State to clamp down on tender fraud

Government will start implementing measures to cut down on tender fraud this year, in a bid to make sure taxpayers get value for their money.

State departments will have to establish “rigorous demand management procedures” and companies bidding for government deals will have to disclose all their directors. This will allow government to work out if the directors are tax compliant, and whether any government officials are bidding for a state tender.

Finance minister Pravin Gordhan made the announcement yesterday during the 2011 budget speech to Parliament. “Poor delivery and stealing from the fiscus are never acceptable,” he stated.

Government will also require departments to submit advance tender programmes, and limits will be prescribed for variation orders to “restrict significant changes to procurement orders”, noted Gordhan.

Last year, Gordhan said companies found guilty of tender fraud would be fined double the amount of the bid, and IT systems would come under “specialised scrutiny”, as government sought to crack down on wasteful spending.

Departments and state-owned entities have come under fire for wasteful expenditure and tender irregularities, which includes issues with tenders and spending at the State IT Agency (SITA), Department of Water Affairs, and the Companies and Intellectual Property Office (Cipro).

Gordhan said there are currently 53 investigations into procurement irregularities involving contracts worth R3 billion. About 65 people linked to these investigations have been charged and appeared in court, said Gordhan.

Service (SARS) is investigating another nine cases of tender fraud, with a total value of about R1.7 billion. SARS will also clamp down on winning bidders that do not fully “satisfy their tax obligations”, said Gordhan.

By the end of last month, the revenue service had identified about 13 000 vendors that had won tenders, and owed more than R1 million in taxes in total, added Gordhan.

Gordhan did not provide specific information about the tender irregularities and tax evasion. However, the ICT sector is not immune to tender fraud, as several departments have come under scrutiny recently.

Issues with irregularities in the ICT sector include SITA incurring R215 million worth of irregular expenditure in the 2009/10 financial year, on top of the R19 million uncovered in the 2008/9 financial year.

Tender irregularities uncovered at Cipro last year resulted in a R153 million contract - for a new electronic content management system, which had been awarded to Valor IT - being canned.

The Department of Home Affairs also scrapped two tenders for IT contracts. In 2009, the R114 million deal for smart ID cards was canned, because of irregularities around the awarding of the deal by SITA. In addition, Gijima's multibillion-rand contract to implement the department's “Who Am I Online” project was cancelled last April.

In addition, the Department of Water Affairs was found to have wasted money, after the auditor-general found an IT services contract had overrun to the tune of R1 billion, because the correct procedures were not followed.

“We have a shared responsibility to prevent corruption, and we call on all citizens to blow the whistle on corruption and to report any procurement irregularities to the relevant authorities,” said Gordhan.