DTI cans R153m Cipro contract

Government's cancellation of a R153.7 million IT overhaul at the Companies and Intellectual Property Registration Office (Cipro) could see the entity missing its October deadline to comply with the new Companies Act.

Work on the implementation of the new enterprise content management (ECM) system could be further hampered by Valor IT filing a court order to have the contract declared valid. In addition, neither Cipro nor the department are able to say whether work has ceased on implementation of the new system.

Earlier this week, the Department of Trade and Industry (DTI) pulled the plug on Valor IT's contract to deploy the ECM system, despite the impending threat of legal action from the small IT company.

News of the cancellation was confirmed by the Democratic Alliance (DA) yesterday. It said the department's director-general Tsediso Matona stated late on Tuesday that Valor IT was served with a notice cancelling the deal last week Thursday.

Valor IT is now set to take the matter to court, which could delay the process of implementing the system even further as lawyers battle it out. The company was not available to comment this morning.

A forensic investigation into the awarding of the contract resulted in the suspension of Cipro CEO Keith Sendwe and CIO Michael Twum-Darko. Both face internal and criminal charges, although the department has not yet clarified what these charges may be.

After the investigation, trade and industry minister Rob Davies gave Valor IT 10 days to defend why it should keep the deal, a deadline that expired at the end of last month, leading to the contract being cancelled.

Valor IT is now asking the court to uphold the validity of the award.

Among the report's findings was that Valor IT had been paid R56 million in February last year, 10 days after having been awarded the entire contract, when it had dropped off a box of CDs and an invoice at Cipro's offices. The CDs were meant to have contained software that was needed to develop the ECM system.

In May, Davies commented this on its own should have raised a red flag. He said steps had been taken to ensure any monies paid would remain in the country. “This was a system that was going to deal with white-collar crime. Its integrity is absolutely fundamental.”

Cipro's head of communications, Elsabie Conradie, told ITWeb at the end of last month that the system must go live by October, because it needs to cater for changes in the Companies Act that will come into effect then.

The new system is critical to Cipro's ability to operate, as most of its interaction with companies is done through its Web site, Conradie explained. “We can't go back on our word; we've made promises to the business community.”

Five bids were submitted to Cipro for the tender, and Valor IT won the contract despite the company putting in an offer that was at least twice as high as the cheapest offer.

Cipro was not available this morning to explain what would happen to the installation of the system, and the department is not commenting as it says the matter is sub judice.

Abe Mbulawa, CEO of Mantra Consulting, has thrown another spanner in the works, saying he is confused as to why the contract should be cancelled at such a late stage.

Mantra was allied to Valor IT during the awarding of the contract, but is now trying to get R3 million in fees it claims the software house owes Mantra.

“This contract has only six months to run, so it does not make sense to cancel it now. Also, the contract specifies that if Cipro doesn't believe that Valor IT is doing a good job, they can deal with the original software suppliers,” notes Mbulawa.

One of the original bidders, Faritec, is unlikely to be in a position to be awarded the deal as the company has liquidated its largest operating entity, Enterprise Solutions.

Richard Hurst, independent analyst, says he expects the deal will have to start almost from scratch. He believes the project has been a “massive waste” of money, and businesses across the spectrum will suffer because of the delays in implementing the new system.

Hurst says Cipro - as a government body - should have been enabling small businesses and not hindering them by putting hurdles in their path. The delay in moving onto the new system is yet another obstacle, he adds.

The cancellation of the deal means it is likely Cipro will not meet its target of moving onto the new IT system by the time the new Companies Act comes into force, Hurst says.

DA shadow minister of trade and industry Andricus van der Westhuizen applauds the DTI's cancelling of the contract with Valor IT. “It was a very brave move of them to do this even though Valor IT has filed a court action against them [to prevent them] from doing so.”

The opposition party also wants a full investigation into the matter to be completed. “Alleged tender corruption is no light matter and the DA insists that those who have been responsible for the losses and delays caused by the alleged rigging of this tender be brought to book,” says Van der Westhuizen.

In a recent Parliamentary reply, it was confirmed that Valor IT had access to the sensitive company and patent information kept in custody by Cipro, he adds.

“I will be writing to the minister to ascertain how he intends to guard against potentially fraudulent activity following the legal dispute with Valor IT; activities that would seriously hurt the thousands of businesses that are required by law to register their company information with Cipro,” says Van der Westhuizen.

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