The education ministry was informed EduSolutions's contract was in breach of various regulations before using it as a supplier for school textbooks.
The Limpopo textbook crisis was created by the department of basic education's reluctance to bypass EduSolutions, despite sitting on a scathing legal opinion that found the politically connected textbook supply company's R320-million contract with Limpopo was "neither fair, equitable, transparent, competitive nor cost effective".
As early as January 17, the national department received a recommendation from senior counsel advocate Pat Ellis that the department had to order textbooks outside of the contract with EduSolutions, which he found was "probably invalid".
Instead, the department waited until early May to place the orders.
The Mail & Guardian has obtained an opinion given to state attorney John Ngoetjana by Ellis as early as January 17 this year that the EduSolutions contract was probably unconstitutional and in breach of treasury regulations and the Public Finance Management Act.
It recommended that the department use an urgency provision in treasury regulations to source the books from another supplier.
Basic education director general Bobby Soobrayan confirmed on Thursday that Minister of Basic Education Angie Motshekga had been informed of the legal opinion. "The minister would have been told of the opinion early," Soobrayan said.
The M&G has also seen a circular sent to Soobrayan and Limpopo's basic education minister Dickson Masemola by the former head of the department's intervention team in Limpopo, Anis Karodia.
He stated that the textbooks contract had been "allocated to a private company [EduSolutions] at an exorbitant tender price that had compromised the department" and that "the company is under investigation and we are not allowed to procure from the said company".
The M&G was unable to establish who is investigating EduSolutions.
It has also been reported that a departmental whistle-blower, Solly Tshitangano, alerted Motshekga in July last year to alleged irregularities in the textbooks tender. Tshitangano has been suspended for alleged misconduct related to procurement.
Despite this, Karodia terminated the EduSolutions contract only on April 26 this year and the national department waited until early May to place new book orders.
The main source of that delay appears to have been Motshekga, who assured EduSolutions on April 2 that everything was still in order and that the department would honour the contract.
EduSolutions director Moosa Ntimba told the M&G this week that it planned to bring a civil claim next week against the department for "monies outstanding" and "loss of profit", maintaining that "there was no indication from the minister [on April 2] that the contract would be terminated".
Ntimba said the company had "fully co-operated" with the department. He also disputed Karodia's criticism of the "exorbitant" tender price, saying the prices were agreed "between the government and publishers".
Last week, EduSolutions failed in an application to the North Gauteng High Court in Johannesburg to have the contract reinstated.
In his opinion, Ellis said he was "confident that a proper case can be made that the contract should be reviewed and declared void".
"I am therefore of the view that the department ought to procure school books for Limpopo in terms of the urgency provisions of … treasury regulations."
His opinion also makes it clear that he consulted two senior officials from the national education department.
Karodia took over the department's administration in December, which he described as a "free-for-all" (See "Intervention team uncovers 'massive mismanagement of funds'" below).
In particular, he noted that there appeared to be "a dominant force of members within the bid adjudicating committee and they receive instructions and pronouncements form influential staff regarding the awarding of tenders".
In late March or early April, EduSolutions lodged a complaint with Motshekga and Soobrayan about Karodia's conduct, claiming that his "verbal and written utterances were defamatory, unsubstantiated and subjective".
Later in May, Motshekga removed Karodia from his position. Soobrayan said that he was removed because he was a bad manager, was "argumentative" and "made allegations about the [provincial minister Masemola] which were embarrassing to the minister".
Soobrayan also said that Karodia had spoken directly to publishers while disregarding the EduSolutions contract.
Karodia has been quoted as saying that he wanted to terminate EduSolution's contract "as soon as the intervention team arrived in Limpopo", but that he faced resistance from the national department and Motshekga.
He told City Press last week: "Myself and [chief administrator] Monde Tom raised the issue with her [Motshekga]. She said, no, no, we have to buy from EduSolutions.
"After a month and a half, Soobrayan came down to Limpopo and said we should cancel the EduSolutions contract."
An education official, who asked not to be named, said that "if the department had terminated the contract early enough, we could have had the books in the schools by April or May".
Although Motshekga has tried to distance herself from the root causes of the textbook crisis, blaming it on administrative impediments, she was alerted to concern about the validity of EduSolution's contract as early as July last year.
The M&G has seen copies of correspondence sent to Motshekga on July 5 2011 by Tshitangano alerting her to alleged "irregular transactions in the Limpopo department of education".
Tshitangano was suspended in April 2011 on charges of misconduct broadly relating "to procurement issues that occurred in May 2010" when the department advertised a bid to outsource the procurement and distribution of pupil and teacher support material to schools in the province.
In a Labour Court affidavit, Tshitangano, who is claiming unfair dismissal, said that he raised several concerns regarding the bid adjudicating committee's decision to appoint EduSolutions as the preferred bidder.
According to Tshitangano, it was not clear on what basis the tender was awarded to EduSolutions, given that the competitive bidding process necessarily involved the assessment of tenders on a points-scoring system.
The bid committee simply indicated that of the 23 bids received, only one service provider met the criteria, obviating the need for scoring and extracting any comparative analysis between competitive bids.
Tshitangano said it was unclear whether any cost-benefit analysis for the services required was done before the bid was advertised.
He wrote to the head of the Limpopo education department, Bennie Boshielo, advising him to request that state law advisers and risk and supply-chain management from the treasury carry out a review. This never took place.
In his legal opinion, Ellis noted that no order had been placed for school books in Limpopo for 2012 and "position is critical, since the first school term is a day away and no school books have been ordered".
Describing the supply system provided for in the service-level agreement with EduSolutions, he noted that:
It allows all schools to buy the most expensive books, regardless of their quality or the need for them and without regard to budgetary constraints;
After negotiating the best deal with publishers, EduSolutions could keep 30% of any discount, passing on the balance to the department. However, this was not audited.
The arrangement lacked the benefit of an open tender – of procuring the product as cheaply and effectively as possible. "The contract has appropriated that benefit for the supplier and has deprived the department of that benefit," he said.
Ellis concluded that the agreement breached the stipulated legislation in that "the provincial department appears to have attempted (to contract) out of its obligation to manage demand, acquisition, logistics and risk and left those to be dealt with by the supplier."
Intervention team uncovers 'massive mismanagement of funds'
Confidential circulars penned by Anis Karodia, head of the intervention task team sent in by the national government, throw into mind-boggling relief the administrative chaos, financial mayhem, waste and plunder of public resources he unearthed in the Limpopo education department.
In two circulars dated March 12 and March 16 2012 and distributed to the head of the intervention unit, the treasury's Monde Tom, Limpopo's minister for education Dickson Masemola, the department's chief financial officer, Martin Mashaba, and the director general of basic education, Bobby Soobrayan, Karodia declared: "There is no doubt that there has been a massive mismanagement of funds."He also said that the department had "waded through the latter part of 2011-2012 in a state of bankruptcy".
He conservatively estimated budget overruns and misappropriation, stemming back to 2009, at R2.6-billion.
Salaries and compensation costs stood at 87% of the total yearly budget, leaving a miniscule amount for the delivery of education services.
Karodia said Mashaba and the department's entire "top-heavy" financial system was unqualified, unable to monitor spending and had "a disregard for" planning.
Senior managers had little understanding of the department and were "slow, cumbersome and lack … direction", whereas supervision was poor and managers were unavailable when important documentation and discussions were required.
In general, the staff did "not have the attitude or will to work". There was no sense of purpose, which had led to a "free-for-all".
Karodia said the "monetary quagmire" would have to be dealt with through the three-year medium-term framework and beyond in order to stabilise the department.
Among the consequences were that schools were starved of funding, services were not provided and service providers went unpaid.
He said the school nutrition programme in Limpopo, which feeds children from impoverished households, needed to be revived.
Other consequences of the crisis were:
More than R50-million was owed to transport service providers, who were effectively double-charging the department through the use of an approved payment system that charged per pupil and for running costs;
Department cellphone and landline bills, which Karodia described as "vulgar", were each running at about R1-million a month;
There was aimless and unnecessary travel by a host of officials;
Many schools had not paid their electricity bills;
There was unnecessary catering and abuse of the grocery budget;
Too many workshops and meetings were held while work remained incomplete and there was unnecessary training of senior staff who should already have had the correct competency;
There were excessive hotel stays; and
District and circular office support was poor and these offices also showed poor initiative in rolling out directives from the department.
Source: Mail & Guardian
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