Office of the Chief Procurement Officer

Progress

&

New Projects

Office of the Chief Procurement Officer: 11 May 2016

1

Status of OCPO

• Office established in March 2013,

– 2015 SCM Review released: diagnostic of public procurement and

provides a reform roadmap

• OCPO corporate structure:

– Policy & Legal

– Governance, Monitoring & Compliance,

– Transversal Contracts,

– Strategic Sourcing,

– SCM ICT, and

– SCM Stakeholders &Clients Management

• Office is fully established

– Supported by technical expertise

– SCM is a specialised field

2

Achievements: Stakeholder management

• The launch of the CSD and other systems on 1 September 2015,

kick-started the road shows to all nine (9) provinces

• Training was provided on the CSD/eTenders for users

• Engagements on other forthcoming reforms were shared

• A 3-month radio (9 African Languages & 2 Commercial) Newspaper

& Billboards campaign was run for the CSD registration and access

to eTenders

• The latest workshops with SCM practitioners occurred every

Thursday for the last 4 weeks

• Engagements with Civil Society Organisations on how they can

improve/assist government on oversight – further Training will be

provided.

3

Achievements: Automation

• Central supplier database

– Central portal for registration of prospective government suppliers

– Benefits

• Once off supplier registration

• Reduction of administrative cost/compliance burden

• Standardised and electronic verification of supplier information

– Tax (SARS)

– Business registration (CIPC)

– Bank accounts

– Identity (DHA)

– Tender defaulters,

– State employees, etc.

– 68 000 registered suppliers and counting

4

Achievements: Automation

5

• eTender Portal

– A web based platform for organs of state to

– advertise bids, publish bid notice, amendments or erratums

– cancellation and awards

– Benefits

• Free access to tender documents

• Transparency

– Advertisements linked to Demand plan

– Tender awards, cancellations and amendments

• Cost saving – advertisements

• 2758 tenders published thus far

Achievements: Automation

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• gCommerce

– Online shopping tool that makes it easier for procurement officials

to purchase from transversal contracts, eg. Amazon.com for

government.

– How does it change the way of doing business-benefits

– Benefits

• Web based accessible anywhere

• Reduced administrative burden

• No more calling and placing manual orders

• Ability to view products, prices and stock before placing orders

• Faster turnaround times

• Caps over expenditure-Integration capability with financial

systems

• Accurate identification of commodities/items – using UNSPSC

Achievements: Automation

7

• eProcurement for government

– An integrated procurement system that enables end to end

procurement process management

– Benefits

• Demand management(procurement plans, spend analysis, etc)

• Sourcing

• Purchasing

• Supplier management

Achievements: Governance monitoring and

compliance

• Reviewing contracts above R10 million

– Coal contracts – Eskom

– Consulting Contracts – Transnet

– Implementing remedial actions of Public Protector: PRASA

• Published on the OCPO website on a quarterly basis.

• Institutions to submit quarterly reports to provincial legislature and

Parliament for oversight purposes.

• Oversight committees to assess if institutions comply with procurement

plans to speed up service delivery.

8

Achievements: Transversal contracting

• Spend under central management of R26 Billion excluding voluntary

participation by Municipalities and SOE’s. Currently, the National Treasury

manages 40 transversal contracts for the purchase of goods such as vehicles,

medical consumables and devices, textiles, etc.

• Introduction of 4 new commodity spend streams

– Property and Leasing

– Professional Services

– Education

– ICT

• Learner teacher support materials

– Savings – reduction in price of stationery packs to R110 per learner. LTSM

Savings projected at R1 Billion if all provinces participate in the contract.

• School furniture tender

• Norms and standards in school construction

– R35 million per school

9

Current Reforms Transversal Contracting :

– From 1 April 2016, the participation of government on the existing (40)

and new transversal contracts is mandatory. This means all common

goods purchased by government will be procured collectively with better

buying power.

– 15 more contracts will be negotiated and managed centrally which will

focus on the health, education property, ICT, support services sectors

– Identification, co-ordination and increase in provincially managed

contracts

– Increased participation of municipalities and SOE’s in centrally negotiated

contracts

– Increased contracting with local, black and small businesses

– Online bidding process for all advertised Transversal Contracts as well as

online catalogue for ease of use by buyers and end users

10

Achievements: Strategic Procurement

– Strategic procurement framework drafted and circulated. This will provide

guidance on how to apply differentiated procurement methods for the

various procurements e.g.. infrastructure vs stationery

– Data Analysis conducted on 2012-2014 spend for National and Provincial

Departments, 8 Metros and 12 Public Entities to determine high spend

cross cutting commodities

– Travel and Accommodation

• Direct negotiations with full service carriers – SAA and BA – between

25-30% upfront discount achieved

• Direct negotiation with 4 major hotel groups – maximum allowable rate

per star grading set

• National travel policy developed to create uniformity in travel

management effective 1 July 2016

– Standards for infrastructure procurement and delivery system developed

and issued

– School cost model developed and issued

11

Current Reforms Strategic Procurement:

– SPF to be issued as Treasury instruction note during the 2016/17 financial year

– Communications – Savings of approx. R300 to R600 Million

• Mobile communications tender issued for National and Provincial requirements and closed

April 2016. Evaluation underway.

• Fixed Line request for proposal currently being drafted

– Further travel and accommodation commodities for negotiation include car rentals, shuttle

services, conferencing, bus and coach hire

– Medical equipment tender closed April 2016 – serves to standardise equipment utilised by

hospitals and clinics – includes high value and volume items which is estimated at approx. R2

Billion

– New projects includes the following projects:

• LTSM procurement and distribution model

• Medical equipment continuation

• Medical Waste Management

• Hospital laundry and linen

• Pharmaceutical dispensing model

• Hospital food services and cleaning services

• Infrastructure and related professional services

– Co-ordination and increase in sector and department strategic sourcing opportunities eg. ICT

12

Plans for compliance and reporting

• Institutions should expected to submit the following to Legislatures and

Parliament for oversight:

– Reports on the adherence to procurement plans,

– Number of deviations from Procurement Plans,

– Number of condonations approved by Accounting Authorities

contravening the PFMA and SCM Prescripts,

– Reports on the outcome of investigations,

– Implementation progress on the remedial actions resulting from

investigations,

– Lack of analysis in what is being bought against the budget,

– How is the procurement done on commodities/services not reflected

on the procurement plan?

13

Plan for savings of R75 Billion by year 3 of MTEF

• OCPO strategy to savings are focused on five areas:

– Renegotiate existing contracts of top 100 suppliers;

– Consolidate spent on common goods where economies of scale in

provide opportunities for government to use its bulk purchasing power

(transversal contracts);

– Utilise technology smarter to reduce duplication of effort and cost;

– Optimisation and innovation – cost avoidance, cost reduction, cost

effectiveness;

– Reduction of Red Tape

• Efforts by OCPO will result in R75 billion over the 2016 - 2018 MTEF with

savings of R15 billion, R25 billion and R35 billion from 2016/17, 2017/18

and 2018/19 financial years respectively

14

Plan for savings of R75 Billion by year 3 of MTEF

• Identify Top 100 suppliers

– TELKOM - Basil Read - Aspen Health - Vodacom

– Travel with Flair - AG Solutions - MTN - BioVac

– Group 5 - Eduvision - MicroSoft - IBM

• Focus on sectors - Negotiation strategy is to focus on industry specific

contracts and focus currently is on:

– Construction - Pharmaceuticals - Banking

– ICT - Travel - Education

– Leasing - Telecommunications - Professional services

• Targets based on feasibility

– Construction R5 billion in 2016 - Travel R1 billion in 2016

– Leasing R3 billion in 2016 - ICT R1.5 billion in 2016

– Telecomms R1.5 Billion - Education R1 billion in 2016

– Sundry negotiations R2 billion in 2016

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Plan for savings of R75 Billion by year 3 of MTEF

• Transversal contracts

– Expand the number of contracts from 40 to 90 and increase

aggregated spent from R26 bil to R90 bil – it reduces unit cost for

common goods

– Renegotiate existing contracts - Eliminate off contract spent from

transversal contracts

• Technology utilisation

– Save R700 mil per year by publishing on www.etenders.gov.za

– Save R350 mil per year by eliminating duplication of verification

services and supplier registration service providers

– Operational costs will be reduced by R1.5 billion (eliminating storage

of paper, data capturing, excessive staff

– Reducing transaction costs – currently it costs

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Plan for savings of R75 Billion by year 3 of MTEF

• Optimisation

– At procurement process, insist on norms and standards e.g

Computers are categorised in entry models for PAs, and high end

PCs for officials requiring high processing capacity;

– Use office space better – average office size for government

officials are 36m compared to 18 – 20 m in private sector

– One printer available on a network for 8 – 15 staff members in stead

of a printer per person

– Total cost of ownership – a little bit more expensive but lasts 2 or 3

times longer (Eg building schools to last a hundred years instead of

high maintenance costs after 10 years)

– Avoiding unnecessary purchases, making full use of assets and

resources is estimated in cost avoidance of R20 bil a year

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Plan for savings of R75 Billion by year 3 of MTEF

• Reducing Red Tape

– Automate labour intensive processes such as manual quotation

processes – it costs government R3600 to raise an purchase order at

the moment;

– Simplify procurement processes – consolidating SDBs, reducing

tender evaluation and award timelines etc.

– Dispute resolution to be accelerated – to many delays, claims and

legal costs on contested awards and poor quality services

– Automated procurement from gCommerce of standard commodities

– Specialisation in high value items – team of professionals that drive

high value strategic procurements

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Current Work: Policy, norms and standards

• Treasury Regulations

– Rationalising instruction notes and circulars

– Differentiate between goods and service and infrastructure

procurement

• Empowerment

– Looking at a different regime for empowerment

• Public Procurement Bill

– Fully establishing the OCPO

– Roles and responsibilities of different role players within an entity

– Empowerment

– Reporting and transparency

– Abuse of the system

– Dispute resolution

– Role of CSOs

– etc

19

Challenges with current reforms

• Support required from National Departments, Provinces and Entities on:

– Implementation of systems

– Submission of required documents for review: slow and non-

compliance

– Poor communication within departments, provinces and entities on

the reforms

– Difficulty in finding fitting skills for the OCPO

– Slow mind-shift of the changes within SCM environment

– No consequence for non-compliance and corruption

• Transgressors not punished

• Failure of integrated justice system

• No action taken against suppliers

• Non-payment of suppliers within 30-days – affects service delivery

and upcoming businesses.

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How do these affect oversight work?

• It should be established in engagements with the Committees where the

SCM function lies in each department, why??

• The Committee should request more information on following areas not

clear in the Procurement Plans?

– If the AO/AA know what they are buying in the department/entity?

– If the AO/AA plans the procurement already signed off in the

procurement plans and the number of cancellation/deviations?

– Does the CFO of the department/entity know the cost drivers of their

budget?

– Are the existing contracts managed for performance and the

defaulters reported or not?

– What are the empowerment goals of each department, these should

be declared in advance?

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CLOSURE

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