Department of Labour

ICT TRANSITION UPDATE

10 September 2013

BACKGROUND

- The Department of Labour (DoL) entered into an Information Technology (IT) Public Private Partnership (PPP) with Siemens Business Services in 2002 for a period of ten years

- This was the first IT PPP and was facilitated with the assistance of National Treasury

- The purpose of the PPP was to provide a full range of IT services to the DoL

- 70% of the PPP was for IT operations and infrastructure, and 30% for systems development

- Prior to the end of the PPP, EOH bought Siemens and continued to deliver the PPP services to the DoL

TERMINATION SUPPORT

- When the PPP ended in November 2012, a Termination Support period was initiated, in terms of the PPP contract, for a handover back to the DoL

- The termination support runs for a period of 12 months ending on 30 November 2013

- During the termination support, EOH are to finalise all outstanding deliverables from the PPP and handover the environment back to DoL including information, licenses, contracts etc.

BRIEFING TO PARLIAMENT

The following was indicated to Parliament in previous briefings :

-The DoL finalised an ICT strategy as the future operating model

-The DoL would look at a combination of multi-vendor and in-house resources for ICT services

-PWC was appointed as the transaction advisor to develop the specifications for tenders to be published

-The tenders would address ICT Run Services (operations) and Build Services (systems development)

-Tenders would be issued to market for appointment of service providers and PWC would assist with the process and service agreements

REVIEW OF ORIGINAL INTENTION

DEVELOP ICT

STRATEGY

DEFINE BUSINESS

REQUIREMENTS

IDENTIFYICT

SERVICES

DRAFTTENDER

SPECIFICATIONS

PUBLISH TENDERS

APPOINT MULTIPLE SERVICE

PROVIDERS

DEVELOPICT STRUCTURE

APPOINT INTERNAL

RESOURCES

Multi-vendor environment

In-housecapability +

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EMERGENT STRATEGY

ICT StrategyFuture ICT landscape

SITA Compliance

Budget

StabiliseDoLICT

Services

Section 197

3 monthsremaining

FACTORS INFLUENCING

STRATEGY

PwC Transaction

AdvisorTender specs

Service Towers

Multi vendor \ Internal

resources

Deviation

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STRATEGY REVISION FACTORSThese are considerations which contributed to the revision from the original

intention which had to be factored in.

SITA COMPLIANCE

The SITA legislation requires that Government Departments acquire certain mandatory services from or through SITA and cannot procure these services

directly.

SITA Mandatory Services

Procure IT for government

Set standards for certification of IT acquisition

Certify all acquisitions for standard compliance

Eliminate duplication

Leverage economies of scale

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BUDGET

The limited budget available to DoL needed to be taken into consideration to determine and prioritise which strategic intentions or operational services could be pursued.

LABOR RELATIONS ACT : SECTION 197

Section 197 of the Labour Relations Act needed to considered, to determine if this would result in the take-on of resources from the service provider to DoL.

STRATEGY REVISION FACTORS

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KEY RISKS (from Risk Register)

RISK MITIGATIONNo Funds available to fully fund the strategy

The Department has to rationalise current funding towards prioritising ICT continuity

Insufficient time for transition period

The take-on of EoH resources onto DoL establishment will mitigate this risk

No adequate time for hand over processes

The take-on of EoH resources onto DoL establishment will come with the necessary intellectual property required

Non existence of IT Continuity Plan Post EOH

The take-on of EoH resources onto DoL establishment will mitigate this risk, and SITA is assisting as a further contingency

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OPTIONS TO ADDRESSING DOL STRATEGY AND DELIVERING ICT

1. Combination of Section 197 resources (internal) + SITA services

2. SITA take-on of IT services with EOH resources

3. Appoint SITA as full IT service provider

4. Take-on of EOH resources through Section 197

In addressing the delivery of the ICT services at DoL, the following options were considered:

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OPTIONS contd…

1. Combination of Section 197 resources (internal) + SITA services

This option requires for DoL to take-on EOH resources through S197 to provide IT services and for SITA to provide outstanding services that fall within their mandatory services.

2. SITA take-on of IT services with EOH resources

Requires for all services to be taken-on by SITA and for EOH resources to move to SITA with the services they provide.

THIS IS A FEASIBLE OPTION AS IT WILL ALLOW DOL TO HAVE IT CONTINUITY AND STABILISATION POST NOVEMBER 2013 however, this could result in EoH S197 resources

becoming redundant within the DoL

NOT A FEASIBLE OPTION AS SITA IS GOING THROUGH ITS OWN TRANSFORMATION AND ALREADY HAVE REDUNDANT STAFF. THIS EXPOSES SITA TO THEIR OWN LABOUR

RELATIONS PROBLEMS AND WILL NOT ALLOW FOR DOL INTERNAL CAPACITY BUILDING. THE DOL WILL STILL BE RESPONSIBLE FOR THE RESOURCES DUE TO SECTION 197.

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OPTIONS contd…

3. Appoint SITA as full IT service provider

Requires for SITA to takeover all DoL IT services and terminate the EOH support period. SITA will then have to source and sub-contract service providers from the market to provide DoL’s IT services

4. Take-on of EOH resources through Section 197

Requires for all EOH resources to be taken-on by DoL in terms of S197 and for DoL to have full internal staff complement to provide all IT services

THIS IS NOT A FEASIBLE OPTION ALTHOUGH IT WILL ALLOW DOL TO HAVE IT CONTINUITY AND STABILISATION POST NOVEMBER 2013 but SITA have indicated their position relating to

Human Resources. DOL will be required to declare EoH S197 resources as redundant, as no funding is available to off-set the duplication.

PRESCRIPTIVE OPTION BY THE LRA THAT COMPELS DOL TO TAKE OVER ALL EOH RESOURCES PROVIDING SERVICES REQUIRED BY DOL

POST NOVEMBER 2013

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REVIEW OF SECTION 197 OPTION

- DoL internal Employee Relations and Legal Services conclude that S197 is applicable

- External senior counsel advice sought by DoL also agree that S197 is applicable and cite case law to support the opinion

- EOH have also sought external legal advice which supports the conclusion

- Neither party can cherry pick resources that they want

- Leave accruals and pension funds need to be transferred to DoL

- Terms and conditions of employment in respect of each employee must remain substantially the same

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MANDATED OPTION

- EOH to provide list of resources on PPP contract by service breakdown and salary packages

- DoL HR and IT team to review EOH employee files - Map employees onto approved DoL structure - Finalise legislative and contractual requirements eg. Choice forms to employees

- Staff negotiations and change management (eg medical aid, pensions etc)- Proposed Phase 1 - Management layer take-on- Proposed Phase 2 – Critical staff- Proposed Phase 3 – balance of staff

DOL IS COMPELLED THROUGH S197 TO TAKEOVER EOH RESOURCES WHICH IS THE OPTION THAT WILL HAVE TO APPLY. This however is the

most complex and time consuming option which has the potential to become protracted.

HIGH LEVEL PROCESS BEING FOLLOWED

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KEY RISKS : SECTION 197 (from Risk Register)

RISK MITIGATIONDelay in implementing LRA Section 197 that may affect the transfer of employees

A dedicated HRM team has been setup to manage the Section 197 process

Inadequate and insufficient implementation of section 197 due to poor research and planning may result in litigations

Legal, Employee Relations and Human Resource Management are on the ICT transition team to ensure proper research and planning with the implementation of Section 197

Insufficient budget to implement the Section 197

The Department is rationalising current funding towards prioritising ICT continuity and the share of costs between the Funds for their ICT services has been agreed

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PLANNED TIMELINES

AUGUST

Identify service towers to take-on

Negotiate resources to take-on

Map to DoL structure

Finalise actual costing and funding

sources

Satisfy regulatory requirements

SEPTEMBER

Staff negotiations

Change management

Define management

roles

Management layer take-on

OCTOBER

Identify critical resources

Critical resources take-on

Balance of staff take-on

Finalise staff take-on

NOVEMBER

Conclude outstanding

items

Close out termination

support

CONTINUED ENGAGEMENTS BETWEEN EOH AND DOL

(assisted by new Management)

(assisted by new Management)

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IMPLICATIONS- A dedicated HR team required to manage the process

- Continuous risk monitoring and management

- PWC services to be terminated

- Focus solely on staff take-over and IT continuity

- No tenders to be issued to the market – most services in-house

- Continue to liaise with SITA for additional requirements eg. Call desk infrastructure, service gaps etc.

- Stopping of all current appointments in ICT

- Increased unfunded financial burden on DoL and the two Funds in terms of Compensation of employees

SERVICES REQUIRED

OPERATIONAL SERVICES REQUIRED

Data-centre and Facilities services

Application maintenance and support

Desktop and network services

Service desk

NON ESSENTIAL SERVICES (some already

available within DoL structure)

Finance

Human Resource Management

Legal Services

Business Operations Management

Business Development Services

Administration and support services

COSTING

Total EOH resources monthly costs = R12 328 380pm (WORST CASE SCENARIO)

OPERATIONAL SERVICES REQUIRED

Data-centre and Facilities services (ICS) = R 1 542 133

Application maintenance and support (+ SAP) = R 3 647 292

Desktop (front line support) and network services = R 2 387 184 (+ operations managers)

Service desk = R1 005 358

TOTAL = R8 581 967p.m

CONTINGENCY PLAN

SECTION 197

Successfully implemented by November 2013

SITA to assist with identified service gaps and infrastructure requirements eg.

Service desk

Protracted and delayed

SITA to assist with full range of RUN services

DUE DILIGENCE COMPLETED PRICING BEING FINALISED

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CURRENT STATUS & PROGRESSSTAKEHOLDER ENGAGEMENTS

- Meetings with National Treasury, DPSA, SARS, SITA and EOH

GENERAL

- Risks monitored weekly and register updated

- HRM team setup and working on structure and mapping of resources

- PWC contract terminated

- SITA engaged on proposals and to serve as contingency plan

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CURRENT STATUS & PROGRESSSECTION 197- DoL Position paper on S197 finalised

- DoL view is to take-over operational staff providing services

- EOH position is for DoL to take-over all staff

- DoL cannot accommodate all EOH staff (+200) on current establishment (131)

- Costing of some resources above government approved salaries

- If agreement not reached by 30 November, DoL becomes responsible for all EOH PPP employees on 1 December 2013

- Possible retrenchments could take place – at DoL costs if post November 2013

THANKYOU

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