21 June 2010 | Neil Oelofse and Rebecca Ellinor

South Africa’s Department of Trade and Industry (DTI) has cancelled a controversial contract for an enterprise content management system, according to opposition party the Democratic Alliance.

Andricus van der Westhuizen, shadow minister of trade and industry, said DTI director general Tsediso Matona confirmed last week Valor IT was served with a notice to this effect on 10 June.

The country’s Companies and Intellectual Property Rights Office (Cipro) had previously awarded Valor IT a R153 million (£14 million) deal to install management system software in February 2009. Valor IT, with a reported turnover of less than R2.2 million (£199,000), was granted the tender ahead of rival bidder Faritec, a stock exchange-listed company that offered to complete the contract for R63 million (£5.7 million).

However, a report by the Auditor-General (AG) revealed a number of deficiencies in the procurement process.

The report said the State IT Agency (Sita) – responsible for most government computer procurement – had failed to ensure that the viability of the Cipro business case had been checked before the contract was awarded.

The AG’s report said Sita had broken public procurement rules when it failed to show proper evaluation of Valor’s financial status before the company was placed on an approved suppliers list.

Inaccuracies were also noted on calculations on the scoring sheets completed by Sita’s bid evaluation committee.

Reporting back to Parliament on the AG’s investigation, trade and industry minister Rob Davies said the contract would be repudiated on the grounds that the tender process was flawed.

Shadow minister van der Westhuizen said he would be asking Davies “how he intends to prevent irregular tender processes from occurring in the future”.

“The government must take action to mitigate the damage and recover as much of the public money already paid to the IT firm as possible.”