Supply Chain Management: National Treasury briefing; Update on Association of Public Accounts 2014 Annual Conference

Meeting report

Breifing by National Treasury
Mr Kenneth Brown, Chief Procurement Officer, National Treasury, informed the Committee that his office reviewed procurement environment issues such as misconduct, unsuitably qualified procurement practitioners and misuse of public funds. The Office of the Auditor-General noted compliance as malicious and 80% of things go wrong within procurement. The Office of the Chief Procurement Officer was also there to inspect non-compliance, self-serving procurement practises and manipulation of procurement systems and processes. It has been observed that there is big competition between the private sector and procurement, and it was emphasized that accounting officers are responsible for procurement, not the Office of the Chief Procurement Officer.

In dissecting the procurement environment, it has been noted it is fragmented and there are eighty pieces of legislation that have got an impact on the procurement system. Things that are supposed to take a week to procure take months to happen, and this fragmentation is in terms of the way transactions happen.

Incoherence, instability and political interference are identified as negative contributors to the procurement environment. Regarding incoherence, government departments are not inter relating in terms of delivery about demand and planning. Political interference is said to be leading good people not to want to be part of the procurement system while instability at leadership level is the cause of lack of accountability, transparency and operational problems because there are many acting directors and chief financial officers. When it comes to transparency, it has been discovered that most of the time government departments do not have a sense of what needs to be procured, a list of suppliers, a plan for procurement and how to monitor the work being done. Procurement should be regarded as a strategic function in government and should, amongst other things, focus on demand planning, procurement planning, inspection and quality management and audit and enforcement. If procurement is modernised it would accelerate quality service delivery, reduce costs and attain value for money.

The priority programmes of the Office of the Chief Procurement Officer are focusing on people, processes and technology. Concerning people, the roles of accounting officers and mandates of bid committees are being clearly defined; a Human Capital Development Framework for supply chain management is being developed as well as the capability within the departments to professionally manage the supply chain management function. On the issue of processes, the main issue is to legalise the environment and automate the system. This means the essential functions or sets of activities that are needed for effective procurement management and linking these as an operational system for supply chain management are being defied. The performance of state procurement in respect of achieving value for money and service delivery is being monitored. Contracts and documents are being standardised to achieve simplicity and avoid duplication, and there is a review of the legislative and regulatory framework. Regarding technology, it is highlighted that this is one area that it is being utilised in government. E-procurement and automation would be introduced. Data management and intelligence are being developed, and performance tracking and payment systems are being simplified and quickened.

In conclusion, the OCPO would assist with oversight through transparency by advertising tenders and publicising companies that won tenders and prices of those tenders. A reporting framework similar to PFMA and MFMA is being put in place. This would lead to the release of procurement information monthly, quarterly and annually and all annual reports of government departments and entities would contain procurement information. Regular briefings to Parliament and legislatures would be done. It was noted that although the reports of the Auditor-General are littered with gaps in the system, no action has been taken and parliamentary committees need to be vigilant in order to fix the system.

Discussion
Ms N Khunou (ANC) wanted to know how far it was being ensured that Blacks are integrated into the system. Twenty years into democracy, there has been a debate about bridging the gap between the first and second economy, and when Blacks get the business White suppliers make things difficult for them. Did the Office of the Chief Procurement Officer have got capacity to monitor the capability of service providers.

Mr Brown, in response, explained that there had been an engagement with Black business people in order to iron out problems. Major challenges facing black businesses included fronting, corruption and exclusion of Black females. Tenders should be put together in a way that would include black women. Treasury would set targets on how people should be included – females, disabled and Blacks. Another problem is the implementation of the legislation. National Treasury is of the view that companies who won tenders should be publicised to make transparency in procurement a reality. That should also be coupled with tracking to see capability to deliver in order to change the mindset of people. From now on there is going to be an orderly process of empowerment.

Concerning capacity OCPO is building its own capacity regarding financial and management capability. The process would be up and running in two years.

Mr T Brauteseth (DA) enquired about the level the National Treasury is on with regard to automation of software packages.

Mr Brown indicated that automation is not a choice. The National Treasury would adapt as technology changes. At this stage there was a need to formalise the level of uniformity and the issue has been discussed with Treasury.

Mr M Booi (ANC) questioned what the National Treasury was doing in terms of dealing with international companies that come here to South Africa do business but when they have to be punished for their incorrect activities their countries step in. Secondly, what will the Office of the Chief Procurement Officer do if there is no capacity because in many instances it is reported that most South Africans do not have the capacity to do certain things.

Mr Brown, on the issue of multinationals, replied that it must be understood that some things depend on the nature of the contract that was put together. Sometimes some issues are discussed at a high political level between the countries involved.
Concerning capacity, innovation is the way to go, especially when it comes to integrated financial systems. The OCPO within the National Treasury needs to have permanent capacity, and as a member of the Stats Council its staff needs to know how to use statistics effectively to roll out infrastructure development.

The Chairperson commented there has to be sustained interaction between the Committee and the Office of the Chief Procurement Officer in order to assist with oversight and to ensure the work of the Office of the Chief Procurement Officer goes to the public space. It was suggested that the Office of the Chief Procurement Officer should have a representative when the Committee holds its hearings.

Mr Booi requested that Mr Brown gave the Committee the organogram of his office so that the Committee could understand the synergy that exists between his office and that of the Auditor-General, giving the Committee an indication about the budget the Office of the Chief Procurement Officer would need in order to carry out its ambitious plans.

The Chairperson enquired about the relationship between SETA and the Office of the Chief Procurement Officer because the management of IT was terrible within the government.

Mr Brown replied that there has been a problem with SETA when it comes to procurement. Discussions have been held with the director-general of security services and other role players in order to manage security, rollout and the fragmentation of automation. But this remains a challenge. There are simple models that could be put in place to manage automation.


Association of Public Accounts (APAC) Conference Update
Mr Booi felt it was important that the Committee was given an active role in the APAC Conference and not only attending as observers because last time it attended it the National Assembly did not play a role.

Mr E Kekana (ANC) commented that it is important the Committee gets the conference documents first before the conference so that they can make meaningful recommendations. To receive the documents during the conference would reduce Members to just mere observers.

Mr Booi agreeing with Mr Kekana, said it is important to know the essence of proposed discussions at the conference and this would allow Members make substantial contributions to the work APAC is doing.

The Chairperson indicated that when the annual general meeting sits, all financial and annual reports would be presented. Two days before the conference there would be panel discussions. So it is important to have access to these documents before the conference.

Ms Khunou suggested that the National Assembly members, irrespective of party affiliation, should have their own meeting before the conference and discuss their contributions to the conference and this could be done by going through the constitution of APAC if the conference documents are hard to secure.

The meeting was adjourned.