The Department of Home Affairs has reached a settlement with Gijima and other suppliers, subject to the fulfilment of various conditions precedent, resolving the dispute concerning the modernisation of the department’s information technology (IT) infrastructure and systems through a project known as Who Am I Online (WAIO).
The WAIO project seeks to re-engineer and digitise most of the key processes of the department together with a significantly enhanced national population register, including birth and death certificates, processing of identity document (ID) and passport applications, visa and other permit applications as well as enhanced movement control for South Africans and foreigners at the country’s borders.
Tender bids for the WAIO project were invited in 2006 comprising three parts:
Part A: The development of an integrated core business system which would automate the various processes of the department
Part B: The implementation of this business system across various Home Affairs sites both in South Africa (including Home Affairs branches and all key ports of entry) and abroad (including a number of foreign missions). This included infrastructure and computer hardware on which the application would operate
Part C: This involved the shared government “middleware” to be provided by State Information Technology Agency (SITA)
The bid by Gijima of R2.1 billion, comprising R1.9 billion for Part A and Part B and an estimate of R200 million for Part C, was approved and a contract signed with Gijima to deliver the project in 2008.
However, concerns over escalating project costs (which by 2010 had grown to R4.5 billion from the original R2.1 billion) and a lack of progress led the department to investigate the project early in 2010.
In April 2010 the department notified Gijima as prime contractor – as well as IBM and HP which had provided lease financing for the project – that it regarded the purported contract as invalid. However, this repudiation was disputed and therefore, to avoid indefinite delays to the project by costly and lengthy litigation, the department entered into negotiations to amicably resolve the dispute and allow for the urgent completion of the project in line with the department’s original requirements and in line with the original cost estimates.
In terms of the settlement agreements between the parties, the total final capital cost (excluding interest) of the items in the scope of this project, including expenditure to date of approximately R1.4 billion, is estimated to be approximately R2.27 billion. This is in line with the Treasury budget of R2.23 billion for the project, which was conditionally approved in 2009.
Government has paid R391 million to date, including interest on leases of R945 million between Gijima and the department. The revenue streams of these leases were purchased by IBM and HP.
The government will undertake to settle early these leases in an amount of R815 million, saving government approximately R234 million in capital and interest.IBM and HP have agreed to such early settlement, thereby foregoing a portion of the amounts due to them.
For its part and in terms of the settlement agreement, Gijima has agreed to contribute R375 million, comprising the writing down of invoices and the future rendering of support and maintenance services.
The settlement opens the way for the urgent resumption of the project and represents a potential R2 billion in saving to government against the R4.5 billion estimated cost to complete the project under the current disputed contracts.
Once the outstanding lease settlement costs have been paid, the department anticipates spending approximately R1.3 billion in completing the project. The vast bulk of this funding will be paid to sub-contractors working with Gijima to deliver on the outstanding components of the project.
A key factor which allowed for completion of the project at close to the original tender amount is the use of existing state IT infrastructure and systems developed in recent years. Among these is the highly successful enhanced Movement Control System developed and implemented ahead of the 2010 FIFA World Cup. To date more than 25 million movements have been processed by the system.
The project will also build on a number of systems currently in use by the South African Revenue Service including its service management system used in branches and the South African Revenue Service (SARS) call centre.
Building on the experience gained and lessons learned over the past year, negotiations to finalise the contract will ensure it is more robust, specific and detailed to avoid scope-creep, delays and cost escalations frequently associated with large IT implementations. Additional internal controls and management will also be introduced to ensure the successful delivery of the project on time and in budget.
The department believes the settlement is in the best interest of the State and most importantly for the people of South Africa who stand to benefit directly from a more effective, more efficient, more secure system within Home Affairs in the near future.
A summary of the direct costs to be incurred in completing the WAIO project including approximately R219 million in interest are as follows:
Paid to date
Early settlement of leases
Completion of the project (including 10 percent contingency)
Finally, the department expresses its conviction that this settlement paves the way for the forensic audit and the Auditor-General’s report to be duly finalised and the matter brought to its logical conclusion.
Cell: 082 990 4853
Issued by: Department of Home Affairs
7 Mar 2011