Department of Defence REPUBLIC OF SOUTH AFRICA

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2. The Procurement Process Presentation to the Portfolio Committee on Defence 08 October 2009

3. Contents Introduction Procurement Process Procurement System Anti-corruption and Transparency 2

4. INTRODUCTION

5. Aim To orientate the Members of the PCD to the Procurement process within the Department of Defence 4

6. Definitions Authorising entity: A board or committee established to monitor compliance to procedures and to authorise bid submissions. Delegan: a person or entity who has powers delegated upon them. JIT: Just-in-time; concept of rapid deliveries and inventory reductions. Material Value Chain: the process, system and infrastructure pertaining to movement and handling of material from requisition to disposal 5

7. Definitions…Cont. Procurement entity: DoD establishment whose primary function is to procure or sell goods / services SCM: supply chain management TQM: total quality management; concept of continuous improvement with emphasis on quality throughout the supply chain Transversal contracts: centrally-managed contracts applicable to more than one government department. 6

8. Scope The content of this presentation only applies to the GDA [or FMS folio 01] procurement transactions, i.e. two thirds of the DOD budget. 7

9. PROCUREMENT PROCESS

10. Procurement Objectives To support the Material Value Chain in accomplishing optimal materiel readiness To ensure delivery of cost-effective quality services to services / divisions through good procurement practices To align procurement systems and processes with DoD Strategic Objectives To ensure compliance of the procurement execution process with the GRC framework To develop partnership arrangements with suppliers, and other procuring organisations and explore opportunities for SC collaboration To promote the principles of BBBEE, industry development and environmental sustainability 9

11. RSA Constitution Sect. 217: Execute Procurement Function through a system that is fair, competitive, transparent, equitable and cost-effective. PFMA Sect 38(1)(a)(iii): Have an appropriate procurement system which is fair, competitive, transparent, equitable and cost-effective. Procurement Prescripts 10

12. PPPF Act 5 of 2000 National Treasury SCM Practice Notes DODI No Acq/2/99/Edition 2 JDP No Acq/00003/04/Edition 1 Secretary for Defense Delegations BBBEE Act Procurement Prescripts 11

13. Procurement Process Flow 12

14. Level 3 2x Procurement Service Centres [PSC’s] Thaba Tshwane and Simons Town SAMHS: Procurement Unit [Medical specific] Procure at a Corporate Level [central] Requirements come from Formations and/or PSMs Purchase through contracts, bids and / or price quotations Procurement Execution 13

15. Level 4 Regional Procurement Sections SA Army: 15 SAAF: 10 SA Navy: 2 SAMHS: 1 J Ops: 2 DHQ Unit: 1 Regional requirements [FSEs] Purchase through contracts or price quotes Procurement Execution 14

16. Procurement transactions fall within the following categories: Petty Cash:- R5,000-00 Price Quotes:- <R500,000-00 Bids:- >R500,000-00 Contract item:- Any Value Procurement Categories 15

17. Price quotations - fwd docs to selected suppliers. Suppliers chosen (rotation) from a database Bids - advertised in government tender bulletin, all suppliers have access to this All PQ’s and bids have closing dates and times. Received, evaluated administratively & technically, ranked for acceptance and recommended to the relevant committee for approval Sourcing Process 16

18. Authorising Entities 17

19. Proc process ends when supplier is paid in full Rule (National Treasury prescribed) - payment 30 days after receipt of invoice Advance payments to suppliers is not done unless agreed to as part of the contract conditions, and approved by CFO FASC – responsible for finalising supplier payments. PSC’s only deliver the payment packs Payment Procedure 18

20. For FASC to process payment, ff documents are required: Delivery note Invoice Receipt voucher (accounting) Order / contract Completion certificate (services/repairs) Payment Documents 19

21. A mix of flexible delivery programmes, activities and mechanisms that can be strategically used to achieve service delivery objectives by outsourcing or PPPs Legislated by - PFMA - Treasury Regulation 16 (PPP’s) - DOD Policy - DODI/00003/2000 DOD Defence Review, April 1998 stated that all non-core functions must be considered for outsourcing, the DOD must focus on its core business Alternative Service Delivery 20

22. Types of Procurement Transactions 21

23. PROCUREMENT SYSTEM

24. System Design Principles Combining the principles of JIT, TQM and SCM Responsible Procurement Officials shall be of the rank of SO1/Assist.Director/Lt Colonel/Cdr upwards Separate ‘oversight’ function from the ‘execution’ function. System must allow ‘pro-active’ monitoring Centralise control, and localise execution 23

25. Procurement Delegans SECDEF : by law CSANDF : by SECDEF Authorising Entities : by SECDEF Senior Proc Officials : by SECDEF / CSANDF Proc Officials : by SECDEF / CSANDF 24

26. Financial Delegans SECDEF : by law CSANDF : by SECDEF Div / Serv. Chiefs : by SECDEF / CSANDF Senior Personnel : by SECDEF / CSANDF 25

27. Procurement Structures: Execution 26

28. Procurement Structures: Oversight 27

29. The New Procurement Framework 28

30. Exercising Procurement Delegation: CSANDF CSANDF shall exercise his Procurement Delegation within the Authorising Entities However CSANDF may use his procurement delegation outside the normal procurement process in cases of emergency as defined in JDP: ACQ 0003/2004 Provided a condonment is prepared and submitted to the authorising entity within 14 days. 29

31. CORRUPTION PREVENTION / CONTROL

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36. THE END