Sanral hit with legal action over cancelled e-toll tender

Kusa Kokutsha, whose bid for the cancelled SA National Roads Agency (Sanral) tender for the continued management of e-tolls was R4.5 billion cheaper than the second bidder, has lodged a high court application to review the cancellation of the tender.

It has also launched high court interdict proceedings to stop the reissued tender process, said Kusa Kokutsha company secretary Dawid Claassen on Thursday.

The company is seeking the substitution of the tender cancellation decision with an order directing Sanral to award the tender to Kusa Kokutsha.

Claassen added that in the face of the interdict proceedings, Sanral gave a written undertaking to Kusa Kokutsha on August 11 not to determine the reissued tender until after judgment has been given in the review proceedings.

Moneyweb reported this week that Sanral has reissued the tender for the continued management of e-tolls, which it cancelled in March this year, despite the continuing uncertainty that exists over the future of e-tolls on the Gauteng Freeway Improvement Project (GFIP).

Sanral Engineering Executive Louw Kannemeyer confirmed that Sanral reissued the tender on July 17 and that the closing date was September 16.

The tender includes the operations and maintenance of a National Transaction Clearing House (NTCH) and Violations Processing Centre.

The Kusa Kokutsha review and interdict applications are scheduled to be heard later this year.

Kannemeyer confirmed that a high court case has been lodged by Kusa Kokutsha and said Sanral is currently defending that case.

However, Kannemeyer declined to comment on the basis of Sanral’s defence in the case, claiming the matter is sub judice.

‘Unlawful and irregular’

Claassen said Kusa Kokutsha believes the reissued tender “was unlawfully and irregularly re-issued in the face of the review proceedings which Kusa brought in June 2020 against Sanral’s cancellation of the 2019 tender”.

“In the 2019 tender, Kusa scored highest on the technical evaluation, has a Level 1 B-BBEE Status Level, is majority owned by black people and its bid was R4.5 billion cheaper than the second bidder.

“As such, Kusa will not respond to the reissued tender, since the tendered scope is equal to, in our opinion, the unlawfully cancelled tender of 2019.

“The cancellation decision was taken unlawfully and without any good reason,” he said.

Claassen added that over the months after Sanral’s communication of the tender’s cancellation, Kusa has not been informed about the reasons for the cancellation, even after requests in terms of the Promotion of Administrative Justice Act and the Promotion of Access to Information Act.

“Kusa was by far the cheapest, technically highest scoring bidder and the PPPFA [Preferential Procurement Policy Framework Act] requires that Sanral award the tender to it,” he said.

Sanral on the cancellation

Sanral general manager communications Vusi Mona told Moneyweb in March that the decision by Sanral’s board to cancel the tender “was informed by a review of the assurance documents from Sanral’s legal and internal audit departments, as well as expert advice provided by the independent advisor to the board’s audit and risk committee”.

The tender was cancelled when it was in the process of being adjudicated and followed Sanral confirming earlier in March that its contract with Electronic Tolling Collection (ETC) for the management of e-tolls on the GFIP had been extended until December 2020.

One of the reasons cited by Sanral for this extension was to allow for the tender process to be concluded.

Outa allegations

The Organisation Undoing Tax Abuse (Outa) alleged last year Kusa Kokutsha was only registered as a business days after the tender was first advertised and appeared to have been set up specifically to bid for the Sanral contract.

Outa said the date on which Kusa Kokutsha was registered indicated that it did not have a track record as a business and, through its directors, is linked to outgoing contractor ETC.

Douglas Davey, then chair of the board of ETC, subsequently confirmed to Moneyweb that ETC did not submit a bid for the tender because it is a special purpose vehicle and was established only to manage and operate the Gauteng tolling system.

Kusa Kokutsha is 53% black-owned and 51% owned by the employees of the company. The balance of its shareholding is owned by Austrian-based global technology corporation Kapsch Group.

The Kapsch Group is the majority owner of ETC, the current service provider to Sanral operating the existing Gauteng open tolling project on the Gauteng Freeway Improvement Project (GFIP).

Three bids

Kusa Kokutsha submitted a bid of R7.548 billion for the cancelled tender.

There were two other bidders for the cancelled tender. Phambili JV submitted a bid of R11.399 billion while SAeTO did not list a bid amount.

Kusa Kokutsha claims that no entity by either of the names of the other two bidders is recorded as being present at the compulsory clarification meeting for the cancelled tender that was held on August 21 2019.

The company further claims any tender cancellation decision by a public body, such as Sanral, must be made in accordance with the applicable legal framework, which includes the Public Finance Management Act (PFMA), National Treasury regulations, the Preferential Procurement Policy Framework Act (PPPFA) and Preferential Procurement regulations.

However, Kusa Kokutsha said:

• The cancellation was not undertaken in accordance with the prescribed legal framework and is illegal.
• The reasons given for the cancellation do not accord with the prescribed legal framework and a cancellation based on these reasons amounts to a material error of law.
• There was no material irregularity in the tender process warranting the cancellation.
• Kusa Kokutsha added that Sanral still has a need for the work sought under the tender, has funds available to cover the total envisaged expenditure, received two acceptable bids and has been unable to indicate any material irregularity in the tender process.

Outa CEO Wayne Duvenage said on Thursday it will be interesting to see the outcome of the court challenge but it will be a cause for concern if Sanral has erred, adding that somebody at Sanral will have to be held accountable if this was proven.

Duvenage said there are question marks around Kusa Kokutsha’s B-BBEE certification but “I can’t see why that will be a reason to cancel the whole tender when they can just disqualify them if there is something wrong there”.

He hopes that Sanral is not manipulating the tender process to favour certain bidders and stressed the need for total transparency about what Sanral will be getting for this tendered contract.

“Who [is] making profits [and] what are the service providers paid for their services, because what often happens is that an outsourced service provider wins a tender and suddenly the appointment of their service providers falls outside the PFMA, which it shouldn’t because we need transparency and want access to all that information.

“That is where we will start to uncover if the service operators are running massive profits on this,” he said.

• This article was republished with permission from Moneyweb.

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