National Treasury laments poor action over tender deviations

National Treasury has raised concerns over poor accountability for officials who abuse the public procurement system through deviations from tender processes without approval, saying the practice is rife in state-owned enterprises.

Procurement through deviation is legally allowed in cases where it would be impractical to invite competitive bids. The process is conducted after approval from Treasury.

Solly Tshitangano, chief director for governance monitoring and compliance in the Chief Procurement Office, says the abuse of deviations opens the public fiscus to looting through inflated contracts.

"This process opens the tender process to fraud, and we have noted the weak disciplinary processes for officials concerned," said Tshitangano, during a media briefing on the practice on Tuesday in Pretoria.

"Deviations are happening everywhere: at national level, in municipalities and at a local level, but it most prevalent in public entities."

In November 2017, Parliament’s standing committee on public finances (Scopa) quizzed the National Treasury on how state entities and institutions had been allowed to deviate from required procurement processes to the tune of a total of R74bn in 2016/17.

But the National Treasury Director General, Dondo Mogajane, stressed that the amount did not entirely point to abuse.

During the hearing, Scopa member Mnyamezeli Booi told Fin24 that research showed about R66bn in deviation procurement came from Eskom, about R2bn from Treasury itself, and about R1bn from the SA Revenue Service (SARS).

The office of the CPO was established in 2013, allowing closer monitoring of the trend within public departments.

"Through deviations, suppliers tend to inflate prices knowing that they are not going to compete with anybody, and that is where government loses out," said Tshitangano.

In the case of Eskom, major deviations related to supplies for mega power stations Medupi and Kusile.

The Department of Water and Sanitation recorded deviations amounting to R470m for the 2016/17 financial year. 

Tshitangano said the National Treasury could only report suspected cases of abuse of public funds to law enforcement authorities, as it had no capacity to conduct investigations.

"Some accounting officers and authorities procure through deviation, even though the National Treasury has said no to such deviation, while others conduct sham tenders to eliminate competitors," said Tshitangano.

A spike in deviations was seen during 2012/13 and 2015/16.

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