Cost of metro’s new IT systems set to quadruple

A multimillion-rand project meant to overhaul the Nelson Mandela Bay Municipality’s computer and financial systems is set to cost ratepayers more than four times the tendered price of R47.5-million.

The municipality will have to fork out R215-million if it wants the mSCOA (Municipal Standard Chart of Accounts) and the Enterprise Management Solutions (EMS) fully running.

The massive undertaking by the city three years ago is set to change the way it draws up its financial reports and will ensure that one computer system links all the municipal departments, instead of 50 at present.

mSCOA is a national Treasury requirement for all municipalities to link up with the national government and EMS is a new internal municipal system.

Implementing the project has been marred by several setbacks due to constant changes in the scope and poor project management.

The Treasury, through its Cities Support Programme, reviewed the project and found that the contract, when awarded, was ambitiously under-priced, according to a national Treasury report that formed part of a mayoral committee agenda.

It also found there was a breakdown in trust between the municipality and Sebata Municipal Solutions, with the contractor feeling that it was no longer financially viable to proceed with the project.

This was because it had been required to alter the systems several times due to changes in the mSCOA versions from the Treasury.

The master agreement between the municipality and Sebata failed to provide for what the Treasury termed “inevitable changes”.

To date, the municipality has spent about R71-million on implementing the two systems.
Quitting now means that it runs the risk of losing the money spent thus far – which would be regarded as wasteful expenditure by the auditor-general.

But finishing the project means that the municipality would have to fork out an additional R100-million.

This excludes added costs of R19-million for subsistence and travel for the contractor – Sebata – to have its staff in the metro implement the project.

It also excludes an estimated R45-million for post-implementation support, and R33-million in annual licensing fees.

“It is absolutely clear that if the NMB were to abandon this contract and start all over again, that would mean wasting all previous effort and expenditure,” the Treasury says.

“Such a course would also be unlikely to imply a cheaper overall system implementation cost.

“The costs are very substantial and require careful consideration. “An argument could be made that the entire project should be abandoned.

“But that would imply a waste of the time and resources already committed, leaving the NMB with no prospect of becoming mSCOA-compliant in the foreseeable future, and also no real likelihood a future system implementation would be any less expensive.”

The Treasury recommended that the municipality improve the overall project management and governance, should it decide to proceed.

It also recommended that a project manager in city manager Johann Mettler’s office be appointed to ensure the project was implemented, and that a project implementation committee chaired by Mettler manage the overall process.

Mettler said the original contract with Sebata had been negotiated by people who were no longer associated with the municipality, making it difficult to hold anyone accountable for the poorly drafted document.

Asked if there was any chance of the municipality being challenged legally for awarding the contract at R47.5-million and actually spending much more, Mettler said: “It is very difficult to assert, with any measure of certainty, that other companies could have delivered at a lower price.”

Mayoral committee member Retief Odendaal said they would appoint an independent IT company that was an expert in such systems to assess the status of the project and advise if the municipality should proceed with it.

At a mayoral committee meeting almost two weeks ago, Mettler said it was important to take into consideration that the municipality needed a new IT system as its old systems were outdated and too many, causing information to fall through the cracks.

Budget and treasury political head Odendaal said at the meeting: “We’ve already spent a significant amount of money on this contract and now we have a proposal that indicates we have to spend more money on securing their services.

“We need to get independent advice, whether we cancel this contract and run with the possibility of losing up to R70-million or we proceed with [it] and incur additional expenditure.”
Mayor Athol Trollip said the contract was weak and did not even mention the deliverables.

Human settlements political head Nqaba Bhanga said: “The [way] we drafted the contract was weak and gave power to the service provider.

“I am worried that we are going to be litigated by the companies that had bid for the tender.”

Sebata did not respond to requests for comment.