Department of Labour

1. ICT TRANSITION UPDATE Department of Labour 10 September 2013

2. 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

3. 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.

4. 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

5. REVIEW OF ORIGINAL INTENTION DEVELOP ICT STRATEGY DRAFT TENDER SPECIFICATIONS DEFINE BUSINESS REQUIREMENTS IDENTIFY ICT SERVICES APPOINT INTERNAL RESOURCES DEVELOP ICT STRUCTURE APPOINT MULTIPLE SERVICE PROVIDERS PUBLISH TENDERS + Multi-vendor environment In-house capability

6. EMERGENT STRATEGY ICT Strategy Future ICT landscape Deviation Stabilise DoL ICT Services SITA Compliance FACTORS INFLUENCING STRATEGY 3 months remaining Budget Section 197

7. STRATEGY REVISION FACTORS These 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.

8. STRATEGY REVISION FACTORS 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.

9. KEY RISKS (from Risk Register)

10. OPTIONS TO ADDRESSING DOL STRATEGY AND DELIVERING ICT In addressing the delivery of the ICT services at DoL, the following options were considered: • Combination of Section 197 resources (internal) + SITA services • SITA take-on of IT services with EOH resources • Appoint SITA as full IT service provider • Take-on of EOH resources through Section 197

11. OPTIONS contd… • 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. 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 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. 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.

12. 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 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. 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 PRESCRIPTIVE OPTION BY THE LRA THAT COMPELS DOL TO TAKE OVER ALL EOH RESOURCES PROVIDING SERVICES REQUIRED BY DOL POST NOVEMBER 2013

13. 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

14. MANDATED OPTION 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 • 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

15. KEY RISKS : SECTION 197 (from Risk Register)

16. PLANNED TIMELINES CONTINUED ENGAGEMENTS BETWEEN EOH AND DOL 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 AUGUST Identify service towers to take-on Negotiate resources to take-on Map to DoLstructure Finalise actual costing and funding sources Satisfy regulatory requirements SEPTEMBER Staff negotiations Change management Define management roles Management layer take-on (assisted by new Management) (assisted by new Management)

17. 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

18. SERVICES REQUIRED 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 OPERATIONAL SERVICES REQUIRED Data-centre and Facilities services Application maintenance and support Desktop and network services Service desk

19. 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

20. CONTINGENCY PLAN SITA to assist with identified service gaps and infrastructure requirements eg. Service desk Successfully implemented by November 2013 SECTION 197 DUE DILIGENCE COMPLETED PRICING BEING FINALISED Protracted and delayed SITA to assist with full range of RUN services

21. CURRENT STATUS & PROGRESS STAKEHOLDER 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

22. CURRENT STATUS & PROGRESS SECTION 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

23. THANKYOU