Defence infrastructure projects: status report by Department of Defence & Military Veterans

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Defence and Military Veterans

05 November 2014
Chairperson: Mr M Motimele (ANC)
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Meeting Summary

The Department of Defence and Military Veterans said under expenditure at the National Department of Public Works has resulted in a huge backlog of maintenance and repairs to DOD facilities. The DOD backlog on facility maintenance and repair was an estimated R12 billion in 2014. These facilities were spread throughout the country and they had a 93% utilisation rate. One of the key challenges the Department faced was that the National Department of Public Works (NDPW) had not been able to deliver Refurbishment and Capital projects on time which has resulted in DOD underspending. In April 2011 the Defence Works Formation was established. One of construction projects, which the Department of Public Works had costed R5.2 million for construction, was completed by the Defence Works Formation for R1.2 million - although  Defence Works Formation salaries were not included in this amount.

Challenges that DOD had faced were that the Defence Works Formation is staffed at 57% and  an attempt to secure funds from National Treasury to increase staffing levels up to 90% had in the past been unsuccessful. Its governance processes are not yet mature and DOD is not yet ready to undertake complex projects without outsourcing. Procurement processes are not yet fully aligned to support the Built Environment. Engineering professional skills levels  are not yet on par with the task at hand.

The key issue here was that DOD has shown that it is able to do this by itself faster and more cheaply. Thus this was the correct way to go and the Committee’s support would be appreciated.

The Committee enquired about the absence of the Secretary of Defence. Members asked if there was a plan to reduce and consolidate the number of DOD facilities in order to reduce overheads, as well as spending on capital works and maintenance. DPW's lack of capacity to spend available funds was raised as a serious concern. Members asked for more information about the refurbishment of the houses of two senior military officials at a cost of about R700 000. Why were senior military officers allocated housing in the first place, and why was the state spending R700 000 on their refurbishment? When the Committee asked about Defence Works Formation vacancies, DOD explained that National Treasury had now agreed to fund the staffing of the Defence Works Formation.

The Defence Works Formation was commended by the Committee for completing construction more quickly and more cheaply. Outsourcing inflated costs. The DOD was asked to provide the Committee with a spreadsheet report of all its projects and their costs by 10 November 2014.

Meeting report

Department of Defence and Military Veterans on the status of Defence Infrastructure projects
Major General Jimmy Ledwaba, General Officer Commanding at Defence Works Formation: South African National Defence Force, said that DOD facilities were spread throughout the country and included both state owned and privately leased accommodation. This excluded facilities in foreign countries, military operations and several houses that were owned by the Government (under the Prestige Account) and therefore controlled by the National Department of Public Works. Under expenditure at the National Department of Public Works has resulted in a huge backlog of maintenance and repairs to DOD facilities.

With regard to Refurbishment, in 2008/09 the Department had under spent by 37% or R178 143 980, and in 2013/14 it had underspent by 52% or R421 614 350.25. Examples of major Refurbishment Projects undertaken included: South African Combat Training Centre; Naval Base Simonstown; Military Academy and A-Mess Thaba Tshwane. The Refurbishment Programme Support Plan for the MTEF Cycle 2015/16 showed R627 760 916 available funds and R101 651 134 surplus funds. All provinces have completed projects to improve the living conditions of soldiers except Mpumalanga. Mpumalanga planned to complete five projects in 2014/15 to 2015/16. For one of the projects, the NDPW had costed construction at R5.2 million but the Defence Works Formation completed it for R1.2 million.

▪ The NDPW has not been able to deliver projects on time which has resulted in Department of Defense underspending;
▪ The Defense Works capability was staffed at 57% and an attempt to secure funds from National Treasury to increase staffing levels up to 90% has been unsuccessful;
▪ Procurement processes were not fully aligned yet to support the Built Environment;
▪ Engineering professional skills levels were not on par yet with the tasks at hand.

Remedial Action included:
▪ The DOD and the NDPW have agreed to devolve functions on Defence Endowment Properties to the DOD;
NDPW has agreed to transfer the refurbishment of 1 Military Hospital (1st Floor) to the DOD, as a matter of urgency.
▪ The DOD is engaging National Treasury and NDPW to allow DOD to fund the staffing of the Defence Works Formation through withholding Accommodation charges. Treasury notified the DOD that Rm375 will be withheld from NDPW as requested
▪ The DOD has embarked on the review of  the Joint Departmental Procurement Policy  to address governance processes.
▪ The DOD has started a process to develop a HR Acquisition Policy to capacitate  the Defence Works Formation with professional masterings.

The Chairperson said that the presentation was supposed to be delivered by the Secretary for Defence, and the Committee had not been told anything about the absence of the Secretary for Defence.

Major General Ledwaba apologised and said that the Secretary for Defence had been called to attend to other emergencies and he had asked that his apologies be extended to the Committee.

Mr D Maynier (DA) wanted to know what matters could be more urgent than attending a Portfolio Committee meeting on Defence and Military Veterans.

Maj Gen Ledwaba said that the Secretary of Defense only announced it this morning so he thought it must be something very pressing. This morning he apologised saying an urgent matter had come up. Unfortunately there was insufficient time to talk about the details of the urgent matter. The Secretary of Defense said that he would come and personally make an explanation.

The Chairperson said the Secretary of Defence should send the information or come and explain to the Committee.

Mr Maynier asked if there was a plan to reduce and consolidate the number of facilities that the Department had in order to reduce overheads, as well as the capital and maintenance spent on them.

Maj Gen Ledwaba said that this related to what was said in the first slide that some of the facilities were not conducive for occupation. Some would be destroyed and new facilities would be introduced in order to accommodate this. There was overcrowding in certain facilities because of non-compliance to occupational health and safety regulations.

Mr Maynier said that the figures for refurbishment were slightly terrifying. There was a routine lack of capacity on the part of the Department of Public Works to spend the funds that were available for refurbishment. His question related to how DPW prioritised where to do maintenance. It appeared that housing for senior military officers was somehow prioritised. He asked if DOD had any knowledge of the refurbishments about to take place or possibly already taking place at number 151 Rudolph Street in Club View, and number 235 Retief Avenue in Littleton Manor. These were two houses belonging to two generals which were being refurbished at a cost of more than R700 000. He asked DOD to shed some light on the matter. He did not see why senior military officers were allocated housing in the first place, and why was the state spending R700 000 on their refurbishment.

Maj Gen Ledwaba said that the underspending by the Department of Public Works has been an issue for some time. This was why there has been an interaction between the two Ministers to see what could be done. An intervention was due where the DPW would hand over endowment property to the DOD, and the Defence Works Formation was in the process of building itself to be able to take over this function. The presentation document indicated the projects it has done throughout the country and a number of actions had taken place in order to revive and to refurbish the Defence facilities as best it could.

Maj Gen Ledwaba said that with regard to military houses being refurbished for senior military officials, he would need to go back and get details about those specific houses and get back to the Committee. In terms of refurbishment, the DOD had a programme which it worked on, on an annual basis, but the programme was not as mature now as the one engaged in with the Department of Public Works. In the interactions with Public Works, DOD tabulated which emergency projects needed attention. Emphasis was placed on facilities used by soldiers.

Mr J Skosana (ANC) thanked the Department for the presentation and for the explanation regarding the absence of the Secretary of Defence. He asked for clarification about the 7% under-usage of facilities - was it due to their dilapidated state.

Maj Gen Ledwaba replied that the understanding was that DOD was ensuring it intervene as quickly as possible where it could so that soldiers could be moved out of unhealthy facilities.

Mr S Esau (DA) asked for clarity about facilities outside the country.

Maj Gen Ledwaba said that the Defence Force outside the country occupied facilities under the control of the Department of International Relations and Cooperation (DIRCO). So it was actually a tenant of International Relations. This was why DOD was not capturing those facilities in this report. It did use certain facilities outside of the country but they were taken care of by another department.

Mr S Esau (DA) asked whether the value of R12 billion for assets was the current value of the assets at the facilities. If that was correct the standard practice for government was that 1.5% should be set aside for the maintenance of assets on an annual basis. He noted the energy of the Defence Works Formation which did the work at a faster pace and at a lower cost. He asked for clarity about the project where the NDPW costing was R5.2 million and Defence Works Formation had completed the construction at R1.2 million. This was very serious because if everything was over-costed purposely for the benefit of external contractors, at the expense of our own infrastructure deteriorating and getting into such a bad state, then we need to look at the costing structures of Public Works in general. He called for a serious investigation into costing because it undermined the government’s infrastructure and more so the defence for the protection of this country. This was a serious matter.

Maj Gen Ledwaba apologised that he did not use a scientific model when producing the data. Before a facility was fixed, one had what was called Condition Assessment and Scope of Work and Bill of Quantities. Then an evaluation was done. In this case an evaluation was done by professional consultants who stated the facility required R5.2 million to be fixed. Here it was shown the value for money the Defence Works Formation had brought to the table. Instead of doing it at that cost, it was able to do it at a much lower cost than was projected. To be fair to the Department of Public Works, it should be remembered that the salaries of the DWF members were not included in this formula. It just showed what was delivered, not how much each person earned. However, he thinks the key issue here was that if the DOD was able to do this by itself, then this was the correct way to go and the Committee’s support would be appreciated.

Mr Esau said the other serious matter was the vacancies. The Defence Works Formation was staffed at 57%, but he thought it was less than 57%. According to the Annual Report, the posts that were funded and not filled by Defence Works Formation were indicated differently. There was a shortfall of more or less 1 385 posts that were not filled. According to the Annual Report, it was less than 50% that were not filled. He asked for a figure and why Defence Works Formation had failed to do their job in getting more people. People could have been contracted or employed from Military Veterans or Reserve Force or from other sectors. Why has that not been done - maintenance must be done and at a faster pace?

On vacancies, Maj Gen Ledwaba said that the funding model for Defence Works Formation would be funded on a year-to-year basis. The structure was created and not fully funded. So the structure was there and was funded on a continual basis. With regard to the progress made, National Treasury has agreed to fund the next staffing of Defence Works Formation. The report has captured that agreement with the National Treasury about the funding, but it was important to make this visible on the ground practically. It could not be expected that in six months the Department was able to deliver what was impossible. The National Treasury has agreed to do the funding by withholding accommodation charges which would then assist Defence Works Formation to improve its structures.

Mr Esau asked for a spreadsheet, for the Committee’s information, about the projects, their duration and costs, showing their life span and going forward so that the Committee could monitor them. He asked further from Department, whether its presentation was informed by due consideration of the report of the National Defence Force Service Commission.

Maj Gen Ledwaba said that the Department would present a spreadsheet of each project. It appointed a project manager in each of its projects who would do the Scope of Work and Bill of Quantities and the costs involved. The Department did have files showing projections of where it was going based on the backlogs, it also looked at capacity for what could be done urgently. Importantly, besides doing some work on its own, it was now co-planning the Department of Public Works projects. The most important thing it had done was the intervention to ensure participation in the Department of Public Works processes - so they do not do it without DOD.

Maj Gen Ledwaba said that the Department had actually presented to the National Defence Force Service Commission last week. They were focusing on specific areas which were areas of concern for the Portfolio Committee, for example specific facilities with problems. The Commission was aware of the questions asked by this Committee but it was also focusing on the specific issue of where the soldiers were accommodated.

Mr Esau said that the Committee also needed a report about the facilities that did not reside under the DOD itself and for which other departments took responsibility such as DIRCO and DPW. Reports were also required from these other departments in terms of their responsibilities for maintaining facilities.

With regard to the R5.2 million costing of the project, Mr Esau urged DOD when costing a job, to cost it properly otherwise it tended to mislead the Committee. Salaries were definitely a part of every project and should be included so that the Committee could have a proper understanding of the value of the project. He still wanted to know the difference between DPW costing and the Defence Works Formation costing. He was interested in where a saving was made and if a saving was made at all. Defence Works Formation worked faster but the DOD Administration needed to work even faster to ensure that every single project was aligned to Supply Chain Management processes and costs and complied with the legislation.

Mr Maynier said his question about the overall stock did not relate to the 7% under utilisation of facilities - it was much more general than that. He guessed the answer would be found in the Defence Review. He hoped that once the final Force Design was set out, the facilities requirement would follow and he hoped it would allow them to significantly reduce the size of stock.

Mr Maynier referred back to the houses for two senior officers for which the Department did not have the particulars. It raised the question: what proportion of the refurbishment budget was actually spent on refurbishing senior officer houses.

Mr Maynier asked for the specific construction project costed at R5.2 million which had been completed by Defence Work Formation for R1.2 million.

Mr Maynier said it may be useful for the Committee to ask the Department to provide it with an up-to-date report on the maintenance and repair of the facilities that this Committee had visited in the Fourth Democratic Parliament. The Committee had visited places and identified specific problems. It would be useful to get a progress report on those specific issues. The Department could therefore be held to account on the specific facilities that had problems.

Mr D Gamede (ANC) said that the DOD had done a good job by doing its own repairs. In this way it was able to do the job as cheaply as possible. He supported the proposal that the Department provided an update on the Committee recommendations for specific DOD facilities from its reports about previous oversight visits.

Maj Gen Ledwaba thanked the Committee for the support. The Department felt enriched by all the issues raised. DOD had resolved to improve the conditions of soldiers as it would be to the advantage of the nation.

The Chairperson asked if the Department checked compliance before it used those facilities.

Maj Gen Ledwaba said that it did, but with some of the facilities spoken about, it was a tenant.

The Chairperson said that the progress report should be submitted will the spreadsheet report on all projects. He would like the researchers to compare them with the findings of the last oversight visit to see to what progress has been made. In this way the Committee would be able to monitor progress made so far. The deadline for submission of this written report was Monday 10 November 2014.

The meeting was adjourned.

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