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Treasury grilled on R74bn deviation procurement

Nov 01 2017 18:37
Carin Smith

Cape Town – Treasury's Director General Dondo Mogajane was grilled by members of SCOPA on Wednesday on how it was possible for state entities and institutions to have been allowed to deviate from required procurement processes to the tune of a total of R74bn in 2016/17. 

While the public procurement process makes provision for deviations of the tender process under certain circumstances, MP’s from across the political spectrum asked Mogajane to explain how such a vast sum could have been racked up without Treasury sounding the alarm.

SCOPA (Committee on Public Accounts) member Mnyamezeli Booi of the ANC told Fin24 that research showed about R66bn in deviation procurement came from Eskom, about R2bn from Treasury itself, and about R1bn from the SA Revenue Service (SARS).

"What we want to know is how could Treasury have let R74bn in deviation procurement pile up without sounding the alarm?" said Booi.

"It means certain departments have abused the procurement system itself. Where was the infrastructure to avoid it? At which stage does Treasury get involved? Is this due to the incapacity of Treasury which could not monitor the situation. We should be suspicious."

Mogajane repeatedly emphasised that one should not assume that the R74bn deviation was due to abuse. It is not breaking the law to apply for deviations in the procurement process.

The deviations by Eskom, for instance, mainly related to supplies for Medupi and Kusile where there was "poor planning" initially, a Treasury official told SCOPA.

Treasury also pointed out to Fin24 that the director general never spoke about R74bn to SCOPA. The R74bn was mentioned based on SCOPA's own calculations extracted from a spreadsheet on deviations. This amount includes both deviations and variations or expansions of contracts.

Deviation

Procurement through deviation is legally allowed in specific cases, for instance, where it would be impractical to invite competitive bids.

The accounting authority may then procure the required goods or services by other means - provided that the reasons for the deviation are recorded and approved by the accounting authority.

"It has come to light that improper supply chain management practices at institutions are seriously undermining sound financial management...and ultimately eroding scarce resources that are intended to improve service delivery," said Mogajane.

He added that political interference should not happen at all in the government procurement processes.

At the same time, he lamented that wrongdoers abusing the system were not receiving criminal or disciplinary penalties they deserve.

He would like to see the political will to address and avoid abuse of the procurement through deviation process to be a norm rather than an exception.

SCOPA member Ntombovuyo Mente of the EFF asked Mogajane why no disciplinary hearings were held or criminal charges laid regarding corruption at Eskom and its deviation procurement of about R66bn.

She also wanted to know if there was a prescribed "price sheet" that compares prices in order to establish when these are being inflated.

Mogajane said improvements to procurement processes should include institutions reducing procurement through deviations. He said he wanted to see institutions applying the principles of fairness, equity, transparency, competitiveness and cost effectiveness when procuring through deviations.

Abuse

An example of an abusive deviation procurement practice seen by Treasury is where an institution waits until the last minute to take action and then declares an emergency for which deviation is needed, said Mogajane. He said he wanted institutions to advertise bids at least six months before the expiry of existing contracts.

Among the many examples of abuse mentioned by Mogajane were inflating prices; not rotating suppliers; not doing market research; splitting procurement to avoid competitive bidding; suppliers appointed at exorbitant prices; bid specifications tailored to favour certain suppliers.

He also mentioned procurement of items not budgeted for; poor procurement plans; inadequate needs assessment; conflicts of interest not declared; political interference; recommendations ignored by accounting officers; manipulation of scores; inadequate supervision of suppliers; submission and payment of fictitious invoices; quality of products compromised; use of sub-standard materials; and detailed tender records not kept.

"Good records must be kept of the minutes of bid selection meetings, for instance. Some things go under the radar and then we cannot see if everything was above board," he told SCOPA.

SCOPA member David Ross of the DA suggested that the wording of the deviation procurement regulatory terminology should be changed from "may" to "must" where it occurs in order to ensure compliance.

SCOPA member Nelson Godi of the APC, meanwhile, said Treasury was not a "super department" able to just say there is nothing it can do about deviation procurement abuse.

"These officers doing just what they want creates a worrying situation," he said.

"It is not a zero sum game, but we need a solution. Be sure you are monitoring the process and you are not captured," he told Mogajane.

Mogajane, however, said the process was indeed well structured and there are strict rules governing deviations from the procurement process.

Thapelo Chiloane of the ANC, in turn, raised concerns about the negative impact of procurement abuse on the public health sector.

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treasury  |  scopa  |  dondo mogajane  |  sa economy  |  procurement

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