An auditor-general probe into ICT deals worth over R3 billion at two Gauteng departments uncovered missed deadlines, overspending, and insufficient procurement practices.
The AG's latest report on the use of consultants at the Gauteng Shared Service Centre (GSSC) and the provincial health department found issues with several of the deals.
In total, the agreements (including non-ICT contracts) the AG found issues with were worth R3.9 billion at the GSSC - the bulk of which was spent on the controversial Gauteng Online project - and another R237.7 million at the health department.
The report shows that from 2008 to the end of the 2011 financial year, the Gauteng Provincial Government spent R14.9 billion on consultants in total.
Although National Treasury and the Department of Public Service and Administration have issued guidelines to improve the overall management and use of consultants "many weaknesses still exist", says the report.
Of the five projects probed at the Gauteng Department of Health, four were found to have deficiencies, such as a lack of internal capacity, performance management and monitoring, training and transfer of skills, and projects not being wrapped up.
At the GSSC, there were similar issues highlighted with three of the five projects the AG looked into, which includes the controversial Gauteng Online contract, pegged at a "best available" value of R2.5 billion.
SMM Telematics Consortium, which is now Cloudseed, won the initial tender and, despite several issues with the contract, was awarded another phase after the concept was reshaped to become part of the provincial broadband network. Cloudseed has won a R107 million contract to provide connectivity for the project, now called the e-Learning solution.
Gauteng Offline
Gauteng Online started in 2001 and moved from the education department to the GSSC in 2007, at which point a tender was issued and awarded for five years at R2.5 billion.
The idea behind the project was to give every learner an e-mail address, free Internet access, and create a technology-enabled learning environment. However, the AG notes the criteria for the bid were only finalised a month after it closed, making the evaluation of tenders unfair.
The lack of a project implementation plan meant deliverables were delayed and the consultant implemented the project without proper guidance or a signed implementation plan, notes the report. The AG also found several milestones were missed.
Of the 405 classrooms that were meant to be converted, 322 were outstanding by the March 2009 deadline. This was in addition to no printers being installed, and no infrastructure renovations being completed by the deadline. The AG also found training was not done, and the project was not properly monitored.
Another consultant was awarded a R22.5 million contract to render project and programme management services for Gauteng Online, which ended in March 2009. However, the deal was extended without alternatives being considered. "The consultancy contract was extended at a further cost of R15 339 792, which was 68% of the original contract value."
The AG also found issues with a call centre contract, after a variation from normal procurement procedures was authorised, because the usual process would have led to timeframes being missed. The deal was outsourced to a consortium for five years for a total value of R1.1 billion.
Despite the deviation, deadlines were missed and the provincial government eventually pulled the deal in-house, under the Department of Finance, which led to the demise of the contractor, Sibize Calling International, then a subsidiary of the defunct Dialogue Holdings.
Canning the deal cost government R279 million, in addition to payments of R219 million paid over two years.
Missing paperwork
The AG also raised issues with the Gauteng health department's 1999 contract for a barcoded asset audit fixed asset register, which was still running in 2010 after various extensions. The consultant was paid millions, but the initial contract could not be found, and the AG says there was no paperwork to "substantiate [a] R16 million payment" to the consultant.
At least R35.7 million was paid to the consultant for an asset management system and physical asset verification. Yet, the project contributed to adverse audit opinions two years running, because the AG could not verify the department's fixed assets, notes the report.
In addition, the department's smart card pilot project started without the contract being signed, and was then paused so the paperwork could be inked. Several issues, such as a lack of terms of reference, led to the pilot project not being completed.
"The department paid an amount of R36 414 555 of the contract value of R36 981 597, without the results of the pilot phase being used for the main project," notes the AG. The project was meant to facilitate the transformation of healthcare service delivery in Gauteng and was meant to establish methodologies that would be used to deploy the main project.
The AG also found the department did not verify the consultant's work before making payment, and "it could not be determined whether the consultant's work was valid and satisfactory".
In addition, the AG found a R29.7 million local area network (LAN) was awarded to a consultant based on functionality, when the bid only came in at third place on this measure. The LAN was not implemented at all facilities, with the project not being implemented at 11.2% sites, it found.
The consultant was paid for 93.6% of the agreed amount, despite only completing 88.8% of the project, said the AG. "The department did not match the percentage of completion of work to the amount payable."
Sorting it out
As a result of the issues with procurement, which the AG shared with the departments and provincial executives, several commitments have been made, says the AG. "Key among these is the institution of immediate action to address the findings and recommendations identified in this report."
The GSSC, which has since been incorporated into the Gauteng Department of Finance, will develop a strategy to deal with using consultants and has set up a project management office. This office is handling the school network and is performing a monitoring and evaluation role.
Finance has also established a governance framework, and its legal and forensic teams are "investigating certain transgressions," says the report. The department tells ITWeb it has "deployed" a combination of external and internal skills for tasks that need "unique" capabilities as it had limited internal capacity.
Procurement procedures in terms of the Public Finance Management Act are being implemented, and it is reversing the historical situation that led to payments to suppliers being delayed, it adds. In the first quarter, it hit a 90% payment rate.
The health department has installed a contract management unit, terminated the use of some consultants and is filling posts. An unnamed ICT deal has been referred to the Special Investigations Unit, says the department.
The department adds it has taken steps, including seeking to fill vacancies and changing consultants for the asset-management project. It has also established a library to house contracts.
It has implemented a turnaround strategy to ensure similar occurrences do not happen again and is working with the AG's office to implement its recommendations.
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