SARS admits it may have 'thrown out the book' with Bain, Gartner contracts

The South African Revenue Services's Chief Financial Officer, Johnstone Makhubu conceded on Wednesday that its procurement division may have "thrown out the book" in its awarding of multi-million rand contracts to Bain and Gartner.

Makhubu was testifying before the Nugent Inquiry probing tax administration and governance at SARS and was quizzed on the awarding of the controversial contracts.

Bain’s business model restructure contract was extended twice, costing taxpayers R164m, while Gartner conducted multi-phased IT work to the tune of R200m.

Evidence leader Carol Steinberg argued this practice potentially allowed companies to find faults at SARS during their diagnostic so that they could extend their time on the projects.

Steinberg put it to Makhubu that she found the trend “terribly worrying … and the same modus operandi happened twice”.

Multi-phased projects

Makhubu insisted that when a company implemented a multi-phased project, it was necessary to make the service provider aware upfront of the possibility of being locked in.

He later conceded that, with hindsight, Bain’s contract should have been conducted through an open tender.

“The procurement process should be kept sacrosanct,” he said.

The mega contract by both Bain and Gartner have featured prominently in the inquiry, with evidence by internal and external experts revealing that they deviated from normal procurement processes - in some cases without approval from the National Treasury.

"Thrown out the book"

Makhubu later admitted that the procurement division may have “thrown out the book as far as the Bain and Gartner contracts are concerned”.

Bain has already given evidence before the commission and vowed to pay back the R164m service fee it was paid by SARS.

The company’s business restructure has been accused of wrecking the tax service leading to a shortfall in revenue collection and the shutting down of key business units, such as the unit tasked with collecting tax from large businesses and another which investigated the illicit economy.

Both strategies were ordered by suspended SARS boss Tom Moyane after his appointment in 2014. The commission's interim report, which has since been handed to President Cyril Ramaphosa, has recommended that Moyane be sacked.

The inquiry continues on Thursday, with Gartner due to give evidence next week Tuesday.

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