The Construction Industry Development Board (CIDB) said that the Standard for Infrastructure Procurement and Delivery Management (SIPDM) had been issued in terms of the Public Finance Management Act (PFMA) and was applicable from 1 July 2016. It promoted the competency of staff dealing with infrastructure and improved client accountability for actions and decisions taken in the infrastructure value chain.
One of the major problems affecting delivery was capacity and competency, which led to capability issues. The Procurement and Delivery Management Competency Framework (PDMCF) being developed would help with the implementation of SIPDM, as it included the development of an infrastructure plan to ensure all procurement documentation, tender evaluations and gateway reviews, as well as risk management, was considered. A procedure had been established for supply chain management (SCM) practitioners to ensure a procedural setup and accountability mechanism for effective implementation. Decisions on contracting strategies to be used by institutions had to be done at the portfolio level, and these were influenced by capacity and competence.
Transformation of the infrastructure delivery sector was defined in terms of ownership. Transformation was not progressing, but the CIDB was developing tools to rectify this situation. The construction monitor showed that 37% of executives in consulting engineering companies were black, fewer than 40% of large contractors were black-owned, and around 30% of contractors were women-owned. This showed the big discrepancy between the black-owned medium and large contractors, as well as gender involvement. Lack of access to credit was a big factor hindering small contractors, and the CIDB had a mechanism in place to help. They were targeting women-owned and black-owned contractors.
The Committee urged greater coordination between the CIDB and the National Treasury (NT). There was a great need for a monitoring and evaluation unit, and for the proper costing of projects to ensure funds were not wasted. It asked to be provided with a list of contracts that had been handled, as well as budgets and quarterly reports.
Construction Industry Development Board: Presentation
Standards for Infrastructure Procurement and Delivery Management (SIPDM)
Mr Mfezeko Gwazube, Acting CEO: CIDB gave a quick overview of the presentation and its pertinent areas. Different sections of the presentation would be handled by the assigned delegates.
Mr Richard Raphiri, Client Capacitation: CIDB, said that Standards for Infrastructure Procurement and Delivery Management (SIPDM) had been issued in terms of the Public Finance Management Act (PFMA), and were applicable from 1 July 2016. The SIPDM promoted the competency of staff dealing with infrastructure and improved client accountability for actions and decisions taken in the infrastructure value chain. It defined the control framework for planning, designing and executing projects, as well as monitoring the performance. It established the requirements and minimum requirements for the process of infrastructure procurement for ease of tracking the associated parties in the value chain. The SIPDM regulated the decision making process in this regard. He concluded that it stipulated the establishment of a suitable infrastructure procurement and delivery supply chain management policy in organs of the state, and also urges that an agency agreement be entered into between those organs where responsibilities for implementation were assigned.
The provision that a state organ shall establish a suitable infrastructure procurement and delivery supply chain management policy, was the crux of the SIPDM. Everything in the standard flowed from that requirement
Ms D Senokoanyane (ANC) asked for clarity on how the CIBD monitored the implementation.
Ms M Manana (ANC) asked who were responsible for infrastructure in the organs of state, and if every department was supposed to have that, considering that some departments had a lack of capacity. She asked what happened in terms of the SIPDM to the departments with under capacity.
Mr A McLaughlin (DA) said infrastructure fell under the Department of Public Works (DPW), but there were other organs of state that had independent infrastructure establishments. He therefore wanted to know if those were still under the DPW and if the CIDB had oversight control of them. With regard to the Treasury establishing accessible infrastructure accounting, what had been the case up to then, and what was ruling the contracts running currently?
Mr Gwazube said that the area was jointly managed by the CIDB and National Treasury (NT), but the CIDB was confined in the infrastructure space.
The Chairperson asked for the specific roles of the CIBD and the NT to be described.
Mr Gwazube said NT was responsible for procurement legislation and the CIBD was responsible for construction issues within the framework. He said the SIPDM existed inside the Infrastructure Delivery Management System (IDMS) and the glue that held these together was the Government Immovable Asset Management Act (GIAMA). Within GIAMA, there were the specifications for different organs of state and it stipulated what the implementing agents and clients could do, based on the custodian departments. The custodian departments within GIAMA of the particular organs were the ones expected to have a particular policy with regard to infrastructure, as they were required to have the capacity and the competency to deliver. The custodian departments were required to produce Asset Management Plans (AMP) that gave a bird’s eye view, to rationalise the need for the asset management of clients. The issue of capacity was a function of the contracting strategy adopted in the policy.
He said the CIBD had not begun monitoring, because it was in the purview of the NT to monitor the standard. He suggested that the manner in which the SIPDM was implemented had to be taken up, because there was no transitional period, and an impact assessment had not been conducted on how it could be done. It appeared that the implementation of the SIPDM had not been costed.
Ms Manana said that it was a serious issue that the SIPDM had not been costed, as it meant it must have no budget and therefore could not be implemented.
The Chairperson urged that possible solutions needed to be brought forward.
Mr McLoughlin said that with their oversight experience in Eastern Cape, where schools were being closed down, it seemed there was a huge problem with implementing agents. He wanted to know if addressing these problems was stipulated in the standards.
Mr N Gcwabaza (ANC) asked if the CIDB had a role in determining if a project was appropriately priced, or if the construction companies involved had an appropriate markup?
Ms Senokoanyane asked what the CIDB’s role was in those instances where there were blame games between a department and the DPW. Did they get involved in stand-offs between provincial and national government over spats on infrastructure projects being implemented?
Mr Gcwabaza (ANC) asked how Industrial Development Zones (IDZs) fell in the infrastructure space.
The Chairperson asked when the SIPDM had been introduced, and if departments had been made aware of its importance after its introduction. She asked for a breakdown of the committees established in its implementation. What was the recourse for committees with no capacity, as it would mean there would be no implementation? Did the DPW have capacity to carry out their responsibility for asset management? She asked why there was no monitoring and evaluation unit in the standards. Had feasibility studies been done on projects, and what had been the timeframes?
Mr Gwazube said that the CIDB raised the issue of GIAMA, saying that it had not been placed at the right level of operation as an Act and that it should not be treated differently to the Public Service Act (PSA), which was transversal and across all levels of government, and the PFMA. There was no single department that did not need infrastructure development. It had to be elevated into the budgeting process, and the trickle down effect would resolve most of the current problems.
He said the CIDB accounted to the Ministry of Public Works. They had made headway in intervening in stand-offs in communities, and had a particular standard that had been established to ensure progress. Capacity and competency would depend on the contracting strategies used, or a mix of these strategies. Public Works was the most organised in terms of discipline and implementation, but there was need for appropriate capacity in the desired units.
The CIDB did not have a role in price design, but the procurement strategies came into play in this section. The board was deliberating on getting alternative solutions to deal with the blame game. The cause of the disputes was in the forms of contract that the public sector could use, as all were designed for particular circumstances. However, there were always issues with two contraction forms -- Joint Building Contracts (JBC) and General Conditions of Contract (GCC). These lead to issues of overspending and blame games.
He said some IDZs became implementing agents because they built their own capacity and capability, and these had been brought on board to alleviate the pressures from the DPW.
Mr Raphiri said the evaluation, specification and adjudication committees had been described in terms of the PFMA, which delegates to the chief financial officer (CFO) of a department to establish the appropriate committees, evaluation, specification committee and adjudication committee. There was need to strengthen the skills gap in these areas
Mr Gwazube said there was a need for delegations of authority to be aligned to particular positions in the procurement strategies. He said the DPW had the structure, but did not have the full complement of people in the right places.
Mr Raphiri said that the structure was being addressed and most positions had been filled, but the full complement for the capacity needed had not been reached yet. There was a gate system for projects that had specified the particular sections that needed feasibility studies. The gates were linked to procurement gates that made it easy for auditing.
Mr Gwazube said that every department had a Service Delivery Improvement Plan (SDIP) and most of the capacity issues were captured there.
Mr Butcher Matutle, Deputy Director General (DDG): DPW, said he would provide a report to the Committee on the progress that had been made, what was going on and also where they were heading.
Mr Gwazube asked the Committee to engage the Council for the Built Environment (CBE) to provide it with the identification of work outcomes that stipulate the required competencies needed in the built environment space. He said SIPDM was not being monitored, as it was a product of the DPW, but the inside units in CIDB were being monitored by them. A list of custodian departments would be provided to the Committee in 10 working days.
Dr Rodney Milford, Programme Manager: CIDB, described a competency framework that unpacked the competencies required for people to operate in the necessary capacities. Assessment of the existing people was an issue but tools were being developed to assess if these criteria were being met. They also had to recognise some of the major deliverers of infrastructure, such as Eskom and water authorities.
Procurement and Delivery Management Competency Framework (PDMCF)
Ms Bongiwe George, Acting Chief Operating Officer (COO): CIBD, said one of their major problems affecting delivery was capacity and competency, which led to capability issues. The Procurement and Delivery Management Competency Framework (PDMCF) being developed would help in the implementation of SIPDM. This had a development of infrastructure plan to ensure all procurement documentation, tender evaluations and gateway reviews, as well as risk management, was considered. A procedure had been established for Supply Chain Management (SCM) practitioners to ensure a procedural setup and accountability mechanism for effective implementation. The procurement and delivery management stages moved from the “level of portfolio of projects” to “project level”. Decisions on contracting strategies to be used by institutions were to be done at the portfolio level, and these were influenced by capacity and competence. The CIBD’s standard for uniformity provided various forms of contracts, and the choice of form of contract could influence project performance. There was construction project management, and this was a point of responsibility in the process. There was survey that showed that 60% of contractors were delayed for over 60 days, and between 2010 and 2016 over 100 public sector contracts had been terminated due to a failure to perform. A strategy called “design by employer” was the dominant contracting strategy used in the public sector, even though the necessary capacity did not exist.
Ms Senokoanyane asked for clarity on the indicators in the construction industry. She said the non-performance indicated that termination was due to non-payments on the part of the client. Was the under-spending rating a correct reflection of the situation on the ground, as it did not make sense?
Mr Gcwabaza asked about the relationship was between the office of the chief procurement officer and the CIDB. He said there was need for coordinated action for projects to succeed. He asked for more information to be given on the issue of non-payment
The Chairperson said that the information they had requested would help the Committee do their oversight. The projects took years and the values were huge. There was a need for a monitoring and evaluation unit. She requested a list of the 100 contracts that were terminated be provided to the Committee.
Mr McLoughlin (DA) asked if there were any role overlaps between what the CBE, the DPW and the CIDB did. He wanted to know how the CIBD conducted quality control once projects were being done. What were the consequences for breach of contract?
Dr Milford said that the reasons for huge project changes were usually design changes which clients requested over the course of a project. All the information the CIBD had of the projects being worked on in past the two years would be sent to the Committee. He said quality issues were always a client problem as the client and agent had to meet on site every month to ensure proper work was done.
Mr Gwazube said that contractors relied on working capital to complete the projects they were working on, and if they did not get paid in time, some contractors stopped working on them. He said that the choice of a procurement strategy being undertaken was dependent on the capacity of the department.
Everybody had been made aware of the standards in 2015, but he was not sure if everyone was oriented to their importance, as no appreciation had been shown. The SIPD was a product of the NT, so they had been mandated to ensure it was adopted. Their relationship with NT was not really good, but they were working towards a workable resolution and a memorandum of understanding (MOU) had been agreed in 2017.
Dr Milford said the CIBD had never been called to the managerial meetings, although the infrastructure framework indicated they must attend. Infrastructure was a prerequisite, but not sufficient for economic growth on its own.
Mr Gwazube said that there had been no distinction between economic infrastructure and social infrastructure, so they had to look at the budget weighting to determine whether it would boost economic growth.
Mr Gcwabaza said that in the South African situation, projects’ continuity had to be prioritised to avoid the stop-start trend of projects.
Mr Gwazube said that the modality of production in the economy had to change. It was a fundamental problem that had to be changed. He also said there was no overlap, as there were clear demarcations in their work.
Ms George said they did provide training to clients in order to ensure compliance.
Transformation of infrastructure delivery sector
Dr Milford said that transformation of infrastructure delivery sector was defined in terms of ownership. Although transformation was not progressing, the CIDB was employing tools to rectify this. The CIDB project assessment scheme and best practice standards entailed standards for developing skills, indirect targeting for enterprise development, contractor performance reports, etc. One-on-one meetings were scheduled for the project assessments. The construction monitor showed that 37% of executives in consulting engineering companies were black, fewer than 40% of large contractors were black-owned, and around 30% of contractors were women-owned. This showed a big discrepancy between the black-owned medium and large contractors. The contractor development programmes were not being run properly, and therefore did not have the intended effect. Lack of access to credit was a big factor hindering small contractors. The CIDB had a mechanism in place to help, and it was targeting women-owned and black-owned contractors.
Mr Gwazube said information on the projects awarded would be provided.
The Chairperson said that the CIDB had to follow up on state organs that were not implementing the standards. The Committee would be waiting for the list of contracts handled, as well as their budgets. She urged the CIDB to cooperate with the NT and also to provide quarterly reports to the Committee.
The meeting was adjourned