The North Gauteng High Court has ruled that a R10-billion state social grant tender awarded by South African Social Security Agency in January is illegal and invalid.
But Judge Elias Matojane ruled that the tender is not to be set aside as doing so would present a risk that social payments to South Africa’s most destitute people could be interrupted.
Sassa, which reports to Social Development Minister Bathabile Dlamini, received something of a lashing from the judge, who in a strongly worded judgment called its conduct "procedurally unfair" and constitutionally "inconsistent" and "invalid".
Matojane ruled that Sassa, its chief executive officer Virginia Petersen, and winning bidder Cash Paymaster must pay the legal costs of the applicants, including the Absa-owned AllPay.
The tender is for the payment of some 15-million social grants, including child and old-age grants, of about R100-billion a year.
The contract was tendered for and awarded to Cash Paymaster Services, a subsidiary of Net1 Universal Electronic Payment Systems Technologies, in January.
But losing bidder AllPay, owned by Absa, cried foul, accusing Sassa of running an irregular tender process.
Central to AllPay's claims was that it was unfairly prejudiced by an 11th-hour change to the tender specifications. However, Matojane dismissed this claim, adding that AllPay only complained after it lost the tender, and not at the time.
AllPay, also claimed that its bid scores were "inexplicably" lowered after a technical presentation so that its competitor would win the contract.
On this count the judge supported AllPay: "[AllPay’s] interim score was reduced from 70% to 58% in every category regardless of whether the relevant issue was discussed at the meeting or not. Despite the fact that applicants had a financial backing from Absa Bank Limited, which is a member of global Barclays group, points were deducted from applicants under the heading financial security for unexplained reasons."
AllPay was thus disqualified as it needed a minimum score of 70% for its bid to be further considered. Cash Paymaster was the only remaining bidder after this.
Early this year the Mail & Guardian revealed that one of the two adjudicators responsible for lowering AllPay’s scores had held a prior business relationship with Cash Paymaster’s BEE partner in the bid.
Conflict of interest
AllPay claimed in court that this was a conflict of interest, but Judge Matojane accepted Sassa's retort that the relationship was "too remote both in substance and in time".
The judge found against Sassa because its bid evaluation committee did not include a supply-chain management expert, which was of "fundamental" concern: "It does not only go to the fairness of the process but also the expertise of adjudicators."
And he ruled that while Cash Paymaster undertook to assign 74% of its workload to a BEE consortium, Sassa did not make an attempt to assess these partners' ability to do the job.
Somewhat mysteriously, Matojane said: "This decision is unlawful, taken for an ulterior purpose." It is not clear what ulterior purpose he referred to.
Cash Paymaster's bid was also found to be defective in that it should provided a separate bid for each province, but instead submitted one overarching bid: "The decision to overlook Cash Paymaster's failure to comply … is not rationally connected to the purpose of the tender as a whole, namely, to ensure proper comparative scrutiny of the bids across different provinces."
But despite his clear findings on the tender's flaws, Matojane ruled that it would not be set aside, referring to an intervention by the Child Law Centre: "The centre has pointed out that as at February 29 2012, 10 789 595 children were receiving child support grants, 524 378 were receiving foster care grants and 114 007 were receiving care dependency grants.
"It follows that over 10-million children will be adversely affected by any interruption in the payments of grants. Therefore any order that the court grants must take into account that the best interest of children are of paramount importance in every matter concerning them."
Setting aside the tender would also be unfair to Cash Paymaster, the judge said: "They now have 10-million people in nine provinces in their system and have issued smartcards costing R190-million which will go to waste if a new tenderer takes over.”
Sassa spokesperson Lumka Oliphant said the agency would respond shortly, as did Cash Paymaster director Serge Belamant.
AllPay lawyer Anthony Norton said: "We are very pleased with the outcome, which we feel vindicates our position that the process was fundamentally flawed, but we're disappointed with the decision not to set the tender aside, which we are very carefully considering and will make an announcement moving on our way forward."
The M&G reported earlier this year that top advocate Norman Arendse had alleged that, while he was deliberating as part of an adjudication committee whether to cancel the previous tender in favour of a national approach, he was offered an "open chequebook" bribe by an individual claiming to represent Cash Paymaster Services.
The M&G also reported that President Jacob Zuma's lawyer, Michael Hulley, played a major behind-the-scenes role in the controversial awarding of the tender to Cash Paymaster Services.