Big players ditch PPPs

Pretoria - Government indecision and political interference has caused the construction industry to lose its appetite for public-private partnerships (PPPs).

At least one chief executive has strong suspicions about corruption and has instituted legal steps to have the awarding of a PPP reviewed.

According to the PPP model, the private sector's balance sheet is used to fund infrastructure and expedite delivery to communities.

But this requires very specialised expertise and the companies complain that it takes millions to prepare a bid.

Awarding drags on for years - if it indeed ever takes place.

Basil Read Holdings [JSE:BSR] chief executive Marius Heyns says the big problem lies in the area of PPPs for serviced accommodation.

The National Roads Agency’s toll road PPPs work well from the industry's viewpoint.

Over the past three years Basil Read has pumped R50m into tenders for PPPs, but has nothing to show for it.

The group will in future rather focus on partnerships with private enterprises, such as the one for building a new coal mine in Mozambique, which is already under way.

The PPP proposal for building four private prisons, which was submitted as far back as May 2009, has still not been awarded.

About a year ago, just before the tenders lapsed, the four tendering consortiums were asked to adjust their tenders.

Heyns says that things have since been dead quiet. The tenderers have not been advised that the PPPs have been cancelled, nor has there been any confirmation that the modified tenders have even been opened.

All the consortiums have at least one foreign partner. "International investments are being lost because no one knows what government is planning."

For two years the industry has been hearing that the PPP for upgrading the Chris Hani Baragwanath Hospital at a cost of R4.5bn is coming to the market, but it has not happened, said Heyns.

Basil Read lost out in the awarding of the PPPs for rebuilding Munitoria, the head office of the Tshwane Metro Council, as well as that for building of a new head office for the Department of Rural Development & Land Reform.

In terms of the Access to Information Act, the company established that in both cases it had scored the highest points in the adjudication of the tenders.

These points, according to Heyns, had been adjusted by the adjudication of "value for money". Heyns considers this to have been a subjective process.

In pursuance of an earlier court order, Basil Read will request a review of the process. But it has decided not to continue contesting the Munitoria PPP.

"I can't spend all day in court," said Heyns.

Group Five [JSE:GBF] chief executive Mike Upton said improved efficiency of the PPP process would greatly benefit the country.

Client departments often lack the expertise to set out the requirements clearly from the beginning.

He said these are often changed during the bidding process and even at the time of awarding.

The PPPs are generally large projects attracting great attention, which sometimes leads to political interference.

"There is some degree of exhaustion within the industry, especially with regard to PPPs for serviced accommodation."

Upton said the further course of the process of financial finalisation at Munitoria and Rural Development, where the company is the preferential bidder, will over the next two months determine Group Five's continued participation in similar PPPs.

Bidding costs millions and the industry cannot afford the non-awarding of a project such as that for the prison PPPs.

"It's an embarrassment for South Africa," said Upton.

"You have to balance what you put in against what you get out," he said.

Group Five is involved in PPPs in Eastern Europe - mainly toll roads - where it says the process is far more efficient.

Louwtjie Nel, chief executive of Wilson Bayly Holmes - Ovcon [JSE:WBO] (WBHO), on the recent announcement of the group's annual results said that WBHO would also scale down its participation in new PPPs in South Africa because awarding is so protracted.

According to him, WBHO has more or less written off the prison PPPs.

He said that even should a company's tender be successful, PPP awards are increasingly being interrogated in court.

All parties find this unpleasant.

Mike Wylie, chairperson of WBHO and the head of its Australian operations, on the same occasion announced that the group had recently won a PPP in Australia.

In Australia it takes four to six weeks to finalise a PPP, said Wylie.  

 - Sake24

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