DA tender 'invalid': Scrap it, says public protector
Thuli Madonsela says a multimillion-rand Western Cape tender is unlawful and must be terminated, in a report premier Helen Zille has vowed to contest.
The multimillion-rand tender for communications services put out by the Democratic Alliance (DA) led Western Cape provincial government has been declared invalid by the Public Protector Thuli Madonsela, who had provisionally recommended that the agreement be immediately terminated.
Madonsela’s investigation had also provisionally ruled that the DA-led administration’s failure to employ proper demand management had constituted maladministration and that the Premier’s department had incurred fruitless and wasteful expenditure.
Furthermore, the inclusion of DA leader and Western Cape Premier Helen Zille’s special advisers — Ryan Coetzee and Gavin Davis — on the tender bid evaluation committee was unlawful and in violation of the Constitution, said Madonsela in the draft report.
But the DA-run government has hit back. On the advice of a legal opinion obtained from advocate Geoff Budlender, supported by a prior opinion from another senior counsel, Zille rejected the draft report as “fundamentally incorrect in its understanding of the law”, and the key finding as “fatally flawed” and charged that unless the public protector reviews the findings that they would have no option but to take up the findings on review.
Zille on Saturday said: “Our legal advice from one of South Africa’s most respected senior counsel is that the participation on the Bid Evaluation Committee of two special advisors was not unlawful”.
“Further, the draft finding that the contract should be terminated is a misdirection and that even if an application were made to court to have the contract set aside, such application would not, on the advice received, succeed,” said Zille.
She said the draft report contained a number of other comments and conclusions that “we reject including the finding of maladministration”.
‘We Made Mistakes’
However Zille said they agreed that the expenditure of R8 696.26 which Madonsela found to have constituted wasteful and fruitless expenditure, could have been avoided.
“But this money was spent precisely to avoid fruitless and wasteful expenditure that would have been incurred if the error had not been corrected early on,” said Zille.
Madonsela’s 80-page report, titled “We Made Mistakes”, which the Mail & Guardian has seen, is subject to change, as all parties have until Friday, May 18 to submit responses. Zille said she would meet with Madonsela next week to discuss the findings.
The investigation, which was prompted by several complaints by among others, the provincial ANC and its alliance partner the Congress of South African Trade Unions (Cosatu), following a report by the Sunday Times late last year, has cleared Zille of any personal involvement in awarding the tender.
Western Cape ANC provincial secretary Songezo Mjongile and Cosatu’s Tony Ehrenreich refused to comment on the provisional report saying it would only be “proper” to wait until the investigation was completed before giving a comprehensive response to the findings.
Mjongile said the ANC’s legal advisers were working on a response that will be submitted to the office of the public protector next week.
Zille also expressed dismay at having to comment on the matter publically before allowing Madonsela “the opportunity to rectify its legal and other errors” ,but conceded that they “obviously cannot allow the flawed draft report to be circulated in public without our response”.
Procurement of communication services
The DA communication tender — as it is commonly referred to as — has caused huge embarrassment for the DA-run administration.
Madonsela was investigating, among other things, whether Zille had a personal stake awarding the tender.
While the investigation found no conclusive evidence of political interference or corruption, the evidence obtained during the investigation as detailed in the report raised serious questions about DA chief strategist Ryan Coetzee, communication director Gavin Davis, head of strategic communication in the provincial government Nick Clelland-Stokes and other provincial officials’ involvement in the awarding of the tender.
The saga dates back to early 2010.
Following two tender invitations that were cancelled in early 2010, the Association for Communication and Advertising (ACA)—an industry body of the advertising and communications sector—in August that year contacted the supply-chain management division of the premier’s department, to offer its assistance.
“The ACA apparently became aware of the difficulties by the department to procure communication services,” said Madonsela.
Madonsela said her investigation could not make a finding as to how the ACA became aware of the difficulties experienced by the department.
The ACA, during engagement with the department, then suggested that a “leading service provider in the industry”, Yardstick, be approached for assistance.
Sticking to Yardstick
“The documentary and oral evidence of the supply-chain management revealed ... the supply-chain manager became somewhat uneasy as departmental officials started to engage Yardstick when no formal quotation for their services had been obtained,” the report read.
“The supply chain manager had on several occasions raised concerns regarding communicating with Yardstick without a formal contract. Her concerns were only taken seriously after a legal opinion was obtained,” said the report.
Madonsela said that Clelland-Stokes had met with Yardstick before any formal engagement was decided on.
He had indicated during an interview with investigators from her office that “the nature of the service provider Yardstick had to be measured prior to a formal quote being forwarded to the supply-chain management division for consideration”.
“He also wanted to negotiate a better price, which resulted in interactions between him and Yardstick,” said Madonsela.
After Clelland-Stokes had “interactions” with the company, the director general Brent Gerber on September 21 2010 approved the procurement of services by Yardstick.
Madonsela said she received a letter from Gerber, which stated that the acting head of assets management of the Western Cape provincial treasury had in June 2011 issued a report on the evaluation of the tender.
The evaluation concluded that:
- It is not clear what the terms of reference for the appointment of Yardstick were. “No approval processes is on file that supports the procurement of Yardstick”.
- It’s not clear why the supply chain division and the line function officials were engaging with the service provider in the absence of a contract or a proper procurement process being followed.
- ” Despite this above finding, it must be noted that the decision to procure services of Yardstick was a prudent one made by the department,” stated the evaluation report, said Madonsela.
In response to the Mail & Guardian Zille said: “The administrative flaws in managing the original tender process were identified by our own internal processes early on and rectified long before the issue became a public matter.”
“We have already acknowledged these shortcomings and are constantly working to improve our management of supply chain processes. None of these administrative failings however involved anything unlawful. Nor did they amount to material failings that could not be rectified or that compromised the awarding of the tender,” said Zille.
However, Madonsela said the provincial government “on its own, did not render the process or agreement that was eventually signed unlawful or invalid”.
Madonsela said Clelland-Stokes also confirmed during the investigation that he and Coetzee had drafted the specifications of the tender for the bid, on instruction of Groenewald, who was the acting deputy director general of the department.
Zille’s advisor Coetzee told Madonsela that they had assisted in drafting the specifications of the tender. Coetzee testified that he had acted on the instruction of Groenewald.
Yardstick was tasked with “preparing processes and scenarios suitable for use in the bidding process” and was in control of the entire procurement process.
On October 1 2010 the new — or third — tender was advertised.
The evaluation report by the provincial treasury also found:
- That the motivation for a single and professional branding which needed a “clear articulation” in a position paper that determines the provincial stance and must have the cabinet endorsement was not adhered to. “This was a requirement that was not identified prior to the tender process.”
- The cancellation of the bid on two occasions reflected among other the lack of adequate demand procedures and supply chain management knowledge and competences.
- The document in the bid file did not allude to a transversal contract and cognisance was not taken of the requirements of the national treasury regulation that demands that the relevant treasury must facilitate a transversal term contract.
- While the supply chain management division had noted the challenges or specific requirements there was “a level of dissention in the ranks and a lack of trust in the credibility of the supply chain management processes within the department”.
- “Senior management cause many delays in the bidding process”.
Nevertheless the bid process continued.
Ten companies were shortlisted through the middleman—Yardstick. One of the two companies which were ultimately finalist for the tender—TWBA—indicated in its declaration of interest that none of its directors, shareholders or members or their spouses conducted business with the state in the last year.
However, in the shortlisting questionnaire it conceded it had been involved with three contracts with the state during the same period.
Madonsela said the director general Gerber conceded during the investigation that the department failed to verify the company’s “contradictory declaration” but he added that the information was “immaterial to the bid process”.
Madonsela said the same evaluation report by the treasury stated “there was no documented record of how the two shortlisted companies, TBWA and Umlingani were found to be acceptable as there was no minutes or deliberations of the bid evaluation committee on file”.
In October 2010 the bid evaluation committee, which included Groenewald, Coetzee, Clelland-Stokes, and Davis, among others, met and agreed to recommend TBWA as the preferred service provider.
Coetzee stated during the interview that he did not know whether Zille had been aware that he was involved in the committee.
Anton Groenewald, the acting deputy director general in Zille’s office, appointed Coetzee and Davis to the bid committee. Madonsela found that his conduct was “improper and unlawful and amounted to maladministration”.
“It resulted in a fundamental deficiency in the procurement process, which, due to the unlawful involvement of the special advisers, did not comply with the procurement system envisaged by Section 217 of Constitution and the Public Management and Finance Act (PMFA),” said Madonsela.
She recommended that disciplinary action be taken against Groenewald and other officials for their direct involvement in appointing the special advisers to the tender bid evaluation committee.
She also had harsh words for Zille’s director general Brent Gerber, for failing to execute his duties, and that as the accounting officer, he was ultimately responsible for the procurement.
Groenewald said Gerber had appointed him as chairman of the tender bid evaluation committee and tasked him with appointing the other members.
Gerber defended the inclusion of Zille’s special advisers—saying that it complied with the ethical standards as set out in the Treasury regulations.
But Johann Stegmann, the head of the provincial treasury, said during an interview with the investigators that “if the composition of any of the bid committee was improper, it would have a serious impact on the legitimacy of the procurement process.
“He further indicated that he was of the view that it is not proper and lawful for a special adviser to be involved in procurement as it raises the risk profile unnecessarily and can create a perception that there is political involvement in the process,” said Madonsela.
Zille responded saying: “Our legal advice from one of South Africa’s most respected senior counsel is that the participation on the Bid Evaluation Committee of two special advisors was not unlawful.”
Madonsela said while there was no suggestion that the special advisers of the premier involved in the processes’ action was improper or tried to manipulate the process in any way, their inclusion was unlawful and in violation of the Constitution.
“The crisp issue that was raised in this regard was that their involvement was unlawful and created a perception of political interference in the appointment of the services provider,” Madonsela said.
Conflict of interest
As the procurement process continued, Yardstick had identified a possible conflict of interest; namely that a member of the pitch team of one of the bidders knew Zille’s special adviser, Gavin Davis “socially”.
A legal opinion was sought, which stated that there “could not, objectively speaking, be any conflict of interest or reasonable apprehension of bias if Gavin (Davis) were to participate in the panel assessing the bidder” as neither him nor his wife have had any relationship with the relevant person since 2003.
Madonsela said acting deputy director general Groenewald had then during a bid evaluation committee asked Davis if there was anything that could diminish his capacity to be objective. “He was given the undertaking that there was none.”
The conversation, said Madonsela was not “specifically minuted and no record of it could be found during the investigation”.
Madonsela said information on exactly what happened during the meetings of the bid evaluation committee was difficult to verify due to the fact that no proper minutes of the meeting were kept.
“Yardstick and not the department as required by the Public Finance Management Act also retained records of the procurement process.”
She found that the evidence revealed a lack of supply chain management record management by the department of the bid evaluation committee, which included minutes of the meetings, a failure to keep minutes of an inquiry into the possible conflict of interest and to retain evaluation documents.
“The department of the premier and TMWA signed the prescribed contract form on December 1 2010,” said Madonsela.
It was first reported that the contract was worth R1-billion, but Madonsela found that the two-year contract was composed of an initial payment of R1.52-million for “once-off deliverables” and another amount, not exceeding R70-million per annum for “on-going deliverables”.
According to the information provided by Gerber, Madonsela found that the provincial cabinet only endorsed a single brand for the provincial government five months after the contract with TBWA, which was supposed to have transversal application, was entered into.
Madonsela said: “The failure to consider and apply the relevant provisions of the treasury regulations, which resulted in an untenable understanding that the procurement process would result in a transversal agreement” constituted maladministration.
Furthermore, “due to the non-compliance of the procurement processes with the constitutional imperatives in respect of the procurement of good and services by organs of the state, the process is invalid”.
“The agreement entered into between TMWA and the department is therefore invalid” and must be “terminated immediately”, said Madonsela.