SA’s history of large-scale procurement projects is laden with conflict, corruption, contract mismanagement and institutional incompetence that has created permanent sceptics out of citizens.
Some of the problems associated with public sector procurement stem from many regarding the state as a lucrative source of business and dedicating their entire business lines to servicing the state. The desperation to secure contracts creates incentives for inducements and corrupt practices that undermine the integrity of procurement systems.
The pliability of state functionaries, who undermine processes by manipulating systems to favour preferred providers in exchange for undeclared fees and rewards means the dimensions of corruption have become institutionalised.
Guardrails against such practices include the use of multiple quotations for transactions above particular thresholds and the use of independent adjudication and evaluation tribunals and committees to lend some integrity to the processes.
Such guardrails are also subject to the risk of manipulation if those charged with providing guidance on technical evaluations are themselves targets of inducements.
The consequences of compromised processes are the delivery of products and services that do not meet the entire spectrum of requirements — leading to additional costs incurred to cover the delivery gap. The cost inflation can be turbocharged upfront if closely related, overpriced bids are submitted just to meet the threshold of minimum submissions.
When evaluators are working with an inflated baseline of costs as the reference point, any conclusion — even legitimate — ends up binding the state entity to higher costs. Beyond the initial front-loading of excess fees, additional scope alterations have become a common feature of extracting additional payments under the premise that working with the incumbents is more practical than soliciting new proposals to ensure continuity.
The contestation over the integrity of procurement processes often leads to litigation in which losing bidders highlight flaws in processes to either restart the process or extract compensation.
When the services in question are fundamentally important to the state and any interruption would lead to a national crisis, the process of resolving disputes about processes has to be balanced with the prospect of harm to service delivery. In the case of the SA Social Security Agency social grants contract that was won by CPS, the possibility of suspending grant payments while process litigation was under way was simply inconceivable.
CPS then had to carry on delivering on what was alleged — and later confirmed — to be a tainted contract. These lessons do not seem to have influenced the recent process of awarding the national lottery licence. When the term of the current operator, Ithuba, was approaching its end, the department of trade, industry & competition solicited new proposals for the next licence.
The incumbents — no doubt buoyed by their belief that they have thus far successfully executed well on the current licence — applied alongside seven other applicants. When the licence was awarded to Sizekhaya Holdings — after a process involving evaluation and adjudication committees and the board of the National Lotteries Commission — other applicants took the view that the process had been tainted enough for them to ask the courts to cast an eye on it all.
The problem with the belated announcement and ensuing litigation is that even the winners were not in a position to take over on the due date and the incumbents — having been told their time was up — had little appetite for investing deep capital in a short-term contract.
The middle ground — a five-month extension — will enable the country to avoid the crisis of interruption but the bigger question (why our procurement processes keep stumbling into crisis and litigation) needs decisive interventions across the entire state procurement ecosystem.
• Sithole is an accountant, academic and activist.
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