JOHANNESBURG - It was sometime in late 2009 that I first heard the story of the R56m box of CDs. This was the A4 box that was delivered to the offices of the Companies and Intellectual Property Office (CIPRO) by Valor IT shortly after it had won the tender to provide that organisation with a new Enterprise Content Management system. The award was controversial because Valor IT's winning bid of R153m was some two-and-a-half times higher than a rival R63m bid from Faritec, a firm with a far more serious IT track record and a better BEE score.

Inside the box were, apparently, CDs with software purchased from two American firms - TIBCO and Vignette (now owned by Open Text.) On May 30 2009 Valor IT submitted an invoice for R56m for software licenses from these companies. The "supporting evidence" was the CDs. The same day CIPRO's CIO Dr Michael Twum-Darko approved payment.

In October 2009 I contacted both Vignette and TIBCO to request comment on their relationship with Valor IT. I was anxious to establish that the fee that Valor IT had charged CIPRO for their software was reasonable. Apart from confirming that Valor IT was a client of theirs both companies refused to answer questions on the matter citing confidentiality concerns.

In March 2010 I resubmitted questions ahead of a story I was planning to publish, and again I received no response. I was thus unable to establish whether South African taxpayers had received value for money when they had paid out R56m up front for these companies' software. Of all the parties I contacted for that story, including Valor IT and CIPRO, TIBCO and Vignette were by far the least co-operative.

On Thursday last week while searching for something else I accidentally stumbled across a recent high court judgment which provided an answer to my question - at least as far as Vignette was concerned. It turns out that a reputable IT firm, Blue Turtle, had helped Valor IT prepare the Vignette component of the October 8 2008 bid for the CIPRO ECM tender.

According to the judgment handed down by Judge Claassen in the Gauteng North High Court the agreement was that Blue Turtle would, "as the sole agent for Vignette," purchase the software from Vignette. The price would be marked up by the standard 40% for CIPRO and the two companies would split the profit.

In the event, having won the bid, Valor IT cut Blue Turtle out of the deal and bought the software directly from Vignette. (Devlin Janssens of Vignette was subpoenaed to testify in the case but failed to appear.) Judge Claassen ruled that ValorIT had violated the terms of the agreement and ordered them to pay Blue Turtle their 50% share.

What is interesting is that, according to the judgment, Blue Turtle were supposed to buy the software "from Vignette at a price of $1,000,000" and it would be sold on to CIPRO for $1,400,000 (exc. VAT). However, Valor IT told the court that they had actually got it from Vignette for $900,000, so the judge ordered that they had to split $500,000 of profit.

How does this compare to what CIPRO ended up paying for it?

In the bid, which neither Blue Turtle nor the court had sight of, ValorIT actually priced the Vignette software at $2,7m (R21,3m) exc. VAT. This included, as per the requirements of the tender, the cost of one year's maintenance. This represented a mark-up of $1,8m and was almost three times what they actually paid for it. Geoff van den Bosch, MD of Blue Turtle, confirmed that the "$1,4m was for the same license and included one year's maintenance." He added that in their case Vignette had "provided the retail price."

Despite the massive inflation of this, and possibly other items, CIPRO awarded ValorIT the tender on the ostensible basis that its bid "offered best value for money" (Faritec's bid having been disqualified for trivial technical infringements of the bid requirements).

On March 27 2009 ValorIT and CIPRO signed their agreement for the delivery of the ECM system. Three days later Twum Darko signed off on the payment to ValorIT of the R56m. R21,3m of this was paid out up front for the Vignette licenses - R10,1m more than the retail price originally decided upon by Blue Turtle and Vignette.

Along with a "transaction management fee" of R4,1m this allowed ValorIT to realize a profit of at least R18,2m within 3 days of being awarded the tender. The remainder of the R56m was made up of R21,5m for TIBCO software, R3,25m for "access channels - Vignette component" and R6,95m for VAT.

I emailed a series of questions to Vignette (Open Text) about the judgment and the price Valor IT had charged CIPRO for their software. Once again, they failed to reply.

I also submitted a series of questions on this matter to Josias Molele, Executive Chairman of Valor IT. Reverend Molele telephoned to say that he would not be providing any answers: "I don't care what you're going to write. Thank you. Bye bye. I am not even going to bother to try speaking civil to you. I am not interested in anything from you. Not anymore. Not after I've seen what you're capable of, using your pen to slash on people's characters ... I am not interested in you. Not again. Not anything to do with James Myburgh. Not in my life.... Write what you think you want to write and write the wrong stuff and I can come back and sue you."

In June 2010 Minister of Trade and Industry Rob Davies formally cancelled the award of the CIPRO ECM tender to ValorIT. This was after R98m had already been spent, and precious little delivered. Valor IT subsequently took the DTI to court over the matter, and the case is currently pending following a failed attempt to reach a settlement.

CIPRO spokesperson Dr Elsabé Conradie, said the organisation was not in a position to respond to our questions due to the fact that the matter was sub judice. Sidwell Medupe, spokesperson for the DTI, said that the department was unable to respond to specific questions as the "matter relating to Valor IT and the cancellation of the ECM contract by the DTI is the subject of a court process currently and we are unable to respond to all questions posed purely out of respect for these court processes."

He stated that following the cancellation of the contract the DTI had referred the matter to police as well as to Special Investigation Unit and Asset Forfeiture Unit. "It was clear from the reports" that Minister Davies had received on the award of the tender "that some aspects that were uncovered by the investigations required criminal and specialised law enforcement agencies to investigate them further. These matters are being attended to by the relevant authorities."

Medupe added: "Once wrongdoing has been proven, we intend to take action to recover any and all monies that were unlawfully paid to Valor IT. We are even prepared to invoke the relevant laws to pursue action against any individuals that may have received illegal benefits from this contract."

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