Construction Industry Development Board & Council for the Built Environment on their 2014 Strategic plans, in presence of Deputy Minister

Meeting report

Construction Industry Development Board (CIDB) Strategic and Annual Performance Plans 2014/15: Briefing
Mr Johannes Makhubela, Head: Planning, Construction Industry Development Board, presented the strategic and annual performance plans of the Board (CIDB) for the year 2014/15. He highlighted the mandate of CIDB, and its organisational structure (see attached presentation for details).

Mr Makhubela then said that the regulations were to be amended, and during the 2014/15 financial year, the CIDB would be focusing on identifying further improvements to contractor registration criteria, taking into account the state of development of the emerging sector and the purpose of the register as a macro-risk management tool for the public sector. Highlighting that the improvements to the legislation would be ongoing, he nonetheless emphasised that at the moment the CIDB was focusing on Grade 1 registrations, where people entered the construction industry, and was hoping to enable their smooth entry into the industry. Equally, CIDB felt that the process should not be cumbersome for those who were renewing their registration.

Broad Based Black Economic Empowerment (BBEEE) reporting requirements would be scrutinised and the regulations tightened.  The CIDB would work with the Construction Sector Charter Council to make sure that the BEE reporting requirements were aligned. It would be noted if a contractor was not BEE compliant, for the principle was that work should not be given to those not committed to transformation, to try to ensure that their BEE rating would improve.

The regulations were also being revised to introduce a demerit system for contractors who continued to put the lives of workers at risk, or showed high incidence of death or injury at work, according to reportable health and safety incidents.

At present, sub-contractors were not regulated under the CIDB registration system, but it was necessary to do so in view of the substantial work that they took on in the construction industry. The requirement that they should in future be registered would mitigate the risk in the construction process as a whole. Another anomaly was that those contractors doing home building, although registered with the National Home Builders Registration Council (NHBRC), were not obliged to register with CIDB, and this was unfortunate given that there was a lot of risk in the housing territory where contractors did shoddy work. CIDB needed to work closely with NHBRC to minimise risks.

In relation to the Regulation of Contractor Development Programmes (CDPs), CIDB would continue to explore the registration criteria, as well as making regulations and possible amendments to the Act to ensure the sustainability, participation, and growth of the emerging sector. Specifically, the CIDB would explore making tools of the CDP mandatory, instead of relying on clients to run these programmes on a voluntary basis.

Mr Makhubela then said that the strategic outcomes-oriented goals of CIDB were to:
-strengthen the awareness on National Contractor Development Programme and roll out of contractor development programmes (CDPs) with a focus on monitoring and reports on CDPs.
- manage and improve the Construction Register Service, through business process management, best practice and registration criteria review.
- implement the anti-corruption strategy, improve compliance monitoring and enforce CIDB prescripts.
- promote uniformity of construction procurement in the organs of state.
- monitor the performance of the construction industry.
- improve the performance of the sector, and value to clients.
- improve infrastructure delivery skills in the construction industry.

The Chairperson interjected to enquire what CIDB was doing about corruption in the sector.

Mr Makhubela noted that CIDB, on an ongoing basis, received complaints from various stakeholders about contractors. It could impose sanctions, such as total deregistration, 10 years suspension from contracting, one year’s suspension, or a fine, among others.

The Chairperson was glad to hear this list of sanctions. The Committee was most interested in hearing what action was actually taken against the various individuals. The CIDB would be asked to give a report about what was done in the previous years and this year.

Mr Makhubela went on to describe the core programmes of CIDB.

Programme 1: Construction Registers Service, focused on:
-Registration of contractors (RoC) and Registration of Projects (RoP) of both public and private sector construction projects.
-Implementation of the regulations, to align the Construction Registers Service with developments in the construction industry. This would in turn ensure that the Register was maintained as a macro-risk management tool for the public sector while taking into account the state of development of the emerging sector.

Programme 2: Construction Industry Performance concentrated on achieving improved performance and setting best practice for an industry that delivered reliable value to clients, and other stakeholders. It gave information on construction industry indicators to inform CIDB strategy, policy makers and stakeholders.

Programme 3: Procurement and Delivery Management focused on enhanced public sector construction procurement, and building the infrastructure delivery management capability of public sector clients, thus enabling efficient and effective delivery of quality infrastructure to the public.

Programme 4: Provincial Offices and Contractor Development emphasised enterprise and contractor development, particularly to try to increase the participation of the emerging sector. The programme also oversaw the CIDB provincial footprint and associated support offerings, via the nine provincial CIDB offices.

Having summarised the work of each programme, Mr Makhubela then set out some of the key performance areas and targets (see attached presentation for more detail).

For programme 1, he noted that in line with the purpose of implementing and managing the national registration services, the objective was to facilitate the registration of public sector projects and distribute quarterly reports, over and above the key function also of registering contractors and projects. It aimed to achieve:
- efficiency in the registration process
- a turnaround time of the 21 working days for processing and concluding compliant grade 2-9 applications.
- administration of all queries to the registers department within two working days
- high quality and effective control in each functional area within the CRS programme.
- Alignment with the Fraud Prevention and Detection Plan, which would cover the entire registrations processing chain, from the time applications were received up to activation of grades at Head Office.
- identification of further improvements to contractor registration criteria r.

Programme 2: CIP Construction Industry Performance aimed to achieve improved performance and best practice for an industry that delivered reliable value to clients, investors and end users, as well as information on construction industry indicators to inform CIDB strategy, policy makers and stakeholders. Value for money was an important criterion. The targets related to the:
- CIDB best practice recognition scheme.
- CIDB best practice project assessment scheme. (See slide 20 and 21 for what has been published or submitted to the board).
- Infrastructure delivery skills
- Best practice guides
- Industry performance
- Cross programme support and other strategic objectives

The programmatic approach was detailed in slides 21-24.

Programme 3 would provide leadership to stakeholders and to stimulate sustainable growth, reform and improvement of the construction sector, for effective delivery. It also aimed to enhance the industry’s role in the country’s economy. An important focus was achieving enhanced compliance to construction procurement and infrastructure delivery management. The particular targets were related to:
- Improving public sector construction procurement and delivery management.
- Improving the effectiveness of client capacitation
- Implementation of the anti-corruption model
- Improving compliance monitoring and enforcement.
- Developing and promoting measures that assisted organs of state in the planning, decision making, implementation and monitoring of contractor development.
- Providing leadership and support to the public sector and other stakeholders in the support of increasing emerging sector participation. When client departments adopted the CDPs, this would lead to improved grading status of contractors within these CDPs, as well as relevant and efficient provincial office CIDB service offerings.

Under Programme 4, Mr Makhubela noted that the CIDB had an Enterprise Development Unit (EDU) which was mandated to provide guidance and support to clients on contractor development. In partnership with the National Department of Public Works (DPW), the EDU provided overall programme management of the National Contractor Development Programme (NCDP), including monitoring and evaluation, across all willing and participant public sector infrastructure clients. The EDU aimed:
- to expand and entrench the NCDP awareness and CDP implementation.
- to strengthen the enabling environment.
- to provide technical support and targeted programmatic training to clients on CDPs towards enhanced reporting and monitoring.

Mr Makhubela then described the Provincial Offices Unit (POU), whose targets were to ensure:
- An efficient and effective registration service.
- that CIDB provincial offices services gave customer satisfaction.
- improvement of client bodies’ capability and capacity on construction procurement.
- sustainable growth of contractors through client and contractor awareness and programmatic support.
- promotion of customer relations and provincial office efficiencies and sound management.

Budget
Ms Hlengiwe Khumalo, Chief Financial Officer, CIDB presented the Budget. The total allocation for 2014/15 was R128.54 million. The bulk of the budget in the four programmes went to staffing (human resources), given the nature of the work as a registration and regulatory organisation.

Some specific allocations of the budget were described as follows:
- Provincial and contractor development was allocated  R31.104 million
- Construction industry performance, where the bulk of research staff were based, was allocated R9.904 million
- Procurement and delivery management dealt with most of the investigations in terms of compliance matters, and focused also on capacitating client departments, and municipalities on procurement related issues, and received an allocation of R11.264 million

- Contractor Register Services worked with Programme 1 (provincial and contractor development), and was awarded R22.685 million
- The Office of the Chief Executive Officer dealt with governance and risk management, communications, and stake holder management, and was allocated R11.743 million.
- “Other” which included corporate services, and the bulk of the support services such as the IT department, were allocated R41.840 million.

CIDB had a dual source of revenue. It received a government grant via the Department of Public Works of around R77 million; the balance of around R48 million came from registration fees collected from contractors as they registered.

Ms Khumalo then tabled the division by economic classification, saying that around R79 million went towards compensation of employees, leaving around R50 million to enable fulfillment of the mandate that it must deal with, other than human resources.

The approved staffing was presented (see attached presentation for detail). There were, in total, 224 filled posts plus 4 ATE posts.

Mr Mzwandile Sokupa, Chief Executive Officer, CIDB, presented the audit findings on the performance of CIDB and compliance from the last three years and the performance targets for the year 2014/15 (See slides 35-36)

Discussion
Ms L Mjabo (ANC) posed questions in Zulu.

Mr K Mubu (DA) requested clarification on the boards of the CIDB and the Council for the Built Environment, noting that they were said to be “incoming”.

The Chairperson clarified that the board had been appointed, but would start to function from 1 August 2014.

Mr Mubu enquired how the board was appointed, whether Parliament played a role in its appointment, and the number of the board members. He called for a breakdown of demographics for the staff.

Mr Mubu asked the net worth of the construction industry in South Africa.

Mr Mubu asked for the role of the CIDB in relation to houses built under the RDP programme, and its relationship with NHBRC.

Mr K Sithole (IFP) asked exactly how many black contractors had been upgraded from grade 1 to 9. He wanted a breakdown of how many youth and women contractors there were in the construction industry.

Mr Sithole asked for more detail on the budget, and noted that there was no mention of sub-programmes.

Mr Sithole noted that R11 million had been allocated to investigations and anti-corruption, and wondered if it could be said that there was a crisis in anti-corruption.

Mr S Masango (DA) asked if the CIDB’s functions crossed over with or duplicated other housing functions. He noted that registration with the CIDB led to expectations of grading, and the same did not seem to happen with the NHBRC.

Mr Masango asked for more detail on the register of projects, where it was indicated that there were problems with public institutions, and asked if there was a similar problem with the private sector

Mr Masango asked whether it would be noted, by the Auditor-General, whether houses were registered or not, and asked if there were regulations or other provisions around this.

Mr Masango wanted further explanations on youth unemployment, pointing out that many youth entrepreneurs were engaged in building houses and construction, but for some, their qualifications and certificates were not helping.

Mr Masango asked which of the critical vacancies were not yet filled.

Mr Masango asked for more detail on the problems with grading in the CIDB.

Mr M Filtane (UDM) commented that he felt the presentation was “passing the buck”. On the one hand, the CIDB said it had the responsibility to drive and enhance delivery management, yet on the other hand it noted that it would not build, but merely gave directions. It received around R80 million public funding, yet the fundamental job of building was being executed by another institution. He was worried that the CIDB had failed to provide reports on contractors who were upgraded, although it was responsible for the grading.

Mr Filtane was further concerned about enterprise development. The EDU was mandated to offer guidance and support to clients, but he wanted to know what precisely was its developmental role. It was one thing for a contractor to be assigned to go and build a school, but entirely another to ensure that the enterprise element was built, so that when that building job was finished, he would actually have been empowered in some way.

Mr Filtane asked how the CIDB understood “transformation” and said that the presentation had not given any detail of achievements from one point to another. Mr Filtane also suggested that the CIDB needed to be stronger in use of words – instead of “promote” he would prefer to see “ensure”, and “participation” should be coupled with “development”. Those who voted this government into power must see transformation happening.

Mr Filtane pointed out that one of the major problems of sub contractors was non-payment by their main contractors. This was generally regarded as a private arrangement, but he felt that the DPW and its entities should be ensuring that when sub-contractors were registered, they were also being paid.

Ms P Adams (ANC) asked a question in Afrikaans.

The Chairperson referred to page 15 of the Annual Performance Plan, where a figure of in R80.6 million was quoted for compensation of employees, but on page 71 a figure of R88.5 million appeared for the same heading. He called for clarification.

Mr Makhubela responded to some of the questions raised.

In relation to the health and safety issues, he noted that from this year, the Annual Performance Plan mentioned this aspect. He reiterated that CIDB was investigating whether a demerits process should apply to those contractors who had accidents or injuries on site.

Mr Makhubela confirmed that the CIDB was concentrating on youth and women in construction, as well as those living with disabilities. Another category, in partnership with Transnet, was “Women in Rail”, which was intended to promote women entering the hard core engineering categories in the construction industry, to try to ensure that there was empowerment of women and youth in construction. In relation to job creation, CIDB followed the strategy of DPW, trying to ensure that on building sites, the labour component would reflect the country’s targets for job creation. There was also a need to look at appropriate technology that would make use of the labour force currently available, rather than mechanising.

Mr Makhubela noted that the Board of the CIDB was appointed by the Minister of Public Works and currently had 12 members.

Deputy Minister of Public Works, Mr Jeremy Cronin, referred Members to the founding legislation for the CIDB, which indicated how the selection of the Board was done and the criteria followed.

Ms Khumalo said that more details on the staff demographics, as well as the sub-programmes, would be sent in writing to the Committee.

Ms Khumalo confirmed that there were some positions that were not filled, which had now been prioritised for filling in 2013/15. Some job profiles for posts were being evaluated.  There was a need for CIDB to employ a senior manager to assist with Legal Services, as well as an assistant, as currently that service was being outsourced.

Mr Makhubela spoke to the roles of CIDB and of NHBRC. The role of the NHBRC was to ensure that the houses built were compliant with certain quality standards. The NHBRC did not grade contractors, but looked at the capacity of the contractor and gave a certificate to certify whether they were capable of constructing a house. CIDB concentrated on infrastructure in general, and its mandate did not include building of houses. A contractor may be registered with NHBRC but not with CIDB, in which case s/he would only be allowed to build the top structure of houses. There was some disjuncture in that some contractors who were employed to build houses started with the basic infrastructure and then built the house, and the two entities were looking to bridge the gaps in this kind of situation, to make sure that there were no contractors who were falling between registering under CIDB and NHBRC.

Mr Makhubela wanted to clarify the question on anti-corruption, noting that the R11 million budget was not solely to deal with anti-corruption, but covered the entire programme, which was attending to monitoring, evaluation and supporting procurement, among others.

Mr Makhubela also explained the grading, which he said was a measure to mitigate risk. The CIDB would have to be satisfied, before upgrading, that a contractor was able to do a given project and a certain amount of work. He said that the grading encouraged contractor development.

Mr Makhubela noted that the CIDB did have statistics showing where the industry had come from, where it was now and the targets for the future, which could be sent to the Committee.

Finally, he agreed that there were many disputes, including payment, between contractors and subcontractors. Some of them were really disputes that can be mitigated. The CIDB had done a study to look at the feasibility of establishing an ombudsman to mediate in such disputes, particularly given the costs of taking a matter to court, but because the feasibility study was not positive, it was investigating other options.

The Chairperson requested that, in its future engagement with the Committee, the CIDB must speak about the workshops and how they might be opened up to become more functional in themselves, instead of outsourcing the trainers.

Council for the Built Environment (CBE) 2014/15 Annual Performance Plan briefing
Ms Gugu Mazibuko, Chief Executive Officer, Council for the Built Environment, presented the Annual Performance Plan highlighting the role of the Council for the Built Environment (CBE), as well as its vision and mission (see attached presentation for full details).

She noted that the five-year Strategic Plan for the Board of the CBE was geared to supporting government priorities in relation to built environment matters. The CBE aimed to:
- be responsive and fully capacitated
- focus upon ensuring that government priorities for infrastructure development, job creation, health and safety were met
- facilitate and monitor continued, sustainable, dynamic and competent professionals and to ensure that the built environment profession was transformed
- establish and maintain a Centre of Excellence for an integrated built environment body of knowledge.
- strengthen public protection and educate the public in relation to the built environment.

The key priorities, achieved through the programmes of the CBE in 2014/15 included:
- alignment of CBE’s activities to the government’s development priorities relating to the built environment.
- running skills development initiatives at the school and tertiary levels, and establishment of structured candidacy programmes to address bottle necks in the skills pipeline, as well as workplace training and transformation.
- conducting research and gathering information on built environment issues.
- strengthening the monitoring and regulatory work on delegated public functions of the professional councils
- ensuring public awareness on built environment issues.

The four programmes of the CBE and their purposes and objectives, were noted in detail on page 10 of the attached presentation.

Programme 1 projects included an initiative on skills needs for built environment graduates and professionals, which were required to support government’s infrastructure delivery programme. Other programmes supported health and safety initiatives in construction; environmental sustainability within the built environment, and supported job creation priorities of government. CBE would ensure that the six Built Environment Professional Councils (BEPCs) implemented transformation programmes and targets.
Quarterly targets were set out on page 12. This programme would aim to achieve an unqualified audit report.

Programme 2 wanted to encourage 150 students to enter the profession, by supporting maths and science programmes. The CBE aimed to have a workplace training structured candidacy framework that incorporated quality assurance guidelines by the 6 BEPCs, through which workplace training would be offered to 50 new built environment graduates, and 100 interns. CBE would be monitoring and would issue an oversight report on accreditation of academic programmes and academic institutions by the BEPCs. It would also produce a monitoring and oversight report on implementation of the registrations of professionals (including Recognition of Prior Learning (RPL).

Programme 3 would conduct a pilot project on the research and information hub for the Built Environment  issues, and other research reports, pertinent respectively to the professional councils, the DPW, service delivery and the built environment impact on the economy, would be produced.

Programme 4 aimed to produce a report on full finalisation of appeals within the statutory 60 days, as well as a report on the best-practice model for appeals and disciplinary proceedings within the built environment. Other reports would cover the decision of the Competition Commission (CC) on five BEPCs, and its investigation into exemption applications, as well as on the adoption of corporate governance frameworks by the BEPCs.

Ms Mazibuko noted that there were about 20 appointed members and 32 council members serving on the CBE. Details of the governance overview of the council and sub–committees were set out on Page 19.

Challenges facing the CBE included:
- its dependency on third parties to deliver on some of the key mandates.
- the slow pace of transformation in the built environment professions
- lack of research infrastructure
- the legal issues around the finalisation of the Built Environment Policy, that suggested a possible repeal of the CBE Act.

Some of the proposed solutions included the need to address the problems with professional registration, a transformation implementation model for the built environment professions, workplace training and candidacy model for the public sector built environment professions, in order to capacitate and develop the skills of graduates. (See pages 27-30 of attached presentation for full details)
Budget
Mr Rhulani Mulanga, Interim Chief Finance Officer, CBE, gave a historical overview of what the CBE had achieved, and what it had failed to achieve. He then gave an overview of the 2014/15 budget and MTEF estimates. He pointed out that CBE had two sources of revenue: the grant received via the DPW, which amounted to R41.5 million, and interest accumulated on invested and unused funds during the previous year, which was estimated at about R150 000. In addition, it had income from the professional councils, amounting to around R1.9 million. The total budget estimate was about R43.5 million for the 2014/15 financial year, incrementally rising over the next two years, as set out on page 22.

He also presented the CBE consolidated budget and the breakdown across the four programmes.

Discussion
Mr Masango asked whether CBE would build schools, as it had done in the past.

The Chairperson clarified that it had been the Industrial Development Trust (IDT) who had been involved in the building of school structures, and was not sure if this fell within the mandate of the CBE.

Mr Masango asked for more specific information on the alignment of strategic plans and government priorities.

The Chairperson also requested more detail on this point.

Mr Sithole thought that the CBE did not show enough evidence, in the Annual Report, of willingness to transform the built environment professions, and wanted this point to be expanded at the next engagement with the Committee.

Ms Adams made remarks in Afrikaans.

Ms Mazibuko noted that it was indeed the case that the statistics did not show much movement. However, there were interventions, and perhaps the CBE needed to expand on this. There were transformation targets specifically mentioned in the 2014/15 APP, and these were set for all six BEPCs. The CBE would be engaging with the BEPCs specifically on those targets to see how they moved forward. She suggested that the six councils should be invited to present what they were doing.

The Chairperson wanted clarification, perhaps in future engagements, on programme 2, dealing with maths and science students and the 150 who were assisted with training, as well as on selection of programmes. He noted that the criteria for selection of the built environment candidates was problematic. He asked how the CBE would be dealing with placement of interns at workplaces, and wanted to know if this suggested that there would be a provincial spread, or if it was intended to place all interns in one place. He similarly asked if the exposure to workplace experience was intended to be offered throughout the country. He noted the need to actively address empowerment in the rural provinces in particular.

Ms Mazibuko said that when targeting for maths and science, the CBE took the Department of Basic Education’s quintile system into account, paying attention to the most under-privileged schools in all the provinces.

The Chairman emphasised that there would be a future engagement with both entities to discuss the unanswered matters in more detail.

The meeting was adjourned.