/ 31 July 2014

Gauteng’s billion-rand white elephant IT system

ANC Gauteng chief whip Brian Hlongwa has been silent on mounting fraud allegations against him.
ANC Gauteng chief whip Brian Hlongwa has been silent on mounting fraud allegations against him.

More than a billion rand’s worth of information technology systems is sitting idle in Gauteng’s health department, thanks to the alleged manipulation of tender processes in 2007 and 2008. The tenders sought to replace government-owned systems with expensive foreign technology. Former health MEC Brian Hlongwa is charged with benefiting from this process.

The Mail & Guardian reported that the Hawks and the Special Investigating Unit (SIU) last week filed papers in the Johannesburg high court purporting to show how procurement processes were bypassed to replace the province’s health information system and electronic health records. 

This week, the corruption allegations against Hlongwa, the ANC chief whip in the province, were referred to the party’s integrity committee.

Hlongwa allegedly received and acted as a conduit for bribes potentially worth millions of rands. The Hawks and the SIU have submitted thousands of pages of evidence spanning contracts, emails, interviews and the written testimony of more than 60 witnesses.

In a 90-page affidavit submitted with the charges, the SIU alleges that, in 2007, Gauteng health department officials were guilty of “sustained bias and dishonest, illegal and unauthorised conduct” when awarding tenders.

At the time, the department was running two separate systems to keep track of patients’ health records and billing information. The department wanted to integrate the systems, allowing a doctor to access information, such as X-rays, that had been recorded elsewhere.

Recommended upgrade
The two systems – Medicom and the patient administration and billing system – were both owned by the government and did not require expensive licensing fees. Both systems were operated by the State Information Technology Agency (Sita) and, according to SIU affidavits, were outdated. Sita recommended that the systems be upgraded at a cost of R58-million over three years.

The department ignored this advice, said the SIU, and instead put out a tender in June 2007 for a new, integrated system – despite this being prohibited by the Sita Act.

Both systems required a wide area network (WAN) to enable information to be shared among hospitals, clinics and the department. The network would also double as an entertainment platform, allowing patients to watch television. 

The WAN was already in use, and had been since 2003, and was maintained by a nongovernmental organisation called Mindset. The system was live at more than 100 facilities across Gauteng and had cost R20 000 a site. Mindset also provided the content, which was a public health channel.

Fourteen local companies submitted bids, with the Baoki consortium eventually being selected. Baoki, a joint venture between AME Africa, Health System Technologies and Equiton Investment Corporation, eventually had a pre-VAT bid for R1.23-billion signed off by the department in 2008, which the SIU said was “highly irregular”.

The Gauteng health department had to provide the infrastructure, but according to the SIU, Baoki said the WAN technology linking health facilities was not functional.  

The SIU said Richard Payne, chief executive of 3P Consulting (Boaki’s implementing company), “introduced his business associates to Hlongwa”. They included Phil Austin, the head of the Life Channel, a United Kingdom-based digital out-of-home television network. It provided a similar service to Mindset. Payne then donated R105 000 to a football club – the Western Rangers – of which Hlongwa was a director.

This, said the SIU affidavit, extended their “already corrupt” relationship. Payne also promised Hlongwa to make a “fly-on-the-wall” documentary about the football team to be shown on the Life Channel.

No tender
In 2008, the Life Channel was given a contract by 3P to install a two-way broadband satellite system at six facilities in the province, for R1.82-million (R300 000 each). It was not put out to tender, as is required for any contract over R500 000. The SIU said the system was “expensive and inappropriate” because it did not work and the technology was already in place. The SIU said Mindset was not consulted, and the new system was simply installed alongside its existing one. Instead of acting as a WAN and a platform for information to be sent among facilities, the SIU said it was only being used as a “TV patient viewing channel”. 

After the 2009 elections, Hlongwa was replaced. The agreement with Baoki was cancelled and a task team was appointed to investigate it. It found that the system had only been installed at the Sebokeng Hospital and three clinics. “The electronic health records system was not in use for routine work,” said the SIU. 

The SIU is clear in apportioning blame: “Underpinning the procurement models advanced by 3P and Payne was his corrupt relationship and his influence over Hlongwa.” As a result, procurement models “free from the constitutional and ethical constraints and financial controls allowed Payne to siphon money from the health department to Hlongwa”. The former health MEC’s direct gain was in payments made by Payne for his home, the SIU said. 

Rather than creating a new system that allowed doctors to look at patient records across the province, R1.2-billion was contracted for products that are not being used. The SIU said the previous two systems are still being used by the Gauteng department of health, maintained by Sita. Mindset is still operating. 

Despite repeated attempts, Hlongwa, Payne and Austin could not be reached for comment at the time of going to print.

Chronology of a ‘crooked’ bid

Large-scale tender fraud in information technology procurement led to the passing of the State Information Technology Agency (Sita) Act in 2002. Therefore, any state spending related to IT has to go through the agency. Here is how the alleged tender irregularity involving the MEC unfolded:

  • In February 2007 the Gauteng health department asked Sita to tender for a replacement to the systems it was currently operating. The agency proposed that a new version of Medicom be installed, costing R58-million over three years. This was ignored and Sita kept trying to meet the department to find other solutions, the Special Investigating Unit (SIU) alleges in court documents.
  • In June 2007 the department put out a tender for a replacement system. Sita was denied a chance to be part of the bid process, according to the SIU.
  • The department then asked the department acquisition council to approve the tender process. The anticipated expenditure then was R650‑million over three years.
  • Fourteen bids were submitted, with two shortlisted: Baoki (R1.045‑billion, including VAT, for three years) and InterSystems (R594‑million, including VAT, for five years). The bid committee (of which Hlongwa was part) chose Baoki’s costlier bid. The SIU said: “It could not possibly have done this by accident, or honestly.”
  • The InterSystems bid was then amended – the SIU does not know by whom – to add R513‑million, ostensibly for training people to use the IT system. This made it more expensive than Baoki’s bid.
  • Baoki then amended its bid to say it included training (even though bids may not be altered).
  • The SIU said: “No member of the acquisition council declared any gifts or conflict of interests.”
  • The original bid was supposed to enable three candidates to show a working example of their products at health facilities, after which the winner would be chosen. But this did not happen – Baoki was selected straight away.
  • When the bid was signed off in November 2008, R123‑million was added for training, raising the cost to R1.23‑billion.