Department on Strategic Asset Management: briefing

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Meeting report

Portofolio Committee on Social Welfare

PUBLIC WORKS PORTFOLIO COMMITTEE
3 October 2001
DEPARTMENT ON STRATEGIC ASSET MANAGEMENT: BRIEFING

Chairperson: Mr M W Hlengwa


Relevant Documents
Report on Strategic Asset Management

SUMMARY
The cabinet approved the recommendation by the Department of Public Works that all government Departments housed in government buildings pay rent for occupation. The new procedure has been approved and awaits implementation by the Department of Public Works.

The Department informed the Committee that a new parastatal is to be set up to manage government assets as an independent body. Tenders for the setting up of the said parastatal have already been finalised. The Committee was also informed that stringent measures and guidelines had been put in place to ensure transparency and creditability in the government tendering process.

MINUTES
Briefing by Mr Thami Sokutu - Director General, Department of Public Works
The DG informed the Committee that the Department had embarked on a strategic planning exercise with various objectives having been adopted.

The Department had adopted the operational efficiency and the establishment of the State Property Agency. The Department had also compiled a National State Fixed Asset management Framework and the establishment of the Construction Industry Development Board (CIDB) is already being completed.

The Department had put in place mechanisms for capacity enhancement of the Community based Public Works programme (CBPWP). The Department had streamlined structures to ensure the spending of Capital and Maintenance of budgets is kept within reasonable bounds.

The DG said that the Department was interacting and engaging the private sector in public private partnership adding that the Department had also taken into account its social responsibilities in the promotion of black economic empowerment ventures.

Giving the history leading to the opting for a tendering method in its disposal of superfluous government assets, the DG first pointed out that the Department was the custodian of the State's fixed property.

The DG explained further that the State owns properties as platforms to deliver government services and that, therefore, it was looking at functional, social and financial returns from its property portfolio.

The DG said that Cabinet mandated NDPW in February 2001 to proceed with the formulation of a holistic Government-wide Fixed Asset Management Framework with a view to planning and procurement of fixed assets.

The DG added that the Framework was also geared towards the Management and maintenance of existing fixed assets and the disposal of superfluous fixed assets.

The DG informed the Committee that due to the severe shortage of skills in the fixed asset management within the National Department of Works, a decision was taken to call on and draw from the expertise in the private sector to provide guidance and assistance.

The Tender Process
The DG said that once the decision to tender had been taken, tenders were invited for multi-skilled Fixed Asset Management Consultancy Teams, to advise the National Department of Public Works on fixed asset management issues.

The terms of reference were two folds. In the first place to detail the Government-Wide Fixed Asset Management Strategy Framework which entails planning, capital investment, acquisition policy, property management and maintenance policy and the fixed asset disposal policy.

The other limb of reference is the project management translation of asset management framework into Fixed Property Act which entails, among other things, advise on an asset management plan and undertaking a broad analysis of the portfolio.

It also covered the establishment of performance indicators for cost and revenue while mapping out and advising on the entire processes. It would also cover the advice on innovative financial structuring and establishment of building blocks for user charges.

Finally, under this item, the project manager would assess the adequacy of information systems and advise on outsourcing and capacity building.

The DG said that thirteen criteria were used to assess, adjudicate tenders based on skills, experience and proposed methodology and that the short-listing was based on the functional criteria only. He added that the final adjudication of short-listed tenders was based on functional criteria at 50 points and the price at 50 points as well.

The DG enumerated the six tenders short-listed as, Consultants in Association; Dinatla; Future Build Public/ Private Partnership; Lyons Financial Solutions Holdings; Price Waterhouse Coopers and Public Building Service Consortium.

He said that the tender from 'Consultants in Association' was recommended to the State Tender Board and the same was accepted on 13 September 2001. He added that the tender price is R9, 755, 490 and the contract period is eighteen months.

Discussion
Mr Sigwela (ANC) asked whether it is possible for local communities to utilise these superfluous fixed assets if they decide to buy them.

The DG said that many people have approached them about the purchase of these assets. He said the only assistance his office rendered is advice on when the assets would be out for disposal. At times his office discusses tender procedures with the local communities to bring them aboard the process.

Mr Sigwela (ANC) asked why the Department has not brought to the Committee draft legislation to introduce sanctions that would compel government Departments to comply with the advice given by Public works regarding occupation of government property.

The DG promised the Committee that due to the desirability of such legislation, the draft would definitely come through to the Committee in twelve months time.

Mr Sigwela (ANC) noted that he was happy that the Cabinet had approved the recommendation that government departments pay for rentals of State owned property. He said that this will remove the blatant abuse of State resources and hopefully inject a sense of accountability in the manner in which such assets are put to use.

The DG clarified that although Cabinet had approved the recommendation on departmental rental payment, the new measure will not be implemented immediately. Some system has to be put in place on how such rentals would be mobilised and collected.

Mr Moonsamy (ANC) asked where the funds collected from the disposed assets go to.

The DG replied that the funds go straight to the Treasury. The Department is, however, working out with Treasury on how to retain some funds in the Department to be utilised for maintenance of the existing State assets.

Mr Opperman (DP) asked whether the Department had created room for people to be assisted with their proposals.

The DG replied that in theory the Department would like to assist people in this regard but in practice it is almost impossible. There are no resources to undertake such assistance.
In terms of tender procedures his office could only help people understand tender information and could not go further than that.

Mr Schippers (NNP) asked how the tendering process is monitored, if at all, and whether Committee members can be allowed to attend the hearings.
The DG said that progress is monitored monthly and that reports coming through to his office show that good progress have been registered so far. He said that as far as he is concerned, he has no objection to Committee members attending. He cautioned, however, that some stage of the tendering process is confidential hence held in camera.

Mr Schippers (NNP) enquired in the name of black empowerment, if people can be assisted to purchase these properties.

The DG said that the tender procedures do not allow them to actively assist people since they must be seen to be impartial and to avoid insider dealing. He, however, said that his office communicates to the Communities affected and asks them on how they wish the property located there to be put to use.

Mr Makubane (ANC) wondered how the Department hopes to empower people when the ads for the senior jobs require extensive experience, which the black people do not have.

The DG replied that the advertised posts require appropriate experience, which is a less onerous criterion than for example a ten year experience, which would exclude many people. Senior vacancies advertised require people with hands-on experience commensurate to the demand of the office.

Mr Sigwela (ANC) said that since there is a deficiency in the market of the cadre of persons the Department is looking for, it is important that the terms of offer be improved so that it can compete favourably with the private sector.

Mr Radebe (ANC) pointed out that the up-coming Asset Management body should be able to offer attractive remuneration package to its employees since this will be a specialised area.

The DG agreed with Mr Radebe. The problem will be sorted out when the proposed State's Fixed Asset Management parastatal is up and running. ded that the parastatal should then have the flexibility to fix appropriate salary scales to attract skilled manpower.

The meeting was adjourned.

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