S. Africa Rail Agency Alleges Tender Rigging in Court Filing

  • Irregularities in supplier's bid overlooked, chairman says
  • Ex-CEO Montana says matter should be internal Prasa issue

A bidding process to supply locomotives to the Passenger Rail Agency of South Africa included “irrational” specifications whose sole purpose was to rig the outcome, according to court papers filed by Popo Molefe, the current chairman of the state-owned rail operator.

Prasa, as the agency is known, is asking a Johannesburg court to review and cancel a 3.5 billion-rand ($242 million) contract awarded to Swifambo Rail Leasing (Pty) Ltd. in March 2013 to supply the company with locomotives made by Vossloh Espana SA, according to a notice of motion dated Nov. 27. Prasa’s decision to award the contract was unreasonable and unlawful, Molefe, who joined Prasa’s board on Aug. 1, 2014, said in an affidavit in support of the agency’s application.

South Africa’s Public Protector Thuli Madonsela said in a report published in August that an investigation into Prasa covering the period from about 2008 to 2013 found the company had a culture of “systemic failure” to comply with its own supply-chain policy. Madonsela also concluded that former Chief Executive Officer Lucky Montana acted improperly regarding the awarding of service contracts and treatment of some employees.

Montana denies any wrongdoing related to either Madonsela’s report, which he’s contesting in court, or the Swifambo contract, he said in a phone interview on Tuesday. The tender process was run correctly overall and there’s no basis to claim the request for proposals was rigged in favor of Swifambo, he said.

While there may have been some “weaknesses" in the request for proposals, the awarding of the contract was neither corrupt nor unlawful, and the bid evaluation was handled by committees whose members remain at Prasa, he said, adding that, therefore, any questions about the tender process should be handled internally. The ex-CEO, who said he’s yet to read Prasa’s court filing, “may end up joining the case as a friend of the court depending on how the process unfolds," he said.

“It’s an internal Prasa matter, Montana said. “It’s not Swifambo. You can’t punish a bidder because of Prasa’s own internal weaknesses."

Broader Probe

The allegations regarding the Swifambo contract were discovered as part of a broader investigation into relationships and activities at the company, Molefe said in the filing. The first 20 locomotives ordered were so-called Afro 4000 models, which don’t comply with height requirements for South Africa’s rail network, he said in his affidavit.

Montana said he’s satisfied the trains will be able to meet South African requirements.

The request for proposals included “irrelevant” specifications such as bore and stroke, the number of cylinders and engine speed, which were precise matches for Vossloh’s 3000 locomotives included in Swifambo’s bid, Molefe said. Even so, the rail agency ordered the company’s 4000 model when the contract was awarded.

“Material irregularities in Swifambo’s bid were overlooked and there are indications that the specification included in the request for proposals was tailored to suit the products that were supplied by Swifambo,” Molefe said in the court documents. “The inference that the tender was rigged to ensure its award to Swifambo is inescapable.”

Molefe asked in the affidavit that the issue be handled by the court rather than through arbitration.

‘Every Intention’

Swifambo had “every intention” of concluding its deal with Prasa, the Business Day newspaper reported Monday, citing Alicia Mngadi, a spokeswoman for Swifambo. The locomotives included in the contract are compliant with all of Prasa’s specifications and Swifambo is looking forward to the court process to resolve the matter, she was quoted as saying. Mngadi didn’t immediately respond to an e-mail from Bloomberg News seeking comment on Tuesday.

Erik Leonhardt, who works in Vossloh’s media department, didn’t immediately respond to e-mailed questions requested by the company. Vossloh Espana is a division of Vossloh AG, which said last month it agreed to sell the rail vehicles unit to Stadler Rail AG.

The allegations contained in the filing were first reported by the Johannesburg-based Sunday Times newspaper on Nov. 29.

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