Companies found guilty of tender fraud will be fined double the amount of the bid, and IT systems will come under “specialised scrutiny”, as government cracks down on wasteful spending.
Several departments and state-owned entities recently came under fire for wasteful expenditure and tender irregularities, which includes issues with tenders and spending at the State IT Agency (SITA), Department of Water Affairs, and the Companies and Intellectual Property Office (Cipro).
Finance minister Pravin Gordhan says government will implement a range of five initiatives to improve supply-chain management, which will include legislative and regulatory reforms. Gordhan was speaking in Parliament yesterday afternoon, as he tabled the mid-term budget.
Government has identified procurement and tender fraud to the tune of R25 billion, which is under investigation. However, while the Inter-Ministerial Committee on Anti-Corruption has already yielded several positive outcomes, “more has to be done”, said Gordhan.
Stiff penalties
Gordhan has proposed that service providers that obtain government contracts fraudulently could face a fine of double the contract value. In addition, public officials who assist in tender fraud will be held liable for the losses incurred by government.
“Measures are required to ensure that officials who have breached the buying rules should not remain under suspension, drawing full benefits, while investigations drag on for years,” noted Gordhan.
The five-step plan to clamp down on tender fraud also involves increased monitoring, and National Treasury taking over payments in some instances. Tenders will have to be publicly disclosed at all phases, and reasons for awards will have to be supplied.
Tax compliance measures will also be strengthened and government will look at identifying procurement requirements that could be better managed centrally.
Gordhan adds several areas of reform have been proposed to aid in identifying savings and better organise public services. Among these, he says IT systems and management of consulting services will come under “specialised scrutiny within the supply chain regulatory framework”.
Counting the cost
In the ICT sector alone, several tenders have come under scrutiny and top-level executives have been placed on 'gardening leave' as a result of irregularities.
SITA, the state's IT procurement arm, was recently slammed by the auditor-general for not having adequate policies, procedures and systems in place. According to SITA's annual report, the entity incurred R215 million worth of irregular expenditure last year, on top of R19 million in the 2008/9 financial year.
Tender irregularities uncovered at Cipro this year resulted in a R153 million contract, for a new electronic content management system, which had been awarded to Valor IT, being canned. In addition, CEO Keith Sendwe and CIO Michael Twum-Dwarko were suspended, but Sendwe died before facing charges and Twum-Dwarko has yet to appear before a hearing.
The Department of Home Affairs has also scrapped two tenders for IT contracts. Last year, the R114 million deal for smart ID cards was canned, because of irregularities around the awarding of the deal by SITA.
In addition, Gijima's multibillion-rand contract to implement the department's “Who am I Online” project was cancelled in April. Gijima is in talks with the department to sort out the issue, but may end up going to court to enforce the contract.
The Public Protector is also probing communications minister Siphiwe Nyanda after concerns that he had breached the executive members' Ethics Code for receiving benefits from an allegedly irregular tender from Transnet through a company to which he has close ties - General Nyanda Security Risk Advisory Services.
The Department of Water Affairs was also found to have wasted money after the AG found an IT services contract had overrun to the tune of R1 billion, because the correct procedures were not followed.
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