BRIEFING REPORT

STANDING COMMITTEE ON APPROPRIATIONS OFFICE OF THE CHIEF PROCUREMENT OFFICER

24 APRIL 2018

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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

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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.

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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.

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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.

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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 656 000 users, 468 017 registered suppliers, 829

Organs of State on boarded, 17 000 practitioners, approximately 30 000

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.

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2.3 ENHANCEMENT OF TECHOLOGICAL REFORMS

(CONTINUED)

eTENDER PORTAL

• The enhancements aims to establish data analytical and reporting

capability. To date, 35 000+ 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

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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

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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.

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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 2021. (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.

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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.

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OTHER INFORMATION

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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.

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3.1 MAJOR DEVIATIONS AND PROCUREMENT

SABC

• Appointment of three labour broker to provide specialised skills

Estimated amount of R19 680 000.00

It was not supported.

TRANSNET

• Expansion of physical security contracts

Estimated amount of R196 913 044.16 for a period of 7 months

It was not supported instead they were granted only 2 months.

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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

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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

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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.

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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 R75 459 673. 60

Invoices not paid yet as at 03 July 2017 R128 205 606.85

Appointment of LTE

Appointed LTE through deviation (emergency)

Estimated at R96 407 000.00

Estimated over R2 billion

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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 2006.

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.

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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

2018.

Eskom submitted procurement plan on 27 March 2018.

TRANSNET to submit its plan after Board meeting scheduled for the 25

April 2018.

SABC, DENEL and PRASA did not submit procurement plans.

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The End

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