Why Tshwane is 'technically bankrupt'
Tshwane paid a service provider R13-million for a job that cost Johannesburg less than a R1-million - that is more than 10 times what the Johannesburg metro paid the same company, Mohlaba & Moshoana Inc, for the provision of an advisory service on fleet management.
It cost Johannesburg R716 000, with an additional R140 236 for professionals in the project team.
Last year's auditor general report said the Tshwane municipality was "technically bankrupt". The municipality also failed to pay its R242-million salary bill on time in January, allegedly because of cash-flow problems. Employees received their salaries a few days late because of a "technical glitch", according to the municipality.
Tshwane spokesperson, Blessing Manale, denied the metro was struggling financially and said the metro's finances were "sound and on track to attain its objectives".
Mohlaba & Moshoana was given the contract without it going out on tender because Tshwane used section 32 of the municipal supply chain management regulations, which allows a contract secured by another organ of state to be used. Tshwane inherited the law firm from Johannesburg, which enlisted the company's services for a 12-month period in 2010-2011. During 2011, Tshwane approached the firm to assist the city to centralise its fleet management on a 15-month contract.
The Mail & Guardian has seen copies of the service-level agreements with the firm for both Tshwane and Johannesburg.
Tshwane defended the expense, saying the service the company provided to the municipality was much more demanding. Manale said that "the nature of service was similar to those rendered for the City of Johannesburg in that it related to fleet advisory services. However, the scope of work relative to the detail work to be carried was different between the two."
Manale said, in Johannesburg, the firm had simply reviewed "an existing fleet contract, specifically focusing on the fleet vehicles and advising on the procurement thereof in terms of a new contract".
But, in Tshwane, the work was much more involved. "This was effectively a greenfield project as it entails a review of the entire fleet operations model, including vehicles, labour, workshop infrastructure, fleet management systems, organisational structure, fleet policies, asset register and budgeting."
Manale said more man-hours were spent on the project than on Johannesburg's. He added that spending the R13-million was justified because "certain competencies required are not [available] within the City of Tshwane or any other organ of state. We could not, therefore, even if we wanted to provide advisory services for this type of project."
But a municipality employee disagreed and said Tshwane had a fully fledged fleet management unit that could have done the job.
According to the service-level agreement, the firm was appointed "to undertake a review of its [Tshwane] fleet services provision and to recommend a suitable model for the provision and management of its fleet".
It also promised that the working relationship between the city and the firm would be continued.
"In the event that the outcome of this review determines that the most suitable model entails the procurement of a private sector provider, the aforementioned appointment contemplates and includes that the service provider shall be retained for the purposes of rendering continued transaction advisory services to the CoT [City of Tshwane] pertaining to such procurement."
Mohlaba & Moshoana referred all questions to Tshwane.
Section 32 of the supply chain management regulations states that the procurement of goods or services under a contract secured by another organ of state is allowed "only if there are demonstrable discounts or benefits to do so".
Tshwane claims there were benefits. "The speed at which we were able to move towards implementation of the project and the hundreds [of hours] of management time and money saved," said Manale.
Tshwane also forged ahead with the contract despite the advice by the municipality's legal services, which warned about the high costs.
"From a legal perspective, it is advised that the further appointment in terms of section 32 of the SCMR [supply chain management regulations] is supported, subject thereto that the rates and tariffs are the same as that in the CoJ [City of Johannesburg] tender and furthermore that the period of this additional appointment be capped."
Among the costs recorded in the service-level agreement are:
- R766 080 for advice on the implementation of transitional, short-term provisions for a fleet;
- R2 052 000 for advice on centralising the fleet budget, and for an affordability analysis and a financing framework;
- R5 472 000 for implementing a full maintenance lease (FML) for a minimum of five years, preferably exploring existing intergovernmental services;
- R1 140 000 for the procurement and implementation of a centralised vehicle monitoring system; and
- R2 872 800 for the project close-out.
Municipal employees said the firm undertook "to get the best maintenance plan for the fleet". "[But] the amount is exorbitant taking into account most car dealers provide a maintenance plan, especially if you buy in bulk," said the employee, who was not authorised to comment.
According to the agreement, the company would undertake a feasibility study that encompassed "project scoping and initiation, stakeholder consultation, status quo and gap analysis, comparative analysis, value assessment, recommendations and final feasibility report".
The second part of the contract was to implement the recommendations from the first phase, which included the preparation of bid documents and identifying prequalifying bidders, the preparation and issuing of request for proposal bids, receiving and evaluating the bids and selecting preferred bidders, compiling a value proposition and assessment report, negotiating with the preferred bidder and preparing a contract management plan, and acquiring a council resolution and signature of an agreement.
Manale said Tshwane was not charged the R2-million for the project close-out, which cost Johannesburg only about R20 000.
"Mohlaba & Moshoana merely provided as a proposal estimating what it will cost should they carry out the close-out phase of the project.
"The City of Tshwane has a counter proposal that the close-out be left out of Mohlaba & Moshoana's scope of work. In actual fact, we have informed them that we would not require them to carry out that aspect of work as they had initially proposed."
Questioned about the possible abuse of section 32, Manale said "the use of section 32 or public tender is neither here nor there, since all lead to same and it is provided for in terms of the supply chain regulations".
Mohlaba & Moshoana recommended that a centralised vehicle monitoring bureau should be established to assist with a monitoring system and the company would assist with the procurement of the service provider.