Eskom chief culprit in cost expansions and deviations

Cape Town – Eskom is the chief culprit among state entities and departments when it comes to deviating from procurement guidelines and expanding the scope of its contracted work, with the development of Medupi and Kusile power stations still stunting its adherence to standards.

This is according to a submission by National Treasury director general Dondo Mogajane and a delegation of the portfolio to Parliament’s Standing Committee on Public Accounts on Wednesday.

Treasury also complained that accounting officers often abuse deviation and expansion provisions.

Current National Treasury regulations allow entities and departments to deviate from procurement guidelines, such as collecting the requisite number of quotations from potential suppliers and going out to comprehensive tender.

However, these provisions only cover exceptional circumstances such as emergency procurement where provision of a service and urgent circumstances where the supplier of the product or service is the sole provider or the only supplier which can meet the specifications.

But National Treasury complained that some entities and departments search the system for loopholes to allow predetermined and connected suppliers to get lucrative business from the entities, under the guise of due process.

Mogajane said National Treasury often turns down requests for deviations and expansion because the reasons are not compelling.

Mogajane told SCOPA that the persistent expansions and deviations are puzzling, because all entities and departments submit procurement plans before the beginning of a financial year and, by expanding, undermine their own spending projections.

“We also want to bring consequence management into this review. If a procurement officer does not take their procurement plan that they submitted seriously, we need to ensure consequence management that will hold executive authorities and accounting officers accountable,” Mogajane said.

Chief Procurement Officer Willie Mathebula said Eskom increased within the fourth quarter of the 2017-18 financial year to R9.4bn, in terms of expansions. He added that between the third and fourth quarters of the 2017-18 financial year, Eskom expanded the scope of projects by R11bn.

“Eskom still tops the list in terms of deviations for quarter three. These were deviations that were supported for that quarter. In quarter four, deviations show that the picture changes with Eskom falling to number three and defence rising to number one,” said Mathebula.

National Treasury’s chief director of supply chain management Solly Tshitangano told SCOPA that Eskom had a number of applications for expansion from the original scope of projects.

He said this shows that Medupi and Kusile power stations are contributing to a major problem.

“In quarter one there were two abnormal numbers. In the second and third quarters these numbers decreased. In applications for deviations, Eskom is consistently high as far as how many deviations the entity applies for,” said Tshitangano.

Tshitangano said while Eskom had the highest figure in terms of expansions, it hardly emerged as the most frequent applicant for expansion of contract scope.