The Public Service Commission (PSC) has found that about 30% of 1700 randomly seletecd contracts worth less tan R200 000 awarded in the housing and public works environments failed to comply with procurement rules.
The commission’s “Evaluation of Supply Chain Management Practices Within the R200 000 Threshold” report concluded that the failure of the Departments of Public Works and Housing, as well as some provincial departments, to comply with the Public Finance Management Act and the Preferential Procurement Policy Framework Act gave rise to irregular expenditure, fraud and corruption through tender fraud, conflicts of interest, kickback schemes and inflated billing.
Business Day recently reported PSC chairman Stan Sangweni said the law, policies and procedures were clear but compliance was a problem. Sangweni urged that internal controls be strengthened.
Transactions up to R200 000 posed the biggest risk to the state as only quotations were required and not publicised tenders, Sangweni said.
A weak supply chain management system meant verbal requests for quotations could be made to favour a service provider by giving incorrect information to its rivals. Also, invitations to quote could be sent out at the last minute to competing providers to favour the preferred one.
Investigators examined 1679 randomly selected transactions concluded between April 2005 and March 2007. Public works and housing were chosen because their operations involve a large degree of outsourcing.
Investigators discovered that the average rate of compliance with procurement rules relating to the invitation of quotations was 71%, implying that in 29% of all transactions evaluated there was no evidence that quotations were obtained before orders were placed with service providers.
Only 55% of transactions complied with the ruling that a required number of quotations need to be obtained .
An "unacceptably low" average of 54% was attained with respect to the evaluation of quotations, which the commission said was a substantial area of concern. "It indicates that the application of the criteria for awarding orders for goods and services is not well controlled and monitored, and is therefore prone to abuse."