works and one of the complainants subsequently submitted their responses thereto, on 23, 21, 4 and 7 January 2011, respectively, which were considered for purposes of the final report.

(xv) The general findings of the Public Protector made from the investigation are the following:

(a) The need for the office accommodation relevant to the investigation was not contained in the SAPS Immovable Asset Plan, as is required by directions issued by the National Treasury.

(b) By negotiating with a single supplier (RPF) and excluding the DPW, the SAPS proceeded beyond the demand management phase of the supply chain management process and in so doing infringed on the functional area of the DPW.

(c) The SAPS adjusted the need for accommodation not according to its real requirements at the time, but to fit the specifications of a single supplier, RPF, in respect of the Sanlam Middestad building.

(d) The procurement of the lease was not in accordance with a system that is cost effective, as is required by the Constitution.

(e) The urgency claimed by the SAPS in respect of the procurement of the lease, which resulted in a deviation from an open tender process, only related to a small part of the accommodation need. The entire Sanlam Middestad building was therefore not urgently required.

(f) The DPW failed to record the reasons for deviating from a competitive tender process, as is required by the SCM prescripts;

(g) The SAPS had more than sufficient time (6 years) to plan and structure its operations pertaining to the FlEA World Cup (FWC). It furthermore had no reasonable prospect, at the time when the process for the procurement of the lease commenced, of preparing and fitting the required two floors of the Sanlam Middestad building for occupation by the Communications Services in time for the FWC. The reliance on urgency was not justified and it was not impractical to adhere to a competitive bidding process in respect of the needs of the SAPS for office accommodation.

(h) It appears from the very nature of the procurement process followed, namely, by entering into a negotiated contract instead of a competitive bidding process, that the constitutional requirements of fairness, equitability and transparency were not complied with.

(i) The terms of the first lease agreement entered into between the DPW and RPF were not approved by the Special National Bid Adjudication Committee of the DPW. There were material discrepancies between the acceptance of RPF's offer and the terms of the lease agreement that was signed.

(j) The procurement of the lease was done in a manner that did not comply with the validity requirements of the Constitution, other applicable legislation and the Treasury Regulations and instructions for procurement by organs of state. The lease agreements entered into by the DPW and the RPF are therefore invalid.

(k) The DPW's decision to proceed with an invalid lease, despite legal advice from two senior counsel obtained at its own request and the undertaking given to the Public Protector that it would not do so, pending the finalisation of the investigation, was improper and unlawful.

(l) The conduct of the accounting officers of the DPW and the SAPS, who were responsible for compliance with the relevant provisions of the Constitution and other procurement legislation and prescripts in respect of the procurement of the lease, was improper and unlawful.

(xvi) The Public Protector's specific findings in relation to the conduct of the SAPS are that:

(a) The lease agreements were signed between RPF and the DPW and not by the National Commissioner of the SAPS, as was alleged. However, the National Commissioner signed a memorandum, dated 10 May 2010, authorising funding for the Sanlam Middestad building lease. He also signed the final SAPS needs analysis, dated 19 July 2010 for 25 301 .54m2.

(b) Although the SAPS did not sign the lease agreement, its involvement in the procurement process was improper, as it proceeded beyond the demand management phase and it further failed to implement proper controls, as required by the PFMA and relevant procurement prescripts.

(c) The SAPS failed to comply with section 217 of the Constitution, the reievant provisions of the PFMA, Treasury Regulations and supply chain management rules and policies. This failure amounted to improper conduct and maladministration.

(d) The conduct of the accounting officer of the SAPS was in breach of those duties and obligations incumbent upon him in terms of section 217 of the Constitution, section 38 of the PFMA and the relevant Treasury Regulations. These provisions require an accounting officer to ensure that goods and services are procured in accordance with a system that is fair, equitable, transparent, competitive and cost effective, This conduct was improper, unlawful and amounted to maladministration.

(e) On the evidence available it could not be found that an improper relationship between the preferred service provider (RPF) and the SAPS motivated the deviation from required tender procedures.

(xvii) The Public Protector's specific findings in relation to the conduct of the DPW are that:

(a) The procurement by the DPW of the lease was not in accordance with a system that is cost effective and competitive, as is required by section 217 of the Constitution, the relevant provisions of the PFMA, Treasury Regulations and supply chain management rules and policies. This failure amounted to improper conduct and maladministration.

(b) The conduct of the accounting officer of the DPW was in breach of those duties and obligations incumbent upon him in terms of section 217 of the Constitution, section 38 of the PFMA and the relevant Treasury Regulations. These provisions require from an accounting officer to ensure that goods and services are procured in accordance with a system that is fair, equitable, transparent, competitive and cost effective. This conduct was improper, unlawful and amounted to maladministration.

(c) The process that led to the conclusion by the DPW of the lease agreements with RPF was fatally flawed in various respects, including non-compliance with prescribed procurement procedures such as ensuring a competitive bid process or justifying the deviations in the prescribed manner. This rendered the process unlawful and further constituted improper conduct and maladministration.

(d) The lease agreement should not have been entered into as it did not comply with the validity requirements of the Constitution, applicable legislation and prescripts. The lease agreements entered into by the DPW and RPF are therefore invalid.

(e) The decision of the DPW to proceed with the implementation of the lease agreement in the face of considered legal advice from two senior counsel to the contrary, particularly the opinion procured on 22 November 2010 under the leadership of the current Minister of Public Works, was in breach of its fiduciary duties and the requirements of good governance in terms of the PFMA, and amounted to maladministration.

(f) The reckless manner in which the DPW dealt with public funds in this case, particularly:

  • the failure to subject the lease agreement to judicial review, as advised by senior counsel and by implementing the lease agreement despite further legal advice from separate senior counsel to the contrary; and
  • reneging on the undertaking given to the Public Protector not to implement the lease until the investigation was complete,

was improper and fell short of the requirements of good administration.

(xviii) The Public Protector concluded that the appropriate remedial action that is to be taken, as envisaged in section 182(1)(c) of the Constitution, is the following:

(a) The National Treasury should urgently review the purported lease agreement between the DPW and RPF in order to determine if the contract can be terminated forthwith.

 (b) The National Treasury must determine whether any irregular or fruitless and wasteful expenditure was incurred by the SAPS and/or the DPW in respect of the procurement process and other matters related thereto and take appropriate action, where applicable.

(c) The Cabinet must at its first meeting convened after the date of publication of this report request an explanation from the Minister of Public Works on:

  • The reasons for the decision to implement the lease agreement with RPF, despite the DPW being provided with a legal opinion of independent senior counsel, soon after her appointment, advising to the contrary;
  • The justification for proceeding with the implementation of the disputed lease, prior to the finalisation of the investigation by the Public Protector, and despite senior counsel opinions and the DPW's previous undertakings to the contrary.

(d) The Secretary of Cabinet must advise the Public Protector of the outcome of the deliberations referred to in paragraph (c) above and the resolutions taken within 10 days from the date of the Cabinet meeting.

(e) The Minister of Public Works with the assistance of the National Treasury should take urgent steps to ensure that the appropriate action is instituted against the relevant DPW officials that acted in contravention of the law, policy and other prescripts in respect of the procurement processes referred to in this report.

(f) The DPW must ensure that appropriate measures are implemented to prevent a recurrence of contraventions of the relevant procurement legislation and prescripts.

(g) The Minister of Police should, with the assistance of the National Treasury, take urgent steps to ensure that the appropriate action is instituted against the appropriate SAPS officials that acted in contravention of the law, policy and other prescripts in respect of the procurement processes referred to in this report.

(h) The SAPS must ensure that appropriate measures are implemented to prevent a recurrence of contraventions of the relevant procurement legislation and prescripts.

(i) The National Treasury should develop and introduce measures that will prevent a recurrence of a situation where client departments of the DPW infringe on the functional areas of the DPW in respect of the procurement of leased accommodation.

 (xix) The National Treasury, the Ministers of Public Works and Police, the DPW and the SAPS must submit action plans and progress reports to the Public Protector in respect of the implementation of the remedial action referred to above.

[CUT]

19 GENERAL FINDINGS

19.1 Findings relating to the procurement process

19.1.1 Finding 1: The need was not dealt with in the SAPS Immovable Asset Plan

19.1.1.1 The SCM guide requires that as part of the strategic plan of a department, the resources required for the fulfilment of its obligations should be clearly analysed. This includes a detailed needs analysis of the goods, works and services required.

19.1.1.2 In his response to the draft report of the Public Protector, the National Commissioner of the SAPS contended that the SCM guide should not be regarded as obligatory. However, the guide remains a directive of the National Treasury that has to be complied with by accounting officers and cannot be ignored.

19.1.1.2 The emphasis is thus on first determining the full nature and extent of the need required prior to initiating the procurement process. The specifications of goods required must be determined through a comprehensive needs analysis, taking into account aspects such as budget and the strategic objectives of the institution concerned.

19.1.1.3 The SAPS Strategic Plan 2010 to 2014 provided as follows:

"The need for the improving of infrastructure through a structured capital works programme within the SAPS, with specific reference to police stations and other office and specialized accommodation in the SAPS, is substantial. Budgetaiy constraints, however, impact on what can realistically be achieved. The building of new police stations, the renovation (refurbishing) of existing ones and the provision of accommodation in accordance with the determined need, will be prioritized in line with the operational priorities and objectives of the SAPS. It will, however, be important that the improvement of infrastructure is conducted in a coordinated fashion, that available budgets are fully utilized and that contracting and subsequent service delivery are done in accordance with relevant legislation. The management of existing assets will be guided by the development of an Immovable Asset Management Plan to comply with the Government Immovable Asset Management Act, 2007" (emphasis added)

19.1.1.4 There is no indication that an Immovable Asset Management Plan, dealing specifically with the accommodation requirements and needs at Head Office, was compiled for 2010/11. The Long-term Infrastructure and Capital Asset Plan included in the SAPS 2010 - 2014 Strategic Plan only provided details on the construction of police stations and refurbishments planned over the medium-term, but did not refer to any accommodation requirements at Head Office.

19.1.2 Finding 2: The involvement of the SAPS proceeded beyond the demand management phase of the SCM process

19.1.2.1 As indicated above, the procurement of leased accommodation on behalf of the SAPS falls within the purview of the DPW. In keeping with its mandate the DPW procurement processes are initiated from the stage that a need is identified and communicated to it by one of its client departments. This process therefore requires that once the element of Demand Management has been satisfied by the client department, i.e. the need identified and the specifications properly determined, the DPW then becomes responsible for the procurement process, without interference from the client department.

19.1.2.2 In the case of the Sanlam Middestad building, however, the SAPS, by entering into negotiations with a prospective bidder (RPF) clearly went beyond the demand management phase of the procurement process, even going so far as to negotiate on price, thereby infringing on the functional area of the DPW, i.e. the acquisition phase.

19.1.2.3 It is clear that the SAPS were fully aware that the procurement of leased accommodation was a DPW function, as was evidenced in a number of internal documents and correspondence.

19.1.2.4 The contents of the 10 May 2010 memorandum1° approved by the National Commissioner clearly indicate that he was made aware of the fact that the SAPS had been negotiating with a single supplier, i.e. RPF. In his evidence submitted during the investigation, the National Commissioner conceded that that the entire procurement process was thus compromised from the point at which SAPS entered into negotiations with RPF, to the exclusion of the DPW and other prospective bidders.

19.1.3 Finding 3: The SAPS adjusted the need to fit the specifications of a single supplier

19.1.3.1 In this instance the need ultimately determined by the SAPS was based on the total lettable floor space available in the Sanlam Middestad building, as opposed to the actual additional space requirements of the SAPS at the time. Simply put, the building itself influenced the need of the SAPS, resulting in the SAPS constantly adjusting the need in order to meet the specifications of the building.

19.2 Cost Effectiveness

19.2.1 Finding 4: The procurement of the lease was not in accordance with a system that is cost effective

19.2.2.1 It is important to note that even those instances where a situation does not warrant the use of tender procedures, this does not mean that an organ of state may do away with a competitive procurement process altogether. Organs of state are still required in order to ensure compliance with the principles of competitiveness and cost effectiveness in section 217(1) of the Constitution, to procure goods or services on the best possible terms.
10 Refer to paragraph 11.12 above

19.2.2.2 The need ultimately determined by the SAPS, as reflected in Table 3 below, was not based on the actual spatial requirements of the SAPS, but rather on the specifications of the building. According to the evidence and information considered during the investigation, the issue of security, as raised by the National Commissioner in his response to the draft report, was never communicated as such to the division who compiled the needs assessments or to the DPW.
19.2.2.3 Table 3 below illustrates the approximate in costs proportionate to the increase in the need of SAPS.

19.2.2.4. The contract amount of the lease purportedly entered into was calculated at R125.40/m2 per month including operational costs. Five months earlier the same building had been offered to the SAPS at R85/m2 also including operational costs, which offer the SAPS declined. The difference between the two proposals amounts to Ri 015 858 per month or R12.2 million per year (for the first year). This is a further indication that the procurement of the lease was not cost-effective.

19.2.2.5 Due to the fact that the need increased proportionate to the floor space made available by RPF in the building, and was not based on the actual requirements of the SAPS, the manner in which the ultimate need was determined by the SAPS indicates that the procurement of the lease of the building was not in accordance with a system which was cost-effective. It is therefore indicative of maladministration having occurred in the needs assessment process thereby tainting the entire procurement process.

19.3 Competitiveness and Urgency

19.3.1 Finding 5: The urgency related only to a small part of the need

19.3.1.1 Organs of state should, where urgency dictates a deviation from procurement procedures, carefully consider the value and lengths of contracts concluded in order to address only the immediate urgency. In this way ongoing needs and requirements must as far as possible and where appropriate be met by way of public tender procedures.

19.3.1.2 Regulation 16A6.4 of the Treasury Regulations provides that if in a specific case it is impractical to invite competitive bids, the accounting officer may procure the required goods or services by other means, provided that the reasons for deviating from inviting competitive bids must be recorded and approved by the accounting officer.

19.3.1.3 The reason for deviating from a competitive bidding process put forward by the SAPS is that it urgently required two floors of the building for accommodating Communication Services for and after the FWC. However, the entire building was not urgently required for the purposes of the FWC and there was no intention to occupy the entire building on an urgent basis. It should further be emphasised that although this submission was made by the SAPS, the DPW is responsible for the procurement process and is thus ultimately responsible for any deviation there from.

19.3.2 Finding 6: The DPW did not record the reasons for deviating from a competitive process as required by prescripts

19.3.2.1 In addition to the above, National Treasury Practice Note No 8 of 2007/08, which came into effect on 1 December 2007 prescribes the following in paragraph 3.4 regarding any transaction which exceeds R500 000. (Vat included):

"3.4.3 Should it be impractical to invite competitive bids for specific procurement, e.g. in urgent or emergency cases or in case of a sole supplier, the accounting officer / authority may procure the required goods or services by other means, such as price quotations or negotiations in accordance with Treasury Regulation 16A6.4. The reasons for deviating from inviting competitive bids should be recorded and approved by the accounting officer I authority or his / her delegate. Accounting officers /authorities are required to report within ten (10) working days to the relevant treasury and the Auditor-General all cases where goods and services above the value of RI million (VAT inclusive) were procured in terms of Treasury Regulation 16A6.4. The report must include the description of the goods or services, the name/s of the sup piier/s, the amount/s involved and the reasons for dispensing with the prescribed competitive bidding process. (emphasis added)

19.3.2.2 From the available evidence it is apparent that the DPW did not properly record the deviation from the bid process, nor did it meet its reporting obligations, as required above. This was conceded by the Minister of the DPW in her response to the draft report.

19.3.3 Finding 7: The deviation procurement process did not comply with the urgency requirement

19.3.3.1 It appears from the available evidence that the SAPS had no reasonable prospects of preparing and fitting the required two floors of the building for occupation of the Communication Services in time for the FWC competition.

19.3.3.2 The SAPS had more than sufficient time to plan and structure their operations pertaining to the FWC. On the available evidence the earliest date on which the "urgent" need for accommodating the Communication Services in a single building for the purposes of the FWC arose was during March 2010, less than three months before commencement of the event. This indicates dilatoriness on the part of the SAPS in that it failed to identify the need in time for a competitive bidding process to be followed.

19.3.3.3 Furthermore, only one floor would have become available on 1 July 2010 when the FWC would have been far advanced, and further floors would only have become available in August 2010. By that time the FWC would already have been concluded. Therefore, it was not possible to accommodate the Communication Services in the building in time for the FWC. Despite having deviated from a competitive bidding process on the basis of urgency, the SAPS has to this day not occupied any part of the building. These facts seem to refute any contention that there were objective reasons for the alleged urgency.

19.3.3.4 The above-mentioned considerations lead to the unavoidable inference that a reliance on urgency was not justified and that it was not impractical to adhere to a competitive bidding process. It follows that the provisions of Regulation 16A6.4 read with Practice Note 8 of 2007/08 could not be relied upon by either the SAPS or the DPW, and that the DPW was, therefore, obliged to follow a competitive bidding process. The failure to do so was an infringement of the Constitutional requirement that the procurement has to be competitive.

19.3.3.5 The approval of the lease agreement for 21 000m2 did not fall within the ambit of Regulation 16A6.4 on the basis of urgency and the reasons for deviating from inviting of competitive bids were not properly recorded, approved and reported by the accounting officer or accounting authority as required by Practice Note 8 of 2007/08. Therefore, the accounting officer or accounting authority was not entitled to procure the relevant lease by means other than a competitive bidding process.

19.3.4 Finding 8: The procurement process did not comply with the requirement of fairness, equitability and transparency

19.3.4.1 In opting for the negotiated process there is no indication in the available evidence that the impact on fairness, equitability and transparency were considered at any time during the procurement process by the SAPS or the DPW. Any deviation from the prescribed tender process must be met with strict adherence to the above SCM prescripts in order to mitigate the risks such deviation may have on the validity of the entire procurement process.

19.3.4.2 It appears from the very nature of the process followed, namely, by entering into a negotiated contract instead of a competitive bidding process, the constitutional requirements of fairness, equitability and transparency were also not complied with.

19.4 Discrepancies between the acceptance of offer and the first lease agreement

19.4.1 Finding 9: The terms of the first lease agreement were not approved by the SNBAC of the DPW

19.4.1.1 The terms of the first lease agreement entered into by the DPW and RPF differed in material respects from that approved by the DPW SNBAC. The letter of acceptance addressed to RPF on 4 June 2010 stated that the total floor space approved was 21 000m2 of office accommodation at R102.601m2, totalling R2 298 810 per month, including parking. However, the lease agreement reflects a total leased floor space of 25 145m2 with a total monthly rental amount of R3 287 988, including parking. Due to the discrepancies, it would appear that the person who signed the lease on behalf of the DPW was not authorised to do so.

19.5 Validity of the lease

19.5.1 Finding 10: The lease agreement entered into by the DPW and the RPF are invalid

19.5.1.1 The procurement of the lease was done in a manner that did not comply with the validity requirements of the Constitution, the PFMA and the Treasury Regulations and instructions for procurement by organs of state. Furthermore, the entering into of the lease was unauthorised.

19.5.1.2 Section 2 of the Constitution provides that conduct that is inconsistent with it is invalid and that the obligations imposed by it must be fulfilled.

19.5.1.3 The conclusion of the lease agreements under the circumstances referred to above was therefore invalid.

19.5.2 Finding 11: The DPW's decision to proceed with an invalid lease agreement was improper and unlawful

19.5.2.1 The DPW's decision to proceed with the lease, as publicly announced by the Minister, was based only on a letter received from the State Attorney, dated 11 November 2010. The letter advised in a single paragraph that, in the State Attorney's opinion, a binding, valid and enforceable lease had been concluded between the DPW and RPF. No reasons were given in the letter for this opinion. The letter confirmed that the DPW had requested the State Attorney to nevertheless obtain the opinion of counsel.

19.5.2.2 The opinion subsequently obtained from senior counsel is dated 22 November 2010 and comprises 19 pages of a considered written argument. Senior counsel's opinion conforms to that of another written opinion, dated 1 September 2010, obtained by the DPW from senior and junior counsel. Both these opinions conflict with the State Attorney's unsubstantiated view.

19.5.2.3 In the face of considered legal advice from senior counsel to the contrary, the DPW's decision to proceed with the implementation of the lease agreement was improper and unlawful, and any expenditure incurred to date, or to be incurred as a result of the implementation of the lease would amount to irregular expenditure.

19.5.3 Finding 12: The conduct of the accounting officers of the SAPS and the DPW in respect of the procurement of the lease was improper and unlawful

19.5.3.1 The accountability for budgetary control and the procurement of goods and services within all government departments lies with the accounting officer, who at all material times were the National Commissioner of the SAPS and the DG of the DPW, or the person who acted in that capacity.

19.5.3.2 The National Commissioner, as the accounting officer of the SAPS acted in breach of those duties and obligations incumbent upon him in terms of the Constitution and the PFMA. Section 217 of the Constitution, read with the provisions of the PFMA and the Treasury Regulations require from an accounting officer to ensure that goods and services are procured in accordance with a system that is fair, equitable, transparent, competitive and cost effective.

19.5.3.3 Section 237 of the Constitution provides that all constitutional obligations must be performed diligently.

19.5.3.4 All conduct that is inconsistent with the Constitution is, in terms of section 2 thereof invalid.

19.5.3.5 The National Commissioner withdrew all delegations in respect of procurement of goods and services over an amount of R500 000 with effect from 30 September 2009. He was therefore solely responsible to ensure that the procurement of the lease, for as far as the involvement of the SAPS was concerned, complied with the said legal prescripts.

19.5.3.6 The failure to ensure that the procurement process complied with the said legal requirements and prescripts, as indicated in the findings above, resulted in the invalid conclusion of a lease agreement, to the detriment of the State.

19.5.3.7 As far as the official who acted in the capacity of the DG of the DPW at the time when the procurement process took place is concerned, the internal enquiry found as follows:

"We are of the view, prima fade, that by directing the Department to follow a negotiated process as a procurement strategy in terms of the lease agreement, Mr Vukela was acting in breach of those duties and obligations incumbent upon him in terms of the PFMA."

19.5.3.8 The internal inquiry recommended that disciplinary action should be taken against the said official.

19.5.3.9 A schematic illustration is provided below comparing the above findings against the relevant phases of the procurement process, as it pertains to leased accommodation. This schematic further highlights the areas of responsibility relating to the DPW, and the SAPS as the client department in the matter investigated.

Schematic: Findings is respect of the procurement process of the Sanlam Middestad building

 

INVESTIGATION FINDING

AREA OF RESPONSIBILITY

Preparation & Demand Management

INCEPTION I NEEDS ANALYSIS

1. SAPS identified the Sanlam Middestad building in March 2010 for the accommodation of certain HO components

2. The need was adjusted to fit the lettable floor space of the building as as follows:

1st needs analysis, dated 6 April 2010, for 13 808 m2
2nd needs analysis, dated 10 May 2010, for 21 020 m2
3rd needs analysis, dated 26 July 2010, for 25 301 m2

FINANCIAL PLANNING

1. Need was not reflected in the SAPS Immovable Asset Plan
2. The existing lease budget was under severe pressure and the new lease was not planned for
3. Funds had to be repnoritised from elsewhere in the SAPS budget in order to fund the new lease

DPW


SAPS

 

 

SAPS

SAPS

SAPS

Acquisition Management

PROCUREMENT PROCESS

1. The SAPS proceeded beyond the demand management phase of the SCM process

4. The urgency related to a small part of the need (2 floors) and did not comply with the urgency requirements of the SCM prescripts

Procurement strategy

3. The SAPS engaged a single service provider, to the exclusion of the DPW which compromised the entire procurement process

4. The reasons for deviating from a competitive process were not recorded as required by SCM prescripts


DPW

SAPS & DPW

 

DPW


DPW

Evaluation

EVALUATION PROCESS

1. The procurement process did not comply with the requirement of fairness, equitability and transparency, and the deviation from a competitive bid process was improper

 

SAPS&DPW

Award

AWARD AND CONTRACT MANAGEMENT

1. The first lease agreement exceeded the lettable floor space approved by the NBAC

2. The lease agreements entered in by DPW and RPF are invalid

3. The decision to proceed with an invalid lease was improper and and unlawful


DPW

DPW

DPW

20 SPECIFIC FINDINGS

20.1 The Public Protector's specific findings in relation to the conduct of the SAPS are that:

20.1.1 The lease agreements were signed between RPF and the DPW and not by the National Commissioner of the SAPS, as was alleged. However, the National Commissioner signed a memorandum, dated 10 May 2010, authorising funding for the Sanlam Middestad building lease. He also signed the final SAPS needs analysis, dated 19 July 2010 for 25 301.54m2.

20.1.2 Although the SAPS did not sign the lease agreement, its involvement in the procurement process was improper, as it proceeded beyond the demand management phase and it further failed to implement proper controls, as required by the PFMA and relevant procurement prescripts.

20.1.3 The SAPS failed to comply with section 217 of the Constitution, the relevant provisions of the PFMA, Treasury Regulations and supply chain management rules and policies. This failure amounted to improper conduct and maladministration.

20.1.4 The conduct of the accounting officer of the SAPS was in breach of those duties and obligations incumbent upon him in terms of section 217 of the Constitution, section 38 of the PFMA and the relevant Treasury Regulations. These provisions require an accounting officer to ensure that goods and services are procured in accordance with a system that is fair, equitable, transparent, competitive and cost effective. This conduct was improper, unlawful and amounted to maladministration.

20.1.5 On the evidence available it could not be found that an improper relationship between the preferred service provider (RPF) and the SAPS motivated the deviation from required tender procedures.

20.2 The Public Protector's specific findings in relation to the conduct of the DPW are that:

20.2.1 The procurement by the DPW of the lease was not in accordance with a system that is cost effective and competitive, as is required by section 217 of the Constitution, the relevant provisions of the PFMA, Treasury Regulations and supply chain management rules and policies. This failure amounted to improper conduct and maladministration.

20.2.2 The conduct of the accounting officer of the DPW was in breach of those duties and obligations incumbent upon him in terms of section 217 of the Constitution, section 38 of the PFMA and the relevant Treasury Regulations. These provisions require from an accounting officer to ensure that goods and services are procured in accordance with a system that is fair, equitable, transparent, competitive and cost effective. This conduct was improper, unlawful and amounted to maladministration.

20.2.3 The process that led to the conclusion by the DPW of the lease agreements with RPF was fatally flawed in various respects, including non-compliance with prescribed procurement procedures such as ensuring a competitive bid process or justifying the deviations in the prescribed manner. This rendered the process unlawful and further constituted improper conduct and maladministration.

20.2.4 The lease agreement should not have been entered into as it did not comply with the validity requirements of the Constitution, applicable legislation and prescripts. The lease agreements entered into by the DPW and RPF are therefore invalid.

20.2.5 The decision of the DPW to proceed with the implementation of the lease agreement in the face of considered legal advice from two senior counsel to the contrary, particularly the opinion procured on 22 November 2010 under the leadership of the current Minister of Public Works, was in breach of its fiduciary duties and the requirements of good governance in terms of the PFMA, and amounted to maladministration.

20.2.6 The reckless manner in which the DPW dealt with public funds in this case, particularly:

  • the failure to subject the lease agreement to judicial review, as advised by senior counsel and by implementing the lease agreement despite further legal advice from separate senior counsel to the contrary; and
  • reneging on the undertaking given to the Public Protector not to implement the lease until the investigation was complete, was improper and fell short of the requirements of good administration.

21 REMEDIAL ACTION

The remedial action that is to be taken, as envisaged in section 182(1)(c) of the Constitution is the following:

21.1 The National Treasury should urgently review the current lease agreement between the DPW and RPF in order to determine if the contract can be terminated forthwith.

21.2 The National Treasury must determine whether any irregular or fruitless and wasteful expenditure was incurred by the SAPS and/or the DPW in respect of the procurement process and other matters related thereto, and take appropriate action where applicable.

21.3 The Cabinet must at its first meeting convened after the date of publication of this report request an explanation from the Minister of Public Works on:

21.3.1 The reasons for the decision to implement the lease agreement with RPF despite DPW being provided with a legal opinion of independent senior counsel advising to the contrary;

21.3.2 The justification for proceeding with the implementation of the disputed lease, prior to the finalisation of the investigation by the Public Protector, and despite senior counsel opinions and the DPW's previous undertakings to the contrary.

21.4 The Secretary of Cabinet must advise the Public Protector of the outcome of the deliberations referred to in paragraph 21.3 above and the resolutions taken within 10 days from the date of the Cabinet meeting.

21.5 The Minister of Public Works should, with the assistance of the National Treasury, take urgent steps to ensure that the appropriate action is instituted against the relevant DPW officials that acted in contravention of the law, policy and other prescripts in respect of the procurement processes referred to in this report.

21.6 The DPW must ensure that appropriate measures are implemented to prevent a recurrence of contraventions of the relevant procurement legislation and prescripts.

21.7 The Minister of Police should, with the assistance of the National Treasury, take urgent steps to ensure that the appropriate action is instituted against the National Commissioner and other officials of the SAPS that acted in contravention of the law, policy and other prescripts in respect of the procurement processes referred to in this report.

21.8 The SAPS must ensure that appropriate measures are implemented to prevent a recurrence of contraventions of the relevant procurement legislation and prescripts.

21.9 The National Treasury should develop and introduce measures that will prevent a recurrence of a situation where client departments of the DPW infringe on the functional areas of the DPW in respect of the procurement of leased accommodation.

22 MONITORING

22.1 The National Treasury, the DPW and the SAPS must submit action plans in respect of the implementation of the remedial action referred to in paragraphs 21.1 and 21.2 above to the Public Protector within 30 days of the date of this report.

22.2 The National Treasury, the Minister of Public Works, the Minister of Police, the SAPS and the DPW must submit quarterly reports to the Public Protector on the progress made with the implementation of the remedial action referred to in paragraph 21 above.

[CUT]

Transcribed from the PDF. Please check against the original.

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