SIU wants National Treasury’s R822 million tender canned

The Special Investigating Unit (SIU) has called for the scrapping of a contract by National Treasury with a technology company that has cost the treasury more than R822 million, even though it has not been implemented.

The SIU also said the Auditor-General has described the project as fruitless and wasteful expenditure because National Treasury has not received value for money. Head of the SIU, advocate Andy Mothibi told members of the Standing Committee on Public Accounts (Scopa) that the Integrated Financial Management System (IFMS) was irregular and should be set aside.

Mothibi was on Wednesday briefing Scopa on the contract between National Treasury and Oracle. The saga has been going on for many years since the issue emerged. A whistle-blower had reported irregularities on the tender to the SIU. SIU lead investigator, Naomi Jose said they wanted the contract to be scrapped because of irregularities.

“The Office of the State Attorney has been requested to brief counsel, to consider the review and setting aside the award of contract, relating to the appointment of Oracle, for the provision of IFMS at a contract value of R822,300,505.50 and to recover the just and equitable amount. This process is ongoing,” said Jose.

She said in 2005 Cabinet approved the IFMS, but in 2013 Cabinet mandated for the procurement of the system. The tender was issued for the IFMS project. But in 2014, the tender was cancelled because one of the bidders objected. It was re-advertised and closed in 2015.

After the SIU received a report from the whistle-blower, it was found that Oracle was in contact with senior officials at the National Treasury and State Information Technology Agency (Sita). The company received information about the nature of the tender and this disadvantaged other bidders. The leaking of the information impacted on the integrity of the process.

The State Information Technology Agency later sent letters to technology firms, SAP and Oracle, to confirm their bids. “The price evaluation committee signed off on this and the following prices were submitted, R670 million from Oracle and R1 billion from SAP. The price evaluation committee went with the Oracle price,” said Jose.

During contract negotiations the price increased by 12.8%. In 2016, an agreement was signed between National Treasury and the company. Jose said the IFMS has not been implemented to date. The Auditor-General found that the IFMS project was fruitless and wasteful expenditure.

“During the period May 2016 to 30 June 2021, National Treasury paid Oracle a total of R822,300,505.60, for license fees, support and maintenance, as well as pre-implementation services,” said Jose. “The evidence available from the SIU is that National Treasury has not implemented the IFMS programme.

“The Auditor-General made a finding that the IFMS project was wasteful expenditure. The AG sought legal opinion, in which senior counsel concurred that the expenditure incurred by Treasury for IFMS software is wasteful expenditure due to the fact that no value was derived,” said Jose.

Mothibi said they have sent some of the cases to the National Treasury to take action against officials who are implicated in this tender. He also said they have also referred the matter to the National Prosecuting Authority.