DEPARTMENT WATER AFFAIRS AND FORESTRY PORTFOLIO COMMITTEE BRIEFING

1. DEPARTMENTWATER AFFAIRS AND FORESTRYPORTFOLIO COMMITTEE BRIEFING PROCUREMENT

2. AGENDA • Introduction • Procurement Policies • State Tender Board • DCC and Tender Committees • Black Economic Empowerment • Fraud prevention • Statistical information • Conclusion

3. INTRODUCTION Political Mandate • Guided by Section 217 of the Constitution of the Republic of South Africa, 1996 (Act No. 108 of 1996) which states that: • When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.

4. INTRODUCTION (CONT) • Subsection (1) does not prevent the organs of state or institutions referred to in that subsection from implementing a procurement policy providing for • a)        categories of preference in the allocation of contracts; and • b)        the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination.

5. INTRODUCTION (CONT) • National legislation must prescribe a framework within which the policy referred to in subsection (2) must be implemented.

6. INTRODUCTION (CONT) • Section 38(1)(a)(iii) of the public Finance Management Act, 1999 (Act No. 1 of 1999) which states that : • The accounting officer for a department, trading entity or constitutional institution -- • must ensure that that department, trading entity or constitutional institution has and maintains – • an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost-effective.

7. PROCUREMENT POLICIES • General Procurement Directives: Based on the five pillars of procurement or principles of behaviour which are: • Value for money; • Open and Effective Competition; • Ethics and Fair Dealings; • Accountability and Reporting; and • Equity.

8. STATE TENDER BOARD Establishment • Established through an act of parliament (Act no 86 of 1968). • The amendment has been promulgated in terms of section 13 of the State Tender Board Act, # 86 of 1968 in Government Gazette # 25766 dated 5 December 2003 as Government Notice 7836. • The promulgation allows national departments an option to arrange their own ad hoc tenders through State Tender Board or in terms of the PFMA.

9. STATE TENDER BOARD (Cont) Functions • To provide supplies and services for and on behalf of the State, the hiring or letting of anything or the acquisition or granting of any right for and on behalf of the state and the disposal of movable State property shall be procured, arranged or disposed of through the Board.

10. STATE TENDER BOARD (Cont) Amendments to the State Tender Board Act, 1968. • Before, the Regulations required that procurement of all goods and services must be done only through the State Tender Board, • the amended Regulations now allow for accounting officers of national departments to procure goods and services either through the State Tender Board or alternatively in terms of the Public Finance Management Act, No. 1 of 1999 (as amended by Act 29 of 1999) (PFMA). • Supports section 38(1)(a)(iii) of PFMA which empower accounting officers to arrange their own Ad Hoc Tenders

11. STATE TENDER BOARD (Cont) Pilot Status • As from 1 June 2001 the Department, together with 3 others, were released from the State Tender Board. • Quarterly reporting to the State Tender Board. • Full accreditation in June 2001.

12. DEPARTMENTAL CONTROL COMMITTEE & REGIONAL TENDER COMMITTEES • Establishment of the DCC • Originally a Tender Committee established in January 1990. • The Departmental Control Committee was subsequently established in March 1992.

13. DEPARTMENTAL CONTROL COMMITTEE Rationale for existence; • To assist the Accounting Officer to discharge of his/her responsibilities relating to procurement of goods and services in a fair, equitable, transparent, competitive and cost-effective manner in line with the provisions of the PFMA.

14. DEPARTMENTAL CONTROL COMMITTEE Objective of the DCC; • To exercise control, within a Departmental context, over the implementation of policy and procedures for the procurement or disposal of supplies, equipment and services and, • To consider, review and recommend expenditures against the background of the approved budget.

15. DEPARTMENTAL CONTROL COMMITTEE Functions of the DCC; • Control that funds are specifically allocated to the relevant procurement actions and approved by the relevant Programme Manager. • Reconsideration of expenditure on procurement actions where funds are not specifically allocated by the Budget Committee, and make recommendations in this regard . • The consideration and approval of submissions to the Department of National Treasury or to the Accounting Officer which hold financial implications for the Department.

16. DEPARTMENTAL CONTROL COMMITTEE Duties of the DCC; • Consider and check specifications and tender documents for supplies, equipment and services to be purchased (or disposed of) by tender before tenders invitations are advertised in the Government Tender Bulletin. • Control that the procedures for the calling, receipt, evaluation and awarding of tenders occur according to the Accounting Officer’s Procurement Procedures, the General Conditions and the User Manual . • Consider and award tenders for the procurement or disposal of supplies, equipment and services up to an unlimited amount.

17. DEPARTMENTAL CONTROL COMMITTEE Duties of the DCC (Cont); • Consider and approve submissions from RTC’s where the recommended tenderer is not the lowest and not according to specification and which is above the RTC’s delegated powers. • Control for compliance with the Accounting Officer’s Procurement Procedures, the proceedings and minutes of RTC’s/RSTC’s in regions and all offices where such committees are established for the procurement of supplies, equipment and services up to the value per case as delegated to such offices by the Accounting Officer from time to time.

18. DEPARTMENTAL CONTROL COMMITTEE Duties of the DCC (Cont); • Consider and approve submissions with financial implications for the Department to the Department of National Treasury or the Accounting Officer and provide advice on the drafting of such submissions. • Give advice in connection with procurement actions within the Department and resulting expenditures. • Recommend the levels of delegated authority to officers outside Head Office to the Accounting Officer for approval. • Perform procedures in line with the 5 pillars of procurement (i.e. Value for money; Open and Effective Competition; Ethics and Fair Dealings; Accountability and Reporting; and Equity).

19. REGIONAL TENDER COMMITTEES Establishment • Per region. • Within Regions by means of Sub Tender Committees. Rationale for Existence • To manage procurement quickly • Reduce turn around time.

20. REGIONAL TENDER COMMITTEES Functions of the Tender Committees • Same as those for the DCC but, • Limited to the level of chairpersonship • Above set limits, sent to the DCC • Set Limits are: • <R250 000 – Deputy Director • <R350 000 – Director • <R500 000 – Chief Director

21. BLACK ECONOMIC EMPOWERMENT • Guided by the Broad Based Black Economic Empowerment Policy. • Preferential Procurement Policy Act The objective of the Act is to: • address the inequalities of the past; • allow for more flexibility; • eliminate fronting and corruption

22. Preferential Procurement Policy Act The framework for the implementation of the preference point systems as prescribed is basically as follows: • for contracts with a Rand value above R500 000 a maximum of 10 points to be allocated for specific goals. The lowest acceptable tender will score 90 points for price; and • for contracts with a Rand value equal to or below R500 000 a maximum of 20 points to be allocated for achieving specific goals. The lowest acceptable tender scores 80 points for price.

23. POLICY FOR THE APPOINTMENT OF PSP’s • Give as wide as possible a spread (rotation) of work within the various disciplines amongst suitable PSP’s; • Strengthening HDE’s and HDI’s through deliberate and active measures aimed at capacity building and skills development, by implementing participation rates and JV’s; • Emphasise and acknowledge projects with a multi-disciplinary and complex nature by selecting the PSP with the best technical capabilities and project approach at all times (above R3 million); and • Incorporate the PPR, 2001 and a uniform evaluation system for the evaluation of project proposals.

24. POLICY FOR THE APPOINTMENT OF PSP’s • The Policy is basically divided into five (5) major parts, namely: • Definitions, planning and control issues; • Category 1: Contract value up to R150 000; • Proposals/Quotations • Category 2: Contract value above R150 000 and up to R3 million; • Proposals and Formal Evaluation. • Category 3: Contract value above R3 million; • Open Tender

25. POLICY FOR THE APPOINTMENT OF PSP’s Major Parts (Continued) • Evaluation system; and • Monitoring system (Using the PSP Database as a search tool)

26. POLICY FOR THE APPOINTMENT OF PSP’s Using the PSP Database as a search tool: • Consulting discipline • HDI ownership % • Province • Field(s) of specialisation. • Each search result (i.e. PSP) can thereafter be interrogated in detail, e.g. employee profile, JV partners, branch offices, client references, etc.

27. PROCUREMENT WITHIN DWAF • Forestry Restructuring • Normal Procurement

28. FORESTRY RESTRUCTURING • DPE run function • 75% of SAFCOL holding sold to Private Sector Companies. • 25% shares still held by SAFCOL for distribution as follows: • 9% Workers • 6% Government • 10% Communities • BEE component for each private sector company shown in the next table.

29. FRAUD PREVENTION • DWAF has anti-corruption toll free hotline, managed independently by tip-off’s anonymous. • Members of committees, • Declare their private interests. • Recuse themselves from such decision making process. • Refrain from discussion related to such process.

30. FRAUD PREVENTION (Cont) • Declaration of interest that companies must indicate ito any relationship with DWAF officials that can influence decision. • Check on individual companies ito HDI status. • In the event that false information by companies is discovered, companies and individuals restricted from contracting with DWAF for 10 years.

31. Statistical Information • The following represents the results of the procurement reform process within DWAF: • Period April 2004 – August 2004 • R167 million contracts awarded • R46 million awarded to HDI’s (28%) • R121 million awarded to Non HDI’s (72%) • R13 million of the R46million awarded to Black Women and • R3million of the R 46 million to white women.

32. Statistical Information (Targets - PSP)

33. CHALLENGES Some of the challenges that the Department is facing are: • Fronting • Fraud & Corruption • Lack of delivery resulting in additional costs • Supplier performance • Determining BEE Status • SMME companies

34. CONCLUSION • Thank You ! • Questions