Gijima claims to be victim in 'unlawful award' of Transnet tender

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 20 Apr 2018
The High Court will ultimately decide if Gijima or T-Systems should get the contract to provide IT data services to Transnet.
The High Court will ultimately decide if Gijima or T-Systems should get the contract to provide IT data services to Transnet.

Both Gijima Holdings and T-Systems believe they should have a five-year contract to provide IT data services to state-owned company, Transnet, but it is SA's courts that will decide.

"Gijima has been a victim in this unlawful award of a tender to T-Systems and it is confident that a court will enforce Transnet's decision to correctly award the contract to Gijima, who is the successful bidder," Gijima told ITWeb.

Both IT services companies filed affidavits and counter-applications in the Johannesburg High Court on 18 April in response to a High Court application filed by Transnet last October. Transnet's declaratory order looks to set aside its February 2017 decision to give T-Systems the IT data services contract, or alternatively confirm Transnet itself has the power to rescind its earlier decision and instead give the contract to Gijima.

The original Transnet case named respondents including T-Systems and Gijima but also Ubuntu Technology, Wipro Technologies SA, Business Connexion, EOH Mthombolo, MTN and National Treasury.

"Although Gijima fully supports the relief sought by Transnet in its application, it felt it necessary and prudent to bring an application in its own right. This resulted in Gijima bringing a counter-application in respect of Transnet's main application contemporaneously with delivering its answering affidavit to Transnet's application," Gijima says.

The group says its counter-application brings to light that Transnet's management recommended the awarding of the contract to Gijima, which recommendation was approved by Transnet group CEO Siyabonga Gama.

"Documents provided to Gijima in the unfolding of the legal proceedings instituted by Transnet reveal certain influences resulted in the recommendations being overruled without grounds for doing so," Gijima says.

"Gijima seeks an order declaring that the letter of intent issued by Transnet to T-Systems...lapsed 120 calendar days after it was issued, and that Transnet is accordingly at liberty to approach Gijima in order to negotiate and conclude a contract for the supply of IT data services," Gijima's counter-application reads.

Gijima also says it submits that "Transnet's decision to award the tender to T-Systems was irregular".

T-Systems, on the other hand, maintains the award to it is valid and any award to Gijima would be invalid.

"Given that the matter is now a legal process, Transnet would like to reserve its comment on this matter," Transnet spokesperson Molatwane Likhethe said in response to questions from ITWeb.

However, Transnet said it would like to clarify that the application for the declaratory order in the High Court last year, "was purely a governance process" that has to happen before the company can implement a National Treasury directive to appoint Gijima to the contract.

Risk versus cost

The main argument comes down to whether the contract's award should have been based on cost and highest points score; or if a due diligence and risk assessment report from Gartner should have swayed the decision.

After four stages of the tender process, T-Systems was the first-ranked bidder, Ubuntu Technologies was the second-ranked bidder while Gijima was third. Only the top two were to continue in the process, but Ubuntu voluntarily withdrew its bid and was replaced by Gijima for the final stages.

"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.

Gijima maintains its pricing was lower and it achieved the highest overall score in the tender points system, and therefore should have been the preferred bidder. However, Transnet nevertheless awarded the tender to T-Systems.

The risk factor identified by Gartner played a big part in the Acquisitions and Disposals Committee's (ADC's) advice to the Transnet board to initially award the contract to T-Systems even though it had not received the highest points.

According to T-Systems, Gartner found the Gijima bid created "major" and "almost certain" risk to Transnet.

T-Systems says some of the risks Gartner identified were that Gijima could not commit to completely transitioning Transnet's IT services within six months, a standard other bidders had to meet; and Gijima failed to provide proof that it had the requisite experience in operating a data centre and hosting services but rather planned to rely on the experience of its partner IBM.

Another concern was that Gijima failed to include all of the services required in the request for proposals (RFP) in its pricing. Security was also identified as a risk as Gijima's bid made no provision for a separate security operations centre.

"The ADC was also concerned about Gijima's enormous price reduction, which it could not justify. There was a risk that Gijima would be unable to perform the contract at that price," T-Systems adds.

According to Gijima's court documents, Transnet's group CIO did not support the recommendation for T-Systems to be awarded the contract and "she took the view that Gijima was capable of mitigating the risks identified".

Gijima was invited to attend a clarification session with a Transnet evaluation team on 23 January 2017 and senior IBM officials attended as well. Gijima says the Transnet officials said after the meeting that Gijima had created the clarity it required.

Gijima says on 7 February 2017, Transnet group CFO Garry Pita* sent a memorandum to Transnet CEO Siyabonga Gama, recommending the tender be awarded to Gijima. Gama accepted management's recommendation on 8 February 2017.

However, it seems the ADC did not accept the recommendation from management and recommended the contract be given to T-Systems, which it was in February 2017.

Gijima complained to the Transnet procurement ombudsman and this was ultimately referred to National Treasury. Treasury's view, sent in a letter to Transnet, was that the risk assessment did not qualify as an objective criterion and that the Transnet board had an obligation to award the contract to the preferred bidder, namely Gijima.

The argument was that the risk factors considered by the ADC and the board would have already been taken into account in the functionality assessment of the bidders during the first four stages of the evaluation, in which Gijima achieved the minimum qualification for, and to assess them again at the end was effectively "double counting" them.

Undue influence

Gijima claims "the latter stages of the evaluation process were tainted with undue influence" which is why it lodged a complaint with the ombudsman.

"It was at the eleventh hour that the aforementioned influences directed the awarding of the contract to T-Systems, despite the overall approval of Gijima being the lowest priced and highest-ranking bidder," Gijima says.

T-Systems, however, denies any "undue influence".

"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," outgoing T-Systems SA MD Gert Schoonbee told ITWeb.

"The details of the bid decision-making in our affidavit are now before the court so it can clearly see how the process was run and how decisions were made. Any smear tactics are simply a distraction to prevent the fair award of the tender," he said.

T-Systems also claims Gijima appears to have received "special treatment" and assistance from within Transnet.

"They were suddenly allowed back into the process after having initially dropped out at an early stage. Despite not meeting the formal requirements, Gijima then recruited staff from the second placed bidder (which had dropped out) and were allowed to resubmit. They dramatically lowered their price by R500 million, to just below the T-Systems price, well after the tender round had closed," it adds.

*Transnet announced yesterday that CFO Garry Pita had resigned, after 12 years with the company, due to "his continued ill-health and strain from the job". Before being appointed group CFO in February 2016, Pita was Transnet's chief procurement officer. Mark-Gregg McDonald will act as interim CFO.

The dispute so far

  • On 23 November 2015, Transnet issued an RFP inviting bids for a contract to provide IT data services, for five years with an option to renew for a further two years.
  • A six-stage process began with nine bidders.
  • At the end of stage four, two bidders remained: T-Systems as the first-ranked bidder and Ubuntu Technologies as the second-ranked bidder.
  • In July 2016, ahead of stage five, Ubuntu withdrew its bid.
  • Transnet decided to allow third-ranked bidder, Gijima, to take its place.
  • In August 2016, the two bidders submitted their best and final offers. Gijima's price was R1.3 billion; T-Systems' price was R1.5 billion, giving Gijima the higher score.
  • On 22 February 2017, T-Systems was named the preferred bidder.
  • T-Systems was informed of the decision on 3 March 2017 in a letter of intent.
  • On 20 March 2017, Gijima challenged the decision with the Transnet procurement ombudsman.
  • The complaint was referred to National Treasury.
  • On 18 July 2017, Treasury informed Transnet that it was its view 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 decision to award the tender to T-Systems and awarded it to Gijima instead.
  • In October 2017, Transnet applied for a declaratory order in the Johannesburg High Court to set its earlier decision aside, alternatively to confirm Transnet itself has the power to rescind its earlier decision.
  • On 18 April 2018, Gijima and T-Systems filed affidavits and both also filed counter-applications.