Report of the Select Committee on Appropriations on the oversight visit to Free State’s Pelonomi Hospital: Hospital Revitalisation Grant Project on 16 August 2011, dated 19 October 2011

 

1. Introduction

 

The Select Committee on Appropriations (the Committee) was established in terms of section 4(3) of the Money Bills Amendment Procedure and Related Matters Act, No 9 of 2009 (the Act). In terms of section 4(4) of this Act, the Committee has the powers and functions conferred to it by the Constitution, legislation, the standing rules or a resolution of a House, including considering and reporting on:

  • spending issues;
  • amendments to the Division of Revenue Bill, the Appropriation Bill;
  • Supplementary Appropriations Bill and Adjustment Appropriations Bill;
  • recommendations of the Financial and Fiscal Commission, including those referred to in the Intergovernmental Fiscal Relations Act, No. 97 of 1997;
  • reports on actual expenditure published by the National Treasury; and
  • Any other related matter set out in this Act.

 

Furthermore, the mandate of the Select Committee on Appropriations encompasses the Committee’s functions to legislate, conduct oversight of the Executive; promote public participation, facilitate international agreements and review matters of public interest in relation to National Treasury and its entities, and the South African Reserve Bank.

 

1.1 Overview

The oversight visit took place on 19 August 2011. A meeting to brief the Committee about the Project was held at Pelonomi Hospital in the Free State. 

 

1.2 Terms of reference 

The visit formed part of the Committee’s ongoing interaction with provinces on their expenditure on conditional grants.  

 

The oversight visit emanated from the Hospital Revitalisation Grant (HRG) first quarter expenditure submissions of the 2010/11 financial year made to the Committee on 19-20 October 2010. During the deliberations, the provincial Departments of Health raised a number of challenges that contributed to the under-spending of the HRG allocation. Among other things, was the appointment, by the provincial Departments of Public Works, of under-performing contractors; poor construction work by contractors; and late payment of contractors.

 

1.3 Purpose of the Visit

The purpose of the oversight visit was to achieve the following:

  • To interact with the Free State Health Department management on the progress made in relation to the challenges submitted to the Committee regarding the Pelonomi Hospital project;
  • To ascertain what interventions have been made to address these project challenges; 
  • To view and verify the progress made thus far on this project;
  • To ascertain how much has been spent on this project to date and the projected overall cost of this project; and
  • To ascertain the completion date of the project.

 

2. Submission by the department

 

The MEC of Health, Hon Fezi Ngubentombi, welcomed the Committee to Pelonomi Hospital. She reported that the hospital had made progress in terms of spending on the Hospital Revitalization Grant as compared to what they had presented to the Committee in October 2010. The MEC reported that they had appointed their own engineer to enhance the department’s capacity to deliver on their mandate on infrastructure improvement.

 

Due to prior commitments, the MEC left and the HOD, Dr Sipho Kabane andhis team made a presentation on the progress of Pelonomi Hospital Revitalisation Grant project to the Select Committees. The Department reported, in October 2010, that expenditure on the Hospital Revitalisation Grant amounted to R22.5 million (i.e. 20 per cent) of the adjusted budget amount of R111.0 million.

 

With respect to the progress made on the projects, the Department submitted that it had the initial contractor was underperforming and as a result it was removed from site.  A new contractor, Shabach Construction, recommended by the Professional Consultant was then appointed.

 

The Department reminded the Committee that the following challenges were noted:

·         Under expenditure of the grant;

·         Poor contract management;

·         Lack of appropriate skills to manage infrastructure projects; and

·         Late appointment of contractors.

 

The Department went further to report that to address the above challenges, the following interventions were made:

·         Appointed three engineers to improve contract management and planning.

·         Established a forum between themselves and the Department of Public Works to improve the management of Revitalisation projects.

·         Bilateral meeting at an Executive level were also conducted.

·         Issued a Mora letter (warning letter) to a poor performing contractor to move off site if the contractor causes any further delays to the project.

 

The interventions led to improved communication and collaboration between the two Departments. It further improved the quality of the Pelonomi Hospital Revitalisation project management.

 

As of the 30 June 2011, the province has spent R21.3 million (35 per cent) of the allocated budget of R61.0 million for the 2011/12 financial year.

 

 

2.1 Pelonomi Hospital Revitalisation -Project Breakdown

 

The Department submitted that the Pelonomi Hospital Revitalisation Project is made up of four subprojects. That is Pelonomi Intensive Care Unit, Pelonomi Radiology upgrade, Specialised Clinics (Out Patient department)/Casualties, New entrance and perimeter fence.

 

Project name

Allocated budget for 2011/12

First quarter expenditure

Percentage spent at first quarter

Physical progress to date

Projected % stage of project

 

R’ 000

R’ 000

%

%

%

Pelonomi ICU

35

5.3

15

22

56.7

Pelonomi radiology Upgrade

8

6.9

87

97

100

Specialised Clinics (Out Patient Department)/ Casualties

10

8.8

88

100

100

New Entrance and Perimeter Fence

8

0

0

100

100

Total

61

21

34%

-

-

 

The Committee was informed that the progress of the project was very slow and the contractor’s performance and quality of work on the site was poor. The floor screed had to be redone, more than four times. This was as a result of poor quality plaster being used to make the floor screed, which had to be removed. The project was further delayed by a disagreement between the contractor and the department’s consultant on the project. The Department also reported that at some stage the contractor abandoned the site and when the contractor returned stringent terms were put in place.

 

At the time of the Committee’s visit, the specialised clinic called  (OPD)/Casualties was at a planning stage, of which 88 per cent of the planning work has been completed. The procurement process of the New Entrance and Perimeter Fence project was still in the early stage as the tendering process was closed on 05 August 2011. 

 

3. Challenges at the Pelonomi Hospital

 

The Committee was informed that there were serious delays with the appointment of the contractor for the Intensive Care Unit. As a consequence to that the ICU machinery has not been procured. After the contractor had been appointed, there were problems with pace of work, poor workmanship in some areas and a lack of supervision. The Department reported that for the sub-project: Radiology, Clinical Engineering and Links, the contractor was behind schedule. However, the Department is adamant that the project will be finished on schedule.

 

The Committee was informed that following interventions by the Departments of Public Works and Health the progress on the whole project has improved tremendously.  

 

The Department submitted to the Committee that the Pelonomi Hospital Revitalisation project was 6 months behind schedule. On the other hand, the Consultant reported that the project might be finish in February 2012 but the department was adamant that it will be complete before end of 03 November 2011. The Department reported that the Penelomi Hospital Revitalisation Project would be completed by 3 November 2011; however the consultant raised doubts about the contractor’s ability to meet this deadline and stated a more realistic date would be February 2012.

   

4. Site Visits

The management of the Department, and the consultant, Goldblah Yuill Architects (represented by Mr J Van der Merwe), led the Committee on a site visit to the following sub-projects:

  • 4.1 Mechanical floor;
  • 4.2 Intensive Care Unit/Recovery Unit;
  • 4.3 High Care Unit; and
  • 4.4 Radiography Department, which is 97 per cent complete.

 

The Department reported that they had received state of the art equipment but their challenge was that the hospital is under-staffed. To overcome this challenge, the staff needs to be trained on how to use the new equipment. The Department added that retaining competent staff is a challenge due to competition with the private sector. Hospital management reported that they have observed a concerning trend in terms of black student enrollments in the Health Faculty of the University of Free State that do not complete their degrees.

 

The Department proceeded with the Committee to the Trauma and Spinery Unit that will be installed with  Magnetic Resonance Imaging (MRI) equipment, which will amount to about R15 million. Due to the slow progress on the implementation of the project, the equipment cannot be purchased at this stage.   

 

.5. Observations

 

5.1 The main challenge on the Pelonomi Hospital Revitalisation project lies with the underperforming contractor, who needs to be closely monitored.

 

5.2 Abandonment of the project by the contractor, which was appointed without the involvement of a professional consultant, and the contractor’s work which was below the required standard are the two major factors that contributed to a delay of this project.  

 

5.3 There are signs that the main contractor has cash flow challenges. This is due to the fact that progress is only made once the department has made payments to the contractor.

 

5.4 The Committee found it concerning that the Department was not taking the recommendations of the consultant seriously as the consultant was being paid by the department for his expert advice. This could be viewed as wasteful expenditure.

 

5.5 The Committee noted that the management of the Department was not in touch with the project. The Committee is of the opinion that too much trust is being placed in an underperforming contractor, thus undermining the purpose of the consultant.

 

5.6 The project is progressing but at a very slow pace. Regarding the completion date, the Committee agrees with the consultant that the project will most likely be completed around February 2012.

 

 

6. Recommendations

 

The Select Committee on Appropriations makes the following recommendations:

 

6.1 The consultant, Goldblah Yuill Architects, should closely monitor quality of work the contractor, Shabach Construction, and the Department should have more supportive of the consultant;

 

6.2 The Free State’s Department of Health should work closely with the consultant as he is a specialist in the build environment; and

 

6.3 The Free State’s Department of Health should be vigilant and make every effort to avoid overspending on this project.

 

Report to be considered.