SITA deviations and expansions: hearing

Public Accounts (SCOPA)

12 June 2018
Chairperson: Mr T Godi (APC)
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Meeting Summary

SITA appeared before the Standing Committee on Public Accounts (SCOPA) to account for deviations and expansions for 2016/17 and 2017/18. Concerns were raised on deviations for the renewal of licences which were a sign of poor planning. To address the challenge of licences, SITA revealed that it had employed 100 companies to develop customised systems for government, which would ensure organic growth of Small, Medium and Micro Enterprises (SMMEs), as well as build the expertise of young people.

The urgent sole supplier contract award to EOH for R22 million worth video conferencing equipment was highly suspicious and a request was made for the tracing of all that equipment. A deviation of R416 million for the procurement of intellectual property rights also did not make sense. SITA explained the deviation of R416 million meant that government would not have to pay licence renewal fees. Of concern was a deviation request of R1.9 billion for Broadband Infraco SOC to upgrade the SITA core network. Members could not understand how SITA could award a R1.9 billion contract without going to market.

SITA was third ranked for the largest amount of contract expansions (R150.8 million in Quarter 3 and 4 of 2017/18). Expansions were found that were a 100% higher than the original scope and not approved by National Treasury as in the case of Bowmans where the original contract was R495 400 but increased to R1.96 million for forensic investigations. The executive for supply chain management and the internal audit acting executive had since been held responsible for the Bowmans contract.

Questioned on consequence management, SITA confirmed that the human element was critical to SITA’s challenges with poor contract management, possible corruption, and lengthy processes. It had tried to minimise the human element by automating the system, while investigations into its Human Capital Management (HCM) and Supply Chain Management (SCM) had been initiated. This had led to the loss of 50% of the supply chain staff, the opening of two criminal cases in the HCM team, while investigations on the Forensic Data Analysts (FDA) contracts were ongoing. SITA also noted incidents of corruption in the adjudication process of government departments, which compromised the procurement process by the time these departments approached SITA. Future investigations into rigged bid specifications could follow.

Some Members felt the SITA Board had not been hands on sufficiently in dealing with SITA challenges. SCOPA would engage further with SITA once the forensic investigation was complete. It hoped that report would indicate that there was movement in the right direction.

Meeting report

The Chairperson remarked that the purpose of the meeting was to understand SITA’s use of deviations and expansions which had appeared to have become the norm in government bodies, and to satisfy SCOPA that SITA was not abusing the system. Apologies were received from the CEO who was incapacitated after running the Comrades Marathon.

Ms N Khunou (ANC) requested a formal apology from the CEO and wanted SCOPA to make a decision on whether it wanted to proceed without him.

The Chairperson replied that the Board Chair would account on behalf of the executive authority, while the CFO would answer questions related to day to day management decisions, especially those on finance. There would be another engagement at the end of June once the forensic investigation was complete.

Mr T Brauteseth (DA) asked about the extension and resale of licences which had been listed as an industry challenge on SITA’s schedules. How could the cycle be broken of IT companies having a hold over government in perpetuity? It was akin to ransom and akin to what happened to the Forensic Data Analysts (FDA) and the Property Control and Exhibit Management (PCEM) system. Could SITA provide a detailed response on how it was planning to handle this challenge?

Ms Rudzani Rasikhinya, SITA CFO, responded that SITA had directly engaged in original equipment manufacturer (OEM) / original software manufacturer (OSM) negotiations with companies such as Microsoft, to reduce payments to middlemen. This had led to the government saving R2.5 billion. It had also looked into the owning of IP by government to reduce costs related to the renewal of licences but an assessment on capacity to see whether skills were available had to be done. 100 companies had subsequently been contacted to develop systems customised for government so that government could own the IP.

Mr Brauteseth asked how long a licence typically lasted.

Ms Rasikhinya replied that it varied between three to five years but sometimes 15 years. It was wrong that SITA contracted for shorter periods because it would pay less for longer contracts.

Mr Brauteseth said that there was clearly a problem with planning. Whose fault was it that licences were not renewed for longer?

Ms Rasikhinya replied that Application Maintenance would be the line of business responsible as well as the hosting area. The majority of the deviations came from the SITA converged communications department.

Mr Brauteseth asked who made the decision to make short-term contracts. Was it the Application Maintenance unit or the CEO?

Ms Rasikhinya replied that contracts were based on the available budget and if the budget had not been appropriated, it became difficult to plan for long-term contracts. SITA confused the contract period and the Medium Term Expenditure Framework (MTEF) period because of poor market intelligence.

The Chairperson said that it was crooked reasoning to say that SITA would lack a budget in the next 10 to 15 years, when SITA was part of government.

Mr Brauteseth asked if it was dangerous to push licences when they expired, given the role SITA played. The employment of 100 companies to develop customised systems also raised a red flag. What was SITA doing in terms of capacity to ensure organic growth of young people who would become experts after a period of time?

Mr Zukile Nomvete, SITA Board Chairman, replied that SITA was changing its business model to develop SMMEs, which was the reason for the appointment of the 100 companies. It was planning to start hackathons and to attract young individuals into the organisation, who could help build a quasi Silicon Valley, so that intellectual property (IP) resided in the country. SITA had also engaged with OEMs to see there could be skills transfer to indigenise IP, as the use of foreign companies did not allow for prices to be locked from price fluctuation. This called for the use of more creative solutions.

Mr Brauteseth asked if SITA meant that there would be a marked decrease in deviations and expansions for licences in the following year because licences were cyclical.

Mr Nomvete agreed that there would be a gradual decrease.

Mr Brauteseth asked about the R10 million deviation for the maintenance of cabinets and UPS for Correctional Services by Telenetix Technology Solutions. The reason for deviation was there was no response from the market. Even though this deviation was supported by Treasury, did it mean that nobody in the market was interested in making R10 million except a sole supplier?

Ms Rasikhinya replied that the market did not meet the mandate and functional requirements of the Request for Bid (RFB). However, SITA had marked it as being possible corruption because there were many people who would be interested in grabbing the opportunity.

Mr Brauteseth asked what SITA was doing if it had identified that it was possible corruption.

Ms Rasikhinya replied that almost half of the people in supply chain had been dismissed while others had resigned.

Mr Brauteseth asked SITA to provide a future response on what had been done about Telenetix Technology Solutions, given that SITA had identified the contract award as possible corruption. Who was responsible for R6.2 million deviation for upgrade and maintenance of desktops and notebooks, which SITA had cited as having SCM irregularities? Were those who resigned being pursued to get the money back?

Ms Rasikhinya replied that the deviation was for the extension of the lease for desktops and their maintenance. A decision was made to hold all related procurement processes until the scope was well defined to ensure nobody was benefitting. This was why SITA said there might have been irregularities in the Accounts Control Management (ACM) process.

Ms Mimi Le Roux, SITA Executive Risk Manager, said that the SCM forensic investigation made it clear that SITA needed to look into investigating of lines of business. The reason for this was to identify possible corruption by the people who initiated the contract and drove the method of procurement, so as to clean up the lines of business.

Mr Brauteseth asked about the R9.1 million extension for maintenance of the SAPS switching centre and infrastructure.

Ms Rasikhinya replied that SITA went to the market to renew the contract but during adjudication, SITA realised that the SCM process was compromised because it picked up irregularities. The tender was therefore cancelled and SITA decided to extend as the switching centres needed to be maintained.

Mr Brauteseth asked about the installation of video conferencing equipment worth R22 million, where SITA cited that the client requested the service provider, EOH. If it so happened that SITA or SAPS liked the supplier, it had to show that the supplier was the only one able to provide video conferencing in the whole country, which was certainly not the case. The second reason for deviation was urgency. How could urgency be a reason?

Ms Rasikhinya explained that SITA had the contract RFB 1221 for network equipment including video conferencing equipment, where a few companies won the bid for different products, including EOH. SITA had an engagement model where departments could engage directly with suppliers. Therefore SAPS was already in the process of contracting EOH at the time that SITA was taken to court for the RFB 1221 contract, which was expiring in Feb 2017. As the contract was coming to an end, SAPS approached SITA to assist in procurement because it could not contract on a contract which had ended. The urgency arose because SAPS was already in the contracting phase when SITA took over the process. SITA could not go to the market because the budget was for 2017 and could not be executed in the next financial year.

Mr Brauteseth asked if it was fiscal dumping. Was SITA saying that EOH won on a competitive bidding process?

Ms Rasikhinya replied that EOH won on a competitive bidding process. It was a matter of identifying the needs of SITA and contracting the supply.

Mr Brauteseth said that if SITA had prequalified EOH and then recommended EOH to SAPS such that it did not have to go through the bidding process again, why was the contract classified as single sourcing?

Ms Rasikhinya replied that SITA should have interpreted the law to the latter. The contract RFB 1221 which EOH won fairly expired on 4 February 2017, but the procurement process was not finalised before the contract came to an end. SAPS could not go ahead and use RFB 1221 because the court had denied the use of the contract. SITA could therefore only contract on the basis of single source and not RFB 1221.

The Chairperson said that single sourcing was therefore the wrong term.

Mr Brauteseth asked where the video conferencing equipment was installed. How many links were there? Which offices were linked up?

Ms Rasikhinya was not able to provide details of where the video conferencing equipment was installed but would provide the information at a later date.

Mr Brauteseth asked if SAPS handled the arrangement of equipment between the supplier and themselves. Did SITA have any insight or oversight where the equipment was installed?

Ms Rasikhinya replied that SITA had insight of installation if it did the procurement as the contract was between SITA and the supplier.

Mr Brauteseth requested where every single piece of equipment was installed and used. What was the story behind the R10 million supply of colour paper, paper boards and continuous paper from Beta Print Centre. Could SITA explain the problem it had with the fair bidding process? What was its corrective response turnaround plan?

Ms Rasikhinya replied that it was for high speed printing but at the close of the bid SITA received a letter from the successful bidder saying that they would not be able to honour the contract. SITA then had to extend the contract from Ubuntu Paper Supply. SITA subsequently issued a replacement bid and awarded it to a new company.

Mr Brauteseth asked about R416 million tender for the procurement of intellectual property rights which apparently did not require the approval of Treasury. How did one procure intellectual property that was ideas? How was it a deviation?

Ms Rasikhinya replied that it meant that the IP belonged to government and government would therefore not have to pay a licence fee in perpetuity. The system was going to be used for the automation of procurement in government entities. At the time, SITA had an evergreen contract with Intenda where 48 entities were using the system to secure end to end procurement processes, Treasury asked SITA to purchase the system on behalf of government. The developer then handed over the IP and source code to SITA which cost R195 million of the R416 million. R120 million was used for maintenance and support for 5 years and R60 million was used for 12 resources to deploy the system to government.

Mr Brauteseth asked if Intenda was supposed to help with buying IP, did government still have to pay for IP after the system purchase. Was there extra IP that came with the system? What did the system actually do?

Ms Rasikhinya replied that the system worked like the Amazon system that would be used to assist in the procurement process. Tenders would be advertised on the system and companies would respond on the system. The whole process from evaluation to award would be done on the system.

Mr Brauteseth asked what the Intenda IP was now called and if all government departments were using the system.

Ms Rasikhinya replied that it was called the G-system and it was yet to be rolled out to departments and entities.

Mr Brauteseth asked about R18 million SAPS licence renewal for one-year maintenance and support of the Analytical Capabilities and Visualisation System (VIMS) solution. Why did SITA consider it corrupt and what was it doing about it?

Ms Rasikhinya replied that it was related to the ongoing forensic investigation. Based on information received, SITA had cited possible corruption from line of business.

Mr Brauteseth asked if the investigation was still ongoing. Had all the contracts been put on hold pending investigation? Did it include Gijima and Khauleza Consortium.

Ms Le Roux replied that the investigation had not yet been extended to Gijima and Khayalesa. SITA wanted to review the whole service level agreement and look at the bigger contracts. There was a contract with a tender at the moment for the forensic department to be appointed and the payment was an upfront annual licence fee. The licence had expired and SITA was busy with litigation for continued use post contract.

Mr Brauteseth asked about the R448 000 procurement for secure certificates. Could SITA explain why it thought the contract was possible corruption?

Ms Le Roux replied that it was based on the initial observation that SITA needed to look at the security products it continually used single sourcing procurement for and the certificates were part of that.

Mr Brauteseth asked about a deviation of R11.8 million for a lease extension from East and West Investments while awaiting transition into appropriate premises.

Ms Rasikhinya replied that this was where the switching centre and office accommodation for the region was hosted. It was a transition to appropriate premises because there were discussions between SITA and Limpopo government to set up a techno park, where the land and building was going to be provided by the Limpopo government. SITA could therefore not enter into a long term lease or acquire new accommodation because it was in the midst of talks. It was something that SITA was looking into for majority of the provinces where SITA would set up techno parks to save money for government.

Mr Brauteseth asked about a deviation not approved by Treasury for SAPS STRLAB system for 24 months, which was worth R4.3 million. How could a sole source contract not require Treasury’s approval? Who was Labway and was it the only company that could provide these services? There was also continuity of service that needed to be explained well.

Ms Rasikhinya replied that it was a system used for DNA analysis.

Mr Brauteseth asked what support was being given by Labway for R4.3 million. How many systems was Labway supporting?

Ms Le Roux replied that it was a database for DNA records that linked to the PCEM system. It fell under PCEM reviewing the system.

Mr Brauteseth asked what was needed to maintain a database. What was the actual maintenance done by Labway?

Ms Le Roux was not sure but she thought it was for daily maintenance on integrity checks.

Mr Brauteseth said that SITA should have the information because it was the IT expert and had procured and agreed to it.

Ms Rasikhinya asked to provide SCOPA with information at a later date.

Mr Brauteseth said it was unacceptable for them not to know because they were at the apex of SITA.

The Chairperson further pointed out that the meeting last week was postpone because SITA wanted more time to prepare itself. SITA should therefore provide SCOPA with the details especially because it was the one that requested the deviation. It seemed that SITA was always led by SAPS and obliged SAPS requests, which was why it was unable to explain what Labway was supplying.

Ms Khunou said that SITA should have prepared itself for the meeting especially as the spreadsheet on deviations was provided by SITA.

Ms Rasikhinya replied that there were two technical developers who assisted when the system had issues. The system was specifically used for rape cases, crime index and references, and if it was not working SAPS would not be able to go to court with the required evidence. The amount awarded was less than R4.3 million and was contracted for less than R3 million.

Mr Brauteseth asked why SITA did not have “less than R3 million” on the spreadsheet.

Ms Rasikhinya replied that SITA decided to maintain the list that was sent to Treasury because SCOPA wanted to know the reasons SITA entered into contracts when Treasury had not approved them.

Mr Brauteseth said that it compromised the integrity of the information provided.

Mr M Booi (ANC) added that the CFO did not seem to know what was going on. He asked her to take responsibility on behalf of SITA and give proper direction and not mislead SCOPA.

Ms Rasikhinya clarified that the request to Treasury was sent before the procurement process. This meant that the adjudication committee members would sometimes ask SITA to go back and negotiate. The amount on the spreadsheet was therefore the R4.3 million which was requested to Treasury but not granted.

Mr Brauteseth asked how many SAPS forensic labs were there in the country.

Ms Rasikhinya was not aware.

Mr Brauteseth said that there were about three labs in the country. SAPS had no qualified forensic auditors in its entire service. Were there no IT people within SAPS so that outside companies had to be contracted to maintain the database? Could a report in writing be provided on what the money was spent on for the Labway maintenance of the SAPS STRLAB system?

Mr Brauteseth asked about a deviation request for R1.9 billion for Broadband Infraco. How could there have been an attempt to award a single contract to Broadband Infraco for R1.9 billion?

Ms Rasikhinya replied that Broadband Infraco was the current service provider for the SITA core network and had a ten-year contract that would expire in 2023. The core network needed to be upgraded to a certain capacity and that was why SITA looked to extend the current contract with Broadband Infraco to cater for the SA Connect project. It did not make sense to go to the market to award something within the same pie as the core service provider, to a different service provider.

The Chairperson asked SITA to speak to the reasons Treasury gave for declining instead of explaining why it had requested the deviation.

Mr Brauteseth requested SITA to provide the actual reasons why Treasury declined.

Mr Nomvete replied that it was because of the lack of a competitive process.

Mr Brauteseth asked why Treasury did not support the extension of the Bowmans contract.

Ms Rasikhinya replied that the reasons for urgency and extension were not justifiable.

Mr Brauteseth asked if SITA agreed that Bowmans had done quite a bit of good work to clean its ACM space in terms of consequence management, which SCOPA liked to see. Was it a fair statement to make?

Ms Le Roux agreed that Bowmans had done so in both SCM and HCM at SITA.

Mr Brauteseth asked why SITA “stacked up its contract and put it in a regular position” if it appreciated Bowmans’ work. It was not helpful or productive because it put its continued work under a cloud.

Ms Le Roux asked Treasury to respond.

Mr Brauteseth said that SCOPA demanded consequence management and he wondered if this was sabotage. He got the impression that SITA was taking matters seriously and was trying to do things right. However, a R1.9 billion deviation application to Treasury without going to the market made the assurance shaky. It should strive to move from the old SITA towards the new SITA and sort out licences.

Mr Booi asked Mr Brauteseth not to conclude on behalf of other Committee members.

Ms Khunou said that SITA was having problems and it was important to get to the bottom of the problems. The SITA Board was not as hands on as it should be. Who initiated and approved a procurement process between SITA and the government, who determined the budget, who came up with the technical specifications and adjudicated and approved tenders?

Ms Rasikhinya replied that there were two ways of procuring in SITA. One was through a procurement agency which was given the task and had a budget, which was further confirmed by government. The agency drafted the spec which was approved by the agency’s own committee and then forwarded to SITA for review. After review, the spec went back to the SITA accounting officer for signoff and sent back to the agency who advertised the bid. Once the bid was closed, the technical evaluation was done by a majority of the agency members and either a technical person or ACM specialist from SITA or both. Adjudication was then done by SITA and went to different committees depending on the amount, who would recommend the successful service provider to the agency which would appoint the service provider. The second option was when SITA was the contracting agent where SITA provided requirements and the budget. SITA developed the specification which went through the bid specification committee, where it was approved. Once requirements were received from SITA, a Procurement Business case was opened which moved from the line of business responsible to the CEO or executive concerned for approval. Evaluation, adjudication and award was done by SITA. The contract was also drafted by SITA and entered into with the service provider.

Ms Khunou asked why SITA deviated so much when it understood the process well. The CFO was asked why there were problems in SITA?

The Chairperson asked what the driver of the deviations was.

Ms Rasikhinya replied that most of the deviations in 2016/17 were for sole service providers where government had invested money into a specific system and therefore had to go back to the OEM for renewal of licences. Some extensions were due to SITA not processing things on time as the turnaround time for the ACM process sometimes took as long as eight months. Another reason was possible corruption which was identified in the ACM and supply chain investigation. Deviations also happened when the spec was not defined properly from a technical point of view.

Ms Khunou asked if the officials were they still part of SITA. Had they being disciplined? What had happened to them?

Mr Zukile Nomvete, SITA board chairman, replied that SITA suffered from poor contract management which was deliberate, and it started from bid specification where the bid was manipulated. The human element was critical to SITA’s problems. SITA had tried to automate everything to minimise the human element. Adjudication was done by the respective government department and came to SITA when it had already been cooked. There had been a lot of double-dipping in the board procurement committee. If it was at the level of the board, then the entire system was corrupt. The investigation had led to a lot of people resigning and criminal charges had been laid against corrupt elements. If SITA could eliminate the human element from bid specification, it would be able to control the process.

Ms Khunou said that the SITA board chairperson had good thoughts but they were not relevant to SITA, because SITA was not moving towards what the good thoughts were saying. The good thoughts had to be translated into action and it was obvious that there were officials within supply chain who were ensuring that the system collapsed. What was being done about those officials? Had they been punished?

Ms Le Roux replied that SITA had already lost 50% of ACM staff because of the forensic investigation. A forensic investigation on the lines of business for bid specification was however needed to enforce consequence management.

Ms Khunou raised concern about the consequence management process which had not been helpful, because those implicated had managed to resign. She suggested that SCOPA find a way of calling back implicated individuals who had left government departments. However, SCOPA needed enough information from the entities on these people.

The Chairperson said that SITA would reconfirm its consequence management after the forensic report was received in June. It would have a discussion on the action to be taken on the individuals identified.

Ms Khunou asked about the Broadband Infraco extension of licences which already had a long term contract but SITA still wanted to expand. How did SITA expand a lease for accommodation in Polokwane and Durban? The initial lease for Polokwane was R 1 million but went up to R26 million and the value of the contract expansion was R11 million. In the case of Durban, it was R7 million and went up to R99 million while the value of the extension was R58 million. She also asked Treasury to shed light on the Intenda contract.

Ms Rasikhinya replied that the long-term contract for Broadband Infraco was for infrastructure where the return on investment would be realised only in the long-term. Broadband Infraco was also a state owned entity which gave SITA the reason to extend for the SA Connect scope.

In the case of Durban lease, SITA went out to the market but it was not responsive, especially since SITA was looking for a green building and looking to set up a techno park. SITA had been in Durban since 2002 which explained the large amount. SITA was in discussion with Dube TradePort to see how SITA could work in their area and establish a techno park with it.

Mr E Kekana (ANC) asked why SITA entered into a contract with the lease company but still went out to test the market.

Ms Rasikhinya replied that in cases where there was a lease agreement, SITA advertised for a bid before the lease contract came to an end so that SITA had time to move. The bidding process in this case did not yield a positive response. That is why it extended the lease in the same building after the bidding process failed.

Mr Solly Tshitangano, Director: SCM Compliance Monitoring at Treasury’s Office of Chief Procurement Officer, said that the Intenda contract was not done through a deviation. The principle remained the same in the sense that SITA had to test the market to see if there were other suppliers with a similar procurement system. This also applied to buildings where SITA had to test the market as leases were about to expire. This is because new buildings could have become available or estate agents who could be aware of other buildings. If there were no options available after testing the market, then SITA would be allowed by Treasury to extend at reasonable and competitive market rates.

Mr D Ross (DA) asked about economies of scale which had saved the fiscus R2.5 billion. Were economies of scale not in contradiction to the competitive bidding process, given the high value of the contracts? Were they not two competitive ideologies? In which areas did SITA enforce the economies of scale model as opposed to the competitive bidding process? Was it for licences only or maintenance and support also?

Ms Rasikhinya replied that it was quite difficult to balance because contracts had to be awarded in a cost effective and fairly competitive manner but SITA had separated licencing from services. For licences, SITA had entered into agreements with all OEMs where government was spending a lot of money and it had negotiated discounts of almost 40%. For services, SITA would go to the market because services offered a space for SMMEs to penetrate.

Mr Ross asked if SITA had sensed collusion in the industry and how it had addressed this concern.

Ms Rasikhinya replied that a few cases had been noted and it had been referred to the Competition Commission which led to service providers being disqualified. SITA had also been able to pick up collusion during the adjudication of different bids.

Mr Ross asked about skill competencies in SITA. Did SITA use consultants, how often did it use them and what was the cost of consultancy?

Ms Rasikhinya replied that SITA had a consultants budget of R100 million and consultants were used in OEM negotiations because they understood the industry and had the muscle. In developing systems, SITA technical developers were complemented by the consultants and the 100 companies contracted to customise systems for government.

Mr Ross asked if the use of outsourced agents encouraged or discouraged corruption, if SITA had sensed collusion in the board on contracts. Were contracts drafted by an outsourced firm or SITA’s own team?

Ms Rasikhinya replied that SITA had its own legal team, but in complex contracts it involved legal firms to draft contracts on its behalf.

Mr Booi asked what the SITA Board had done about the lack of capabilities at SITA in relation to the National Development Plan. What did it think about SITA which appeared not to have the capacity?

Mr Nomvete replied that the Board had tried to enhance skills and eliminate the human element through a new procurement system. It had implemented a new business model to kill the mindset that SITA was only there to procure. It tried to recruit the best people to join the organisation who sometimes found it difficult to stay because of inherent historical problems within SITA. The process of trying to clean up had taken up much of the attention of SITA which resulted in investigations. The Board had ensured that no cancellation of tenders was made unless the Board had been informed why.

Mr Booi asked if SITA had informed Treasury or the Minister about the challenges it faced. Could it provide a breakdown of the problems it faced to SCOPA so that it could assist? This was also because SCOPA had an attitude towards SITA and its failings thus the challenges facing SITA should be shared.

Mr Nomvete replied that he had spoken to the Minister and the Director General about the challenges facing SITA and informed them of the death threats that employees were facing. It had provided the National Intelligence Agency (NIA) with information and had gone as far as using personal resources for security as nobody would have wanted to work for SITA for fear of their safety. If SITA did not get it right, it would be difficult to attract the best talent going forward. The new business model wanted to ensure permanency and reduce turnover which usually opened up the organisation to more challenges.

Mr Kekana asked if the forensic investigation had been outsourced. If so, what were the terms of reference for the forensic investigation, when did it start and when did it end?

Ms Le Roux replied that Bowmans investigated the Human Capital department and had fully concluded the process. A number of individuals had resigned while others were dismissed and two criminal cases had been opened. Cyanre was appointed to investigate ACM and results would be provided. There were outstanding disciplinary cases linked to the FDA and SITA was asked by the Independent Police Investigative Directorate (IPID) and National Prosecuting Authority (NPA) not to proceed with internal disciplinary cases as they wanted to use them for evidence in their case. Bowman Gilfilan was currently doing a forensic investigation on FDA related companies for the Rofin contract and Investigative Software Solutions (ISS) which will be submitted at the end of June. Fundudzi Forensic Services investigated ACM in the regions and would provide a report at the end of June.

Mr Kekana asked about the lease agreement. If SITA was looking for a building it had to go out and do its own research before it compiled the specifications. However, SITA had replied that in some cases it did not get what it wanted. SITA had looked for a specific office, occupied the office and when the contract came to an end, it applied for a deviation on the basis that it could not find another suitable office in the area.

Ms Rasikhinya replied that SITA went to the market with a specification similar to what SITA was currently occupying, but that process was a desktop activity as it did not have capacity to send individuals out. It was true that SITA needed to do due diligence to gather market intelligence in drafting the specification, to ensure it did not advertise for a building that did not exist. SITA had failed in this regard.

The Chairperson said that SITA could have been making impossible specifications so that it had to remain where it was.

Mr Kekana agreed with the Chairperson because the answers provided did not make sense. ACM needed to be tightened because corruption lay in the bid specifications which were sometimes designed outside the market.

Ms Chiloane raised concern about SITA ranking as third highest government entity for expansions in Quarter 3 and 4 in 2017/18. It had 18 expansions worth R150.8 million. What was the reason for this?

Ms Rasikhinya replied that it was mostly due to contracts coming to an end on 31 March 2018 and SITA wanted to ensure that it had contracts in place to avoid irregular expenditure. Expansions were also caused by delays in the business lines.

Ms Chiloane asked if SITA had project managers. Why were they being paid if they were not doing their job? Expansions were caused by poor planning? Who were the SITA programme managers and had there been any consequence management?

Ms Rasikhinya replied that there had been lack of consequence management in SITA for a long time because of how the Employee Relations section within Human Capital Management handled this. From a management point of view, consequence management had also not been taken seriously but this had started to change. Consequence management was asked for when a deviation or expansion was requested due to lack of planning.

The Chairperson understood the historical problems but the matters being dealt with were very recent. Was there anyone being taken to task for the poor planning that had led to the need for contract extension.

Ms Rasikhinya replied that consequence management had taken place for individuals involved in the access links contract.

The Chairperson asked if it was an exception.

Ms Chiloane asked how many project managers did SITA have and how many had gone through or were going through a disciplinary process. Were any of the project managers present? There were 18 expansions in six months which was abnormal. SCOPA wanted to see the consequence management and what happened to them.

Mr Nomvete replied that a list of transgressors and actions taken against them will be provided to SCOPA.

The Chairperson emphasised that consequence management was the most important area.

Ms Chiloane asked about expansions that had increased by over 100% and were not supported by Treasury.

Ms Rasikhinya replied that the expansion was for links. The contracts were never renewed and a decision was made to use the same suppliers because they owned the links. That was when SITA asked Treasury for an expansion for 12 months while SITA was going to the market to replace the links. The bidding process had been adjudicated and it was waiting to go to the SITA Board procurement committee.

Ms Chiloane asked why SITA continued to expand despite Treasury not supporting this. Who was going to take disciplinary measures?

The Chairperson asked who authorised that the expansion should proceed without Treasury’s approval

Ms Rasikhinya replied that no approval had been granted for the access links. The process was continuing based on the criticality of the service. The bid adjudication committee had approved subject to Treasury’s approval.

The Chairperson asked what Treasury’s reasons were for not supporting the expansion.

Ms Rasikhinya replied that Treasury said that it was not justifiable and the bid that SITA had gone to the market for should be awarded. It was still in the process of awarding the bid.

Ms Chiloane said that it was very suspicious that SITA expanded contracts for more than two service providers doing the same thing.

Ms Le Roux explained the nature of the service was to provide network connectivity to different government sites across the country. The same type of service was being offered by different providers with different links awarded to them. It spoke to the criticality because if services were stopped, government departments would be affected.

The Chairperson said that those in project management should be reprimanded because they put SITA in a position where it was stuck.

The response was that the process of identifying them was underway as the SITA converged communications department was responsible.

Ms Chiloane suggested that the list of project managers responsible be provided. A detailed report on consequence management should be provided because it was a terrible mistake that was costly. She asked SITA to explain the expansion for Infrasole for the support and maintenance of switches and supply of diesel, which was not supported by Treasury?

The Chairperson asked if it was the same matter of criticality.

Ms Rasikhinya replied that it was the same criticality issue and was under the same converged communications department. There was an interim measure of getting diesel from Treasury RT70 because SITA went to the market but the whole process was compromised.

The Chairperson asked who compromised the process.

Ms Rasikhinya replied that it was both SITA line of business and supply chain and action was being taken against the head.

Ms Chiloane asked why SITA did not provide the required information to Treasury when clarity was requested. How sure can SCOPA be that the information provided at this meeting is true if it refused to give clarity to Treasury?

The Chairperson asked SITA to show leadership and take responsibility when providing information to Treasury and not to justify the reasons for expansion.

Ms Chiloane asked about the expansion for Bowmans which had an original contract of R495 400 and expansion value of R9.6 million. What was so urgent about it?

Ms Rasikhinya explained that Bowmans was urgent as there were threats to staff members after the ACM investigation was initiated. SITA needed to appoint a service provider who was already knowledgeable. The threats happened when it was still busy with the Human Capital Management investigation.

Ms Chiloane asked if Bowmans was providing security as the gap from R495 400 to R9.6 million was very wide.

The Chairperson commented that it could not be that the extension was bigger than the original scope.

Ms Le Roux replied that the original amount was based on a limited investigation that was going to be done in the HCM space. The investigation opened a can of worms and needed the whole department to be investigated which led to the opening of a new investigation.

The Chairperson said that when a company had that kind of advantage, even if a tender was sent out, it would still emerge as favourable. If the company was better, test it. SITA found itself in a space it could have avoided. The solution was to go to Treasury and ask to advertise for a shorter time period which showed that SITA had applied its mind. Expansions and deviations are used only when pressed for time.

Ms Chiloane asked if the report expected at the end of the month was from Bowmans

Ms Le Roux replied that it dealt with the HCM investigation and will be brought together with the June report to the Committee.

The Chairperson asked what happened to the expansion after it was declined by Treasury.

Ms Rasikhinya replied that Bowmans was appointed and did the work. The request for extension went to Treasury after work had commenced.

The Chairperson said that when Treasury rejected the expansion, SITA proceeded nonetheless. How did SITA ask Bowmans to do additional work before applying to Treasury? And after applying to Treasury and the request was not granted, who allowed Bowmans to continue?

Ms Rasikhinya replied that two people had been held responsible, the acting executive for internal audit and the executive for supply chain management. The executive for HCM was under suspension.

Ms Chiloane asked what Fundudzi Forensic Investigators did.

Ms Rasikhinya replied that it was responsible for SCM forensic investigation in the regions.

Ms Chiloane asked how many forensic investigation service providers SITA had.

Ms Rasikhinya replied that it was only Fundudzi Forensic Investigators and Bowmans.

Ms Khunou asked if Fundudzi was responsible only for supply chain management and Bowman for the entire entity.

Ms Rasikhinya replied that Bowmans was appointed for investigation into Human Capital Management and the people in SCM. Bowmans was currently finalising investigations for FDA related contracts as the majority of those who left SCM were handling FDA contracts, and it therefore needed further investigation.

Ms Chiloane asked if the two companies were doing the same work.

Ms Rasikhinya replied that they were not because Bowmans was dealing with SCM staff at head office and Fundudzi was dealing with SCM staff in all nine regions.

Ms Chiloane asked if Funduzi had completed the investigation.

Ms Rasikhinya replied that the investigation would be completed at the end of June. All field work had been done. It was waiting to prosecute those who had had charges laid against them.

Ms Chiloane wanted Treasury to comment on the gap on expansions that was too wide.

Mr Kekana did not understand how SCM individuals were investigated and yet another company was appointed to investigate contracts.

Ms Le Roux replied that in the first investigation in SCM, 80 computers had been confiscated to look for corruption and conflict of interest. The individuals in the region had their laptops confiscated and this was awarded to Fundudzi. The nature of charges came back to a specific contract in SCM where due process was not followed or instances of conflict of interest were found. The clean up in supply chain management was across all wrong doing.

Ms Chiloane asked about upgrading the SITA next-generation network that was not supported by Treasury.

Ms Rasikhinya replied that work had already been done but payment was to be done over 10 years. The payment had already been identified as irregular expenditure. SITA approached Treasury to inform them of the irregular expenditure and to have it ratified so it was not marked as irregular expenditure for 10 years.

The Chairperson said that SITA should proactively seek systems that would keep malpractices in check. It was a red flag that a contract expansion was more than 100% of the original scope. It had to be thoroughly investigated. Could Treasury give its understanding, assessment and explanation of what should happen?

Mr Solly Tshitangano responded that with forensic investigations in general, there existed a scope but a department could not advertise for a forensic bid. The investigator was appointed from a panel after being asked to submit a proposal. Work would be done on the original scope. After the investigation was complete and the report identified individuals to be disciplined or cases to be open, whatever work that followed would be based on the original investigation. In this case Treasury would approve. The letter from SITA however indicated that the original scope was narrow and SITA wanted to increase the scope to 12 months from 2 months, which meant that it was new work. As it was a new scope, SITA should have asked for proposals from other suppliers in the panel instead of giving it to one supplier. By the time SITA approached Treasury it had already appointed the supplier and wanted Treasury to rubber stamp it.

The Chairperson said that the process was wrong and the matter would be dealt with after the outcome of the forensic investigation. He hoped that the SITA board chairperson and his team appreciated the concerns of SCOPA and had gotten a sense of where the focus and emphasis should be. It was no longer about accusing someone who was absent but taking responsibility, as it spoke to the quality of leadership.

Ms Khunou asked if the forensic investigation was not dealt with correctly in terms of financing, how is the Committee sure that the report is justified. The appointment of the investigator was in conflict.

The Chairperson said that he was referring to substance but agreed that there were issues with process. However, if that process produced evidence, SCOPA would not necessarily turn its eyes away from the facts. Once the forensic investigation was out, SITA and the Committee should engage to satisfy themselves that it was not just talk but action. The reports should show that there was momentum in the right direction.

The meeting was adjourned.

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