Department of Public Works' Service Level Agreements with client departments

Public Works and Infrastructure

13 November 2012
Chairperson: Ms M Mabuza (ANC)
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Meeting Summary

The Department of Public Works (DPW) noted that it had a mandate, through its Trading Entity, to manage state-owned property and leases of private property by government departments, in terms of the Government Immovable Asset Management Act. Initially the DPW signed Memorandums of Understanding in regard to the occupation by client departments and entities. However, these were later strengthened into Service Level Agreements (SLAs) that were of a standardised format and that set out a number of standard conditions, as well as the particular obligations of both parties. A description of the standard content of the SLAs was given. The SLAs set out the Service Delivery Standards (SDS) expected of DPW. They were essentially supposed to govern all aspects of the relationship between DPW and the client departments and entities.

In the previous year there were 41 users, of whom 22 had signed SLAs. In this year, the number had risen to 51, but only 23 were signed, which meant the level of compliance had dropped to 51%. Five departments or entities did not require SLAs. There were others that were currently in negotiation. The lack of signature was largely due to the fact the DPW had not championed and followed up on them, as it had in previous years, but it was now trying to get signatures. Neither the DPW nor the users had, in the past, complied fully with all terms and conditions, but this was also to be strengthened. Many of the user departments were not, as they should, submitting User Asset Management Plans (UAMPs) as required by legislation, and this had meant that the accommodation was not properly planned. In the future, this would be addressed and client departments were being trained on how to complete the plans. DPW, since 2005, had carried the financial debt where its invoices for new acquisitions, accommodation, leases, tenant installations, security and IT and phone infrastructure were not paid, as well as municipal services. Whilst, admittedly, DPW had its own problems in submitting accurate invoices, there was a substantial amount of debt outstanding. The figures were fully analysed, but in total the recoverable claims currently outstanding were R343.4 million. The debtors’ book was at about R3.1 billion, of which R1.1 billion related to debts from prior years. The client accounts would all be analysed with the clients in December and January. It was clear that new methods were needed to discuss the admitted inadequacy of service delivery arrangements, and so a Turnaround Strategy was compiled. Its interaction with client departments would be strengthened in all respects, including focused client support, monitoring and reporting.

Members asked why so much was owing, what specifically was being done to have the user departments repay, and wondered if the Minister was aware of the figures. They also wanted to know how the non-compliance would be addressed, and when the Turnaround Strategy was to be implemented. They questioned the training on user asset management plans, asked whether itemised billing had improved and what would be done if clients were not satisfied with services. The Committee wanted a follow-up, with a listing of clients that had not signed the Service Level Agreements, and proof of debt being pursued by the DPW.

Meeting report

Department of Public Works (DPW): Signature of Memorandums of Understanding and Service Level Agreements with client departments
Mr Peter Chiapasco, Acting Deputy Director General, Key Account Management, Department of Public Works, gave the presentation on the signing of the Memorandums of Understanding (MOU) between the Department of Public Works (DPW or the Department), with client departments and other entities.

He began by giving a background to the MOUs and Service Level Agreements (SLAs). He noted that the Department sought to regularise its relationships with user departments and entities, so that each side was clear on what had to be provided to and from each side.

During the Department’s development and implementation of its Zimisele Service Delivery Improvement Programme (SDIP), a Client Satisfaction Survey revealed that user departments were not happy with the level of services provided by the DPW, and had and identified the need for the development of Service Delivery Standards (SDS) that would define the level of services rendered by DPW.

He mentioned that a more robust form of MOUs, known as Service Level Agreement (SLAs) were then developed, and these were the preferred form of agreement to bind User Departments and DPW to agreed Service Delivery Standards. These Service Delivery Standards (SDS) were included as an attachment to the SLAs. Both the SLA and SDS documents entrenched the delivery of accommodation services according to agreed turnaround times, performance measurement, and business processes.

Mr Chiapasco explained the purpose of SLAs as governing the relationship between the DPW and user departments and entities serviced by the Department of Public Works. He set out that DPW provided accommodation to client departments, throughout the immovable asset life cycle, which took account of every stage from planning to acquisition, as well as maintenance and disposal. SLAs also provided the basis to ensure ongoing service delivery at acceptable standards. The duration of the agreement was three years from date of signature by both parties, and the SLA would be reviewed every three years.

Mr Chiapasco then explained the structure of the standard SLAs. Items 1 to 4 set out the general conditions. Definitions defined the acronyms and related immovable asset management terminology used in the agreement. The Purpose clause defined the reason for the SLA and SDS. The Parties clause named the parties concluding the agreement. The duration clause defined the applicable period of the agreement.

Items 5-9 set out the responsibilities of the user department. These clauses described the Immovable Asset requirements, Financial Requirements, Role of the Accounting Officer, Obligations of the user as tenant in a state owned building, and Obligations of a user in a leased property.

Items 10 to12 set out the responsibilities of the DPW as provider of accommodation. Once again this included a clause on financial requirements, which defined specific responsibilities for DPW in relation to expenditure and recoupment from user departments in relation to accommodation services. The applicable service delivery standards between DPW and the user department were defined, in respect of the provisioning of accommodation.

Items 13 to16 were general conditions which included clauses on the frequency of DPW/User Department meetings. The breach and dispute prevention clauses defined the way in which the parties must seek to resolve disagreement. Disputes would be referred to Accounting officers for resolution, and elevated to Ministerial level where further intervention was required. The General clause provides for the inclusion of matters of general applicability. Finally, the domicilium address, and details of signatories would be given.

Mr Chiapasco then gave an outline of the SLAs, as at 30 September 2012. He mentioned that there was a significant increase of client departments. In 2011/12 there had been 41 users, and 22 SLAs were signed, whilst five national departments or entities did not require them, and 14 were not signed. In 2012/13 there was a total of 51 users. Five national departments or entities did not require SLAs. 23 had been signed, and 23 were not signed. The level of compliance had therefore dropped, from 61% in 2011, to 51% in 2012.

With effect from 1 April 2012,  DPW had been approached by a number of departments and entities to discuss further accommodation services. These included the Departments of Economic Development, Monitoring and Evaluation, the National Planning Commission, the Companies Tribunal (an entity of Department of Trade and Industry, the Special Investigating Unit and Commission for Conciliation, Mediation and Arbitration. He mentioned that possible relationships were under discussion, and the signing of SLA’s would depend on agreements reached.

Mr Chiapasco returned to the issue of only 51% compliance with signature of SLAs. This was partially due to insufficient departmental championing and follow-up of the SLA initiative as had been done in previous years. Since SLA’s formed the basis of managing relationships with users, and the delivery of services by DPW, there had been a concerted effort, since January 2012, to ensure signature of all outstanding SLAs, or further interaction and written communication to try to get them signed.

He added that there was inadequate adherence to the terms of the SLAs on the part of user departments and entities, as well as by DPW, and this was possibly because the SLAs were not emphasised as important at all levels. The adherence to the Government Immovable Asset Management Act was also compromised that a lack of commitment and sense of urgency amongst those user departments and entities that had not concluded the SLAs. The user departments were sceptical of the value of signing such agreements, and he conceded that this was largely due to the DPW’s own poor performance track record. There was some authority derived from the fact that user departments and entities were allocated funds for their accommodation and this afforded them some decision-making power and influence over the DPW, which was seen as “in service”  to the user departments.

In addition, user departments often did not compile or submit User Asset Management Plans (UAMPs) as required by legislation, to enable DPW to fulfil its custodial obligations and deliver the range of required accommodation services on time, qualitatively and within budget. Consequently, the accommodation requirements were provided in a reactive manner. This impacted on delivery timeframes. Inadequate competency and resources within user departments and DPW were the primary contributors to the non-preparation of UAMPs.

Following the devolution of infrastructure budgets to users in 2005, DPW now carried the financial debt if non-compliant users failed to reimburse the DPW, within 30 days, for expenditure incurred on new acquisitions, accommodation charges in State-owned buildings, new or existing leases, tenant installations, security measures, IT, and telecommunications infrastructure, and for municipal services. All of these were set out in the SLA, in item 6.

Billing dilemmas were attributable, in part, to the non-existence of an itemised billing system within DPW, and inaccurate information was often used to levy invoices. This led to problems at a later stage.

Mr Chiapasco then presented the analysis of the Property Management Trading Entity (PMTE) for debtors, as at end of September 2012. He gave a comparison of the current and previous financial years’ figures. State-Owned Accommodation debt was R22.755 million in 2011, and R420.295 million in 2012. Private Accommodation accounted for R512,123 million in 2011, and R467.763 million in 2012. Municipal services debt was R171.937 million in 2011, rising to R227.651 million in 2012. The amounts owned for Capital Works (PACE projects) was R59,011 million in 2011, but R399.682 million in 2012.

The recoverable claims (listed as CA), in the 2011 year, was R343.413  million, but R185.931 million in 2012.

The PMTE had a debtor’s balance of R3.1 billion as at the end of September 2012. Of this amount, R1.1 billion (or 36%) related to debts from prior years and R2 billion related to debts outstanding for the current financial year. These amounts were mainly current, or less that 60 days old. Specific meetings would be held with clients during December and January, to analyse the individual accounts.

Mr Chiapasco said that a new method was needed to discuss the admitted inadequacy of service delivery arrangements within DPW. It was clear that it had not been sufficiently responsive to the needs of individual users departments for many years. For this reason, the DPW now had a Turnaround Strategy (TAS). It had adopted a client-centric model, as a fundamental pillar of the TAS, in order to offer dedicated resources, as far as possible, to all key customers across the accommodation value-chain. Additional resources to capacitate the Department’s client-centric model were currently being procured.

DPW intended to intensify its interaction with user departments and entities to compile User Asset Management Plans (UAMPs) on an annual basis (three years in advance) indicating the immovable assets which the user currently uses or intends to use. This would assist with coordination of the use of immovable assets, and there should be improved service delivery by the DPW as a result of proper planning. The UAMPs would become a bidding process document with National Treasury, as originally intended. DPW’s unit would continue to provide training to users on how to compile the UAMPs.

DPW would also be stressing the need for user departments, entities and DPW to adhere to the terms and conditions of signed SLAs. Levels of compliance with the SLAs by user departments and entities would be regularly monitored and reported on. DPW would be asking for support from Parliament to ensure that the outstanding SLAs were signed. DPW would be acquiring and implementing an account billing system that enabled itemised billing, to facilitate payment for services by users. He repeated that focused meetings would be held with user departments and entities, from December 2012 to January 2012, to analyse the individual accounts and ensure the collection of payments due to DPW.

Discussion
Ms P Ngwenya-Mabila (ANC) questioned why there was R3 billion owing and what was being done to have these departments pay back DPW.

Ms Ngwenya-Mabila also asked if client departments were to be trained on UAMPs, and how many had been trained already.

Ms C Madlopha (ANC) also wanted to know about money owed by client departments

Ms Ngwenya-Mabila wanted to know when the TAS would be implemented.

Ms Ngwenya-Mabila asked for clarity as to why some departments did not require SLAs.

Mr Chiapasco mentioned that the five users that did not require SLAs were the Department of International Relations and Cooperation, and four entities.

Mr S Sithole (ANC) asked when the SLAs would be signed, saying that the user departments and entities did not appear to be concerned about the urgency of the matter.

Mr M Swathe (DA) also questioned why departments and entities were not complying with the SLA requirements, and what steps were being taken.

Ms Ngwenya-Mabila asked if the Minister was aware of the moneys owing, and the non-compliance with the SLAs.

Mr Chiapasco said that he presumed that the Minister was aware of this situation.

Mr Chiapasco said that the time frames would be set for new clients within which they must sign the SLAs.

Mr Swathe asked would happen to the SLAs if, after three years, the client departments were not satisfied with the service received.

Mr Morris Mabinja,
Acting Chief Director: Key Accounts Management, DPW, informed Members that currently there was no real benefit for user departments that had signed the SLAs. Thus, this created no sense of urgency for those who had not signed as they were not missing out on anything. Accommodation infrastructure planning could be achieved through the completion of SLAs and User Asset Management Plans (U-AMP). The allocation of funding for accommodation infrastructure by National Treasury must be based on the submission of the latter (UAMP). This would promote accommodation infrastructure planning and provisions of the SLAs.

Mr Swathe asked if the DPW had improved on its itemised billing as yet.

Mr Chiapasco said that the billing system had improved.

Ms Madlopha also questioned the inadequacy of adherence to SLAs by users. She mentioned that the level of compliance was very low.

Mr Swathe then asked what the Department had learnt through Zimisele.

Mr Chiapasco said that DPW was not directly involved with the initiative.

The Chairperson called for a schedule of what departments were paying, based on the information submitted by DPW. The Committee also expected to see evidence of communication between the DPW and the client departments who owed money, to show that DPW really was following up on the outstanding debt.

The meeting was adjourned.

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