Despite an auditor-general's report that found a Department of Water Affairs IT services contract had overrun to the tune of R1 billion because the correct procedures were not followed, no corrective action has yet been taken and the contract is still active.
The report, completed in May and tabled in Parliament in July, found that the department did not follow proper procedure when extending an IT contract with signed with former state ICT group arivia.kom. The deal was initially worth R180 million, but the extensions pushed up the total value to about R1.2 billion.
However, despite several irregularities around the extension of the deal, the department this morning confirmed that it has a contract in place with T-Systems, which bought arivia.kom last December. T-Systems has also confirmed that the department is still one of its customers, which it inherited when it bought arivia.kom.
According to the AG's report, the department was not able to provide a copy of the a signed contract dating back to 2003, and then extended it for an additional 49 months, hugely inflating the value, without following proper procedure.
The report explains that this had the effect of adding an additional R1.056 billion to the original three-year R180 million contract.
However, while the AG has called on the minister to take corrective action against departmental officials who extended the deal without following procedures, the department says it is still studying the report and will take appropriate action once it has completed its internal review.
The report stated that an investigation into certain alleged procurement irregularities at the Department of Water Affairs, revealed that the department did not follow proper supply chain procedures when appointing several service providers.
Last September, the minister of water and environmental affairs Lulu Xingwana provided the AG with a document containing allegations that indicated the DWA may not have complied with supply chain management processes when appointing service providers.
Unsigned
The report points out that the department extended a contract with an IT service provider, which was never signed in the first place and did not follow the proper procedure. The contact is with former state entity arivia.kom.
According to the AG's report, the department could not provide its investigating team with a signed copy of a contract with the service provider, which is in contravention of procurement practices.
The initial outsourcing contract was entered into in 2003, however, the AG points out that it was initially for a 36-month period and worth R180 million. This information is based on an unsigned copy of the contract.
The deal was then extended several times, for a total of 49 months, which added another 587% to the initial value of the deal, taking total payment to the service provider to about R1.2 billion.
Extending the deal was in contravention of the department's own procurement policies, and overshot the one-year cut off for contract extensions, reveals the report. It says that new proposals were never obtained before the contract was extended, and the increased total value of the deal is also in contravention of the department's policies, says the AG.
In addition, notes the report, the deal was extended by the department's DG and signed off by the CFO, despite its departmental bid adjudication committee being unwilling to approve the renewal of the contract.
As a result, says the AG, payments made that were in contravention of proper procurement procedures “constitute irregular expenditure”.
The department's chief director of communications, Mava Scott, says “we do have a contract with T-Systems at the moment” to provide IT services.
An inherited problem
In 2003, arivia.kom signed the multi-million rand three-year contract to provide outsourcing services to the department. The department awarded the arivia.kom consortium, which included including Cornastone, a three-year IT outsource contract to support its applications and maintain its infrastructure.
The deal included support for more than 3 000 desktops and the network and server infrastructure. In addition, arivia.kom would also support highly specialised applications relating to hydrology and water management and forestry management systems.
These include the custom-developed water authorisation and registration system, water user and regulation system for billing and licensing; the water management system, which monitors status of water resources and acts as a single source for information on all testing and contaminants; and the national veld fire system.
T-Systems, which bought arivia.kom towards the end of last year, says it inherited the contract with the department when it bought out the state entity.
“As a multi-national company, T-Systems has very strict policies and procedures of conducting business, whether in the private or public sector. T-Systems can only account for decisions made post-acquisition, in December 2009, and cannot comment on processes and procedures followed by arivia.kom or decisions made prior to the acquisition date,” the company says.
The AG also found that the appointment of the department's Trivec surveillance system service provider was in contravention of National Treasury regulations, and again no signed contract was provided.
Moreover, says the AG, the appointment of a service provider to implement a change management system was plagued by irregularities. Among these was the fact that the service provider and the department's DG co-direct two entities.
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