Sanral: Concerns around multi-billion-rand contract awarded to highest bidder

The South African National Roads Agency (Sanral) awarded a multi-billion-rand national road upgrade contract to the Chinese-led Unik-Diphatse joint venture (JV) despite its bid being the highest of seven received.

In addition, a Sanral internal audit proactive assurance report seen by Moneyweb revealed that material risks or concerns were identified for JV partner Unik Construction Engineering Incorporated in Botswana.

The report refers to an article published by Ink Journalism on 21 December 2021 titled ‘How blacklisted Unik Construction gobbled P268 million from the treasury’ and said Unik Construction was blacklisted for defrauding the Botswana government and the World Bank in a road construction tender funded by the bank.

It states the African Development Bank Group on 13 October 2023 announced the conclusion of a negotiated settlement agreement with Unik Construction Engineering (Pty) Ltd, thereby putting an end to sanctions proceedings for a corrupt practice.

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‘No longer blacklisted’ says Sanral

The report refers to Sanral management comments noting that Unik Construction Engineering was blacklisted in Botswana for two years (4 October 2013 to 3 October 2015) and that the tender closed in February 2023 when it was no longer blacklisted.

The report also refers to corrupt practice in the Manzini Region water supply and sanitation project in Eswatini, with a second article indicating African Development Bank Group put an end to the sanction proceedings against Unik Construction Engineering on 13 October 2023 with a condition of non-debarment for a period of 12 months, effective 11 October 2023.

It said the article states that Unik Construction will remain eligible to participate in African Development Bank Group financed activities provided it enhances the anti-bribery and integrity compliance programme – but that this condition “does not impose sanctions against Unik Construction Engineering or restrict them from tendering on any South African government tenders”.

The report states that none of the partners in the JV and directors of each JV partner were found to have been restricted or defaulted on SA tender processes on the National Treasury database of restricted suppliers and tender defaulters.

It said the overall risk rating of Unik Construction Engineering Incorporated in Botswana was considered “low risk for Sanral”.

It concluded that based on the supply chain prescripts and the central database report, the sanctions that have lapsed or sanctions that did not take place “cannot be considered material for this particular contract”.

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N3 upgrade contract

The Unik-Diphatse JV was awarded the 45-month contract for the upgrade of National Route 3 Section 2 from Hammarsdale Interchange to Uitkomst in eThekwini on 27 February 2025.

It submitted a tender of R3.5 billion.

The contract amount approved by Sanral was R3 292 298 773.

The other bids:

• Remako Group Holdings (Pty) Ltd: R2 213 298 899;
• Aqua Transport and Plant Hire: R2 542 944 414;
• EXR Construction: R2 728 866 086;
• Base Major-CSC JV: R3 113 854 553;
• WBHO Construction-Edwin Construction JV: R3 297 000 000; and
• Anvisda Plant and Civil JV: R4 316 439 695.

Remako Group Holdings, WBHO-Edwin JV, and Aqua Transport and Plant Hire all had a broad-based black economic empowerment (B-BBEE) Level 1 rating, while the others, including the Unik-Diphatse JV, had a Level 2 rating.

The award of the contract to the Unik-Diphatse JV has astounded many contractors and the Organisation Undoing Tax Abuse (Outa).

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WBHO wants details

WBHO confirmed it had requested details about the award from Sanral and had a meeting with the roads agency last week. The outcome of the meeting is not known.

It is believed that Sanral’s bid adjudication committee declared the tender submitted by the WBHO-Edwin Construction JV non-responsive because the combined B-BBEE certificate for the JV from the verification agency contained a typographical error with the expiry date a year earlier than the date of issue.

This meant the certificate was not valid on the closing date of the tender.

ALSO READ: ‘No chance of collecting, which Sanral knows’ – Outa

Sanral ‘followed process’

Responding to a Moneyweb query, Sanral spokesperson Vusi Mona said Sanral followed a tender evaluation process and appointed “the highest scoring bidder according to price and B-BBEE points”.

He said the process includes assessment of the eligibility and functionality of bidders to arrive at the preferred bidder, and that bidders can be disqualified for not meeting any of the relevant criteria.

RHe confirmed Sanral only engaged in negotiations with the Unik-Diphatse JV, stressing the tender evaluation process dictates the recommended bidder.

“Sanral only engaged and negotiated with the highest scoring bidder following the conclusion of the evaluation and adjudication processes,” said Mona.

“The negotiations were aimed at reducing the offered price and the negotiations were successful.

“Sanral engages and negotiates with the highest scoring bidder when it is of the view that even the price offered by the successful bidder can still be negotiated downward.

“Of course, this only happens after the conclusion of the evaluation and adjudication processes.”

Mona said Sanral conducts internal audit proactive assurance on its tenders above a certain threshold from time to time, and this was done in this case.

He said the findings were considered in this case, adding that these “are internal reports used to support decision making in tender governance processes”.

“We do not disclose these reports and/or their findings to external parties unless required by law, taking into account confidentiality and POPI [Protection of Personal Information] Act requirements,” he said.

A construction industry stakeholder who did not want to be named says the Popi Act is irrelevant and questions Sanral’s commitment to transparency.

Mona said Sanral did not seek an external legal opinion as a direct result of the findings of the internal audit report and is not aware of any findings and comments that would have prevented it from making the award to the Unik-Diphatse JV.

However, he confirmed that a legal opinion was sought “on other matters not arising from the [audit] report”.

Mona said that to date no legal challenge to review and set aside the award has been lodged.

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Outa to ‘advocate’ Creecy over ‘unknown’ JV

Outa CEO Wayne Duvenage said Outa has received a few emails raising concerns about this tender award and that it will advocate that Minister of Transport Barbara Creecy suspend the contract award and have the whole process audited by the Auditor-General – as she did recently with the driving licence machine tender contract.

Duvenage added that as far as Outa is aware, the Unik-Diphatse JV has never received a tender contract in the past in South Africa and is not known by industry players and those who monitor the construction industry.

This raised a “red flag”, particularly for a high-value mega contract, he said.

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Was the award pro-SA?

Duvenage noted that there were a number of other red flags about this tender award.

He said one has to be very careful not to come across as anti-foreign companies but questioned if there was some weighting in the tender for local companies – which create local jobs, buy equipment locally and keep the profits and revenues in South Africa – as Chinese firms generally bring in their own works and equipment.

“If you are giving contracts to international companies at a higher price, then it’s going to raise so many red flags about it that it warrants a very thorough investigation by the minister,” he said.

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