DBSA Responses 1 PDF

Response to Daily Maverick’s query regarding the DBSA’s implementation of
procurement for Sanral
As a result of its impeccable track record in managing procurement processes in

infrastructure development, the DBSA was called on as implementing agent for procurement
in Sanral’s infrastructure delivery across five projects. The Bank’s role so far has been in bid
evaluation, implementing that role in adherence to Sanral’s policies, with the mandate to ensure
the regularity and integrity of the entire process.
One of the contracts is Mtentu Bridge, a highly complex and challenging project that requires
expertise and experience in mega-bridge construction. The tender briefing session for this
project was attended by several interested bidders, but only two bids from two joint ventures
were submitted, because only a few entities can competently meet the complex technical
requirements of the project. The two bidders were Steffanutti and Grenaker LTA, referred to
as Stefstocks G-LTA Mtentu JV, and CCCC and MECSA Joint Venture, referred to as CCCC/
MECSA JV. Both bidders were considered equally and fairly, across all stages of evaluation
and the DBSA recommended CCCC/ MECASE JV for the project.
Daily Maverick Statement and Question:

“The above information surely suggests that there is a very real possibility that both MECSA
and the CCCC might run into dire financial problems while it concludes the Mtentu Bridge
project”. Why did the DBSA BEC persist in recommending the JV, despite these warning
signs?
DBSA Response:
The DBSA did not persist in recommending this bidder, but simply recommended them
following a transparent, regulated public procurement process - principally, an administrative
evaluation, technical evaluation, financial offer, preference score, due diligence, and the final
recommendation.
It is important to understand that the decision-making calculus leading to the

recommendation considers several factors. These are determined in the terms of reference
of the tender document, driven by the ultimate objective to recommend a capable bidder
who can deliver the project timeously, within budget and at exceptional standards. Analysis
of financial statements forms part of the risk assessment of bidders and does not constitute
a disqualifier, nor grounds not to appoint a service provider in the context of the advertised
tender conditions. Forming part of due diligence, it assists project owners in contract
management. The possibilities of financial problems or liquidity risks are managed through
mandatory contractual requirements, including but not limited to Construction Guarantees
and appropriate Insurance.
It is worth noting that both bidders passed the technical assessment. In assessing their
financial offers and preference scores, and Stefstock G-LTA Mtentu JV’s pricing came in at
R6.6 billion while CCCC/ MECSA JV’s pricing came in at R4.0 billion. It follows that the
DBSA recommended the most cost-effective offer.

“The bid documents also make it clear that MECSA did not even bother to submit Annual
Financial Statements (AFS) for the 2020 and 2021 financial years. The most recent AFS
were for the 2019 financial year. The DBSA itself highlighted this as a problem, stating in its
report that this “poses a challenge in analysing the current financial position of the entity.”
How could the DBSA recommend MECSA as the winning bidder without having had sight of
the 2020 and 2021 financials? For all we know, MECSA could be in an even more
precarious position than it was in the financial years which the DBSA did review. Did the
DBSA make any effort to obtain the more recent AFS from MECSA? Did the DBSA
communicate to SANRAL that this might be problematic?”
DBSA Response:
It is important to note that the recommendation made was not to MECSA, but to the CCCC/
MECSA JV. Accordingly, the due-diligence process in the evaluation interrogated the CCCC/
MECSA JV’s financial statements.
During due diligence, DBSA issued a formal enquiry for more recent financials from the
CCCC/ MECSA JV, and the bidder formally responded with supporting documents from their
accredited accounting firm. It is important to understand that the decision-making calculus
leading to the recommendation considers several factors. These are determined in the terms
of reference of the tender document, driven by the ultimate objective to recommend a
capable bidder who can deliver the project timeously, within budget and at exceptional
standards. Analysis of financial statements forms part of risk assessment of bidders and
does not constitute a disqualifier, nor grounds to not appoint a service provider in the context
of the advertised tender conditions. Issues of financial risk are assessed holistically and
within the context of the financial position of the joint venture, and not singularly focused on
only one party of the bidding joint venture.
It is worth noting that according to information available in the public domain, CCCC is
Africa’s largest international contractor, publicly traded, with a 40-year history of building
some of the continent’s largest infrastructure projects with reported revenue of US$70 billion.

“Another concern, as highlighted in the DBSA report, involves the number of days, on
average, that the CCCC takes to settle its invoices/bills from sub-contractors or service
providers. The report shows that the CCCC in 2021 took a full seven months to settle such
bills. If they continue this trend while executing the Mtentu Bridge project, the JV’s South
African sub-contractors and service providers will no doubt face severe liquidity issues if the
JV does take that long to settle their invoices. Does this not concern the DBSA? “
DBSA Response:
The issues pertaining to how CCCC/ MECSA JV will manage their financials forms part of
the standard contract management process used by Sanral, and implemented by the
assigned teams that will perform construction supervision and monitoring. Sanral has its own
Project Management standard operating procedures, which ensure that contractors adhere
to the signed contract. Any default by a contractor will be managed through contractual
provisions, applicable to varying areas inter alia sub-contracting obligations, payments to
subcontractors and labourers etc.
The DBSA carried out its role and met its mandate, ensuring the integrity and regularity of
the bid evaluation process. Its proven track record in delivering procurement for clients and
partners in infrastructure development is exemplary, guided by timeous delivery, within
budgets and at exceptional standards.
End.

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Response to Daily Maverick’s query regarding the DBSA’s implementation of

procurement for Sanral

As a result of its impeccable track record in managing procurement processes in

Daily Maverick Statement and Question:

It is important to understand that the decision-making calculus leading to the

Daily Maverick Statement and Question:

Daily Maverick Statement and Question:

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