Big revelations in US tech giant’s R1.9-billion South African government tender

A controversial IT contract awarded to US tech giant Oracle was allegedly facilitated by a former National Treasury senior official and its cost has tripled from an initial amount of R670 million to R1.9 billion, Sunday Times reports.

These are among several findings from a four-year investigation by the Special Investigating Unit (SIU) into the Integrated Financial Management System (IFMS) contract, which Oracle won in 2015.

The IFMS is intended to be an all-in-one system combining the government’s financial and human resource systems to improve service delivery and increase security.

However, two decades after being approved by the cabinet, the system has yet to deliver any tangible benefits.

President Cyril Ramaphosa authorised an investigation into the IFMS tender awarded to Oracle in 2020.

During a presentation to Parliament’s Standing Committee on Public Accounts (Scopa) in September 2023, the SIU alleged that Treasury only had a single computer with prototype software to show after spending R882 million on the contract.

National Treasury was asked to respond to the presentation and provide its input by 22 January 2024. Taking the feedback into consideration, the SIU notified National Treasury that it stood by its initial findings.

The SIU subsequently announced it had begun a process to blacklist Oracle and block the company from doing business with the government in a presentation to Parliament in March 2024.

SIU head Andy Mothibi said the investigation had proved a conflict of interest between senior Treasury officials and Oracle.

“During the investigation we’ve gathered evidence — which we really can’t unpack in the committee meeting — but we do have the evidence that supports the findings,” Mothibi said.

Sunday Times reported that it has seen the report and listed some of its key findings:

• Oracle received sensitive tender information from a former accountant-general before the tender was advertised

• Oracle misrepresented facts in its declaration form, but was not disqualified

• The company’s price and contract period increased after its appointment, from R670 million over five years to R1.9 billion over 20 years

• Oracle was unlawfully allowed to amend and resubmit its proposal for failing to complete mandatory requirements, but was not disqualified

• R68 million in fruitless and wasteful spending was made in continuous payment to Oracle for software support and maintenance

• R85 million was paid by the Treasury to procure additional product licences that fell outside the scope of the tender; and

• The bid evaluation committee had not been established at the time the bid was advertised, which was “irregular”

SIU lead investigator Kevin Reddy explained that the tender came down to a face-off between Oracle and SAP, which had quoted R1 billion in its bid.

Reddy maintains that Oracle won because the former accountant-general had warned the company to lower its price.

The SIU submitted its report to President Cyril Ramaphosa in May 2024, recommending that the Hawks and NPA pursue criminal charges against five people, disciplinary action against two others, and that Oracle be blacklisted.

National Treasury is challenging the SIU’s report in the Pretoria High Court, arguing that the entity conflated “minor administrative oversights with criminal transgressions.”

Treasury-director general Duncan Pieterse has staunchly defended the entity and the former accountant-general accused of providing sensitive tender information to Oracle.

Pieterse argued that the report could destroy the Treasury’s reputation as the “ideal of financial responsibility and probit.”

He has maintained that the SIU would have come to “very different” conclusions had it properly considered the National Treasury’s inputs.

Pieterse further alleged that the SIU exceeded its mandate by investigating matters beyond 24 December 2020 and had no legislative authority when it came to findings on matters of executive policy.

“The SIU report is in conflict with the law. Its findings are — in the light of a proper consideration of the relevant evidence — unreasonable, irrational and arbitrary,” Pieterse said.

Impact of blacklisting uncertain

The implementation of the IFMS was first approved by Cabinet ministers in 2005.

An initial R1-billion contract was awarded to a consortium consisting of ICT Works and T-System’s Arivia.kom in 2010.

However, that project was abandoned and its expenditure written off in 2014, after which the new contract was rewarded to Oracle.

It remains unclear how a potential blacklisting of Oracle could impact other government entities and local businesses which make use of the company’s software.

Oracle owns the Java programming language and the MySQL database management system (DBMS), which are widely used in various government contracts.

MySQL holds a global market share of nearly 42% in DBMS, making it the most widely-used software in this category.

According to OfferZen’s 2024 State of the Software Developer Nation report, almost 23% of South African developers programmed in Java as their most-used language.

MyBroadband previously asked the SIU whether the blacklisting would include a ban on the company’s software, but it did not provide feedback.

MyBroadband contacted Oracle for comment but it did not immediately respond before publication.

source:Big revelations in US tech giant’s R1.9-billion South African government tender – MyBroadband