19 Apr 2018

Media statement on T-Systems’ Transnet litigation


On Wednesday 18 April T-Systems submitted an affidavit to the high court in Johannesburg setting out why Transnet’s original decision to award their ICT contract to T-Systems was both correct and legally valid.
According to T-Systems South Africa MD, Gert Schoonbee: “T-Systems was awarded the contract based on its price, modernisation, service standards and crucially the low risk to Transnet’s IT system on which South Africa’s rail and port networks depend. Our case is very strong. While we would accept not winning a tender on competitive grounds, we must take steps to protect our reputation. By placing the verifiable facts on record before the court and the public, our key stakeholders can see exactly how, why and on what grounds we won the contract.”
T-Systems was awarded the contract after an exhaustive six stage open tender process with nine bidders which has now lasted almost two years. On 22 February 2017 Transnet decided to award the contract to T-Systems, informing it of this decision on 3 March 2017 in a letter of intent (“LOI”). However, rival bidder Gijima which had not made it to the final round, initiated a complaints process which then didn’t include T-Systems. Transnet reversed its decision and refused to consider the serious risks identified by Gartner, their own independent consultants.
For Transnet, these are vital services. Any failure to Transnet’s IT systems – particularly the data centre - puts their operations, commercial viability, and even the safety of their personnel and customers at risk. Put simply, if the mainframe fails, the trains will not run. This is why “risk” is such an important consideration.
Gartner, the world’s leading information technology research and advisory company, had found that the Gijima bid created “major” and “almost certain” risk to Transnet. In contrast the Gartner review identified no major risks from T-Systems, which is why Transnet had awarded T-Systems the contract.
Some of the risks Gartner identified with the Gijima bid include:
  • Security: there was no separate Security Operations Centre
  • Financial viability: inexplicably, they suddenly dropped their price by R500 million, yet the company needs loans to stay in business.
  • Services: they did not quote on all elements of the required services rendering price comparisons meaningless.
  • Transition: they could not commit to completely transitioning Transnet’s IT services within six months – the standard other bidders had to meet.
  • Experience: Gijima failed to prove it had the requisite experience operating a data centre and hosting services.
Gijima also appears to have received special treatment and assistance from within Transnet. They were suddenly allowed back into the process after having initially dropped out at an early stage. Despite not meeting the formal requirements, Gijima then recruited staff from the second placed bidder (which had dropped out) and were allowed to resubmit. They dramatically lowered their price by R500 million, to just below the T-Systems price, well after the tender round had closed.
For these, and the many other procedural and substantive reasons – including the risk to Transnet – which are set out in detail in its Affidavit, T-Systems maintains that the contract awarded to T-Systems is valid and any award to Gijima would be invalid. 
According to Schoonbee, “Resolving this commercial dispute as soon as possible is vital for both our and Transnet’s reputations. Transnet is core to the South African economy and it is in everyone’s interests that Transnet is able to select the best solutions in a transparent and fair process so that it can realise cost savings and further modernise its IT systems for this new digital era. While this matter is before the courts we will continue to work closely with Transnet to ensure there is no disruption to the quality of service or stability of their systems. We have formally committed in writing to support Transnet’s cost optimisation and modernisation drive.”
T-Systems understands that its proposal has been shared with the Transnet Board, as well as key government stakeholders, namely National Treasury and the Department of Public Enterprises.  ”We look forward hearing back on these proposals,” said Schoonbee. “Until then we will continue to service Transnet, and we will place our trust in the courts.”