EOH faces R44m fine for delays in home affairs tender

Source: IT web, 03/11/2020

After months of wrangling and negotiations over the delays, the DHA
has fined EOH over the R400 million contract and has recommended it be
ceded to a suitable subcontractor.
The department has since approached National Treasury seeking guidance
on the matter.
EOH is contesting this penalty and the amount is under dispute.
This is not the first time EOH has been hit with a fine in recent
months. In July, the company was penalised R7.5 million by the
Johannesburg Stock Exchange (JSE) for publishing false information in
its 2017 and 2018 financial results.
The latest details of the fallout between EOH and the department were
revealed in Parliament last week by home affairs minister Dr Aaron
Motsoaledi, who presented a rescue plan for the ABIS to the portfolio
committee on home affairs.
The contract was for EOH to migrate data on the current Home Affairs
National Identification System, which only records photos and
fingerprints of South African citizens, to the new ABIS.
The final implementation of the system would provide a single source
of identification for citizens across state institutions and private
sector entities.
The contract was processed and awarded by the State Information
Technology Agency on behalf of the DHA.
However, the project was delayed after the missing of master files in
the ABIS contract with EOH and a forensic audit is under way into the
contract.
Delivery discrepancies
In his presentation to the portfolio committee, Motsoaledi revealed
that out of the R400 million contract, R224 million had already been
spent on services, infrastructure and software.
He also said in terms of the contract, if there are any delays in the
implementation of the project, the DHA reserved the right to levy a
penalty for every month of delay.
“In invoking this penalty clause, DHA levied a penalty of R43 973
141.80 against EOH because the project has already been delayed by two
years. EOH is contesting this penalty and hence the amount is under
dispute. The contract also stipulates that such disputes are to be
mediated by a senior counsel appointed jointly by the DHA and EOH
Mthombo,” he said.
The joint appointment has already been made and the mediation process
is starting this week.
Furthermore, the minister said EOH has taken a decision to exit all
government contracts and as part of its exit plan from the DHA
contract, EOH is proposing to cede the work to a subcontractor.
“In the event of EOH exiting, the contract still needs to be salvaged
because most plans of modernisation of DHA services revolves around
ABIS,” Motsoaledi said.
The minister added that the legal opinion obtained by the DHA
suggested that ceding is permissible, subject to certain requirements
being met.
According to Motsoaledi, after meeting with officials from the
Department of Communications and Digital Technologies, it was decided
that the DHA proceed with the ceding, provided the cession is approved
by National Treasury.
“The DHA has already approached National Treasury for guidance. It is
recommended that the portfolio committee notes the decision to cede
the ABIS contract to a suitable subcontractor, subject to the
finalisation of the negotiations and approval by National Treasury.”
Discord continues
EOH, however, has denied it is quitting government contracts.
A spokesperson says the company has noted the minister’s presentation,
adding: “EOH remains committed to the project insofar as the
engagements under way present viable options which are commercially
sustainable for both parties.
“EOH maintains and intends to maintain its ongoing strategic
relationships and engagements with the government insofar as those
relationships and engagements are commercially sustainable.”
Further, in terms of the contract, EOH said it is disputing that it is
the cause of the delays.
“In this regard, EOH and the DHA are proactively and constructively
engaging one another through their respective attorneys with a view to
securing an amicable outcome to the difficulties encountered on the
Automated Biometric Identification System project to date. There are
presently no arrangements or agreements in place concerning the
replacement of EOH on that project, whether by cession or otherwise.”
The JSE-listed company has been battling with a myriad challenges âˆ`
operational and legal.
EOH’s problems surfaced after Microsoft in February last year
terminated its contract with the IT services company after an
anonymous whistle-blower filed a complaint with the US Securities and
Exchange Commission about alleged malfeasance to do with a R120
million contract with the SA Department of Defence.
Ever since, the company has been trying to improve its image after
corporate governance issues emerged following an investigation by
ENSafrica, which unearthed suspicious transactions worth about R1.2
billion
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