Here’s how Western Cape’s R1.2 billion IT tender was riddled with irregularities

Parliament has heard the details of how a R1.2 billion tender at the State Information Technology Agency (Sita) was marred by irregularities.

On Friday, the Portfolio Committee on Communications and Digital Technologies received a detailed report on the matter.

The investigation was initiated last year after media reports and a complaint from a service provider raised concerns about procurement irregularities in the bid process.

The committee and Communications Deputy Minister Mondli Gungubele had directed the Sita to commission a forensic investigative report.

The five-year contract, awarded to the Blue Networks Consortium (BNC), was intended to maintain and expand local area network (LAN) services for schools in the Western Cape.

The investigation, carried out by law firm Cliffe Dekker Hofmeyr (CDH), revealed multiple flaws in the bidding and evaluation processes.

Investigation into Western Cape’s R1.2 billion tender

Tendai Jangara, director of dispute resolution and head of corporate investigations at CDH, informed the committee that the law firm received full cooperation from all relevant officials involved in the tender process, including those from Sita and the Western Cape Department of Education.

“We received all of the documentation we needed to deal with and this speaks to the integrity of our investigation,” she said.

Jangara described the forensic investigation as “very rigorous”, detailing how the law firm meticulously examined each step of the process that led to BNC being recommended and awarded the R1.2 billion contract out of 11 bidders.

She explained that the probe uncovered four material irregularities in the tender process, the first of which pertained to alternative solutions and two pricing options.

Jangara indicated that bidders were allowed to propose alternatives to the existing system supplied by IT company Xirrus.

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However, BNC’s interpretation led to two pricing options in its bid — one for Xirrus and another for Huawei.

BNC’s submission included two pricing options, a practice found to be unprecedented with standard bidding procedures.

Jangara noted that both the board procurement committee and the Sita board expressed significant discomfort regarding the dual-pricing issue.

As a result, a legal opinion was sought by the Sita board and it ultimately recommended BNC based on one of its pricing options to the Western Cape government.

She revealed that other bidders stated during interviews with the law firm they would have submitted multiple pricing options if the two pricing options had been explicitly allowed.

Watch the meeting below:

Additionally, the lack of clarity in the tender documents – requests for bids (RFBs) – contributed to the irregularities.

“So, we were satisfied having gone through the investigation and understood how this had played out that what was meant by alternative solution was an alternative to the Xirrus solution, providing a solution that could also work as Xirrus works and not the interpretation taken by BNC to mean that they could then provide two pricing options.

“We believe and having gone through this process that by providing those two pricing options and not even being able to complete the SBD 3.1 Form, this created an irregularity that fatally flawed this process,” Jangara explained.

Second irregularity

The second irregularity in the R1.2 billion tender involved compliance with local content requirements, a key factor in the evaluation process.

“This the irregularity that prompted the report to Parliament and then the instruction to the minister to investigate as one bidder became aware of the fact that there were irregularities in how local content was evaluated as part of the bidding and evaluation process,” Jangara told MPs.

She explained that National Treasury regulations mandated that at least 90% of the electrical cables used in the LAN services project must be locally manufactured.

The bidders were required to complete and sign a form to demonstrate compliance.

“It is incumbent on the bidders to ensure that they have completed the form correctly and it is then incumbent on the evaluators to ensure that they can see that the bidders have met the threshold of 90%.”

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Only three, excluding BNC, of the 10 bidders adhered to the local content requirements by properly responding and meeting the stipulated thresholds, according to the CDH report.

The law firm also found that the bidding process was tainted by the bid evaluation committee “extracting information from forms that had not been completed correctly”.

Jangara added that the bid evaluation committee had the legal option to seek clarification from bidders during the evaluation process.

“We do not know why this option was not utilised by Sita and the client at the time being the Western Cape.”

Sita board recommendation

The final irregularity pertained to the Sita board’s decision-making process in recommending BNC for the contract.

The investigation revealed that eight out of 14 board members voted in favour of awarding the contract to BNC.

One board member opposed the recommendation due to concerns over the two pricing options, while another member voted in favour on the condition that the matter be referred back to the bid procurement committee for further review.

“We established that in going through this process, only 57% of the board members voted in favour of this round-robin resolution and as a result what threshold needed to be met was 70% as per the MOI [Memorandum of Incorporation].”

Additionally, the investigation found that Sita’s company secretary had incorrectly tallied the board’s votes.

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In an attempt to address the error, the Sita board convened a meeting in 30 May 2023 to rectify the decision.

However, by then, the Western Cape Department of Education had already awarded the contract 11 days earlier based on the initial recommendation.

Jangara explained that Sita’s supply chain management (SCM) department had communicated the recommendation to the provincial department before the rectification could take place.

The investigative report recommended that the contract be reviewed, the tender process deemed unfair, and the awarding of the contract to BNC declared invalid and set aside.

It further called for accountability from all parties involved in the tender process, including the Sita board and its company secretary.

Consequence management

As part of consequence management, Sita suspended Tendai Vincent Mphaphuli, the company secretary and head of legal services, and Kenneth Pillay, an SCM executive, in November 2023.

However, both individuals filed disputes for unfair labour practices with the Commission for Conciliation, Mediation, and Arbitration (CCMA) following the initiation of disciplinary processes.

Mphaphuli successfully won his arbitration case on 30 October 2024, while Pillay’s case remains unresolved.

According to Yvonne Mkefa, a director of CDH’s employment law practice, both suspensions were lifted on 9 and 21 October, respectively.

“As so far as the internal processes are concerned, the disciplinary processes are still pending,” Mfeka said.

Western Cape privy to tender process

Jangara later told the committee that officials of the Western Cape provincial government were involved in the entire tender process.

“They would be the decisionmakers on the committees. They would sit on every committee. They were a party to the discussions that would happened there and then the voting thereof.

“So when it came to coming to the conclusion of this matter they had been part of all of the discussions, they had been part of the decision that were made through that process.”

In December 2023, City Press reported that the Department of Communications and Sita were considering legal action to compel the Western Cape government and the provincial department of education to withdraw the R1.2 billion tender.

The report also noted that the Western Cape Department of Education had ignored Sita’s recommendation to retract the tender.

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