Home Affairs wins ConCourt case over R1.5bn IT tender

The Department of Homes Affairs has won a long-running legal battle against two companies at the Constitutional Court (ConCourt), over a R1.5 billion tender for an electronic document management system.

The ConCourt dismissed with costs on Wednesday an appeal application by New Dawn Technologies and Valor IT over the contract that dates back to 2010.

This was the third defeat for the companies, after the Pretoria High Court last year and the Supreme Court of Appeal (SCA) in September dismissed their applications.

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Home Affairs Minister Dr Aaron Motsoaledi said he was ecstatic about the ConCourt judgment, which dismissed the application because it found it “lacks reasonable prospects of success. Consequently, it has decided that the leave to appeal must be refused with costs”.

Motsoaledi instructed his department to pursue legal costs against New Dawn and Valor IT, and wants National Treasury to blacklist them from doing business with the state. 

The matter started when the Department of Home Affairs wanted to digitise its records. In terms of the law, the State Information Technology Agency (SITA) – which provides IT infrastructure for government – had to issue a tender looking for a service provider on behalf of the department. But the tender was awarded to three companies; New Dawn, Valor IT and Ideco.

Treasury warning

Before any contract could be signed, or service level agreement could be finalised, National Treasury warned that there was no money for such a massive tender. As a consequence, Home Affairs could not go ahead with this contract.

The department’s spokesperson Siya Qoza said Ideco understood the position of government and let matters rest there. However, New Dawn and Valor IT decided they were entitled to state money in this regard and litigated against the department for R602 million and R28 million, respectively. 

Qoza said due to the claims by these two companies, the department’s audited contingent liability shot up to R2.1 billion in the 2019/20 financial year. Contingent liability in Home Affairs is the amount that companies and individuals claim by way of litigation either for contracts, as is the case in this one, or for Immigration or Civic matters. 

“As long as a public institution has contingent liability on its books, the Auditor-General will flag it each year as a risk because if the department cannot successfully defend the litigation and the money became payable, the budget of the department would be severely impacted. 

“However in this case, the department vigorously defended the matter and contended that there was no contract signed. But New Dawn claimed that they had bought equipment which, despite persistent request for evidence by the Department, they could not produce,” he said in a statement on Thursday.

Motsoaledi ‘baffled’ by legal action

Motsoaledi said he was “baffled” by the legal action pursued by the two companies against government for this huge amount of money. He said this was despite New Dawn and Valor IT knowing that they had never provided any service to the department.

“We are aware that it is the Constitutional right of individuals and companies to utilise the various courts of the country in pursuit of justice. However, we believe it is sheer opportunism, bordering on theft and corruption, for anybody to demand state money when they didn’t provide any services.

“We strongly discourage this kind of behavior,” the minister said. 

He said he intended to write a letter to Treasury to request that these two companies be blacklisted from doing business with the state. 

“This is not vindictiveness but it’s a warning to individuals and companies who believe that they can receive millions in public funds via spurious litigation,” he said. 

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