1 Supply Chain Management. 2 Integrated supply chain management Availability Availability Operational performance Operational performance Reliability.

1 Supply Chain Management

2 Integrated supply chain management Availability Availability Operational performance Operational performance Reliability Reliability Cost efficiencies Cost efficiencies Resource optimization Resource optimization Total quality management Total quality management

3 Operational performance Stock out frequency Stock out frequency Fill rate Fill rate Full orders shipped Full orders shipped Cycle time Cycle time Consistency Consistency Flexibility Flexibility Quality compliance Quality compliance Dependability of information (R+I) Dependability of information (R+I) Performance measurement Performance measurement

4 Cost efficiencies Optimization of costs across the SC Optimization of costs across the SC Purchasing Purchasing Production Production Total logistic costs Total logistic costs

5 Resource optimization Optimization of all resources in the SC Optimization of all resources in the SC Finance Finance Human Human Technology Technology Capacity Capacity

6 Total Quality Management

7 TQM - Quality Formal quality assurance systems Formal quality assurance systems Continuous improvement Continuous improvement Statistical process control Statistical process control Incoming quality assured Incoming quality assured

8 TQM - costs Open book costing Open book costing Cost transparency Cost transparency Total acquisition cost Total acquisition cost Total cost of ownership Total cost of ownership Financing Financing Holding Holding Replacement through theft Replacement through theft

9 TQM - logistics JIT where required JIT where required Continuous improvement Continuous improvement Physical location Physical location Active on TQM Active on TQM KPA’s and KPI’s KPA’s and KPI’s Knowledge of world class standards Knowledge of world class standards R&D commitment R&D commitment Value analysis Value analysis Project management Project management

10 TQM - Design Warranty management Warranty management Reduced set up times Reduced set up times Short cycle manufacturing Short cycle manufacturing Sufficient for all demands Sufficient for all demands Forecasting systems Forecasting systems Committed to TQM Committed to TQM TQM part of performance management TQM part of performance management

11 SC decisions and support techniques Demand management Demand management SC and network design SC and network design Inventory analysis and planning Inventory analysis and planning Segment assignment Segment assignment Distribution planning Distribution planning Inventory management Inventory management Facility location and deployment Facility location and deployment Fleet planning Fleet planning Lead time quotation Lead time quotation Production scheduling Production scheduling Workforce scheduling Workforce scheduling

12 Demand management Accurate and instant demand information Accurate and instant demand information Data mining, simulation and statistical analysis Data mining, simulation and statistical analysis Determine warehouse, distribution centre and manufacturing locations Determine warehouse, distribution centre and manufacturing locations What inventory to hold, in which warehouses and at what times What inventory to hold, in which warehouses and at what times Appropriate routes and inventory policies Appropriate routes and inventory policies Dispatching, carrier selection, routing Dispatching, carrier selection, routing

13 KPI’s for supply chain (supply chain scorecard) Quantitative Quantitative Customer satisfaction Customer satisfaction Time Time Costs Costs Assets Assets Qualitative Qualitative Innovation Innovation

14 Supply chain scorecard Information includes: Information includes: Input data required Input data required Frequency of measurement Frequency of measurement Responsible person Responsible person Goal or target Goal or target Current performance Current performance Initiatives to improve Initiatives to improve

15 Benefits of measurement Understand the customer – improve service delivery Understand the customer – improve service delivery Higher quality and efficiency goals Higher quality and efficiency goals Measurement = important communication tool Measurement = important communication tool Reduce poor management decisions Reduce poor management decisions Focused approach on waste reduction and supply chain optimization Focused approach on waste reduction and supply chain optimization

16 Reporting Relies on comprehensive reporting systems and structures Relies on comprehensive reporting systems and structures Status reports Status reports Exception reports Exception reports Ad-hoc reports Ad-hoc reports Trend reports Trend reports

17 KPI – customer satisfaction P104 SCM Process order fulfilment Process order fulfilment Right quantity, right time, right condition, right place Right quantity, right time, right condition, right place Processing accuracy Processing accuracy Forecasting accuracy Forecasting accuracy Budget planning accuracy Budget planning accuracy Delivery performance Delivery performance Level of customer satisfaction Level of customer satisfaction Product quality Product quality

18 KPI - Time Supply chain response time Supply chain response time End-to-end pipeline time End-to-end pipeline time Order cycle time Order cycle time Production flexibility in terms of: Production flexibility in terms of: Labour Labour Material Material Capacity Capacity

19 Time based-control techniques Dependent demand techniques Dependent demand techniques Quantity and timing depends on the need for the end product Quantity and timing depends on the need for the end product JIT JIT Better lead time management Better lead time management Eliminates waste Eliminates waste Requirements planning Requirements planning Integration with upstream suppliers Integration with upstream suppliers

20 Time based control techniques Independent demand techniques – rapid response to occurences in business Independent demand techniques – rapid response to occurences in business Quick response Quick response Computer driven – captured demand on a real-time basis Logistics and manufacturing time reduced and more efficient Computer driven – captured demand on a real-time basis Logistics and manufacturing time reduced and more efficient Continuous replenishment Continuous replenishment As above, but continuously As above, but continuously Automatic replenishment Automatic replenishment Supplier estimates the need and replenish – fast moving items Supplier estimates the need and replenish – fast moving items Efficient consumer response Efficient consumer response Retail (groceries) – optimal allocation of shelf space, efficient management of promotions, product range, efficient replenishment Retail (groceries) – optimal allocation of shelf space, efficient management of promotions, product range, efficient replenishment

21 KPI - Costs Total supply chain costs Total supply chain costs Finished goods inventory turns Finished goods inventory turns Total delivered costs – supplier to customer Total delivered costs – supplier to customer Costs of excess capacity Costs of excess capacity Cost of capacity shortages Cost of capacity shortages

22 KPI - Assets SC inventory expressed in inventory days SC inventory expressed in inventory days Net asset turns Net asset turns Cash-to-cash cycle time Cash-to-cash cycle time Capacity uitilisation Capacity uitilisation

23 KPI - Innovation New product technology New product technology New process technology New process technology Strategic partnership development Strategic partnership development

24 Demand Management Introduction and Interface to Strategic Planning and Budgeting Introduction and Interface to Strategic Planning and Budgeting Procurement Planning Procurement Planning Inventory Planning Inventory Planning Strategic Asset Planning Strategic Asset Planning

25 Responsibilities- demand management AO must: establish and implement appropriate demand management ensure resources required support: its operational commitments and its strategic goals outlined in Strategic Plan.

26 Demand management system must :- (a) include timely planning and management processes to ensure that all goods and services required are quantified, budgeted for and timely and effectively delivered at the right locations and at the critical delivery dates, and are of appropriate quality and quantity at a fair cost; (b) take into account any benefits of economies of scale that may be derived in the case of acquisitions of a repetitive nature; (c) provide for the compilation of the required specifications to ensure that its needs are met; and (d) provide for an appropriate industry analysis and research to ensure that innovations and technological benefits are maximized. System of demand management

27 Demand management Demand Management - start of SCM. Demand Management - start of SCM. Needs assessment - determine demand for goods and services; Needs assessment - determine demand for goods and services; Actual usage of goods/ services analysed - ways are sought to optimise usage; Actual usage of goods/ services analysed - ways are sought to optimise usage; Specification of goods/ services are described accurately; Specification of goods/ services are described accurately; Requirements are linked to budget; Requirements are linked to budget; Supplier industry is analysed/ sourcing strategies are developed. Supplier industry is analysed/ sourcing strategies are developed. Demand management – Demand management – used to optimise usage and used to optimise usage and reduce procurement spend whilst reduce procurement spend whilst increasing the Department’s capacity to execute. increasing the Department’s capacity to execute.

30 Objectives - procurement planning To support improved service delivery through proactive and planned procurement processes; To support improved service delivery through proactive and planned procurement processes; To implement Government’s Preferential Procurement Strategy; To implement Government’s Preferential Procurement Strategy; To improve department’s purchasing advantage; To improve department’s purchasing advantage; To improve purchasing efficiencies and effectiveness; To improve purchasing efficiencies and effectiveness; To improvement procurement processes and disciplines; To improvement procurement processes and disciplines; To provide a basis for longer term contracts; and To provide a basis for longer term contracts; and To provide a basis for performance management and continuous improvement. To provide a basis for performance management and continuous improvement.

31 Procurement planning benefits Include:- Better alignment of procurement activities with objectives; Better alignment of procurement activities with objectives; Better value for money outcomes; Better value for money outcomes; Better planning effectiveness and efficiencies; Better planning effectiveness and efficiencies; Better risk management; Better risk management; More proactive application of innovations in procurement; More proactive application of innovations in procurement; Better partnerships between suppliers and Department; Better partnerships between suppliers and Department; More opportunities for achieving goals and objectives; More opportunities for achieving goals and objectives; Improved basis for development of longer term contracts; and Improved basis for development of longer term contracts; and Better integration of strategic sourcing practices with proven demand management practices. Better integration of strategic sourcing practices with proven demand management practices.

32 Procurement Planning Committee Team should be established on an annual basis for duration of procurement planning cycle. Once the plan has been developed, the monitoring of procurement effectiveness and efficiencies occurs within the different cost centres. Team should be established on an annual basis for duration of procurement planning cycle. Once the plan has been developed, the monitoring of procurement effectiveness and efficiencies occurs within the different cost centres.

33 Historical overview analysis Actual procurement spend and actual usage is analysed on an annual basis. The analysis is typically done across the following categories: Actual procurement spend and actual usage is analysed on an annual basis. The analysis is typically done across the following categories: Commodity; Commodity; Business unit; and Business unit; and Supplier. Supplier. The high-level analysis is meant to cover the entire procurement spend and all commodities. The high-level analysis is meant to cover the entire procurement spend and all commodities. The usage analysis is meant to focus on what was consumed or used and is not meant to focus on what was procured. The usage analysis is meant to focus on what was consumed or used and is not meant to focus on what was procured.

34 Strategic Imperatives + Budget Constraints In determining opportunities and priorities for procurement planning cycle, the Procurement Planning team ensures they have a thorough understanding of strategies and strategic objectives. In determining opportunities and priorities for procurement planning cycle, the Procurement Planning team ensures they have a thorough understanding of strategies and strategic objectives. The budget constraints are equally important in the development of procurement plan. The Planning team should understand the budget limitations and potential trade-offs that may be required. The budget constraints are equally important in the development of procurement plan. The Planning team should understand the budget limitations and potential trade-offs that may be required.

35 Identifying Opportunities High-level spend and usage analysis and insights gained in understanding the strategic imperatives and budget constraints provide the Procurement Planning team with a basis for identifying the opportunities. High-level spend and usage analysis and insights gained in understanding the strategic imperatives and budget constraints provide the Procurement Planning team with a basis for identifying the opportunities. Opportunities are identified to realise the benefits of procurement planning: Opportunities are identified to realise the benefits of procurement planning: Improved service delivery; Improved service delivery; Reducing demand/usage; Reducing demand/usage; Reduced procurement spend / expenditure; Reduced procurement spend / expenditure; Improved procurement efficiencies; and Improved procurement efficiencies; and Fewer redundant items. Fewer redundant items.

36 Setting Priorities Ability to achieve all identified opportunities will be constrained by its capacity and appetite for change. It is therefore important to prioritise the focus areas for the procurement planning cycle. Ability to achieve all identified opportunities will be constrained by its capacity and appetite for change. It is therefore important to prioritise the focus areas for the procurement planning cycle. Priorities should be set be assessing the benefit potential against the ease of implementation. Priorities should be set be assessing the benefit potential against the ease of implementation. Benefit potential – The benefits would depend on the degree of leverage that the department has over suppliers. Other benefit factors would include the extent of “quick wins” and early successes that possible. Benefit potential – The benefits would depend on the degree of leverage that the department has over suppliers. Other benefit factors would include the extent of “quick wins” and early successes that possible. Ease of implementation – The complexity of the supplier environment, the time it takes to qualify suppliers, the incumbents and the switching potential are all aspects that need to be considered in deciding the ease of implementation. Ease of implementation – The complexity of the supplier environment, the time it takes to qualify suppliers, the incumbents and the switching potential are all aspects that need to be considered in deciding the ease of implementation.

37 Usage and Sourcing Analysis The Usage and Sourcing analysis must answer the following questions: The Usage and Sourcing analysis must answer the following questions: What is the historical annual volume of purchases by user (R and units)? What is the historical annual volume of purchases by user (R and units)? What is the extent of seasonality? What is the extent of seasonality? What is the forecasted demand? What is the forecasted demand? Who are the current and anticipated buyers? Who are the current and anticipated buyers? What is the annual number of orders? What is the annual number of orders? What purchases are outside of the normal order cycle? What purchases are outside of the normal order cycle? What are the functional, design, and quality specifications? What are the functional, design, and quality specifications? What is the level of customisation? What is the level of customisation? What is the level of standardisation? What is the level of standardisation? Who owns the product specifications? Who owns the product specifications?

38 Outcomes of Demand Management Demand Management. Demand Management. To identify opportunities to reduce usage or consumption; and To identify opportunities to reduce usage or consumption; and To provide a solid forecast to be used as a basis for better budgeting, smarter sourcing and improved inventory planning. To provide a solid forecast to be used as a basis for better budgeting, smarter sourcing and improved inventory planning. Demand management relies on solid analysis at a commodity level. Demand management relies on solid analysis at a commodity level. Forecasting Usage/Demand:- developed for specific commodity and is best developed at the lowest level of usage or demander. Forecasting Usage/Demand:- developed for specific commodity and is best developed at the lowest level of usage or demander. Needs Analysis:- ensures that demand is based on well thought through needs and wants. Needs Analysis:- ensures that demand is based on well thought through needs and wants. Demand Drivers. The cause of the demand is called the “Demand Driver”. The driver can drive demand up or down. Demand Drivers. The cause of the demand is called the “Demand Driver”. The driver can drive demand up or down.

39 Total Cost Model For items - cost implication >12 months, develop a total cost model. For items - cost implication >12 months, develop a total cost model. Total cost model must include all externally + internal costs. Total cost model must include all externally + internal costs. External costs - aspects such as maintenance contractors; annual license fees; regular servicing costs; costs of breakdowns and repairs; and finally, the cost of disposal. External costs - aspects such as maintenance contractors; annual license fees; regular servicing costs; costs of breakdowns and repairs; and finally, the cost of disposal. Internal costs - personnel costs associated with processes from acquisition through to disposal; personnel costs for the operations of the equipment or service; transportation and distribution costs; and inventory holding costs. Internal costs - personnel costs associated with processes from acquisition through to disposal; personnel costs for the operations of the equipment or service; transportation and distribution costs; and inventory holding costs. Total cost used for identifying alternate sourcing opportunities. Total cost used for identifying alternate sourcing opportunities.

40 Audit demand management Governance process Governance process Process overview flowchart Process overview flowchart SCRE SCRE Audit objective Audit objective Risks Risks Preventative and detection control Preventative and detection control Control Adequacy Assessment Control Adequacy Assessment Audit program Audit program Control Effectiveness Assessment Control Effectiveness Assessment Audit opinion Audit opinion

41 Demand management - risk assessment Demand Management Functions Documents / Records Risks Our needs: Determination of the resources (goods and services) required in achieving the outcomes envisaged within the business plan. Needs assessment: DocumentationInputProcessOutput E – Effectiveness Business plan activities not defined in sufficient detail to facilitate effective determination of resources required. Lack of involvement of end-users / program managers in determining the required activities. Lack of understanding or non-uniform interpretation of the required format. R – inaccurate/incomplete/Untimely/Unauthorized How were our needs satisfied in the past: Performing an analysis of past expenditure trends per sub-program structure (aligned to strategic plan structure). Historical overview: Documentation DocumentationInputProcessOutput R – inaccurate/incomplete/Untimely/Unauthorized Inaccurate/incomplete information used in the historical overview. Mathematical errors made during the performance of the historical overview. R – inaccurate/incomplete/Untimely/Unauthorized Misallocations and classification errors in source data used to perform historical overview.

42 Capture data Application program processing Consolidated needs analysis Exception reports Standardised request and instructions R E S(ac) R R R R Needs analysis Operational plan Completed forms

43 Audit objective To evaluate the adequacy and effectiveness of the controls relating to: Safeguarding of assets – access control in the capturing phase Safeguarding of assets – access control in the capturing phase Reliability and integrity of information in the: Reliability and integrity of information in the: Preparations of the manual needs analysis forms; Preparations of the manual needs analysis forms; Capturing Capturing Processing Processing Updating the consolidated needs analysis assessment; Updating the consolidated needs analysis assessment; Exception reports Exception reports Effectiveness of the needs analysis Effectiveness of the needs analysis

44 Risks Inadequate access control (1) Inadequate access control (1) Inaccurate, Incomplete, Untimely, Unauthorized Inaccurate, Incomplete, Untimely, Unauthorized Manual forms (4) Manual forms (4) Capturing (4) Capturing (4) Processing (4) Processing (4) Updating needs analysis (4) Updating needs analysis (4) Exception reports (4) Exception reports (4) Ineffective Needs analysis (1) Ineffective Needs analysis (1)

45 Capture data Application program processing Updated historical overview Exception reports Analysis of history R E S(ac) R R R R Historical overview

46 Demand management - risk assessment Demand Management Functions Documents / Records Risks What is available in the market: Conducting an industry and commodity analysis aligned to the needs identified. Industry and commodity analysis DocumentationInputProcessOutput Limitations placed on the scope of the industry and commodity analysis. Required skills profile not readily available. High costs associated with the performance of an industry and commodity analysis. What methods are available: Identification of different methods to satisfy the needs identified, for e.g. other government institutions, ad hoc contracts, etc. Method analysis DocumentationInputProcessOutput Incomplete identification of procurement options available during the performance of the method analysis. How many times do we have this need: Specification of frequency of needs. Frequency analysis DocumentationInputProcessOutput Lack of involvement of end-users / program managers in determining the frequency of their needs. Mathematical errors / inappropriate assumptions made during the performance of the frequency analysis.

47 Capture data Application program processing Commodity analysis Exception reports Standardized forms R E S(ac) R R R R Industry + commodity analysis Commodities needed as from needs analysis Suppliers based on industry Industry analysis

48 Demand management - risk assessment Demand Management Functions Documents / Records Risks Best method of ordering: Calculation of the economic order quantity (EOQ). Economic Order Quantity analysis R – inaccurate/incomplete/Untimely/Unauthorized Mathematical errors / inappropriate assumptions made during the performance of the EOQ analysis. Timely satisfaction of our need: Identification of the lead and delivery times for each need based on the chosen method. Lead and delivery time analysis R – inaccurate/incomplete/Untimely/Unauthorized Mathematical errors / inappropriate assumptions made during the performance of the lead and delivery time analysis.

49 Economic order quantities

50 Economic order quantities Useful to establish the optimal frequency and quantity which should be ordered for each stock item Useful to establish the optimal frequency and quantity which should be ordered for each stock item Formulas are built into LOGIS Formulas are built into LOGIS Based on: Based on: Cost per unit Cost per unit Delivery times Delivery times Cost of ordering Cost of ordering

51 Capture data Application program Processing Updated EOQ analysis Exception reports- out of stock items Inventory carrying costs R E S(ac) R R R R EOQ analysis Annual consumption and cost per order Stock levels Delivery and lead time Pre printed order for approval Inventory status file Bill of Materials BOM

52 EOQ – practical use Reorder levels Safety levels

53 Costs of stock Holding cost Holding cost Storage facilities Storage facilities Handling Handling Insurance Insurance Theft Theft Obsolescence Obsolescence Opportunity cost of capital Opportunity cost of capital Setup cost Setup cost Materials and equipment Materials and equipment Ordering cost Ordering cost Administration cost of procurement function Administration cost of procurement function Tracking order progress Tracking order progress Shortage cost Shortage cost Cost incurred when item out of stock Cost incurred when item out of stock

54 Limitations of EOQ Total demand over a given period should be known Total demand over a given period should be known Inventory consumption constant, distributed evenly over time Inventory consumption constant, distributed evenly over time Purchasing price + transport costs are constant, independent of quantity or time of order Purchasing price + transport costs are constant, independent of quantity or time of order Suppliers are reliable, no shortages in supply and inventory Suppliers are reliable, no shortages in supply and inventory No limitation to the availability of capital No limitation to the availability of capital Cost of inventory holding is known and constant Cost of inventory holding is known and constant

55 Capture data Application program processing Lead and delivery time analysis Exception reports – out of stock Order, delivery, production lead times R E S(ac) R R R R Lead and delivery time analysis Exception reports – performance of suppliers Exception reports and KPI’s Usage report Historic supplier delivery times Stock levels report

56 Implications of lead time Timing issues critical when planning inventory Timing issues critical when planning inventory Complexity of lead time = each stage of the supply must determine the demand from its customer Complexity of lead time = each stage of the supply must determine the demand from its customer

57 Risk assessment RISKSIMPACTLIKELIHOO D 1 Business plan activities not defined in sufficient detail to facilitate effective determination of resources required. Catastrophi c Likely 2 Lack of involvement of end-users / program managers in determining the required activities. Catastrophi c Moderate 3 Lack of understanding or non-uniform interpretation of the required format. ModerateModerate 4 Mathematical errors made during the performance of the historical overview. ModerateUnlikely 5 Misallocations and classification errors in source data used to perform historical overview. Major Almost certain

58 Risk assessment (continued) 6 Limitations placed on the scope of the industry and commodity analysis. Major Modera te 7 Required skills profile not readily available. Modera te 8 High costs associated with the performance of an industry and commodity analysis. MinorLikely 9 Incomplete identification of procurement options available during the performance of the method analysis. Modera te Unlikel y 10 Lack of involvement of end-users / program managers in determining the frequency of their needs. Major Modera te 11 Mathematical errors / inappropriate assumptions made during the performance of the frequency analysis. Modera te Unlikel y

59 Risk assessment (continued) 12 Mathematical errors / inappropriate assumptions made during the performance of the EOQ analysis. ModerateUnlikely 13 Mathematical errors / inappropriate assumptions made during the performance of the lead and delivery time analysis. ModerateUnlikely

60 Audit objective Reliability and integrity Reliability and integrity To evaluate the system of internal control that ensures accurate, complete, timely and valid information have been used to complete the needs assessment To evaluate the system of internal control that ensures accurate, complete, timely and valid information have been used to complete the needs assessment

61 Audit program Document the system of internal control that ensures that all information is accurately included in the needs assessment overview throughout the: Document the system of internal control that ensures that all information is accurately included in the needs assessment overview throughout the: documentation phase, documentation phase, Input phase, Input phase, Processing phase Processing phase Output phases Output phases

62 Control risk assessment Control objectives Risks – inadequate preventative controls Risks – inadequate detective controls SCO Reliability and integrity of information R13 Inadequate process to ensure validity of transactions (authorisation) – Changes made to the supplier’s database not authorised. R14 Inadequate process to ensure accurate processing of transactions - changes to suppliers database not done accurately. R15 Inadequate process to ensure complete processing of transactions – all new suppliers not updates in the suppliers database. R16 Inadequate process to ensure timely processing of transactions – suppliers database not updated timely resulting in purchases being made from old suppliers with more expensive prices.

63 Adequacy assessment Control objective RiskImpactLikelihoodAssessmentType Preventative / Detective Nature Manual/ IT CA A CE A Reliability and integrity of information Inaccurate … Incomplete…. Invalid/unauthorised Untimely

64 STRATEGIC ASSET PLANNING COMMITTEE Strategic Asset Planning Committee. Strategic Asset Planning Committee. Communicate Planning Process and Key Milestones. Communicate Planning Process and Key Milestones. Process Monitoring and Control. Process Monitoring and Control. Executive Level Communication and Commitment. Executive Level Communication and Commitment. Reporting Status. Reporting Status. Planning Milestones achieved and missed. Planning Milestones achieved and missed. Strategic Asset Planning committee meetings that have been held and attendance. Strategic Asset Planning committee meetings that have been held and attendance. The status of the Strategic Asset Plan. The status of the Strategic Asset Plan. Financing and budgeting and issues that should be investigated in more detail by finance. Financing and budgeting and issues that should be investigated in more detail by finance. Sponsorship and performance issues to be addressed by the Executive Committee. Sponsorship and performance issues to be addressed by the Executive Committee.

65 Needs assessment Need for assets directly linked to provision of services. Asset planning phase involves assessment of existing assets (and planned acquisitions) against service delivery requirements. Need for assets directly linked to provision of services. Asset planning phase involves assessment of existing assets (and planned acquisitions) against service delivery requirements. Proposals for new assets must be justified by thorough evaluation of all service delivery options and be the subject of a comprehensive appraisal or investment evaluation. Proposals for new assets must be justified by thorough evaluation of all service delivery options and be the subject of a comprehensive appraisal or investment evaluation. The service delivery strategy is described in the context of the strategic objectives and strategic plan. The service delivery strategy is described in the context of the strategic objectives and strategic plan.

66 Programme delivery strategy Typically covers: Typically covers: Definition of scope, standard and level of services to be delivered Definition of scope, standard and level of services to be delivered Assessment of methods of delivering these services. Service options are typically evaluated on financial, economic, social and environmental grounds Assessment of methods of delivering these services. Service options are typically evaluated on financial, economic, social and environmental grounds Determining, where appropriate, methods of containing demand for services Determining, where appropriate, methods of containing demand for services An identification of the resources, including assets, required to deliver services. When identifying resource requirements consider 'non-asset' solutions – (leases) An identification of the resources, including assets, required to deliver services. When identifying resource requirements consider 'non-asset' solutions – (leases)

67 Non-asset solutions Three broad types of non-asset solutions should be considered: Three broad types of non-asset solutions should be considered: Re-designing the service to reduce the need for assets; Re-designing the service to reduce the need for assets; Increasing the utilisation of existing assets so that the acquisition of a new asset can be avoided; and Increasing the utilisation of existing assets so that the acquisition of a new asset can be avoided; and Using private sector contractors to provide parts or all of the service. Assets may still be required for the service, but they will be controlled and operated by the contractor rather than being controlled by the department. Using private sector contractors to provide parts or all of the service. Assets may still be required for the service, but they will be controlled and operated by the contractor rather than being controlled by the department.

68 EVALUATING EXISTING ASSETS Evaluation of existing assets determines whether performance is adequate to support service delivery. This process pre- supposes appropriate condition and performance standards are set for assets. Evaluation of existing assets determines whether performance is adequate to support service delivery. This process pre- supposes appropriate condition and performance standards are set for assets. Where these standards have not been defined, the performance of the asset should be assessed against benchmarks. Where these standards have not been defined, the performance of the asset should be assessed against benchmarks. Programme evaluations, where applicable, should include the evaluation of asset performance. Programme evaluations, where applicable, should include the evaluation of asset performance. Asset performance should be reviewed regularly to identify assets that are under-performing, or costly to own or operate. It is also possible to over-invest in assets. Asset performance should be reviewed regularly to identify assets that are under-performing, or costly to own or operate. It is also possible to over-invest in assets. The evaluation should reveal assets that provide more than their required capacity, or are surplus to requirements. The evaluation should reveal assets that provide more than their required capacity, or are surplus to requirements. Assets that have been inadequately maintained may pose potential safety or health risks, disrupt services, or incur unforeseen expenditures for the correction of the defects. Assets that have been inadequately maintained may pose potential safety or health risks, disrupt services, or incur unforeseen expenditures for the correction of the defects.

69 Effectiveness of current asset use All assets being used to deliver service need to be identified and registered. How effectively these assets support the services has to be determined. All assets being used to deliver service need to be identified and registered. How effectively these assets support the services has to be determined. Assets should be evaluated in terms of their: Assets should be evaluated in terms of their: Physical condition: Is the asset adequately maintained? Is there a maintenance backlog that requires attention? Are major replacements or refurbishments likely to be required during the planning period? Physical condition: Is the asset adequately maintained? Is there a maintenance backlog that requires attention? Are major replacements or refurbishments likely to be required during the planning period? Functionality: How well suited is the asset to the activities and functions it supports? Functionality: How well suited is the asset to the activities and functions it supports? Utilisation: How intensively is the asset used? Could it be used more productively by extending its working hours, or by accommodating additional functions? Utilisation: How intensively is the asset used? Could it be used more productively by extending its working hours, or by accommodating additional functions? Financial performance: Are the asset's operating costs similar to those for other comparable assets? (Use benchmarking to establish this wherever possible.) Are the energy, cleaning and maintenance costs reasonable? Are user charges being made, and how do they relate to the total operating costs of the asset (including the cost of capital)? Financial performance: Are the asset's operating costs similar to those for other comparable assets? (Use benchmarking to establish this wherever possible.) Are the energy, cleaning and maintenance costs reasonable? Are user charges being made, and how do they relate to the total operating costs of the asset (including the cost of capital)?

70 Effectiveness of new assets Assessment of existing assets must include those assets in the process of being acquired or that are committed Assessment of existing assets must include those assets in the process of being acquired or that are committed Evaluation of existing and anticipated new assets provides a statement of assets that are available, or expected to be available, to support service delivery: Evaluation of existing and anticipated new assets provides a statement of assets that are available, or expected to be available, to support service delivery: Existing assets that are required and are presently capable of supporting delivery needs; Existing assets that are required and are presently capable of supporting delivery needs; Existing assets that are required but are below the necessary standard and need refurbishment to service delivery needs; Existing assets that are required but are below the necessary standard and need refurbishment to service delivery needs; Assets that are surplus to service delivery needs and can be disposed of; and Assets that are surplus to service delivery needs and can be disposed of; and Assets that must be acquired to meet service delivery needs. Assets that must be acquired to meet service delivery needs.

71 DEVELOPING ASSET STRATEGY The asset strategy uses the statement of needs and the evaluation of assets as a basis for the development of the Asset Strategy. The asset strategy uses the statement of needs and the evaluation of assets as a basis for the development of the Asset Strategy. The strategy must be a five-year forward strategy covering acquisition, safeguarding, maintenance, refurbishment, redeployment and disposal, together with the capital and operating costs. The strategy must be a five-year forward strategy covering acquisition, safeguarding, maintenance, refurbishment, redeployment and disposal, together with the capital and operating costs. A detailed evaluation of the life-cycle costs and the benefits and risks informs the strategy. A detailed evaluation of the life-cycle costs and the benefits and risks informs the strategy. Each stage of the life-cycle needs to be planned to identify what needs to be done to ensure that assets effectively support service and programme delivery. Each stage of the life-cycle needs to be planned to identify what needs to be done to ensure that assets effectively support service and programme delivery. The individual plans consider the needs of the other stages of the life-cycle to ensure an integrated approach is achieved. The individual plans consider the needs of the other stages of the life-cycle to ensure an integrated approach is achieved.

72 Asset Management plan Asset Management Plan, consisting of: Asset Management Plan, consisting of: Acquisition Plan; Acquisition Plan; Operational Plan; Operational Plan; Safeguarding Plan Safeguarding Plan Maintenance Plan; Maintenance Plan; Disposal Plan; Disposal Plan; Funding Plan; and Funding Plan; and Risk Management Plan; Risk Management Plan; Service Delivery Method; Service Delivery Method; Performance Monitoring; and Performance Monitoring; and Procedures, Systems and Training. Procedures, Systems and Training.

73 Acquisition, safeguarding and maintenance Acquisition plan Assets to be acquired may be purchased, either on the open market, or from another government department. They may also be leased or hired. The asset acquisition plan should define the type and timing of asset requirements, and set out the proposed method of acquisition and financing. Assets to be acquired may be purchased, either on the open market, or from another government department. They may also be leased or hired. The asset acquisition plan should define the type and timing of asset requirements, and set out the proposed method of acquisition and financing. Operations, Safeguarding and Maintenance plan The operations plan defines operating policies and practices in respect to working hours, security, safeguarding, cleaning, energy management and the responsibilities and resources required to manage the asset. The operations plan defines operating policies and practices in respect to working hours, security, safeguarding, cleaning, energy management and the responsibilities and resources required to manage the asset. The operational management of individual assets should be assessed to determine: The operational management of individual assets should be assessed to determine: The total operating costs that should be considered in the funding plan; and The total operating costs that should be considered in the funding plan; and Whether this function can be contracted out in whole or in part. Whether this function can be contracted out in whole or in part.

74 Procedures Procedures, Systems and Training Procedures support consistent application of definitions, standards and efficient work practices - It is essential they are disseminated and available to users of the different assets. Procedures support consistent application of definitions, standards and efficient work practices - It is essential they are disseminated and available to users of the different assets. The management information system is more than an asset register. It should support budgeting, planning and management of assets and provide an effective means of reporting asset performance. The management information system is more than an asset register. It should support budgeting, planning and management of assets and provide an effective means of reporting asset performance. Training programmes need to be tailored to the needs of staff who will require an understanding of the principles of asset management and the associated budgeting and management processes. Staff with responsibility for operation, maintenance and disposal will require more in-depth training. Training programmes need to be tailored to the needs of staff who will require an understanding of the principles of asset management and the associated budgeting and management processes. Staff with responsibility for operation, maintenance and disposal will require more in-depth training.

75 Procedures Safeguarding plan To be managed effectively, assets must be protected against theft or fraudulent use and other hazards such as fire. The consequences of not having the asset available for service delivery must be carefully considered. To be managed effectively, assets must be protected against theft or fraudulent use and other hazards such as fire. The consequences of not having the asset available for service delivery must be carefully considered. This plan must describe asset protection approaches that will be used. This plan must describe asset protection approaches that will be used. Maintenance plan The maintenance plan defines maintenance standards, describes how work is to be carried out, and forecasts necessary maintenance expenditure for planning period. The maintenance plan defines maintenance standards, describes how work is to be carried out, and forecasts necessary maintenance expenditure for planning period. Modifications or enhancements are work that is required because of change in the use of the asset, or a need to improve its functional performance - capital expenditure. Modifications or enhancements are work that is required because of change in the use of the asset, or a need to improve its functional performance - capital expenditure.

76 Disposal and funding Disposal plan Disposal options include transfer for alternate use, rental, sale and/or lease-back, and demolition. Disposal options include transfer for alternate use, rental, sale and/or lease-back, and demolition. Funding plan The options available for funding both capital and operating expenditures for assets must be described. New assets may be funded in whole or in part: The options available for funding both capital and operating expenditures for assets must be described. New assets may be funded in whole or in part: from the disposal of unused assets; from the disposal of unused assets; by leasing or other form of private investment; or by leasing or other form of private investment; or from borrowings, including appropriated funds. from borrowings, including appropriated funds. Revenues to support borrowing or leasing charges, or to supplement operating expenses, may be obtained from user charges or levies. Revenues to support borrowing or leasing charges, or to supplement operating expenses, may be obtained from user charges or levies. The funding plan should be based on an analysis of all available possibilities, including utilising private sector funding wherever appropriate. The funding plan should be based on an analysis of all available possibilities, including utilising private sector funding wherever appropriate.

77 Risk Management plan Asset management related risks may include: Asset management related risks may include: risks related to method of acquisition risks related to method of acquisition asset failure due to inadequate maintenance or operation asset failure due to inadequate maintenance or operation lack of safeguarding of assets. lack of safeguarding of assets. The nature of certain assets making them more susceptible to fraud or misuse should specifically be considered. The nature of certain assets making them more susceptible to fraud or misuse should specifically be considered. It should be noted that the state does not normally insure its assets, which strengthens the need for an effective risk management plan. It should be noted that the state does not normally insure its assets, which strengthens the need for an effective risk management plan. The asset risk management plan describes the risk management strategies and actions to be implemented for the assets under control. They are to be: The asset risk management plan describes the risk management strategies and actions to be implemented for the assets under control. They are to be: aimed at effective and timely outcomes; aimed at effective and timely outcomes; geared to meeting the quality standards of industry; and geared to meeting the quality standards of industry; and determined in line with best practice. determined in line with best practice. The monitoring and evaluation of the risk management measures implemented must be continuous. The monitoring and evaluation of the risk management measures implemented must be continuous.

78 Performance Monitoring Periodic reviews of asset performance are an essential element of the asset management framework. They aim to provide factual and quantitative information on the performance of the asset in meeting service and programme delivery needs. Periodic reviews of asset performance are an essential element of the asset management framework. They aim to provide factual and quantitative information on the performance of the asset in meeting service and programme delivery needs. Performance monitoring forms the basis of management of the asset throughout its life. It facilitates adjustments to the various plans, ensuring service delivery needs are met and providing increased efficiencies. Performance monitoring forms the basis of management of the asset throughout its life. It facilitates adjustments to the various plans, ensuring service delivery needs are met and providing increased efficiencies.

79 CAPITAL FUNDING AND BUDGETING The funding process allows for consideration of asset acquisition and enhancement options effectively and to establish priorities. The funding process allows for consideration of asset acquisition and enhancement options effectively and to establish priorities. Funds can then be applied to new projects and investments to satisfy objectives, and to obtain best value for money. Funds can then be applied to new projects and investments to satisfy objectives, and to obtain best value for money. The sources of funding must be identified. The sources of funding must be identified.

80 Inventory analysis OBJECTIVE The analytical technique determines the stock level and also which stores items and the quantities thereof must be obtained as well as which items must be kept in stock. The analytical technique determines the stock level and also which stores items and the quantities thereof must be obtained as well as which items must be kept in stock. ADVANTAGES OF INVENTORY ANALYSIS/PLANNING Stores are purchased directly according to requirements (as and when required when possible). Stores are purchased directly according to requirements (as and when required when possible). Stores could be purchased in most economical way. Stores could be purchased in most economical way. Storage space is optimised by avoiding unnecessary stock holding. Storage space is optimised by avoiding unnecessary stock holding. Available capital can be utilised to better effect. Available capital can be utilised to better effect. Quicker satisfaction of requirements. Quicker satisfaction of requirements. Saving in manpower. Saving in manpower.

81 Measure / KPI Benchmark* Target** Year 1 Responsibility and Measurement Tool/Report Timely Item Codification (Non-contract items) < 7 days 7 days, excluding Tender cycle District – Logistics using LOGIS and manual inspection of registry Timely Item Codification (Contract items) 3 days 5 days District – Logistics using LOGIS and manual inspection of registry Value of Stock with no consumption < 5% of the total stock value 10% reduction on current value Head: Acquisition and Demand Management Value of Surplus to Requirement (A and E-class Accountable) < 10% of the total stock value 10% reduction on current value Head: Acquisition and Demand Management Value of Declared (Non-Authorised) Redundant Stock value < 0.6% of Total Stock Value value < 1% per month of Total Stock Value value < 1% per month of Total Stock Value Head: Acquisition and Demand Management Value of Declared (Non-Authorised) Obsolete Stock value < 0.05% per month of Total Stock Value value < 0.01% per month of Total Stock Value Head: Acquisition and Demand Management Value of Declared (Non-Authorised) Damaged Stock value < 0.05% per month of Total Stock Value value < 0.01% per month of Total Stock Value Head: Acquisition and Demand Management Value of Declared (Non-Authorised) Unserviceable Stock value < 0.01% per month of Total value of moveable assets value < 0.2% per month of Total Stock Value value < 0.2% per month of Total Stock Value Head: Acquisition and Demand Management Performance benchmarks

82 Acquisition Management

83 System of acquisition management AO must establish an effective system of acquisition management to ensure – (a) goods and services are procured in accordance with authorized processes only; (b) expenditure on goods and services is incurred ito of an approved budget in terms of section 15 of the PFMA; (c) threshold values for the different procurement processes are complied with; (d) bid documentation, evaluation and adjudication criteria, and general conditions of a contract, are in accordance with any applicable legislation; and (e) Treasury guidelines on acquisition management are properly taken into account.

84 (2) The AO may, in writing; - (a) lower, but not increase, different threshold values specified in sub-par number (1); or (b) direct that – (i) only formal written quotations be obtained for any specific procurement of a transaction value lower than R5 000 [VAT included]; (ii) a competitive bidding process be followed for any specific procurement of a transaction value lower than R200 000 [VAT included]. (3) Goods or services may not deliberately be split into parts or items of a lesser value merely to avoid complying with requirements of policy. When determining transaction values, a requirement for goods or services consisting of different parts or items must as far as possible be treated and dealt with as a single transaction. Range of procurement processes

85 Sourcing Opportunities Sourcing improvement opportunities could include: Sourcing improvement opportunities could include: Changes to specification of the good/service; Changes to specification of the good/service; Increasing length of contract to drive down procurement costs; Increasing length of contract to drive down procurement costs; Changes to nature of relationship with the service provider (for example change to a risk and benefits sharing relationship); Changes to nature of relationship with the service provider (for example change to a risk and benefits sharing relationship); Aggregate demand across a wider range of users and obtain bulk discounts; Aggregate demand across a wider range of users and obtain bulk discounts; Introduce increased levels of competition amongst suppliers; Introduce increased levels of competition amongst suppliers; Issue “lots” for common products to encourage competition amongst multiple suppliers; Issue “lots” for common products to encourage competition amongst multiple suppliers; Exclude intermediaries (“middle-men”) that add cost and do not provide value added services; Exclude intermediaries (“middle-men”) that add cost and do not provide value added services; Improved level of specification so that service provider avoids building in contingency costs; Improved level of specification so that service provider avoids building in contingency costs; Reduce costs of procurement (i.e. the supplier’s sales cost) by reducing procurement processing time and reducing delays and changes to the procurement process. Reduce costs of procurement (i.e. the supplier’s sales cost) by reducing procurement processing time and reducing delays and changes to the procurement process.

86 Sourcing Strategy Development Final sourcing strategy takes into account the analysis; the identified opportunities; and the risk profile. Final sourcing strategy takes into account the analysis; the identified opportunities; and the risk profile. Analysis - cover category usage analysis, the supplier industry analysis and TC model that was developed. Analysis - cover category usage analysis, the supplier industry analysis and TC model that was developed. The sourcing strategy will describe the approach that will be followed to procure the commodity. Approach options could include: The sourcing strategy will describe the approach that will be followed to procure the commodity. Approach options could include: A longer term contract; A longer term contract; A national transversal contract; A national transversal contract; Outsourcing the service; Outsourcing the service; Three quote system; Three quote system; An open tender; or An open tender; or A Public Private Partnership. A Public Private Partnership.

87 Supplier Screening External market is analysed before suppliers are screened. External market is analysed before suppliers are screened. Market analysis – profile : Market analysis – profile : total number of suppliers; total number of suppliers; their relative size; their relative size; empowerment profile; empowerment profile; geographic spread; and geographic spread; and understand the challenges that suppliers are facing. understand the challenges that suppliers are facing. Suppliers - screened using Request for Information (RFI) techniques. Suppliers - screened using Request for Information (RFI) techniques.

88 (1) AO must – (a) keep a list of accredited prospective providers of goods and services that must be used for the procurement requirements through written or verbal quotations and formal written price quotations; (b) at least once a year through newspapers commonly circulating locally, the website and any other appropriate ways, invite prospective providers of goods or services to apply for evaluation and listing as accredited prospective providers; (c) specify the listing criteria for accredited prospective providers; and (d) disallow the listing of any prospective provider whose name appears on the National Treasury database as a person/company prohibited from doing business with the public sector. Lists of accredited prospective providers

89 The list must be updated at least quarterly to include any additional prospective providers and any new commodities or types of services. Prospective providers must be allowed to submit applications for listing at any time. The list must be compiled per commodity and per type of service. No bids or quotations may be solicited from any supplier/service provider/contractor who is not registered and verified by the appropriate branch on the Procurement Unit’s Supplier Database, or is in a position to be so before the award. Lists of accredited prospective providers

90 Single or Selected Suppliers/Brand or Trademark Practice of obtaining price quotations from single or selected suppliers for a specific brand or trademarks is to be cautiously dealt with. Practice of obtaining price quotations from single or selected suppliers for a specific brand or trademarks is to be cautiously dealt with. If a product or a specific brand only will satisfy the requirement, for example where existing equipment is involved and the item required is a component thereof, or price quotations are to be invited from single or selected suppliers only, the approval of the BAC are to be obtained prior to the invitation of the price quotations. If a product or a specific brand only will satisfy the requirement, for example where existing equipment is involved and the item required is a component thereof, or price quotations are to be invited from single or selected suppliers only, the approval of the BAC are to be obtained prior to the invitation of the price quotations. Requests for approval must be fully motivated and accompanied with documentary proof. Requests for approval must be fully motivated and accompanied with documentary proof.

91 Bid administration

92 Written quotation or bid not considered unless provider who submitted quotation/bid – (a) has furnished that provider’s – (i) full name; (ii) identification number or company or other registration number; (iii) tax reference number and VAT registration number, if any; (iv) tax clearance from the South African Revenue Services which proves that the provider’s tax matters are in order; (v) Statement (s) proving that water, electricity, rates and business levy accounts are up to date or formal payment arrangement; and (b) Conflict of interest – (i) whether he/she is in service of the state, or has been in the service of the state in the previous twelve months; (ii) if the provider is not a natural person, whether any of its directors, managers, principal shareholders or stakeholder is in service of the state, or has been in the service of the state in the previous 12 months; or (iii) whether a spouse, child or parent of the provider or of a director, manager, shareholder or stakeholder referred to in subpar (ii) is in the service of the state, or has been in the service of the state in the previous 12 months. General preconditions for consideration of written quotations or bids - conflict of interest

93 Procedure for the invitation of competitive bids:- (a) Any invitation to prospective providers to submit bids must be by means of a public advertisement in newspapers commonly circulating locally, the website of the municipality or municipal entity or any other appropriate ways (which may include an advertisement in the Government Tender Bulletin) (b) the information contained in a public advertisement, must include – (i) the closure date for the submission of bids, which may not be less than 30 days in the case of transactions over R10 million (VAT included), or which are of a long term nature, or 14 days in any other case, from the date on which the advertisement is placed in a newspaper (ii) a statement that bids may only be submitted on the bid documentation provided by the municipality or municipal entity; and (iii) date, time and venue of any proposed site meetings or briefing Sessions - indication regarding compulsory attendance Public invitation for competitive bids

94 AO may determine a closure date for the submission of bids which is less than the 30 or 14 days requirement, but only if such shorter period can be justified on the grounds of urgency or emergency or any exceptional case where it is impractical or impossible to follow the official procurement process. Bids submitted must be sealed. Where bids are requested in electronic format, such bids must be supplemented by sealed hard copies. Public invitation for competitive bids

95 Procedures for the handling, opening and recording of bids;- (a) Bids– (i) must be opened only in public; and (ii) must be opened at the same time and as soon as possible after the period for the submission of bids has expired; (b) Any bidder or member of the public has the right to request that the names of the bidders who submitted bids in time must be read out including each bidders total bidding price; (c) No information, relating to bid other than one in sub-par (b) may be disclosed to bidders or other persons until an official award is made; and (c) AO must – (i) record in a register all bids received in time; (ii) make the register available for public inspection; and (iii) publish the entries in the register and the bid results on the website. Procedure for handling, opening and recording of bids

96 AO may negotiate the final terms of a contract with bidders identified through a competitive bidding process as preferred bidders, provided that such negotiation– (a) does not allow any preferred bidder a second or unfair opportunity; (b) is not to the detriment of any other bidder; and (c) does not lead to a higher price than the bid as submitted. Minutes of such negotiations must be kept for record purposes. Negotiations with preferred bidders

97 A two-stage bidding process is allowed for – (a) large complex projects; (b) projects where it may be undesirable to prepare complete detailed technical specifications; or (c) long term projects with a duration period exceeding three years. In the first stage technical proposals on conceptual design or performance specifications should be invited, subject to technical as well as commercial clarifications and adjustments. In the second stage final technical proposals and priced bids should be invited. Two-stage bidding process

98 AO is required to – (a) establish a committee system for competitive bids consisting of at least – (i) a bid specification committee; (ii) a bid evaluation committee; and (iii) a bid adjudication committee; (b) appoint the members of each committee, (c) provide for an attendance or oversight process by a neutral or independent observer, appointed by AO, when this is appropriate for ensuring fairness and promoting transparency. The AO may apply the committee system to formal written price quotations. Committee system for competitive bids

99 (1) Bid evaluation committee must – (a) evaluate bids in accordance with – (i) the specifications for a specific procurement; (i) the points system (b) evaluate bidder’s ability to execute contract; (c) check iro recommended bidder whether municipal rates taxes/municipal service charges not in arrears, and; (d) submit to adjudication committee report & recommendations regarding award of bid (2) BEC composed of at least one procurement rep, one technical rep, one legal rep as minimum, and may when appropriate, include an external specialists advisor. Bid evaluation committees

100 (1) A contract for banking services (a) must be procured through competitive bids; (c) may not be for a period of more than five years at a time. (2) Process for procuring a contract for banking services must commence at least nine months before the end of an existing contract. (3) The closure date for the submission of bids may not be less than 60 days from the date on which the advertisement is placed in a newspaper in terms of par 22(1). Bids must be restricted to banks registered in terms of the Banks Act, 1990 (Act No. 94 of 1990). Procurement of Banking Services

101 (1) AO may request SITA to assist with the acquisition of IT related goods or services through a competitive bidding process. (2) Both parties must enter into a written agreement to regulate the services rendered by, and the payments to be made to, SITA. (3) AO must notify SITA together with a motivation of IT needs if – (a) the transaction value of IT related goods or services required in any financial year will exceed R50 million (VAT included); or (b) the transaction value of a contract to be procured whether for one or more years exceeds R50 million (VAT included). (4) If SITA comments on the submission and the municipality disagrees with such comments, the comments and the reasons for rejecting or not following such comments must be submitted to the council, the National Treasury, the relevant provincial treasury and Auditor General. Procurement of IT related goods or services

102 AO may procure goods or services under a contract secured by another organ of state, but only if – (a) the contract has been secured by that other organ of state by means of a competitive bidding process applicable to that organ of state; (b) there is no reason to believe that such contract was not validly procured; (c) there are demonstrable discounts or benefits to do so; and (d) that other organ of state and the provider have consented to such procurement in writing. Procurement of goods and services under contracts secured by other organs of state

103 (1) The acquisition and storage of goods in bulk (other than water) which necessitate special safety arrangements, including gasses and fuel, should be avoided where ever possible. (2) Where the storage of goods in bulk is justified, such justification must be based on sound reasons, including the total cost of ownership, cost advantages and environmental impact and must be approved by the AO. Procurement of goods necessitating special safety arrangements

104 AO may procure consulting services provided that any Treasury guidelines in respect of consulting services are taken into account when such procurements are made. Consultancy services must be procured through competitive bids if – (a) the value of the contract exceeds R200 000 (VAT included); or (b) the duration period of the contract exceeds one year. In addition to any requirements prescribed by this policy for competitive bids, bidders must furnish particulars of – (a) all consultancy services provided to an organ of state in the last five years; and (b) any similar consultancy services provided to an organ of state in the last five years. (4) AO must ensure that copyright in any document produced, and the patent rights or ownership in any plant, machinery, thing, system or process designed or devised, by a consultant in the course of the consultancy service is vested in the municipality Appointment of consultants

105 AO may – (a) dispense with the official procurement processes established by this policy and to procure any required goods or services through any convenient process, which may include direct negotiations, but only – (i) in an emergency; (ii) if such goods or services are produced or available from a single provider only; (iii) for the acquisition of special works of art or historical objects where specifications are difficult to compile; (v) in any other exceptional case where it is impractical or impossible to follow the official procurement processes; and (b) ratify any minor breaches of the procurement processes by an official or committee acting in terms of delegated powers or duties which are purely of a technical nature. AO must record the reasons for any deviations of this policy and report them to the next meeting of the council and include as a note to the annual financial statements. Deviation from, and ratification of minor breaches of, procurement processes

106 In accordance with section 113 of MFMA there is no obligation to consider unsolicited bids received outside a normal bidding process. AO may decide in terms of section 113(2) of the Act to consider an unsolicited bid, only if – (a) the product or service offered in terms of the bid is a demonstrably or proven unique innovative concept; (b) the product or service will be exceptionally beneficial to, or have exceptional cost advantages; (c) the person who made the bid is the sole provider of the product or service; and (d) the reasons for not going through the normal bidding processes are found to be sound by the AO. Unsolicited bids

107 If the AO decides to consider an unsolicited bid, the decision must be made public in accordance with section 21A of the Municipal Systems Act, together with – (a) reasons as to why the bid should not be open to other competitors; (b) an explanation of the potential benefits if the unsolicited bid were accepted; and (c) an invitation to the public or other potential suppliers to submit their comments within 30 days of the notice. Unsolicited bids

108 (5) The adjudication committee must consider the unsolicited bid and may award the bid or make a recommendation to the AO, depending on its delegations. (6) A meeting of the adjudication committee to consider an unsolicited bid must be open to the public. (7) When considering the matter, the adjudication committee must take into account – (a) any comments submitted by the public; and (b) any written comments and recommendations of the National Treasury or the relevant provincial treasury. (8) If any recommendations of the National Treasury or provincial treasury are rejected or not followed, the AO must submit to the Auditor General, the relevant provincial treasury and the National Treasury the reasons for rejecting or not following those recommendations. (9) Such submission must be made within seven days after the decision on the award of the unsolicited bid is taken, but no contract committing the municipality to the bid may be entered into or signed within 30 days of the submission. Unsolicited bids

109 AO must establish measures for combating of abuse of the SCM system, which must stipulate the following: (1) AO must– (a) take all reasonable steps to prevent abuse of the supply chain management system; (b) investigate any allegations against an official or other role player of fraud, corruption, favouritism, unfair or irregular practices or failure to comply with this supply chain management policy, and when justified – (i) take appropriate steps against such official or other role player; or (ii) report any alleged criminal conduct to the South African Police Service; (c) take all reasonable steps to ensure that no recommended bidder, or any of its directors, is listed as a person prohibited from doing business with the public sector; (d) reject any bid from a bidder if any municipal rates and taxes or municipal service charges owed by that bidder or any of its directors to the municipality, or to any other municipality or municipal entity, are in arrears for more than three months; or Combating of abuse of supply chain management system

110 (e) reject a recommendation for the award of a contract if the recommended bidder, or any of its directors, has committed a corrupt or fraudulent act in competing for the particular contract; (f) cancel a contract awarded to a person if – (i) the person committed any corrupt or fraudulent act during the bidding process or the execution of the contract; or (ii) an official or other role player committed any corrupt or fraudulent act during the bidding process or the execution of the contract that benefited that person; and (g) reject the bid of any bidder if that bidder or any of its directors – (i) has abused the supply chain management system of the municipality or has committed any improper conduct in relation to such system; (ii) has been convicted for fraud or corruption during the past five years; (iii) has willfully neglected, reneged on or failed to comply with any government, municipal or other public sector contract during the past five years; or (iv) has been listed in the Register for Tender Defaulters In terms section 29 of the Prevention and Combating of Corrupt Activities Act (No 12 of 2004). (2) The AO must inform the National Treasury and relevant provincial treasury in writing of any actions taken Combating of abuse of supply chain management system

111 Acquisition Management Introduction to Acquisition Management Introduction to Acquisition Management Quotations Process Quotations Process Competitive Bid Process Competitive Bid Process

112 OVERVIEW OF ACQUISITION MANAGEMENT Best interest of the Public. Best interest of the Public. Since the Government uses public funds to finance its procurement of goods and services, it is obliged to ensure that the best interest of the public is served when these funds are spent. Since the Government uses public funds to finance its procurement of goods and services, it is obliged to ensure that the best interest of the public is served when these funds are spent. “Best interest” includes satisfying requirements at the most favourable conditions, including price, ensuring that businesses and industries are afforded the best possible opportunity to satisfy such requirements on a competitive basis. “Best interest” includes satisfying requirements at the most favourable conditions, including price, ensuring that businesses and industries are afforded the best possible opportunity to satisfy such requirements on a competitive basis. Bid system. Bid system. It is common practice that governments utilise a bid system to procure their goods and services and to sell government goods. Such a system, with conditions and procedures formulated by the powers concerned, best protects the interest of the customers and the suppliers. It is common practice that governments utilise a bid system to procure their goods and services and to sell government goods. Such a system, with conditions and procedures formulated by the powers concerned, best protects the interest of the customers and the suppliers.

113 Contracts. Contracts. During the procurement of goods and services, or the selling of government goods, in accordance with the bidding system, contracts are concluded by the issuance of letters of acceptance and government orders. During the procurement of goods and services, or the selling of government goods, in accordance with the bidding system, contracts are concluded by the issuance of letters of acceptance and government orders. If price quotations are processed under delegated powers, contracts are concluded by the issuance of government orders. If price quotations are processed under delegated powers, contracts are concluded by the issuance of government orders. In addition, the procurement of requirements of the State/Province can also be embodied in legal written formal contracts in which the specific obligations and prerogatives of all parties concerned are stipulated. In addition, the procurement of requirements of the State/Province can also be embodied in legal written formal contracts in which the specific obligations and prerogatives of all parties concerned are stipulated. It must be ascertained that bidders accept all the relevant stipulations of the general conditions of bid and contract or any other additional conditions indicated in the bid document and as approved by the Department. It must be ascertained that bidders accept all the relevant stipulations of the general conditions of bid and contract or any other additional conditions indicated in the bid document and as approved by the Department. OVERVIEW OF ACQUISITION MANAGEMENT

114 GOVERNMENT PROCUREMENT INITIATIVES Historically Disadvantaged Individuals (HDI) In accordance with the PPPFA HDI’s are defined as South African citizens who fall into population groups that had no franchise in national elections prior to the introduction of the 1983 and 1993 constitutions; and/or who is a female; and/or who has a disability. To comply with the PPPFA these HDI’s are allowed to claim such status in their bids and be granted preference points according to a preference point system. In accordance with the PPPFA HDI’s are defined as South African citizens who fall into population groups that had no franchise in national elections prior to the introduction of the 1983 and 1993 constitutions; and/or who is a female; and/or who has a disability. To comply with the PPPFA these HDI’s are allowed to claim such status in their bids and be granted preference points according to a preference point system. Small, Medium and Micro Enterprises (SMME’s). The SMME’s are an integral part of the RSA’s economy and form the basis from which businesses are developed. The classification of businesses within this category is done in accordance with guidelines provided by the Department of Trade and Industry. The advancement of SMME’s is done in accordance with guidelines provided by the PPFA and is achieved through the awarding of contracts of small or reasonable contract amounts. The SMME’s are an integral part of the RSA’s economy and form the basis from which businesses are developed. The classification of businesses within this category is done in accordance with guidelines provided by the Department of Trade and Industry. The advancement of SMME’s is done in accordance with guidelines provided by the PPFA and is achieved through the awarding of contracts of small or reasonable contract amounts.

115 Limit structures Less than R5,000, including VAT and other expenses. Quotation. Verbal or telephonic quotes are acceptable. The agreed quote should be in writing. Quotations are typically requested from suppliers that are registered with the Department. Between R5,000 and under R100,000. Quotation. At least three written quotations that must be kept on record. As with the smaller quotes, these should also be requested from suppliers that are registered with the Department. Above R100,000.Bid or Tender. The different bidding processes are described in the sections that follow.

116 Quotations and bids Quotations. Price quotations may under certain conditions be invited telephonically, by- e- mail, or in writing, within cost-effective limits from all possible suppliers, or from a limited number of suppliers, provided that the order is placed against confirmation by letter, telex, telefax, e- mail, or facsimile of the price quotation by the only bidder or the bidder whose offer is the lowest according to specifications or deemed realistic value for money if not the lowest. Bids. A bid is a written offer on the official bid documents forming part of an invitation to bid, which has been dealt with in accordance with the requirements of SCM regulations and, unless otherwise determined by the Head of Department, has been advertised in the Government Bid Bulletin.

117 ESTABLISHING THE BID COMMITTEES There are at least three committees involved in the Bidding process: Bid Specification Committee; Bid Specification Committee; Bid Evaluation Committee; and Bid Evaluation Committee; and Bid Adjudication Committee. Bid Adjudication Committee. Delegated authority will vary across different committees, particularly the Bid Adjudication Committee. In some instances the Bid Adjudication Committee will have the delegated authority to award a bid to supplier. Delegated authority will vary across different committees, particularly the Bid Adjudication Committee. In some instances the Bid Adjudication Committee will have the delegated authority to award a bid to supplier. In some instances, Bid Adjudication Committee will make a recommendation to the AO who will make the final award. In some instances, Bid Adjudication Committee will make a recommendation to the AO who will make the final award. The policies and ethics governing the different committee should be described in the Department’s SCM Policy Manual. The policies and ethics governing the different committee should be described in the Department’s SCM Policy Manual.

118 DELEGATED POWERS OF BID ADJUDICATION COMMITTEE Need to delegate. It is essential to know that the power to arrange for the procurement of goods and services or selling of moveable department property is vested in terms of MFMA. To allow for effective workload management, powers are delegated to officials Need to delegate. It is essential to know that the power to arrange for the procurement of goods and services or selling of moveable department property is vested in terms of MFMA. To allow for effective workload management, powers are delegated to officials Delegations to Departments. Delegations to Departments. National Treasury has delegated a set of powers to provincial departments - powers are coupled to financial limits, with re- delegation levels and conditions prescribed. National Treasury has delegated a set of powers to provincial departments - powers are coupled to financial limits, with re- delegation levels and conditions prescribed. These powers are not commodity bound and they enable departments to carry out their functional activities in the most responsible manner, without the intervention of National or Provincial Treasury. These powers are not commodity bound and they enable departments to carry out their functional activities in the most responsible manner, without the intervention of National or Provincial Treasury. The requirements to which the delegated powers are subject must be strictly observed. The requirements to which the delegated powers are subject must be strictly observed.

119 Delegations to SCM Application of Procurement delegations. Delegated powers relate to the processes and activities followed in procurement and sales, whereby contractors are identified from whom goods or services should be procured or to whom movable property will be sold. Delegated powers relate to the processes and activities followed in procurement and sales, whereby contractors are identified from whom goods or services should be procured or to whom movable property will be sold. The delegated powers indicate at hand who, depending on the value of each case at hand, may follow what processes and activities. Once the contractors are identified, the actual procurement of goods or services is done by means of an order The delegated powers indicate at hand who, depending on the value of each case at hand, may follow what processes and activities. Once the contractors are identified, the actual procurement of goods or services is done by means of an order Concerning the approval of finances for the placing of orders or for cash purchases, separate delegations are applicable pertaining to financial authorities. Concerning the approval of finances for the placing of orders or for cash purchases, separate delegations are applicable pertaining to financial authorities.

120 Implementation of Delegated powers It is imperative that supply chain officials take cognisance of the following: It is imperative that supply chain officials take cognisance of the following: Powers are delegated to the AOs of departments in order to prevent their activities being impeded and to grant departments management autonomy in line with the MFMA. Powers are delegated to the AOs of departments in order to prevent their activities being impeded and to grant departments management autonomy in line with the MFMA. Powers are delegated to the AOs of departments in person and may not be exercised by department officials without the express written re-delegation or empowerment by the AO concerned to the holders of certain posts. Powers are delegated to the AOs of departments in person and may not be exercised by department officials without the express written re-delegation or empowerment by the AO concerned to the holders of certain posts. Before an official takes any action regarding any part of the procurement or selling process, it must be ascertained whether the authority to do so is delegated to him/her and he/she is empowered to do so. Before an official takes any action regarding any part of the procurement or selling process, it must be ascertained whether the authority to do so is delegated to him/her and he/she is empowered to do so.

121 Non-compliance with Delegated Powers Cognisance must be taken of the fact that any action regarding procurement in the public sector which does not adhere strictly to the stipulations and conditions contained in delegated powers, shall be unauthorised or irregular, unless ex post facto approval has been granted by the BAC. Cognisance must be taken of the fact that any action regarding procurement in the public sector which does not adhere strictly to the stipulations and conditions contained in delegated powers, shall be unauthorised or irregular, unless ex post facto approval has been granted by the BAC. The delegations of powers to a person or body of persons does not exempt the AO from accountability. AO will exercise strict control measures to ensure that delegations will be executed in a responsible manner. In cases of misuse, delegated powers may be withdrawn. The delegations of powers to a person or body of persons does not exempt the AO from accountability. AO will exercise strict control measures to ensure that delegations will be executed in a responsible manner. In cases of misuse, delegated powers may be withdrawn. No guarantee exists that such requests for ex post facto approvals will be favourably considered and approved by the AO or his/her delegate. No guarantee exists that such requests for ex post facto approvals will be favourably considered and approved by the AO or his/her delegate. When requests for ex post facto approval for irregular expenditure actions are not approved, it could transpire that the cost incurred as a result of such action is carried by the person(s) responsible for such actions. When requests for ex post facto approval for irregular expenditure actions are not approved, it could transpire that the cost incurred as a result of such action is carried by the person(s) responsible for such actions. Such irregular expenditure actions will be reported to the Auditor General, Treasury and the Legislative. Such irregular expenditure actions will be reported to the Auditor General, Treasury and the Legislative.

122 PREFERENCE POINT CLAIM IN TERMS OF THE PREFERENTIAL PROCUREMENT REGULATIONS 2001 The application of preferential procurement and broad base black economic empowerment must be consistent with. The application of preferential procurement and broad base black economic empowerment must be consistent with. The Preferential Procurement Framework Act and its Regulations The Preferential Procurement Framework Act and its Regulations The Broad based Black Economic Empowerment Act The Broad based Black Economic Empowerment Act Set target - achieve through preferential procurement. Set target - achieve through preferential procurement. Stipulate the preference point system in bid documents to be applied in adjudication. Documentation must include criteria for the evaluation of quotations/bids to identify the quotation/bid that represents the best value for money. No preferential procurement system has to be applied in respect of acquisitioning with a rand value less than R30 000 per case. Stipulate the preference point system in bid documents to be applied in adjudication. Documentation must include criteria for the evaluation of quotations/bids to identify the quotation/bid that represents the best value for money. No preferential procurement system has to be applied in respect of acquisitioning with a rand value less than R30 000 per case. The relevant preference point formula as per the PPPFA must be used to calculate the points for price in respect of acquisitioning with Rand value above R30 000. The relevant preference point formula as per the PPPFA must be used to calculate the points for price in respect of acquisitioning with Rand value above R30 000.

123 ACQUISITION MANAGEMENT DEVIATIONS Urgent and emergency situations. Urgent and emergency situations. Cases of urgency or emergency may arise which necessitate procurement sections to deviate from existing procedures in order to obtain goods and services. Such cases are catered for and are to be dealt with according to standing delegated powers. Cases of urgency or emergency may arise which necessitate procurement sections to deviate from existing procedures in order to obtain goods and services. Such cases are catered for and are to be dealt with according to standing delegated powers. It should be noted that poor planning is not a ground to justify urgency. It should be noted that poor planning is not a ground to justify urgency. Irregular actions. Irregular actions. Whenever the SCM directives delegations, and the Department supporting policy, instructions and procedures are deviated from, such actions are considered as irregular. Whenever the SCM directives delegations, and the Department supporting policy, instructions and procedures are deviated from, such actions are considered as irregular. Ex post facto approvals for such unauthorised actions will have to be obtained from the HoD or his/her delegate through the normal service channels. These can only be regularised if recommended by the BAC and approved by the HoD or his/her delegate. If not there are to remain irregular and should be dealt with in terms of applicable legislation. Ex post facto approvals for such unauthorised actions will have to be obtained from the HoD or his/her delegate through the normal service channels. These can only be regularised if recommended by the BAC and approved by the HoD or his/her delegate. If not there are to remain irregular and should be dealt with in terms of applicable legislation.

124 QUOTATIONS PROCESS The quotation process is initiated primarily by a user, who then developed the cost estimate, with or without the assistance of acquisition management. The quotation process is initiated primarily by a user, who then developed the cost estimate, with or without the assistance of acquisition management. Needs Memo. A needs memo is typically created by the chief user or end user. The memo is then forwarded to the acquisition management team to assist with the determination of the cost estimate and determine the acquisition process to be followed Needs Memo. A needs memo is typically created by the chief user or end user. The memo is then forwarded to the acquisition management team to assist with the determination of the cost estimate and determine the acquisition process to be followed Cost Estimate. The cost of the product or service must be estimated as accurately as possible to determine the approach to be followed for the acquisition. The different approaches that can be followed to estimate the costs include: Cost Estimate. The cost of the product or service must be estimated as accurately as possible to determine the approach to be followed for the acquisition. The different approaches that can be followed to estimate the costs include: Obtaining an amount from the Chief User on an amount that he/she is willing to spend on the specific request; Obtaining an amount from the Chief User on an amount that he/she is willing to spend on the specific request; Review prior orders; Review prior orders; Obtain telephonic quotations for budgeting purposes; Obtain telephonic quotations for budgeting purposes; Scan newspapers and adverts; and Scan newspapers and adverts; and Reviewing standard price lists. Reviewing standard price lists.

125 FORMAL PRICE QUOTATIONS Delegated Power. Delegated Power. Procurement officer to invite and accept price quotations instead of tenders. It is the responsibility of the procurement officers to ensure that procurement is done in accordance with a system, which firstly, is fair and competitive and secondly, promotes the Provincial Government’s reform initiatives. Procurement officer to invite and accept price quotations instead of tenders. It is the responsibility of the procurement officers to ensure that procurement is done in accordance with a system, which firstly, is fair and competitive and secondly, promotes the Provincial Government’s reform initiatives. Documents. Documents. Price quotation documents compiled by procurement officials must be simplified, with sufficient space for the offerer to endorse its offer and accept all conditions indicated therein. On the documentation it must be indicated that the price quotations will be subject to EC 36 conditions. The documents have to clearly indicate: Price quotation documents compiled by procurement officials must be simplified, with sufficient space for the offerer to endorse its offer and accept all conditions indicated therein. On the documentation it must be indicated that the price quotations will be subject to EC 36 conditions. The documents have to clearly indicate: The required goods or services required; The required goods or services required; The closing date and time by which the price quotations are to be returned; and The closing date and time by which the price quotations are to be returned; and The validity period. The validity period.

126 Time Scales. Time Scales. Procurement officers may determine the closing date and time of price quotations. The period involved does not have to be the same as that applicable to tenders. It must also be determined what the validity period will be. Procurement officers may determine the closing date and time of price quotations. The period involved does not have to be the same as that applicable to tenders. It must also be determined what the validity period will be. Recording. Recording. The required information must be recorded in the price quotation register. The price quotation must also be diarised so that it could be monitored. The required information must be recorded in the price quotation register. The price quotation must also be diarised so that it could be monitored. FORMAL PRICE QUOTATIONS

127 OBTAIN EXPENDITURE APPROVAL The chief user clerk completes the requisition form VAS 2 (or LOG 1 where LOGIS is used). The chief user clerk completes the requisition form VAS 2 (or LOG 1 where LOGIS is used). If the item is not available in stock or the item requested is not a store item, a request is send to the budget section, at the District Office, to draw an Expenditure Control (Commitments) Report from BAS. The report is provided to the Chief User. If the item is not available in stock or the item requested is not a store item, a request is send to the budget section, at the District Office, to draw an Expenditure Control (Commitments) Report from BAS. The report is provided to the Chief User. The Chief User or EDO (depending on circumstances) evaluates the Expenditure Control (Commitments) Report to check if there is sufficient Budget available to accommodate the request. If there is sufficient budget available and the Chief User is satisfied with the request, the VAS2 or LOG1 is approved. The Chief User or EDO (depending on circumstances) evaluates the Expenditure Control (Commitments) Report to check if there is sufficient Budget available to accommodate the request. If there is sufficient budget available and the Chief User is satisfied with the request, the VAS2 or LOG1 is approved. If no budget is available a determination will take place to see whether the request is an urgent need or not. In the event of the request not being urgent the request (VAS 2 or LOG1) is cancelled / rejected and the functionary is notified. If no budget is available a determination will take place to see whether the request is an urgent need or not. In the event of the request not being urgent the request (VAS 2 or LOG1) is cancelled / rejected and the functionary is notified.

128 Urgent need - budget If item requested supports an urgent need, the Chief User will forward a formal memorandum to Head Office to request for budget to be made available by means of virement. If item requested supports an urgent need, the Chief User will forward a formal memorandum to Head Office to request for budget to be made available by means of virement. Head Office will inform the Chief User whether the memorandum was approved or not. Head Office will inform the Chief User whether the memorandum was approved or not. With reference to the feedback received from Head office, the LOG1 will be approved or cancelled accordingly and the requestor will be informed of this decision. With reference to the feedback received from Head office, the LOG1 will be approved or cancelled accordingly and the requestor will be informed of this decision.

129 RECEIPT OF FORMAL PRICE QUOTATIONS Confidentiality. Confidentiality. Price quotations are confidential and must be treated as such. Price quotations are confidential and must be treated as such. Alterations on Price Quotations. Alterations on Price Quotations. The procurement officials are to ensure that the offerer initials any alterations on price quotations. In the event of price quotations being received with no initials against alterations, they are to be submitted to the supervisor for initialling in order to confirm that personnel attached to the procurement office did not do the alterations. The procurement officials are to ensure that the offerer initials any alterations on price quotations. In the event of price quotations being received with no initials against alterations, they are to be submitted to the supervisor for initialling in order to confirm that personnel attached to the procurement office did not do the alterations. Price Quotation Receipt Register. Price Quotation Receipt Register. The Tender Receipt Section records all price quotations received in the Price Quotation Receipt Register, after being numbered so that the total number of price quotations received for a specific quotation can be controlled. The following minimum information is required in the register. The Tender Receipt Section records all price quotations received in the Price Quotation Receipt Register, after being numbered so that the total number of price quotations received for a specific quotation can be controlled. The following minimum information is required in the register. Price quotation number. Price quotation number. Closing date. Closing date. Price quotation received and the numbers allocated thereto. Price quotation received and the numbers allocated thereto.

130 EVALUATION OF FORMAL PRICE QUOTATIONS During the scrutiny of the price quotations, the following must be attended to: During the scrutiny of the price quotations, the following must be attended to: Correctness and Availability of information. Study the price quotations thoroughly and note the following: Correctness and Availability of information. Study the price quotations thoroughly and note the following: Are the required documents correctly completed and signed? Are the required documents correctly completed and signed? Are prices and delivery periods indicated as firm or not? Are prices and delivery periods indicated as firm or not? What is the basis of delivery? What is the basis of delivery? What other information does the offerer in a covering letter furnish? What other information does the offerer in a covering letter furnish? What are the conditions set by the offerer? What are the conditions set by the offerer?

131 Specification. Check all price quotations for deviations from the specified requirement and note the nature and influence thereof. Specification. Check all price quotations for deviations from the specified requirement and note the nature and influence thereof. Price. Study the price for completeness and reasonableness. Price. Study the price for completeness and reasonableness. Comparative Schedule - Scoring. After scrutiny of the price quotations received, the maximum information must be noted on a comparative schedule. The positions of each offer in relation to the offer being the lowest in price (points) must be indicated. Comparative Schedule - Scoring. After scrutiny of the price quotations received, the maximum information must be noted on a comparative schedule. The positions of each offer in relation to the offer being the lowest in price (points) must be indicated. Validity. All steps must be taken to ensure that price quotations are dealt with whilst they are valid. If not, request all offerers by letter or fax to extend the validity periods of their offers. The responsibility to timely request and finalise extension of the validity periods of price quotations rests with the procurement office that invited the price quotations. Validity. All steps must be taken to ensure that price quotations are dealt with whilst they are valid. If not, request all offerers by letter or fax to extend the validity periods of their offers. The responsibility to timely request and finalise extension of the validity periods of price quotations rests with the procurement office that invited the price quotations. EVALUATION OF FORMAL PRICE QUOTATIONS

132 RECOMMENDATIONS Recommendations by Users. Recommendations by Users. The users must be requested to timely evaluate and submit written recommendations on the price quotations. The basic guidelines for acceptance of price quotations are firstly, to consider only price quotations received if their prices are reasonable, and secondly, to consider price quotations being the lowest in price or highest in points and complying with the specifications where more than one price quotation is received. The users must be requested to timely evaluate and submit written recommendations on the price quotations. The basic guidelines for acceptance of price quotations are firstly, to consider only price quotations received if their prices are reasonable, and secondly, to consider price quotations being the lowest in price or highest in points and complying with the specifications where more than one price quotation is received. Submissions. Submissions. Procurement officials must establish the format and manner in which recommendations are to be submitted for consideration. Procurement officials must establish the format and manner in which recommendations are to be submitted for consideration.

133 ACCEPTANCE OF PRICE QUOTATIONS Administrative Acceptance. Administrative Acceptance. The recommendations in respect of price quotations must be considered and accepted/amended, prior to approval by procurement officers or their delegated procurement officials. The recommendations in respect of price quotations must be considered and accepted/amended, prior to approval by procurement officers or their delegated procurement officials. Signing of Comparative Schedules. Signing of Comparative Schedules. The signing of the relevant comparative schedules by procurement officers or their delegated procurement officials does not indicate acceptance of price quotations within the Education Department. Only once the comparative schedules have been signed, indicating that the recommended price quotations are accepted, may the price quotations be processed. If the signing of the comparative schedules indicates that the recommendations are referred back or not approved, appropriate actions are to be taken. The signing of the relevant comparative schedules by procurement officers or their delegated procurement officials does not indicate acceptance of price quotations within the Education Department. Only once the comparative schedules have been signed, indicating that the recommended price quotations are accepted, may the price quotations be processed. If the signing of the comparative schedules indicates that the recommendations are referred back or not approved, appropriate actions are to be taken.

134 CATEGORIES OF BIDs Open Bids. Open Bids. Bid invitations are published in the Government Bid Bulletin and bids documents are supplied to all prospective bids on their request. All bids, which are submitted timely and in the prescribed manner, are considered. Bid invitations are published in the Government Bid Bulletin and bids documents are supplied to all prospective bids on their request. All bids, which are submitted timely and in the prescribed manner, are considered. Bids by means of approved lists (bidders from pre-selected suppliers). Bids by means of approved lists (bidders from pre-selected suppliers). In certain circumstances it is not practicable to invite open bids. In these cases it is advertised in the Government Bid Bulletin that firms/persons who are interested to render a specific service, or supply specific items, are to bid in the normal manner to have their names included on an approved list. In certain circumstances it is not practicable to invite open bids. In these cases it is advertised in the Government Bid Bulletin that firms/persons who are interested to render a specific service, or supply specific items, are to bid in the normal manner to have their names included on an approved list. Bids from sole suppliers. Bids from sole suppliers. If there is only one supplier a bid document is posted to the sole supplier. However, the invitation to bid must also be advertised in the Government Bid Bulletin. If there is only one supplier a bid document is posted to the sole supplier. However, the invitation to bid must also be advertised in the Government Bid Bulletin. Restricted bid. Restricted bid. In certain cases, the AO can approve that bids need not be advertised, but may be invited from selected potential suppliers only. In certain cases, the AO can approve that bids need not be advertised, but may be invited from selected potential suppliers only.

135 Conditions that must be followed when procuring goods or services through written or verbal quotations are as follows :- (a) quotations must be obtained from at least three different providers preferably from, but not limited to providers whose names appear on the list of accredited prospective providers of the municipality or municipal entity. (b) to the extent feasible, providers must be from Priority Business Enterprises and/or Black Business Enterprises; (c) if it is not possible to obtain at least three quotations, the reasons must be recorded and reported quarterly to the AO or another official designated by the AO; (f) if a quotation was submitted verbally, the order may be placed only against written confirmation by the selected provider. Verbal quotations

136 (1) Conditions for the procurement of goods or services through formal written price quotations:-– (a) quotations must be obtained in writing from at least three different providers whose names appear on the list of accredited prospective providers of the municipality or municipal entity; (b) quotations may be obtained from providers who are not listed, provided that such providers meet the listing; (c) to the extent feasible, providers must be from Priority Business Enterprises and/or Black Business Enterprises; (c) if it is not possible to obtain at least three quotations, the reasons must be recorded and approved by the chief financial officer or an official designated by the chief financial officer, and (d) the AO must record the names of the potential providers and their written quotations. Formal written price quotations

137 The procedure for the procurement of goods or services through written or verbal quotations or formal written price quotations is as follows :- (a) all requirements in excess of R30 000 (VAT included) that are to be procured by means of formal written price quotations must, be advertised for at least seven days on the website and an official notice board of the municipality or municipal entity; (b) when using the list of accredited prospective providers the AO must promote ongoing competition amongst providers by inviting providers to submit quotations on a rotation basis; (c) offers received must be evaluated on a competitive basis taking into account unconditional discounts Procedures for procuring goods or services through written or verbal quotations and formal written price quotations

138 (d) Offers below R30 000 (VAT included) must be awarded based on compliance to specifications and conditions of contract, ability and capability to deliver the goods or services and the lowest price; (e) acceptable offers above R30 000 (VAT included) are subjected the preference points system and must be awarded to the bidder with the highest points; (f) the AO must take all reasonable steps to ensure that the procurement of goods and services through written or verbal quotations or formal written price quotations is not abused; (g) the AO or chief financial officer must on a monthly basis be notified in writing of all written or verbal quotations and formal written price quotations accepted by an official acting in terms of a sub- delegation, and; (h) municipal requirements for proper record keeping must always be observed. Procedures for procuring goods or services through written or verbal quotations and formal written price quotations

139 (1) Goods or services above transaction value of R200 000 (VAT included) and long term contracts may only be procured through a competitive bidding process, subject to par 11(2) of this policy; and (2) No requirement for goods or services above an estimated transaction value of R200 000 (VAT included), may deliberately be split into parts or items of lesser value merely for sake of procuring the goods or services otherwise than through a competitive bidding process. Competitive bidding process

140 Procedures for the following stages of a competitive bidding process:- (a) compilation of bidding documentation as detailed in par 21 (b) public invitation of bids as detailed in par 22 (c) site meetings or briefing sessions, if applicable as detailed in par 22 (d) handling of bids submitted in response to public invitation as detailed in par 23 (e) evaluation of bids as detailed in par 28 (f) awarding of contracts as detailed in par 29 (g) administration of contracts, should include a written agreement between the municipality and the bidder after approval of the bid; and (h) proper record keeping must be such that original /legal copies of written agreements are kept in a secure place for reference purposes. Process for competitive bidding

141 Criteria to which bid documentation for a competitive bidding process must comply, must :- (a) take into account – (i) the general conditions of contract and any special conditions of contracts, is specified; (ii) any Treasury guidelines on bid documentation; and (iii) the requirements of the Construction Industry Development Board, in the case of a bid relating to construction, upgrading or refurbishment of buildings or infrastructure; (b) include preference points system to be used, goals as contemplated in the Preferential Procurement Regulations and evaluation and adjudication criteria, including any other criteria required by other applicable legislation; Bid documentation for competitive bids

142 (c) compel bidders to declare any conflict of interest they may have in the transaction for which the bid is submitted; (d) if the value of the transaction is expected to exceed R10 million (VAT included), require bidders to furnish– (i) if the bidder is required by law to prepare annual financial statements for auditing, their audited annual financial statements – (aa) for the past three years; or (bb) since their establishment if established during the past three years; (ii) a certificate signed by the bidder certifying that the bidder has no undisputed commitments for municipal services towards a municipality or other service provider in respect of which payment is overdue for more than 30 days; (iii) particulars of any contracts awarded to the bidder by an organ of state during the past five years, including particulars of any material noncompliance or dispute concerning the execution of such contract; Bid documentation for competitive bids

143 ROLE OF PROCUREMENT SECTION The Procurement Section will invite bids on behalf of the Department. The Procurement Section will invite bids on behalf of the Department. All specifications of the Department have to be ratified by the Bid Adjudication Committee before bids can be invited. All specifications of the Department have to be ratified by the Bid Adjudication Committee before bids can be invited. BID REGISTRATION BID REGISTRATION A bid number is to be allocated to the relevant case from the Bid Register. The bid number consists of at least three parts, namely a prefix indicating the procurement office involved, letter “T” for Bids and sequential number from the bid register. A bid number is to be allocated to the relevant case from the Bid Register. The bid number consists of at least three parts, namely a prefix indicating the procurement office involved, letter “T” for Bids and sequential number from the bid register. A separate file must be used for each requirement to be processed, wherein all bids and subsequent related correspondence will be filed. A separate file must be used for each requirement to be processed, wherein all bids and subsequent related correspondence will be filed.

144 BID DOCUMENTS RELATING TO OPEN BIDS Time scales. Determine time scales involved with the bid that is firstly the date of advertising, secondly the closing date and time of bid and lastly the validity period of the bid. Time scales. Determine time scales involved with the bid that is firstly the date of advertising, secondly the closing date and time of bid and lastly the validity period of the bid. Closing date and time. All Bids close at 11:00 on the closing date indicated in the bids documents. Bids close at least 30 days after the date of publication in the Government Bid Bulletin. If the materials are to be stocked outside of the RSA the Bid Bulletin may be longer. If a shorter closing period is required, approval from the Bid Adjudication Committee is to be obtained. Bids may not close over a pre-determined period during December / January of each year. If the closing date falls on a Saturday, Sunday or Public Holiday, the closing date must be forwarded to the first following working day. Closing date and time. All Bids close at 11:00 on the closing date indicated in the bids documents. Bids close at least 30 days after the date of publication in the Government Bid Bulletin. If the materials are to be stocked outside of the RSA the Bid Bulletin may be longer. If a shorter closing period is required, approval from the Bid Adjudication Committee is to be obtained. Bids may not close over a pre-determined period during December / January of each year. If the closing date falls on a Saturday, Sunday or Public Holiday, the closing date must be forwarded to the first following working day. Validity period. The period offers are to remain valid is normally not longer than sixty days, but in the case of period contracts not longer than ninety days. The validity period is calculated from the day after closing date of the bid. Validity period. The period offers are to remain valid is normally not longer than sixty days, but in the case of period contracts not longer than ninety days. The validity period is calculated from the day after closing date of the bid.

145 Bid documents When compiling bid documents ensure that the following are included: When compiling bid documents ensure that the following are included: Prepare the advertisement by completing the form in the prescribed manner. Prepare the advertisement by completing the form in the prescribed manner. The form indicates the exact address and the route to the bid box concerned. The form indicates the exact address and the route to the bid box concerned. The form provides for the obtaining of the required “Tax Clearance Certificate” by bid. The form provides for the obtaining of the required “Tax Clearance Certificate” by bid. The form covers the general conditions of contract as approved The form covers the general conditions of contract as approved The form provides for the particulars of the item required, closing time, validity period, etc, and also makes provision for the Bidders price and other information required, from the Bidder. The following information must be entered by the Procurement Section: The form provides for the particulars of the item required, closing time, validity period, etc, and also makes provision for the Bidders price and other information required, from the Bidder. The following information must be entered by the Procurement Section: Bid Number Bid Number Closing Date and Time Closing Date and Time Validity Period Validity Period Description of requirement, which must correspond with the advertisement Description of requirement, which must correspond with the advertisement Location of delivery of where the service is required. Location of delivery of where the service is required.

146 Bid documents continued These forms provide for the claiming of preferences relating to products bearing the SABS Mark and having local content and equity ownership by Historically Disadvantaged individuals (HDI’S) and are to be filled in by the Bidder. These forms provide for the claiming of preferences relating to products bearing the SABS Mark and having local content and equity ownership by Historically Disadvantaged individuals (HDI’S) and are to be filled in by the Bidder. The form provides for the required “Declaration of interest” by the Bidder. The form provides for the required “Declaration of interest” by the Bidder. Special bid conditions. Any other special bid conditions, if applicable and as approved by the Department. In this regard the opinion of the Legal Section is to be obtained, prior to Bidding. Special bid conditions. Any other special bid conditions, if applicable and as approved by the Department. In this regard the opinion of the Legal Section is to be obtained, prior to Bidding.

147 Bid specification committee must compile specifications for each procurement of goods or services (1) Specifications – (a) must be drafted in an unbiased manner to allow all potential suppliers to offer their goods or services; (b) must take account of any accepted standards such as those issued by Standards South Africa, the International Standards Organisation, or an authority accredited or recognised by the South African National Accreditation System with which the equipment or material or workmanship should comply; (c) where possible, be described in terms of performance required rather than in terms of descriptive characteristics for design Specification committees

148 (d) may not create trade barriers in contract requirements in the forms of specifications, plans, drawings, designs, testing and test methods, packaging, marking or labeling of conformity certification; (e) may not make reference to any particular trade mark, name, patent, design, type, specific origin or producer unless there is no other sufficiently precise or intelligible way of describing the characteristics of the work, in which case such reference must be accompanied by the words “equivalent”; (f) must indicate each specific goal for which points may be awarded in terms of the points system set out in the Preferential Procurement Regulations 2001; and (g) must be approved by the AO prior to publication of the invitation for bids in terms of par 22 of this policy. The accounting officer, may sub-delegate this function to the chair of the bid specification committee. Specification committees

149 (3) The bid specification committee must be composed of multi-disciplinary team of municipal officials which include at least one procurement rep, one technical rep and one legal rep as minimum, and may when appropriate, include an external specialists advisor. (4) No person, advisor or corporate entity involved with the bid specification committee, or director of such a corporate entity, may bid for any resulting contracts. Specification committees

150 Specifications The format of the specification can be one of the following or a combination thereof: The format of the specification can be one of the following or a combination thereof: User requirement User requirement Functional Specification Functional Specification Statement of work Statement of work Formal contracts. In the event that a formal contract will be concluded, the concept formal contract is to form part of the bid documents. It is to be ensured that approval from both the Legal Section, through the chief of finance, and the Department Bid Adjudication Committee and the office of the Procurement Section has already been obtained. Formal contracts. In the event that a formal contract will be concluded, the concept formal contract is to form part of the bid documents. It is to be ensured that approval from both the Legal Section, through the chief of finance, and the Department Bid Adjudication Committee and the office of the Procurement Section has already been obtained. Task directives for professional services. It is important that due attention is given to the correctness of the task directive as it can ensure that the bid process runs more smoothly which shortens the turnaround time on the process. Task directives for professional services. It is important that due attention is given to the correctness of the task directive as it can ensure that the bid process runs more smoothly which shortens the turnaround time on the process. Recording of Bids Recording of Bids Enter the required particulars of the bid in the Bid Register. Enter the required particulars of the bid in the Bid Register. Diarise the date that the file is to be held over for and give an instruction on the file to the registry to pend the file. Diarise the date that the file is to be held over for and give an instruction on the file to the registry to pend the file. Despatching of Bid Despatching of Bid Forward forms and bid documents to the despatch section for the advertising of bids and distribution of bid documents to interested or potential bidders. Forward forms and bid documents to the despatch section for the advertising of bids and distribution of bid documents to interested or potential bidders.

151 DEVELOPING SPECIFICATIONS User requirements. User requirements. The user with the need for the product or service usually initiates the drafting of the specification. It is always better to identify and adapt an existing specification that meets, or is close to meeting, expectations and requirements. The user with the need for the product or service usually initiates the drafting of the specification. It is always better to identify and adapt an existing specification that meets, or is close to meeting, expectations and requirements. Technical specifications Technical specifications usually differ to user requirements, as they are mainly observable characteristics, such as dimensions of the product or materials that the product is made from. User requirements on the other hand describe the results or outcomes to be achieved. usually differ to user requirements, as they are mainly observable characteristics, such as dimensions of the product or materials that the product is made from. User requirements on the other hand describe the results or outcomes to be achieved. Standards bodies. Standards bodies. Wherever possible, standards and specifications from bodies such as the SABS should be used. The SABS is available to assist in the drafting of specifications even if the specification does not carry a SABS number. In the latter case, the Department must carry the cost and the specification then becomes the property of the Department. Wherever possible, standards and specifications from bodies such as the SABS should be used. The SABS is available to assist in the drafting of specifications even if the specification does not carry a SABS number. In the latter case, the Department must carry the cost and the specification then becomes the property of the Department.

152 Technical equipment. In the case of technical equipment, apparatus, machinery and fragile goods, the following must be clearly specified: Technical equipment. In the case of technical equipment, apparatus, machinery and fragile goods, the following must be clearly specified: Whether installation or erection is required; Whether installation or erection is required; Whether servicing and / or maintenance is required; Whether servicing and / or maintenance is required; Whether demonstrations and or training is required; and Whether demonstrations and or training is required; and The guarantee that is required. The guarantee that is required. Statutory requirements. The Department must ensure that specification adhere to statutory requirements set by other bodies. Examples of some of the acts that may be applicable include: Statutory requirements. The Department must ensure that specification adhere to statutory requirements set by other bodies. Examples of some of the acts that may be applicable include: The Hazardous Substances Act, 1973, (Act No 15 of 1973); The Hazardous Substances Act, 1973, (Act No 15 of 1973); The Medicines and Related Substances Control ACT, 1965 (Act No 10 of 1965); The Medicines and Related Substances Control ACT, 1965 (Act No 10 of 1965); The Foodstuffs, Cosmetics and Disinfectants Act, 1981 (Act No 85 of 1993); The Foodstuffs, Cosmetics and Disinfectants Act, 1981 (Act No 85 of 1993); Occupational Health and Safety Act, 1993 (Act No 85 of 1993); Occupational Health and Safety Act, 1993 (Act No 85 of 1993); The Post Office Act, 1958, (Act No 44 of 1958); and The Post Office Act, 1958, (Act No 44 of 1958); and Second Wage Amendment Act, 1981, (Act No 58 of 1981). Second Wage Amendment Act, 1981, (Act No 58 of 1981). DEVELOPING SPECIFICATIONS

153 Total Cost of Ownership (TCO) or Lifecycle Costing In the development of the specification it will be important to address all elements of the cost of the product or service. The terms sometimes used are Total Cost of Ownership (TCO) or Lifecycle Costing. This is particularly important for assets. Here all elements of the cost of an item are considered during the usable life of the asset. These elements would include: In the development of the specification it will be important to address all elements of the cost of the product or service. The terms sometimes used are Total Cost of Ownership (TCO) or Lifecycle Costing. This is particularly important for assets. Here all elements of the cost of an item are considered during the usable life of the asset. These elements would include: The planning cost; The planning cost; The original acquisition cost; The original acquisition cost; The cost of maintenance and services; The cost of maintenance and services; The cost of risk for items such as insurance (even though the State is self insured, this is a cost that must be considered); The cost of risk for items such as insurance (even though the State is self insured, this is a cost that must be considered); The cost of repairs and spares; The cost of repairs and spares; The interim replacement cost whilst an item is undergoing maintenance and/or repairs; and The interim replacement cost whilst an item is undergoing maintenance and/or repairs; and The cost of labour to the Department where this is required; The cost of labour to the Department where this is required; The cost of transport and holding costs; The cost of transport and holding costs; The cost of disposing of the asset where this is applicable; and The cost of disposing of the asset where this is applicable; and Other factors that will either drive up or drive down the total cost during the time that the department requires the asset. Other factors that will either drive up or drive down the total cost during the time that the department requires the asset. The total cost of the asset is not the cost that is reflected in the asset register. That cost is typically the value of the asset used for financial accounting practices. The total cost of the asset is not the cost that is reflected in the asset register. That cost is typically the value of the asset used for financial accounting practices.

154 Lifecycle costing The lifecycle cost can be divided into four cost areas: The lifecycle cost can be divided into four cost areas: Planning costs. These are the costs associated with the development of the acquisition strategy and the specifications. With some acquisitions it is important to also include environmental impact assessments and feasibility studies. Planning costs. These are the costs associated with the development of the acquisition strategy and the specifications. With some acquisitions it is important to also include environmental impact assessments and feasibility studies. Acquisition costs. This is traditionally the cost that receives the most attention. For assets this would include the costs of manufacturing or constructing the solution as well as the cost of transporting the solution. Another cost to consider is the cost of commissioning. Acquisition costs. This is traditionally the cost that receives the most attention. For assets this would include the costs of manufacturing or constructing the solution as well as the cost of transporting the solution. Another cost to consider is the cost of commissioning. Operation and maintenance costs. Here the recurring expenditure is determined. This will include items such as the cost of electricity, water and other utilities; the cost of specialised staff that may be needed; and cleaning costs. If insurance costs are not applicable, then it is important to include a portion of the security costs that can be attributed to the product. Operation and maintenance costs. Here the recurring expenditure is determined. This will include items such as the cost of electricity, water and other utilities; the cost of specialised staff that may be needed; and cleaning costs. If insurance costs are not applicable, then it is important to include a portion of the security costs that can be attributed to the product. Disposal costs. Sometimes agents are needed to dispose of an asset. In other instances, costs may be incurred in dismantling and removing the product. With some assets there may even be a revenue component if there is a residual or intellectual value associated with the item. Disposal costs. Sometimes agents are needed to dispose of an asset. In other instances, costs may be incurred in dismantling and removing the product. With some assets there may even be a revenue component if there is a residual or intellectual value associated with the item.

155 BID DOCUMENTS RELATING TO LISTS OF APPROVED / PRE-SELECTED BIDDERS Need for approved lists Need for approved lists Different circumstances sometimes necessitate that a panel of persons/firms from which bids may be invited, be available. It may, for instance, be that specific repetitive requirements, although anticipated, for some reason or other cannot be planned for in advance, or that the service/product is usually required on a very short notice, or a specific project is extensive and requires the inclusion of a number of specialist fields. Different circumstances sometimes necessitate that a panel of persons/firms from which bids may be invited, be available. It may, for instance, be that specific repetitive requirements, although anticipated, for some reason or other cannot be planned for in advance, or that the service/product is usually required on a very short notice, or a specific project is extensive and requires the inclusion of a number of specialist fields. Invitations for inclusion on approved lists Invitations for inclusion on approved lists Invitations of bids with the purpose of being included in an approved list basically follow the steps similar to those regarding the invitation of open bidders. The difference, however, lies in the fact that the bid document consist of the item, or more often, the service required, a questionnaire which must be filled in by the bidder and the criteria against which applications to be included in the approved list will be evaluated. Invitations of bids with the purpose of being included in an approved list basically follow the steps similar to those regarding the invitation of open bidders. The difference, however, lies in the fact that the bid document consist of the item, or more often, the service required, a questionnaire which must be filled in by the bidder and the criteria against which applications to be included in the approved list will be evaluated.

156 Maintenance of approved lists Maintenance of approved lists From time to time the Procurement Section publishes particulars of supplies or services, in respect of which there are approved lists of bidders, in the Government Bid Bulletin and invites any potential bidders to apply for inclusion in such lists. If a department finds that a bidder on the approved panel does not fully comply with the set requirements, his name may be deleted from the approved list. From time to time the Procurement Section publishes particulars of supplies or services, in respect of which there are approved lists of bidders, in the Government Bid Bulletin and invites any potential bidders to apply for inclusion in such lists. If a department finds that a bidder on the approved panel does not fully comply with the set requirements, his name may be deleted from the approved list. Invitation to bid for actual requirement Invitation to bid for actual requirement If and when the item or service is required, the Department invites bidders in the same manner as that applicable to open bidders, from some of, or from all bidders whose names appear on the approved list, depending on the circumstances. If and when the item or service is required, the Department invites bidders in the same manner as that applicable to open bidders, from some of, or from all bidders whose names appear on the approved list, depending on the circumstances. BID DOCUMENTS RELATING TO LISTS OF APPROVED / PRE-SELECTED BIDDERS

157 BID DOCUMENTS RELATING TO SOLE SUPPLIERS Source. Although only sole suppliers are referred to, it must be borne in mind that it may be possible that more than one manufacturer / distributor may be in a position to supply the specific item, but this item is not available in the open market. Under these circumstances all known suppliers will be invited to bid, as well as having the bid advertised in the Government Bid Bulletin. Source. Although only sole suppliers are referred to, it must be borne in mind that it may be possible that more than one manufacturer / distributor may be in a position to supply the specific item, but this item is not available in the open market. Under these circumstances all known suppliers will be invited to bid, as well as having the bid advertised in the Government Bid Bulletin. Invitation to bid. The procedures for inviting a bid from a sole supplier are similar to those used for inviting open bidders, but the following differences exist: Invitation to bid. The procedures for inviting a bid from a sole supplier are similar to those used for inviting open bidders, but the following differences exist: The request for the invitation of a bid from sole supplier must be submitted for approval to the BAC prior to the invitation. Included in the request must be documentary proof that the status of the sole suppliers or sole agent must produce documentary proof from their parent companies or main suppliers that they are in fact the sole suppliers or agents. The request for the invitation of a bid from sole supplier must be submitted for approval to the BAC prior to the invitation. Included in the request must be documentary proof that the status of the sole suppliers or sole agent must produce documentary proof from their parent companies or main suppliers that they are in fact the sole suppliers or agents. The invitation to bid must also be advertised in the Government Bid Bulletin. The invitation to bid must also be advertised in the Government Bid Bulletin. The bid documents to be used, differ slightly from those used to invite open bidders in the following way: The bid documents to be used, differ slightly from those used to invite open bidders in the following way: Addressed to the specific bidder is added to those used for open bidders. Addressed to the specific bidder is added to those used for open bidders. The appropriate form is amended by adding the following “Indicate nett percentage commission or profit before tax…” The appropriate form is amended by adding the following “Indicate nett percentage commission or profit before tax…”

158 ADVERTISING OF BIDDERS To ensure that the biding system is open, fair, and competitive, as required in the MFMA, bids are advertised in the Government Bid Bulletin. To ensure that the biding system is open, fair, and competitive, as required in the MFMA, bids are advertised in the Government Bid Bulletin. The Government Printing Works advertises annually in December, a list containing publication dates and numbers of the following year’s Government Bid Bulletins. This list is to be used to establish the dates by which the forms are to be submitted. The Government Printing Works advertises annually in December, a list containing publication dates and numbers of the following year’s Government Bid Bulletins. This list is to be used to establish the dates by which the forms are to be submitted. On receipt of the bulletin containing the list, an own programme is to be compiled, by fixing dates by which the submission of forms is required. The publication dates and the numbers of the various bulletins are also to be included in the program. On receipt of the bulletin containing the list, an own programme is to be compiled, by fixing dates by which the submission of forms is required. The publication dates and the numbers of the various bulletins are also to be included in the program.

159 PREPARATION OF ADVERTISEMENTS File. Open a file for each category of advertisement as it is categorised in the bulletin, namely: File. Open a file for each category of advertisement as it is categorised in the bulletin, namely: Invitation of bidders for the categories supplies, services and disposals. Invitation of bidders for the categories supplies, services and disposals. Results of Bidders awarded concerning supplies and services. Results of Bidders awarded concerning supplies and services. Information of cancelled bidders. Information of cancelled bidders. Verification of advertisement notifications. Ensure the form contains the following information: Verification of advertisement notifications. Ensure the form contains the following information: Publication date Publication date Bid number Bid number Closing time and date Closing time and date Where the supply / service is required Where the supply / service is required Description of the supply / service required Description of the supply / service required Information concerning dates and venues set aside for compulsory site inspections, explanatory meetings or briefing cessions, if applicable. Information concerning dates and venues set aside for compulsory site inspections, explanatory meetings or briefing cessions, if applicable. Submission of advertisements. On the Government Printing Work’s submission date, files containing the form received during the preceding week are drawn. A list of all advertisements in the various categories is then compiled so that it can be correctly published in the Government Bid Bulletin. The list is then submitted to the Government Printing Works for publication. Submission of advertisements. On the Government Printing Work’s submission date, files containing the form received during the preceding week are drawn. A list of all advertisements in the various categories is then compiled so that it can be correctly published in the Government Bid Bulletin. The list is then submitted to the Government Printing Works for publication. Verification of actual advertising. Copies of all the forms are to be kept, so that it can be verified that the advertisements had in fact appeared in the Government Bid Bulletin. Such verification will be done by attaching to the relevant forms, copies of the applicable pages of the Government Bid Bulletin in which the invitations had been advertised. Verification of actual advertising. Copies of all the forms are to be kept, so that it can be verified that the advertisements had in fact appeared in the Government Bid Bulletin. Such verification will be done by attaching to the relevant forms, copies of the applicable pages of the Government Bid Bulletin in which the invitations had been advertised.

160 DISTRIBUTION OF BID DOCUMENTS Date of distribution. Under no circumstances may the bid documents be posted before the published date of bid. On the day the bid is advertised in the Government Bid Bulletin, the bid documents must be posted to all those known potential bidders. Date of distribution. Under no circumstances may the bid documents be posted before the published date of bid. On the day the bid is advertised in the Government Bid Bulletin, the bid documents must be posted to all those known potential bidders. Requests for documents. Requests for bid documents to be forwarded to interested bidders are to be recorded on a suitable application form and dealt with as follows: Requests for documents. Requests for bid documents to be forwarded to interested bidders are to be recorded on a suitable application form and dealt with as follows: Personal requests: After the applicant has completed and signed the application form, the relevant bid document may be handed over. The following information must appear on the form: Personal requests: After the applicant has completed and signed the application form, the relevant bid document may be handed over. The following information must appear on the form: Bid number Bid number Name and address of bidder Name and address of bidder Supplier’s contact person, telephone and fax number Supplier’s contact person, telephone and fax number Date of collection Date of collection Name and signature of the recipient Name and signature of the recipient Telephonic requests: The application form is to be completed on behalf of the applicant and the relevant bid document posted thereafter. Telephonic requests: The application form is to be completed on behalf of the applicant and the relevant bid document posted thereafter. Facsimile requests: The application form is to be completed on behalf of the applicant and the relevant bid document posted thereafter. The facsimile is to be attached to the completed form. Facsimile requests: The application form is to be completed on behalf of the applicant and the relevant bid document posted thereafter. The facsimile is to be attached to the completed form.

161 EXTENSION OF CLOSING DATES Advertising. Should it be necessary to extend the closing date of a bid, the extension is to be advertised before the original closing date. Furthermore, the bidders to whom bid documents had already been forwarded must be advised in writing of the intended extension. For this purpose a form may be used. Advertising. Should it be necessary to extend the closing date of a bid, the extension is to be advertised before the original closing date. Furthermore, the bidders to whom bid documents had already been forwarded must be advised in writing of the intended extension. For this purpose a form may be used. RECEIPT OF BIDDERS RECEIPT OF BIDDERS Actual receipt of bids. Bids must at all times be deposited in the bid box, even if delivered by hand. If bidders are received through the post, it must immediately be channelled to the bid receipt section, without being opened. In the latter case, the date and time it is received are stamped on the envelopes and it is then sorted according to the closing dates in “Pigeon-Holes” Each “Pigeon Hole” represents a specific day of the month. Bulky bidders received must be kept securely with reference in the relevant “Pigeon-Hole” as to where it is being kept. Actual receipt of bids. Bids must at all times be deposited in the bid box, even if delivered by hand. If bidders are received through the post, it must immediately be channelled to the bid receipt section, without being opened. In the latter case, the date and time it is received are stamped on the envelopes and it is then sorted according to the closing dates in “Pigeon-Holes” Each “Pigeon Hole” represents a specific day of the month. Bulky bidders received must be kept securely with reference in the relevant “Pigeon-Hole” as to where it is being kept. Bid box keys. Procurement officers are to ensure that bid box keys are controlled and not left unattended. When not in use, the keys are to be locked away. Bid box keys. Procurement officers are to ensure that bid box keys are controlled and not left unattended. When not in use, the keys are to be locked away. Opening of Bid Box. Concerning the bid box, the following procedure must be followed by two members of the Bid Receipt Section when the box is opened: Opening of Bid Box. Concerning the bid box, the following procedure must be followed by two members of the Bid Receipt Section when the box is opened: At 10:50 the exact time is confirmed by calling telecom, whereafter own watches are synchronised with the telecom time. At 10:50 the exact time is confirmed by calling telecom, whereafter own watches are synchronised with the telecom time. At 10:55 the bid box is unlocked in the presence of the two persons, whereafter the bid box is emptied and the bidders put in a canvass bag provided for this purpose. If there are a few bidders involved, the use of a canvas bag may be dispensed with. At 10:55 the bid box is unlocked in the presence of the two persons, whereafter the bid box is emptied and the bidders put in a canvass bag provided for this purpose. If there are a few bidders involved, the use of a canvas bag may be dispensed with. At 11:00 sharp the outer opening of the bid box is closed, the bid box is inspected to ensure that it is completely empty, the door of the bid box is locked, the canvas bag is locked and taken to the sorting table where it is unlocked and the contents deposited on the sorting table. At 11:00 sharp the outer opening of the bid box is closed, the bid box is inspected to ensure that it is completely empty, the door of the bid box is locked, the canvas bag is locked and taken to the sorting table where it is unlocked and the contents deposited on the sorting table. The bid boxes should generally be open for 24 hours per day, 7 days a week. However, the bid boxes are to be closed at the closing time for bidders for about 1 hour, to compel bidders to hand in their late bidders and obtain receipts for such late bidders The bid boxes should generally be open for 24 hours per day, 7 days a week. However, the bid boxes are to be closed at the closing time for bidders for about 1 hour, to compel bidders to hand in their late bidders and obtain receipts for such late bidders Sorting of envelopes. Each envelope is stamped with a stamp indicating the date and time (11:00) that it was received. The bidders are sorted numerically according to the closing dates, together with the bidders that have been taken from the relevant “Pigeon-Holes” earlier on. Late bidders must be kept in an allocated “Pigeon-Hole” until all bidders received timeously are dealt with, where after they are handed to the supervisor for the necessary attention. Sorting of envelopes. Each envelope is stamped with a stamp indicating the date and time (11:00) that it was received. The bidders are sorted numerically according to the closing dates, together with the bidders that have been taken from the relevant “Pigeon-Holes” earlier on. Late bidders must be kept in an allocated “Pigeon-Hole” until all bidders received timeously are dealt with, where after they are handed to the supervisor for the necessary attention.

162 Preparation prior to opening of bidders The bid receipt section draws the following and place it on the sorting table: The bid receipt section draws the following and place it on the sorting table: The files of all those bidders that will close on a specific day. The files of all those bidders that will close on a specific day. The bidders previously posted, received and placed in the “Pigeon-Holes” for the specific day. The bidders previously posted, received and placed in the “Pigeon-Holes” for the specific day. The bidders deposited in the bid box, removed earlier on and applicable for the specific day. The bidders deposited in the bid box, removed earlier on and applicable for the specific day. Opening of bidders for a specific date. Concerning the bidders for the date involved, all envelopes are opened on two sides to ensure that no documents are left inside. If an envelope contains any loose pages, these must be stapled to the bid document. Care must be taken that the respective bidders are kept separately. In order to achieve the object of transparency, bidders must be opened in public. Opening of bidders for a specific date. Concerning the bidders for the date involved, all envelopes are opened on two sides to ensure that no documents are left inside. If an envelope contains any loose pages, these must be stapled to the bid document. Care must be taken that the respective bidders are kept separately. In order to achieve the object of transparency, bidders must be opened in public. Verification of opened bidders. Place all the bidders received and opened in the relevant file and hand to the supervisor. The supervisor checks each bid to ensure that all the documents have reference to the correct bid and reads out the names of all bidders. Verification of opened bidders. Place all the bidders received and opened in the relevant file and hand to the supervisor. The supervisor checks each bid to ensure that all the documents have reference to the correct bid and reads out the names of all bidders. Opened envelopes. The Supervisor of the Bid Receipt Section checks all the envelopes for the specific day to ensure that no documents are left behind. The empty envelopes are then bound together and kept in a cabinet for approximately three months, whereafter it can be discarded. Opened envelopes. The Supervisor of the Bid Receipt Section checks all the envelopes for the specific day to ensure that no documents are left behind. The empty envelopes are then bound together and kept in a cabinet for approximately three months, whereafter it can be discarded. Unmarked envelopes. In the event that envelopes have not been endorsed in the required manner and the bid particulars thus not displayed on the outside, the envelopes may be opened by the Supervisor of the Bid Receipt Section to establish the bid number and closing date. This information is then endorsed on the outside of the envelope, where after the envelope is sealed and placed in the appropriate “Pigeon-Hole”, if it is not a late bid. Unmarked envelopes. In the event that envelopes have not been endorsed in the required manner and the bid particulars thus not displayed on the outside, the envelopes may be opened by the Supervisor of the Bid Receipt Section to establish the bid number and closing date. This information is then endorsed on the outside of the envelope, where after the envelope is sealed and placed in the appropriate “Pigeon-Hole”, if it is not a late bid. Bidders from only or sole suppliers. If a bid was originally invited from one bidder only, or sole bidder, the bid may be opened if it is received prior to the closing date. If more than one bidder was invited to bid, all the bidders must be opened in the normal manner on the closing date and directly after the closing time. Bidders from only or sole suppliers. If a bid was originally invited from one bidder only, or sole bidder, the bid may be opened if it is received prior to the closing date. If more than one bidder was invited to bid, all the bidders must be opened in the normal manner on the closing date and directly after the closing time.

163 OPENED BIDDERS Authentication. All bidders received are perforated, or marked in a manner unique to the Bid Receipt Section to prevent the inclusion of late documents or replacement of documents already received. The bidders are also stamped with a number so that the total number of bidders received for a specific bid can be controlled. Authentication. All bidders received are perforated, or marked in a manner unique to the Bid Receipt Section to prevent the inclusion of late documents or replacement of documents already received. The bidders are also stamped with a number so that the total number of bidders received for a specific bid can be controlled. Alterations on bidders. The bidders are all checked for any alterations made by the terderer and, if applicable, submitted to the supervisor of the Bid Receipt Section for initialling, to confirm that personnel attached to the procurement section did not make the alterations. Alterations on bidders. The bidders are all checked for any alterations made by the terderer and, if applicable, submitted to the supervisor of the Bid Receipt Section for initialling, to confirm that personnel attached to the procurement section did not make the alterations. Bid receipt register. All bidders sorted per specific bid number on the day that they are opened, are recorded in a bid receipt register by the bid receipt section. The following minimum information is required in the register: Bid receipt register. All bidders sorted per specific bid number on the day that they are opened, are recorded in a bid receipt register by the bid receipt section. The following minimum information is required in the register: Bid number Bid number Closing date Closing date Bidders received and the numbers allocated thereto. Bidders received and the numbers allocated thereto. Names and signatures of two persons opening the bidders. Names and signatures of two persons opening the bidders. Forwarding to users. In the case of bidders received by the office of the Department Bid Board, a covering letter, that contains the names of bidders, is despatched either by hand, or by post together with the bidders received, to the relevant Department. Forwarding to users. In the case of bidders received by the office of the Department Bid Board, a covering letter, that contains the names of bidders, is despatched either by hand, or by post together with the bidders received, to the relevant Department.

164 LATE BIDDERS General. A late bid is not opened, except where the envelope was not endorsed with the bid number and/or return address. Bidders are late if they are received at the address specified in the bid document, after closing time (11:00) on the specified date. No late bidders shall be admitted for consideration, except under the following circumstances: General. A late bid is not opened, except where the envelope was not endorsed with the bid number and/or return address. Bidders are late if they are received at the address specified in the bid document, after closing time (11:00) on the specified date. No late bidders shall be admitted for consideration, except under the following circumstances: Initial steps in handling a late bid. The bid receipt section is to establish the reason for the late bid, as the delay could have been caused by an official at the address where the bid had to be delivered, with the result that the bid could then be allowed for consideration. The initial steps in the handling of a late bid differ depending on the manner in which it was received. The initial steps taken for the three different categories are as follows: Initial steps in handling a late bid. The bid receipt section is to establish the reason for the late bid, as the delay could have been caused by an official at the address where the bid had to be delivered, with the result that the bid could then be allowed for consideration. The initial steps in the handling of a late bid differ depending on the manner in which it was received. The initial steps taken for the three different categories are as follows: Late bid handed in by hand. Receive the bid and immediately affix the stamp indicating the date and precise time of receipt on the envelope. Issue a receipt indicating the bid number, date and exact time of receipt, name of bidder, reason for late submission and the name of person handing in the late bid. Obtain the signature of the person submitting the late bid, sign the receipt and hand the original copy of the receipt to the person. Late bid handed in by hand. Receive the bid and immediately affix the stamp indicating the date and precise time of receipt on the envelope. Issue a receipt indicating the bid number, date and exact time of receipt, name of bidder, reason for late submission and the name of person handing in the late bid. Obtain the signature of the person submitting the late bid, sign the receipt and hand the original copy of the receipt to the person. Bid deposited in the bid box after closing time/date. Receive the late bid from the sorting clerk and fill in the necessary information in the designated spaces of the additional stamp affixed to the envelope and which contains the following: Bid deposited in the bid box after closing time/date. Receive the late bid from the sorting clerk and fill in the necessary information in the designated spaces of the additional stamp affixed to the envelope and which contains the following: Bid removed from bid box at 11:00 on … Bid removed from bid box at 11:00 on … Bid closed Bid closed Signature Signature Late bid received from registry. Affix a stamp indicating the date and exact time received from the registry. Late bid received from registry. Affix a stamp indicating the date and exact time received from the registry. Final steps in handling a late bid. All late bid are to be returned to the bidder, under cover of an explanatory letter. Final steps in handling a late bid. All late bid are to be returned to the bidder, under cover of an explanatory letter.

165 EVALUATION OF BIDDERS Recusation from handling of bidders - It may occur that procurement is to be done for the specific requirement of an official of a procurement section. In such an event, the official concerned must recuse him/herself, where bidders for such a requirement are being processed. Recusation from handling of bidders - It may occur that procurement is to be done for the specific requirement of an official of a procurement section. In such an event, the official concerned must recuse him/herself, where bidders for such a requirement are being processed. Scrutiny of bidders - It is imperative that all bid documents must be thoroughly studied to ensure that they comply in all respects with the stipulations of SCM regulations. Scrutiny of bidders - It is imperative that all bid documents must be thoroughly studied to ensure that they comply in all respects with the stipulations of SCM regulations.

166 Correctness and availability of documents Study the bidders thoroughly to establish the following: Study the bidders thoroughly to establish the following: All necessary certificates and the tax clearance certificate issued by the SA Revenue Services are correctly completed, signed in ink and are in the original. All necessary certificates and the tax clearance certificate issued by the SA Revenue Services are correctly completed, signed in ink and are in the original. All necessary forms are correctly completed, signed in ink and are in the original. All necessary forms are correctly completed, signed in ink and are in the original. Necessary documents such as Bank Guarantees, Certificate, Deposits, Reports and Sureties are attached. Necessary documents such as Bank Guarantees, Certificate, Deposits, Reports and Sureties are attached. Correctness and availability of information. Study the bidders thoroughly to establish the following: Correctness and availability of information. Study the bidders thoroughly to establish the following: Prices and delivery periods indicated as firm or not. Prices and delivery periods indicated as firm or not. Basis of delivery. Basis of delivery. Any other information furnished by the bidder in a covering letter, such as offering an alternative product, setting of own conditions, comments on concept formal contract, etc. Any other information furnished by the bidder in a covering letter, such as offering an alternative product, setting of own conditions, comments on concept formal contract, etc. Samples. Establish whether the required samples were included. Samples. Establish whether the required samples were included. Comparative prices. Calculate the comparative prices by: Comparative prices. Calculate the comparative prices by: Deducting preferences. Deducting preferences. Adding additional costs as specified by the bidder, if applicable. Adding additional costs as specified by the bidder, if applicable. Deducting unconditional discounts where offered, if applicable. Deducting unconditional discounts where offered, if applicable.

167 Preferences for equity ownership Establish position of bidders with regards to equity ownership in respect of historically disadvantaged individuals (HDI). Provided that a person who obtained South African Citizenship on or after the coming to effect of the interim constitution, is deemed not to be an HDI. Establish position of bidders with regards to equity ownership in respect of historically disadvantaged individuals (HDI). Provided that a person who obtained South African Citizenship on or after the coming to effect of the interim constitution, is deemed not to be an HDI. Preference point system. Calculate the number of points gained in respect of the following: Preference point system. Calculate the number of points gained in respect of the following: The 80/20-preference point system must be used to calculate the points for price in respect of bidders/procurement with a rand value equal to, or above R500 000. The department may, however, apply this 80/20-point system for procurement with a value less than R500 000, if and when appropriate. The 80/20-preference point system must be used to calculate the points for price in respect of bidders/procurement with a rand value equal to, or above R500 000. The department may, however, apply this 80/20-point system for procurement with a value less than R500 000, if and when appropriate. The 90/10-preference point system must be used to calculate the points for price in respect of bidders/procurement with a rand value above R500 000. The 90/10-preference point system must be used to calculate the points for price in respect of bidders/procurement with a rand value above R500 000. Formal Contracts. When formal contracts are involved, the Legal Division is to be consulted to ensure that bidders have noted and accepted the contents thereof, and have not responded with counter-proposals. In the event of counter-proposals, the Legal Division will investigate and pronounce thereon. The inputs of the Legal Department in this regard is thus of vital importance. Formal Contracts. When formal contracts are involved, the Legal Division is to be consulted to ensure that bidders have noted and accepted the contents thereof, and have not responded with counter-proposals. In the event of counter-proposals, the Legal Division will investigate and pronounce thereon. The inputs of the Legal Department in this regard is thus of vital importance. Comparative Schedule - Scoring. After scrutiny of the bidders received, they are scheduled on a comparative schedule and submitted for evaluation and formulation of a recommendation to the BEC. It is imperative that the schedule contains the maximum information to make the evaluation of the bid easier. Comparative Schedule - Scoring. After scrutiny of the bidders received, they are scheduled on a comparative schedule and submitted for evaluation and formulation of a recommendation to the BEC. It is imperative that the schedule contains the maximum information to make the evaluation of the bid easier.

168 Validity of bidders Check the diary for pending dates to ensure that recommendations are made in good time to be verified and submitted for approval and that letter of acceptance may be posted before the validity of the bid expires. Check the diary for pending dates to ensure that recommendations are made in good time to be verified and submitted for approval and that letter of acceptance may be posted before the validity of the bid expires. If recommendations have not been received, enquiry must be directed to the procurement section concerned, as well as initiating the process to extend the validity of the bidders if necessary. If recommendations have not been received, enquiry must be directed to the procurement section concerned, as well as initiating the process to extend the validity of the bidders if necessary. On receipt of the recommendation ascertain whether offers are still valid. If not, request all bidders in writing to extend the validity of their offers. Extension of thirty days is usually required and may be requested by facsimile. The responsibility to timely request and finalise extension of the validity periods of bidders rests with the procurement office. On receipt of the recommendation ascertain whether offers are still valid. If not, request all bidders in writing to extend the validity of their offers. Extension of thirty days is usually required and may be requested by facsimile. The responsibility to timely request and finalise extension of the validity periods of bidders rests with the procurement office.

169 Bid Adjudication Committees Role. The role of the bid committees is to adjudicate bids submitted and, either award them or recommend acceptance thereof to higher- level committees. Role. The role of the bid committees is to adjudicate bids submitted and, either award them or recommend acceptance thereof to higher- level committees. Functions. The functions to be performed by the BAC are the following: Functions. The functions to be performed by the BAC are the following: To objectively evaluate and award bids or recommend to higher-level committees, officials or AO the acceptance of successful bidders. To objectively evaluate and award bids or recommend to higher-level committees, officials or AO the acceptance of successful bidders. To give guidance in respect of procurement policy matters. To give guidance in respect of procurement policy matters. To exercise overall control concerning the compliance with directives and procedures. To exercise overall control concerning the compliance with directives and procedures. To ensure procurement procedures are efficiently complied with. To ensure procurement procedures are efficiently complied with. The BAC comprises of the following members: The BAC comprises of the following members: The Chairperson, with the rank of at least a Director and appointed by the AO. The Chairperson is to preside over each meeting. The Chairperson, with the rank of at least a Director and appointed by the AO. The Chairperson is to preside over each meeting. Three additional knowledgeable members, of whom at least one is to be a SCM functionary, as appointed by the official who has been delegated to procure supplies and services. The members must assist in deciding on matters submitted for decision. Three additional knowledgeable members, of whom at least one is to be a SCM functionary, as appointed by the official who has been delegated to procure supplies and services. The members must assist in deciding on matters submitted for decision.

170 (1) The bid adjudication committee must – (a) consider the report and recommendations of the bid evaluation committee; and (b) either – (i) depending on its delegations, make a final award or a recommendation to the AO to make the final award; or (ii) make another recommendation to the AO how to proceed with the relevant procurement. (2) The bid adjudication committee must consist of at least four senior managers of the municipality or municipal entity which must include – (i) the chief financial officer or, if the chief financial officer is not available, another manager in the budget and treasury office reporting directly to the chief financial officer and designated by the chief financial officer; and (ii) at least one senior supply chain management practitioner who is an official of the municipality; and (iii) a technical expert in the relevant field who is an official, if such an expert exists in an advisory capacity. Bid adjudication committees

171 (3) The AO must appoint the chairperson of the committee. If the chairperson is absent from a meeting, the members of the committee who are present must elect one of them to preside at the meeting. (4) Neither a member of a bid evaluation committee, nor an advisor or person assisting the evaluation committee, may be a member of a bid adjudication committee. (5) (a) If the bid adjudication committee decides to award a bid other than the one recommended by the bid evaluation committee, the bid adjudication committee must prior to awarding the bid – (i) check in respect of the preferred bidder whether that bidder’s municipal rates and taxes and municipal service charges are not in arrears, and; (ii) notify the AO. (b) The AO may – (i) after due consideration of the reasons for the deviation, ratify or reject the decision of the bid adjudication committee referred to in par (a); and (ii) if the decision of the bid adjudication committee is rejected, refer the decision of the adjudication committee back to that committee for reconsideration. (6) The AO may at any stage of a bidding process, refer any recommendation made by the evaluation committee or the adjudication committee back to that committee for reconsideration of the recommendation. (8) AO decides to award the bid other than that recommended by the bid adjudication committee for bids above, R10m, S114 of the Act must be complied with within 10 working days. Bid adjudication committees

172 Bid Adjudication Sub Committees Evaluation Committee. The evaluation committee evaluates bids for recommendation to the Bid Adjudication Committee. Evaluation Committee. The evaluation committee evaluates bids for recommendation to the Bid Adjudication Committee. Bid secretariat. The Bid Secretariat must comprise of members of the procurement office, which will best support the applicable BAC and perform the role of the Secretary of the BAC concerned. The bid Secretariat will see to the administrative matters of the various evaluation and adjudication committees. This will entail the following: Bid secretariat. The Bid Secretariat must comprise of members of the procurement office, which will best support the applicable BAC and perform the role of the Secretary of the BAC concerned. The bid Secretariat will see to the administrative matters of the various evaluation and adjudication committees. This will entail the following: Establish from the bid documents whether the applicable directives have been complied with to ensure a valid bid. Establish from the bid documents whether the applicable directives have been complied with to ensure a valid bid. Establish from the contents of the bid documents and the recommendations compiled by the users of the following: Establish from the contents of the bid documents and the recommendations compiled by the users of the following: In the case of a sole bidder whether the price is reasonable In the case of a sole bidder whether the price is reasonable Whether the price and delivery periods are firm or not. In respect of non-firm prices, whether there is reference to any price indices according to which price escalation will be calculated. Whether the price and delivery periods are firm or not. In respect of non-firm prices, whether there is reference to any price indices according to which price escalation will be calculated. The calculated comparative prices and the points gained according to a preference or evaluation point system. The calculated comparative prices and the points gained according to a preference or evaluation point system. Whether the offer complies with specification. Whether the offer complies with specification. The order of the bids based on comparative prices and points gained for equity ownership. The order of the bids based on comparative prices and points gained for equity ownership. To ensure that the motivations, provided by the user for the passing over of bids, which are lower in price or higher on points, give sufficient reasons for it. To ensure that the motivations, provided by the user for the passing over of bids, which are lower in price or higher on points, give sufficient reasons for it.

173 Co-opted Members. The Chairperson of the various evaluation and adjudication committees approves that members may be co-opted to attend meetings on an ad hoc basis if it is necessary. This may include the user or his/her representative. Co-opted Members. The Chairperson of the various evaluation and adjudication committees approves that members may be co-opted to attend meetings on an ad hoc basis if it is necessary. This may include the user or his/her representative. Quorum. The Chairperson and two full members one of which must be a SCM functionary form the quorum. Quorum. The Chairperson and two full members one of which must be a SCM functionary form the quorum. Meetings. Bid Adjudication and Evaluation committees are to meet regularly so that matters to be dealt with by them are not delayed. Meetings. Bid Adjudication and Evaluation committees are to meet regularly so that matters to be dealt with by them are not delayed. Bid Adjudication Sub Committees

174 Right to Vote. All full members of the committees have the right to vote. The Chairperson has a casting vote as well as a deliberate vote. Co-opted members have no right to vote. Right to Vote. All full members of the committees have the right to vote. The Chairperson has a casting vote as well as a deliberate vote. Co-opted members have no right to vote. Method of voting. The raising of the hands will do, unless at least two-thirds of the members present decide on voting by secret ballot. Method of voting. The raising of the hands will do, unless at least two-thirds of the members present decide on voting by secret ballot. Minutes. The minutes of the BAC meetings must be compiled in a brief, clear and impartial manner directly after the meetings. All decisions, with the specific reasons against each bid for the awarding, recommending or non-acceptance of bids, must be reflected in the minutes for any future enquiry. Should a member want a specific matter to be recorded, other than a decision, it must be formally requested. A members’ reason for a dissenting voice must also be recorded. Correct minuting of decisions will enable procurement officials to reply to any query on bids dealt with. The minutes, signed by the Chairperson, will serve as proof of the decisions of the meeting. Minutes. The minutes of the BAC meetings must be compiled in a brief, clear and impartial manner directly after the meetings. All decisions, with the specific reasons against each bid for the awarding, recommending or non-acceptance of bids, must be reflected in the minutes for any future enquiry. Should a member want a specific matter to be recorded, other than a decision, it must be formally requested. A members’ reason for a dissenting voice must also be recorded. Correct minuting of decisions will enable procurement officials to reply to any query on bids dealt with. The minutes, signed by the Chairperson, will serve as proof of the decisions of the meeting. Comparative Schedules. Bids within the Department are accepted, referred back, cancelled or not approved by the signing of the comparative schedules by the chairpersons of the Bid Adjudication committees concerned. This will allow bids to be processed further. Comparative Schedules. Bids within the Department are accepted, referred back, cancelled or not approved by the signing of the comparative schedules by the chairpersons of the Bid Adjudication committees concerned. This will allow bids to be processed further. Validity of bids. Bid Secretariats must ensure all actions are directed at finalising bids without delay. The requirement to finalise bids within the validity periods of bids cannot be over emphasised. The necessity to request the extensions of validity periods of bids must be the exception. If the validity period is allowed to expire and bids increase their bided price, avoidable expenses will occur. Validity of bids. Bid Secretariats must ensure all actions are directed at finalising bids without delay. The requirement to finalise bids within the validity periods of bids cannot be over emphasised. The necessity to request the extensions of validity periods of bids must be the exception. If the validity period is allowed to expire and bids increase their bided price, avoidable expenses will occur. Register. All members will sign a register at each meeting serving as attendance register, as well as the prescribed undertaking to confidentiality of that meeting. Register. All members will sign a register at each meeting serving as attendance register, as well as the prescribed undertaking to confidentiality of that meeting. Bid Adjudication Sub Committees

175 The rights/powers of the Chairperson are as follows: The rights/powers of the Chairperson are as follows: The authority to chair the meeting. The authority to chair the meeting. Rulings on points of order are final and may not be questioned. Rulings on points of order are final and may not be questioned. May adjourn a meeting. May adjourn a meeting. May withdraw any proposal or other matters for discussion before it is put to the vote. May withdraw any proposal or other matters for discussion before it is put to the vote. The Chairperson retains all his/her rights as a member. The Chairperson retains all his/her rights as a member. The rights/powers of a member are as follows: The rights/powers of a member are as follows: Have advance knowledge of the agenda Have advance knowledge of the agenda Submit proposals and participate in discussions Submit proposals and participate in discussions May have a dissenting voice, and have reasons therefore recorded May have a dissenting voice, and have reasons therefore recorded A member may also excuse himself or herself if feelings strongly about an issue. The meeting will continue depending on the quorum requirements A member may also excuse himself or herself if feelings strongly about an issue. The meeting will continue depending on the quorum requirements Rights/Powers

176 Duties + Responsibilities (CP) Maintain order during a meeting and ensure that business is conducted in an orderly manner. Maintain order during a meeting and ensure that business is conducted in an orderly manner. Before opening the meeting ensure that it is properly constituted Before opening the meeting ensure that it is properly constituted Protect the rights of every member. Protect the rights of every member. Regulate participation in discussions. Regulate participation in discussions. Deal with items in sequence of the agenda and ensure that members do not indulge in irrelevant discussions/tedious repetition. Deal with items in sequence of the agenda and ensure that members do not indulge in irrelevant discussions/tedious repetition. Ensure that members know exactly on what they are required to vote. Ensure that members know exactly on what they are required to vote. Ensure that only one member holds the floor at any one time. Ensure that only one member holds the floor at any one time. Provide guidance by directing the meeting but shall not dominate. Provide guidance by directing the meeting but shall not dominate. Conduct meetings in a formal manner. Conduct meetings in a formal manner. Sign comparative schedules after approval by the bid committees. Sign comparative schedules after approval by the bid committees.

177 Be fully conversant with the powers and limitations of the committees they are serving in. Be fully conversant with the powers and limitations of the committees they are serving in. Have a working knowledge of SCM regulations and standing delegated powers. Have a working knowledge of SCM regulations and standing delegated powers. Attend all meetings. Attend all meetings. Be punctual for meetings and stay for the duration of a meeting. Be punctual for meetings and stay for the duration of a meeting. Prepare properly for each meeting by studying the agenda and preparing thoroughly therefore. Prepare properly for each meeting by studying the agenda and preparing thoroughly therefore. Be familiar with meeting procedures in order to make a contribution in the correct manner. Be familiar with meeting procedures in order to make a contribution in the correct manner. Refrain from repeating what other members have already said. Refrain from repeating what other members have already said. Respect that time is precious. Respect that time is precious. Become familiar with the rights and duties of members in order to expedite proceedings. Become familiar with the rights and duties of members in order to expedite proceedings. Listen attentively to what other members have to say. Listen attentively to what other members have to say. Duties + Responsibilities (M)

178 The AO must ensure that irrespective of the procurement process followed, no award may be given to a person – (a) who is in the service of the state; or (b) if that person is not a natural person, of which any director, manager, principal shareholder or stakeholder is a person in the service of the state; or (c) a person who is an advisor or consultant contracted with the municipality or municipal entity. Prohibition on awards to persons in the service of the state

179 The notes to the annual financial statements must disclose particulars of any award of more than R2000 to a person who is a spouse, child or parent of a person in the service of the state, or has been in the service of the state in the previous twelve months, including – (a) the name of that person; (b) the capacity in which that person is in the service of the state; and (c) the amount of the award. Awards to close family members of persons in the service of the state

180 Declaration of Interest Statement As a member of the bid evaluation panel, you are required to declare any interest, as far as you are aware that you have, in any of the bidders and their consortium member companies. As a member of the bid evaluation panel, you are required to declare any interest, as far as you are aware that you have, in any of the bidders and their consortium member companies. An interest includes, but not limited to:- An interest includes, but not limited to:- Your shareholding in a bidding company or any of its consortium member companies. Clearly indicate the extent of your shareholding and links to the bid Your shareholding in a bidding company or any of its consortium member companies. Clearly indicate the extent of your shareholding and links to the bid Family members, friends or associates employed by a bidding company or any of its consortium members. Clearly indicate the extent of this relationship and links to the bid Family members, friends or associates employed by a bidding company or any of its consortium members. Clearly indicate the extent of this relationship and links to the bid Family members, friends or associates’ shareholding in a bidding company or any its consortium members. Clearly indicate the extent of their shareholding and links to the bid. Family members, friends or associates’ shareholding in a bidding company or any its consortium members. Clearly indicate the extent of their shareholding and links to the bid. Family members, friends or associates contracted to provide services to a bidding company or any of its consortium members. Clearly indicate these individuals links to the bid. Family members, friends or associates contracted to provide services to a bidding company or any of its consortium members. Clearly indicate these individuals links to the bid. You, or any of your family members, friends or associates receiving, or in agreement to receive, any gifts, favours, payments, sponsorships, subsidies, or any other benefits from any bidders or any members of any of the consortia, within the last 12months of the date of this declaration. You, or any of your family members, friends or associates receiving, or in agreement to receive, any gifts, favours, payments, sponsorships, subsidies, or any other benefits from any bidders or any members of any of the consortia, within the last 12months of the date of this declaration. Any other personal interest that may reasonably be deemed relevant to protect integrity of the bid evaluation. Any other personal interest that may reasonably be deemed relevant to protect integrity of the bid evaluation.

181 Risk management Risk management. Users must consider risk management in the development of specifications. This is a structured process that must performed to ensure that risks are understood, minimised and effectively managed. The risk management process involves the following: Risk management. Users must consider risk management in the development of specifications. This is a structured process that must performed to ensure that risks are understood, minimised and effectively managed. The risk management process involves the following: Identifying the risks. Identifying the risks. Evaluating the seriousness of risks. Evaluating the seriousness of risks. Mitigating or minimising the risk. Mitigating or minimising the risk. Monitoring risks. Monitoring risks. Evaluation criteria. The evaluation criteria should be described ahead of the evaluation process and included in the specification. The exact details that are included in the Bid document may vary, but the overall criteria must be included. This ensures that the bidding process is transparent and adheres to ethical practices. Evaluation criteria. The evaluation criteria should be described ahead of the evaluation process and included in the specification. The exact details that are included in the Bid document may vary, but the overall criteria must be included. This ensures that the bidding process is transparent and adheres to ethical practices. As a guide, there are four evaluation areas that should be included in the evaluation process: As a guide, there are four evaluation areas that should be included in the evaluation process: Administrative compliance; Administrative compliance; Technical evaluation; Technical evaluation; Commercial evaluation; and Commercial evaluation; and Empowerment evaluation. Empowerment evaluation. Bid closing period and validity period. In developing the specification the users must determine the date that the service or product is required. This provides a basis for establishing the submission date and validity period of the quotations and/or bids. Bid closing period and validity period. In developing the specification the users must determine the date that the service or product is required. This provides a basis for establishing the submission date and validity period of the quotations and/or bids.

182 Logistics management Part of supply chain management that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption to meet customer requirements Part of supply chain management that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption to meet customer requirements

183 Logistics – cost management Identify and include all cost elements Identify and include all cost elements Manage costs to the lowest possible expense Manage costs to the lowest possible expense Major elements include: Major elements include: Inventory handling cost Inventory handling cost Lot quantity costs – material handling and procurement Lot quantity costs – material handling and procurement Order processing and information costs re demand forecasting and planning Order processing and information costs re demand forecasting and planning Warehousing costs Warehousing costs Transportation costs Transportation costs Cost of lot sales Cost of lot sales

184 AO must establish an effective system of logistics management in order to provide for: the setting of inventory levels, placing of orders, receiving and distribution of goods, stores and warehouse management, expediting orders, transport management, vendor performance, maintenance and contract administration. Logistics management

185 Order administration Duties of officials in charge of placing orders separated from other procurement mechanisms e.g. requesting of quotations or the tender process in order to avoid negative implications. Appoint the officials that are entrusted with the issuing of orders in writing. FINANCIAL AUTHORITY (FA) FINANCIAL AUTHORITY (FA) Financial Implications of an Order. When the official authorised to issue an order, receives the procurement file from pre-order administration, he/she must ensure that the ‘funds certificate’ as prescribed by the finance section, has been obtained and that funds have been allocated for the purchase. Financial Implications of an Order. When the official authorised to issue an order, receives the procurement file from pre-order administration, he/she must ensure that the ‘funds certificate’ as prescribed by the finance section, has been obtained and that funds have been allocated for the purchase. CONTROL OVER ORDERS CONTROL OVER ORDERS Official order forms. All government orders must be placed with the order form Z492. Official order forms. All government orders must be placed with the order form Z492. Allocation of serial numbers - the forms are to be provided with serial numbers – completeness controls. Allocation of serial numbers - the forms are to be provided with serial numbers – completeness controls. Blank Order forms. The order forms are face value forms. The misuse thereof can thus have serious financial implications – safeguarding of assets. Blank Order forms. The order forms are face value forms. The misuse thereof can thus have serious financial implications – safeguarding of assets.

186 Order forms in stock. All unused order forms : Safeguarded by being locked away in a safe place; Safeguarded by being locked away in a safe place; Accounted for by quantity and serial number Accounted for by quantity and serial number Issued per required quantity and serial number against signature of the recipient; and Issued per required quantity and serial number against signature of the recipient; and Verified regularly. Verified regularly. Order administration

187 VERIFICATION AND SIGNING Original Orders. The procurement official must compare the orders with the source documents and checks it for correctness. Original Orders. The procurement official must compare the orders with the source documents and checks it for correctness. Signing of orders. Prior to the despatching of orders to or collection of orders by contractors, the orders are to be signed by the procurement officials concerned and only those who are duly empowered and delegated to sign the orders. The signatures are to appear on each copy of the order, and are to be over both the official stamp of the procurement section and printed number, rank and name of the procurement officer concerned. Signing of orders. Prior to the despatching of orders to or collection of orders by contractors, the orders are to be signed by the procurement officials concerned and only those who are duly empowered and delegated to sign the orders. The signatures are to appear on each copy of the order, and are to be over both the official stamp of the procurement section and printed number, rank and name of the procurement officer concerned. Source documents. The source documents must be kept for inspection purposes with the file copy of the order. Source documents. The source documents must be kept for inspection purposes with the file copy of the order.

188 Inventory analysis

189 Holding inventory Reasons Reasons Cost savings and hedging against price increases Cost savings and hedging against price increases Protection against demand and lead time uncertainties Protection against demand and lead time uncertainties Purchasing costs Purchasing costs

190 Symptoms of poor inventory management Increase in number of outstanding orders Increase in number of outstanding orders Increase in the Rand investment in stock Increase in the Rand investment in stock Differences in stock turnover rates Differences in stock turnover rates Increase in the number of out-of-stock occurrences Increase in the number of out-of-stock occurrences Lack of storage space Lack of storage space Excessive increases in inventory carrying costs Excessive increases in inventory carrying costs Increases in obsolete inventory or expired stock Increases in obsolete inventory or expired stock

191 Inventory management performance measures Return on inventory investment Return on inventory investment Inventory investment/working capital investment Inventory investment/working capital investment % increase in stock level % increase in stock level Stock write offs Stock write offs Customer service levels over time Customer service levels over time Inventory accuracy – counts Inventory accuracy – counts Number of out-of-stock instances Number of out-of-stock instances Percentage of demand supplied from stock Percentage of demand supplied from stock

192 Just in time stock management

193 Definition Disciplined and continuous problem solving approach which eliminates all forms of wastage by employees, suppliers, product design and process design to deliver all goods and services at the right time and place Disciplined and continuous problem solving approach which eliminates all forms of wastage by employees, suppliers, product design and process design to deliver all goods and services at the right time and place

194 Critical elements Commitment by top management to JIT and continuous improvement and elimination of waste Commitment by top management to JIT and continuous improvement and elimination of waste Participatory management approach Participatory management approach Increased emphasis on TQM Increased emphasis on TQM Reduced purchase quantities Reduced purchase quantities Regular deliveries and highly reliable delivery schedules Regular deliveries and highly reliable delivery schedules Reduction in the number of suppliers Reduction in the number of suppliers Shortened and highly reliable internal and external lead times Shortened and highly reliable internal and external lead times

195 Advantages Lower inventory levels Lower inventory levels Small buffer stocks – minimum stock levels Small buffer stocks – minimum stock levels Quality improvement Quality improvement Cost savings Cost savings

196 ABC inventory management

197 ABC inventory management Line items graded based on quantities kept Line items graded based on quantities kept A-Items - high monetary value, not high quantities are tightly controlled and monitored - never stock outs on A items A-Items - high monetary value, not high quantities are tightly controlled and monitored - never stock outs on A items B-items require less control and monitoring, lower monetary value and quantities, stock is kept on hand B-items require less control and monitoring, lower monetary value and quantities, stock is kept on hand C-items are only ordered when requested by clients C-items are only ordered when requested by clients

198 ABC - example Item codeAverage investment % average units ABC system 11 70021.3%A 22703.4%C 31 44018.1%A 47209.0%B 53 30041.4%A 65406.8%C Totals7 970100%

199 Disposals and Asset Management Asset Disposals Asset Disposals Asset Maintenance Asset Maintenance Fixed Asset Management Fixed Asset Management

200 (1) The AO must establish an effective system of disposal management for the disposal or letting of assets, including unserviceable, redundant or obsolete assets, subject to sections 14 and 90 of the Act, which must be in terms of the municipal financial regulations. (2) The disposal of assets must– (a) be by one of the following methods – (i) transferring the asset to another organ of state in terms of a provision of the Act enabling the transfer of assets; (ii) transferring the asset to another organ of state at market related value or, when appropriate, free of charge; (iii) selling the asset; or (iv) destroying the asset; Disposal management

201 (b) provide that :- (i) immovable property may be sold only through a competitive bidding process except when the public interest or the plight of the poor demands otherwise; (ii) movable assets may be sold either by way of written price quotations, a competitive bidding process, auction or at market related prices, whichever is the most advantageous; (iii) in the case of the free disposal of computer equipment, the provincial department of education must first be approached to indicate within 30 days whether any of the local schools are interested in the equipment; and (iv) in the case of the disposal of firearms, the National Conventional Arms Control Committee has approved any sale or donation of firearms to any person or institution within or outside the Republic; Disposal management

202 (c) furthermore ensure that – (i) immovable property is let at market related rates except when the public interest or the plight of the poor demands otherwise; and (ii) all fees, charges, rates, tariffs, scales of fees or other charges relating to the letting of immovable property are annually reviewed; and (d) ensure that where assets are traded in for other assets, the highest possible trade-in price is negotiated. Disposal management

203 THE DISPOSAL PROCESSES Composition of stores disposal boards Composition of stores disposal boards Boards to be established depending on the workload and geographical requirements. Boards to be established depending on the workload and geographical requirements. Each board must have a chairperson, appointed in writing and his/her duties must be detailed in full. Each board must have a chairperson, appointed in writing and his/her duties must be detailed in full. The chairperson must be assisted by technical experts. The chairperson must be assisted by technical experts. Persons in charge of stores to be disposed of, may not serve on stores disposal boards or sign disposal certificates. Persons in charge of stores to be disposed of, may not serve on stores disposal boards or sign disposal certificates.

204 Proceedings of disposal boards The board convenes and inspects the stores in loco; The board convenes and inspects the stores in loco; gathers the necessary evidence by taking down written statements, which can be supplemented by its own findings if necessary; gathers the necessary evidence by taking down written statements, which can be supplemented by its own findings if necessary; compiles its recommendation; and compiles its recommendation; and presents its report in duplicate to the convening authority. presents its report in duplicate to the convening authority. Each member of the board is to sign the board’s report. Should a member not concur with the recommendations of the board, he/she is not to sign the board’s report, but is to submit a minority report. Minority reports are to be submitted to the convening authority together with the board’s main report. Each member of the board is to sign the board’s report. Should a member not concur with the recommendations of the board, he/she is not to sign the board’s report, but is to submit a minority report. Minority reports are to be submitted to the convening authority together with the board’s main report. The convening authority now confirms the recommendations; or The convening authority now confirms the recommendations; or refers it back to the board for further investigation if found necessary; or refers it back to the board for further investigation if found necessary; or includes additional executive instructions if found necessary; includes additional executive instructions if found necessary; forwards the necessary instructions, together with the copy of the report, to the district/warehouse responsible for the execution of the confirmed/amended recommendation; forwards the necessary instructions, together with the copy of the report, to the district/warehouse responsible for the execution of the confirmed/amended recommendation; files the confirmed report in numerical order; files the confirmed report in numerical order; completes the confirming register (see Annexure A), and completes the confirming register (see Annexure A), and monitors the execution of the confirmed report. monitors the execution of the confirmed report.

1 Supply Chain Management. 2 Integrated supply chain management Availability Availability Operational performance Operational performance Reliability.

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1 Supply Chain Management. 2 Integrated supply chain management Availability Availability Operational performance Operational performance Reliability.

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Presentation on theme: "1 Supply Chain Management. 2 Integrated supply chain management Availability Availability Operational performance Operational performance Reliability."— Presentation transcript:

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