Chief Procurement Officer quarterly briefing

Public Accounts (SCOPA)

06 September 2016
Chairperson: Mr N Godi (APC)
Share this page:

Meeting Summary

The meeting got off to an uncertain start when the Committee was informed that the Chief Procurement Officer would not be attending, as he had gone to a pre-planned information communication technology (ICT) statutory tour to Europe. Members were particularly upset that he had failed to communicate this to the Committee about this beforehand. This was deemed unprofessional. The Committee proceeded with the meeting nonetheless.

The Office of the Chief Procurement Officer (OCPO) said that the Treasury was currently managing 40 transversal contracts for the purchase of goods such as vehicles, medical consumables and devices, and textiles, worth R26 billion. There were 300 000 compliant suppliers on its database. The e-Tender portal was designed to bring down the cost of advertising of tenders. The idea was that the system allowed everyone who downloaded from the site, access to tender documents for free. The g-Commerce was like a shopping tool, as it linked procurement, and what one needed to buy, with the budget.

The challenge with the procurement plan was that most departments uploaded a document that had been signed, but there was no capacity for funding. The Office was attempting to enforce the government’s 30-day rule for payment of its suppliers. The reason for non-payment by departments to suppliers was unknown.

During the discussion, Members asked what the role of OCPO was; when would tenders stop being advertised in newspapers; did the OPCO have the expertise to deal with the challenges; what corrective steps were being taken for those accused in criminal cases; what were the shortcomings of the e-Tender portal; and why were not more departments on board with this system, and could these departments not be compelled to join?

Meeting report

Absence of Chief Procurement Officer

Mr Solly Tshitangano, Acting Chief Procurement Officer, said that  Mr Kenneth Brown, Chief Procurement Officer, apologised for not being present due to a pre-planned information communication technology (ICT) statutory tour to Europe. He had left this past weekend.

The Chairperson said he wondered why Mr Brown had not seen fit to inform him of his travel plans, as a letter had been directed to him to advise if he would not be available on this date. The issue was not whether he was here or not, but that he had failed to communicate his absence according to procedure.

Mr M Booi (ANC) said that the relationship between Parliament and National Treasury was strained. This type of incident had happened before with a previous department.

The Chairperson said that the meeting should proceed, but that Mr Brown's absence would need to be dealt with accordingly.

Mr Booi said that Mr Brown had not treated the Committee with the respect that it deserved by being absent without an explanation.

Mr M Hlengwa (IFP) said that the Committee deserved an explanation because if National Treasury had received a letter, surely the trip had not been planned overnight. He did not take kindly to the “willy-nilly” approach of National Treasury. The Committee needed something in writing, an explanation that was concise.

Ms N Khunou (ANC) said that there needed to be consistency within the Committee. If it were any other department, then the Committee would postpone the meeting and wait for the appropriate person to attend.

Mr D Ross (DA) said he had looked through his notes and could not find where the Committee had left off from the previous meeting's discussion. He said that Mr Brown played a critical role in SCOPA.

Mr T Brauteseth (DA) asked if the trip to Europe had been properly procured.

The Chairperson said he heard what had been said, and that was why he had said what he did. He expressed his concern, adding that he did not want to talk about the issue there.

Mr Tshitangano asked that the meeting be adjourned for ten minutes so that there could be an explanation and a discussion of the way forward, since Mr Brown was not present.

Mr Brauteseth replied that as unsatisfying as Mr Brown's absence was, the meeting should continue if the officials present could assist with the questions, and when Mr Brown returned, he would be questioned by the Committee.

Mr Booi said that the presentation was broad one and that the questions that would be asked were specific. The presence of Mr Brown would have been of assistance. This meeting should be prioritized, as Mr Brown's return was unknown.

Mr Hlengwa said that the meeting should continue and that any issues flagged for Mr Brown would be noted. The behaviour shown today bordered on being unprofessional.

The Chairperson said that National Treasury had a consistent absence that was not shown by other departments. There was something fundamental that needed to be dealt with at National Treasury.

Ms Khunou said that at the end of day, the report had to be presented, but what should be reflected on the record?

The Chairperson said that they would go over the report and any issues that required Mr Brown’s input would be flagged. The presentation should begin and once it was over, then Members could ask questions. T today should mark the beginning of consistent engagement with the Department.

Briefing by Office of the Chief Procurement Officer

Ms Rakgadi Motesto, Chief Director: Stakeholders and Clients Management, Office of the Chief Procurement Officer (OCPO), said that the office had been established through the existing specialist function to ensure fairness and transparency. It was almost fully established, but still needed to fill a few vacancies. Suppliers were being registered only once they were on a central database. There were 300 000 compliant suppliers on the database.

The e-Tender portal had been designed to bring down cost of advertising tenders. The idea was that the system allowed everyone who downloaded from the site access to tender documents for free. The g-Commerce was like a shopping tool -- it linked procurement of what one needed to buy with the budget. Procurement plans were reviewed quarterly. The challenge with the plans was that most departments uploaded a document that was signed, but there was no capacity for funding. Currently there were 40 transversal contracts running that were almost worth R26 billion. Strategic procurement attempted to find better ways of procuring certain commodities for government.

The 30-day payment of invoices was a project taken on by OCPO. The issue of payments was difficult to understand, because government departments did not give reasons why they were not paying. One client had been owed R23 million, and it had gone under. Then government had moved on to another agency, which was experiencing the same problems.

Mr Tshitangano continued with the second of part of the presentation, dealing with a report of the SCOPA of 2013/14 which had raised a concern over the increase in irregular expenditure. This had been mainly due to institutions not following proper purchasing processes. One issue raised was the abuse of the process. When the review was done, one found that there may be three quotations from one supplier, or inflated quotations. The key was that institutions wanted to avoid competitive bidding.

From the previous year, they had been publishing the procurement plan quarterly, which would include tenders that needed to be advertised. When complaints were reviewed, certain bid specifications were tailored to certain suppliers. Most of the time, when institutions were evaluating the tenders and they could see that a certain supplier would not make it, they would change their specifications.

Deviations were a serious problem. If as an accounting authority one did not have sufficient time to advertise, one would be deviating without a valid reason. When a supplier was appointed, to avoid competition they would use a deviation to add more to the budget. The measures put in place by the OCPA were in an instruction note, effective from 1 May 2016. This note said that deviations should be done with a valid reason, and more than one supplier was to be researched. If there were going to be variations of more than 15%, then National Treasury should be informed.

The publication of procurement plan had been complained about, because of the content advertised. Departments may have had preferred suppliers, and they had been allowing the information about the tenders to go to the preferred supplier, and there had not been a fair tender application process.

There had been no reports of criminal charges being laid. One needed to know from which side of the supply chain the issues were being reported. Some of the cases that had been reported had been withdrawn because they were not reported correctly. The investigator had to give the report to the prosecutor and they struggled, because they were not using the Public Finance Management Act (PFMA). The Act’s Chapter 34 presented a major problem because if one had anything to report as an accounting officer, that should be given to the police, who would investigate it. If they did a review and saw that a tender had not been properly attained, then they would track the matter and due process would be followed. Pictures were shown of tenders that had been traced because of complaints that had been issued. An example was given of a school in Limpopo which had been a victim of supplier negligence.


The Chairperson asked about some the procurements that had been reviewed, especially those contracts of over R10 million that had to be reviewed by National Treasury.

Mr Tshitangano replied that these were PRASA contracts of over R10 million that the Public Protector had not been able to review. National Treasury was still in the process of reviewing the contracts, and they were still in contact with the Public Protector.

The Chairperson asked if this explanation covered Eskom and Transnet, as well as PRASA.

Mr Tshitangano said that this explanation did not cover Transnet.

The Chairperson asked for an explanation for Transnet.

Mr Tshitangano replied that the explanation covered only PRASA. Transnet was looking at contracts involving consultants.

The Chairperson asked about Eskom.

Mr Tshitangano replied they had reviewed Eskom’s diesel and coal contracts.

The Chairperson asked when the Committee would be receiving a report on the matter.

Mr Tshitangano replied that Eskom had said they would submit their comments on 15 June 2016, but they had submitted their comments and necessary documents only last week.

The Chairperson said that any questions could be raised at this time.

Mr Tshitangano said that there had been an amendment, and the changes meant there would be a compulsory sub-contractor and certain pre-qualifications, according to the black economic empowerment (BEE) code.

He said that the Performance Bill had not been finalised. It was still an internal discussion. National Treasury has concluded the discussion on the bill. This week there would be cluster meetings and once cabinet approved the document, it would go to Parliament.

Mr Kekana asked what the role of OCPO was? Were they assisting departments in terms of specifications or adjudication? He asked about the capacity of the department. Did OCPO rely on the information it got from suppliers? What was the process of formulating regulations at National Treasury?

Ms Khunou said that black businesses were dying, and part of the reason could be the 30-day payment problem. There has not been any transformation with the suppliers. She heard complaints, and was unsure how they got their information. She asked about the advertising of tenders in newspapers, and when the process would be stopped. Did they have the expertise to deal with the issues they had mentioned? She asked about consultants -- how much were they being paid, and why were South Africans not being used?

Ms N Mente (EFF) expressed her displeasure at the presentation. She said she was not getting any sense of assistance. She asked what a proper school looked like, and what the package of a R35 million proper school was. She asked about the R45 million that had been declared in the travel department. She asked who had not been paid, and why they were not paid. She asked where the assistance was, and why there were no annexures for the Committee to follow through.

Mr Tshitangano replied to Mr Kekana, and said norms and standards were monitored to make sure they were implemented. The norms and standards were known by accounting officers. The bid committees were trained by the accounting officers and if they wanted evidence, they would provide the necessary documents. The sole supplier verification required that a sole supplier gave a certificate attaining to that fact. The verification process confirmed the sole supplier by going to the distributor. If one was going to issue regulations, then these must be issued in a gazette for 30 days. A circular or instruction note would not be issued if it was not in line with the regulation. Before an instruction note for implementation was given, it was circulated and allowed a time for comment, and then it was published.

The issue of additional documents would be sent through, as they had been unsure of what documents to bring to the Committee. Those tenders that were still being advertised in the newspapers were few, but most were using the e-Tender portal. The reason for late payments of suppliers by government departments was not known. The debt was being rolled over into a new financial year, and suppliers continued not to be paid each financial year. This issue needed to be dealt with by Parliament. There had to be a solution that came from the Committee.

Any additional information would be packaged and sent to the committee. Those who were doing market research should be the people who were in government, to make sure that prices were not over-inflated by suppliers.

Ms Motesto said that accounting officers received training at a national level, and understood what was expected of them. The 30-day payments were not being honoured by most departments. The idea was not to come to the committee to “rat” on departments, but since they had been given the green light, they would do so. The Central Supplier Database (CSD) gives departments the details of suppliers. The problem with suppliers was that they paid a third party to register their companies, which they could do themselves for free. There was a limited supply in the sectors that government needed. The system was supposed to benefit suppliers.

Mr Hlengwa said that he was making assumptions based on what he had just heard. There should be answers as to why departments were not paying within 30 days. What department was owing a travel agency R33 million? This department should be named. There was concern over criminal cases -- what corrective steps were being taken for those accused of wrongdoing? Public servants were doing business with the state -- what were the challenges in this regard? The e-Tender portal was positive, but what about the shortcomings of the internet based portal?

Mr Brauteseth asked why more departments were not on board with this system, and could departments not be compelled to join the small percentage. What was being overseen by the Office? More departments should be pushed to getting the best deals possible. Was the bar not too high for the open bidding referred to in Gauteng? Were the invoices that had been mentioned an accurate representation of the money owed? The travel agency that was owed R33 million -- what type of company had that kind of cash flow? What power would the OCPO have? Would it not be better suited to have federal system, such as in America?

Mr Ross asked if the bill would be circulated amongst Scopa Members? The state contracts and treasury tender fraud issues included PRASA, Eskom and SA Airways, and he asked if there should be an intervention by the Committee. Would it agree to extending the intervention, with a new approach?

Ms Motesto replied that consultants were used at an advisory level and that these industry experts, who were not available at a government level, were used to go over contracts. If someone with potential was found, then they were trained. Those who were not paying would have until tomorrow to reply to an email sent out. The e-Tender portal would be linked with websites to allow immediate access to tenders.

Mr Tshitangano said that investigators and prosecutors needed to be trained on the supply chain (SC) protocols. The fact that government employees were doing business with government departments was due to fragmented law. The system could not identify if it was a government employee, but when one registered a company in which there was a government employee, then the supplier would be flagged. The system would have shortcomings in terms of access in rural areas. This was also the issue with the tender bulletin, which was available only in certain areas. The open bidding process was abused when appointments were based on those who were preferred. Those involved in irregular expenditure were sometimes being held responsible. If there was irregular expenditure which needs to be controlled by a public entity, it first had to be investigated. The cause of the irregular expenditure and the party responsible should be established, and action taken against the guilty party. People who were responsible for irregular expenditure often moved to other departments, so there was no recourse to them.

Ms Khunou asked where Small Enterprise Development Agency (SEDA) offices were located, especially those where one had to go to get tenders. SEDA would never help achieve the procurement role that was expected of it. There were 300 000 suppliers, and of these, how many were black? There was no clarity on the role of the procurement, and there should be clear communication lines.

Mr Hlengwa asked if the R33 million debt question would be answered at a later stage.

Mr Kekana asked if the OCPO officials were satisfied with the capacity of the Office.

The Chairperson said that in order to better benefit from the Office, suppliers needed to have a kind of relationship that helped them to understand what was happening. The Office existed because of a failure by departments to do the right thing. The procurement office should be understood in that capacity. The accountability of public office expenditure remained the responsibility of the Office’s accounting officer. The Office gets a lot of information, but where does this information go? There were two issues that needed to be dealt with. The first was the 30-day payment situation, where there was a need to get continuous feedback. Secondly, there were the issues around criminal cases. These were the areas that needed to be isolated to find solutions.

Mr Booi said there was a plea for an intervention, and that was why Mr Brown’s presence had been needed in the meeting. It was their job, as the legislature, to write the laws for Parliament, and if there was no definition for them, then there would be anarchy. The OCPO was accountable to them, and not the other way around. Mr Brown should communicate the flaws in the Office so that appropriate laws could be written for it. The Office could not be guided by feelings.

Mr Ross said the non-compliance rate was at 72%, and that there was a recurring trend of non-compliance. That was why the question had been asked about the recommendation to enforce compliance, and a new role for Scopa.

Ms Khunou said the reports to be sent by Ms Motesto would assist in the Committee’s investigations. The reports that had been mentioned should be made available for the next meeting.

The Chairperson said the Treasury’s information on compliance should be taken into consideration so that the Committee could focus attention on any issues. When procurement issues came before the Committee, there had to be specific and generalised information so that they could follow each other. All the details should be given.

The meeting was adjourned.

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: