Use of Consultants and Outsourcing by Correctional Services : input by Minister & National Commissioner

Correctional Services

26 February 2008
Chairperson: Mr. D Bloem (ANC)
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Meeting Summary

The scope of the briefing on outsourcing of services and use of consultants by the DCS covered the definition of outsourcing, the reasons for outsourcing, legislative frameworks that inform outsourcing and a record of the services that are outsourced. The presentation also focused on the benefits of outsourcing, steps that have been taken thus far to enhance the procurement system and future areas for improvement.

The Department acknowledged that there had been problems with corruption and maladministration within the procurement system. However, they assured the Committee that steps had been taken to alleviate the situation. They had forged a partnership with the Special Investigations Unit (SIU) in an attempt to curb corruption and maladministration. In addition the Department made clear that an internal structure, the Department Investigation Unit, had been created to combat corruption.

The Committee was concerned about the migration of members of the Department to private consultancy and they questioned the role of these members in the procurement system. In addition the Committee felt that the outsourcing of services ultimately weakened the Department. Another major concern of the Committee was whether service delivery had improved within the Department since the inception of the Procurement System.

The Minister of Correctional Services responded to some of the Committee’s questions. He assured the Committee that the Department and Ministry together were committed to the ‘Developmental state’. He also stressed that there was a need to alleviate skill shortages by increasing the number of training sites to service the Department. He said that it was not acceptable that there were only two colleges run by the Department at the moment. There was need for further work in that arena.

The Minister explained that the results achieved by the SIU and DIU were commendable and acknowledged that they had made progress in the fight against corruption. He explained that the outsourcing of Recruitment services was initiated in an attempt to cut down on the corruption in recruiting. As such he concluded that outsourcing had been beneficial to the Department.

Meeting report

The National Commissioner of the DCS, Mr Vernie Petersen, introduced the presentation. He began by stating that the Department wanted to make it clear that they acknowledged that there was a problem about corruption within the outsourcing of services. He explained that since the Department had entered a partnership with the Special Investigating Unit (SIU) and since the Department Investigating Unit (DIU) was formed, there has been some progress in the fight against corruption.

Mr Petersen highlighted some of the achievements of the SIU. He said that in the 2006/07 financial year more than R 8 million was recovered through the efforts of the SIU. He explained that many of the misdemeanours were medical aid fraud. He brought to light that R3.4 billion worth of losses had been recovered since the inception of the partnership with the SIU. The CDC stated that the Department had made clear to its members that procurement fraud would not be tolerated.

Mr Petersen concluded by saying that the service contract between the DCS and the SIU had been renewed and a proclamation vis à vis this was published in November 2007.

Mr Mollet Ngubo, Director: Supply Chain Management (DCS), continued with the presentation. He explained that outsourcing refers to the practice of turning over internal departmental functions/services to an outside supplier. The Department outsources services because there were certain skills and expertise that were not available within the Department. Also there was a high turnover of employees and DCS was not able to retain employees since the private sector offered better remuneration. Outsourcing allowed the Department to refocus on their core functions and consequently this improved service delivery. In addition the Department out-sourced certain services to give effect to legislative frameworks such as the Public Finance Management Act (PFMA),
Preferential Procurement Policy Framework Act (PPPFA) and the Health and Safety Act.

Mr Ngubo then went on to list the services that Department outsources (Public-Private Partnerships (PPP). Two of the most important ventures in this category were the two prisons, Mangaung and Khutama Sinthumule. The design, building and financing of these centres was outsourced. In addition these two facilities would be operated by external personnel for a maximum period of 25 years. Some of the other services that were outsourced included: the training of professional nurses and medical practitioners on dispensing of medication, training of junior and middle managers on management development and training of executive and senior managers on leadership.

Mr Ngubo outlined again how outsourcing services had benefited the Department. It was now able to focus on core issues. In addition service delivery had improved. The use of HR service providers had also significantly contributed to the Department’s establishment growth.

Mr Ngubo stated that although there had been corruption issues within the Procurement System, the Department had taken several steps to resolve this. In March 2004, the Supply Chain Management system was implemented. Structures had also been put in place to ensure compliance with legislative frameworks and the Constitution. These structures were the National Bid Adjudication Committee, Sub-Adjudication Committee and the Bid Evaluation Committee (BEC). The duties of these committees included ensuring that the scoring (of the PPP) was fair, consistent and correctly calculated. In addition, The BEC evaluated and recommended appropriate bids/proposals from those that were submitted to the committee.

Discussion

The Chairperson asked why the two private prison facilities (Mangaung and Khutama Sinthumule) were run by ex-correctional services officers. it was clear that these officers worked at the Head Office during the deliberations on the outsourcing of services. He questioned whether this was compatible with the DCS code of conduct and asked if the department had any assurance that the former officials would not utilise the opportunity to their personal gain.

Mr Petersen explained that when the contracts were being negotiated for the two prisons, the Department overlooked the fact that the two directors appointed were in fact former members. He assured the Committee that in future the Department would consider a ‘restraint of trade’ provision. He said that it was necessary to ensure that there was integrity in the negotiation process. Now members were required to sign a restraint of trade and the Department was doing everything in their power to ensure that former DCS employers were not hired for the PPP.

The Chairperson interjected at this point. He said that he knew for a fact that the two directors (of Mangaung and Khutama) were former DCS officials and that they were also in the highest tier of management in the DCS, only to have left and entered the PPP.

Mr Petersen replied that the two ex-officials were not actually shareholders of the prison facilities but they had an employer-employee relation with the companies in charge of the prisons. The Department would institute other processes to ensure the integrity of the process and identify if there were any people who were using the PPP for their personal gain.

Mr R Shah (DA) asked the Department to verify whether departmental regulations were followed when outsourcing took place. He was particularly interested in knowing whether BEE conditions were satisfied during the process.

Mr Petersen explained that there were systems in place to measure compliance.

Mr Shah also questioned why DCS had not included their major outsourced projects in their list during the presentation. He asked if the Department could list these projects and if they could explain what monitoring frameworks were in place.

Mr Petersen acknowledged that they had covered bigger projects than those mentioned in the presentation. He said that the Department could provide detailed reports on this if required.

Mr Shah also asked what the fate of the two privately operated prisons was.

Mr Petersen responded that ownership would revert back to the State.

The Chairperson added that as the facilities had been modelled to be correctional facilities this was the only purpose that they may utilised for.

Finally Mr Shah asked whether the DCS had undertaken any cost evaluations to determine if outsourcing was indeed more cost effective than employing skilled persons.

Mr Petersen explained that before the DCS embarked on the PPP, they had to evaluate the effectiveness of doing so and it was concluded in those deliberations that outsourcing was the more cost-effective route. He offered the example that if the DCS hired skilled personnel they would eventually become redundant when the projects they were required for, were completed and as such it was better to outsource these skills.

Ms W Ngwenya (ANC) stated that she was concerned about the length of the period during which Mangaung and Khutama would be under private management.

Ms S Seaton (ANC) explained to the Committee that the 25 year term had been agreed upon prior to the Private Public Partnership.

Mr Petersen added that the benefits of the length of the period was that the risk factors and maintenance of the buildings lay with the private company for the duration of the project and offered some relief to the DCS.

Ms Ngwenya asked whether contractors (such as the building contractors) were mandated to sign the code of conduct mentioned in the presentation. In addition she asked whether there were any alternative measures that could be taken to improve service delivery other than outsourcing.

The DCS did not comment on this.

Ms Seaton then went on to ask whether the CCTV work at Westville had been concluded. She said that this was a matter of security and should be dealt with effectively and efficiently. She expressed concern that the installation of the CCTV system was outsourced. Finally she said that although it was good to see that the number of financed positions had increased in the past years, it was also worrying to see that the number of vacant positions had also increased and she asked the DCS to explain why this was so.

Mr Petersen explained that there were still some security problems regarding the inmate tracking system at Westville, He assured the Committee that the DCS would be compiling a report on this in a couple of weeks. With regards to the issue of large numbers of vacant positions, Mr Petersen clarified that the DCS had tried several innovations in an attempt of fill these positions. He said that a lot of the vacancies were due to scarcity of skills in the industry.

Mr H Cupido (ACDP) said that it was alarming that many officials from the DCS were leaving to establish consultancy firms in the hope of benefiting from the PPPs. He asked what were the core issues the DCS had been able to focus on since the inception of the PPPs.

Mr Petersen acknowledged that many civil servants did leave the State to work in the private sector and that this does create an artificial scarcity of skills. He went on to say that the core function of the DCS was to rehabilitate offenders and that it was necessary as a department to remain focused on this objective. He emphasised that there were some functions that did not form part of the core function of the DCS but that were necessary services required by the DCS. As such it was beneficial for the DCS to outsource these services in order to focus on their core function, rehabilitation. On whether the DCS had managed to succeed at this, was a subject for a lengthier debate.

Mr Petersen said that there were big issues that the DCS was faced with that needed immediate attention such as overcrowding. The DCS was currently researching the possibility of establishing a system of non-custodial sentences. This could help to further the objective of rehabilitation.

Mr Cupido questioned whether the DCS had been successful with their goal of rehabilitation. He also asked what the recidivism rate was.

Mr Petersen confirmed that there was no system in place to calculate the recidivism rate. However he acknowledged that in a recent research conducted by an unnamed independent body it was estimated that the recidivism rate was 94%. In other countries such as Japan the recidivism rate was as low as 60%. He confirmed that the DCS was trying to develop a model to measure recidivism. He also suggested that an alternative tool to enhance rehabilitation would be to establish a system whereby volunteer probation officers were appointed to offenders that were released.

The Chairperson interjected at this point. He asked the DCS to name some of the cases that the SIU had been working on since the President had signed the proclamation.

Mr Petersen held that it would be inappropriate to divulge a list of such pending cases as this could jeopardise the investigations.

The Honourable Minister and his Deputy joined the meeting at this stage. The Chairperson welcomed them and then indicated that the discussion could resume.

Ms C Chikunga (ANC) noted that the presentation had only provided the advantages of outsourcing but had ignored the disadvantages. She asked the DCS to list any potential disadvantages of outsourcing.

Mr Ngubo gave a list of the disadvantages of outsourcing. He said that when a service was outsourced, when the contract ends this left the DCS in the same position they were initially. He also acknowledged that out-sourcing could also result in maladministration if the process was not monitored. He also noted the issue that some of the consultancy firm hired by the DCS were not big enough to cover the entire State and as a result there were inconsistencies in the provision of services across the 6 regions.

Ms Chikunga asked how the PPP was assisting to build a ‘developmental state’.

Mr Ngubo explained that every year the DCS hosts stakeholders seminars to educate them on the procurement process so that they may be better equipped when they make their tenders.

The Minister, Mr Ngconde Balfour, interjected at this stage. He began by apologising for his late arrival. He assured the Committee that the Ministry was dedicated to working together with the DCS and the Committee. As a department, it was necessary for the DCS to evaluate how their activities contributed to the ‘developmental state’. He acknowledged that the DCS was committed to the ‘developmental state’ but urged the DCS to compile a report on how this commitment translates to their work. The DCS must show how their initiatives help to better the community.

The Minister went on to say that there was a need to set up more colleges to facilitate the Department. He said that the DCS must focus on recruiting entry level personnel and thereafter they must ensure that they have sufficient institutions to train these people. There had been an attempt at a two tiered recruitment process whereby one level of employees went straight to the field while the rest attended the department’s college facilities and then joined the field.

Ms Chikunga questioned how the DCS ensured that contractors followed government policies when they were exercising their tenure. How did the DCS monitor the services delivery of such contractors?

The DCS did not comment on this.

Ms Chikunga expressed concern that LUMKA recruitment agency (which was one of the recruitment consultants outsourced by the DCS) which bore a recognisable female name, was the lowest paid service provider. She questioned whether this was not contradictory to the State’s mandate to empower women.

Mr Alfred Tsetsane, C
hief Deputy Commissioner (Corporate Services), warned the Committee against assuming that the agency was run by a woman merely because it was named after one. He confirmed that the DCS did consider the empowerment of women when implementing the Procurement Process.

Mr M Cele (ANC) indicated that according to minutes of a discussion held in 2006 on the length of the period that Mangaung and Khutama would be part of the PPP it had been suggested that a shorter period of 15 years could be negotiated but this had never come to pass.

Mr Petersen apologised for his ignorance on this matter. He explained that he had not been present at the aforementioned meeting. However he explained that that length had been decided upon because it resulted in a reduction in costs for the DCS.

Mr Cele went on to say that he felt that outsourcing weakened the DCS.

Mr Petersen stated that the DCS had benefited immensely due to the procurement process. He said that outsourcing removed the risk factor for the State and in addition the maintenance of facilities became the responsibility of the service provider. After conducting comprehensive evaluations, it was concluded that outsourcing was cost effective. He explained that the DCS relied on the premise that the private sector could handle certain tasks more effectively compared to the State.

Mr Cele asked who was in charge of training the employees of the private centres and he also asked the DCS to explain who got paid more.

The Minister indicated that the remuneration was better in the private sector.

However, Mr Petersen suggested that although the actual salary in the private sector was higher, this was countered by the fact that the State provided their employees with more benefits (medical aid, uniform, housing etc). He explained that remuneration costs more per capita for the DCS than it did for service providers. He felt that DCS officials were not attracted to joining the private sector at all.

Mr Mahote (ANC) commended the DCS on providing information regarding corruption in the DCS. He also acknowledged that the efforts of the SIU were praiseworthy. He asked the DCS to list the skills that were referred to as scarce skills in the presentation.

Mr Petersen explained that some of the scarce skills in the DCS were the same skills that were scarce generally across the state.

Mr Mahote also inquired what the excess Human Resources staff was doing in the DCS if a lot of the recruitment services were now outsourced. He asked whether these officials were deployed elsewhere within the DCS.

On the same topic, Mr Shah accepted the efficacy of outsourcing specialised skills. But he queried how outsourcing had helped the DCS to solve compliance issues.

The Minister explained that the purpose of outsourcing recruitment services was to cut down on interventions that were corrupt in the recruitment process. It was necessary for the Committee to note that some of the issues with nepotism in the DCS were merely perceived and had no foundation in reality. He said that although there were real cases of nepotism, in some cases the allegations were unfounded.

Mr Tsetsane (DCS) clarified that the recruitment service contract had expired in March 2007 and that DCS had no intention of renewing this contract but there could arise a need to consult with the agencies in the future. He explained that there were some recruitment procedures that the DCS was not equipped to undertake such as head-hunting. He noted that when the DCS engaged with recruitment agents they learnt from them and this improved their capacity.

The Chairperson asked whether the DCS had proof of where officials had been capacitated from engaging with recruitment agents. It was clear that the Committee as a unit was against the outsourcing of recruitment services.

Mr Tsetsane replied that it depends on how the officials engage with the agents. He made it clear that at the moment the DCS was only using their HR for recruitment but that in future they would continue to outsource recruitment services.

Mr Petersen added that it would be incorrect for the DCS to ignore the concerns raised by the Committee. As such he promised that the DCS would try to implement the suggestions made by the Committee, such as monitoring of consultants and equal employment opportunities across urban and rural areas.

Mr Shah inquired about the fate of the private prisons when ownership reverted to the State.

The Chairperson responded to Mr Shah’s question. He explained that as the State’s property the prisons would maintain their status as correctional services institutions. The Chairperson went on to ask whether the outsourcing of recruitment services did not lead to duplication of work since the recruitment consultants still had to refer shortlisted applicants for decision by the DCS’s Human Resources team.

The Minister affirmed the Chairperson’s statement that when ownership reverts to state, Mangaung and Khutama would remain correctional facilities. It was time the DCS stopped outsourcing recruitment services. Since the partnership with the SIU to investigate corruption it was no longer necessary to outsource recruitment services as there were now systems in place to curb corruption. On the other hand, recruiting was a lengthy process that required vast manpower. In light of this it, he accepted that it might still be beneficial to the DCS to outsource recruitment services.

The Chairperson admitted that the Jali Commission did conclude that there was a need to outsource recruitment services to reduce corruption within the DCS but he questioned if this was still necessary since the partnership with the SIU and the creation of the DIU to investigate corruption.

The DCS did not comment on this. Mr Petersen called upon the Chief Financial Officer to summarize the DCS’s outlook on outsourcing.

Ms Nelisa Mareka assured the Committee that the DCS was currently exploring methods to encourage competition among their tenders. They were also researching on how they could ensure that outsourcing led to value for money. The DCS was committed to the application of the restraint of trade.

She explained that the there was continuous vetting of DCS employees and consultant firms to curb corruption and maladministration. She accepted that there was a need for due diligence when dealing with cases of corruption and maladministration to ensure effective resolutions.

The Chairperson asked the DCS to explain why they used so many outsourced services and consultants. It was disconcerting that the number of consultants hired had augmented over the years. Was it not possible to cut down on this expenditure? Perhaps the DCS could use inmates for the nutrition programme?

Mr Petersen acknowledged that there was a need for the DCS to evaluate the reasons for the rising numbers of consultants. He assured the Committee that the DCS would report back on this issue.

Mr Fihla (ANC) – visiting from PC Defence – reiterated the sentiments of the Chairperson. He said that the DCS should consider utilising rehabilitated inmates to monitor kitchen staff.

On the topic of utilising inmates for the nutrition programme, Mr Petersen affirmed that the DCS was in the process of developing such a system and that he hoped it would be implemented soon.

Ms Chikunga commented that the recruitment process currently excluded many of the rural peoples. Considering that there were no prisons in most rural areas, it was necessary for the DCS to extend their recruitment to those areas so that the less fortunate could benefit from the PPPs as well.

The DCS conceded.

Ms Chikunga said that an added disadvantage that resulted from outsourcing services was that the DCS had weakened capacity to control or regulate the service providers.

Mr Shah added that there was a need for the DCS to evaluate the synergy between private prisons and the state facilities in order to determine which of the two institutions was lucrative.

Mr Petersen accepted that the use of non-members did weaken the state’s control over the correctional services. He recommended that the DCS should regulate their relationship with the private sector. They would look into tightening their Service Level Agreements. The DCS would try to establish structures to monitor contractors. He affirmed that a maximum threshold would be imposed to restrict the extent of outsourcing. Finally he explained that many countries had grappled with the issue of security with regards to outsourcing of services. Some of these issues had been overlooked by the DCS since it was concluded that outsourcing was cost-effective.

The Chairperson concluded the discussion by alerting the DCS that they should pay heed to the concerns of the Committee regarding the outsourcing of recruitment services. He said that as a Committee they had the responsibility to endorse the budgetary allocation of the DCS and they could only do so if they were satisfied with the expenditure of the DCS.

The Chairperson adjourned the meeting.


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