Minister Modise apologises for R156 million irregular expenditure at 1 Military Hospital

Defence Minister Thandi Modise was forced to apologise after an investigation found that the bungled repair and maintenance project at 1 Military Hospital in Pretoria was marred by irregular expenditure of more than R156 million.

Modise tendered her apology during a virtual meeting alongside the Parliamentary Joint Standing Committee on Defence prior to the delivery last week of the report by Abacus Financial Crime Advisory, a company that investigated the renovations at 1 Military Hospital.

“We are not happy with what we found. This matter should not have dragged on for this many years. For that, we want to apologise,” Modise added.

Herman de Beer, the managing partner of Abacus Financial Crime Advisory, said his company had conducted a forensic audit into the repair and maintenance programme at 1 Military Hospital, and the subsequent refurbishment project.

De Beer said the project was launched in 1999 by the Department of Public Works, but construction only began work in 2001, and the repair and maintenance project (Ramp) work in 2006.

At the time the project was estimated to cost roughly R232 million. Between 2010 and 2011, the Ramp expansion was estimated to cost R156 million.

His company was brought in to investigate the project after the sum total of R431 million had been spent by March 2011, while certain floors remained unfinished and locked.

The initial phase from 2012 to 2014, led by Public Works, was taken over by the Department of Defence, up until now.

De Beer said in December 2000, SSI Engineers and Environmental Consultants was appointed by Public Works as the principal engineers for Ramp.

However, in January 2001, Multi-Pro took over as the Ramp project manager.

“A status quo assessment by SSI on 1 Military Hospital was conducted between January and March of that year. “In April 2001, a status quo report, including cost estimates issued by SSI, was produced. The project then went quiet for about four years.”

In October 2005, De Beer said, the cost estimates for electrical and mechanical services were redone by SSI, but a full status quo report was not performed again. Following that, a tender for Ramp was issued by Public Works in July 2006 for the project to run up until 2009.

Of their findings, De Beer said investigators found that the department had failed in its oversight responsibility to ensure a complete status quo report before the appointment of contractors.

He said there had been a failure by Public Works and Defence to appropriately plan the execution of the repair project for 1 Military Hospital.

Public Works had also failed to appoint a single principal agent to manage the project, and there was an oversight failure to effectively co-ordinate on-site execution.

Investigators found the project’s most significant challenges occurred from 2010 to 2011. Superway and Fastmove contractors received extensions of 12 months even though the department cancelled all Ramp projects in December 2009, citing them as “inappropriate”.

A company called Babereki then replaced Multi-Pro. From December 2009 to 2010, De Beer said, the project turned into a disaster.

This was after redesign and refurbishment elements were introduced for the first and second-floor kitchen area.

On March 31, 2011, all the contractors and consultants left, and the doors on the first floor were locked.

When the Abacus team arrived on site in 2019, De Beer said, they found the pharmacy was incomplete, with the doors locked.

He said they found the first floor was a highly technical and complex area of the hospital housing X-rays, scanning devices, and laboratories.

The decision taken to redesign and refurbish that particular floor resulted in design flaws.

These included passages leading to the theatre complex being too narrow to allow hospital beds to pass.

The equipment bought could also not fit through the doors, and was never installed, he said.

Approximately R20 million worth of medical equipment, including scan, X-ray, and mammogram machines, were purchased.

However, that equipment later became obsolete.

As a result of this, the team said, the procurement of the medical equipment was regarded as fruitless and wasteful expenditure.

“The conclusion was that the relevant defence officials be held accountable for the fruitless and wasteful expenditure.

“It was further recommended that all expenditure of R156 million relating to the Ramp expansion be classified as fruitless and wasteful expenditure.

“The cost estimate for the refurbishment required to restore 1 Military Hospital to what people thought it would be, was R1.4 billion.

“Due to the lack of facilities on the first floor, certain outsourced work needed to take place, with patients moved to private facilities.

“The cost incurred for that was estimated to be more than R1 billion,” De Beer concluded.

Co-Chairperson of the committee Cyril Xaba, in welcoming the report, raised the alarm about various shortcomings.

These included shoddy project management, lack of oversight, unreasonable cost escalation, arbitrary changes in project scope, lack of co-ordination and management of consultants and contractors.

Xaba added that they were also concerned about deviations from normal procurement processes, overpayment of contractors, the cost of outsourcing medical services, and possible corrupt relationships between officials of the Department of Defence and the contractors.

Xaba said the committee found it unacceptable that medical equipment to the value of R20 million was purchased without the involvement of or guidance from principal agents.

This resulted in newly-purchased medical equipment not fitting through the doors.

Furthermore, he said they found it even more discomforting that the redesign of the hospital’s first floor was conducted and managed by inexperienced and unqualified people.

This led to a situation in which a passage leading to the theatre complex was too narrow to allow hospital beds to fit through it.

“There must be a civil claim lodged against those responsible to recover the ill-gotten gains that arise directly from illegal acts perpetrated in the name of the Ramp Project.

“Also, the office of the Auditor-General must initiate actions, as per the Public Audit Amendment Act, against corruption and recover lost funds,” added Mamagase Nchabeleng, the co-chairperson of the committee.