The Department of Labour's (DOL's) appointment of technology services company Accenture - without a tender process - to help it with an exit strategy from its 10-year contract with Siemens has been questioned by Parliamentary portfolio committee members.
The committee met last week to discuss the public-private partnership (PPP) that was initiated in 2002, to run until November 2012, between the department and Siemens.
The PPP was established to address the high turnover of IT staff in the public sector; difficulty in reaching IT objectives; the automation of services towards e-government initiatives; the department's need to improve its IT capacity and expertise; and the need to exploit international best practice.
The project was originally expected to cost R1.2 billion, but inflation raised these costs to a projected R1.9 billion. There had been problems throughout, and detailed reports and investigations were instituted by National Treasury and KPMG, as well as internal inquiries by the DOL.
The contract failed to specify progress deadlines, although it placed obligations on the DOL to make regular payments. The DOL lacked the capacity to manage the contract properly, and, in particular, to ensure adequate transfer of skills from the 97 contracted Siemens staff to the three DOL staff.
In 2010, the department thought it prudent to commission an internal inquiry, and to evaluate the exit and transfer options of this contract. A systems review has now been completed. It was agreed that Siemens must replace 50% of the hardware, and ensure the remaining hardware had at least a two-year useful lifespan. After consultation with the State IT Agency, National Treasury, and South African Revenue Service, it was decided to hire Accenture to help with the turnaround and exit strategy.
Questionable emergency
Accenture has completed an analysis of requirements in preparation for the exit and will develop a new strategy from March 2012. It is not acting as a replacement for Siemens, but this is a stop-gap measure to assist the DOL with benchmarking exercises.
Lessons learned from this exercise included limitation of contracts to five years, the need to ensure internal capacity to manage contracts, and the need for effective skills transfer, and strategic placing of IT needs in the organisation.
Members raised their concerns over the use of emergency Treasury Regulation 16A6.4 for the appointment of Accenture without a tender. The DOL had known about the expiry date of the contract for 10 years and should have planned for it, they commented. DOL representatives said emergency measures were taken because the DOL was in dire straits.
Vikash Sirkisson, acting CIO of the department, said that, in the past year, Accenture had attended to, and completed, phase one, which was an analysis of the existing IT requirements for hardware, systems, licensing and automation, in preparation for the exit from the PPP and the transfer to a new service provider. Phase two is the development of an ICT strategy post-PPP, and implementation is due to start this month.
He added that the cost for the first phase of the Accenture process was R2.7 million, while the second phase would cost about R8 million (still to be finalised). The budget provision for the PPP in this financial year is an estimated R120 million.
New CIO
Members argued that the R1.9 billion had effectively been wasted on Siemens.
Deputy director-general of corporate services at the DOL, Lerato Molebatsi, said the amount needs to be placed in context since it represents 10 years of work, and when broken down into cost-per-year, it was not excessive and is similar to the IT spending of many other government departments.
However, members insisted that Accenture was being employed to do what the PPP should have done, and this was why the R1.9 billion is regarded as wasteful expenditure.
The department also confirmed it has appointed a new CIO, but the identity of the person cannot be disclosed as the contract had not yet been signed. The post should be occupied from 1 April.
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