DM168 INVESTIGATION: Free State: Casting a spotlight on one of the 4,302 cases of PPE corruption worth billions

DM168 INVESTIGATION: Free State: Casting a spotlight on one of the 4,302 cases of PPE corruption worth billions


Healthcare workers prepare to put on PPE at a field hospital. (Photo: Asekho Gashe)

Chaotic processes, unlabelled boxes, defective sterile gowns, court cases and SIU probes – this is the ghastly story of massive procurement issues dogging the Free State government.

Estelle Ellis

First published in the Daily Maverick 168 weekly newspaper.

A shocking picture of chaotic procurement processes, characterised by unlabelled boxes, the wrong personal protective equipment (PPE) being delivered, futile planning, and a controversial “quarantining of defective gowns” has emerged in the Free State.

Right on the heels of PPE corruption in Gauteng, the Special Investigating Unit (SIU) has brought to the fore another case of possibly dishonest bidders supplying inferior protection against Covid-19. The SIU has asked the Special Tribunal to set aside a staggering R39-million in PPE contracts issued by the Free State government – and this is only for protective gowns.

This was one of 4,302 cases worth billions of rands relating to PPE contracts concluded since the start of the Covid-19 pandemic that were being investigated by the SIU countrywide, advocate Andy Mothibi, the head of the SIU, told the Standing Committee on Public Accounts (Scopa) on 1 September. The contracts under investigation were awarded to 2,421 service providers.

“We are continually receiving more allegations. New cases are being added [all the time],” Mothibi told Scopa.

So far, the SIU is investigating or has finalised investigations for PPE contracts countrywide worth R14.8-billion; investigations into R6.9-billion have been finalised, R7.1-billion in contracts are under investigation and Mothibi said investigations into contracts valued at about R746-million must still start.

Political pressure and procurement

Mothibi said that nationally there were trends observed in the procurement of PPE.

These included that political pressure played a role in the procurement process, that the type of goods supplied were not consistent with the nature of the business registered, product specifications were ignored and products that were not suitable for their intended purposes were purchased, in several instances against the advice of experts who gave opinions on the usefulness of the products.

Many companies were awarded contracts for the supply of PPE, which included certain items that qualified as “medical devices”, despite the fact that these companies did not have the necessary licences from the South African Health Products Regulatory Authority (Sahpra) to import, sell or distribute such medical devices. In many cases, prescripts relating to the packaging, transport and storage of such medical devices were not complied with.

He added that in some instances the names of the service providers were determined before any supply chain management process started. Mothibi further said that another trend was the delivery of substandard PPE or PPE that did not comply with the technical specifications contained in the invitation to submit quotations. In certain cases PPE was not packed according to predetermined standards.

They also found cases where there was misrepresentation by suppliers: they did not disclose their close friendships with officials who were involved in awarding PPE contracts, and PPE was packaged under a false, forged or cloned label.

Mothibi said the SIU had also recorded instances in which witnesses provided false information to the SIU. Some staff in state institutions appeared to have taken responsibility for the irregularities relating to the PPE procurement instead of senior management or executive authorities.

They also noticed instances in which evidence was destroyed, and a number of witnesses who had been interviewed were now refusing to sign their witness statements, he said.

Presiding over the Free State case in the Special Tribunal hearing involving 32 companies, Judge Lebogang Modiba indicated that her ruling, expected in the next two months, will be a watershed judgment on whether companies that were not registered with Sahpra could legally bid for the supply of medical-grade PPE to hospitals.

She added during the legal argument before her that an important question was how this affected the users of public health services.

Substandard quality

The Free State government has conceded in papers before court that the gowns that were delivered were of inferior quality and not sterile, and that the samples provided by suppliers for assessment and the gowns eventually delivered were not similar.

“There is no basis whatsoever that any of the [service providers] are entitled to receive payment from the tender in question,” advocate Thandi Norman, arguing for the SIU, said, adding that the Free State government had made it its “mission” to protect noncompliant tenders.

The gowns were procured during the early part of 2020, when hospitals were getting ready to face the first wave of Covid-19 infections. But – in what the SIU described as a chaotic situation – the samples provided during the procurement process were not the same as the gowns that were eventually delivered. Gowns in unidentified boxes were lumped together and, by the time the authorities investigated, it had become impossible to distinguish which gowns had been delivered by the different suppliers.

The SIU’s application was opposed by the Free State provincial government, which, in a scathing attack on the SIU, claimed that its own investigation into the issue was halted by investigators, leaving it open to civil action from suppliers who had not been paid yet.

Norman described the bid process as illegal, irrational and ill-considered.

She said the Free State government “failed to comply with the relevant legal prescripts and contravened the principle of legality”.

“The process was so flawed, that there was no way that they could have lawfully concluded any of the contracts.”

Countering the complaint by the Free State government that the SIU was interfering in what was a contractual issue, Norman said the case was referred to the SIU by the Free State Treasury itself.

The Free State team that had assessed the gowns failed to check that the PPE had South African National Standards certification. This, she said, was mandatory and critical, adding that “no tangible criteria” had been used during the evaluation process and that the SIU would dispute that the “health experts” the Free State government had appointed were, in fact, experts.

She said the tender was for sterile surgical gowns but one company was allowed to bid for isolation gowns and in the validation report officials from the Free State government referred to “surgical isolation gowns”.

“There is no such thing,” Norman said. “This shows how flawed the process was.”

After problems with the gowns were pointed out, Free State officials then embarked on a “validation process” to figure out what to do next. According to court documents, they then tried to contact many of the service providers but only got their voicemails. Boxes of gowns had no indication of sizes or quantities; the boxes were labelled as sterile but inside them were non-sterile gowns.

Norman said, according to their investigation, frontline medical teams were then advised to sterilise the gowns using the autoclave machines in theatres at R6 a gown.

“It is like inviting a bid for 10 goats and then someone brings 10 sheep and says you can still slaughter them,” Norman said.

Estelle Counting the costs of PPE corruption scaled
A healthcare worker attends to a patient. (Photo: Gallo Images / Alet Pretorius)

Noncompliance

There was noncompliance with tender conditions, noncompliance with technical specifications and no segregation of the duties between members of the bid committees, Norman said.

She added that there has also been noncompliance with the Medicines and Related Substances Act and guidelines issued by Sahpra.

Three bidders provided a South African National Standards certificate (to show compliance with South African National Standards) but Norman said in doing so they “created new problems for themselves” – the certificates were riddled with errors and contradictions and could not be traced back to the three companies.

A report was required for each bidder, but was not done properly. “Simply put, the bids were not evaluated in terms of the mandatory requirements of the bid.”

Norman argued that these shortfalls were fatal to the procurement process and the contracts should be set aside.

A similar investigation by the Public Protector, however, found that the allegation that the procurement process followed by the Free State Provincial Government did not comply with legislative prescripts, and specifically with National Treasury Instruction Notes, was “not substantiated”.

Norman said the SIU did not agree with the conclusions of the Public Protector.

“The competency of investigations by the office of the Public Protector has recently been severely criticised where she was accused of failing to analyse and understand facts at her disposal with a complete lack of basic knowledge of the law and its application. The Public Protector also misconstrued various pieces of legislation.”

Another investigation by the Auditor-General also found that successful bidders for this contract did not all have their tax affairs in order.

Norman said there was an attempt by the Free State government to regularise the situation by imposing penalties on the bidders and deciding to use the gowns for other purposes.

This was a “blatant attempt” to circumvent the provisions of the Public Finances Management Act, she said. “There is no tangible evidence that the gowns delivered are fit for use or fit for purpose in nonsurgical environments.”

Advocate Anton Katz SC, arguing on behalf of the Free State government, said there was nothing wrong with the procurement process but some service providers delivered gowns that “did not conform with the criteria”.

It had, however, become difficult for government officials, Katz explained, to find the gowns that were substandard because these had become muddled with other stock, including gowns that were donated by the World Health Organization, and some had been distributed and used.

He said this was a contractual issue and this was outside the scope of the SIU, adding that the provincial government had planned to negotiate financial penalties for the suppliers that did not provide the right gowns.

Other procurement

Katz argued that it was strange that the SIU did not pursue similar action in respect of other PPE that was procured in the same way.

He said the fact that the gowns delivered were not sterile was the SIU’s primary cause of action but that this “did not render the procurement unlawful”.

The Free State government’s own investigation into the matter was halted by the SIU, he said. He asked the court to shield the provincial government against legal claims by suppliers because it had been barred from paying them by the SIU, which also stopped the provincial government from using the gowns.

He said that, when the Free State government wrote to the SIU to complain of the enormous prejudice it was suffering, it was ignored. A request to use the gowns was also ignored.

Modiba asked Katz if she was correct in sensing irritation with the SIU on behalf of the Free State government.

“They are keen to do the right thing,” Katz answered. “They say the SIU has stopped them from sorting out this mess. They are irritated. They have tried to get this process going. On the evidence there wasn’t gross maladministration,” he said. “My submission is that it is unfair for them to be targeted and tarnished.”

Katz said the Free State government conceded that the gowns delivered were not up to standard. “Upon receipt of the gowns it became apparent to the departments that certain service providers had not complied with the relevant specifications.”

He added that his clients encountered difficulties when trying to conduct a validation process to determine which gowns were up to standard and which ones were not.

“Not all service providers could be reached to attend the validation checks,” he said, adding that those who could “were not always able to identify their boxes since most of the service providers procured from the same manufacturer”. The number of boxes also made it impractical for officials to validate all of them.

He explained that, although the gowns were not sterile, officials decided they could still be used and they were advised to negotiate a lower price.

The SIU complained about experts who were not included in the committee that evaluated the gowns, but, said Katz, this “did not match up to the facts” – a clinical manager and a specialist nurse were serving on the body, he said.

Katz added that none of the instruction notes issued by the National Treasury required suppliers to be registered in terms of the Medicines and Related Substances Act and with Sahpra.

It had become impossible, he said, to work out which service provider delivered compliant gowns and which did not.

“The process followed by the departments in the selection of service providers was fair and equitable and was in accordance with the emergency procurement framework,” Katz said.

Payments ceased

Advocate William Mokhare, arguing for some of the supplier companies, said that payments, even for items that were not gowns, had ceased. Yet inspection of delivery sites showed boxes of PPE had been delivered, he said.

He added that there was a lack of an efficient and effective reception system that would have enabled the seamless identification of supplies once they had been delivered.

Mokhare said the SIU initially “created the false impression” that the items delivered were “so useless” that no consideration could and should be paid to the service providers.

“We did not appoint ourselves,” he argued. “We were invited to bid.”

He said the department should pay the suppliers for the gowns that were used.

Presenting on the progress of the SIU investigations with regard to the emergency procurement of goods during the pandemic, Mothibi told Scopa:

“It appears that persons in positions of authority within Provincial Government believed that the declaration of a ‘national state of disaster’ meant that all procurement is automatically now conducted on an ‘emergency’ basis, and without compliance with any of the normal prescripts regulating public sector procurement, but without realising that even ‘emergency’ procurement must still be conducted in accordance with certain minimum prescripts to ensure (in so far as possible) that such processes remain fair, equitable, transparent, competitive and cost-effective… Various officials of Provincial Government merely rubber-stamped decisions … accepted and gave effect to ‘unlawful’ instructions from officials more senior than them, which resulted in a complete breakdown of the checks and balances protection normally afforded by the principle of ‘segregation of duties’.” DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for R25 at Pick n Pay, Exclusive Books and airport bookstores. For your nearest stockist, please click here.

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Estelle Ellis

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