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NEC heads to court over R400m DHA biometrics saga

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 22 Feb 2022

The battle to control the lucrative and essential multimillion-rand biometrics contract ceded by the Department of Home Affairs (DHA) to French multinational IDEMIA from EOH is now headed to court.

The R400 million contract was awarded by the DHA to JSE-listed EOH in 2017 after a tender process marred in controversy. The implementation was required to be completed in November 2018.

A forensic report by auditing firm Nexia SAB&T revealed how EOH and State Information Technology Agency (SITA) senior staffers orchestrated an unlawful scheme to make sure the company landed the lucrative contract.

The row over the contract escalated in April last year, as SITA flagged the contract for violating procurement laws when it was ceded from EOH to IDEMIA with the consent of the DHA.

SITA, which procures ICT products and services for government departments, said at the time the move by the DHA to hand over the R400 million contract to IDEMIA as of 31 March 2021 did not comply with laws and regulations, and sets a bad precedent in government.

At the time of the cession in March, the project (which was supposed to have been completed in 2018) was still very far from completion. At that time, R224 million had already been spent on services, infrastructure and software.

Since the contract was ceded to IDEMIA, a new contract for R191 million was signed between the DHA and IDEMIA for the completion of the project, with a 31 October 2021 deadline. Despite the lapse of four years from the initial award, the system is not yet live.

Three companies – NEC Africa, Accenture SA and Ernst & Young Advisory Services – missed out on the bid to EOH, and now one the companies, NEC, is fighting back.

Unlawful contract

In the court papers seen by ITWeb, NEC says it has filed a fresh court application seeking an order to declare the master service agreement (MSA) concluded between DHA and EOH Mthombo as unlawful and unconstitutional and set aside; alternatively, declared void from the onset and set aside the cession of the unlawful contract to IDEMIA; declare all payments made by DHA to EOH as unlawful; and force EOH to refund all such payments or at least the profits made by EOH to DHA.

The company says there is “no dispute that the award of the ABIS tender to EOH Mthombo was procured by corruption by certain EOH Mthombo employees and thus there is no dispute that the genesis of the contracts currently in place – the award of the ABIS [Automated Biometric Identification System] tender to EOH Mthombo – is unlawful”.

It adds that if the contact is permitted to continue running, “then a government contract worth hundreds of millions of rands will be left with an entity that was not party to a competitive tender process and that bears some responsibility for the failure of the project to date”.

“DHA, as an organ of state tasked with implementing a project of national importance, was duty-bound properly and critically to consider and interrogate all the options available to it and to choose the one which provided the best value overall and is most likely to be successful,” says NEC Africa.

“The DHA’s evaluation of the options before it was materially flawed. Having chosen its preferred option through a materially flawed process, it obtained approval for its choice from National Treasury through a process which was not appropriate and without apprising National Treasury of all the relevant facts.”

The critical contract is to migrate data on the current Home Affairs National Identification System, which only records photos and fingerprints of South African citizens, to the new ABIS.

The final implementation of the system would provide the country with a single source of identification for citizens across state institutions and private-sector entities.

The contract is one of those highlighted at the State Capture Commission as having been fraudulently awarded to EOH five years ago.

In response to the application by NEC, the DHA does not oppose the repayment relief, provided it is not required to return hardware or cease to use software procured under the MSA and does not oppose the disgorgement relief, provided that EOH Mthombo actually made profits under the MSA.

When approached for further comment by ITWeb, DHA ministerial spokesperson Siya Qoza said: “We respectfully decline to comment because the matter is in court.”

NEC declined to comment further on the same grounds.

EOH and IDEMIA are opposed to a court challenge, and accuse NEC of acting in its own commercial interest.

Unavailability of resources

In his affidavit, Paul Jeremias, IDEMIA country manager, said: “The completion of the project is above 90%, considering the first six work streams are the most workload-intensive and are almost completed. The two outstanding work streams relate to testing and implementation. These two work streams could not be completed due to unavailability of key DHA resources.

“IDEMIA substantially performed its obligations in terms of the amended and restated master turnkey solutions agreement between IDEMIA and the DHA. Further, IDEMIA would have completed the implementation of ABIS by the time this application is determined.”

Jeremias confirmed receipt of ITWeb’s request for comment but IDEMIA had not responded by the time of publishing.

The parties are waiting for a new court date after the matter was postponed on 7 February by mutual agreement.