Recruiting the right professionals to do the work remained a major challenge for the Department of Public Works. The Department echoed this when it briefed the Standing Committee on Appropriations on the 2016 Appropriation Bill, describing its highlights, programme objectives and budget, strategies for effective procurement within the entire public works sector, and strategies for an effective expanded public works programme (EPWP) and responses to audit findings on the EPWP.
Among the highlights, the Department stated there was a separate organisational structure for the Property Management Trading Entity (PMTE). Key appointments at senior management had been concluded, and fundamental reforms to the supply chain management had been introduced. As a result, there were three streams: Infrastructure, Properties, and Goods and Services. The rollout of an integrated Enterprise Resource Planning system had been concluded, and the Immovable Asset Register (IAR) had been substantially completed.
With regard to programme objectives and budget, the DPW reported that the allocations provided to the five programmes would go towards improving governance processes, internal controls, and the integration of the Information Technology system; improving cooperative governance across the three spheres of government in partnership with relevant state entities; coordinating the implementation of the EPWP, which aimed to create work opportunities and provide income support to the poor and unemployed through the use of labour intensive methods; providing strategic leadership for the regulation of the construction sector and transforming the public sector immovable asset management; and developing and reviewing policies for the prestige accommodation portfolio, in line with the Ministerial Handbook.
Concerning strategies for effective procurement within the entire public works sector, the DPW was focusing on smart procurement through the use of panels, terms, and transversal contracts; implementation of term contracts to ensure efficiencies in respect of time and value for money; implementation of the Archibus system to manage the lease contracts and contribute to the procurement of new leases from 51% black-owned entities; engage monthly with the Projects Unit to ensure tenders were timeously processed; and full implementation of an integrated Enterprise Resource Planning (ERP) system to make sure suppliers were paid within 30 days.
About strategies to maintain an effective EPWP, and responses to audit findings on the EPWP, the DPW was expending its energies on the effective use of the Public Employment Programme-Inter Ministerial Committee to unblock strategic constraints for the successful implementation of the programme, and creating coordination mechanisms within the EPWP that linked to structures at all spheres of government. It was enhancing technical support to participating municipalities and concluding agreements between the Minister of Public Works, Premiers/MECs of Public Works and municipal mayors to implement the programme. The DPW was undertaking pre-audit visits to help public bodies have compliance on site, and it was engaging with the Department of Planning, Monitoring and Evaluation and the Auditor General of South Africa to determine an appropriate manner in which to audit the EPWP.
Members asked if the Department had employees who were on suspension or special leave; wanted to find out what the key challenges were that caused the implementing bodies to deviate and not meet the EPWP targets; wanted to know what the accuracy of the substantially completed Immovable Asset Register (IAR) was; asked for clarity on complaints that some EPWP allocations were given to members of a particular political party; and enquired about the value of the disposal of immovable assets. The Department was also asked if the centralisation of procurement was not going to affect small and medium enterprises (SMEs). It was asked to give the Committee an indication of how it was planning to address the problems affecting the Department, and Members wanted to know why the Integrated HR Plan for the DPW and PMTE was not developed for five years instead of developing it yearly. A question was also raised about why Property and Construction Industry Policy and Research had been allocated the large amount of R3.6 billion.
Briefing by Department of Public Works (DPW)
Mr Mziwonke Dlabantu, Director-General: DPW, took the Members through the highlights of the Department, programme objectives and budget, strategies for effective procurement within the entire public works sector, strategies for an effective expanded public works programme (EPWP) and responses to audit findings on the EPWP.
On highlights, the Director-General stated that the Property Management Trading Entity (PMTE) was substantially operationalised, and there was a separate organisational structure for the Department and the PMTE. Key appointments at senior management level had been concluded, and fundamental reforms to the Supply Chain Management (SCM) had been introduced. As a result, there were three streams: Infrastructure, Properties, and Goods and Services. The rollout of an integrated Enterprise Resource Planning system had been completed, and the Immovable Asset Register (IAR) had been substantially completed. The Department had finalised the approach on the use of other government implementing agencies to complement capacity shortfall in the PMTE, and had developed and reviewed policies for the prestige accommodation portfolio in line with the Ministerial Handbook.
With regard to programme objectives and budget, Programme Administration had received an allocation of R517 million. The bulk of the allocation was for the compensation of employees and goods and services. The other allocations would see to the integration of the Information Technology (IT) system, as well as implementation of change management, and would be spent on improving governance processes and internal controls. The Intergovernmental Coordination Programme had been given R31 million. The programme intended to spend the allocation on improving cooperative governance across the three spheres of government in partnership with relevant state entities. The EPWP had been allocated R2.3 billion. Its objective was to spend the money on coordinating the implementation of the EPWP, which aimed to create work opportunities and provide income support to the poor and unemployed through the use of labour intensive methods.
The Property and Construction Industry Policy and Research Programme had received an allocation of R3.6 billion. The bulk of the allocation in this programme went towards the PMTE to perform immovable asset management functions on behalf of the Department. These functions entailed the provision of office and residential accommodation for client departments at the national government level, as well as the acquisition, management, maintenance and disposal of immovable assets in the Department’s custody. The Prestige Policy Programme had received an allocation of R96 million. This programme would spend the allocation on developing and reviewing policies for the prestige accommodation portfolio in line with the Ministerial Handbook. It also wanted to improve the delivery of services to prestige clients regarding the provision of both movable and immovable assets.
Mr Cox Mokgoro, Chief Financial Officer: DPW, presented the strategies for effective procurement within the entire public works sector. The following strategies were presented:
- Smart procurement through utilisation of panels, terms and transversal contracts;
- Transparency through the use of an e-tender portal and a Centralised Supplier Database (CSD);
- Introduction of electronic procurement and a reduction of manual processing;
- Operationalisation of contract management in the Department;
- Implementation and operationalisation of SCM processes for 2017/18infrastructure;
- Implementation and operationalisation of SCM processes for leases in 2016/17 financial year;
- Implementation of the E-tender system.
Value for money:
- Within facilities management there were on-going projects to improve energy efficiency in buildings and reduce water usage;
- Implementation of term contracts to ensure efficiencies in respect of time and value for money;
- With renewal of leases, there was an active engagement on the renegotiations of property leases to ensure the DPW was paying within market related rates;
- Optimisation of office space (an on-going process);
- To facilitate the effective management of the entire life cycle of immovable assets used by the State;
- The Department was implementing Archibus, which was an integrated property management system.
Lease and property management:
- Contributing to the procurement of new leases from 51% Black ownership;
- Implementation of Archibus to manage the lease contracts, including the data management system, reporting system, analytical tool (integrated property management system);
- SCM processes were being developed to allow for effective and timely procurement of leases;
- Leases were to be procured at head office to ensure benefits of economies of scale;
- Panel of lessors to be procured through a tender process.
Good quality service:
- SCM was focusing on working closely with the operations to facilitate delivery;
- Engage monthly with projects unit to ensure the tenders were timeously processed;
- Focus on reduced audit findings and irregular expenditure;
- The implementation of new systems and processes would result in reduced response time and improved efficiencies;
- Service level agreements (SLAs) with internal line functions.
Black Economic Empowerment:
- Implementation tool in 2016/17 to monitor the spend on women, small, medium and micro enterprises (SMMEs), black economic empowerment (BEE), and rural areas;
- Focus procurement on awarding to 51% held BEE companies through leases, facilities management, and infrastructure (construction and renovations);
- Revisit the leasing module to give preference to 51% BEE companies.
Superior Contract Management
- Ensure delivery of service was in line with contracts;
- Value for money;
- Improved reporting on SCM statistics;
- Improved reporting on analytics -- time and money spent;
- Database source of contracts (goods and services) – reduced paper and electronic filing;
- Performance evaluation of suppliers and black-listing of non-performing suppliers.
Infrastructure Implementation and Maintenance:
- As part of effective demand management, SCM would be assisting in various sourcing strategies to better address clients’ needs in an efficient yet compliant way.
The following strategies would be rolled out in 2016/17 financial year:
- Use of pre-appointed panels for built environment consultants -- anticipated date of implementation was September 2016;
- Use of G-commerce to procure items available through National Treasury Transversal Contracts -- anticipated date of implementation was August 2016;
- Utilisation of term contracts for routine commodities -- anticipated date of implementation was August 2016;
- Consolidation of similar / related requirements for simultaneous procurement;
- Batch tendering as opposed to continuous tendering, to improve efficiencies and certainty for contractors;
- Archibus was to assist in improving and monitoring the provision of scheduled maintenance and planned improvements;
- Use of other organs of state to implement projects;
- Establishment of joint teams with client departments;
- Engagement of young built environment professionals.
Payment Of Suppliers Within 30 Days:
- Full implementation of an integrated Enterprise Resource Planning (ERP) system;
- The above would facilitate online real time requisitioning, ordering, receiving of goods and services, invoicing and matching all these for a prompt payment process;
- Suppliers to be capacitated with the complex requirements of the SCM system;
- Consequence management for non-compliant officials.
- Introduction of an infrastructure delivery transparency model;
- Use of the centralised supplier database of National Treasury;
- Publication of Request for Proposals (RFPs) and bids on the National Treasury e-Portal;
- Publication of RFPs/bids and final awards on the Departmental Website
- Construction Industry Development Board (CIDB) register of contracts.
Mr Stanley Henderson, Deputy Director-General: DPW, briefed the Committee about strategies for effective EPWP and response to audit findings on EPWP.
Effective EPWP Strategies:
- Effective usage of the Public Employment Programme–Inter Ministerial Committee (PEP-IMC) to unblock strategic constraints for the successful implementation of programmes;
- Creating coordination mechanisms within the EPWP that linked to structures at all spheres of Government;
- Developing the funding frameworks, conditions and mechanisms for the EPWP;
- Enhancing technical support to participating municipalities and concluding agreements between the Minister of Public Works, Premiers/MECs of Public Works and municipal mayors to implement the programme, and also supporting municipalities to develop and endorse EPWP Municipal policy;
- Monitoring the implementation of the EPWP against its targets and evaluating the impact of the EPWP;
- Designing and implementing a national communication strategy for the EPWP and providing guidelines on corporate identity;
- Identifying areas for further expansion of the EPWP and designing programmes for implementation in these areas, and to document and publicise best practices in the EPWP;
- Establishing appropriate accountability and location thereof for audit purposes.
The 2015/16 second quarter preliminary audits had started in December 2015, and from the EPWP projects visited by the Auditor General of South Africa (AGSA) to date, the following deviations had been noted:
- No copy of ID documents for participants;
- Signed attendance registers for participants were not available;
- Employment contracts for participants were not available;
- Payment registers or bank statements not available to confirm payments made;
- Participants not reported (pending a list, or not reported at all);
- Lists of projects not reported that were EPWP in public bodies.
The AGSA audits the DPW as though the DPW created the reports on work opportunities itself, rather than its coordination role. To remedy this, in the 2015/16 audits:
- The DPW was undertaking pre-audit visits to help public bodies have compliance on site;
- There would be engagement with the accounting officers of implementing bodies to ensure compliance with all EPWP prescripts;
- There would be engagement with the Department of Planning, Monitoring and Evaluation (DPME) and the AGSA to determine an appropriate manner in which to audit the EPWP and ensure accounting officers of implementing bodies were held accountable for non-compliance with the EPWP prescript.
The other matters in which the Standing Committee on Appropriation may assist included:
- Continued oversight by the Committee;
- Support with departmental strategies to cover funding gaps, especially the compensation of employees;
- Support with the recovery of outstanding debts from client departments;
- Approval of the long outstanding unauthorised expenditure, from 2007/08 to 2014/15.
Mr Jeremy Cronin, Deputy Minister: DPW, commenting about the EPWP and its audit outcomes and findings, informed Members there was no clear understanding of the unique way South Africa was rolling out these programmes. This programme was seen as an innovator in the global space, and some other countries had used these innovation methods. Unemployment had been on the rise and was standing at 25%. On 15 April 2016, the Department had stated in the media that the EPWP figures that were always reported were not reliable. What the AG reported had been based on the EPWP audit for 2014/15. Three-quarters of a million people participated in these programmes every year and this had been increasing yearly. The DA and ANC were supporting these programmes, and even DA-controlled municipalities worked with them. The way the AG had been approaching the EPWP audit was based on misconceptions. Most provinces and municipalities were participating in the EPWP, though the EPWP had not delivered on the targeted jobs.
He said that the EPWP did not implement but coordinated and assessed work opportunities, and looked at the developmental impacts in communities. It looked at the outcomes and outputs of these programmes. The EPWP wanted to make sure the implementers were kept on their toes so that they were able to account on the reporting systems. The Department had engaged with the AG and the DPME to ensure that auditing and accounting were appropriate to the nature of the programmes and did not undermine the efforts of SA in this respect.
The Director-General, in his concluding remarks, said that the challenges were on the spending gaps. The Department was not recruiting the right candidates for the work to be done. Further, over a long period, the Department tended to default on debt payments. As a result, the DPW was working closely with Treasury to seek to recover those debts. Lastly, the DPW had had discussions with the Standing Committee on Public Accounts (SCOPA) on matters of unauthorised expenditure.
Dr C Madlopha (ANC), asked if there were employees in the Department who were on suspension or special leave. She wanted to know what caused the Department to achieve less while spending more. What were the key challenges for the implementing bodies resulting in deviations and not meeting the EPWP targets? Lastly, she expressed appreciation for the fact the Department had gone to Home Affairs to verify the identity numbers of the participants in the programmes and also for visiting the work sites.
The Director-General, regarding suspensions, said that the Department had taken the view to comply with the principles of labour relations. It looked at whether there was a need for a person to be suspended. In many cases, the Department had not suspended employees as there had been no need for that. Currently, there were 23 suspensions without pay, and they varied from three to six months.
On the issue of achieving less while spending more, he said the matter was of great concern. The difficulty had been with the setting up of targets for the APP. Last year the Department held a workshop on strategic planning and target setting. That was why there had been low disclosures on performance for target planning. This had resulted in the Department approaching the DPME for assistance so that it could come up with SMART objectives.
Pertaining to the challenges leading to not meeting EPWP targets, the Director-General said the problem lay with the lack of internal capacity. Some programmes were designed to be implemented through an intensive labour process, and that meant one had to find local people to do the job.
Mr J Figg (DA) wanted to know what the accuracy of the substantially completed Immovable Asset Register (IAR) was. He asked for clarity on complaints that some allocations for the EPWP had been given to members of a particular party. He wanted to find out what the value of fraud in the Department was. He enquired about the value of the disposal of immovable assets. Was the centralisation of procurement going to affect the SMEs? What consideration had been given to the acquisition of an item in order to do the work with regard to terms of contracts? Did the Head of Department (HOD) have performance agreements for the other accounting officers in order to achieve targets? What consequences were in place for not meeting the 30-day payment to service providers? Lastly, he enquired why the Department had not been given an opportunity to engage with the AG before the audit report had gone public.
The Director-General, on the accuracy of the substantially completed IAR, said it was 99.9% complete. Regarding the value of immovable assets, he said the Department was busy transforming the property portfolio. It was trying to find better ways of disposing of things of value, and not relying on the fiscus, to see if that money could be invested in the work of the Department. Concerning the centralisation of procurement, he said there was a central database which would state where the SMEs were from. The procurement office would then specify where it wanted to buy. Designated groups were being targeted, and there was work happening on how to better the system.
With regard to terms of contracts, the Director-General said there was a misalignment. There were things to be considered first, and this depended on the nature of the contract. The service provider needed to look at his/her financial management. The state wanted to give an entity business so that services could be delivered but it became difficult when the state also had to give the entity money to acquire something when the job had not yet been completed or started. This needed some balancing. The state had to deliver services.
He said performance agreements were in place to cover all things that needed to be covered like APPs. Regarding the 30-day payment issue, the Department had done much to make sure payments were made within the stipulated time, but the Department first had to make sure that the work was done.
Mr Mokgoro, responding to the question on value of fraud in the Department, said that the 2014/15 report had looked at all transactions. Some of these were perceived to be around R3 billion. Ever since then, there had been a decline in fraud. An 85% target had been set on the reduction of fraud. That was the baseline that had to be established so that in the forthcoming financial periods there was no talk of fraudulent acts. The focus in the past had been on turning the Department around because at one stage, it was in an “intensive care unit” (ICU). Now the focus was on finance and SCM issues, and changing of the perceptions about the Department. It had moved from a disclaimer to a qualification, with two items.
Deputy Minister Cronin, responding to the claim that EPWP allocations had been given to members of a certain political party, agreed that such actions did appear to be taking place. He said that this should not be done by politicians because that was fraud and it created friction within the ANC. There had been a case similar to this eThekwini, and the Department had insisted on regular reports on what the metro was doing about the matter. Unfortunately, the ward councillor involved was dead. All the received affidavits looked the same and stated that one had to be a member of the ANC to be selected to participate in the EPWP. The guidelines were not there, and this made the process to be open to manipulation. The Western Cape government used a lucky draw approach. It went to the community and talked about the project. People put their IDs in a bucket and a draw was made. The duty of the Department now was to provide guidelines and a transparent process of recruitment.
On the opportunity to engage with the AG, he said the Department had responded and the AG had accepted the response of the Department. The AG had gone down to the municipalities to look at how the EPWP was implemented and performing.
The Deputy Minister added that the AG had received 767 825 beneficiary records from the EPWP reporting system. After receiving the AG findings, the EPWP had analysed the data that had been received from the office of the AG. The analysis had found that there was significant improvement in the EPWP data. 50% of the findings reported in the interim report had been eliminated in the final report. Of the total number of records submitted to the office of the AG, only 0.4% of the records were reported to have had Persal numbers, while 99.6% of the records did not have Persal numbers. Of the total number of records tested against the Home Affairs database, only 0.4% were reported to have died. This meant that a total of 99.6% were alive at the time of the test. Only 2% were reported to have invalid or no ID numbers, meaning that 98% of the records had valid ID numbers.
Mr A McLoughlin (DA) asked the Department to give the Committee an indication of how it was planning to address the problems affecting it. He wanted to know why the integrated HR plan for the DPW and the PMTE had not been developed for five years, instead of developing it yearly. Why had the Property and Construction Industry Policy and Research been allocated a large amount of R3.6 billion? He enquired if the Archibus system was already in place and if it was standardised. Was the Department making use of conveyancers?
The Director-General said that the Department and its client departments had set up a Joint departmental team to deal with the problems they faced. They had held regular meetings at executive, ministerial and deputy ministerial level. Discussions were around issues that had been the cause of problems. For example, a client department would give a brief on what it wanted, and before the tender was advertised, it was discovered that the specifications had changed. One needed a lead time of nine months when one was dealing with infrastructure projects before the tender was put out. One also needed to look at the budget to see if it was going to match the process of running the project prior the actual construction.
Pertaining to the Integrated HR Plan, he reported that the plan was a living document and had to be reviewed every year. It was all about reviewing plans for the Department.
Regarding the allocation of R3.6 billion, he said that the bulk of the allocation was going to be transferred to the PMTE to perform immovable asset management functions. Concerning the Archibus system, he said it was standardised, and standardisation applied to whatever they tried to do. It was something they inculcated in the modus operandi of the Department. About the use of conveyancers, the Director-General said the Department made use of the State Attorney’s Office to do the conveyancing.
Dr Madlopha remarked that in many instances a person was employed to do a specific job but when that person was employed, he or she made use of a consultant. This increased the wage bill because two people were being paid for the same job. She wanted to find out who monitored the consultants.
The Director-General said that money spent in this way was substantial. People had their daily jobs to do, and because of interventions that had to be made, consultants had to be used. Treasury had set rules for dealing with consultants.
The Chairperson asked if the Department had plans to fight fraud, and wanted to know if there was a risk management plan in place.
The Director-General reported there was a fraud strategy in place which was reviewed every year. An annual risk management plan was also in existence. A risk assessment was conducted annually.
The Chairperson remarked that the Department should not be complacent. From the presentation it was clear there was much that needed to be done. The Department needed to come up with a plan of action on how to address matters raised by the AG. In the next coming months, the Department should sit down with the AG and come up with action plans, and every six months the Department should try to have a meeting with the AG and sort out all outstanding matters. By having good relations with the AG, the Department would be able to get a clean audit. She welcomed the commitment of the Department to appoint the right professionals to do the work, because that was one of the issues the AG had raised.
She advised the Department to strengthen the PMTE, keep costs of accommodation minimal, and support efforts for infrastructure rollout, although some clients had not been happy with the work of DPW. To meet MTEF requirements, the DPW had to achieve its performance targets and to do this the Department had to work closely with the DPME.
The Deputy Minister, in his closing remarks, stated that when the Department needed a turnaround, the first thing that had been done was to consolidate all the property leasing units of the Department into a Property Management Trading Entity (PMTE), and it had had to work with consultants to help it to do its work. The PMTE was now working. The R3 billion budget was an allocation given to the PMTE to drive the EPWP work.
Adoption of Minutes
The Committee adopted three sets of minutes.
Dr Madlopha moved the adoption of the minutes of 3 May 2016. Ms S Shope-Sithole (ANC) seconded the motion.
Mr N Gcwabaza (ANC) moved the adoption of the minutes of 4 May. Mr McLoughlin seconded the motion.
Ms N Manana (ANC) moved the adoption of the minutes of 6 May. Ms Shope-Sithole seconded the motion.
The meeting was adjourned.