Outsourcing of Nutritional Services: briefing by Department & Department’s Progress Report on Suspension of Officials

Meeting report

Briefing by the Department of Correctional Services (DCS) on the outsourcing of nutritional services
Ms S Moodley (Chief Deputy Commissioner: Development and Care, DCS) briefed the Committee on the outsourcing of nutritional services by the Department.  At the request of the Committee, the presentation was limited to a report on the status of the tender awarded to the current service provider (see attached document).

The contract to provide food and related services to seven of the Department’s management areas expired on 31 July 2007.  The contract was extended for a further period of twelve months to 31 July 2008.  A task team was appointed to conduct a feasibility study on the provision of nutritional services.  The feasibility study was not completed before the expiry date of the contract and the contract was extended for a further period of six months to 31 January 2009.  The tender was re-advertised in August 2008.

Discussion
In response to a question from a Member of the Committee, Ms Moodley explained that the feasibility study was not completed before the contract with the service provider expired because the task team lacked the necessary financial expertise.  The Department decided to appoint an external contractual adviser with the necessary expertise.  The Commissioner had requested an external investigation into the management of the contract and to identify the gaps and problems that had occurred.  She agreed to submit a report to the Committee on the results of the investigation but was unable to provide details of when the investigation would be completed.

Mr J Selfe (DA) asked if feasibility studies were done before the first contract was awarded in 2004 and before the contract was subsequently extended in 2005, in 2007 and in 2008.  He referred to reports in the media concerning a letter from the Minister to the Commissioner, in which the Minister was reported to have instructed the Commissioner on conducting a feasibility study on the awarding of contracts.  He said that the Public Finance Management Act (PFMA) placed the responsibility in the hands of the accounting officer (in this case the Commissioner) and asked what role was played by the Minister.

Ms W Ngwenya (ANC) asked if the Committee was consulted before the original contract was awarded.  She noted that the contract applied to seven management areas only and wanted to know how many prisons were administered by the Department.  She asked if it was acceptable that the Department’s budget was utilised for outsourcing in stead of building its own capacity to deliver nutritional services.  She asked how much was spent on outsourcing and tendering and who will provide catering services when the current tender expired.

Mr H Cupido (ACDP) requested clarity on the reference made in the presentation to multiple bidders.  He asked if that meant that there could be multiple bidders for the different management areas or if there could be multiple bidders to provide supplies.  He wanted to know if a clear distinction was drawn in the tender documents.

The Chairperson confirmed that copies of the tender documents were distributed to the Members of the Committee.

Ms S Seaton (IFP) asked if the feasibility study was being continued and what impact it was expected to have on the tender process.  She wanted to know when the feasibility study was expected to be completed.

In response to Mr Selfe’s question, Ms Moodley advised that no feasibility study was done prior to the awarding of the contract in 2004.

The Chairperson asked for the reasons why the study was not done at the time.  He expressed the dissatisfaction of the Committee on having to deal with a fait accompli as the Department had already decided to extend the contract.

Mr M Ngubo (Acting Chief Financial Officer, DCS) was unable to provide an explanation why a feasibility study was not done before the contract was awarded.  The decision to outsource the provision of nutritional services was motivated by a lack of adequate facilities and staff.

Mr A Tsetsane (Chief Deputy Commissioner: Corporate Services, DCS) conceded that the guidelines for the outsourcing of services were not complied with when the contract was awarded.  However, the Department attempted to address the gaps that had occurred in the process by establishing a task team and by conducting an external investigation.

The Chairperson pointed out that the contract awarded in 2004 expired in 2006 and was renewed in 2007 and in 2008.  He wanted to know why a feasibility study was not done and why the tender was not advertised when the contract expired.  He said that the renewal of the contract contravened both the PFMA and section 217 of the Constitution.

Mr Selfe quoted section 217 of the Constitution.  He said that the renewal of the contract did not comply with the requirements of fairness, equitability, transparency or cost effectiveness.

The Chairperson remarked that the renewal of the contract without re-advertising it was unfair and contrary to Government policy on black economic empowerment.

Mr Tsetsane replied that an investigation was undertaken to determine what had gone wrong and why a feasibility study was not undertaken before the contract was awarded and extended.  He expected that the report on the investigation would provide the answers to the questions asked by the Members.

Mr Tsetsane agreed that the Commissioner was the accounting officer in terms of the PFMA.  He confirmed that a letter was written to the Commissioner by the Minister but suggested that the Committee approached the Minister to divulge the contents of the letter.  The guidance and leadership of the Minister were appreciated but there may be a difference in the points of view between the Minister and the Commissioner.  He was unable to advise the Committee on how the media obtained details of the Department’s internal correspondence.

In response to Ms Ngwenya’s questions, Ms Moodley gave the assurance that the Department was taking action on the issues that were raised.  She said that the provision of services was not interrupted when the contract expired and the contract was extended by six months to ensure that meals continued to be provided to inmates.  Issues concerning the adequacy of facilities and the availability of staff resulted in the outsourcing of nutritional services in the seven management areas identified as the Department was unable to provide the three meals per day required by the Correctional Services Act.  The Department administered 242 prisons but not all were able to provide the services required and only a few had the necessary agricultural facilities to grow their own food.

Ms Moodley was unable to reply to the question on the cost of outsourcing nutritional services.  The Chairperson agreed that the amount could not be divulged in an open meeting as there was a tender process underway.

Mr Ngubo advised that the previous tender for services to all seven management areas was awarded to one service provider.  The Department reserved the right to appoint a service provider per management area.  The closing date for tenders was 29 September 2008.

The Chairperson asked for confirmation that a single service provider would not be awarded the contract to provide services in more than one management area.

Ms Seaton asked what would happen if a tender was not received from another company for a particular management area.

Ms Ngwenya said that the process of awarding tenders was not clear and requested a written explanation from the Department.  She was concerned that the tender was limited to seven management areas when there were 242 prisons in the country.  The feasibility study was not completed and she felt that the Department was not in a position to establish whether or not tenders for nutritional services were appropriate for a particular management area.  The Department was not able to provide the Committee with the necessary information to reach informed decisions and to provide guidance.

The Chairperson agreed that an evaluation of whether or not value for money was provided was required.  He pointed out that there were other prisons that were larger than those listed in the presentation.

Mr Cele (ANC) asked who provided food in prisons prior to 1994.  He understood that the prisons provided their own nutritional services.  The Department had not provided any information on the number of inmates who had benefited from outsourcing the services.  He said that it would appear that the Department ignored its own procurement policies.  He asked how much was spent on water, electricity and labour for nutritional services and who covered the cost of those overheads.

Mr Selfe noted that the decision to extend the contract in 2007 and in 2008 was made by the National Bid Adjudication Committee.  He asked who decided to extend the contract when the original contract expired in 2005.  He asked why the provision of services to additional satellite prisons was not included in the original tender.

In response to Ms Seaton’s question, Mr Tsetsane said that the feasibility study was not expected to affect the tender process.  The study included an assessment of the value for money provided and the benefits to staff and inmates in terms of the transfer of skills.  If the feasibility study indicated that outsourcing did not deliver the desired results and that it was better for the Department to provide nutritional services, the Department had the three year duration of the contract in which to prepare for taking over the services concerned.

Mr Tsetsane acknowledged the concerns raised by Ms Ngwenya.  He hoped that the feasibility study would result in the answers to the questions raised by the Members.  He reported that the surveillance systems installed had indicated improvements in the incidents of pilfering of food.  The outsourcing of services resulted in improvements to the condition of kitchens and equipment as the contract required the service provider to carry out repairs within 24 hours.  The Department experienced delays of up to twelve months when repairs were carried out by the Department of Public Works.  An improvement in the transfer of skills was recorded but the services of an expert were needed to determine value for money.  He confirmed that the task team considered the delivery of nutritional services in all areas.

Mr Ngubo advised that departmental policy made provision for the extension of contracts.  The Department followed the guidance provided in practice notes and the Commissioner had consulted with National Treasury and the Auditor-General as required.

The Chairperson asked why the Department had to extend the contract.

Mr Ngubo replied that the feasibility study had not been undertaken at the time when the contract expired.  If the contract was not renewed, the Department would have had to purchase supplies on quote, which was a more expensive option.

Mr Selfe said that the original contract awarded to the contractor was subsequently expanded to include satellite prisons.  He read the written response to a question raised in Parliament.  He was concerned that the contractor benefited from an administrative amendment to the original contract.

Mr Ngubo explained that the management areas defined in the tender documents inadvertently excluded mention of all the prisons located in the management area. 

Mr Tsetsane added that satellite prisons were included in the management areas after the Department was reorganised.  If required, the investigation can be extended to include an assessment on whether or not there was foul play when the contract was extended.

Mr Ngubo said that the contract included the provision that accredited training was provided to inmates.  An audit had been conducted but he was not able to provide any details.  He was also unable to respond to Mr Cele’s question on who carried the costs of water, electricity and labour.

The Chairperson asked how the cost-effectiveness of outsourcing could be evaluated if the costs of overheads were not known.

Ms Moodley said that the determination of cost-efficiency required financial expertise.  The results of the feasibility study would indicate whether or not the outsourcing of the service was cost-efficient or not and if it was a viable alternative for the Department to provide the service instead.

Mr Selfe requested clarity on the task teams that were appointed.  He understood that Ms Moodley was involved in the current task team but an earlier task team included Mr Patrick Gillingham, who was a Regional Commissioner and who was closely involved in the awarding of the tender.  He was concerned that there appeared to be a conflict of interest.

Bishop L Tolo (ANC) was concerned over the Department’s inability to reply to questions from the Committee.

The Chairperson explained that the Committee will schedule another meeting with the Department to respond to the unanswered questions.

Bishop Tolo said that during oversight visits, prison personnel had complained over the lack of consultation between prison management and themselves.

Mr Tsetsane replied that the Correctional Services leadership was committed to improve the levels of consultation and to open up the lines of communication.

In response to Mr Selfe’s question, Mr Tsetsane explained that the Minister had proposed the members of the task team that was referred to by the media.  The Commissioner suggested an alternative structure and consensus was reached on the task team currently in place.  He noted the concern that was raised over the involvement of Mr Gillingham and undertook to appraise the Commissioner and the Minister accordingly.

The Chairperson stated that he shared Mr Selfe’s concern and stressed that the issue was the possibility of a conflict of interest.

Ms Ngwenya asked if the feasibility study would be completed before the expiry of the extended contract with the service provider.

Bishop Tolo remarked that prior to 1994 prison inmates prepared their own food.  He wanted to know if the motivation for the outsourcing of nutritional services included cost savings.

Mr Cele said that section 8 of the Correctional Services Act and section 35 (2) (e) of the Constitution assigned responsibility for the provision of nutritional services to prisoners to the Department and not to private companies.

Ms Seaton remarked that Members of Parliament and the Committee had promoted the self-sufficiency of institutions for a number of years.  By becoming self-sufficient, institutions developed skills and saved money.  She believed that the Department needed to take such a policy into account and to develop accordingly.

Ms Moodley replied that the Department was not able to produce all the foodstuffs necessary and will have to continue to put out tenders in future.  She said that the motivation for the outsourcing of nutritional services included the overcrowding of prisons and the strain on facilities, infrastructure and staffing levels.  She said that the results of feasibility study would indicate the most viable option to the Department.

The Chairperson said that the prison at Thohoyandou was very overcrowded but nutritional services were not outsourced.  He pointed out that inmates continued to work in the kitchens after the service was outsourced.  The Department continued to pay the inmates a gratuity for the work performed out of taxpayers’ money.

Bishop Tolo remarked that certain prisons shared their excess produce with other prisons and he did not understand the Department’s response that it had to continue to put out tenders for the purchase of foodstuffs.

Mr Tsetsane welcomed the input from the Committee.  He said that the issues raised by Members will be taken into consideration in the interventions that were instituted by the Department.

In conclusion, the Chairperson reiterated the Committee’s concerns over the inclusion of Mr Gillingham in the task team.  He said that a date would be set for the Department to report back to the Committee on the results of the feasibility study and the external investigation.  He commended the Commissioner for the actions that were taken and reminded the Department of the Committee’s responsibility to ensure that taxpayers’ money was properly spent.  He assured the Department of the Committee’s continued assistance and support.

Progress report on precautionary suspensions in the Department of Correctional Services
Mr A Tsetsane (Chief Deputy Commissioner: Corporate Services, DCS) presented the progress report on precautionary suspensions for the first quarter of 2008 (see attached document).

483 suspensions were reported during 2006/07, at a cost of R9.794 million.  During 2007/08, 509 employees were suspended at a cost of R15.070 million.  During the first quarter of 2008, 136 suspensions at a cost of R2.098 million were reported.  Analyses of the number of cases, the time frames involved and the cost of suspensions were included.  Examples of cases that were pending for longer than 12 months were provided.

Interventions by the Department in the management of suspensions included the training of 500 managers, increased emphasis on the monitoring of suspensions, the introduction of a computerised monitoring system, monitoring visits to five provincial regions and presentations at meetings of the Regional Commissioners’ Forums.

Discussion
Ms L Chikunga (ANC) noted that the charges against employees included criminal offences.  She asked if such cases were reported to the South African Police Services (SAPS).  She referred to the case in Mpumalanga province where an employee was suspended on full pay for a period of 35 months for his unauthorised absence.  She felt that the period of three years to investigate a relatively minor offence was unacceptable.  She asked if the sanctions imposed when managers failed to adhere to the timeframes had been implemented.

Mr Selfe recalled that the Commissioner advised the Committee during an earlier briefing that a more streamlined process was to be introduced by the Department.  He asked if the new process had been implemented and what the impact was.  He noted that more new cases were being reported than were finalised and indicated an upward trend unless the process of resolving the cases was speeded up.  The case studies indicated that the suspensions in many cases were lifted after periods of one to three years and represented a huge waste of resources.  He noted that many cases were pending, awaiting appeals and for other reasons.  He asked if anything can be done to speed up the process.

Ms Seaton was concerned over the length of time it took to resolve cases where employees were suspended on full pay.

Ms Ngwenya asked how the Department managed suspensions.  She asked what mechanisms were in place to reduce the risk of undue interference in cases and to reduce the escalation of costs.

Mr Tsetsane replied that the exact timeframes of the various steps in the process needed to be established in order to identify where delays occurred.  He confirmed that incidents of criminal behaviour were reported to the police in addition to launching an internal investigation.  The internal case needed to take the outcome of a criminal charge into account to avoid accusations of victimisation if the employee was found innocent by a court of law.  He said that the application of sanctions where managers failed to adhere to the timeframes had not yet been implemented.  Future performance assessments were expected to reveal where failure to comply had occurred.

Mr Tsetsane reported that the new procedure for managing suspensions applied although the reporting process was not computerised yet.  He expected an improvement in the number of unresolved cases in future.  Suspensions were managed at the Regional Commissioner level.  The process was found to be more effective if the matter remained on the agenda of regional meetings where area commissioners were required to report on progress.  He expected a reduction in the cost of suspensions as implementation of the process progressed and became more efficient.

Mr Selfe noted that the report on the cases in Gauteng omitted mention of the incident where staff members were alleged to have assisted prisoners to escape from the C-Max prison in Pretoria.  He asked if the cases had been finalised.

Mr Tsetsane replied that there was no report from Gauteng on that particular case and undertook to follow up with the Regional Commissioner concerned.

The Chairperson asked if the cost of suspensions had declined during the current year.

Mr Tsetsane replied that the costs of R2.098 million for the first quarter of 2008 represented an increase over previous years.

Bishop Tolo asked how many Correctional Services officials were serving sentences for corruption in prison.

Ms Seaton noted that no long outstanding cases were reported for the Western Cape.  She asked if the matter concerning Jacques Horn was finalised.

The Chairperson replied that the case was scheduled for discussion at the meeting scheduled for 22 August 2008.

Mr Tsetsane welcomed the attendance of the Regional Commissioners at future briefings.  He confirmed that there were examples of Correctional Services personnel who were found guilty of corruption and who were serving prison sentences.  He was aware of convicted officials from KwaZulu Natal who were serving sentences in Kokstad prison.  Further investigation into cases of corruption involving C-Max, Krugersdorp and Empangeni prison officials was necessary.  He agreed that it was important that the outcome of corruption cases was reported to the Committee so that the Department was seen to be taking appropriate action.

In conclusion, the Chairperson remarked that it was important for the public to be aware that the Department was serious about rooting out corruption within Correctional Services.  He said that the law applied to all and magistrates tended to hand down harsher sentences if members of the SAPS or the DCS were found guilty of breaking the law.  Members of the Committee were required to know what went on in the Department and had to be informed of the outcome of major incidents implicating DCS officials.  He requested that the Commissioner provided full details of the cases involving Messrs Delaporte and Horn at the meeting scheduled for 22 August 2008.

The Chairperson thanked the delegates from the Department for the presentations.

The meeting was adjourned.