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Monday Nov 18, 2013

Cape Town ready for stadium over-charging battle

The City of Cape Town is ready to 'take on' the contractors who made millions out of the construction of the Cape Town Stadium by rigging tenders and colluding on bids, says deputy city manager Mike Marsden.

The final cost for the construction of the stadium was R3.64 billion and the architects, engineers and quantity surveyors claimed R638 million in professional fees.

It will also work with the Department of Trade and Industry and the Construction Industry Development Board (CIDB) to develop better controls for the construction industry.

'We need to have a clean construction industry for the National Development Plan,' he said. The plan is the government's long-term vision to reduce poverty by 2030.

Marsden said the collusion by construction companies was widespread, affecting all the host cities and government departments, including the Department of Water Affairs, parastatals such as South African National Roads Agency Limited, and UCT.

The Competitions Commission fined 15 companies for tender rigging and price collusion on major projects, including the 2010 World Cup stadiums earlier this year.

These companies included Murray & Robertsand WBHO, which had won the Cape Town Stadium contract in a joint venture.

Marsden said that despite appeals from the CIDB and the national government for the city's input on ways to improve regulation of the construction industry, it had not been approached by UCT for help with its claim for the R87 million Gra├ža Machel women's residence contract.

Cape Town's 'breakthrough' settlement with the 11 professionals who worked on the stadium for the World Cup did more than just save the city R52m in professional fees, he said. 'They will also support the city in its collusion case because the escalation in the stadium costs impacted on their reputations too.'
The city had put together a highly competent legal team, including experts who had experience in international collusion cases, to work on its claim against the contractors. This claim would be submitted early next year, said Marsden.

The professional team, which included architects, engineers and quantity surveyors, initially claimed R638m in professional fees for their respective individual contracts with the city.

He said an independent quantity surveyor had reviewed all the accounts for the stadium costs and had found nothing out of order.

But after successful negotiations, it was agreed to reduce the professional fee to R585m, including disbursements for the stadium peripheral works.

Marsden, pictured, said a quantity surveyor also went through every aspect of the construction costs and so far 'everything is in order'. The final cost for the construction of the stadium was R3.64 billion, which meant that the final agreed upon fee was 16 percent of that, significantly lower than what was originally negotiated between the parties. 'We are satisfied that the construction costs have been accurately represented.'

The details of the settlements may not be released because of a confidentiality clause.

Marsden said the city was pleased that the risk of further arbitration had been removed and that the R250m that had been put aside as a contingency if negotiations did not succeed could be taken off the city's financial statements.

Cape Argus

    
 

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