BRIEFING REPORT STANDING COMMITTEE ON APPROPRIATIONS OFFICE OF THE CHIEF PROCUREMENT OFFICER 24 APRIL 2018

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Gwendolyn Ross
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1 BRIEFING REPORT STANDING COMMITTEE ON APPROPRIATIONS OFFICE OF THE CHIEF PROCUREMENT OFFICER 24 APRIL

2 TABLE OF CONTENT 1. Introduction 2. Reforms /Major work under way: 2.1 Public Procurement Bill 2.2 Development of Contract Framework 2.3 Enhancement of Technological Reforms 2.4 Health and Technological Reforms 2.5 Property and Leasing 2.6 SCM Curriculum Reform & Supplier Practitioner Development 3. Other information 3.1 Major Deviations and Procurement 3.2 Procurement Plans 2

3 1. INTRODUCTION Cabinet, in reference to its Cabinet Resolution of 10 December 2014, resolved that the Office of the Chief Procurement Officer (OCPO) accelerates Supply Chain Management Reforms by modernising the SCM function in the public sector. The Resolution focused on the following: Finalise the legal framework governing the OCPO and SCM function in government; Simplifying, standardizing and automating procurement activities across all spheres of government; Modernise SCM technology and upscale the intelligent use thereof; Develop SCM capacity of government. 3

4 2.1 PROCUREMENT BILL Public Procurement Bill The Public Procurement Bill aims to amongst others deal with elimination or standardization of fragmentation in the procurement legislative environment. Currently, the draft Bill is with the Office of the Chief State Law Advisor. Once received, Cabinet approval will be sought so that the Bill is released for Public Comments. 4

5 2.2 DEVELOPMENT OF CONTRACT FRAMEWORK Development of Contract Management Framework (CFM) Improved contract management within the sphere of government. The contract will address irregular expenditure as well as wasteful expenditure. Draft CMF is being finalized for circulation to users for inputs. Development of State Owned Construction Contracts To provide a standardised contracts on State owned construction. This initiative will enable the State to be able to have an influence on the content of the contracts as well as to bring the contracts in line with our regulatory framework including the PFMA, MFMA PPPFA, and other relevant legislation as well as to align it to SA s current socio-economic requirements. Currently stakeholder engagements are being conducted. 5

6 2.3 ENHANCEMENT OF TECHOLOGICAL REFORMS Central Supplier Database The enhancement aims at facilitating inclusive growth and enabling the doubling of suppliers and transformation in terms of reporting in terms of PPPFA. The system has users, registered suppliers, 829 Organs of State on boarded, practitioners, approximately reports generated daily, enabled reporting on procurement spent, PPPFA reporting, employees doing business with State etc,integration with CIDB Supplier database finalised. Barriers to entry: Absence of procurement systems result in government forfeiting opportunities to invite more than 3 quotations. Adoption of common classification and codification convention across all spheres of government prohibit identification of local content. 6

7 2.3 ENHANCEMENT OF TECHOLOGICAL REFORMS (CONTINUED) etender PORTAL The enhancements aims to establish data analytical and reporting capability. To date, tenders published on etenders,7500+ visits per day, 626 Organs of State on boarded. Functionality has also been done but not implemented and it will also look at enabling of the procurement plans. A data warehouse was established consolidating information from: 168 departments, 157 municipalities, 4 Entities,eTenders, Contract register application, Central Supplier Database. Not all entities have uploaded their information. Tender awards are not published by procuring entities soon enough. Employee data not available through electronic systems.scm spent information at granular level not submitted by all organs of state 7

8 2.4 HEALTH & EDUCATION INITIATIVES HEALTH INITIATIVES Five Health Sourcing Strategies developed and implemented and they include: Medical Equipment, Medical waste Mngt, Laundry & Linen, Hospital Cleaning Serv and Hospital Food Services. The reforms will address procurement efficiency, health facilities and local economic development across all departments of health. Currently being implemented by Provincial Depts of Health under the guidance of NDOH. LTSM SOURCING The reform aims to improve timely delivery of LTSM to schools. Possible savings if correctly implemented by Provincial Education Departments (PEDs) Better planning for LTSM at school level Currently being managed and implemented as Transversal Contracts 8

9 STRATEGIC AWARENESS AND TRAVEL INITIATIVES STRATEGIC PROCUREMENT AWARENESS The purpose of the initiative is to provide awareness to on strategic procurement reforms to National, Provincial and Public Entities. To date, 25 awareness sessions have been completed and 560 officials were reached. Three additional sessions are to be held which will reach an additional 90 officials. TRAVEL INITIATIVES Travel Technology Business Case has been developed that will provide government with one platform from which travel bookings will be made and provide more visibility on travel spend and behavior. Travel policy rules and budget built-in the solution. Promote competition in the market. Business Case was approved. RFP to be issued in 2018/19 to solicit proposals for a Procure-Finance- Operate-Transfer model from the market. 9

10 2.5 PROPERTY AND LEASING PROPERTY AND LEASING The purpose of this reform is to create an investment opportunities to the value of R40 billion in conjunction National Department of Public Works in state owned properties by (Coastal properties) The project is divided into revenue and investment as well as savings. Currently, in terms of investment and revenue, the project is at advance stage awaiting approval of the framework. While in terms of savings, the project is at initiation stage as a result of structural changes that affect the proceeding of the project. 10

11 2.6 CURRICULUM REFORMS & SUPPLIER/PRACTITIONER DEVELOPMENT SCM CURRICULUM Ready for Internship or employment students, Support to lecturers since the content is new to HLIs Expand to access TVET colleges SUPPLIER /PRACTITIONER DEVELOPMENT Partnerships with conferencing service providers to ensure standing engagement platforms and accuracy of information. 11

12 OTHER INFORMATION 12

13 3.1 MAJOR DEVIATIONS AND PROCUREMENT PRASA Moloto Rail project The project is estimated at R60 billion. PRASA wanted to appoint China Communication and Construction Company (CCCC) to fund and build Moloto rail corridor through deviation. OCPO advised not to deviate. Deviation request was not submitted. Lease of 10 locomotive for a period of 24 months Estimated R40 million (15 December 30 April 2018). PRASA was advised to advertise a bid for a shorter period. 13

14 3.1 MAJOR DEVIATIONS AND PROCUREMENT SABC Appointment of three labour broker to provide specialised skills Estimated amount of R It was not supported. TRANSNET Expansion of physical security contracts Estimated amount of R for a period of 7 months It was not supported instead they were granted only 2 months. 14

15 3.1 MAJOR DEVIATIONS AND PROCUREMENT Procurement of ICT system Bid initially awarded to T-systems and Board reverse its decision Estimated contract amount R1.3 billion for 5 years Dispute between legal Transnet and T-system in court 15

16 3.1 MAJOR DEVIATIONS AND PROCUREMENT Eskom Kusile & Medupi Power Stations Eskom paying huge penalties for delaying access to sites Major expansions due to poor planning 16

17 3.1 MAJOR DEVIATIONS AND PROCUREMENT Department of Energy (DOE) Nuclear Building Programme Procurement Estimated at R1 trillion It was not supported. Department of Water and Sanitation Mzimvubu Water Project Department wanted to appoint China Communication and construction Company (CCCC) to fund and build Mzimvubu dam Estimated at R20 billion It was not supported. 17

18 3.1 MAJOR DEVIATIONS AND PROCUREMENT Department of Water and Sanitation - Lepelle Water Board Appointment of MSW as principal agent For the upgrade of Olifantspoort and Ebenezer Budget was R20 million but appointment was for R40 million Invoices paid as at 07 July 2017 amounted to R Invoices not paid yet as at 03 July 2017 R Appointment of LTE Appointed LTE through deviation (emergency) Estimated at R Estimated over R2 billion 18

19 3.1 MEASURES TO ADDRESS CONFINEMENTS/ DEVIATION Director General of National Treasury established a task to review current procedures and processes. Provision to deviate from competitive bidding contained in 2005 Treasury Regulations. Abuse of this provision noticed during Two practice notes issued in 2007 to address the abuse of this provision and introduced the reporting to National Treasury and Auditor General. Further instruction notes issued in 2011 and 2016 to address the same abuse and introduce the publication of deviations on quarterly basis. Current measures not reducing the number of deviations. 19

20 3.2 PROCUREMENT PLANS Submission date is 31 March of each financial year. Procurement opportunities published on website quarterly to give equal opportunity to potential suppliers. No online system to track the implementation of procurement plans. Received 35 procurement plans from the voted entities by deadline for 2018/19 financial year. One plan does not comply with the template. Received 3 procurement plans from voted entities between 4-6 April Eskom submitted procurement plan on 27 March TRANSNET to submit its plan after Board meeting scheduled for the 25 April SABC, DENEL and PRASA did not submit procurement plans. 20

21 The End 21

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