/ 7 September 2018

SAA links to Bain raise red flag

Tie-ups: SAA chief executive Vuyani Jarana met Bain’s managing partner
Tie-ups: SAA chief executive Vuyani Jarana met Bain’s managing partner, Vittorio Massone (above), before starting his job. When Jarana arrived, he brought Bain consultants with him to do ‘pro bono’ work

Broke SAA has become the latest state entity with a questionable link to disgraced multinational consultancy Bain & Company.

The airline’s executives have been trying since March to award Bain a flawed R139-million tender to develop an optimal organisational design, despite having budgeted only R8-million for it.

The Mail & Guardian has seen two proposals, one in March and another in May, for the deal, both of which failed to satisfy SAA’s board.

SAA spokesperson Tlali Tlali on Thursday confirmed the tender, which had raised red flags in one of SAA’s internal procurement committees, was never awarded because the airline could not afford it.

“This means SAA did not make any payments to any service provider as no award had been made,” Tlali said. “Notwithstanding, we are satisfied that the process leading to the identification of the service provider who would have rendered the service was policy compliant and based on merit,” he said.

Other concerns raised by SAA’s bid adjudication committee included:

  • That two bid evaluation committees (BEC) were formed, the second of which saw two general managers, Vuyi Raseroka and Zuks Ramasia, introduced without prior communication with committee members;
  • That the second BEC introduced presentations as a criterion despite it not being listed in the tender advert, and the fact that Bain scored 100% and its competitor EY scored 0%;
  • A R90-million price difference between Bain, the preferred bidder of the bid evaluation committee, and EY, which would have charged R49-million;
  • That Bain was already doing pro-bono work in SAA chief executive Vuyani Jarana’s office without a clear indication of how that was done; and
  • The tender advertising period was shortened without the required approvals, but was later ratified.

The concerns were raised before the first board submission, which was rejected by the board’s finance committee.

The M&G understands the latest submission, in which Bain had dropped its price to R125-million, was passed by the finance committee (fincom) but rejected by the full board.

An SAA insider said the general feeling at the March 8 bid adjudication committee meeting was that the contract had been crafted to suit Bain.

“No matter how one looks at this, it was clear that tender was rigged,” the insider said. “They changed the BEC and introduced a presentation phase that wasn’t listed as evaluation criteria in the advert, and there is no way you could get past that price difference,” the source said.

“From a procurement perspective, it fails, and that is why the main board won’t approve it. Remember, fincom is a technical subcommittee of the board. How many instances have you seen [in which] boards contradict each other?”

Another internal source said: “People were concerned but scared … They asked that the recording be switched off and questioned why GMs [general managers], who never sit in BEC meetings, were there and took even the BEC by surprise.

“At that second BEC, the bidders were asked by the GMs to make presentations and from that Bain was scored 100% and EY 0%. It just seemed impossible, and unfortunately, individual scores were not available, so you can see why they were concerned.”

Tlali said SAA put out the tender in accordance with its supply chain management policy. “Interested parties responded to the invitation, submitted bids which were duly evaluated … In all the work undertaken and overseen by the board, governance and accountability have critical elements of the evaluation of performance and strategy implementation.”

Back in March, what SAA’s bid adjudication committee did not know was that Jarana had met Bain managing partner Vittorio Massone to discuss the airline before taking up his job at SAA’s Kempton Park headquarters. Jarana joined SAA in November last year but his appointment had been announced in August.

When he started work in November, it was with a group of Bain consultants in tow, who were meant to do pro-bono work in his office. A month later SAA approached the treasury with a request to appoint Bain, without going to open tender.

Treasury chief director Solly Tshitangano rejected the application, saying SAA should put out a transparent tender.

The modus operandi of Bain — a one-on-one meeting with Jarana and a questionable procurement process that included pro-bono work — seems to mirror revelations about the company’s role in the restructuring of the South African Revenue Service (Sars), which allegedly led to the decimation of its capacity.

Commenting on Bain’s relationship with SAA, the firm’s head of external relations, Marlynie Moodley, said: “Our work with clients is confidential. We have very strict guidelines to ensure that we are fully compliant with the laws and procurement guidelines across all geographies in which we operate. South Africa is no different.”

Moodley has previously defended the pro-bono work done by Bain at SAA, saying the company did it out of its love for South Africa and that it did not affect its later bid.

Bain and Massone have faced criticism after his testimony last week before the Nugent commission of inquiry into the state of corporate governance and allegations of misconduct at Sars during suspended commissioner Tom Moyane’s tenure.

Testimony revealed that Massone had met Moyane months before he was appointed Sars commissioner, and that Bain’s pro-bono work at Sars resulted in it getting a contract to restructure the revenue service, for which it was paid more than R200-million.

Testifying at the commission, Tshitangano said the speed at which Bain responded to the bid and the shortening of the bid period made it look as if Bain had prior knowledge and preparation.

The commission also heard testimony that Sars at the time was a world leader in revenue collection and many countries sought to model their tax collection on it.

Although Massone was at pains to distance Bain from the destruction of Sars, the company this week announced an internal review of its work for Sars.

It also emerged this week that Massone had met the then-new Telkom chief executive, Sipho Maseko, before the company secured a R91.1-million tender in 2013. To date, Bain’s presence at Telkom, where it was involved in restructuring, has grown.

Tlali said Jarana’s meeting with Bain during his notice period from Vodacom was done with the permission of SAA’s board as part of the “CEO [chief executive officer] on-boarding process”.

“The on-boarding process meant that he had to fully apprise himself of the landscape and one of the steps he took was to meet not only with Bain but all consulting firms in the period preceding his assumption of office at SAA.

“Mr Jarana appreciated that SAA did not have the luxury of time and he had to hit the ground running and took advantage of the notice to use it as part of the CEO on-boarding process,” he said.

The M&G has also learned that two SAA directors, Swazi Tshabalala and Nolitha Fakude, have tendered their resignations. Fakude, deputy chairperson and one of the people appointed by former finance minister Malusi Gigaba, said her resignation was for personal reasons. Tshabalala, who was appointed to the board of the MTN Group in May and as vice-president and chief financial officer of the African Development Bank Group, could not be reached at the time of going to print.