Picture: ELIJAR MUSHIANA
Picture: ELIJAR MUSHIANA

The process to appoint Bain by the SA Revenue Service (Sars) was irregular and riddled with "red flags", in a manner that suggests that the consultancy’s appointment was predetermined, a Treasury procurement official said on Friday.

Bain conducted the far-reaching restructuring of the Sars operating model at a cost of R164m, which is said to have destroyed the revenue collector’s capacity and neutralised its efficiency.

The Treasury’s Solly Tshitangano told the commission of inquiry into governance at Sars that the 50% discount that Bain gave the tax agency — which ensured them the tender for a diagnostic exercise on the restructuring — was "unusual".

He said it was "very strange" that the second company’s price had come in at R2.8m and Bain’s as the winning bidder came in at R2.7m only after the 50% discount.

He disclosed that before the tender process had even begun, Sars wrote to Telkom, which had had an existing contract with Bain to request that the tax agency "participate" in that contract.

"Already a service provider had been identified and for you to be able to know that Bain has a contract with Telkom, … they would have done some analysis so that they would know this,"he said.

This attempt failed as no response appeared to come from Telkom. But it also marked a deviation from what Sars had told the minister when it requested approval to go out on tender. In a letter to the minister, Sars said it would hold a closed tender and invite companies already on its database to bid for the work.

It was also unusual that companies were invited to a briefing on the tender on December 11 2014, and were asked to submit their proposals the next day. Bain had already included its price in its documents.

"My suspicion is that for you to be able to provide documents with a price a day after attending the briefing [means] you would have started some time back and this is a problem we know in government," Tshitangano said.

"We know that government officials give information to suppliers so that they start preparing."

Once the first phase of work had concluded Sars "changed its story" and instead of going to market for phase 2 of the project, it deviated from procurement processes and retained Bain.

It did this through a deviation in terms of treasury regulations for cases of emergency or sole suppliers only.

"Bain is not the sole supplier and there are no facts given to say that this was an emergency," he said.

During the first leg of the process, Sars had also undertaken that the second phase would be subjected to a new procurement process, but this did not happen. The second phase cost R151m and the third — which the treasury approved — cost R50m.

Tshitangano said the Treasury had approved this third phase because Sars had said if it failed to do so, the institution would incur irregular expenditure as this phase was meant to finalise the work.

Bain was expected to return to give evidence on Friday.

marriann@businesslive.co.za

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