South Africa 20.10.2016 07:01 am

Manuel in Hawks’ sights for ‘R100m contract that cost R1bn’

Former Minister of Finance Trevor Manuel testifies about the arms deal before the Seriti Commission on June 11, 2014 in Pretoria, South Africa. Manuel said spending in the so-called arms deal was within the Parliament-approved budget and no separate money was allocated for the purchase. President Jacob Zuma appointed the commission in 2011 to investigate alleged corruption in the multi-billion rand deal. Picture: Gallo Images / Foto24 / Lisa Hnatowicz.

Former Minister of Finance Trevor Manuel testifies about the arms deal before the Seriti Commission on June 11, 2014 in Pretoria, South Africa. Manuel said spending in the so-called arms deal was within the Parliament-approved budget and no separate money was allocated for the purchase. President Jacob Zuma appointed the commission in 2011 to investigate alleged corruption in the multi-billion rand deal. Picture: Gallo Images / Foto24 / Lisa Hnatowicz.

It seems taking down one finance minister isn’t enough for the elite crime-fighting unit – now they seem to be going after a former one too.

With Finance Minister Pravin Gordhan facing criminal charges, The Citizen has reliably been informed that the Hawks are widening their scope of investigation and looking at possibly laying charges against his predecessor, Trevor Manuel, as well.

ALSO READ: Guptas no longer quite so delighted about Gordhan

Manuel allegedly approved a contract on modernisation at the SA Revenue Service (Sars), worth R100 million, currently standing at R1 billion, without following due processes.

According to papers seen by The Citizen, the R100 million contract was awarded to Barone, Budge & Dominick (BB&D), allegedly without going out to open tender. Instead, three potential service providers were invited and BB&D was appointed on exemption. It is also claimed Manuel’s then deputy, Jabu Moleketi, indicated he needed more information before taking a view on the matter.

Furthermore, documents seen by The Citizen show that Sars was criticised for allegedly relying on the former Sars general manager of strategy, modernisation and technology, Barry Hore’s “personal experience” and “memos” for the project.

Based on these allegations, the founder of the Decolonisation Foundation and former government spokesperson Mzwanele “Jimmy” Manyi has laid charges of “corruption and irregularities” against Manuel, his successor and former Sars commissioner Pravin Gordhan and Hore.

The Citizen understands the matter has been referred to the Hawks for an inquiry and the public protector for assessment.

Who got the memo?

A memo dated November 2, 2006, sent from Gordhan’s previous office at Sars to Manuel, shows that on November 23, 2006, Moleketi allegedly noted that “this read was complex, would need more information to state a view, hence can only note”. Moleketi then drew a line through the “recommended” and “not recommended” options and instead chose the “noted” option. On the same day, however, Manuel approved the memo.

A Sars Strategic IT Assessment, dated June 2, 2015, prepared by Gartner Consulting, states the “modernisation agenda was largely driven by a single individual and business had little say in IT investment”. The assessment notes that the modernisation process worked on a principle of “memos” describing what was going to be done.

It further states these memos included elements of alignment with Sars’ business plan, but was never 100% matched with the business needs.

The assessment reveals that the contract was R100 million for customer management and a subsequent contract for R10 million was awarded, also on an exemption for an automated tax processor. By June last year “Sars have spent approximately R1 billion on BB&D services” and “Sars has spent approximately R3.997 billion on modernisation”, according to the assessment.

Gartner further recorded that a memo “to minister Manuel, dated 2/11/2006, reflects that Hore was only prepared to recommend IBM, Accenture and BB&D as a result of his past experience with these vendors”. According to the Gartner assessment, an open tender process was conducted to which three consortia responded, one of which was disqualified.

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The other two went through the Sars evaluation process and the Accenture consortium achieved the highest score. Gartner’s assessment confirms that BB&D was not part of the original Accenture consortium and were brought in through a tender exemption in terms of Treasury Regulation 16A6 4.

The motivation for bringing in BB&D through an exemption process was set out in the memo addressed to Manuel. The memo records that one of Sars’ service providers was “unlikely to remain a viable and affordable option” and that Sars had approached three alternative service providers to submit proposals within four weeks.

‘Better value for money’

The memo explains that BB&D was eventually chosen as it offered a “bespoke solution” to Sars’ needs and “a better value for money solution”.

Hawks spokesperson Brigadier Hangwani Mulaudzi and public protector spokesperson Oupa Segwale confirmed receipt of a complaint. The Citizen has seen the complaint, which asks that “irregularities and corruption” involving Manuel, Gordhan and Hore be investigated.

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This is not the first time grievances about the appointment of BB&D were referred to the public protector. In 2010, a complaint by Sars’ former regional operations manager Kenneth Fitoyi to the public protector included the appointment of BB&D, citing similar concerns now raised by Manyi. But Fitoyi says the then public protector, Thuli Madonsela, did not investigate the matter, citing it did not fall within their mandate.

Mulaudzi said: “The Hawks have registered an inquiry and it will go through a process of thorough analysis and, once we are done, we will decide whether there is a case or not.”

The public protector’s Segwale said the complaint “will be assessed for jurisdiction and merit. Until the assessment has taken place, we can’t say whether it will be investigated.”

Sars spokesperson Sandile Memela said they were aware the Hawks “are investigating the matter. Sars is fully cooperating.”

‘Don’t f***ing bother me’

Approached for comment last week, Manuel said: “I don’t talk to newspapers. Goodbye, thank you.” Pressed further for comment, an angry Manuel lashed out: “I won’t respond to rubbish, okay. Is this Mzwanele Manyi? Tell him to go and take a flying … rude word. Don’t call me again about rubbish like that. Go and take it to the Hawks and do whatever you want to do. It is rubbish, okay, it is rubbish, rubbish, rubbish, okay?

“Don’t ever call me about anything that Mzwanele Manyi has said, because you will start off my day on a bad note. I don’t want that. I don’t know where you got this number from but please stop calling me.”

LISTEN TO THE AUDIO BELOW OF MANUEL REFUSING TO COMMENT:

Yesterday, The Citizen requested Manuel’s email address to send him questions in writing, but he declined, saying: “I’m not a public person. This is my private number. Don’t ever call me ever again. Take out my number out of your bloody system. I’m not here for you, go away. Don’t bloody f***ing bother me. I won’t bloody give it (the email address) to you.”

‘I’ve never heard of this before’

Speaking on behalf of Gordhan, Yolisa Tyantsi said a response would be released when approached by the Hawks and the office of the public protector.

Moleketi said: “I will never comment because I am hearing it for the first time from you. I haven’t heard anything from anybody. I don’t know what are the legal implications. I’d rather not comment. I have not seen any document.

“You are just a voice on the other end of the telephone. I don’t know what you are talking about. So, I can’t comment on things that I have not seen.”

The Citizen suggested sending him questions in writing and he said: “No, no. I’m on my way to the airport. I am out of South Africa.”

A second request was made and Moleketi said: “I’m not interested at all. Don’t even bother to send questions. Go find someone else; don’t waste my time.”

Hore said: “I’m afraid I’m unable to comment on what is being said. I understand (these are serious allegations), but I am unable to comment. Even if you send me questions in writing I am unable to comment.”

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Gartner’s Lisa Lawlor and BB&D’s CEO Peter Searle said they were bound by confidentiality agreements and referred all queries to Sars.

How BB&D came to replace previous service provider Oracle

Barone, Budge & Dominick’s (BB&D’s) appointment and contents of the memo dated November 2, 2006, in which the office of the commissioner of Sars – at the time, Pravin Gordhan – highlighted the motivation to replace Oracle with a new service provider.

  • Oracle had stated that it would require an urgent response to its new proposal by the end of September 2006, as it was under pressure from IBM to resolve the situation.
  • In the opinion of the general manager of strategy, modernisation and technology (Barry Hore) and from his personal experience there were only a few suppliers that he was prepared to recommend and that had the necessary capability and track record to deliver the functionality required to provide a suitable alternative, given the constraints, time pressure and criticality involved in rescuing this transaction.

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  •  IBM, Accenture and Barone, Budge & Dominick (BB&D) were approached with the request, at their own risk, to within four weeks make a proposal.
  • IBM declined to participate. ɳ Accenture offered a turnkey solution consisting of a hybrid of propriety and mainstream solution (SAP CRM & Accenture Revenue solution) at a contract cost of about R356 million and a total solution cost of approximately R529 million, which includes Sars’ internal cost. This option would far exceed the budget allocated for this initiative in Sars’ threeyear plans; and
  • BB&D offered a fit-for-purpose, turnkey, no-frills, bespoke solution, based upon software already developed by BB&D for similar projects for other customers.
  • The cost to deliver on original scope was approximately R100 million (software and maintenance costs of about R85 million, and hardware cost of about R15 million).

With the addition of Sars’ internal costs a solution cost of approximately R202 million for the original scope is expected. It should be noted that the cost is still a provision estimated and subject to a comprehensive project scoping and pricing exercise, which remains to be done.

  • The R15 million required for hardware was significantly less expensive than that required for the other options. It was stated this was affordable within refunds from Oracle.
  • Upon analysis, it was the opinion that BB&D offered the better value-for-money solution, dealing with the essential functional requirements and the needs of Sars without any unnecessary frills. In addition, Hore and his team’s previous working experience with BB&D reinforced the confidence of the supplier’s ability to deliver.

Some of the procurement and governance issues: 

  • Due to time constraints, substituting Oracle with a new service provider would require an exception to be made to Sars’ normal process. Legal opinion confirmed that this was possible, provided that solids grounds existed for doing so.
  • Treasury Regulation 16A6.4 was then enforced.
  • Sars still needs to satisfy itself that BB&D is BEE-compliant.

Some of Sars’ decisions: 

  • The programme team conduct a detailed six-week scoping exercise with BB&D and the key employees at Sars in order to confirm the current deliverable costings.

Financial implications as stated in the memo: 

  • A key factor in the choice of an alternative was clearly also financial. The original contract price payable to IBM/Oracle was R299 million (inclusive of finance charges and VAT). This amount did not include hardware/infrastructure, contingency or implementation costs.

Together with the fact that Oracle now holds the view that it is not a turnkey project, the total investment in accordance with Sars estimated would be between R900 million and R1 billion.

Agenda driven by ‘single individual’

When BB&D acquired the contract, through exemption, it was for about R100 million, comprising of software and maintenance for about R85 million and hardware for about R15 million. By last year, Sars had spent R1 billion on the particular service provider.

Although modernisation “did deliver value, as it created an electronic platform for tax administration”, in terms of “impact and value for money”, a Sars assessment roadmap, prepared on June 2, 2015 by Gartner Consulting, showed a medium rating.

Some of the issues raised in the roadmap were that decisions taken to proceed with “a certain vendor were not good”. And part of Gartner’s recommendations were that they should ensure that “contract renewals do not transgress the PMFA Act or the Competition Act and that mandatory compliance requirements are rechecked prior to signature of renewal in a timely manner”.

Other issues were that when modernisation started in 2006, there was no clear idea or strategy of what the end would look like, said Gartner. Again, “business seemed to have little or no say in determining the modernisation agenda and related IT investments, even though they signed off against it”.

Gartner also noted that “the modernisation’s agenda was largely driven by a single individual” and that the “agenda was not fully aligned with the business requirements at all times”.

“The modernisation process worked on a principle of memos describing what was going to be done. Furthermore, these memos included elements of alignment with Sars’ business plan, but was never 100% matched with the business needs,” revealed the assessment roadmap.

It also stated that an open tender process was conducted to which three consortia responded, one of which was disqualified. “The other two went through the Sars evaluation process and, from the documentation provided, the Accenture consortium achieved the highest score.

The evaluation process was audited by Internal Audit, after which the tender was awarded to Accenture. BB&D were not part of the original Accenture consortium and were brought in through a tender exemption in terms of Treasury Regulations 16A6.4,” the report stated.

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“A memo to Minister (Manuel) dated 2/11/2006 reflects that the GM strategy modernisation and technology was only prepared to recommend IBM, Accenture and BB&D as a result of his past experience with those vendors,” recorded Gartner.

“Achievements in modernisation were never mapped against actual business benefits delivered and cost incurred were not linked to benefits realised. Gartner therefore found it impossible to quantify the value delivered by modernisation.”

Seeking clarity on the leaked report, Gartner Africa Events & marketing manager Lisa Lawlor said: “We cannot discuss projects conducted for clients or the work produced. Therefore, I recommend you contact Sars directly.”

The sequence of events on how the replacement of Oracle with Barone, Budge & Dominick (BB&D) was approved:

  •  On November 2, 2006 a memo from the office of Sars commissioner Pravin Gordhan, titled “Renegotiation of Siebel (now Oracle) systems EMEA LTD/IBM UK LTD/IMB SA LTD/SARS Agreement” was sent to then finance minister Trevor Manuel.
  • November 13, 2006: Chief legal & policy officer JJ Louw and general manager of Strategy, Modernsation & Technology B Hore sign the memo.
  • November 14, 2006: Gordhan, signs the memo.
  • November 23, 2006: Deputy minister Jabu Moleketi noted: “This read was complex would need more info to state and view hence can only note”.
  • November 23, 2006: Manuel approves the memo.

vicky@citizen.co.za

 

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