Treasury officials warned DCS against controversial R378m IT tender

2016-06-01 13:47
Justice and Correctional Services Minister Michael Masutha. (GCIS)

Justice and Correctional Services Minister Michael Masutha. (GCIS)

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Johannesburg - National Treasury officials warned the Department of Correctional Services against awarding a controversial R378m IT tender to an ANC benefactor. However, the department still approved it despite the warning.

The tender, with Integritron Integrated Solutions (IIS), was subsequently investigated by the National Treasury, and the findings prompted Finance Minister Pravin Gordhan to write a letter to Correctional Services Minister Michael Masutha, instructing him to cancel the tender. 

Masutha has denied that Gordhan ordered him to cancel it, saying it was only a recommendation.  

He also said he told Gordhan that the Auditor General was auditing the procurement process of the contract and that it would be "premature" to take any action.  

The office of the Auditor General however told News24 that it was not "doing any special investigation, other than a normal statutory audit [for the department of correctional services]". 

AG spokesperson Africa Boso also said the National Treasury's findings would be considered "as part of this 2015-16 normal annual audit process". 

Masutha's spokesperson Mthunzi Mhaga could not be reached by News24 on Tuesday to clarify the minister's comments on the AG. 

The tender is now also the subject of a court case. 

The tender was for supplying and maintaining an electronic record of all the country's prisoners, called an inmate management system.

'Unreasonable and not competitive'

In minutes of the bid committee, dated November 10, 2015, it's mentioned that two observers from the National Treasury attended the committee's meetings. It, however, mentions that the observers did not attend meetings for the technical evaluation of the bids. 

According to the minutes of the nine bids that were received, two were disqualified and seven were evaluated for functionality. Only one, Integritron, met the "minimum functionality requirements". 

A letter from the Treasury in October 2015 stated that because "only one supplier met the minimum functionality requirements... this makes it difficult for the bid evaluation committee to conclude that the solution proposed is the best without any comparison with other systems". 

"In these circumstances, the finalisation of this bid will render the process unfair, unreasonable and not competitive," the letter said. 

However, despite the letter from the National Treasury, the committee approved the recommendation of Integritron. 

The subsequent report by the National Treasury into the tender further found that Integritron did not give the required information in its SBD4 (declaration of interest) form. 

'Irregularly appointed'

It also failed to disclose certain information about its relationship with its sub-contractor for the tender, Xtreme Intelligence Solutions. 

"The review revealed that Dewald Olivier was a director of Integritron Solutions (Pty) Ltd and Xtreme Intelligence Systems (Pty) Ltd. He resigned as a director of Xtreme Intelligence... on 30 October 2015."

The report found that the relationship between Integritron and Xtreme Intelligence should have been regarded as "fronting". 

The report found that the Accounting Officer acted negligently by disagreeing with the previous advice from the National Treasury.  

Gordhan’s subsequent letter, dated April 11, states that the National Treasury concluded its review of the bid process to see if the DCS had complied with supply chain management laws during the bidding process. 

"The review revealed that Integritron Integrated Solutions was irregularly appointed," Gordhan said.

"In view of the above, the accounting officer and members of the bid committee failed to comply with certain provisions of the Public Finance Management Act, Treasury Regulations, instruction notes and preferential procurement regulations, 2011," he wrote.

Gordhan further told Masutha to bring a disciplinary case against bid committee members and the accounting officer. 

Last month, News24 revealed that the state’s chief procurement officer, Kenneth Brown, had instructed the DCS to cancel the "irregular" tender. 

IIS is part of the SA Security Solutions and Technologies (Sasstec) group of companies that has benefited from government tenders. 

The Sasstec group approached the High Court in Pretoria at the beginning of May in a bid to interdict Gordhan, Masutha, Brown and Solly Tshitangano from implementing recommendations in the National Treasury's report on the tender. Tshitangano is chief director for governance monitoring and compliance in Brown’s office.

It also wanted to interdict them from implementing Gordhan’s instructions and defaming it by mentioning its name and the alleged irregularities publicly, or in the media. 

'Confidentiality limitations'

Claudio Bollo, the lawyer for Sasstec, told News24 the matter was struck off the urgent roll, but was still pending on the normal roll. 

Documents obtained by News24 show how DCS national commissioner Zach Modise defied requests by Brown’s office to review the awarding of a contract for an inmate management system to IIS.

Another Sasstec company, SA Fence and Gate, has been awarded government tenders worth billions by Eskom, DCS, and the Passenger Rail Agency of SA.

SA Fence and Gate is an ANC donor and member of the party's Progressive Business Forum.

Sasstec is partly owned by politically-connected businessman Moya Nape and ex-home affairs chief IT director, Patrick Monyeki. The group’s biggest shareholders are CEO Geoff Greyling and his family.

Greyling told News24 previously that IIS would not be able to comment on the contract due to "confidentiality limitations" in the contract with the DCS. 

He also denied using the ANC’s PBF to help it win tenders. 

"To our best knowledge, it is not possible to leverage PBF membership in this manner. We are one PBF member of at least 6000 businesses... When this is considered in context, it is clear that our position hardly constitutes 'state capture' as is implied in the media." 

Read more on:    pravin gordhan  |  michael masutha  |  johannesburg

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