REPORT
TO PORTFOLIO COMMITTEE ON SPORT AND RECREATION
1. Introduction
In its motivation for
inclusion as a
A comprehensive business
case was prepared, assessing availability and suitability of sites, the nature
and size of the stadium and its long term sustainability. A stadium suitable
for multi purpose use was mooted.
After the announcement that
The site identification
process resulted in the selection of the Prince Alfred's Park precinct,
adjacent to the
Thereafter, a design
consortium was appointed to develop preliminary designs (which included a firm
which had experience of FIFA stadium requirements) and preliminary designs were
prepared and completed by July 2006. These were sufficiently detailed to allow
tender specification to be prepared and to enable tenders to be issued for
detailed design work.
NMBM was in a position to
issue invitations to tenderers in July 2006, but was unable to do so, due to
the fact that at that time, availability of funding had not yet been confirmed.
It is possible, that had we been able to do so, the tendered prices would be
considerably reduced.
2. Tender process
The tender process for the
acquisition of contractors to construct the stadium has occurred in four
stages:
·
Demolition, bulk earthworks and stormwater
·
Bulk sewer works
·
Bulk water
·
Piling
·
Stadium main contract
Earthworks, stormwater,
sewer and water contracts will all be complete by the end of March.
The piling contract was
awarded in December 2006, the contractor is establishing on site and will be
completed by May 2007 (overlapping in a planned way with the main construction
contract).
The main construction
contract will be awarded during the second week of February 2007.
3. Approach to design and cost
effectiveness
Design of a stadium
requires a number of factors to be balanced, including what will be sustainable
in the long term, what FIFA's requirements are, aesthetics and practicality.
The approach adopted by NMBM was to be as modest as possible, to meet FIFA
specifications without grandiose designs, but to provide for adequate quality
and standards to ensure durability and minimise the demand for maintenance in
years to come as well as to be as practical as possible.
An example of an issue
affecting the design approach, is the size of the stadium. The business case
developed by NMBM, suggests that in the long term, NMBM can only support a
30 000 seater multi-purpose stadium. FIFA however would require a
48 000 seater stadium. The approach adopted was to balance these two
requirements by providing for modular seating which is FIFA compliant but is
capable of being removed after the World Cup. This modular seating is available
for hire for a stipulated period. The space available after removal, could be
used for suites or other additional construction, as a source of income for the
stadium. A further example is the roof. Weather records reflect that the time
of the World Cup (June) in NMBM produces rain and wind. FIFA requirements make
a roof an absolute requirement only for the western stand, but the LOC
Technical Team advice was that fully roofed stands are needed at coastal
venues. In addition, the business case reflects that the stadium would not be
sustainable in the long term without a roof. Given this approach, it follows
that the possibilities for limitation of scope of work are reduced, to avoid
affecting quality and standards or sustainability of the stadium. The scope and
specification for professional and construction work was exhaustively covered
by NMBM's Technical Team together with the LOC Technical Committee. The stadium
design was signed off by the Technical Team as compliant not only with FIFA
requirements, but with its own expectations.
4. Approach to contracting
The process used by NMBM
for the procurement of tenders was based on an open tender system (JBCC and
CIDB documentation). The alternative option of "design and construct"
based on a fixed price model was not considered by either NMBM's technical
advisers or the LOC Technical Team to be appropriate for a number of reasons,
the most important of which is time. Experience gained with the use of
"design and construct" in South Africa, for example with major tar roads,
other than major sporting facilities in Africa and the Gautrain project has
shown conclusively that it is a time consuming process.
Further, given the limited
number of major contractors who meet CIDB qualification standards for a project
of this size, it was decided to include in the specifications, a number of
designed and costed components which will be available for local contractors,
meeting certain empowerment criteria.
5. Funding
As has been stated above,
the design and scope of work was finalised with close participation by the LOC
Technical Team. In like fashion, the estimated cost of that work was calculated
by NMBM's quantity surveying team and separately by the LOC Technical Team. It
was based on that calculation that the LOC Technical Team recommended to
National Treasury as to the amount of the conditional grant to be allocated to
NMBM. NMBM's pre-tender calculated estimate, was R960 m (rounded off)
where as the amount approved was just under R890 m (both figures excluding
VAT). The reduced amount allocated by National Treasury as a conditional grant,
was based on a political decision, not on a calculated estimate. The point is,
that the figures and estimates, on the basis of which all parties made their
decisions, were the best information available at the time. It was necessary
for National Treasury to confirm this allocation before municipalities could
proceed to tender, given the requirements of the MFMA. National Treasury
however has made it abundantly clear through correspondence with Host Cities
that the figure allocated by it is fixed and will not be changed and that any
shortfalls are the responsibility of Host Cities.
6. Preliminary outcome of the tender
process
In terms of the Supply
Chain Management regulations under the MFMA, and NMBM's Supply Chain Management
Policy, the tenders received must first be evaluated by an Evaluation
Committee, which produces a report dealing with all the criteria and conditions
in the tender specifications. This report, with recommendations, is submitted to
an Adjudication Committee which in turn considers the report and recommends an
award to the Accounting Officer (Municipal Manager).
NMBM has received three
qualifying tenders. Yesterday (
The matter will be reported
to the Council on
The possible shortfall
ranges from a maximum of R262 million (rounded off) to R106 m
(rounded off) which will require elimination of grand stand roofs. This will of
course have an impact on sustainability.
7. National Treasury / Department of
Sports and Recreation SA point of view
On 13 December 2006,
representatives of the Host Cities and the above two Departments met during the
course of which it was pointed out that Accounting Officers face a challenge of
having to award tenders in the near future, for amounts in excess of the
amounts provided by National Treasury. It was requested that National Treasury,
acting in terms of Section 170 of the MFMA, grant a departure from the
conditions contained in Section 19 of the Act, which would enable
Accounting Officers to proceed to award contracts. It was further proposed
however that a meeting be held in January involving the Host Cities, Department
of Sports and Recreation SA and National Treasury to enable the individual
solutions for Host Cities to be examined collectively by Government and a set
of solutions arrived at which would meet the needs of Government.
Unfortunately, National
Treasury thereafter responded that no exemptions to Section 19 would be
granted, that no meeting would be held at a Government level but requiring Host
Cities to motivate to their Councils options available to address shortfalls.
The Director-General of
2010 World Cup has subsequently confirmed that no additional funding will be
forthcoming from National Treasury.
8. Possible reasons
It should be pointed out
that there has not been "an increase" in tender prices. What has happened,
is that the tendered prices, which reflect a genuine competitive testing of the
markets, are higher than the calculated estimates prior to the issue of
tenders.
Reasons for this could
include the following:
As a result of the above
factors, tenderers have costed in their perception of the risk particularly in
their costing of preliminaries and mark ups on provisional sums (ranging from
400% to 765% more than pre-tender estimates).
9. Constraints caused by MFMA
From NMBM's point of view,
the MFMA has not proved to be a source of procedural difficulty.
Section 19 of the MFMA
precludes municipalities from spending money on a capital project (which would
include the award of a tender) unless the money for the project has been
appropriated in the capital budget, the project, including the total cost, has
been approved by the Council and the sources of funding to fund the budget
provision have been considered and are available.
This is prudent provision
and provides for a sound management principle. It has proved to be a constraint
for some municipalities, where Accounting Officers have not had time to report
to Councils on the potential budget amendments needed to provide for the
increased cost reflected in tenders, given that existing budgets would have
reflected the amounts allocated by National Treasury. In NMBM's case, there
will be time to submit a report to Council and obtain the necessary authority,
before proceeding to award the contract.