Aeromedical services: fly by night tenders in the Spotlight
A Spotlight special investigation by Marcus Low and Ntsiki Mpulo sheds new light on government’s use of aeromedical services, and fly by night tenders. Spotlight is a publication of public interest law centre, Section 27.
Aircraft have been used effectively to provide emergency medical services and to transport medical specialists and other supports services to deep rural and underserved areas in South Africa since 1960. However, an investigation has revealed that the provision of such aeromedical services has become mired in questionable tenders. Now, a relatively unknown Free State emergency medical services company, new to aeromedical services, is rapidly winning government contracts in the so-called Premier League provinces and two others.
The tender for aeromedical services in South Africa is called RT-79. It is run by the National Treasury – and not the Department of Health, although the latter does play an important role. RT-79 has been advertised and awarded three times – in 2009, 2012 and 2015.
However, the 2015 RT-79 tender was cancelled at short notice in mid-2016 without a new tender to replace it. This created a vacuum in a number of provinces that was soon filled by a newcomer to aeromedical services – a company called Buthelezi EMS, owned by Thapelo Buthelezi.
Spotlight previously reported on Buthelezi EMS allegedly providing sub-standard ground ambulance services to the Free State Department of Health. The Democratic Alliance has also questioned the Free State government’s decision to outsource ambulance services to a private company providing poor service. Attempts to get comment from Buthelezi has been unsuccessful. Their website is still under construction, their Facebook page not regularly updated and some numbers listed on their Facebook page are were not working at the time of writing this article. An e-mail with questions sent to an address an unidentified woman who answered one of the phone lines supplied, went unanswered.
Buthelezi EMS enters the scene
For years, Buthelezi EMS provided only ground ambulance services in the Free State. However, in 2015 they started providing aeromedical services in the Free State. When the 2015 national RT-79 tender was cancelled, Buthelezi EMS entered into a joint venture with a company called Halo Aviation. Halo previously worked with ER24 and has a proven track record providing aeromedical services. Together, Buthelezi and Halo soon were awarded contracts in Mpumalanga and Limpopo in the following months. They also won a tender in the North West Province. Farhaad Haffejee of a competitor, the non-profit Red Cross Air Mercy Service (AMS) says they were not aware of the North West tender until after it was awarded. Buthelezi EMS also provide services in Gauteng.
Processes are being challenged
However, the process by which Buthelezi EMS has come to be awarded these contracts is currently being challenged in the North Gauteng High Court by AMS. While the cancelation of the RT79-2015 contract meant new business for Buthelezi and Halo, it also meant that AMS were suddenly out of business in Limpopo and Mpumalanga in spite of providing an undisputed quality of service.
According to Haffejee AMS had to retrench staff in both Limpopo and Mpumalanga. “In addition,” he says, “the AMS has taken significant losses because aircraft, hangars, offices, etc that were acquired for the three-year duration of RT79-2015 are now supernumerary in the AMS system. As such, the AMS has had to put aircraft on the market for sale and have had to deal with the closure of two bases in Mpumalanga and Limpopo.”
Air Mercy Service has had to put aircraft on the market for sale and have had to deal with the closure of two bases in Mpumalanga and Limpopo.
AMS has argued in ongoing court proceedings that proper procedures were not followed when new service providers were appointed in the wake of the cancelation of RT-79. They claim that they were not invited to or asked to bid for the new contracts in Mpumalanga and Limpopo.
Provinces advised against doing business with AMS
“Perhaps what is worrying about all of this is that when the tender was cancelled, National Treasury advised the Provinces not to do business with the AMS,” says Haffejee. “What happened was that both the Mpumalanga and Limpopo provinces were advised to piggyback on a tender (as allowed for by the Public Finance Management Act) of the Free State Department of Health which had been awarded to Buthelezi EMS and Halo. Even though the AMS was already operating in the provinces, providing a service without any operational issues and at a lower cost, the AMS was not considered to continue, even on a month to month basis until such time that all the legal issues had been settled.”
“Further to this, the Mpumalanga Provincial Department of Health went against the written advice of the Mpumalanga Provincial Treasury which instructed them that they were only able to grant Buthelezi a contract for six months as per the PFMA and instead gave Buthelezi a tender for a period of three years,” says Haffejee. “What is even more surprising is that the rates charged by Buthelezi EMS for this new contract is significantly more than what the AMS was charging under the RT79-2015 contract.”
What is even more surprising is that the rates charged by Buthelezi EMS for this new contract is significantly more than what the AMS was charging under the RT79-2015 contract.
Spotlight asked National Treasury about the alleged failure to include AMS in bidding processes in these provinces. Treasury did not provide a direct answer to this question. Treasury also claimed that there was nothing wrong with the Mpumalanga tender as alleged. Treasury did however explain that they provided interim guidance to provinces stating as follows:
“The departments are hereby authorised to acquire the above services in accordance with the following prescripts:
Paragraph 188.8.131.52 of the Guide to Accounting Officer which stipulates that “In urgent and emergency cases, an institution may dispense with the invitation of bids and may obtain the required goods, works or services by means of quotations by preferably making use of the database of prospective suppliers, or otherwise in any manner to the best interest of the State”
Paragraph 16.A6.4 of the Treasury Regulation stipulates that “ if in a specific case it is impractical to invite competitive bids, the accounting officer or accounting authority may procure the required goods or services by other means, provided that the reasons for deviating from inviting competitive bids must be recorded and approved by the accounting officer or accounting authority.”
The reasons for the urgency/emergency and for dispensing of competitive bids, should be clearly recorded and approved by the accounting officer/authority or his/her delegate.”
More questions asked
Commenting on this issue, Ryan Horsman of Halo told Spotlight that “all participating provinces were advised by National Treasury to deal directly with approved service providers to ensure continuation of the provision of an aero medical service within each respective province.”
According to Horsman the majority of the provinces preferred this approach “as the general consensus was that the National Tender did not address the unique individual challenges each Province experienced”.
We also put the following question to Treasury: “When the 2015 RT-79 tender was cancelled in mid- 2016, why were well-functioning services that were already in place (such as those provided by AMS) not allowed to continue until such time as a new tender could be concluded?”
The rather puzzling response from treasury was simply that “The tender award prejudiced suppliers that should have been in contention for award of business on the contract.” It appears services to patients were impacted by the abrupt cancelation of the tender. According to Haffejee Provinces went without an aeromedical service for some time before Buthelezi EMS and Halo was able to set up operations in these provinces.
Follow up questions we sent to Treasury were not answered. Attempts to get comment from the Free State, Limpopo, Mpumalanga and national departments of health were also unsuccessful.
Why was the 2015 RT-79 tender cancelled in the first place?
Leading up to the award of the 2015 RT-79 tender, AMS wrote to Treasury about various concerns regarding the tender specifications. These initial concerns appear to have been ignored by Treasury which went ahead with the award of the tender to, amongst others, AMS and a newly formed company called FlyFOFA. AMS doubted FlyFOFA’s ability to deliver and raised its concerns with National treasury.
The Kwazulu-Natal Department of Health also doubted FlyFOFA’s ability to deliver and kept AMS under contract – even though FlyFOFA won the tender for fixed-wing services in the province.
The Kwazulu-Natal Department of Health also doubted FlyFOFA’s ability to deliver and kept AMS under contract – even though FlyFOFA won the tender for fixed-wing services in the province. (We previously reported on the Kwazulu-Natal situation here.) There were additional concerns about the management of FlyFOFA (discussed in the next section), but they appear not to have impacted the cancelation of the tender.
”When RT79-2015 was awarded to Air Mercy Service and FlyFOFA, ER24 as the lead partner approached the Public Protectors office to investigate the award of the tender to these parties as criteria utilised for the award to AMS and FlyFOFA did not match tender requirements,” says Ryan Horsman of Halo. “HALO supported the approach to the Public Protectors Office.”
In line with this complaint, the eventual cancelation of the 2015 RT-79 tender was justified by Treasury by the fact that a so-called “utilization factor” had not been disclosed in the tender documents. (A utilization factor is an estimate of how much a service will be utilised and accordingly how much it will cost the state at a quoted rate.) Whether it is in fact necessary to disclose utilization factors in tender documents is one of the issues that the court has been asked to consider. AMS argues that non-disclosure of this number in tender documents does not make the tender unlawful and that National Treasury did not follow due process in the cancellation of the tender.
Cost implications and the utilization factor
The court battle also involves a dispute regarding the cost implications of the utilization factor that was used. Treasury argues that the number used prejudices the State to about R30million. AMS disputes this and includes in their court papers compelling comparisons indicating that AMS provides the full service required at roughly the same or lower cost than competitors at a higher technical level. In fact, it seems likely from the AMS estimates that the state is getting less value for money by using Buthelezi EMS.
When asked by Spotlight, Treasury provided only the following explanation for the cancelation of the 2015 RT-79 tender: “The contract was not in line with the Special Conditions of Contract of the Tender. Evaluation criteria was used that were never part of the evaluation criteria as specified in the tender document. Hence the contract was awarded on an unlawful basis.”
Haffejee is suspicious of the motives behind the cancelation of the tender. “Why was this tender only cancelled nine months after the award?” he asks. “Why did National Treasury never respond to the objections lodged by the AMS immediately after the award of the Fixed Wing portion of the RT79-2015 tender to a non-qualifying operator (FlyFOFA) without any due diligence having been done?”
A history of questionable tenders
The RT-79 tender was introduced in 2009 at the behest of FIFA, who wanted an aeromedical service meeting certain specifications to be in place in time for the 2010 Soccer World Cup hosted by South Africa. Rhett Davis, Deputy Director for Disaster Management at National Health, was involved with the 2009 tender from the Department of Health’s side. In April 2010, Davis left his job at the department and was appointed Procurement Manager at ER24, a private medical service owned by Mediclinic International (or Mediclinic Southern Africa). Shortly after Davis left the Department of Health, ER24 put in a bid together with a company called Halo and in March 2012 they won the rotor wing (helicopter) tender for the Free State, NorthWest and Mpumalanga. While the movement of individuals from government to companies that subsequently win government contracts is of concern, we stress that we have no evidence of wrong-doing by Mr Davis, (nor by Mr Theu or Mr Fisha mentioned below).
The RT-79 tender was introduced in 2009 at the behest of FIFA, who wanted an aeromedical service meeting certain specifications to be in place in time for the 2010 Soccer World Cup hosted by South Africa.
The Northern Cape tender in 2012 was awarded to a company called Flying Ambulance Pty. The Director of Flying Ambulance Pty was at the time Krause Steyl. Steyl is also director of a company called Aerocare that also provides aeromedical services. According to reports Steyl was involved with Executive Outcomes – a mercenary group that planned a coup in Equatorial Guinea in 2004. The coup failed. Steyl turned state witness and testified against the other conspirators. When asked about the award to Steyl and Flying Ambulance Pty, Treasury responded that “National Treasury was not and is not aware of such.”
Prior to Flying Ambulance Pty winning the tender the province had an excellent outreach service which had been developed by the AMS together with the Northern Cape Department of Health over a period of 16 years (started in 1996) which ensured that patients in small outposts received regular visits from top specialists. Not only did it serve the patients it also relieved the pressure on the referral hospitals in the urban centres especially Kimberley. This service saw the eradication of dental and eyecare backlogs in the Northern Cape, infact the NC Province received recognition at the time from National Health for the Province that had made the most significant progress in eradicating backlogs of cataract blindness.
Dismissals and irregularities
The 2015 RT-79 tender wasn’t any better. As in 2012, people previously involved with the award of tenders won parts of the new tender. A newly formed company called FlyFOFA won the fixed-wing air ambulance and outreach tenders for the Northern Cape and Kwazulu-Natal. The Executive Managing Director at FlyFOFA is Charles Theu – previously the Director of Emergency Medical Services at the National Department of Health where he was the department’s person responsible for RT-79.
As in 2012, people previously involved with the award of tenders won parts of the new tender.
In addition, the Chief Operating Officer at FlyFOFA, Thabo Fisha, had in September 2015 been dismissed from a senior position at the South African Civil Aviation Authority (CAA). The CAA told journalist Erika Gibson that the dismissal was not linked to FlyFOFA. The CAA did however state on the record that there were irregularities with the issuance of an air operating certificate to FlyFOFA in January 2015. There are also claims from industry sources that FlyFOFA was issued with an operating license in record time. The CAA told Spotlight that FlyFOFA does not presently have a valid license to provide air ambulance services.
FlyFOFA did not respond to questions sent by Spotlight.
The 2015 tender was unusual for other reasons as well. Originally due to come into effect on 1 April 2015, the award date was delayed multiple times, and with no compelling reason given. The award was eventually made in September. Then, having started late, the tender was abruptly and controversially (as described above) cancelled mere months later in July 2016.
Correction and addition:
This article was amended on 3 March 2017. According to Mr Rhett Davis his job title at the National Department of Health was “Deputy Director — Disaster Management” and not “Deputy Director of Emergency Medical Services” as originally stated. Additionally, Mr Davis left the Department of Health on 12 April 2010 and not 2011 as originally stated. We also initially wrote that Davis was responsible for “driving” the Department of Health’s involvement with the 2009 RT-79 tender – we have amended this to simply indicate that he was involved with the tender. We also added Mr Davis’s job title at ER24 and a comment stating that we have no evidence of wrong-doing by Mr Davis. Spotlight did not obtain comment from Mr Davis prior to the initial publication of this article. This was a serious journalistic error. Spotlight apologises to Mr Davis for this error. Spotlight takes sole responsibility for this error.