EXCLUSIVE: T-Systems fights for R1.5bn Transnet contract

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 19 Apr 2018
Gert Schoonbee, outgoing T-Systems SA MD.
Gert Schoonbee, outgoing T-Systems SA MD.

T-Systems is fighting for a R1.5 billion contract with Transnet, which it was awarded last year, but which Transnet now wants to award to Gijima instead.

The German IT company's South African operation filed an affidavit in the Johannesburg High Court yesterday in response to a High Court application filed by state-owned company, Transnet, last October.

Transnet's court application looks to set aside its February 2017 decision to give T-Systems the five-year contract to provide IT data services to Transnet, or alternatively confirm that Transnet itself has the power to rescind its earlier decision. However, T-Systems maintains the award to it is valid and any award to Gijima would be invalid.

"T-Systems consequently seeks orders dismissing the application by Transnet, and reviewing and setting aside its 'in principle' decision of September 2017 to award the tender to Gijima," T-Systems says in its affidavit, which ITWeb has in its possession.

The battle goes back to a tender process which began over two years ago but which now looks like it will only be settled by the courts.

In November 2015, Transnet issued a request for proposals inviting bids for a contract to provide IT data services for a period of five years with an option to renew for a further two years. T-Systems has since 2010 had a contract to provide similar IT services to Transnet, and was bidding for the new contract along with eight others, over six stages.

T-Systems says at the end of stage four, only two bidders remained in contention: itself and Ubuntu Technologies. At that point, T-Systems was the first-ranked bidder. Ubuntu later dropped out and Transnet decided it would allow the third-ranked bidder, Gijima Holdings, to take its place.

"In August 2016, the two bidders submitted their best and final offers (BAFOs). Gijima reduced its price dramatically. It had originally quoted some R1.9 billion at stage four. In its BAFO it said it would provide the services for R1.3 billion, a reduction of R560 million. By contrast, T-Systems' bid price in its BAFO was R1.5 billion, marginally less than its price at stage four," according to T-Systems.

As a result of Gijima's price reduction, it was the first-ranked bidder in the final evaluation at stage six. However, a risk assessment and due diligence process conducted by Gartner consultants revealed significant risks for Transnet if it accepted Gijima's bid.

The Transnet board therefore awarded the contract to T-Systems on 22 February 2017. Gijima then complained to the Transnet ombudsman in March 2017 and the complaint was referred by Transnet to National Treasury for investigation.

On 18 July 2017, Treasury informed Transnet it was its view that the contract should have been awarded to Gijima, because it had the highest score. On 27 September 2017, Transnet's board took an "in-principle" decision to rescind its earlier decision to award the tender to T-Systems and decided to award it to Gijima instead.

The decision was conditional on bringing an application to court to set its earlier decision aside, alternatively to confirm Transnet itself has the power to rescind its earlier decision; this was filed by Transnet last October.

The papers filed yesterday are an answering affidavit to Transnet's filing. T-Systems has also filed a counter-application "to review and set aside Transnet's decision of September 2017 to rescind its award of the contract to T-Systems and award the contract to Gijima"; and a third-party application "for judicial review of certain decisions of Transnet and National Treasury".

Reputation defence

Outgoing T-Systems SA MD Gert Schoonbee told ITWeb that T-Systems won the contract after an exhaustive six-stage open tender process.

"T-Systems was awarded the contract based on its price, modernisation, service standards and crucially the low risk to Transnet's IT system on which South Africa's rail and port networks depend.

"While we would accept not winning a tender on competitive grounds, we must take steps to protect our reputation when accused of any undue influence. Our case is very strong. The facts in our affidavit, which is now in the public domain, speak for themselves," he added.

An amaBhungane report in 2016 raised questions on the IT company's contracts with Transnet and Eskom, embroiling it in the infamous #GuptaLeaks scandal. The report alleged T-Systems supplier development partner Sechaba Computer Services had paid kickback money to Homix, a Gupta-linked letterbox company exposed in 2015 in a kickback scandal involving Neotel. T-Systems has repeatedly denied these allegations.

"By placing the verifiable facts of the matter on record before the court and the public, our key stakeholders can see exactly how, why and on what grounds we believe we won the contract," the company says.

"These facts highlight the strength of our bid, especially when considering the risk assessment. Transnet's own independent consultants, Gartner, the world's leading information technology research and advisory company, found the Gijima bid created 'major' and 'almost certain' risk to Transnet. In contrast, T-Systems has operated these systems for many years and the Gartner review identified no major risks from T-Systems, which is why Transnet awarded T-Systems the contract."

Schoonbee says resolving this commercial dispute as soon as possible is vital for both T-Systems' and Transnet's reputations.

"For Transnet, these are vital services. Any failure to Transnet's IT systems, particularly the data centre, puts their operations, commercial viability, and even the safety of their personnel and customers at risk. Put simply, if the mainframe fails, the trains will not run. This is why 'risk' is such an important consideration when awarding the contract.

"While this matter is before the courts we will continue to work closely with Transnet to ensure there is no disruption to the quality of service or stability of their systems," he adds.

Gijima filed its own responding affidavit with the Johannesburg High Court yesterday, saying it "supports the relief sought by Transnet in the main application". It also filed a counter-application "in which it seeks similar relief to the relief sought by Transnet in the main application".

By the time of publication, Transnet had not responded to ITWeb's requests for comment on the matter.

* ITWeb will look into each side's arguments in more depth in a follow-up article.

You can read a summary of the T-Systems court papers and basis for opposition here.