Status of the Department of Labour Public Private Partnerships & Information Technology Systems

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Employment and Labour

04 November 2010
Chairperson: Mr E Nyekembe (ANC)
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Meeting Summary

The Chief Information Officer of the Compensation Fund, an entity of the Department of Labour, briefed the Committee on the public/private partnership that had been entered into in 2002 between the Department of Labour (the Department) and Siemens, in respect of Information Technology (IT) systems. This initiative had initially been costed at R1.2 million but had now risen to 1.3 million, due to the increase in consumer price index, services relating to the Annual Report and an increase in end user devices. There was still 25 months of the contract left to run. Reasons for entering the contract included the high turnover of IT staff in the public sector, and difficulty in reaching IT objectives, particularly in view of fiscal constraints, and the Department’s need to improve its IT capacity and expertise, and exploit international best practice. Risk was shared between the Department and Siemens. IT operations and infrastructure comprised 70% of the contract, with the other 30% related to systems development. National Treasury had undertaken a review of the system, which found that there was insufficient contract management and monitoring by the Department, which lacked the capacity to monitor, as well as lack of consistent change management to integrate the businesses successfully. Operational delivery was, however, satisfactory. The progress since 2002, and plans up to 2012, were set out and explained. Details were given on the operations and infrastructure, and challenges were named as including delay and backlogs in procurement and cabling of offices, and increased demand for laptops, as well as the lack of an architectural plan which led to a delay in implementation of Disaster Recovery. Details were also given of the claims system, the financial system and the KPMG review that was ongoing and would provide recommendations for the future, and the Unemployment Insurance Fund projects, as well as what had been implemented to try to address the challenges. Although a qualified audit report had been given on this project, all matters raised were linked to the lack of a proper IT asset register, and this was now being attended to, with a full count of assets and investigation of all discrepancies.

Members asked what was meant by change management, and wondered how the delays were being detected and dealt with. They asked about the location and numbers of the Department of Labour’s offices, and noted the functioning of the mobile trucks with satellite connections to rural outreach. Members asked how the Department was addressing skills development, whether it had relationships with the tertiary institutions, and how it was identifying skills. Members stressed that they needed to be kept up to date on the KPMG findings, and on the unbundling processes referred to in the presentation, and the scanning process of the Compensation Fund.  

Meeting report

Mr E Nyekembe (ANC) was elected as Acting Chairperson.

Department of Labour Public/Private Partnerships and Information Technology systems: briefing
Mr Vikash Sirkisson, Chief Information Officer: Compensation Fund, Department of Labour, briefed the Committee on the public private partnerships and information technology systems of the Department of Labour (DoL or the Department)

He firstly set out the background to the DoL's Public Private Partnership (PPP), which had been signed in 2002 between the Department and Siemens. The initial cost of this system had been R1.2 billion. The current cost was now R1.3 billion. He said that the reasons for the cost increase were attributable to the increase in the Consumer Price Index, services relating to the Annual Report and an increase in end user and ad-hoc devices. There was still 25 months remaining under the contract.

Mr Sirkisson said that one of the reasons behind the PPP was the extremely high turnover of public sector Information Technology (IT) staff, and there was a requirement for the integration of labour market services and systems. The DoL had been striving to reach its IT objectives despite fiscal constraints. Part of the motivation for the formation of the PPP was to improve IT capability and expertise and also to enable the Department to exploit of international standards and best practice.

Mr Sirkisson tabled a break down of the components of the PPP. He noted that the PPP envisaged risk sharing between the DoL and Siemens. The deliverables were noted as IT operations and infrastructure, which comprised 70%. The other deliverables related to systems development, and comprised 30% of the PPP. National Treasury (NT) had, as the custodians of the PPP, commissioned a stringent review.

Mr Sirkisson tabled the findings to the Committee. He said that the NT had reported that there had been insufficient contract management and monitoring from the DoL and that there had also been insufficient capacity within the DoL for the optimal management of the PPP. He noted that there had been no consistent change management implemented by the DoL so that the business could be adequately integrated into the new IT environment. However, NT had found that operational delivery had been satisfactory.

Mr Sirkisson named some of the challenges in the PPP, including the transfer of DoL IT staff to Siemens, a lack of organisational change, and stakeholder management for the monitoring of scope and progress. He said that the contract had also not been structured according to the deliverables.

He noted the progress that had been made since 2002. Much of this related to the Siyaya Claims System, for the implementation of the Unemployment Insurance Fund (UIF), the launching of the new DoL website, the development of the Employment Equity system, the development of the Employment Services system and the development of support of legislation for the Children in the Performing Arts (CIPA) system.

Mr Sirkisson then briefed the Committee on IT operations and infrastructure, setting out the data line speed upgrades, the infrastructure roll out main datacentre network, additional redundancy measures, and the dynamic DoL infrastructure requirements. He noted that there were some challenges with IT operations and infrastructure, including delays and backlogs in procurement and the cabling of offices.
There had also been an increase in the demand for laptops. There were problems around the lack of an architectural plan for the address of datacentre consolidation. This had led to a delay in the implementation of Disaster Recovery.

Mr Sirkisson noted the system's development, in terms of timelines, from the inception of the contract in December 2002 up until the contract termination date in November 2012. He provided the Committee with an overview of the system’s development according to project names, inception and estimated dates of completion and gave an indication whether or not the projects were on track. He highlighted the challenges regarding the inspection and enforcement system, as well as the plans for the future (see attached presentation for details).

Mr Sirkisson then described the Claims System, and noted that at present 41 change requests had yet to be delivered. He noted that some of the changes had been occasioned by environmental changes, whilst others related to functionality.

Mr Sirkisson then highlighted the challenges in relation to the financial system, as well as the way forward in relation to the KPMG review that was ongoing, with the intention of providing recommendations for the future.

In respect of the UIF, he noted that there was a scanning and indexing project ongoing. The plans for the future were also set out. He then also highlighted the main challenges and the future plans in respect of the Public Employment Services, Labour Practice and Labour Market Policy progress, the Compensation Fund (CF) and the Integrated Client Database. Finally he set out the current PPP strategic challenges, as well as measures implemented, and the plans for the future (see attached presentation for full details).

Mr Bheki Maduna, Chief Financial Officer, Department of Labour, tabled the PPP's financial reporting to the Committee. He noted that the Auditor-General had qualified the report, but all matters raised in this regard were due to the lack of a proper IT asset register. That register formed the basis of reporting. The Department had now worked out a plan to address the issues, and this would involve a physical count of all IT assets, with the outcome then being compared to the automated asset discovery tool results of Siemens. He emphasised that all discrepancies would be investigated.

Ms L Makhubela-Mashele (ANC) commended the presenters for their comprehensive presentation, and this was echoed by Mr F Maserumele (ANC).

Mr Maserumele sought clarity on the term 'change management' that had been used in the presentation.

Mr Sirkisson noted that the DoL needed to prepare the users for the new IT development system by changing their mindsets, and by continuing to use effective communication with users, during the development and roll-out phase.

Mr Maserumele wanted to know how quickly the DoL could detect the delays that were referred to in the presentation, how the DoL would address these delays and how it would ensure that delivery occurred.

Mr Maserumele wanted to know how many constituencies DoL had, as well as the locations of those constituencies.

Mr Sam Morotoba, Acting Director-General, Department of Labour, confirmed that the DoL had head offices in Pretoria and nine provincial offices. He said that the DoL was still in the process of finalising the merger between the two offices in Gauteng. He added that each provincial office was responsible for the managing of the labour centres within its specific province. The Department currently had 125 labour centres, with three being presently in the course of building, which meant that it would have a total of 128 labour offices. All of these offices were linked via IT networks, including e-mail.

Mr Morotoba added that the DoL had 20 mobile trucks, with satellite connections, for outreach in the rural areas. For the past three months, the DoL had been piloting the concept of using a bus service where people could access DoL services.

Mr Maserumele sought clarity on what the DoL was doing in terms of skills development. He also wanted to know about the Department’s relationship was with tertiary institutions, and how it was identifying skills in youth.

Mr Morotoba agreed that it was important for the DoL to have relationships with the tertiary institutions.

Mr Morotoba added that the particular agreements and contracts that DoL had presently did not make provision for the DoL to have internal IT capability. For this reason, all the IT staff had been transferred completely to Siemens and that the DoL had lost its entire IT capability, notwithstanding the recruitment of new people. It was very difficult for the DoL to supervise the IT functions adequately if it did not have its own capabilities in this field.

Ms Makhubela-Mashele noted that she was looking forward to the KPMG report, so that a way forward could be mapped out.

Mr Morotoba confirmed that once the DoL received the KPMG report, it would study and discuss those recommendations with the National Treasury and the State Law Advisors, and would then keep the Committee advised.

The Acting Chairperson sought clarity on the unbundling process, especially as referred to on page 22 of the presentation.

Mr Morotoba agreed that the issue of unbundling was a concern and thanked the Acting Chairperson for raising the matter. The DoL was dealing with these issues.

The Acting Chairperson also sought clarity on the scanning process in terms of the Compensation Fund (CF), Siemens and Kofax. He thought that more elaboration was needed on this, as he did not recall that the Department had interacted with the Committee on this since August 2010. He said that the DoL should be monitoring the unbundling very closely, and that the Committee would like to be briefed regularly on the unbundling process and its progress.

The meeting was adjourned.


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