KZN Transport Department reveals fraud among construction companies, leading to contract failures

Construction companies are engaging in “fraudulent conduct” to win bigger projects for which they have neither the capacity nor the capability to implement, leading to a high failure rate.

The KwaZulu-Natal Department of Transport has warned that contractors who are expected to handle larger projects according to their grading by the Construction Industry Development Board (CIDB) are failing.

These revelations emerged during a briefing by the department to the members of the KwaZulu-Natal legislature finance portfolio committee on the performance of the department’s contractors.

It revealed that it has since discovered that some of these companies are awarded bigger projects because they have “bought certificates (bought companies that owned the certificate and used those certificates to apply for work)” that gave them higher grading, but they lacked the capacity to handle big projects.

A recent list by the department shows that most contractors graded high by the CIDB are failing.

Of the 30 contracts it assessed that were failing, it found that one company was graded at level 6, five were graded at level 7, 13 were graded at level 8, and eleven were at level 9.

It was further revealed during the meeting that when it comes to the performance of contractors, the problem is two-fold: it is contractors who do not have the capacity and consultants who do not take the work allocated by the department seriously.

Thabani Nkosi, CFO of the Department of Transport, detailed the challenges that have been identified.

“When it comes to the performance of our contractors, in the main, the department appoints contractors based on their Construction Industry Development Board (CIDB) grading, where you expect them to have the necessary capacity and capability because they would have been vetted by CIDB. Unfortunately, we have come to realise that that is not the case because some of them are buying these certificates, some of them buy these off-the-shelf companies, and some of them do not have the necessary capacity to go and start where you would find a grade 9 contractor being awarded a tender of over R500 million, and they are struggling to establish for a mere R5 million.

“That then gives us problems, and it shows that we are facing a problem when it comes to the performance of these contractors. We rely on the vetting done by CIDB, and we have undertaken to be in talks with them to see how they can assist the department.”

He said as a remedial measure, they have to terminate these contractors' contracts and blacklist them.

“Although it is not an ideal situation because if you are doing a rehabilitation project, for example, and then you have to terminate in the middle, you will find that some preliminary works have already been done on the road, which causes another problem for road users, and you start the procurement process again. It is a problem for us as a department, and our best bet is to have discussions with CIDB on how they do the vetting.”

Nkosi said in the past they had a similar problem to the extent that they decided to allocate certain work to companies with higher grading.

“Now even those (higher) graded companies are failing us. That was out of frustration to say if the 5, 6, and 7 are failing us, then move on to the 8 and 9 graded companies, but these are failing us as well.”

“We have met with consultants which we felt are not giving serious attention to the department,” he said, adding that the department had even slapped one of the consultants with a debt of R56 million when they felt they were not giving them the same standard as they would to SANRAL.

Committee member Mervyn Dirks said it is concerning that many black companies are lagging behind when it comes to work allocated.

“We have seen that African people are largely not benefiting from the projects of the department. The MEC is saying that the province is a construction site, but for whom? We know that the people who benefit mostly are the white-owned companies, to a lesser extent the Indian-owned companies, and now even the Chinese are benefiting.”

Transport MEC Siboniso Duma said: “We cannot afford to drop the ball due to contractors' failures. Our focus remains on accountability and efficiency, ensuring that KZN citizens see value for their money.”

“The scale of the backlog of our road infrastructure warrants us to take a hard line against contractors who fail to finish projects on time; hence, we felt that we needed to name and shame these contractors, which we hope will deter future contractors from similar failures,“ he said.

THE MERCURY