Presentation by Mr Trevor Balser Acting DG National Dept of Water and Sanitation 20201028.pptx

1. PRESENTATION TITLE
Presented by:
Name Surname
Directorate
Date
PSC Roundtable:
Efficient, Economic and Effective use of
Resources in the Procurement Environment
Panel discussion
Experiences in the Public Procurement Environment
Trevor Balzer
Acting Director-General
Department of Water and Sanitation
28 October 2020

2. Purpose
To reflect on the experiences related to Supply
Chain Management in the Department of Water
and Sanitation to advance the Efficient,
Economic and effective use of resources with a
focus on the timeous payment of suppliers.
2

3. Experiences in the SCM environment
• Section 217(1) of the Constitution provides that “When an organ of
state in the national, provincial or local sphere of government, or any
other institution identified in national legislation, contracts for goods
or services, it must do so in accordance with a system which is fair,
equitable, transparent, competitive and cost-effective.
• Complying with the procurement prescripts contributes to efficient
processes, possible good quality of service delivery including
economic growth.
• The Department has incurred over the previous financial years
irregular expenditure which was in contravention section 217 (1) of
the constitution and National Treasury procurement prescripts.
• These contraventions has in many cases proved costly to the
Department due to high litigation costs associated with these
contracts also leading to losses, fruitless and wasteful expenditure.
3

4. Problem statement
• The Department has two accounts (Main and WTE) with a
total budget for 2020/21 of R30.2 billion of which R17.9 billion
is appropriated for infrastructure development.
• The Departmental Performance in delivering capital /
infrastructure projects have been in a constant decline since
2015.
• This led to unacceptable delays in Water Resource
Infrastructure and RBIG projects; and was even more
prevalent where the Internal Construction Unit is the
contractor.
– Delays also led to an increase in Fruitless and Wasteful
expenditure.
– Inefficiencies which increase project costs.
– Developed a Culture of Inefficiency
• In 2017 the Supply Chain Policy centralised all procurement
functions to be the responsibility of the Head of Supply Chain
for both WTE and Main Account. (Procurement Process Bottleneck)
4

5. Pre- Framework for Infrastructure Delivery and Procurement Management
(FIDPM) Departmental procurement process duration
5
± 432
working
Days
10. Director General
Specification Approval for
Advertisment for bids above R20
million (14 days)
9. DBAC
Specification Approval/
Recommendation for Advertisment (7-
21 days)
8. DBSC
Specification Approval (27-59+ days)
7. CFO
Fund Avaliblity Check (5+ days)
6. D: Management
Accounting
Recommend Budget Avaliabilty (2
days)
5. CD: SCM via SCM
Central Point
Demand Plan Check (14-30+ days)
4. DDG: IBOM
Recommendation (4 days)
3. CD: ID/ CD: ES
Support Document (4 days)
2. D: SCM
Demand Management /Cross
Functional Team (60+ days)
1. CD:CM
Document Originator (5 days)
11.
Advertism
ent
Advertism
ent of
tender
(21+
working
days)
12.
Breifing
Session
Pressentat
ion to
proposed
bidders (1
day)
13.
Tende
r
Closin
g
Tender
date
closing
period (1
day)
20. Director General
Bid Approval for Appointment
for bids above R20 million (14
days)
19. CD: Risk
Management if applicable
above R20 million
18. DBAC
Bid Approval/ Recommendation
for Appointment (7-21+ days)
17. CD: SCM
Prepare submission for
appointment (30-90+days)
16. CD:SCM
Negotiations inconjunction with
LS if applicable
15. Bid Evaluation
Committee
Committee approved to
evaluate the bids recieved (14+
days)
14. D: SCM
(Acquisition)
Bid Opening and Pre-
Evaluation Administration (33 -
49+ days)
21.
Draftin
g of
contra
ct by
Line
Functi
on (3-
5
days)
22.
Vettin
g of
contra
ct by
CD:
LS
(10+
days)
23.
Signing
of
contract
between
DWS and
Contracto
r (1 day)
24.
Mobili
sation
to Site
(1
day)

6. Framework for Infrastructure
Delivery & Procurement
Management
6
PG 1
9%
PG 2
9%
PG 3
18%
PG 4
6%
PG 5
39%
PG 6
9%
PG 7
9%
PG 8
1%
Duration for FIDPM Process Flow
8. Gate 8 (PG 8) 1 Day
Administer the contract and confirm compliance with all
contractual requirements
7. Gate 7 (PG 7) 7 Days
Recommend the award Award the contract
6. Gate 6 (PG 6) 7 Days
Evaluate tender offers n terms of underakings and
parameters established in procurement document
5. Gater 5 (PG 5) 30 Days
Solicit tender offers
4. Gate 4 (PG 4) 5 Days
Confirm that cash flow is sufficient to meet projected
contracual obilgations
3. Gate 3 (PG 3) 14 Days
Obtain approval for procurement docments
2. Gate 2 (PG 2) 7 Days
Obtain approval for procurement strategies that are to be
adopted
1. Gate 1 (PG 1) 7 Days
Obtain permission to start the procurement process
78
working
Days
The FIDPM process intended for
procurement of infrastructure beyond
R500k; and thus setting the
performance target for National Bids.
Procurement below R500k will be
quotation-based with a performance
target of less than 1 calendar month.

7. IPO proposal: objective
7
Performance
•Endeavour to deliver Infrastructure Projects
within time and cost
Accountability •Comply and Deliver
Transparency
•Restore
Procurement
Confidence
This in preparation of the
establishment of the NWRI
Agency, Keeping the Unit
Management Accountable for
Performance & Compliance

8. IPO proposal: functions
• Participating in project planning and project management meetings;
• Ensuring Compliance with SCM Regulations
– that All specifications are fit for submission into the procurement process.
• Placing tender advertisement in the Government Tender Bulletin;
• Loading bid documents on the e-portal;
• Administering the bid opening process;
• Administer the bid evaluation processes (monitoring and reporting performance);
• Prepare legal documentation for entering into contractual agreements with
contractors and/or service providers;
• Establish bulk procurement options (according to line function demand) to allow
for optimum pricing being in line with the (FIDPM) to lower costs and improve
value for money; and
• Do market research on latest development of technical and engineering aspects
to be captured on a database to assist line-function with specification
development and design.
8

9. IPO proposal: governance
• The IPO will be regulated by ALL prescripts and regulations set by National
Treasury and other relevant governing institutions (i.e. CIDB).
• Will operate within the confines of the Framework for Infrastructure Delivery and
Procurement Management (FIDPM).
• The Chief Financial Officer will retain the oversight role over the functioning of
the IPO but SCM delegations need to be amended in terms of Section 44 of the
PFMA by the Accounting Officer.
• Risk Management will be essential with both establishment and operations of
the IPO
• Internal Audit will include the IPO operations in its Audit Schedule to ensure
consistent compliance improvement.
• Enhanced Transparency:
– Public (virtual) Opening of All National Bids
– Live Bid Tracking; to ensure integrity
– Two Envelop Bid Process
9

10. IPO Proposal
Risk Management
10
Key Risks
There are risks to
establishing a 2nd Supply
Chain in WTE:
• Irregular Expenditure
due to non-compliance
with NT Regulations;
• Corruption; Intentional
Interference for
personal gain;
Risk Mitigation
i. The office of the CFO will have a compliance
oversight role in this the functioning of the IPO;
ii. Risk Management will form part of the IPO
Establishment Task Team
iii. National Treasury will also be consulted on the
implementing strategy after approval is
obtained to establish the IPO;
iv. The Transparent Performance-based
Procurement Philosophy will be adopted and
implemented with the primary objective of
obtaining a record of clean governance.
v. Employment of an Ethics Officer (with a Risk-
Based Performance target set)

11. IPO proposal: Initial proposed structure
11
(a) IPO Manager
(Pr. Eng/Tech)
(b)Engineering
Manager
(Pr. Eng/Tech)
Engineering
Staff
(X4)
(c)SCM Manager
(SCM Professional
)
SCM Assistants
(X10)
Admin Support
(x4)
(d) Legal Officer
(Legal Professionl)
(e) Ethics
Officer
(f) Empowerment
Compliance Officer
Office Manager

12. IPO proposal: institutional arrangement
12
Finance
• Apportioning a 0.5% of all
Construction Projects to fund the IPO
• (20/21 budget: R22.5m)e
• Augmentation Fund can be used to
augment.
Organisational Placement
• Report into the NWRI Branch
• Oversight from CFO
• Preparation for the Establishment of the
NWR Agency (proto-operations)
Personnel
• Section 76 (NWA) Appointments
• 3 Year performance-based contracts
(with renewals/extensions based upon
achieving targets)

13. IPO Proposal
Way Forward
• Upon Approval by Accounting Officer the following
is to be done:
i. Engage National Treasury to obtain support and to
clarify inconsistencies.
ii. Review DWS Supply Chain Policy to incorporate IPO
iii. Draft IPO Business Protocol to define Governance
and Compliance
iv. Set IPO Performance KPI’s and draft Contracts
accordingly
v. To set a target of a fully operational IPO within 2
months of approval.
13

14. Challenges experienced in the payment
of suppliers
• The Department’s normal invoices are being processed
within the prescribed 30 days period.
• The effects of incidents of unauthorised, irregular,
fruitless and wasteful expenditure normally manifests
through the payment systems. Such payments remain
unpaid for extended period of time, with some involving
legal proceedings.
• Synopsis of unpaid invoices and impact on emerging
entrepreneurs.
14

15. 30 days turnaround strategy
(being implemented)
• Standard Operating Procedures for Invoice Management (A circular
Issued)
• Centralisation of invoice management
• Electronic invoice tracking system is on the pilot phase for
implementation
• Stakeholder engagements (Dedicated efforts to proactively engage
suppliers on verifications, reconciliations, banking details, etc)
• Cash management interventions and Revenue collection
enhancement strategies to make funds available

16. Turnaround Strategy including
consequence management
Turnaround Strategy
• The Department developed a Turnaround Strategy, this strategy is an enterprise-
wide strategy encompassing both business (Policy and Programmes) and
financial elements.
• Financial management, supply chain management, investigations into
maladministration, policies, systems, business processes and standard
operation processes that contributes to the functioning of identified areas or
components.
• The strategy has been institutionalised by including in the Annual Performance
Plan of the Department. The implementation and monitoring activities are also
embedded in the Branch’s performance management.
Consequence management
• One of the pillars of the Department’s Turnaround strategy is the implementation
of consequence management, which Parliament required when approving the
Department’s budget in the 2019/20 financial year.
• This involves Departmental disciplinary inquiries, investigations by SAPS, SIU
and condonation processes with National Treasury.
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17. Thank you
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