Legal Considerations Before Cape Town Water Can Flow

Ricardo Pillay | Dentons

Facing its longest drought in recent history, Cape Town is preparing itself for the inevitability of “Day Zero” – the moment it runs out of water completely. The City has developed a water augmentation plan, which includes the construction of desalination plants at several locations, and has issued tenders for the projects. However, critics – especially water treatment companies eager to submit their proposals – have accused the municipality of taking too long to start the process.

Legal requirements: protection, not delays
According to Ricardo Pillay, a partner at law firm Dentons, the perceived lag stems not from negligence on the part of the City. Rather, it’s constrained by its obligation to follow strict legal procurement procedures that align with the principles of the Constitution and relevant procurement legislation. “Failure to comply with tendering and public procurement laws could result in significant delays that would, in fact, impact on the lawfulness of the award of a tender with the consequent delays in the delivery of water to the public.”

Pillay warned that the procurement legislation ensures “a fair, equitable, transparent, competitive and cost-effective procurement process that supports competition, BBBEE requirements and promotes economic growth by employing and empowering local labour and sourcing production content locally. A departure from these core principles threatens the sanctity of the award of a lawful tender. This is particularly crucial in the construction sector where the government has a responsibility to ensure that all contracting parties have equal access to competition in the sector”.

“Emergency conditions may present itself as excuse to bypass correct procedure, but doing so presents immense risk for the state owned entity, the project and the public at large,” says Pillay. For example, a disgruntled vendor who feels a contract was unlawfully awarded to another party could contest it in court, effectively bringing the project to a halt.

Although time consuming, adherence to the law throughout the project lifecycle, in particular during the procurement stage, ensures the prompt delivery of promised benefits and its sustainability.

Meeting the legal requirements for all phases of public procurement ensures that critical services are implemented as soon as possible while protecting the constitutional rights of every stakeholder. “Water delivered outside lawful processes could run dry very quickly,” warns Pillay. “It may be impractical under urgent or emergency circumstances to go out to tender. However, using this exception, provided for under the procurement legislation, must be exercised under proper legal guidance. To ensure that public money is spent in an effective and efficient manner, the procurement process must be respected and adhered to, notwithstanding the delays caused by a commitment to compliance.”

In the initial phases, it’s critical to pursue the correct tender process, develop watertight RFP’s, check proposals thoroughly against legislation and perform any other due diligence. Only then should a contract be created, also carefully developed by an experienced legal team to address all relevant laws.

Independent audits can be carried out to ensure adherence to requirements. Are workers representative of the submitted BEE certificate? Is work being performed to plan? Is this happening throughout the supply chain? Audits reveal the facts and provide learnings that can be applied to future undertakings.

As the project progresses, changes to contracts may become necessary. This and the initial development of contracts are administered through the process of contract management, another area requiring legal oversight. Arbitration and dispute resolution are also important legal services both during and after a project. Resolving conflict professionally and amicably as it occurs avoids stoppages. Failing in either contract management or dispute resolution usually results in project delays or budget overruns.

Once delivered, a project needs to be operated and maintained. Funding models for operations and maintenance agreements must be appropriate to the project type. Once again, the legal aspects of this phase cannot be overlooked. Proper maintenance and operation models should be agreed on in the tender stage.

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