1. REVIEW OF THE STATE PROCUREMENT SYSTEM TO ENSURE VALUE FOR MONEY Progress Presenter: Henry Malinga| Chief Director| 29 August 2012 1

2. Table of Contents  Measures to counter SCM related fraud and corruption  Multi-Agency working group  Nature and extent of SCM breaches  Possible solutions  National initiatives to enhance value for money  Measures to enhance compliance monitoring and improving  transparency and accountability  Other initiatives impacting on SCM  Way forward 2

3.  A Multi-Agency Working Group (MAWG) was established to investigate fraud and corruption relating to Public Sector SCM processes.  Two sub-working groups were established to focus mainly on preventative measures and on enforcement respectively.  The group dealing with preventative measures is focusing on: Enhancing regulatory measures and compliance monitoring; Strengthening oversight; and Procurement reforms and systems priorities. Measures to counter SCM related fraud and corruption 3

4. Multi-Agency Working Group  This group which is chaired by the Accountant General is represented by following institutions: National Treasury South African Revenue Service Financial Intelligence Centre Auditor-General Department of Public Service and Administration Special Investigation Unit 4

5. Nature and extent of SCM Breaches SCM breaches include:  Procuring outside of transversal term contracts;  Manipulation of evaluation processes;  Acceptance of sub-quality products and/or services at inflated prices;  Cover quoting, conflicts of interest, bribery and fronting;  By-passing SCM prescripts; and  Using expansions and variation of orders that are far in excess of original contract prices. 5

6. Possible solutions  Enforce the procurement of goods and services that are available in terms of Transversal Term Contracts.  Consider the introduction of probity on all major contracts.  Strengthening the monitoring function of the Treasuries. 6

7. Possible solutions (continue)  Enforce code of conduct/ethics on SCM practitioners and Bid Committee members;  Publication of all tender awards;  Price Benchmarking to be enforced;  Encourage the enforcement of remedial actions ( penalties, litigations, restrictions etc.) on all suppliers that act fraudulently; and  Register for tender defaulters and database of restricted suppliers to be checked prior to award of contracts in order to ensure that no restricted companies are awarded any contracts. 7

8. National initiatives to enhance value for money  Preferential Procurement Regulations took effect on 7 December 2011. These regulations align preferential procurement with the aims of the B-BBEE Act and its Codes of Good Practice.  Guide on the regulations and revised Standard Bidding Documents issued to assist Accounting Officers/Authorities with the implementation of the regulations.  Instruction notes have been issued on 5 sectors identified by Minister of the DTI for Local content in terms of these regulations. 8

9. National initiatives to enhance value for money (continue)  Sectors designated Bus ( Bus body)80% Textile, clothing, leather and footwear100% Steel Power Pylons100% Canned/Processed Vegetables80% Rail Rolling Stock65%  Instruction note on Set top boxes (30%) is in process of being issued. 9

10. National initiatives to enhance value for money (continue)  SCM regulatory framework, which forms part of the Treasury Regulations is in the process of being reviewed.  This review includes the Identification of provisions in all instruction notes, circulars and guidelines considered regulatory in nature for elevation into the Treasury Regulations. 10

11. Measures to enhance compliance monitoring and improving transparency and accountability  Institutions compelled to: Submit annual procurement plans and monitor performance against plans; Verify names of Directors against staff structure to ensure that there are no conflict of interest; Publish all bids awarded; and Pay suppliers within 30 days 11

12. Other initiatives impacting on SCM  Broad-Based Black Economic Empowerment Amendment Bill.  Draft Amendment to the Broad-Based Black Economic Empowerment Act’s Codes of Good Practice. 12

13. Way forward  National Treasury is already in the process of appointing the Chief Procurement Officer.  This process will be finalised shortly.  The purpose is to establish an office that will: Modernise the state procurement system to be in line with the prescripts of the Constitution; Ensure transparent utilisation of resources for improved service delivery; and Exercise sound stewardship of government assets and resources. 13

14. THANK YOU 14