Controversial tender follows former KwaZulu-Natal Health MEC Sibongiseni Dlomo, who is now Parliament’s health committee, as aggrieved company goes to court
A lucrative medical waste contract controlled by the KwaZulu-Natal health department is expected to come under scrutiny in the Pietermaritzburg High Court after it was stripped from one provider and handed to another under circumstances the aggrieved company claims were “illegal” and “irrational”.
Durban-based Compass Medical Waste Services hopes to have the multimillion-rand contract it lost in May last year – subsequently given to Germiston-based Buhle Waste by provincial health – reviewed and set aside, claiming the alleged underhand method used had the deliberate, illegal and sole intention of excluding Compass from continuing with the contract.
The department, however, claims it had no choice but to boot the company out as it had to “bring new role players into the province and halt the monopoly Compass has been exploiting”.
The dispute is one of many between the parties in recent years.
In a separate civil case related to the same disputed contract, Compass lodged a claim in May last year, in which it is demanding back pay of more than R207 million, claiming it was underpaid for nearly a decade.
The contract is for the handling and disposal of all forms of medical waste in the province from more than 300 sites, including clinics, hospitals, old-age homes, emergency services and ports of entry.
How it plays out could affect the legacy of former KwaZulu-Natal health MEC Sibongiseni Dhlomo, whose tenure was rocked by various scandals, most notably the department’s handling of the province’s oncology services.
Dhlomo left the department after the May national and provincial elections last year.
He is now the chairperson of Parliament’s health committee, which is handling the National Health Insurance Bill.
More recently, a scathing Public Protector’s report called for the department’s former head and chief financial officer – both of whom served under Dhlomo – to be sanctioned for their role in an allegedly fraudulent R60 million mobile hospital tender.
The DA laid charges in January against Dhlomo based on the Public Protector’s report.
Compass managing director Ian du Randt claimed in court papers that the department “deliberately avoided a competitive procurement process” when it awarded the contract to Buhle in March last year.
Du Randt said Compass was informed on March 31 last year that its contract would be terminated at the end of April.
He said the manner in which Buhle was appointed was done in “a deliberate effort to exclude Compass” and that the department went against its own supply chain management policy, which would require no less than three quotes on a contract the size and scale as this one.
KwaZulu-Natal’s health department used National Treasury Regulation 16A6.6 to accomplish the shuffle.
The regulation allows a department’s accounting officer to “participate in any contract arranged by means of a competitive bidding process by any other organ of state, subject to the written approval of such organ of state and the relevant contractors”.
The department adopted Mpumalanga’s health department’s contract and its provider, Buhle.
The KwaZulu-Natal health department maintains it used the Treasury regulation because Compass had operated the tender for 16 years on a month-to-month basis.
But Compass has accused the department of hypocrisy and said there was evidence of foul play in the process.
Du Randt said the three-year contract Buhle had with the Mpumalanga health authority expired in November 2018 and it, too, was running on a month-to-month basis.
He said that, according to his calculations, based on Buhle’s 2018 pricing used in Mpumalanga, Buhle was charging the KwaZulu-Natal health department R10.7 million a month to collect the 452 tons of waste generated in the province’s public health system. Du Randt said Compass’ rate was R5.04 million.
Compass was originally awarded the healthcare risk waste contract in 1998. It expired in November 2003 and has been run on a month-to-month basis ever since.
The reasons offered by both the department and Compass for the multiple extensions ranged from a lack of expertise in the department to unexplained cancellations of tender processes and disputes between the parties.
In April last year, Compass unsuccessfully attempted to interdict the department from terminating its contract in favour of Buhle.
Judge Jerome Mnguni found that because Compass had held the contract for 16 years beyond its contractual period, he was “satisfied that the extension of the contract on a month-to-month basis for such a prolonged period was irregular and unlawful” and that any continuation of that arrangement would offend “section 217 of the Constitution and should be frowned upon”.
However, he said Compass was within its rights to pursue civil litigation.
Du Randt, on the strength of Mnguni’s judgment, said in court documents: “It is irrational to view the contract with Compass as irregular on the one hand, but to consider it appropriate to participate in the expired Mpumalanga contract with Buhle. Participating in another contract which has expired cannot remedy any irregularity, assuming that there was one.”
He said a media briefing released by the KwaZulu-Natal health department in May last year about awarding the contract to Buhle – and in which it called Compass a “white-owned monopolistic waste management company” and Buhle a “100% black-owned waste management consortium” – was inaccurate.
Compass is a Level 2 B-BBEE service provider, said Du Randt, as opposed to Buhle’s Level 3.
Any claim of monopoly was untrue, he said, as Buhle managed provincial health contracts in Mpumalanga, Limpopo, Free State and Gauteng.
“The procurement of healthcare risk waste services from Buhle by means of Treasury Regulation 16A6.6 was unlawful. This renders the contract between the department and Buhle unlawful. The department is required to follow a lawful procurement process and there can be no lawful reason for it to delay doing so,” he said.
Willie Mkasi, chief director of legal services for KwaZulu-Natal’s health department, said a normal tender process was not followed as it would have taken an “inordinate amount of time”.
He said in court documents the continued use of Compass was “irregular and wasteful expenditure” and that the “most expedient way of securing a contract” was via regulation 16A6.6.
The adoption of the Mpumalanga tender regularised the contract, which had been in limbo for 16 years.
“It is intriguing that Compass makes the averment that Buhle services is being rendered on a month-to-month basis in Mpumalanga when it also enjoyed such indulgences to its advantage previously,” said Mkasi.
It has since come to light the Mpumalanga Health Department has made attempts to regularise Buhle’s month-to-month contract.
However, the department’s procurement unit has a chequered past. In 2017 the KwaZulu-Natal Treasury took over the responsibilities of the supply-chain management unit.
In July last year various employees were “redeployed” after tender documents were leaked on social media, destroying the integrity of the bidding process.
Last month the Zondo state capture commission heard that the department’s tender process was rigged as far back as 2006.
Phetole Sekete, Buhle Waste’s owner, said in his affidavit that Compass had employed a strategy to roll over the contract it was awarded in 1998, blocking new entrants, as it was “determined to exploit and capitalise on the extraordinary commercial benefits” the contract offered.
Although not directly answering the accusation about the alleged inflation of prices, he said Buhle Waste was “providing greater value to the department” using “state-of-the-art” technology.
In December last year, the KwaZulu-Natal health department advertised the tender for the medical waste contract.
The closing date for all bids was January.