Northern Cape government pays R25m for no work done

Johannesburg - The Northern Cape government dished a cool R25 million golden handshake to a consulting company that claimed potential loss of profit; part of the amount for a contract confirmed only a few weeks earlier, and the bulk for work that had been scheduled two years ago but was never done.

According to a settlement agreement between the provincial Health Department, the Public Works Department and V3 Consulting Engineers (Pty) Ltd, dated March 3, 2021, the government committed to pay the company a total of R25.4m for the two projects: maintenance of the Dr Harry Surtie and De Aar hospitals contracts and maintenance for the firefighting contract.

The Public Works Department appointed V3 to provide professional services for the maintenance of the Dr Harry Surtie and De Aar hospitals February 1, 2021. On February 16, 2021, V3 complained about the potential loss of profit, citing that there was “clarity required on financial budgets and the untenable situation of having two consultants of similar scope of services appointed on the same project”.

Concerning the fire equipment maintenance contract signed in 2019 for three years, V3 cited “the potential profit loss due to the required budget not being approved”. The company estimated profit loss for the project at R21.2m excluding VAT.

According to the record of calculations, the fire maintenance budget for the 2019/20 financial year was projected to be R12.6m. However, only R3.1m was allocated to V3, resulting in a R9.5m shortfall.

In the 2020/21 financial year, up to R8.9m was expected to be spent but only R583 000 was allocated. For the 2021/22 financial year, the figures stood at R9.4m expected expenditure and no allocation had been made to V3. The combined budget shortfall for the two financial years was R17.7m.

From the calculations, the total loss of profit to V3 on the fire equipment maintenance contract amounted to R24.4m including VAT. On March 3, 2021 Dr Dion Theys, representing the Health Department, and Ramona Grewan, representing the Public Works Department, agreed to pay V3 R25.4 m in two tranches.

“The first payment to be affected at the end of March 2021 and the last payment at the end of May 2021,” the agreement stated. Olebogeng Manhe signed on behalf of V3 in his role as the company’s CEO.

Attempts to get a comment from V3 were unsuccessful.

A spokesperson for the Public Works Department, Crystal Robertson, said the Independent Development Trust (IDT) was allocated the maintenance of the De Aar and Dr Harry Surtie Hospitals, and subsequently appointed V3 to conduct the maintenance of the aforementioned health facilities for 3 years, ending on September 30, 2020.

According to Robertson, on September 30, 2020, the department received a request from the Department of Health to ensure that maintenance was continuing at the health facilities, “as these facilities provide essential services to patients in the province”.

“When IDT dissolved, the department could not issue an instruction to them any longer, so it was recommended that the services of V3 be appointed for 6 months to allow for the completion of works,” she said.

According to the appointment letter, she said, the Public Works Department appointed V3 – on behalf of the Department of Health – on May 16, 2019 for three years to conduct maintenance on firefighting equipment.

“A second service provider was appointed, but not by the (Public Works Department) which prompted V3 to claim for future financial losses; as a result, the settlement agreement,” Robertson said. She said the settlement was in line with the contractual provision that “if any dispute or difference of any kind whatsoever arises between the client and the consultant in connection with or arising out of the agreement, the parties shall make every effort to resolve amicably such dispute or difference by mutual consultation…”.

Consequently, all parties settled, she said. She said the Public Works Department “did not pay any settlement fees”, adding that “the parties agreed that the Department of Health shall make a combined payment of approximately R25m for the maintenance of the Dr Harry Surtie Hospital and the De Aar Hospital contracts”.