The government could face claims amounting to tens of millions of rand as construction firms plan to seek compensation for costs incurred when submitting bids for the long-delayed public-private partnerships (PPPs) for the construction of four new prisons.

This follows Correctional Services Minister Nosiviwe Mapisa-Nqakula’s decision last week to cancel the planned prison projects and the government ordering a review of the PPP model.

Mike Upton, the chief executive of listed construction and engineering company Group Five, said on Friday the group felt “somewhat aggrieved” it had taken so long for the correctional services minister to make a formal announcement.

The cancellation had resulted in “tremendous waste”.

Upton said Group Five and other consortiums had spent tens of millions of rand of shareholders’ money in preparing bids and in responding to government’s call for the private sector to embrace PPPs.

He said: “We have to wonder if there is an element of some recourse due to us. The process is flawed in terms of how these programmes can easily be delayed or cancelled without there being any consequences.

“Maybe contractors need to be compensated for their costs if they put in a responsive tender. We must consider it a prerequisite in future.”

The procurement process for the planned new prisons in Paarl, East London, Nigel and Klerksdorp commenced in 2003. The final tender was issued in September 2008 with bids to be submitted by May 2009.

However, the bids were never opened because a review of the policy and process was instituted.

Upton said Group Five would have to consider whether it should respond to PPP tenders in the future at some government ministries, but did not think “PPPs are dead in South Africa”.

However, Upton believed PPPs had got to a watershed in terms of the rules of the game to ensure there was a proper process that was bankable.

Upton said the cancellation was destroying the opportunity to increase the rate at which infrastructure could be delivered.

The cancellation had created a major credibility problem for the government, particularly as it came after the cancellation of many other projects and PPPs.

Ed Jardim, a spokesman for Murray & Roberts, said the cancellation was disappointing considering the high cost in time and resources to all groups that had submitted bids and the fact that bidders were asked to extend the validity of their bids, which had created an expectation that the projects would proceed.

Neville Gurry, the executive director of the SA Federation of Civil Engineering Contractors (Safcec), said Safcec and Consulting Engineers SA (Cesa) would submit a formal proposal to the government to suggest a way forward for infrastructure delivery because the sector was stagnant.

“The guys are desperate for work and the country’s infrastructure is falling apart. The more we let it go, the more it will cost to fix,” he said.

Graham Pirie, the executive director of Cesa, said that the joint proposal was drawn up largely because budgets were not being spent.

In terms of the medium-term expenditure framework and planning commission diagnostic report, infrastructure was seen as the cornerstone of the New Growth Path and job creation. “Unless we have streamlined PPPs I don’t think that is going to happen.”

Pirie said it was necessary to review the PPP environment because they were the only way forward to enhance service delivery infrastructure, but the tool was not used optimally and it was “a long and torturous process”.