The South African Post Office has been served with a claim for R50-million in damages over a tender to supply a biometric identification and electronic payment system for welfare payments in North West Province.
Brian de Lacy, representing min- ority shareholders in Cornastone e-Commerce Services (CES), has issued a letter of demand to Post Office CEO Maanda Manyatshe and is poised to launch legal proceedings if the Post Office refuses to pay up.
CES’s bid was scored highest by Post Office tender evaluation committees, but in September last year the contract was awarded to Kumo Technology, a company whose bid was about twice as expensive as Cornastone’s.
Even before the award, CES wrote to the Post Office querying the late introduction of new parties into the Kumo consortium — Brian van Rooyen’s Labat Africa in partnership with the Altech technology conglomerate. CES suggested that this alteration of the Kumo consortium after the tender had been submitted might be in breach of the tender rules.
CES says it never received a reply.
After the award, CES approached the Post Office with allegations of impropriety in the tender process. Manyatshe referred the company to Bongo Rulashe, an ombudsman CES took to be part of the Public Protector’s office, but who turned out to be contracted to the Post Office.
De Lacy and another CES shareholder alleged that a senior employee at the Post Office had tried to secure a bribe of R150 000 before the tender was awarded to swing the contract to CES. As part of the deal, he also allegedly asked for a member of the Kumo consortium — and later himself — to be employed by CES.
The CES representatives said they rejected these approaches and later supplied Rulashe with affidavits setting out the allegations.
Rulashe instituted a preliminary inquiry and found prima facie evidence suggesting that the bid process had been tainted.
Rulashe suspended the Post Office employee, whose name is known to the Mail & Guardian, pending investigations. The investigation included an independent report by Ernst & Young on the technical aspects of the bid.
In his final report Rulashe found that the Post Office employee had failed to disclose a personal relationship with the member of the Kumo consortium. This meant he was ”in no position to adjudicate Cornastone’s tender fairly or impartially by any stretch of imagination”.
Rulashe also found the employee had made misrepresentations to the Post Office tender board about the structure of the Kumo consortium.
”These misrepresentations were potentially prejudicial to the Post Office and furthermore the inclusion of Labat in the Kumo Consortium amounted to an irregularity in the tender process as their inclusion occurred after the tender had been closed,” Rulashe found.
No adverse findings were made against Kumo, Labat or Altech.
He recommended disciplinary procedures be instituted against three senior Post Office employees and that CES be awarded the tender instead of Kumo.
Instead, on November 27 last year, CES was informed in writing that the Post Office had cancelled the tender ”due to operational reasons”.
De Lacy and other minority shareholders say they spent millions of rands setting up their bid and now are demanding compensation.
Cornastone, their majority empowerment partner, has declined to litigate because it is concerned about damaging its chances of future contracts, but it has ceded its rights to the minorities.
”Personally I have lost a career and a couple of million rands,” says De Lacy. ”This on the back of adhering 100% to the policies, rules and procedures and providing a solution that would have given the Post Office a real advantage over its competitors.
”Furthermore, I have gone to a lot of trouble and effort to ensure that our empowerment was based on substance with real development plans. I personally funded all this. The Post Office has really jerked us around big time on this.”
Two of the three Post Office employees cited in Rulashe’s report have left the parastatal. The third — against whom the allegations of attempted bribery were made — faced internal charges. But the Post Office refused to give any details of the charges or the outcome of his hearing.
”We cannot make public statements on the affairs of our em- ployees; save to say that from time to time the Post Office endeavours to promote highest standards of professional and ethical conduct among its employees.”
The Post Office said the R50-million claim was in the hands of its lawyers and declined to explain why it had failed to deal with the questions about the involvement of Labat and Altech before the award of the tender.
Asked why the tender committee had opted for a solution that was double the price of the CES bid, costing a potential R90-million more over the four-year contract, the Post Office said that ”pricing was just but one of the criteria used” in the selection process.
Justifying its decision to withdraw the tender, the Post Office stated that it reserved the right not to make an award.
”The tender was withdrawn based on commercial and business considerations, especially the new mandate of the Post Office emanating from the Electronic Communications and Transaction Act of 2002.
”As you know, the Act mandates the Post Office to be a preferred authentication service provider of online transactions.”
De Lacy counters that the contract had nothing to do with online transactions. He says the implications of the Act were fully canvassed during the tender process and that nothing happened to justify the about-face between awarding the tender to Kumo and cancelling the tender.
The Post Office is launching the welfare payment system in the North West on Monday. At the time of going to press it could not say what company is providing the technology.
Approached for its response to the situation, Kumo revealed that its former CEO had resigned last Thursday. Queries were referred to Dan van der Westhuizen, a director of Kumo and chief executive of the local division of the US software giant Computer Associates.
Van der Westhuizen declined to comment and said he would refer queries to attorneys representing Altech, which he described as being ”prime in the consortium”. No further response was forthcoming at the time of going to press.
Other listed directors of Kumo include Kenny Setzin, executive director of New Africa Investments (Nail) and the businessman Tiego Moseneke.
Brian van Rooyen of Labat told the M&G that the Kumo partners were about to launch their own legal action against the Post Office over the withdrawal of the North West tender.
Labat is also preparing papers to challenge the award of the Limpopo welfare payment contract to a rival company, Cash Paymaster Services.