Progress report on Kimberley Mental Health Hospital: Interrogation of Northern Cape Provincial Departments of Health, Roads and Public Works

Meeting report

Opening remarks
The Chairperson noted the presence of an Acting Health MEC from the Northern Cape (NC), Mr Mac Jack, and said continuity was ideal in government. He doubted the kind of briefing the MEC would have received, particularly that the issue had been ongoing for quite some time. This was the fourth meeting on the matter and was definitely not the last. The MEC who had been appearing before the Committee all these years was not present, and this was worrisome.

But what was also worrisome was the Auditor-General’s (AG's) report on health infrastructure provision, and that had led to the Committee deciding to invite the province. The Committee resolved that certain cases would be pursued until they had been finalised. The manner in which the Kimberley Mental Health Hospital (KMHH) progressed was uncomforting. The visit to the facility late last year also did not go down well with Members. Satisfaction could be drawn to a degree, on the structures that were there as evidenced in the oversight visit this year. Even on the actual construction there appeared to be some commendable progress, but there remained few issues that should be clarified.

The Chairperson said the completion date was one issue, and during the visit it appeared there was a process to look at the redesign necessitated by policy changes. The impact of these at the point of the visit was not known and understood. Also, there was no clarity provided on what the impact of such changes would be on duration and cost.

The Chairperson acknowledged correspondence from the NC Provincial Department of Roads and Public Works that was based on a document obtained from the National Department of Health (DoH). That report assisted in giving a better picture of how things unfolded. There were issues that the Committee grappled with on oversight, and mostly related to the history of the project. The issues were raised with the political leadership. It was emphasised that some of the issues required further investigations. The Committee needed to get a sense of whether there was movement and, if so, where was progress being made.

Northern Cape presentation
Dr Gustav Wilhelm Pistorius, NC Chief Director (CD): Infrastructure and Technical Services, read through the presentation and said there were several scope and design changes that had occurred. The details were technical, but what was worth noting was the time for completion of the KMHH. The construction period was supposed to be 24 months commencing on 28 November 2011, when Nyatse Construction was awarded the contract. Allowance was made for R49 million. The contract revised in December of that year, and an extension time to January 2014. The revised cash-flow projections stood at R400 million.

The NC Provincial Department of Roads and Public Works instructed the agent to conduct an audit of existing work. The intention was to find out challenges with the previous contract, especially as they related to building quality. This resulted in further extension of completion to March 2014. The principal department, the Department of Health, gave an instruction to cease internal construction in several buildings. The amended drawings or changes the department initiated further necessitated an extension of time. Completion was further extended to August 2014.

There were drawings that had to be issued for demolition of some internal walls. This resulted in rebuilding of the internal walls and infrastructure. Because of the changes, the contractor notified the principal agent that a further extension was needed. The latest available completion date was now March 2015. The graphs indicated the possible impact on the cash-flow. The contractor’s performance to date was at 29% and overall completion was 55%. There was a big gap in terms of performance and closing that gap was a challenge.

There was an experienced project management team in place that were positive about the project. There was noticeable improvement on the quality of work. With a project of that size one needed about 1000 staff members, and the contractor currently had only 250 on site. The main sub-contractor had since left the site, as there was a dispute on the appointment of selected sub-contractors. The project had R73 million available for this financial year. But the department had applied for additional funding.

Nyatse Construction was appointed for R400 million, but due to the contract price adjustments further R39 million was allocated. When the project management team was drawn, an additional R40 million was authorised for that purpose. There was no impact on the preliminaries as a result of the redesign. Contingencies were not provided for in the R400 million. The estimated cost at completion was now provisionally around R590 million. With additional fees the total was around R700 million and that figure did not include the operationalisation of the project. DoH allocated R73 million for the financial year, and an application was prepared for additional funding. The expected expenditure for the year was around R100-150 million for the year.

He read through mitigation actions that were implemented. A project steering committee was represented at all project management structures. Industry specialists were appointed to finalise the structural stability of the concrete. A follow up review was done last week, and similar reviews were done on civil, mechanical, and electrical engineering designs, but also quantity surveying. DoH appointed a senior engineer to assist with daily oversight. The department of public works had also appointed engineers to monitor construction quality to avoid the repeat of sub-standard construction. This had resulted in positive results.

DoH was involved in a process of finding a senior built-environment professional to assist with performance monitoring for all role players. The important thing was that the management structure had been implemented right from the start. A joint management steering committee was crucial to this project. Designs should have been finalised before the project was awarded, so that there were no design changes that resulted in disruptions. This was a major challenge with the project; not only was the quality problematic, but there were constant design changes. This should not be allowed in future. Proactive management was essential on any project of this magnitude, and full time attention of the principal agent was required. The provincial departments concerned had learnt that appointment of service providers needed to be based on appropriate skills and not only on cost. But, also that a structured approach on how due diligence was done would avoid any frustrations associated with performance and delivery.

Discussion
Mr R Ainslie (ANC) noted that the lessons came at a great cost. Over a billion Rands had been committed to the project if one took into consideration all the amounts involved. He sought clarity on the R73 million that had been allocated on the project for the year. Who made the funding application, to whom was the application made, and for how much? He commented that the R150 million appeared woefully insufficient for the contemplated completion date. Surely the funding required for this purpose was far more than this. The presentation indicated that at this stage the project could cost up to R700 million and the latest completion date was March 2015. R150 million was far too little to meet the envisaged completion date. He sought clarity on who authorised the funding request to National Treasury (NT). How much was it, and what would happen if that money was not approved?

The Chairperson clarified the question and asked how the Department of Roads and Public Works reconciled the completion date (March 2015), with the price tag of R700 million, and the payment rate of R100-150 million.

Ms Gugulethu Matlaopane, Head of Department (HOD), NC Department of Health, replied that the R150 million was for the current year, and the department would ask for a top-up from NT.

The Chairperson asked how much the top-up would be.

The official could not answer.

Dr Pistorious replied a R100 million extra was requested for this year. This was on condition that the project progressed satisfactorily.

The Chairperson interjected and clarified that Members were trying to reconcile the completion date and the money to be paid at completion, of course with a view on the price tag of R700 million.

Dr Pistorius referred Members to page 13 of the presentation and said there were escalations from the contractor for additional cost. This was not all the construction costs. The total fee for professionals and the designs was R90 million and R20 million respectively. This was not part of the construction cost. The construction cost was R590 million.

The Chairperson put the question differently and asked what percentage of the work was outstanding, and what percentage of the money was left. He requested that this be reconciled with the 12 months that was left for the contract.

Dr Pretorious replied that 55% of the work had been done; and R419 million remained to complete the project. The department had requested the money from NT through the normal processes.

Mr Ainslie asked how much was asked for next year - was it R400 million?

Dr Pretorius replied he did not have the figure but it would, more or less, be that amount.

The Chairperson commented that the outstanding amount that was requested from NT should be that simple, given the history of the project. It could not be that the official was not sure.

Dr Pretorious replied he was a technocrat and that his target was “to chase R20 million a month.”

The Chairperson commented that if that was the case, it would only take the official to R220 million at completion. This talked to planning challenges.

Mr Pretorious replied the claims from the contractors in terms of delays and interest ought to be kept in mind. This was not purely based on construction.

Mr Ainslie commented that the Committee took the department’s figure given as an estimate in the report, which in this case was R700 million. Professional fees and designs had to form part of the total cost, and could not be treated separately. Construction projects could not be constructed without designs and without paying professionals. There was a huge shortfall and lessons had not been learnt.

The Chairperson requested that the NC HOD for health comment. The completion date was near, and yet there was no money. This date looked hypothetical. Where was the money to pay for the completion; had that been discussed conclusively?

Officials appeared confused and hesitant to respond.

Kgoshi S Thobejane (ANC) interjected during the silence and said the person who prepared the presentation should respond, given that none of the officials appeared to have appetite to respond.

The Chairperson requested that the HOD be allowed to answer the question, as continuing with the discussion without resolving the question of money would be a waste of time.

After a lengthy silence, the Chairperson asked the MEC to assist.

MEC for Roads and Public Works, Mr Dawid Rooi, replied that the NC Department of Roads and  Public Works was only an implementing agent, and that the user department (health) needed to reply to the question of whether there was budget.

Ms Matlaopane replied the department believe that there would be money if re-allocations of the budget were done. Both the NT and the DoH had been engaged.

The Chairperson requested that the engagement be elaborated on.

Ms Matlaopane replied the province had written to NT, and that similar presentations were made to the provincial treasury explaining the extension.

The Chairperson replied the issue was not the extension but where the money would come from. Could the official elaborate on the engagements further? What did the Provincial Department of Health request, and what were the responses? The Committee was simply pointing out that on the basis of what had been allocated on the project for 2013 was far too low to achieve completion in a year’s time. He pleaded that the Committee be given comfort that issues were being realistically dealt with.

Ms Matlaopane replied that two issues were raised with the Provincial Treasury. One was that the budget allocated for the project in the Medium Term Expenditure Framework (MTEF) would not be sufficient due to the design changes. It was also indicated that the extension of the deadline was another challenge to the budget.

The Chairperson commented that the financial implications of the designs were far too low to necessitate an engagement with NT.

Ms T Chiloane (ANC) requested that the question on the details of the engagement be directed to NT.

The Chairperson replied NT was not represented, and requested DoH instead to respond.

Ms Precious Matsoso, DoH Director-General (DG), commented that the understanding was that the facility was not only going to cater for mental health patients, but state patients like the incarcerated prisoners.

The Chairperson asked if this was the new focus.

Ms Matsoso replied “no”. This had always been provided for at the facility. The concern was that the R700 million would not deliver services, it was only earmarked for the facility. Planning for staff also needed to happen.

The Chairperson interjected again and said he did not want to go there.

Ms Matsoso replied it was suggested to the province that it needed to look at the precinct with regard to the core responsibility for the mental health service. This needed to be done in a phased approach. It was asked whether all of the operations at the facility were required at the same deadline, or whether it could be delivered in phases. The second issue raised was the proportionality of the facility to the needs of the province.

The Chairperson commented “just like the prison. The province had one of the biggest prisons and yet it had the lowest population figures.”

Ms Matsoso said the province had to ensure that in the delivery of services, only the first precinct needed to be functional, with other wings phased over a period of time. That would not have impacted on the delivery of this precinct. Had that advice been taken, it probably would answer the question.

The Chairperson asked if the advice was taken.

Ms Matsoso replied only the team from NC could answer.

Dr Massoud Shacker, Infrastructure Head, NC Department of Health, replied it was true that the total budget requirement would eventually be R700 million. The budget that would be required by the March 2015 completion date was close to R450 million rand. The total grant including the equitable share of the province was about R450 million. For the next year the department would run short of cash-flow. Additional budget was needed, and should be applied for. For the current year, the additional budget that NT allocated was R57 million.

Ms Matsoso clarified that the question was whether the advice, to do the operationalisation of the facility in phases, was taken.

The Chairperson sought clarity on who was supposed to take the advice as that had a bearing on the budget.

Ms Matsoso replied it was indicated to the province that there were arms in the design that were not core to the delivery of mental health and needed to be considered at a later stage. The sections were relevant to such Departments as Social Development (DSD) and Correctional Services (DCS). The matter was raised with the HOD.

The Chairperson commented that it was clear that the advice was not taken, or else the presentation would look differently to what it was. This completion date of March 2015 was hypothetical.

Dr P Rabie (DA) sought clarity on why the main subcontractor left the site as stated in the presentation. How would such a void be filled, and what plans were there to ensure that the completion date was met?

Mr Ainslie sought clarity on the reference made to the Division of Revenue Act (DORA). He asked if it was the view of the NC department of health to use the entire allocation on one project.

The Chairperson clarified that the reference to the total allocation as per the DORA was merely to highlight the implication on the total provincial budget. Using all of the equitable share on one project was not necessarily the intention.

Mr Ainslie asked if it was not ideal to stop the project until all ongoing tests on such things as the stability of the concrete, the structure, and the civil and mechanical engineering designs were complete. This whole thing could come crushing down, and yet R700 million was being spent. If the outcome of the tests was negative, would that not be a setback given that everything would have to be dismantled? He doubted if there was logic in continued spending on structures that could possibly be demolished. The province should stop construction and do the tests. What were the implications of these tests that the Provincial Department of Health had commissioned on the entire project?

The Chairperson clarified that the question sought to establish what the reviews arrived at, given that they were to be carried on 22-26 October.

Mr Louis Grammer, Ntaba RPM Consulting Project Manager, KMHH, replied that it was decided that it was important to review all the designs of the service provider. It was agreed that the structure and the civils would be the first ones. External consultants were brought in, and as things stood the consultants would come back with a report.

The independent consultants were still busy reviewing the changes that were made by the civil and structural engineers. By the end of November (2013) there would be a final close out. The firm was tasked by public works to appoint the consultants who would do the external reviews, the firm still awaited the reviews on the mechanical and electrical matters. An indication that had come out of those reviews that had already been undertaken was that there was no problem with the concrete. It had passed all the independent tests.

The Chairperson interjected and refuted the statement. It was not so; the report prepared by Aurecon in January 2013 for the DoH listed all the shortcomings. The hammer tests, load core results, load tests, roof drainage and first floor slabs on Block A were among issues highlighted. The only redeeming sentence was at the end of the report where it was stated “we do not foresee that buildings would be condemned for structural defects; no significant visual structural defect was revealed; the defects in the tests data picked up could be addressed.” There were defects; the question was whether they had been addressed or not.

Mr Ainslie sought an answer to his question on the fact that the structure might have to be demolished pending the results of the tests.

Mr Shacker highlighted some of the structural defects as reflected on the report. It was true- roof cracks, inadequate roof drainage blocks, less than 18 millimetres surface beds, and deflection of the beams were all real challenges. The department (public works) should demolish, but the defects were not necessarily on the entire structure. The Joint Management Committee (JMC) and the interim steering committee had in-loco supervision on 100% basis on site. Then the defects and defaults were collectively identified. These were pointed out to contractors for fixing. This was a conjunctive application of remedial and new work; this was cumbersome and it took more time and needed more money.

The Chairperson asked why remedial work was required.

Mr Shacker replied the department could stop everything, but the challenge was that the contractor kept claiming on the contract.

The Chairperson commented that the need for remedial work reflected the poor quality of work. Why did poor quality of work appear to be consistent?

Mr Shacker replied it was true that much of the work that had been carried out was of poor quality. This was the reason the “national department” needed to intervene. The remedial work that had to be conducted was well documented for any future actions on both the professional service provisioning or construction supervision level. This was all documented; and the department knew what was happening.

Mr Ainslie sought clarity on whether the remedial work costs had been included on the R700 million figure. He jibed the conjunctive approach bandied about sounded more like conjunctivitis.

Mr Shacker replied even in the bill of quantity that was provided to the current contractor, as certain portion for remedial work was made as a provision. Additional estimates based on previous experience had been made. One could never truly determine the strength of concrete. Supervision was crucial in loco monitoring. There was a transparent and collaborative effort between partners and it had not always been like that. It took the provincial government six months to develop the approach. But the truth of the matter was that the project would cost government well over R700 million.

Mr Kholekile Nogwili, HOD for the NC Department of Roads and Public Works, said the department had been clear that it was dealing with a serious matter. There were problems; the building was deserted for a lengthier time during the litigation period. It was made clear to the new contractor that there might be structural damage that might require remedial work. The reason the department gave in to the extension dates was the realisation that there were structural defects that needed to be corrected.

The Chairperson commented that this was a sticky situation that should never have happened. He said he was confused as to the direction of the meeting.

Dr D George (DA) commented that the kind of challenges appeared similar to Jabulani Hospital in Soweto. The cashflows on the report just did not make sense; the numbers were not right and would get the department into more trouble in terms of price adjustments. Prices would move up as the completion date was moved further into the future. That the contractor did not have enough staff indicated there was a problem. He suggested the information could have been presented differently and simpler, with clear activity and timelines.

Dr George said he did not have confidence in all what was said. Officials ought to remember that it was the most vulnerable members of society with severe problems who would use the facility. This was the kind of service they were accorded; this was not acceptable.

The Chairperson reminded the officials of an earlier question on the staff complement of the contractor and whether there had been engagements in that regard. What were the reasons for the main contractor to leave?

Mr Grammer replied the tender stipulated that the main contractor also employed local sub contractors. In getting the tender, the main contractor was in a joint venture with HSH Construction, who was graded a 7GB (the Construction Industry Development Board graded construction contractors based on the portfolio of evidence and the magnitude of projects a contractor could undertake) in the NC. Unfortunately there was a tender just across the road for a new private psychiatric hospital. HSH Construction – partners in the KMHH – was awarded the tender.

The Chairperson failed to understand, and expressed shock.

Mr Grammer continued and said because of that contract HSH Construction then terminated their collaboration with Nyatse Construction on KMHH. The agreement was still in place in terms of use of equipment. The contractor had been engaged on its staff complement, but indicated that appointment of staff was impacted on by the redesign. This aspect of the work would be monitored. It was interesting to note that with HSH leaving the site the monthly turnover had not dropped at all.

The Chairperson sought clarity on when HSH Construction chose to walk away.

Mr Grammer replied that it was at the end of September.

The Chairperson sought clarity on the sub-contractors and the nature of the dispute.

Mr Grammer replied that the dispute had been resolved. This was a simple case of tender documents requesting that sub-contractors be appointed according to the selected method. The contract which formed the basis for this contract stated that there be no selected contractors, only nominated contractors. He clarified that a selected contractor was usually part of the team that decided who tendered or not, and could raise objections. The nominated sub-contractor was where the client (the department of public works) had a list of preferred sub-contractors.

The Chairperson sought clarity on who, at public works, would make this determination.

Mr Grammer replied it was the project manager.

The Chairperson commented that was the person who should be responding to the questions. That official should be more knowledgeable. He sought clarity on whether the official was involved.

Mr Grammer replied “he was”. He said it had now been agreed to that all sub-contractors would be appointed as nominated and not selected. Some of the sub-contractors he could remember were Nolitha Security; Valken Kitchen Equipment; M&L, and CNC engineering services. He promised to avail the written information on terms of reference, the entire list of sub-contractors, and how much money was paid per sub-contractors.

The Chairperson commented that the challenges that were there were as a result of the legacy of the past, and that there was a need to revisit it. The Committee had raised its discomfort with the processes at KMHH. In previous meetings with officials in Parliament it became apparent normal processes were ignored in order to facilitate the project. The need for involvement of the law enforcement agencies had since been emphasised.

The Chairperson commented that the Public Finance Management Act (PFMA) sought to ensure that managers performed, and accounted for their actions. He sought clarity on the Sizwe Ntaluba Gobodo investigation that the HOD was unhappy about.

MEC Rooi commented that the department engaged Gobodo on the scoping report, even though it was not a scoping report. Extensive work had been done on the report. As advised the department engaged the services of the Special Investigative Unit (SIU). He raised concerns with the information was dealt with, and said information was not protected correctly. There were issues that the HOD could find difficult to reveal. There were names that the Gobodo report mentioned.

The Chairperson said the Committee was empowered by the rules of Parliament to ask for any information and could summon anyone. The intention was not to just get information that was not helpful or assisting the objectives of the Committee. The official should just present the information as long as it did not jeopardise the pending processes. The ultimate success of the process was to correct the wrongs that happened.
He felt the private sector was just spiting government by building a private psychiatric hospital, just in front of the KMHH. This was just to emphasise the point that the public sector was useless. He was keen to know which state department allocated that site. This did not make sense at all and could not be justified. The Chairperson took exception that the people who struggled for a better life would make such a mockery of government and said it made everyone look like clowns.

Mr Nogwili said Gobodo was approached to give clarity on their report and they were not willing to do so. They confirmed their willingness to assist whoever with whatever documents required. The Special Investigations Unit (SIU) was approached and the entity confirmed on 18 October that it was taking the project. A team had already been assembled. Once the information had been collected, the SIU would present to the department and the Committee would be kept abreast of developments.

The Chairperson said it was crucial that the Committee was kept informed about the issues from the past. These could not be left unattended, as they would continue to impact on the future. Like a ghost, they needed to be exorcised.

Mr Ainslie commented that Members were happy that the matter had been referred to the SIU, even though it would take longer to finalise. He sought clarity on whether there was a separate investigation to the SIU process, especially since the Department had indicated last year it was investigating with a view to punish the wrongdoers.

Mr Nogwili replied this was a matter that was referred to Gobodo a year ago, but all processes would be taken by the SIU going forward.

Mr Ainslie commented he would not refer to Gobodo as that was confidential. He noted paragraph two of a response letter from Gobodo - given only to Members and collected afterwards –on why the firm would not do the investigation. He said he would not raise the matter at the meeting but would talk to the official privately.

Mr Nogwili said Gobodo had given an assurance they would avail all the documentation they have to the SIU.

The confidential response letter was collected from Members and returned to the HOD.

The Chairperson pleaded with the DG to be involved in resolving critical questions that had not been thoroughly addressed around the budget. This would have an impact on the completion date. The Committee would like that DoH and the province to engage on the matter. Timeframes and the budget should be looked at, and perhaps tied to the work being done by the SIU. This was the key element; the continued escalations could not be ignored. The province was well into the future and yet the past cost it billions of Rands. The DoH was a good model of good governance and functional systems, but that also it needed to ensure this was filtered down to provinces, especially the NC.

MEC Rooi commented that the Committee’s observations had been noted.

The meeting was adjourned.