City in legal bid to scrap R2.7bn broadband deal
DA contends ANC-led administration entered into contract illegally on the eve of last year’s municipal election
THE DA-led administration in the capital has launched a legal bid to nullify a R2.7 billion broadband contract sealed by the previous ANC administration on the eve of last year’s municipal polls.
The City entered into an 18-year contract with Thobela Telecoms after a majority of councillors voted to approve the deal last April.
MMC for corporate and shared services, Cilliers Brink, said the DA – in the opposition benches at the time – questioned the timing of such a massive undertaking so soon before the elections.
Brink was speaking to journalists yesterday at Tshwane House about a looming legal battle between the City and the contractors.
Both parties had already exchanged legal documents and were awaiting a Gauteng High Court, Pretoria, date, he said.
The City would contest the contract on the grounds that the ANC administration entered into it unlawfully.
Brink said: “In November last year, the auditor-general found the deal to be irregular and determined its value at R2.736 billion.
“The finding prompted mayor (Solly) Msimanga’s administration to investigate the procurement of the deal.”
The broadband contract and its procurement were riddled with irregularities, he said, and non-compliance by the then ANC government headed by Kgosientso Ramokgopa.
Among the irregularities Brink singled out were changes to specifications after the bids had closed, and a violation of the Preferential Procurement Act and its regulations.
Brink said other irregularities were that two vendors from the same holding company submitted bids and were not eliminated.
Also, crucial adverse information about the proposed deal was withheld from councillors when they voted to approve it.
“The contract failed to comply with Section 112 of the Municipal Finance Management Act relating to cost effectiveness,” he said.
The deal was the third in a list of major, multi-year contracts concluded under the previous administration. These the Msimanga administration want to set aside owing to their illegal standing.
“The broadband deal binds the City into an 18-year relationship with a service provider to build a broadband network, which would later become a commercial outfit. The tender price (excluding VAT) was R2.736 billion,” Brink said.
An assessment of the deal’s terms and conditions confirmed that it exposed the City to severe, one-sided liability and did not offer value for ratepayers’ money.
“One of the many questions now to be decided is, did the City, councillors and the public know what they were getting into when the deal was approved?” he said.
According to Brink, no feasibility studies were undertaken to demonstrate the full costs and benefits of the contract. “Information and communications technology infrastructure should be directed at technologies that are future proof and scalable to avoid future costs considering the period of the contract.”
The project was deemed to fall outside the scope of the powers and functions assigned to local government in terms of the constitution. Brink said.
“The auditor-general’s finding confirmed some of our suspicions.
“A new cohort of senior managers embarked on a cumbersome investigation into how the broadband deal was concluded.
“The auditor-general deemed the tender irregular as a result of non-compliance to requirements. Accordingly, all future related expenditure must be disclosed in the financial statements as irregular.”