The Standing Committee on Appropriations received a briefing yesterday from the Chief Procurement Officer on procurement deviations, modifications and expansions of contracts by various departments in the last quarter of the current finaical year 2019/20).
The Procurement Office, which is based in the National Treasury, is charged with the task of advancing fair and competitive bidding norms and standards to ensure that there is compliance with the rules and regulations that govern procurement processes in government departments.
The committee heard that there is a legal basis for deviations, but that is based on urgent and emergency basis that compel a given department to deviate from the normal competitive procurement rules.
According to the Acting Chief Procurement Officer, Ms Estelle Setan, a deviation can be allowed to happen if there is a serious threat to property, life or due to a natural disaster. This deviation must be recorded within 10 working days if it exceeds R1 million.
Coupled with that, she said a deviation is granted to departments to modify and expand a contract due to contractual obligations. According to procurement rules, she said: “The modification and expansion of a contract can be allowed if a given project had to be extended due unforeseen circumstances related to the need to extend the time frame of a given project or the nature of a contact initially entered into.”
The committee heard that the spike in deviations in the second quarter of the current financial year is attributed to the eight applications of Eskom. Ms Setan said that constitutes R68.7 billion which forms part of renegotiating its coal supply.
Apart from Eskom, the committee heard that of the 231 deviation applications worth well over R10 billion, the top 20 departments and entities that applied for deviations are the Department of Health and Prasa (Passenger Rail Agency of South Africa). Ms Setan said much of the Department of Health’s deviations relate to its procurement of vaccines and Covid-19-related commitments.
Regarding Prasa, she said: “Well over R1.1 billion has been granted to Prasa for technical assistance, rehabilitation, maintenance of networks and security.”
Ms Setan said in her view, there are worrying and inherent trends emerging that point to the increasing departure from competitive bidding processes by many government departments. She said more alarmingly, is the tendency by accounting officers of departments to implement deviations even though te National Treasury has disapproved them.
She told the committee that the migration to an automated procurement portal, aimed at incepting an integrated central supply database to curb non-compliance, is yet to be implemented. She said: “This is compounded by the scarcity of information from departments regarding their procurement processes, and that makes it hard for us to conduct our due diligence and carry out our mandate.”
Ms Setan told the committee that the advent of Covid-19 has exacerbated this sorry state of procurement trends in government. She added that there is a low submission of Covid-19-related procurement reports by departments to the Procurement Office. She said: “Of 805 expected reports, only 171 have been received thus far.”
The committee asked if there is enough capacity in the office to uphold its mandate of curbing wasteful expenditure. In response, Ms Setan said: “We don’t have enough personnel with the necessary skills to deal with government institutions that have complex supply chain management systems. The office’s incapacity to make a follow-up on the outstanding departments’ Covid-19 procurement reports is a case in point.”
The committee also asked Ms Setan about consequences for accounting officers who ignore the National Treasury’s disapproval of their departments’ deviations, as a deviation without approval is a serious problem that cannot be tolerated. Ms Setan said that is an issue which the National Treasury is currently grappling with.
Ms Setan told the committee that the office’s responsibility is to write rules of engagement. She added: “We are basically policy makers. We ensure that departments have the necessary instruments in place to follow fair procurement processes. Our mandate is limited to that.”
The Chairperson of the committee, Mr S’fiso Buthelezi, asked: “Who approves these deviations, who allows departments to deviate from the law?” In response, Ms Setan said: “There is a Governance, Compliance and Monitoring Unit at the National Treasury that approves deviations.
Mr Buthelezi added: “I am asking this question because there is often an outcry when we, for instance, approve R56 billion for the recapitalisation of entities such as Eskom. The citizens of this country would be even more outraged to learn that these funds are not, at best, spent responsibly, and at worst ,in accordance to the procurement laws of this country.”
He said: “We need not be pedestrian when we deal with this matter because much of the corruption and fraud engulfing the government departments emanate from lack of compliance with procurement rules and regulations.” Mr Buthelezi demanded adamantly that the office should provide the committee with the top five departments and entities that consistently deviate from procurement procedures in successive financial years, and those that are yet to provide it with Covid-19 procurement reports.
Mr Buthelezi told Ms Setan that it is obvious that the Procurement Office is overstretched and needs to be capacitated urgently to address one of the components that are critical in the management of public funds. He added: “It is unacceptable that we still don’t have an integrated supply chain management system across all departments. And that it remains as fragmented as it is, given the strategic role that procurement plays in addressing economic inequalities and in effecting service delivery.”
He said there is so much at stake here, and added: “We can’t afford to be pedestrian about the inefficiencies that confront this office. Our country’s development agenda hinges on this office’s ability to do its work efficiently and effectively. Its inception was galvanised by this realisation. As a committee, we should not spare any effort in righting all the wrongs that beset its mandate.”
By Abel Mputing
18 February 2021