1. Transformation Programme Towards Operational Efficiency PORTFOLIO COMMITTEE 13 NOVEMBER 2001

2. Transformation Programme Background Poor Service Delivery –Under- expenditure –Inefficient Processes –Inefficient Financial Management –Capacity and Skills Budget Reform –Business Model

3. Transformation Programme Poor Service Delivery Under Expenditure Process Analysis Skills Impact Leasing –Proliferation of lease contracts within government

4. Transformation Programme Under - Expenditure History of under expenditure Late confirmation of roll-overs Reprioritisation of needs by departments. Budget requests that are more than what the department can spend. Allocation of budgets without projects

5. Transformation Programme Process Analysis No. of Process Steps No. of documents required Average time to tender No. of planning steps No. of handoffs No. of decision points No. of decision makers  65  40 non – recurring 25 recurring  75-95 weeks  35  19  13  6

6. Transformation Programme Skills Impact Capacity skills of project managers Level of skill of project managers Ratio of Project Managers to Projects –1-10 Project (Private sector depending on complexity) –1-30 Projects(DPW)

7. Transformation Programme Budget Reform  Distinguish between ownership vs occupancy roles  Requirement of PFMA  Capital expenditure and maintenance reside on client departments budgets  Client departments service level agreements with DPW

8. Transformation Programme BUSINESS MODEL State Accommodation Advisory Services Transversal Policies Custodian of State’s Fixed Asset Landlord role – Asset Register(B/S), Rates and Taxes, Acquisition and Disposal, Ensuring Compliance, Maintenance and Construction Planning, Lease Brokering and Lease Management Monitoring and Benchmarking Optional Municipal Services Management Lease Management Promoter of Construction Industry Promoter of Public Works Program NDPW/SPMC CLIENT DEPARTMENTS Option Evaluation

9. Transformation Programme Current Initiatives Asset Management Strategic Partner –Broad Portfolio Analysis, Classification and Strategy Formulation –Develop adequate and appropriate information systems –Establish building blocks for user pays –Training of asset management staff –Advise the department on asset management plan –Formulate the Asset Management Framework

10. Transformation Programme Current Initiatives RAMP (Repair and Maintenance Programme) –Risk transferred to private sector contractors –Multi year budgeting –Assessment of the state of disrepair – true life cycle costing –Predetermined cost of future maintenance Correctional Services –Enhance safe custody –Improved humane incarceration –Improved state of readiness –97 Contracts awarded or recommended – Total Value R910 million

11. Transformation Programme Current Initiatives Department of Defense –Improved state of readiness –Fixed leakages of jet fuel pipes that minimised fuel losses Lifts Programme –Improved the functionality of buildings –Improved compliance with safety legislation –Instituted a call center for lifts(24hrs) –720 lifts nationally –27 contracts awarded – Total value R66 million

12. Transformation Programme Current Initiatives PACE Comparative Expenditure as at end of October 2000-2001: R362 530 2001-2002: R700 756 For the whole of 2000-2001 we had spent R698 042

13. Transformation Programme Current Initiatives Leasing Negotiation and renewal of lease agreements 80% completed and the remaining to be finalised by 30 December 2001. Savings from the leasing project is R20 million as at the end of October 2001

14. Transformation Programme Rationale for SPMC Formation of a responsive vehicle Separation of the policy making and regulatory role from the delivery function Unlocking the value of the State’s Property portfolio Separation of commercial and non- commercial components of State Property Considered application of commercial principles

15. Transformation Programme Role of DPW and SPMC National Department of Public Works State Property Management Company(SPMC) Value Proposition  Ensure that the built environment is effectively regulated to the benefit of the South African public  Ensure that equity and empowerment occur in the construction industry  Provide a clear and transparent environment in which land issues are redressed  Leverage governments influence to impact the lives of the rural poor  Ensure that government is meeting its accommodation requirements in a cost effective manner while addressing social objective  Streamline service delivery by reducing the bureaucracy and leveraging best-of-breed skills and systems  Provide value-added advisory services to ensure that accommodations improve government’s service delivery

16. Transformation Programme Role of DPW and SPMC National Department of Public Works State Property Management Company(SPMC) Mandate To regulate the built environment To transform the construction industry - CIDB To create jobs, provide infrastructure, develop HR and empower communities through implementation of the Ilima/Letsima programme To facilitate the delivery of government service through delivery of the asset and accommodation requirements in accordance with the prescribed legal frameworks

17. Transformation Programme Customer Focus Information Sytems, Human Resources and Financial Management STATE PROPERTY MANAGEMENT COMPANY Accelerated Service Delivery Vehicle STATE PROPERTY MANAGEMENT COMPANY Accelerated Service Delivery Vehicle Ministry of Public Works FUTURE NATIONAL DEPARTMENT OF PUBLIC WORKS NDPW CBPWP, CIDP, ECDP Policy Formulation, Monitoring & Evaluation NDPW CBPWP, CIDP, ECDP Policy Formulation, Monitoring & Evaluation

18. Transformation Programme Overall SPMC Charter The SPMC will provide the Government of South Africa with its core facilities and accommodation needs through  Cost-effective, value-adding management and maintenance of its owned portfolio  Structuring of leases with private sector owners  Construction of on-spec, on-time, on budget new facilities  Maximise the value of the property portfolio and minimise risk to the State It will meet its mandate with a customer focused, information rich, commercially capable organisation that makes effective use of private sector capabilities ILLUSTRATIVE

19. Transformation Programme SPMC To be established as a 100% government owned company Possible alternatives Fully funded entity An entity that will be self sufficient after a monopoly period

20. Transformation Programme Governance Minister SPMC Board of Directors(SPMC) NDPW Board of Directors(CIDB) CIDB IDT,CBE,etc

21. Transformation Programme A continuum of legal entities Depart- ment Schedule 3A Schedule 3B Schedule 2 Company Fully adheres to government objectives Over regulated Rigid remuneration Internally focused Regulated by PFMA Established in terms of National legislation No borrowing power Mainly funded by NRF Regulated by PFMA Functions in accordance with ordinary business principles Limited bridging finance Mainly funded by means other than NRF Regulated by PFMA Commercially driven principles Mainly self funded Regulated by PFMA 100 percent owned by government Autonomous Commercial principles Free from policy constraints Self funding Tends to ignore government’s broad social objectives Regulated by Companies Act

22. Transformation Programme Core Functions of the SPMC Asset Management Key Account Management Principles Project Management Leasing Management Services Property and Facilities Management Alternative Forms of Delivery

23. Transformation Programme SPMC Organisational Arrangements Key Account Manager Center of Expertise Project Management Center of Expertise P& FM Center of Expertise Leasing Asset Management Matrix Management Single Point Accountability

24. Transformation Programme Core Functions of NDPW National Department of Public Works Monitoring and Evaluation Poverty Alleviation Programme CBPWP Policy Formulation - SPA and NPWP

25. Transformation Programme Major Milestones Road Map Framework SPMC Act B/Case SPMC Act Transition Launch 15 Oct November 29 Oct Apr 2002 Dec 2001 Oct 2002

26. Transformation Programme Benefits SPMC creates a sharply focused organisation SPMC can be designed from a clean base SPMC provides new degrees of freedom People, Systems, Organisation, Compensation Policy formation within NDPW separated from execution SPMC will be accountable and transparent NDPW - Policy focused organisation Proper Monitoring and Evaluation by NDPW

27. Transformation Programme THANK YOU