A GOVERNMENT IT TENDER has been quietly awarded for an outrageous R153m – more than double the next-best tender – to a tiny, little-known company, on the understanding that 5% of the total (R7.65m) will be slipped into the coffers of the ANC.
Curiously, there were only two bidders on the shortlist for the Department of Trade and Industry’s contract to upgrade the information technology system used by the Companies and Intellectual Property Registration Office, better known as Cipro.
The favourite to win the tender was Faritec, an established, listed IT company employing a staff of 475. Faritec’s BEE credentials were presumed to be impeccable: Jay and Jayendra Naidoo, who earned their Party spurs as government consultants on the arms deal, are its BEE stakeholders. Its bid, in the circumstances, was a modest R60m.
The other finalist, Valor IT, which claims to be wholly black-owned, is unknown in the market. Valor IT put in a massive bid of R153m – more than two-and-a-half times as much as Faritec’s price – and won the contract!
Cipro did not follow standard procedures when evaluating the tender. When cautioned on the point, Michael Twum-Darko, Cipro’s Ghanaian head of IT and the organisation’s chief information officer, is said to have declared: “That’s no problem, Tshedi [Trade and Industry DG Tshediso Matona] will sign – because there’s five percent in it for the ANC.”
The contract was eventually signed off by Cipro’s chief financial officer Renier du Toit – and Matona.
Twum-Darko handled every aspect of the controversial tender, while remaining in close contact with Valor IT’s Josias Molele.
Although the contract was awarded to Valor last December, there has been no official announcement – on the specific instructions of Cipro chief executive Keith Sendwe.
But there has been an unreported uproar within Cipro over the controversial tender. Central to the rumpus is said to be the organisation’s No. 2, chief operations officer Melanie Bernard-Fryer.
Bernard-Fryer was chief-of-staff to former Public Service and Administration minister Geraldine Fraser-Moleketi. She co-authored government’s anti-corruption legislation and was hired by Cipro chief executive Sendwe a year ago, with a specific brief to stamp out corruption within the kickback-riddled organisation.
Late last year, before the tender was discreetly awarded to Valor IT, several staff members at Cipro reported their concerns about the “improper tender process” to Bernard-Fryer. The operations chief is believed to have ordered a quiet investigation into the unknown finalist, Valor, and was concerned when all her investigator could come up with was a “cryptic” website.
Bernard-Fryer started asking questions – and last September she refused to sign off the contract, on the grounds that proper tender process was ignored. She told a friend that “fronting” was “very likely, because it’s just so murky”. (The term “fronting” is used to describe a black company using political connections to win a tender – only to pass the contract on to a “white” company for a percentage of the contract fee.)
Chief executive Keith Sendwe responded by suspending her. Officially, the reason was something else: a staff member under investigation in another matter had sent a “very rude” email to Bernard-Fryer demanding to know what was happening. Bernard-Fryer copied this email to her husband as an example of what she had to put up with at work and this was considered a breach of confidence worthy of suspension. “Melanie reckons the real reason for her suspension was because she refused to sign off the Valor IT contract,” says an insider.
At her internal disciplinary hearing last December, her labour lawyer, Dimitri van der Westhuizen, successfully argued that the offence did not merit suspension and the hearing’s independent chairperson recommended her reinstatement. That process dragged on for a good six weeks. By the time she returned to her desk in mid-January – to a cool welcome from chief executive Sendwe – the contract had been awarded to Valor IT, signed off in her absence for Cipro by chief financial officer Renier du Toit.
What were Bernard-Fryer’s concerns? Usually tender bids at Cipro go first to a tender evaluation committee for a process of due diligence – which took place. They then go to a bid adjudication committee drawn from the Cipro executive team, which makes the final decision. Members of this committee include chief executive Keith Sendwe, chief financial officer Renier du Toit and Melanie Bernard-Fryer.
On this occasion, however, the award was confirmed, not by the usual internal adjudication committee, but by an anonymous group of external individuals, completely flouting Cipro’s strict tender procedures.
None of this would have leaked, had it not been for an unusual event at tender-loser Faritec’s presentation to analysts and the press of dismal half-yearly results on 16 February. Chief executive Simon Tomlinson announced that the company had lost a massive government IT contract to an unknown black competitor whose bid at R150m – he was R3m out on the price – was more than double his own company’s bid. Surprisingly, the attending hacks, including a representative from Business Day, chose to ignore this startling disclosure, preferring to concentrate on Faritec’s net loss of R21.4m, 40 staff redundancies and a share price plunge to new 52-week lows – down from 105c a year ago to just 11c.
The analysts, however, were not so slow – and one of them tipped off noseweek. “It’s an astonishing waste of R90m of taxpayers’ money,” observed one of those present. “I’ve never heard of Valor IT – but then, IT companies are a dime a dozen, aren’t they?” The analyst added: “Tech awards are diabolical, the whole area is rich with scandal.” Tomlinson agreed to meet noseweek to tell all, but the 44-year-old chief executive was reluctant to set a date and finally called it off, saying he would require board approval to say anything. Faritec does a lot of work for government, and he could not risk jeopardising future tenders.
Black empowerment issues are sensitive at Faritec; the company is 30% owned by J&J Group, the BEE investment holding and management company founded by former Cosatu general secretary Jay Naidoo and the union’s former negotiations co-ordinator Jayendra Naidoo. The latter sits on the Faritec board.
Faced with Tomlinson’s change of heart, noseweek called Faritec’s IT director Peter Winn, who, initially, was a lot more forthcoming. Cipro’s tender, he explained, was for what is known as Enterprise Content Management, in this case, a combination of software and business consulting services embracing all aspects of document managing for the Registrar of Companies.
“This company Valor IT is totally unknown in the industry,” said Winn. “In our 14 years in business we’ve never come across them. We’ve struggled to find out who they are and I don’t know of any other contract that they’ve won.
“This thing stinks big time,” declared the IT director, adding: “I think we’re at a stage in our country’s life-cycle where awards are made under dubious rationale or circumstances.”
After being told last December that they had lost the tender to Valor IT, Winn says that Faritec lodged its “official concern” about the tender process. Cipro promised to look into it and early in February wrote to Faritec confirming Valor IT as the winner.
Trade and Industry DG Tshediso Matona
Winn says the contract award was then rubber-stamped by Sita, the State Information Technology Agency, which adjudicates and controls all government IT spend.
Like Simon Tomlinson, Winn agreed to meet noseweek and give further details of Faritec’s bid and “the feedback we’ve had from the market”. However, an hour later (after discussion with Tomlinson?), he called back to cancel, saying: “From our perspective, the deal is lost. We don’t want to be perceived as being the partner that has sour grapes because we lost the deal. “We probably have 30%, 40%, 50% of our revenue coming from government through Sita. It would be suicidal for us to... You can draw your own conclusions in terms of price variation, and I think that government’s obliged to divulge the value of the awarded tender.”
Cipro’s companies data base reveals that Valor IT is a close corporation registered on 22 June 2005. The register lists two directors/members: Josias Molele, 48, and Jamila Seedat, 41.
Molele comes from the professional services area, selling professional services to government. He cut his teeth at the old Q Data, which, after merging with Persetel, became Comparex Africa, a leading integrator of business solutions based on Information and Communication Technology (ICT). In 2003 Comparex won an R11.5m contract to beef up service delivery in the Northwest Province’s department of finance. Molele, then a regional executive with Comparex, said at the time: “We are delighted to work with government to assist them in realising their strategic goals and objectives through the power of IT.”
But around this time Molele resigned from Comparex. “He was an ambitious man,” recalls a colleague. “We appointed another black guy ahead of him and he didn’t like that.”
Although Valor IT may not be well-known, it does have an impressive website, even if it is short on facts and figures. It says the company was established by experienced black IT professionals and is “wholly black-owned and managed”. It uses “best of breed” strategic partners and focuses on providing ICT professional services within both public and private sectors. “Within the organisation there is a vast wealth of expertise in terms of project management, change management and project implementation/support, crafting and implementation of Business Applications as well as other areas of ICT.”
Under Latest News, it announces that Valor IT was recently appointed by Sita as “a preferred supplier of top calibre ICT contractors to the entire public sector” -- which should come as no surprise if one of the company’s functions is to share the take with the governing party. Surprisingly, there is no mention of its coup in winning the Cipro tender last December – or any other specific successes.
Valor IT has modest offices at Waterfall Park, in Midrand’s Vorna Valley, identified with a modest handwritten sign. For the triumphant winner of a massive government tender, managing director Josias Molele is surprisingly reticent when noseweek calls him.
What was the tender for? “It’s basically for what they call ECM – Electronic Content Management,” says Molele. “But I don’t want to be seen to be stealing the limelight from the client. Let Cipro be the one that goes to the media.”
What was the tender price? “Shouldn’t we let Cipro divulge that? Let them be the ones to give you everything in terms of the process. You can speak to their CEO. Cipro is also supposed to go back to parliament and report.”
Valor IT doesn’t seem to be very well known in the industry? “We’ve been in existence for quite some time, as early as 2005. We have been in the game for more than 25 years; individually we’ve got serious managers in the IT industry. My board, my management teams, we’ve all been in the game.”
Is this your first big government contract? “You see, that is where, with journalists, I become very careful. On Cipro, I cannot give you much, because I don’t want to take the limelight from the client. I’ve won big contracts before, close [in value] to what this one is.”
How many staff are there at Valor IT? “I do not want to sound hostile to the journalists, because I believe they’ve got a role that they’re playing. But let’s be honest, you are now already going for the interview.”
When news of the 5% handout of taxpayers’ money to the ANC emerged, we belled Molele again to ask him about it. He did not return our calls. Neither did Cipro’s rebellious chief operations officer Melanie Bernard-Fryer. Silence reigned, too, from the DTI’s director-general, Tshediso Matona.
However, Cipro chief financial officer Renier du Toit confirms that he and DTI director-general Matona signed off the Valor IT contract. He adds: “The tender was awarded and signed off in line with duly approved protocols and procedures.” Asked about the 5% to the ANC, Du Toit dodged the question, replying: “Cipro wish to confirm that the awarding of the tender to Valor IT was in strict adherence to the Supply Chain Management Policy governing the procurement of such goods and services.”
Not much of a denial. A Cipro insider tells us that a worried trade and industry minister Mandise Mpahlwa called a crisis meeting to discuss noseweek’s investigation into the Valor IT award.
This is not the first time that Cipro operations chief Melanie Bernard-Fryer has been in hot water. In 2007 she was suspended and fired as chief executive of the Media Advertising, Printing, Publishing and Packaging SETA, after blowing the whistle on alleged fraud and corruption within that organisation. Shortly before joining Cipro in March 2008 she received an undisclosed sum in compensation for unfair dismissal.
Link - http://www.noseweek.co.za/
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