Questions over tender process in Bain's R164m SARS contract

Questions of a possibly uncompetitive tender process have been raised regarding a R164m contract awarded to Bain & Company by the South African Revenue Service (SARS).

Bain & Company was contracted to come up with a new restructuring plan for the tax agency. The global consulting company gave evidence for the first time at the Nugent Commission of Inquiry into SARS on Thursday.

The commission heard that Bain's contract was extended twice without conducting a request for proposal, in violation of procurement process. 

"I wonder what Bain’s checks and balances are in making sure, from your side, you’re respecting the laws of the country," remarked evidence leader Carol Steinberg.

The firm had initially conducted a diagnostic report for SARS at a 50% discount rate, which slashed the consulting fee from R4.76m to R2.38m.

Asked by Steinberg why such a discount was offered, Bain Managing Partner Vittorio Massone said it was the "normal system" adopted by the firm when dealing with a new client.

However, Bain said it would have been unsustainable to continue with the 50% discount as the company commenced  work on the restructuring programme that cost SARS R164m.

• READ: Auditor General finds SARS overstated compliance figures

Despite the criticism levelled at Bain, Massone said the company was proud to have done work for SARS and never questioned its authority.

Massone said suspended SARS boss Tom Moyane had rejected the four business structure proposals put forward by Bain, and that the final model adopted by SARS differed from their work.

He told the commission that some of the structural changes introduced by Bain were aimed at breaking the concentration of power in operations, but Steinberg argued that new model created a "greater concentration" of power in the Business and Individual Taxes unit (BAIT), which was headed by Jonas Makwakwa and, ultimately, Moyane.

"Makwakwa ended up with a far greater power," said Steinberg, a statement Massone confirmed.

Appearing to struggle under cross-examination, Massone tried to explain that the restructuring was, among other things, meant to create a "strong customs unit and a unified enforcement unit".

Bain will continue their evidence on Friday. Also due to give evidence is the Minister of Finance Nhlanhla Nene, his predecessor Malusi Gigaba and Dennis Judge.

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