EOH employees colluded with government officials to secure tenders, inquiry hears

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  • The judicial commission into state capture is hearing testimony from ENSafrica Forensics head Steven Powell.
  • Powell says EOH employees colluded with government officials to secure tenders on multiple occasions.
  • In some cases contracts running into the millions were extended.


 

Employees of ICT firm EOH's public sector vertical colluded with government officials to secure tenders, the judicial commission of state capture heard on Wednesday.

The commission, chaired by deputy chief justice Raymond Zondo, heard testimony from ENSafrica Forensics managing director Steven Powell.

ENSafrica Forensics last year conducted a probe into irregularities in Microsoft software provider contract between a subsidiary of EOH and the department of defence. ENSafrica found that procurement processes were flouted and software licences were over-invoiced. This led CEO of EOH Stephen van Coller to call for a broader review of all public sector contracts with the firm.

The commission has since asked ENSafrica to assist in providing information it has on certain individuals and entities which may be implicated in the state capture project, among these include current Johannesburg Mayor Geoff Makhubo who is set to appear before the commission on Friday.

"When we issued the interim report, we found a multiple number of tender abuses," Powell said.

"What transpired is guys would collude with government officials at departments to irregularly extend existing tenders," Powell said. He noted that National Treasury puts limits to the extension of contracts, for example if the value of a tender goes up by more than 20%, the entity must re-tender, he said. Or if work is to be provided for a different project, the entity should re-tender, he added.

A group of people under the leadership of Jehan Mackay, the head of EOH's public sector business, would bypass the tender process on "multiple occasions." There would be "multiple extensions of contract which should have gone to tender," said Powell.

Often these extensions would happen on the perception of "sole sourcing" – in which an entity would motivate that it is the only one that can provide a particular service, when in reality other service providers could do the same. Without competition, prices would escalate, Powell explained.

Commenting on the sole sourcing mechanism, Zondo said that he does not understand why a government entity would not open for tender, especially when there is not an emergency at hand. "A government entity would suffer nothing from opening to tender. When there is no emergency, why not advertise for the whole world?" 

Getting their way

Powell explained that people at EOH would "collude with officials and would get inside track on tenders before they were even advertised." Their advanced notice would provide them more information than competitors, providing them with an advantage position in the tender process.

"These scenarios play out on multiple occasions. When things go wrong for this group of people and they do not get their way with a public entity, they would use the politically exposed person to exert influence on decisionmakers to make sure it goes their way," said Powell.

These EOH employees would get advance notice of confidential information the bid adjudication process - if they knew they would lose a tender, they would contact a well-known politically exposed person who would intervene in the process and the tender would change. This happened in contracts with the City of Johannesburg, Powell said. The City had a number of contracts with companies from the EOH group, particularly for IT-related services, Powell explained.

He listed a few contracts running into the millions that were extended between the City and EOH company Mthombo.

The inquiry continues to hear testimony from ENSafrica.

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