Government has a plan to deal with defaulting contractors

The government is implementing interventions to mitigate the negative impact of defaulting contractors on public infrastructure delivery.

Public Works and Infrastructure Deputy Minister Sihle Zikalala said on Tuesday that defaulting contractors are one of the major challenges the government is confronted with in delivering public infrastructure.

He said on Tuesday during a National Council of Provinces ministerial debate on public infrastructure delivery challenges that while it is not a uniquely South African problem but an international built-environment challenge – “to us, it has major development implications”.

“We are fiercely driving a campaign to weed out shoddy and corrupt contractors within our system.”

Zikalala said current public infrastructure delivery challenges include financing constraints, stalled projects, crime, which others interpret as the ‘construction mafia’, and gaps in infrastructure that hinder even the most promising ventures.

He said one of the interventions being implemented is to have a panel of contractors to ensure that once a contractor defaults, “within a month, we get another contractor that can substitute for that contractor, and then the work continues”.

Zikalala said turnkey projects, where they will be able to connect planning design with implementation to fast-track the process, are also being explored.

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Multiple reasons

He attributed contractor defaults at times to delays in payments by various government departments, a change of scope, weather conditions, high costs, and failure to manage the project by officials assigned the responsibilities.

“Another elephant in the room is that there are many contractors who win contracts in government by simply underbidding or under-quoting,” he said.

“In time, they will find that the work they are expected to do is huge compared to what they have costed.

“There are instances where contractors have found ways to delay the projects themselves, and even in some cases they will try to cost and claim for things that are not yet done.”

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Construction mafia

Zikalala said corruption in government contracts is also a huge problem. It is sophisticated, and therefore needs a dedicated approach.

He said construction site disruptions, which are characterised by extortion and lead to stoppages on project sites, are another challenge. These have occurred in several areas.

Minister of Transport Barbara Creecy and Minister of Human Settlements Mmamoloko Kubayi also referred to the “construction mafia” during the debate.

Kubayi said 3 445 blocked BNG (Breaking New Ground) or RDP projects were identified across the country in the 2022/23 financial year but they had been able to successfully unblock 3 150 projects in the 2023/24 financial year.

She said the root causes of blocked projects were community unrest and the “construction mafia”.

“At times the ‘construction mafia’ comes and disrupts the project and demands 30% without doing any work, which then leads to a contractor feeling that they will not have sufficient resources to be able to conclude the project and therefore decide to abandon the site,” she said.

Kubayi said there is also “deception by communities” where they want to dictate “who must get the projects and who must not get the projects, who must get employment, who must not get employment”.

She said sometimes it also involves a beneficiary list, with those who believe they are not on the list to benefit and somebody else is going to benefit and therefore “the project can be stopped”.

“All this will then lead into increased costs and delays,” she said.

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Prasa

Creecy said the Passenger Rail Agency of South Africa (Prasa) owns 2 280km of South Africa’s rail network and operates 585 trains in the metropolitan areas in the Eastern Cape, Western Cape, KwaZulu-Natal and Gauteng.

But Creecy said 95% of the Prasa infrastructure was damaged through theft and vandalism during the Covid-19 and post Covid-19 period.

“When the trains were not operating in the lockdown period, this is when people were engaged in these vandalism activities and post this period, lines have been recovered and partially recovered but limited services are operating,” she said.

Creecy added that 34 of Prasa’s priority service lines have been resumed to date, with 23 services resumed along the full extent of the line and 11 services resumed only partially.

She said the lines that are partially complete will be finalised over the Medium Term Expenditure Framework period.

“The big problem when it comes to increasing the number of passenger trains we operate in urban areas is the signalling recovery, and at the moment, there are only six lines where the signalling has been completely restored.

“There are challenges, even as we repair. The first is further theft and vandalism of infrastructure,” she said.

“Although we still do have theft and vandalism, we are doing much better in reducing this and having better security operations on our lines.”

Creecy said there are also disruptions by the so-called business forums and capacity challenges in terms of the industry’s ability to deliver on these programmes, and global supply chain disruptions.

She said mitigation measures included developing and implementing the Integrated Security Strategy and Plan, which involves deploying service personnel and collaborating with other security agencies.

Creecy said it also included the use of technology, including seismic detection and drones.

“Prasa has done well in this regard in reducing the number of incidents and overall one can say we are quite satisfied with the integrated collaboration we have in terms of in-house security as well as working formally with the law enforcement cluster.

“We also have good stakeholder management processes.

“In the end, if one wants to get passenger rail up and running, it has to be through communities themselves protecting the network,” she said.

Creecy said Prasa had about 40 million passenger trips at the end of the 2023/24 financial year and estimated this could increase to more than 150 million by 2025/26.

She said the socio-economic benefits flowing from this included the creation of 12 539 jobs, which were sustained through various projects.

“The full recovery and modernisation of Prasa is expected to contribute an estimated R34 billion to the GDP,” she said.

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Road projects

Creecy also referred to the hijacking of road construction projects by the “construction mafia” but stressed that project delays were largely caused by projects being abandoned due to poor performance.

Zikalala said the government has been persistently working with law enforcement agencies to deal with organised crime in the construction industry.

“We have warmly welcomed the reinvigorated efforts and prioritisation to eliminate this crime by the law enforcement agencies,” he said.

This article was republished from Moneyweb. Read the original here.