Banning Suppliers? This is wider than Bain & Co

Bain and Co

In early August 2022 news spread that the UK government banned Bain & Co. One of the largest consulting companies in the world, banned for three years from doing work for the UK government. The reason given: “Bain & Co is guilty of grave professional misconduct which renders its integrity questionable” due to their state capture work in South Africa.

Shaun Scott“But why has the South African government not done the same as their UK counterparts, for work carried out in South Africa?”, asks Shaun Scott, Author of Public Procurement and Supply Chain Management.

“Athol Williams blew the whistle on Bain & Co in 2019. He submitted his 700-page affidavit to the State Capture Commission in July 2020 and testified in March 2021. As a previous partner at Bain, he was a credible witness. His evidence was more detailed and damning than that presented to the Nugent Commission.”

“The Nugent Commission used the words “Deep Collusion” to describe Bain’s involvement at SARS. Athol Williams used those words in the title of his recent book. The State Capture Commission used the words “unlawful”. These conclusions would typically result the debarment of an entity from doing work for government. Yet in South Africa there has been no such action against Bain & Co.”

“Debarment is an accepted practice used worldwide by public procurement bodies. It prohibits a company or an individual from participating in public procurement for a specified period. In South Africa, we refer to the practice as “restricted”, “Says Scott.

“The Special Investigation Unit (SIU) December 2021 report into procurement failures during the National State of Disaster, sometimes referred to as the PPE Corruption Report, recommended that many suppliers and directors be “restricted”. A recent review of National Treasury’s “Database of Restricted Suppliers” shows that none of the companies referred for restriction, have been restricted.”

“The August 2022 version of the “Database of Restricted Suppliers” lists 113 companies and individuals. Not many, considering the almost R1trillion that the procurement sector spends each year. Only 4 suppliers and their directors were restricted in 2021. So far in 2022, two suppliers and one director has been restricted.”

“One reason for the difficulties lies in the process. The process, confirmed by National Treasury in their 31 March 2022 Instruction 03, requires the restriction to be initiated by the institution where the infringement occurred.”

“In the Bain example, SARS will have to initiate the process. In many of the SIU cases, the Gauteng Department of Health will have to initiate the process. In these institutions, this is tantamount to blowing the whistle.”

“The individuals that initiate the process open themselves to the pressures that whistle blowers face. As we know, whistle-blowers are not protected. Ask Athol Williams.”

The answer possibly lies in two areas.

“The first is the creation of a more formalised “Debarment and Restriction” capability. This has been part of the success at the World Bank where they have a two-tier system comprising the Office of Suspension and Debarment and a Sanctions Board. Where this capability should reside in South Africa, is a key structural question related to the Public Procurement Bill, published in 2020.”

“The second answer lies with the Auditor General of South Africa (AGSA). This entity must become more deliberate at recommending that the institution restrict the suppliers involved in the abuse of the SCM system. Attention is placed on the consequence management of the individuals involved in irregular expenditure, but more focus is needed on the consequence suppliers should suffer. The AG’s scope does not extend to external suppliers, but the least they can do is ensure the public institution initiates the restriction process,” Scott Concludes

Shaun Scott recently did a Q&A on this topic..
Watch Q&A video now

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