State Information Technology Agency: Contract Management System &Turnaround Strategy

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed the delegation from State Information Technology Agency (SITA) and representatives from the Department of Public Service and Administration (DPSA). She stated that it had not been possible to organise a fully complementary Cluster meeting, involving all other Chairpersons of Portfolio Committees who were also involved in SITA issues but that representatives would attend.

She noted an apology from Hon Richard Baloyi, Minister for the Public Service and Administration, and also from Mr Roy Padayachie, the Deputy Minister, who were unable to attend.  

The Chairperson requested that the presentation on the contract management system of SITA should be summarised, and that the main focus should be on the turnaround strategy.

State Information Technology Agency (SITA) presentations on contract management system and the Turnaround Strategy
Ms Zodwa Manase, Chairperson, State Information Technology Agency, introduced the Acting Chief Executive Officer of SITA, Ms Nontobeko Ntsinde, and the Members of the Board and Senior Management. She announced that the board of the State Information Technology Agency (SITA) had had a full complement since March 2010, and that highly qualified specialists from the IT, audit and legal fields had been appointed. She expressed her confidence in Ms Ntsinde’s  ability to implement the turnaround strategy and said that positive changes were taking place at SITA. The process of appointing the executive had begun, and the acting positions were being filled. SITA had received an unqualified audit report recently and recorded a small net profit.

Ms Nontobeko Ntsinde, Acting Chief Executive Officer, SITA, said that she would concentrate on the Turnaround Strategy, as requested by the Chairperson.

She noted that SITA had been established in April 1999 through the amalgamation of different government Information and Communication Technology (ICT) entities in the then-named Departments of Defence, State Expenditure and Safety and Security. The Presidential Review Commission of 1996 had identified and defined the mandate of SITA as the lead agency for ICT for government. The mandate included the development of standards and strategies to enable inter-operability and the exchange of information between systems, and the enhancement of government productivity. It was envisaged that SITA would use economies of scale to reduce costs, would co-ordinate ICT initiatives throughout government and contribute to the betterment of citizen-centred services. SITA's contribution to government priorities was to provide an effective public sector ICT agency, to modernise public service operations, to provide for citizen convenience, to ensure the security and convergence of government ICT and to support Government ICT programmes.
 
In the ensuing years, the failure of SITA to deliver on its mandate had become increasingly apparent, and Government intervention had been necessary. The challenges that were identified included poor service delivery, featured by inconsistent delivery and absence of services at some service outlets. The perception of services being expensive and as not adding value was widely held. Benchmarking established that this was true for some areas, but not others. Procurement was a serious problem, characterised by poor quality of service and lack of compliance with regulations. A major focus of the Turnaround Strategy would lie in addressing this issue. Dissatisfaction with SITA service levels and standards had led to the failure of the 'customer base' of government departments being incorporated into SITA. Personnel issues such as high staff turnover, especially at leadership levels, were further challenges.

Systemic and institutional issues that had prevented the achievement of SITA'S mandate were poor enforcement of inter-operability and economies of scale, an ineffective regulatory role, problems with software agreements and non-adherence by government departments to the SITA Act. In terms of internal performance there was a poor compliance and performance culture, bloated functions and structures, unsigned business and service level agreements and an ineffective contract management system. The delivery of services without service agreements allowed departments to renege on payment and enforceability was not possible as no agreements had been signed. 

Ms Ntsinde briefly addressed the procurement system, tender management and identified the area of contract administration and compliance as the major stumbling book in the contract management system. Problems with supplier compliance in terms and conditions, and with Service Level Agreements (SLAs) were areas in which irregular expenditure had been picked up by the Auditor-General, and this had been reflected in successive audit reports.

These factors led to a review of SITA by the Minister in 2008. Several review teams were set up who made proposals and recommendations. In March 2010 the Turnaround Strategy was adopted by Cabinet. The appointment of the reconstituted Board in March and of the Acting Chief Executive Officer in July 2010 started the transformation process. The new mission statement spoke to rendering an efficient value added ICT service to the public sector, in a secure cost-effective and integrated manner, which contributed to service delivery and citizen convenience.

The Turnaround focus areas identified were services, procurement (Supply Chain Management), SITA's regulatory role, stakeholder image and reputation and governance. Revenue generation for services provided was seen as a key aspect of the way forward and cross-subsidisation for services had to be prevented in order for SITA to sustain its activities and to continually upgrade its infrastructure.

Six Strategic Outcomes were identified for the next three years. The Key Performance Areas and Outputs outlined the initiatives and activities that would be undertaken to achieve them. These outcomes included that SITA should be the proficient lead agency in public sector ICT, that it should have an effective and integrated public sector ICT supply chain management, that it establish competitive pricing and financial sustainability, that it should have effective governance and monitoring and become an effective ICT regulator.

Ms Ntsinde elaborated on these, and flagged priority areas that had to be addressed. Supply Chain Management was an area requiring special attention. There was a need to develop and approve a Business Plan for the regulatory function, and to approve and implement cost recovery management.

Reviewing the progress to date in the implementation of the turnaround strategy, Ms Ntsiki said the Board was dealing systematically with the many forensic investigations under way. The Board had mandated the Audit and Risk Committee to interrogate all the outstanding matters and to present the board with a way to move forward on them. Since the process started there had been four suspensions of senior management personnel and disciplinary processes would start shortly. The second phase was currently being undertaken and disciplinary action, suspensions and even criminal investigations were likely to follow.

When trying to achieve economies of scale, the biggest challenge had been pricing. SITA had been discussing pricing with equipment manufacturers and found that the bigger companies paid lower prices. Small-scale companies, with whom SITA had to do business to comply with Broad Based Black Economic Empowerment (BBEEE) were disadvantaged by higher costs being charged by the manufacturers. This was then reflected in the costing done for tenders. SITA had engaged with the manufacturers to try to standardise costs. She mentioned that new technologies were more cost effective and the GovTech Conference in Durban in the coming week would reveal how new technologies could enable government to reduce ICT costs.

In terms of contract and supply chain management, SITA was customising a system with a contract management module. This would help to deal with matters outside the system and would help eradicate irregular expenditure. It was also necessary to address the human element, and the non-compliance of certain people with any system.

The HR Committee of the Board had developed an organisational structure and once it was approved by the Board, it would be cascaded down to the lower levels.

With regard to the audit findings and the reports received from the Auditor-General, the Board had mandated the Chairperson's Committee of the Board to develop a matrix to address all the audit findings from the present financial year, and related findings which could go back three years. This would include a timeline, indicating when the issues would be sorted out and what resources and support were required.

The work of reviewing the existing costing and pricing model, through a benchmarking process, had also begun.

Discussion
Ms J Maluleke (ANC) said she found the presentation straightforward and the strategies good but that implementation would be a challenge.

Ms H Van Schalkwyk (DA) said that the strategy looked fine on paper, but wondered whether the SITA board would have the political will to implement the turnaround strategy, as this would determine its success or failure. She referred to the Risk Assessment Report of Henderson Solutions, which the Minister said that he had handed to the Board. She was curious to know whether those matters identified in that Report had also been addressed. However, she pointed out that the Committee had no knowledge of the content of this Report, although it was presumed to be about tender irregularities and corruption, and she wanted more information about the matter. She also wanted to know why there was such a high turnover of staff, as she felt that the lack of continuity resulted in problems.

Mr C Msimang (IFP) stated that the report had been positive but there were still many challenges. He was concerned about the many officials who were still in 'acting' positions and he wanted to know what frameworks had been drawn to fill the posts, and how many vacancies existed, as he this seemed to be a major challenge for SITA.

Mr A Williams (ANC) commented that oversight was one of the roles of the Committee and government in general. He requested more detail and timelines on the implementation to facilitate monitoring.

Ms F Bikani (ANC) felt that this good presentation was a positive step forward. She expressed her concerns about the flawed procurement processes and the daily functionality of the system, the unsigned Service Level Agreements and problems with tenders. She asked why the anomaly of unsigned agreements was allowed to continue. Despite legislation being in place, there were many grey areas.

Ms Bikani queried the financial status of SITA and asked if it could provide a breakdown of how the finances were utilised on an annual basis, including funding received from the National Treasury.

Ms Bikani asked how SITA's regional or provincial offices were run, as that area had not featured in the strategic plan.

Ms Bikani noted that some public service entities still did not want to work with SITA. She queried if there was a monitoring and evaluation process that would indicate if perceptions of SITA were becoming more favourable.

Ms Bikani asked how many years procurement would be sourced from one service provider. She was concerned about pricing and sustainability, and the perception that SITA's costing was too high, and requested more detail on the plans which would be implemented to reduce costs.

Mr L Suka (ANC) was pleased by the unqualified audit report by the Auditor General. He stated that the Chief Executive Officer had a major task in implementing the turnaround strategy, and required the full support of the Board and the necessary political will. He felt that she should be given the opportunity to implement the necessary changes and that the progress should be monitored by report-backs to the Committee. He noted that KwaZulu Natal had been singled out as a nerve centre for ICT operations, and enquired about the rest of the country. He was also concerned about problems that had been experienced with PERSAL.

Ms Manase responded broadly to the issues raised. She agreed with Ms Maluleke that implementation was the key issue. She concurred with Ms Van Schalkwyk that the political will was vital, and assured her that it existed and that she had support at Ministerial level, as well as from the Department of Public Service and Administration and her own Board. This had been apparent in the suspension of Senior Management implicated in misconduct. The high turnover of top level staff was a feature of the IT industry. In answer to questions on vacancies, she stated that the Chief Operating Officer had been appointed and the position of Chief Financial Officer was being readvertised. Applicants for these posts had, after applying, received counter-offers from their existing employers when they had indicated that they wished to join SITA.

In relation to oversight by the Committee, she noted that the system of the balanced scorecard and performance contracts set targets that were measurable, and evaluation was an ongoing process which the Committee would be able to measure. She commented that Ms Bikani had posed many valid issues. SITA received no allocation from National Treasury but derived its finances from other government sources. She invited the Committee to visit the regional offices and inspect SITA's various projects. She reiterated that political will to implement was taken very seriously.

Ms Ntsinde added that the high turnover of staff at the executive level and the vacancies that still existed should be seen in the context of the Turnaround Strategy adopted by the reconstituted Board. Within the turnaround environment, it had been necessary to design the strategy first, because this informed the structure and determined what roles personnel must play to fulfil SITA's mandate. Two of the staff who had been suspended were at executive level, which necessitated the acting positions. The new structure would make it possible to fill the existing vacancies.

The issues of Procurement and Service Level agreements were characterised by frustrations from the customers’ side about poor service delivery and problems with unsigned service agreements. Stakeholders had tactically not signed agreements so that funds could be redirected to meet their other commitments. A process was being driven by the Stakeholders Relations Committee and Procurement Committee Chairpersons, to engage with the customer issues. This applied particularly to major stakeholders such as the South African Police Services (SAPS) and the Department of Defence. Problems with suppliers were being dealt with in a similar process. This engagement would continue until all the problems had been ironed out. She noted that Service Level Agreements were a legal requirement, so SITA was aiming for full compliance.

She noted that Ms Bikani had expressed a strong opinion that SITA should be adopting a firmer stance on non-compliance. Ms Ntsinde acknowledged these comments and said that there had been a mishandling of the problem, but that it must be borne in mind that relationships were involved, and there would be serious implications if services were cut to customers such as SAPS. If corrective action did not follow from the discussions, then the Minister would give his support to taking legal action.

Ms Ntsinde stated that the Board had recently decided to remove the delegation of authority from every single level of management, so that authority now rested with the Chief Executive Officer, so no expenditure could be incurred without approval from that person. This drastic measure was adopted to return financial discipline, to hone down on areas of runaway expenditure, and ensure cost containment.

Ms Ntsinde acknowledged problems with regional offices. However, improving the head office structure was a priority. Members of the Board had begun to visit regional offices to get an understanding of how they were operating and to see what elements should be centralised or decentralised. In KwaZulu Natal, infrastructure was not being fully utilised, but could be better used in Pretoria, to serve a broader base. Informed decisions would be made about the future of regional offices.

Ms Ntsinde noted that the Procurement Committee had started the process of cleaning up the database of suppliers, as there were many irregularities in the system, such as contracts which had been in place for years, effectively excluding other contractors. The whole database had to be interrogated, nationally and provincially, and a matrix was being developed to indicate where the contracts were, what their nature was, and other relevant details.

Mr Williams followed up on the balanced scorecard issues. He requested that SITA return in three months time and give an assessment on this and the impact of the turnaround strategy on the ground, including whether the Thusong Centres were connected and functional. He hoped that by the following year the Committee could move on from the turnaround, and start speaking of successes in SITA.

Ms Manase promised that SITA would return when it was invited, and report on progress.

Ms Ntsinde said the balanced scorecard had been criticised as vague by the Auditor –General. The Board was looking at its own internal audit process to monitor performance.

Ms Van Schalkwyk enquired about the R5 billion SmartCard Tender that had been leaked via SITA, and enquired whether SITA would be involved in the process again.

Ms Manase said that SITA had not been approached on this matter again. The leak had been dealt with and the Board had prevented serious damage.

Ms Bikani asked what binding processes were set out in the SITA Act, and what monitoring and evaluation processes existed.

Ms Ntsinde responded that unfortunately the requirements of the SITA Act had not always been followed in relation to debtors or the 30-day payment clause. However, SITA was moving towards consequence management, to ensure compliance and break entrenched patterns.

Ms Bikani was also interested to know about the relationship between SITA and the DPSA, and how involved SITA was in the PERSAL turnaround strategy, which the Department had claimed was highly technical.

Ms Ntsinde said that SITA had been invited to participate in the process, and was represented on the Steering Committee and Operational Committees. The process had been hindered by some challenges, but SITA was a key component, especially in terms of cleaning up of the database and the Integrated Financial Management System (IFMS).

The Chairperson noted that input on PERSAL was appreciated. She noted that the Committee was working hard on the collaboration of institutions, to improve efficiency and consolidate research work.

Other business
Ms Bikani noted her dismay at the recent poor catering arrangements for delegations visiting the Committee.

Ms A Dreyer (DA) noted that there had been several problems experienced by Committee Members with Parliament's Support Services, including Members not being informed timeously of cancellations.

The Chairperson agreed that these had been problematic. She highlighted the cancellation of oversight meetings. She said that a report would be sent to the relevant parties and a response requested.

Committee Report on PALAMA and SITA
The Chairperson proposed that the Report be tabled, but that the discussion should be postponed until the next meeting.

Members agreed.

Nomination of Members to attend GovTech Conference
The Chairperson called for nominations for Members to attend the GovTech conference in Durban from 5 to 6 September 2010.

The meeting was adjourned.