2005-10-31,+Gautrain+tender+was+a+charade,+Khuzwayo,+BRep

= 'Gautrain tender was a charade' =

Business Report, Johannesburg, October 30, 2005

By Wiseman Khuzwayo

Johannesburg - The winning tender for the construction and operation of the R20 billion Gautrain rapid transit railway was flawed and a charade, Judge Ivor Schwartz said in the Johannesburg high court on Friday.

His comments came after the court was told that the Bombela consortium, which was anointed as the project's preferred bidder in July, had not yet been incorporated as a legal entity and was still operating as a special purpose vehicle.

It also emerged that two of the empowerment companies that were partners in the successful tender were shelf companies with one director and no shareholders.

The judge also questioned how Loliwe Rail Contractors, Loliwe Rail Express and the Strategic Partners Group (SPG) came to be part of the winning consortium despite the fact that they clearly had no track record in building railways.

The Loliwe companies filed a high court application to have their status and that of SPG in Bombela clarified.

The legal tussle comes as the countdown towards the projected start of construction in January enters its final stage. The projected completion date is only four months before the start of the 2010 soccer World Cup in South Africa and fears have been raised that a protracted court battle could critically delay the project.

The issue before Judge Schwartz revolves around the best and final offer (Bafo) with which Bombela won the tender for the Gautrain. In the document the two Loliwe companies and SPG were included in the consortium as strategic empowerment partners.

Other members of Bombela are JSE-listed Murray & Roberts; French construction firm Bouygues Travaux Publics; RATP, a French rail and bus operator; and Bombardier Transportation (UK), the lead member of the consortium, which is a British subsidiary of Canadian-listed Bombardier. Excluding RATP, which will operate the system, each member of Bombela holds a 25 percent interest.

The matter dates back to April 2002 when the Gauteng department of finance and economic affairs called for pre-qualification tenders.

Mzolisi Diliza, the chief executive of the Chamber of Mines, approached Mbali Swana, a consultant who was the sole shareholder of shelf company Prop 5. Together they formed SPG, which eventually became a strategic partner in Bombela, with Diliza as chairman.

Bombela and another consortium, Gauliwe, were shortlisted for the project in 2003. Gauteng premier Mbhazima Shilowa named Bombela as the preferred bidder on July 2.

Gauliwe consists of giant Spanish construction company Dragados; South African construction company Grinaker LTA; Spanish rolling stock manufacturer CAF; Spanish rolling stock operator Canac; and empowerment partners Tirisane and Ufudo.

Guy Hoffman, senior counsel for the Loliwe companies, said SPG made Swana its agent at the meetings of Bombela's steering committee.

The department was not happy with SPG's lack of operational performance, according to an affidavit by Swana. As a result, the Loliwe companies were formed to provide the financial and performance component for Bombela. The two companies are led by Black Management Forum Investments.

Hoffman said it was subsequently agreed at a number of Bombela steering committee meetings to substitute the Loliwe companies for SPG, because the latter could not meet its financial and operational obligations, thereby burying the original consortium's bidding agreement. The interests of SPG would be aligned with those of the Loliwe companies.

It was also agreed that the Loliwe companies would be the Gautrain concession holders. Under the agreement, Loliwe Rail Contractors would take 70 percent of the 25 percent strategic stake in Bombela and Loliwe Rail Express the other 30 percent.

Hoffman argued that the Loliwe companies were included in the Bafo as empowerment partners. On January 25, a day before the Bafo submission deadline, the Bombela steering committee had adopted and signed a resolution endorsing this fact. Swana signed on behalf of the Loliwe companies while Diliza signed as a Loliwe shareholder.

This version was disputed by William Mokhari, counsel for SPG. He said no such restructuring as claimed by the Loliwe companies took place.

He said Bombela had informed the Gauteng government on several occasions that the bidder had not changed. SPG's name appeared consistently in the economic social development chapter of the Bafo document.

Mokhari said SPG intended to engage the Loliwe companies as service providers. This would be done between the announcement of the preferred bidder and the bid's financial closure in December, during which time service level agreements would be negotiated.

He argued that Swana did not have the mandate to enter into binding agreements on behalf of SPG. Only Diliza had this power, which he had obtained through the power of attorney from SPG's shareholders.

Swana had manipulated his position as the SPG's alternate member on Bombela's steering committee for his own financial gain, Mokhari said.

On January 20 Diliza had sent an e-mail to Ron Parker, the steering committee's co-ordinator, pointing out that he was the only one who had the authority to enter into binding agreements on behalf of SPG.

The judge said he hoped to be able to pass judgment on Wednesday.

Whatever the outcome, the matter is unlikely to go to rest on the day. The losing party is likely to take the matter further by seeking a declaration.

It is also likely that the losing bidder, Gauliwe, will be following the case with keen interest. It may want to challenge the Gauteng government on the basis that the winning tender had now changed.

Whichever way it goes, it will no doubt interfere with the construction schedule of the Gautrain.

From: http://www.busrep.co.za/index.php?fArticleId=2972551