Allegations of rigged tender procedures are coming back to bite Telkom in the form of lawsuits totalling billions of rands.
Last week Bihati Solutions filed a R1.7-billion legal challenge against Telkom regarding a network services tender that it says it won but Telkom did not follow through with it.
Telkom says it will try to get the awarding of the tender set aside by the courts because its period of validity had expired. But it could also face legal challenges from the other five bidders for the tender — Mthiyane Seyama Projects, Biz Afrika 1944, Vuka Enterprises, Fortel Investments and Plessey/Hezeki.
Vuka Enterprises’ Michael Zuma (not Michael, the brother of President Jacob Zuma) initially said he could not disclose whether the company would take legal action, but later said that if ‘push came to shove” the company would have to use its legal options.
The Mail & Guardian also understands that Maredi Telecoms is planning a legal challenge against Telkom regarding a R150-million microwave point-to-point tender. Both these disputed tenders are linked to the dismissal of Motlatsi Nzeku, Telkom’s chief operating officer, by Reuben September, Telkom’s chief executive, in February last year.
Nzeku was accused of being divisive, counterproductive and ‘defamatory”, but he has retaliated by compiling and sending to the Telkom board a dossier of allegations against September.
The M&G has a copy of this. In it Nzeku says he was fired by September because he blew the whistle on irregularities in the microwave point-to-point tender. But Telkom says its tender processes are ‘extremely stringent” and it boasts a proud record of compliance with laws and regulations.
‘Given the number of procurement committees and stringent approval processes up to board level, it is unlikely for tender irregularities to occur,” said Telkom. It said September had appointed the firm KPMG last year to investigate and audit internal processes.
‘The internal audit report has confirmed that the process [followed] in appointing the supplier was above board,” said Telkom. Nzeku took his dismissal to arbitration in February and Telkom says the arbitrator has indicated that a judgment can be expected soon.
The microwave tender
Nzeku says that the group executive for network infrastructure provisioning, Marius Mostert, was implicated in a May 2008 internal audit report for tampering with the tender and when he, Nzeku, tried to take disciplinary action against Mostert, September intervened.
Mostert was subsequently suspended by Telkom in March last year pending an investigation into the microwave tender. But, Telkom said that despite a ‘thorough, independent forensic investigation”, ‘no evidence could be found to implicate Mostert of any wrongdoing.
Consequently, Telkom could no longer justify — Mostert’s suspension and he resumed his responsibilities — on June 1 2009.” Maredi Telecoms launched an urgent interdict in April last year to prevent the awarding of the tender to Ericsson and Telsaf, but it failed.
A source close to Maredi said it would now challenge the awarding of the tender and was submitting final affidavits to be lodged with the North Gauteng High Court. ‘They are still looking to fight the matter,” said the source. Telkom paints a different picture.
‘The court found that there was no wrongdoing by Telkom officials,” said Telkom. ‘Maredi is currently continuing with its review’ application, which is being opposed by Telkom. ‘In the interim Maredi has also approached Telkom to settle the review application on the basis that, if they withdraw, each party will pay its own costs,” said Telkom.
The network services tender
Nzeku is also reported to have written to Siphiwe Nyanda, the communications minister, to notify him that the specifications for the network services tender were changed without proper authority.
Nzeku said the criteria were changed to accommodate other bidders after the tender had already closed and the shortlisting completed. He said the Plessey/Hezeki consortium, which was chosen as one of six successful bidders, was meant to have been disqualified for violating Telkom trademarks and tender confidentiality.
The M&G has internal Telkom documents that appear to back up his claims.They include a memo sent to September by Sikkie Kajee, KPMG’s acting executive: internal audit, in which Kajee confirms reports that the Plessey/Hezeki consortium (PH) had violated Telkom’s tender confidentiality and may have violated Telkom’s trademarks.
He recommends that Plessey/Hezeki be ‘reprimanded and asked to place, at its own cost, adverts disassociating Telkom from the PH advert and tender”. Kajee says Telkom could continue with the awarding of the contract based on the original criteria, though he admits that doing so will probably result in legal challenges.
The second option would be to disqualify Plessey/Hezeki, which, he concedes, could result in legal action by the consortium. The third option would be to start the process again, but Kajee argues this would make ‘little or no business sense”.
The M&G has another internal memo that contains Telkom’s recommendations for the final awarding of the network services tender. It recommends that six applicants each be awarded a different region.
Although it acknowledges that only Plessey/Hezeki and Bihati Solutions met all the engineering criteria for the tender, Telkom’s legal services division gave it permission to relax the ‘engineering critical criteria” to accommodate more applicants.
In its founding affidavit, Bihati Solutions claims that this relaxation was ‘legally questionable” and says it is not ‘lawful, reasonable, fair or equitable” for Telkom to seek to abandon the awarding of the tender.
‘It is submitted further that Telkom has acted with an ulterior purpose, to extricate itself from the difficulties relating to the tender process, which are not of Bihati’s making,” the affidavit says.
‘I point out in this regard that there have been various other controversies that have arisen, which led ultimately to the dismissal of Telkom’s chief operating officer, in the wake of a dispute between him and the chief executive officer, Mr September.”
Telkom said that, based on senior counsel’s legal advice, it was bringing an application to the high court to review and set aside the awarding of the tender. ‘Following a board decision in November 2008, Telkom issued a conditional letter of award to six bidders,” it said.
‘During negotiations with regard to the conditions that needed to be met by the proposed suppliers, Telkom received inquiries from the office of the public protector as well as the legal representative of some of the unsuccessful bidders.
‘In light of this development the process was put on hold and Telkom immediately consulted its external legal counsel. The issues that were considered included the validity period of the tender and the date of the award in light thereof.
‘Telkom is currently busy with the preparation of this application,” said Telkom. ‘All affected parties will be notified shortly.”
A Plessey spokesperson said that the ‘Telkom tender is, as far as we are aware, the subject of ongoing litigation to which Plessey is not a party. Accordingly it is our policy not to comment on such matters.”
Plessey’s consortium partner Hezeki Contracting’s Ravesh Moodley said neither it nor the consortium had received any award letter for the North Eastern Region and ‘Hezeki Contracting cannot comment on the internal documents from Telkom you claim to have seen.”