Hosting Matters Summary: Infrastructure Development and Governance Framework Update
Providing access to new assets and infrastructure, such as the Engineering Operations Centre and Science Operations Centre, is crucial for supporting the delivery and operation of the SKA MID telescope. The governance framework outlines key documents and obligations, including agreements with SKAO and South Africa. Access to land for construction remains a priority, with ongoing efforts to secure necessary servitude agreements. Funding background for hosting buildings and infrastructure reflects the initial requirements and budget allocations for the project.
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Hosting Matters February 2024
Summary of Hosting Matters Provide Access Land New assets and infrastructure: Hosting Buildings Engineering Operations Centre (EOC) SKA Processing Centre (SPC) Science Operations Centre (SOC) Existing assets and infrastructure Construction Support delivery of SKA MID via construction contracts Operations Enable operation of the SKA MID telescope through Agreement on Bilateral Collaboration Other Matters Dark Fibre
Governance Framework of Documents that underpin obligations Hosting Agreement SKAO Obligations South Africa Obligations Co-Location Agreement Access Existing Assets & Infrastructure Access New Assets & Infrastructure Construct Servitude Agreements Co-Location with iThemba LABS Construction Contracts Lease: New Assets & Infrastructure Operate Transfer of Assets & Infrastructure Agreement on Bilateral Collaboration Lease: Existing Assets & Infrastructure Service Level Agreements Permission to Access Site Permissions & Authorisations Acceptance Agreement Joint Repository
Access: Land 23 4 1 5 Background RSA to make available Site at zero cost for construction and operation of SKA 20 6 19 18 17 Status 16 One servitude outstanding, registered to a Pty Ltd. Only director was sequestrated in personal capacity Engagements with liquidators has not yielded positive results. SARAO Legal advisors to engage with land owner with intent to approach court to make a ruling on potential servitude agreement Registration 48 servitude agreements concluded 38 agreements registered with Deeds Office 15 14 13 12
Hosting Buildings: Funding Background Initial requirements (2019/20) Based on best available information SKAO requirements as mature as possible at the time, based on initial planning Informed budget requirement Project Capital Costs as per Primary Submission and Bill of Quantities (excl. VAT) Description Percentage Building 1 to be used for the SARAO and SKA SOC Building 2 to be used for the ZA- SRC/SKA SPC and CHPC Building 3 to be used for the SKA EOC National Park Fence 4.76% Total construction cost for hosting commitments Amount R 450,294,687 35.74% 48.24% R 607,828,453 Infrastructure South Africa (2021/22) Review and approval of continued SIP status Acceptance into ISA project pipeline and subsequent pitches 11.26% R 141,923,220 Budget Facility for Infrastructure- BFI (2022/23) Full submission in May 2022 Final Award in March 2023 R 60 000 000.00 R 1,260,046,360 100.00%
EOC Status Update Initial budget estimate (2019): R140M (excl. VAT) Informed by best available information from SKAO Budget adjustment based on detailed requirements (2022): R205M (excl. VAT) Appointment of multi-disciplinary team to finalise detailed requirements More mature requirements from SKAO informed by updated construction and operations planning Updated requirements from 2019 Inflation based adjustment (2024): R226M (excl. VAT) Tender published (twice) during course of 2023 Market response (2024): R262M (excl. VAT) Karoo premium and excludes escalation Third call will likely result in increased costs Request for Approval: R363M (incl. VAT) 20% contingency
Risk and Mitigation: Delivery of Hosting Buildings Additional funding requirement for EOC will impact future delivery of SPC and SOC if funded from fixed BFI allocation only Appointment of a multi-disciplinary team for design of SPC and SOC currently underway updated budget requirements available over next 12 months SPC is a priority, and will introduce a technical risk to SKA if unavailable SOC will introduce an operational risk to SKA if unavailable Options to mitigate impact on SPC and SOC Funding through additional BFI calls linked to SRC Funding through DSI Re-scoping of SOC requirement, although this may deviate from BFI commitment
EOC Recommendation Noting the deviation between the budget submission to the BFI of R141,923,220 (excl. VAT); and the funding allocation from the BFI of R141,923,220; and the current funding requirement to deliver the EOC of R363,162,960 and noting the risk to delivery of the SPC and SOC, and mitigation options It is recommended that the DSI formally communicate to the NRF indicating the following: The DSI notes the funding required for delivery of the EOC, and deviation from the funding made available through the BFI The DSI notes the risk posed on delivery of the SPC and SOC, and possible mitigation options exist that require further exploration The DSI confirms that the existing BFI funds may be used to provide the additional funding requirement for the EOC at this time. The DSI will secure the additional funding and make available over the course of establishment of the SPC and SOC
SPC and SOC: Status Update Initial procurement strategy was design and build Most efficient, however introduced risk aggravated by very immature requirements from SKAO Procurement strategy adjusted Phase 1: Concept design led by multi-disciplinary team Phase 2: Detailed design and build Appointment of multi-disciplinary team currently being evaluated Will remain contracted for the duration of the construction project
Financial Principles that Inform Current Negotiations Current engagements with SKAO will result in revenue Delivery of new hosting infrastructure at zero up-front cost Hosting Agreement SKAO Obligations South Africa Obligations Co-Location Agreement Access Existing Assets & Infrastructure Access New Assets & Infrastructure Construct Servitude Agreements Co-Location with iThemba LABS Construction Contracts Lease: New Assets & Infrastructure Operate Transfer of Assets & Infrastructure Agreement on Bilateral Collaboration Lease: Existing Assets & Infrastructure Service Level Agreements Permission to Access Site Lease for EOC, SPC and SOC Permissions & Authorisations Site Management Agreement Acceptance Agreement Joint Repository
Financial Principles that Inform Cost Recovery Lease Agreement for EOC, SPC and SOC Capital cost recovery over 10 year period, restricted by the ability of the IGO to legally commit now based on existing Funding Approvals Cost of capital, inflation and planned maintenance/ asset replacement informs annual escalation Site Management Agreement Value: R30M (only FTEs) to R100M (full value) per annum (estimated) Two approaches being considered (to evolve with requirements) Overhead charge per FTE (24%) Cost recovery of salaries + enabling infrastructure established to support services VAT SKAO exempt from VAT as per P&I protocol NRF is not VAT registered, and SARS have confirmed no technical mechanism to enable transfer of VAT from any NRF procurements Mitigation: SKAO undertake all procurements (subject to periodic review), with the exception of Security and SANParks Agreement R3M R5M exposure to NRF
VAT Recommendation Noting that SKAO is exempt from paying VAT; SARS has confirmed there is no technical mechanism to enable transfer of VAT by the NRF; and a proposed mitigation is for the SKAO to undertake procurements, except for Security and Land Management contracts; and the VAT exposure to the NRF is valued at between R3M and R5M per annum the SASSC is requested to Note the VAT exposure and process SARAO will implement to mitigate the impact Discuss other alternatives, as appropriate
Dark Fibre Update In-principle agreement with CSIR and MCT to explore ceding of contract Meeting held 5th February Further meetings to be held with MCT Internal approval processes to be followed within NRF Timelines Intention to bring to NRF Board in July for approval Site establishment likely beginning of 2025 Mitigation options to accelerate timeline Transfer of project to SKAO, including ceding of contract
