Public Protector finds that the contract was irregularly awarded, actions of Minister constitute improper conduct
Public Protector, Report on an investigation into allegations of improper and irregular awarding of a tender to Sekunjalo Marine Services Consortium (SMSC), by the Department of Agriculture, Forestry and Fisheries, Report No. 21 of 2013/14, December 5 2013
(i) "Docked Vessels" is my report as the Public Protector issued in terms of section 182 (1) (b) Constitution of the Republic of South Africa, 1996 and section 8(1) of the Public Protector Act.
(ii) The report communicates my findings and appropriate remedial action following an investigation into a complaint lodged on 19 February 2012, by the Democratic Alliance Member of Parliament, Honourable Mr. P Van Dalen, (the Complainant), who requested my office to investigate allegations relating to the improper award of an R800m tender for the fisheries patrol services to Sekunjalo Marine Service Consortium (SMSC). He further requested my office to investigate the Department of Agriculture, Forestry and Fisheries (DAFF)'s alleged subsequent failure to re-advertise the tender which meant that it was unable to fulfil its mandate to do scientific surveys, anti-poaching patrols and inspections of fishing trawlers for illegal activities. He further alleged that the failure seriously jeopardi ses the research and protection of the country's fishing resources, and has far reaching economic consequences. The Complainant also requested a determination regarding the propriety of scoring allocating one of the bidders the score of 1 (very bad) on all the criteria and the one with least experience with the highest score of 5 (excellent) by one of the Bid Evaluation Committee (BEC) members (Mr Joseph Sebola). My office also received a substantially similar complaint from Mr Paul Maclons, the Managing Director of Smit Amandla Marine (Pty) Ltd.
(iii) On 15 March 2012 and after the commencement of my investigation a further complaint was lodged by Smit Amandla, the company that had held the contract for 12 years, alleging that the Hon Minister Joemat-Pettersson had arbitrarily terminated its services at the end of the contract in retaliation to Smit Amandla's whistle-blowing on the SMSC award, and in contravention of the contract provision that provided a 3 month handover period be observed. Smit Amandla alleged that this would have an adverse impact on its employees and on a smooth handover. lt further alleged that the SA Navy did not have the necessary competencies and human resources for this undertaking. 1 met with Ms Manana of Smit Amandla on 28 March 2012 who requested me to ask the Minister to withdraw the 30 day notice and abide by the 3 months' notice that was in the original contract that had expired, a request 1 duly acceded to without success .
(iv) As the investigation progressed, media reports regularly alleged that the patrol fleet was lying unattended to on account of the SA Navy's alleged lack of competencies and capacity to undertake the responsibility at the required magnitude and later that the vessels had been damaged by disuse.
(v) As the investigation drew towards a conclusion, the investigation team was approached by a whistle-blower who alleged that DAFF had irregularly contracted with a company for the refurbishment of its vessels that had lost seaworthiness due to lying idle and lack of maintenance. 1 decided to defer this to an offshoot investigation. Accordi ngly, no determination is made in this report on this allegation.
(vi) On being approached on the original complaint DAFF did not deny awarding the said tender irregularly to SMSC. DAFF went further to cancel the tender and committed itself to re-advertising the tender as soon as possible.
(vii) When I approached Minister Joemat Pettersson, in writing on 29 March 2012 asking her to reconsider a one month handover period from Smit Amandla to the SA Navy as impractlcal, and to consider Smit Amandla's request that the three month period allegedly in the original contract be adhered to, Minister Joemat- Pettersson refused. The request included the need for a proper assessment of the SA Navy's readiness for the task in question. Minister Joemat-Pettersson contended that all was in place for a smooth handover and that she would provide me with a progress report, which to this end was never provided.
(viii) On analysis of the complaints the following eight (8) issues were considered and investigated:
(a) Was DAFF's irregular award of the R800 million tender for the crewing, management and maintenance of the research and fisheries patrol services, an act constituting improper conduct and maladministration?
(b) Did Mr Joseph Sebola irregularly score SMSC 5/5 on everything, which did not have the relevant experience, while scoring Smit Amandla 1/5 on everything despite its (10) years' of experience conducting the exact service in question, and if so, does the action constitute improper conduct and maladministration?
(c) Did the award of the patrol vessels tender to SMSC by DAFF in spite of the fact that Premier Fishing (a subsidiary of the Sekunjalo Group) has fishing rights accord SMSC the role of referee and player, and if so, did this create a conflict of interest for SMSC, and accordingly, an act of maladministration by DAFF?
(d) Did the submission of four (4) tenders on the same bid by the entities (Premier Fishing, Premier Fishing Consortium, Sekunjalo Limited and SMSC) which fall under the Sekunjalo Group constitute collusive tenderi ng? lf so, did DAFF's entertainment of these bids constitute improper conduct and maladministration?
(e) Did DAFF's failure to re-advertise the tender result in its inability to conduct scientific surveys, anti-poaching patrols and inspections of fishing trawlers for illegal activities, and if so, does this constitute improper conduct and maladministration?
(f) Did DAFF irregularly terminate Smit Amandla's services by ignoring a 3 month handover period and awarding the servlce to the SA Navy which did not have the necessary competencies, and if so did such action constitute improper conduct and maladministration?
(g) Was Minister Joemat-Pettersson's rejection of the request to defer her planned abrupt handover to the SA Navy an imprudent act whlch resulted in lack of proper patrols and deterioration of patrol vessels resulting in millions of Rand in refurbishment costs and rampant poaching? lf so, does her action amount to fruitless and wasteful expenditure and accordingly, constitute improper conduct and maladministration?
(h) Did DAFF irregularly contract a company that had been part of the SMSC, Nautic, to repair its vessels that had become unseaworthy at a cost exceeding R30m, and if so, does such action constitute improper conduct and maladministration?
(ix) The investigation included correspondence, perusal and analysis of documents, telephonic and face to face interviews with officials of DAFF, Sekunjalo Investment Company and Smit Amandla and the South African Maritime Safety Authority (SAMSA). Informal discussions with industry role players such as officials from SAMSA and the Chairman of the Sekunjalo Group enriched the investigation team's appreciation of the configuration of the industry and histories of the role players involved in the impugned tender. Relevant legislation and prescripts were also sourced and considered.
(x) A week before releasing this provincial report, 1 received a letter from the Minister of Justice and Constitutional Development (Minister of Justice), attaching a letter from Minister Joemat-Pettersson requesting the Minister of Justice to intervene in this investigation and that of the NPA, which she labeled unnecessary despite having cooperated throughout the investigation and twice agreeing to defer the processing of the new tender until having had sight of this provisional report. 1 consider Minister Joemat Pettersson's action as conduct constituting interference with my investigation and an attempt to incite the Minister of Justice and Constitutional Development to undermine the independence of two constitutional bodies. Such conduct, in my considered view is at odds with section 181(4) of the Constitution which states that 'no person or organ of state may interfere with the functioning of these institutions (this refers to Chapter 9 institutions)' .
(xi) I make the following findings:
(a) Regarding DAFF's irregular award of the R800 million tender for the crewing, management and maintenance of the research and fisheries patrol services, an act of maladministration, I make the following findings:
(aa) DAFF's immediate admission that the tender was irregularly awarded and proceeding to cancel it and commit to advertise the process anew was proper;
(bb) The award of the tender (MLRF 088) to SMSC was not in compliance with DAFF's Supply Chain Management requirements and processes and was therefore improper. The absence of legal and financial experts on the BEC rendered the subsequent award of tender (MLRF 088) to SMSC ill-advised, and thus constitutes maladministration.
(cc) DAFF in awarding the tender (MLRF 088) to SMSC failed to deal with apparent issues of conflict of interest and omissions by SMSC, and this amounts to maladministration.
(b) Regarding Mr Joseph Sebola's alleged irregular scoring of SMSC 5/5 on everything which did not have the relevant experience while scoring Smit Amandl a 1/5 which had (10) years of experience in conducting the exact service in question, I make the following findings:
(aa) The allegation that Mr Sebola scored 1/5 to SMSC and 5/5 to Smit Amandla is substantiated and so is the allegation that of the two, it was Smit Amandla that had done the exact work specified in the tender for over ten (10) years; and
(bb) Mr Sebola's conduct was, in the circumstances, irrational, subjective and biased, it thus constitutes improper conduct and maladministration.
(c) Regarding the award of the patrol vessels tender to SMSC by DAFF in spite of the fact that Premier Fishing (a subsidiary of the Sekunjalo group) had flshing rights accorded SMSC the role of referee and player and that this possibly creating a conflict of interest for SMSC and,accordingly, an act of maladministration by DAFF; I make the following findings:
(aa) The allegation that the Department's award of the contract to SMSC placed the company in the position of referee and player thus creating a conflict of interest is substantiated. Whilst it is true that there are safe guards put in place to limit the role of the management company in the patrol and the research vessels, and that thus reduced the conflict of interest, it is not eliminated.
(bb) The conduct of DAFF in awarding SMSC a tender placing SMSC in this position constitutes improper conduct and maladministration.
(d) Regarding the submission of four (4) tenders on the same bid by the entities (Premier Fishing, Premier Fishing Consortium, Sekunjalo Limited and Sekunjalo Consortlum) which fall under the Sekunjalo Group constitute collusive tendering, I make the following findings:
(aa) The allegation that the submission of four tenders on the same bid by the Sekunjalo Group entities has not been denied by any of the parties. I however have decided to refer the decision on whether or not the conduct constituted collusive to the Competition Commission.
(bb) I am therefore unable to find improper conduct or maladministration an DAFF's part in this regard.
(e) Regarding DAFF's alleged failure to re-advertise the tender resulting in its inability to conduct scientific surveys, anti poaching patrols and inspections of fishlng trawlers for illegal activltles; I make the folJowlng findings:
(aa) The allegation that DAFF failed to timely advertise the tender is substantiated, however its failure is partly justified in that lt needed to identify and address the systemic administrative failures that led to the aborted tender process and to wait for the conclusion of the investigation .
(f) Regardlng DAFF's alleged irregular termination of Smit Amandla's services by ignoring a 3 month hand-over period and awarding the service to the SA Navy which allegedly did not have the necessary competencies, and if so, dld such action constitute improper conduct and maladministration1 1 make the following findlngs:
(aa) The allegation that DAFF irregularly terrninated Smit Amandla's contract by ignoring the 3 month handover period notice is not substantiated because the original contract requiring the 3 month handover period had lapsed and the arrangement was an a month to month basis.
(bb) However, in view of the fact that the reasons for a prudent handover period persisted, the abrupt handover was ill advised. The conduct of Minister Joemat-Pettersson and DAFF in this regard is improper and constitutes maladministration.
(g) Regarding Minister Joemat-Pettersson' s rejection of the request to defer her planned abrupt handover to the SA Navy an imprudent act which resulted in lack of proper patrols and alleged deterioration of patrol vessels amounting to millions of Rand in refurbishment costs and that this amounts to fruitless and wasteful expenditure and accordingly, improper conduct and maladministration, 1 make the following findings:
(aa) The Minister's rejection of a request to defer her planned abrupt handover to the SA Navy which led to alleged Jack of patrols and deterioration of patrol vessels was imprudent and led to fruitless and wasteful expenditure and;
(bb) The actions of the Minister constitute improper conduct and maladministration.
(h) Regarding DAFF's alleged irregular award of a contract for the repair of its unseaworthy vessels, returned by the SA Navy, at a cost exceeding R30m, I intend to:
Reserve my findings pending a full offshoot investigation on this matter.
(xii) Appropriate remedial action to be taken on my findings of maladmlnistration and as envisaged by section 182(1) (c) of the Constitution is the following:
Cognizance is taken of the fact that at the time of commencement of the investigation into the allegations against DAFF, it had already revoked the contract it had awarded to SMSC and DAFF is commended for immediate withdrawal of the tender in response to Smit Amandla's justified legal action.
(a) To consider taking disciplinary action against the Minister for her reckless dealing with state money and services resulting in fruitless and wasteful expenditure, lass of confidence in the fisheries industry in SA and alleged decimation of fisheries resources in SA and delayed quota allocations due to lack of appropriate research.
The Director General: National Treasury
(a) To ensure that the Chief Procurement Officer assist the Accounting Officer of DAFF by reviewing each stage of the bidding process to ensure that SCM statutory and regulatory requirements are complied with before the bid is awarded.
The Minister: DAFF
(a) To ensure that the already advertised tender for the services of a ship manager for the crewing, management and maintenance of the research and fisheries patrol vessels is finalised and the contract awarded within 60 days from the date of the final report.
The Dlrector General:DAFF
(a) To ensure that the relevant legislation, SCM policies and prescripts are complied with, including in the appointment of the BSC, BEC and BAC members in the processing of this tender;
(b)To investigate and, if warranted, take disciplinary action against Mr Sebola in respect of his conduct referred to in the findings made in this report.
The Competition Commission:
(a) The Competition Commissioner is requested in terms of section 6(4)(c) to investigate the alleged collusive conduct and advise DAFF for future purposes.
Issued by the Public Protector, December 5 2013. The full report can be downloaded from the link below.
Click here to sign up to receive our free daily headline email newsletter