For the record
In an article on 14 May last year titled "Millions blown in corrupt IT tender" we published allegations concerning tender fraud in the Information and Communication Technology department of the Ekurhuleni Metropolitan Municipality (EMM).
TCM, the company who was awarded an EMM bid in 2007, issued summons in the South Gauteng High Court against The Saturday Star, alleging that the article was wrongful and defamatory of TCM.
TCM has also since responded to the allegations of irregularities. It has denied that it bypassed supply chain management policies and has stated that it delivered the tender to specifications on time and at the prices tendered.
We accept that to the extent that the article conveyed or implied that TCM was involved in corruption or fraud or had acted unlawfully in any manner in relation to the bid, these allegations were unfounded. We retract these allegations and apologise unreservedly to TCM.
Police are about to swoop on the Ekurhuleni municipality - perhaps even before Wednesday’s election - and arrest five senior officials for an elaborate tender fraud that has cost hundreds of millions of rands for a computer system that does not work.
The Saturday Star can reveal that a special investigating team has finalised its probe and will meet with the National Prosecuting Authority next week to have the arrest warrants issued.
Specialist forensic investigators Aurco were called in to the East Rand metropolis when the scope of the fraud proved to be too big for the Ekurhuleni Metropolitan Municipality’s (EMM) internal auditors.
The auditors themselves were tipped off by anonymous whistleblowers.
The investigation discovered massive fraud and mismanagement in the EMM Information and Communication Technology (ICT) department involving suppliers in collusion with the municipality’s own staff.
The fraud began when Ekurhuleni looked for a company to design and implement a new computer network infrastructure for the municipality.
An internal audit report rang alarm bells when it found the winner of the tender had bypassed the municipality’s supply chain management policy.
International computer giant IBM bid unsuccessfully for the tender. It could have done the work for a third less than the original quote in a third less time. IBM quoted R35 million to have the project completed in 42 weeks, while TCM - the company that “won” the tender - quoted R90m to finish the job in 156 weeks.
The internal auditors found that TCM had never complied with the bid requirements and that their bid application documents should have been rejected. IBM has gold partner status, which means it has the broadest range of expertise, while TCM had but a third rating and was not as competent as IBM. This rating was only awarded to TCM after the tender was awarded.
The audit also found that EMM’s staff allowed TCM to start the project without having insurance risk cover, should they fail to complete the project. Over and above this, TCM won the tender without a project or a design plan.
Ekurhuleni paid TCM a maintenance contract before the system and products were installed and implemented.
Eight months after the tender was awarded to TCM, someone in the municipality asked about the company’s project plan only to be told none existed. The project manager said a meeting would be held to draw one up and would be e-mailed to EMM’s internal audit department. From June 2007 until June 2009, EMM paid TCM nearly R279m without the project being completed.
The audit report also found that EMM had awarded a tender for the supply, delivery installation, implementation of computers and its components to a company called Meropa.
But Meropa was only registered as a company less than a year before the contract was awarded and it has only one member. That person is related to an EMM employee.
Meropa in turn is inexplicably linked to four other companies that have been awarded tenders to render a service as part of the municipality’s ICT system. In total, Aurco has found that Ekurhuleni paid at least R386m on its ICT needs to these six linked companies that might well have been set up as shell companies or “post box” vendors, to channel council funds.
Each company by-passed tender procedures and Aurco believes that there was “bid-rigging” too, where the shell companies were able to tender for work with inside knowledge of what reputable companies had already bid.
- Last week, the Saturday Star reported how the EMM’s 2010 office, set up to implement world cup initiatives, wasted R22m between popular DJ S’bu and the greening of non-existent sports fields.
In the process, they flouted tender regulations, according to a secret forensic report.
The council requested a probe into the validity of its 2010 office’s spending and appointed Indyebo Consulting to probe the fields and DJ S’bu’s record company. Indyebo recommended that the Special Investigations Unit get involved. - Saturday Star
[IN RESPONSE to an article published in the Saturday Star on May 14 2011, TCM states that it was awarded a tender on merit from Ekurhuleni Metropolitan Municipality (EMM) to supply Cisco IT related goods and services in February 2007.
TCM denies any collusion or corruption in the award of the tender. TCM is not linked in any way to Meropa. TCM has done business with Meropa and many other Ekurhuleni ICT vendors on a normal business relationship and has no knowledge of the family relationships that exist with Meropa and Ekurhuleni.
TCM prides itself on doing business in a responsible and ethical manner. TCM would welcome any investigation in the award of the tender, which it clearly received on merit. TCM denies that it bypassed supply chain management policies of Ekurhuleni. The contract was awarded from 1st March 2007 until 30th June 2009 together with ongoing maintenance by the Tender and Procurement Committee in February 2007.
TCM partnered with Cisco South Africa who imported the top skills globally to ensure a world class design and implementation. The network design was not a tender requirement but was part of the scope of work that TCM complied with. The tender requested unit prices to be supplied without a design and accordingly was not a fixed price tender. Therefore it is nonsensical to compare the price of IBM to TCM as the design was not approved at the time of tender.
TCM requested a copy of the “AURCO” report in November 2009 but was never furnished with it.
TCM delivered the tender to specifications on time and at the prices tendered. TCM prides itself on doing business with the utmost professional and ethical business conduct consistent with sound corporate governance and the delivery of the goods and services in the tender was complied with in accordance with the documentation.
TCM stands by its opinion that internal disarray at Ekurhuleni is responsible for any systems not working after the TCM contract ended. TCM complied with all its objectives. Ekurhuleni have subsequently failed to award a support contract despite going to tender twice since the end of TCM’s contract.
Ekurhuleni paid TCM monies due to TCM after summons had been issued in the South Gauteng High Court under Case Number: 2009/51743 for a final balance of monies due in terms of the tender document. The amount paid by Ekurhuleni was in accordance with the final balance due of R4 500 000, which was paid in August 2010 together with the legal costs of TCM.
This clearly indicates that full payment was made after legal action was taken against Ekurhuleni despite the existence of the “AURCO” report and the corruption allegations.
In conclusion Cisco also executed a post completion evaluation of the environment at the request of Ekurhuleni to determine whether a gap existed between the tender specification and the finished product so that they could determine whether or not final payment to TCM was due. At the conclusion of this evaluation Ekurhuleni paid TCM in full."]