ATC140710: Report of the Portfolio Committee on Public Works on Budget Vote 7: Public Works and on the Strategic Plan 2014 - 2019 and Annual Performance Plan 2014 - 2015 of the Department, dated 10 July 2014

Report of the Portfolio Committee on Public Works on Budget Vote 7: Public Works and on the Strategic Plan 2014 - 2019 and Annual Performance Plan 2014 - 2015 of the Department, dated 10 July 2014

The Portfolio Committee on Public Works, having met on Tuesday, 8 July 2014 to consider the budget vote of the Department of Public Works, the strategic plan and the annual performance plan of the department, wishes to report as follows:

1. Introduction

Following the tabling of the Strategic Plan of the Department of Public Works, the Portfolio Committee on Public Works held a public meeting with the Department of Public Works (DPW).

2. Presentation by the Department of Public Works

The vision of the Department of Public Works is to be a service oriented department that delivers value and contributes to the national agenda for social and economic development.

The mission of the department is to provide quality accommodation and related services to clients; efficiently and effectively manage the immovable assets in their custodianship; actively contribute to the national goals of job creation and poverty alleviation through the Expanded Public Works Programme; to provide expert built-environment advice to their stakeholders and to provide strategic leadership to the South African Construction and Property industries, including the regulation of these industries.

The legislative mandate of the department is primarily governed by the Immovable Asset Management Act, as promulgated in 2007. The department regulates the construction industry and built environment through the Construction Industry Development Board Act, 2000 (Act No. 38 of 2000) and the six Professional Council Acts that regulate the six Built Environment Professions (BEPs), and through the Council for the Built Environment Act (Act No. 43 of 2000).

The six professional councils and their respective acts are the following:

1. the South African Council for the Quantity Surveying Profession (SAQSP) that was established in terms of the Quantity Surveying Profession Act (Act 49 of 2000);
2. The South African Council for the Architectural Profession (SACAP) that is regulated by the Architectural Council Act (Act 44 of 2000);
3. The Engineering Council of South Africa was established by the Engineering Profession Act, 2000 (Act No. 46 of 2000);
4. The South African Council for the Landscape Architectural Profession (SACLAP) that was established as a statutory council in terms of Section 2 of the South African Council for the Landscape Architectural Profession Act – Act 45 of 2000;
5. The South African Council for the Project and Construction Management Professions Council (SACPCMP) was established in terms of section 2 of the Project and Construction Management Professions Act (Act 48 of 2000);
6. SA Council for the Property Valuers Profession (SACPVP) was established in terms of section 2 of The Property Valuers Profession Act, 2000.

The department derives its policy mandate from the following draft and adopted policies:

(a) Department of Public Works, White Paper: Public Works, Towards the 21 ^st Century, 1997;

(b) Department of Public Works, White Paper: Creating an Enabling Environment for Reconstruction, Growth and Development in the Construction Industry, 1999;

(c) Construction Sector Transformation Charter, 2006;

(d) Property Sector Transformation Charter, 2006;

(e) DPW Broad-based Black Economic Empowerment Strategy, 2006;

(f) Property Management Strategy on BBBEE, Job Creation and Poverty Alleviation,

2007; and

(g) the Green Building Framework.

In drafting its Strategic Plan, the department has taken into consideration the Government’s policy priorities, the manifesto of the ruling party and the National Development Plan (NDP) as translated in the 2014 Medium Term Expenditure Framework (MTEF).

There are four public entities reporting to the department. The entities serve as an extension of and assist the department in delivering its stated mandate. The four entities are the Construction Industry Development Board ( cidb ), the Council for Built Environment (CBE), Agrément South Africa (ASA) and the Independent Development Trust (IDT).

The budget allocation to the Department of Public Works for the 2014/15 financial year is R6, 1 billion. Over the 2014 Medium Term Expenditure Framework (MTEF) an amount of R245 million was reprioritised from the infrastructure budget to compensation of employees, goods and services and transfers and subsidies.

The reprioritisation of funds for compensation of employees was intended to cover the projected shortfall on employees’ salaries and for the additional appointments in the department. R40 million additional funds for goods and services was reprioritised and allocated to fund the Presidential Inauguration under State Functions in Programme 5. Between 2015/16 and 2016/17 goods and services was reduced by R53 million to reprioritise funds to ensure for the compensation of employees. Transfers and subsidies reprioritisation to the amount of R9 million over the MTEF period is for bursaries awarded for non employees to cater for students that study towards careers in the built environment and construction industry.

There are no budget allocation increases to the baseline between the 2014/15 and 2015/16 financial years. The allocation increase to the baseline for 2016/17 amounts to R159 million in support of the following areas:

· R74 million for the Expanded Public Works Programme (EPWP) Social Sector Grant;

· R65 million for the EPWP Non-State Grant;

· R10 million for the EPWP Integrated Grant to Provinces; and

· R10 million for the EPWP Integrated Grant to Municipalities.

Over the 2014 MTEF period, baseline reductions of R1 ,3 billion have been effected in the following areas:

· R650 million on infrastructure projects in the Immovable Asset Management programme.

· R150 million on non-core goods and services items in all programmes.

· R26 ,2 million on compensation of employees.

· R150 million on transfers to the Property Management Trading Entity (PMTE), and

· R308 ,3 million on the EPWP.

These reductions are largely a result of continual underspending in the Department’s infrastructure budget.

Spending on infrastructure decreased from R1 ,3 billion in 2010/11 to R676 million in 2013/14. The decrease of the infrastructure budget was due to the reprioritisation of funds to provide funding for the turnaround programme.

The Department’s overall infrastructure budget has been reduced by R220 million in 2014/15, R180 million in 2015/16 and R250 million in 2016/17, mainly to provide for reductions to expenditure that Cabinet approved.

2.1 Public Works’ performance targets, as set out in its Strategic and Annual

Performance Plans for 2014/15

The five programmes of the Department of Public Works (DPW) have the following key performance targets per programme:

2.1.1 Programme 1: Administration

This programme provides strategic leadership and support services, including the accommodation needs and overall management of DPW.

The strategic goal is to provide good corporate governance to support effective and efficient delivery. The strategic objectives under this programme are to promote sound corporate governance practices within DPW and to ensure effective and sound financial resource management and ensure effective corporate resource management.

The five-year target of the DPW under this programme includes Management Performance Assessment Tool (MPAT) rating of 3 - 4 on all government functions, a clean audit outcome for DPW and the Property Management Trading Entity (PMTE), and achieving a 100 percent support provided to the core business of the DPW through Human Resources planning, Human Capital Investment (HCI) programmes, security management, legal advisory services and communications.

The following key performance areas are the most significant within Programme 1:

• Investigations initiated within 30 days based on reported allegations in line with National Treasury Regulations.

• Change in irregular expenditure balance for DPW and PMTE.

• Change in the value of newly identified transactions relating to irregular and fruitless and wasteful expenditure for DPW and PMTE.

• Compliant invoices settled within 30 days.

• Fraud and corruption cases within Supply Chain Management detected.

• Relevant and compliant bids awarded within the validity period.

• Planned Maintenance contracts awarded to contractors registered on the DPW Contractor Development Programme (CDP).

• Contracts on the approved DPW Procurement Plan awarded in line with the batch tendering process aligned to the IDMS model.

• Beneficiaries participating in the DPW skills development programme.

• ICT infrastructure upgrade to secure system access for PMTE and DPW business units.

2.1.2 Programme 2: Immovable Asset Management

The purpose of this programme is to provide and manage government’s immovable asset and property portfolio in support of government’s social, economic, functional and political objectives.

The strategic goals for this programme are to create an efficient, competitive and responsive accommodation infrastructure network and to contribute towards comprehensive rural development. It is further to create an effective life cycle asset management of immovable assets under the custodianship of the department and to ensure an improved land administration and spatial planning for integrated development in urban and rural areas.

The five year targets under this programme are to create integrated plans for DPW’s immovable asset portfolio development and ensure that DPW infrastructure plans are integrated with sector departments and 25 rural municipal Spatial Development Frameworks (SDFs).

The following key performance areas are the most significant within Programme 2:

• Properties in the Immovable Asset Register populated with information fields that are GRAP compliant and land parcels vested.

• Immovable assets valued to determine deemed carrying amounts.

• Approved Immovable Asset Management Framework and property performance standards (PPS) for all categories of Immovable Assets.

• Approved Construction Implementation Programmes.

• Approved National Infrastructure Maintenance Strategy.

• Properties released for Land Reform and for Human Settlements.

• User departments’ accommodation solutions produced for project implementation.

• Government precincts integrated with the spatial development frameworks of identified municipalities.

• DPW’s infrastructure programme integrated with sector departments and rural municipal spatial development frameworks.

• Completed client survey index for Service Delivery Improvement Programme (SDIP) towards compilation of a Client Value Proposition.

• Service Level Agreements approved by identified user departments.

• Procurement Instructions issued as per approved Construction Implementation Programmes.

• Construction and beautification of schools.

• Planned construction projects completed as per approved Construction Implementation Programmes.

• Land Ports of Entry under recapitalisation as per the CWIP.

• State-owned buildings made accessible for persons with disabilities as per the CWIP.

• Approved Infrastructure Programme Implementation Plans (IPIPs) for user departments.

• Approval of project scopes.

• Budget variance on each completed project.

• Implementation of the approved Construction Implementation Programmes.

• Reduction of expired leases for leased accommodation.

• Lease agreements signed within 30 days after finalisation of the open bid process.

• Day-to-day maintenance breakdowns addressed (calls closed) within agreed timeframes.

• Buildings retrofitted in terms of green building principles.

• Response times for the provision of office and residential movable assets to Prestige Clients (in line with the Ministerial Handbook) from date of receipt of request.

• Response times for resolution of Prestige maintenance issues after logging of complaint (within the mandate of DPW).

2.1.3 Programme 3: Expanded Public Works Programme (EPWP)

The purpose of this programme is to provide work opportunities and income support to poor and unemployed people through the labour-intensive delivery of public and community assets and services, thereby contributing to development.

A strategic goal of the DPW under Programme 3 is to provide decent employment through inclusive growth. The strategic objective is to co-ordinate, monitor and evaluate the creation of work opportunities and income support to the poor and unemployed, so as to contribute to national goal of job creation and poverty alleviation.

While the five-year target is to create six million work opportunities created for the poor and unemployed between 2014 - 2019, aligned to the Business Plan for this third phase of the EPWP.

The following key performance areas are the most significant within Programme 3:

• Work opportunities created through EPWP labour intensive approach aligned to the EPWP business plan (Phase 3).

• Disbursement of performance based incentive allocations to eligible public bodies across all sectors.

• Beneficiaries trained through the National Skills Fund.

• Youth participation in the National Youth Service programme within DPW.

• Work opportunities created in rural municipalities aligned to the EPWP phase 3 business plan .

• Work opportunities created by DPW.

2.1.4 Programme 4: Property and Construction Industry Policy Regulations

The purpose of this programme is to promote growth and transformation in the construction and property industries. It also seeks to promote uniformity and best practices in the construction and immovable asset management in the public sector.

The strategic goal under this programme is to provide strategic leadership and to develop the necessary regulation so that the construction and property sectors are actively involved in promoting economic empowerment and skills development.

Further strategic objectives include promoting growth and transformation of and competition in the construction and property industries and to promote uniformity and best practice in construction and immovable asset management public sector.

Part of the specific targets stated for this programme is to complete legislation that guides the Agrément South Africa, the necessary transformation of the Independent Development Trust (IDT) and the Built Environment Professions. An important objective would be to complete the revision of the 1997 and 1999 White Papers on Public Works and the Construction Industry to table it to the Cabinet for its consideration and approval, and to ensure that the department has legislation that properly legislates the mandate of the department. The programme finally has to complete regulatory and legislative work that ensures best practices on the expropriation of immovable asset to ensure that the department appropriately manages future spatial arrangements that facilitates socio economic development across the country.

The following key performance areas are stated within Programme 4:

• Draft amendments to legislative framework for the Built Environment Professions (BEPs) developed.

• Revised draft Independent Development Trust (IDT) Bill developed.

• Draft revised DPW White Papers developed.

• Construction and Property Sector Codes aligned to the revised BBBEE Codes of Good Practice (2013).

• Draft Immovable Asset Investment Policy developed.

2.1.5 Programme 5: Auxiliary and Associated Services

This programme provides services including compensation for losses incurred in the government assisted housing scheme, and assistance to organisations for the preservation of national memorials. It further ensures that the protocol responsibilities for state functions are properly fulfilled.

The key performance area for the programme is stated as :

· Prestige events supported with infrastructure related services .

3. Conclusion

The committee noted the following:

3.1 The key performance areas stated in the department’s Annual Performance Plan (APP) was not drafted according to the principle of ensuring that they are specific, measurable, achievable, relevant, and time-bound (SMART).

3.2 The phenomenon of collusion between major companies in the construction industry that was dealt with by the Competition Commission and that continues to be dealt with by the Construction Industry Development Board ( cidb ) has the undesired effect of delaying the progress of emerging contractors into higher grades on the cidb’s Register of Contractors.

3.3 The Department of Public Works does not have legislation that describes its mandate and that the department is reviewing White Papers dated 1997 and 1999 as a precursor to develop such legislation.

3.4. The department is rolling out phase three of the EPWP and that in phase two the training component required attention and that the number of disabled participants remained low in all sectors.

3.5. The department has set a clear goal for itself to get the PMTE operational as a prerequisite to get a clean audit.

4. Recommendations

The committee recommends to the Minister of Public Works that:

4.1 the key performance areas as stated in the department’s Annual Performance Plan be redeveloped to be specific, measurable, achievable, relevant and time-bound by March 2015.

4.2 the review of the White Papers dated 1997 and 1999 be speedily processed so that legislation that describes the department’s mandate and its role as regulator and driver of transformation in the built environment and construction industry is completed by the end of the current financial year, 2014/15.

4.3 the impact of collusion in the construction industry be investigated. This investigation should specifically focus on the impact that practices of collusion amongst higher graded contractors might have had on the advancement of contractors that fall in grades 3 to 5 on the cidb’s Contractor’s Register.

4.4. the training and skills development component of phase three of the Expanded Public Works Programme to be enhanced to ensure longer term future employment and entry into the artisan field of the built environment and construction industry; such efforts should specifically target the vulnerable categories of the youth, women and the disabled; finally, definite efforts be designed to increase the number of disabled participants in the EPWP phase three.

4.5. the department regularly reports to the committee on the efforts it is making to fill management and specialist positions within the PMTE as well as on the financial accounting and reporting structures it is putting in place to ensure value for money is achieved in the work to augment the PMTE.

Report to be considered.