SITA Briefing : IT Acquisition Centre, Procurement Policy & Partnership Agreements, Cash Flow Management; SITA Amendment Bill

Meeting report

PUBLIC SERVICES AND ADMINISTRATION PORTFOLIO COMMITTEE
5 June 2002
SITA AMENDMENT BILL, IT ACQUISITION CENTRE, PROCUREMENT POLICY & PARTNERSHIP AGREEMENTS, CASH FLOW MANAGEMENT: BRIEFING BY SITA

Chairperson: Mr J. Gomomo

Documents handed out:
SITA Amendment Bill [B24 - 2002]
Presentation on SITA Amendment Bill (see Appendix 1)
Memorandum on the Objects of SITA Amendment Bill (see Appendix 2)
ITAC Strategic Acquisitioning Made Easy - brochure (see Appendix 3)
SITA Presentation:
- Procurement Policy & Partnership Agreements
- Cash flow management
- IT Acquisition Centre (ITAC)

SUMMARY
A new approach has been devised for SITA's business strategy. Previously SITA was responsible for both procuring government IT and for implementation. Now its focus will be on purely procurement except for the Defence component where the status quo remains. It was stated that their new business model will be cost effective, increase productivity and be citizen convenient. It will also ensure that there is no duplication of work. It aims at entrenching inter-operability - that is, government institutions should speak to each other to find out what programmes work for them. They are not aiming at competition with the private sector but to be a primary vehicle for delivering services to government departments. This new business model is therefore performance based. It aims to implement the new business values without disrupting business services.

MINUTES
Mr Robinson Ramaite (Director General of DPSA) briefed the Committee on the background to the SITA Amendment Bill. This was followed by a run-through of the clauses that have substantial amendments by Ms Empie van Schoor (see Appendix 1).

Mr C van Schalkwyk (SITA CEO) presented the Powerpoint presentations dealing with partnership agreements, cash flow management and the IT Acquisition Centre (see documents). Also present was the new Chairperson of SITA, Ms Z Manase.

Discussion
Mr Sikhakhane (ANC) asked if government departments would in a way be forced to take their work somewhere else. Is this not the implication of SITA's new business model?

Mr Ramaite answered that it is impossible for SITA to employ people to fix every government computer. SITA will focus on the IT House of Values: elimination of duplication, interoperabilitty, IT security , leveraging economies of scale. And it is clear that SITA will have to give up some functions because SITA is both a procurement agent as well as a provider of services. SITA will keep all work related to networks and services that link various departments There will be a 36 month period of transition to ensure a smooth process as SITA gives up some of its services. But SITA will keep some of the work, for example, the work that has to do with Defence.

Mr Abrahams asked what if the Minister of Finance disapproves this new business model as being not financially viable.

Mr Ramaite answered that under the founding provisions of SITA Act that the Minister of Finance should be consulted on all matters of finance, just as SITA is required to consult with the Minister of Intelligence on all matters of security.

Mr Walters asked if non-executive member and alternate member meant the same thing. If not, what is the definition of an alternate member and why do they allow fewer executive members and more non-executive or alternate members?

Mr Ramaite replied that by making the majority of members non-executive and having fewer executive members, they are complying with the Amendment Bill provisions. He explained that an alternate member and non-executive member is not the same thing, because an alternate member is a member who fills the place of an absent executive or non-executive member.

Mr Mthembu asked what the rationale is behind the preparation of this Bill.

Mr Ramaite replied that they will need to prepare a separate document to explain why they have prepared this Bill.

Mr Baloyi commented that it is quite unnecessary to discuss the Bill clause by clause at this meeting.

Mr Walters asked if the R9 billion target could still be expected under this new model.

Before answering the question, Mr Van Schalkwyk noted that he was willing to make a presentation on the intent of the Bill. He agreed that SITA has not reached its initial target. Nonetheless the original R9 billion procurement figure would not change.
Mr Sikhakhane asked if SITA was able to sustain itself.

Mr Schalkwyk replied that they had not been very confident of this in the past but he hopes that the new Bill will be able to make SITA sustain itself.

Mr Gomomo suggested that the Bill would have to be fine-tuned before it can be presented to the National Assembly late next week.

Mr Baloyi asked if SITA would be able to monitor their own performance against the new business model.

Mr Van Schalkwyk replied that the 'plan - do - review' strategy will be applicable to SITA as a whole, not only to ITAC .

Mr Abrahams asked what are their time lapses regarding 'business case' processing.

Mr Van Schalkwyk replied that if it is under 10 000 pieces ordered by a department it will take SITA three days to deliver but if it is over 10 000, it can take a month, though it can be a lot faster. SITA avoids closed tendering processing because it gives unfair advantages. It all depends on the piece of equipment ordered.

Mr Gomomo thanked all who had participated and encouraged Mr Schalkwyk to keep up the good work . He suggested that there should be a review in the future for the benefit of the public.

The meeting was adjourned.

Appendix 1:
STATE INFORMATION TECHNOLOGY AGENCY AMENDMENT BILL [B24-2002]
BRIEFING OF PORTFOLIO COMMITTEE ON PUBLIC SERVICE AND ADMINISTRATION

Content
· Main purpose of Bill
new business model
· substantial amendments
Subsidiaries, objects & functions of SITA, Board's constitution, transfer of staff & assets, share capital, regulations
· Consultation process

Main purpose of Bill
· incorporate new business model (elaborated on later)
· amend share capital
· increase number of Board members

New business model
· IT House of value
security
interoperability
economies of scales
elimination of duplication
· Aims of House of Value
Lowering costs
increasing productivity
enhancing service delivery
· Establish subsidiaries to realise IT House of Value
· Redefine compulsory & optional services of SITA to align it with IT House of Value
· Duty on SITA to uphold & enhance IT House of Value in performing functions

Substantial amendments:
Subsidiaries Clause 3
· Express provision for SITA to
establish subsidiaries, e.g. e-Services to procure IT goods & services through IT Acquisition centre (ITAC)
transfer shares in subsidiaries to third persons
requires cabinet's approval for
- number of shares to be transferred
- persons to whom shares are to, be transferred
- conditions of transfer

Objects of SITA Clause 4
· Adjust objects of SITA to emphasise its role in using IT to-
promote efficiency of departments
improve service delivery

Duties & powers of SITA Clause 5 (section 7(1))
· Services that SITA must & may render are redefined
· Certain Listed services must, if required, be rendered to national & provincial departments (compulsory services)
e.g. provision of wide area networks & transversal information Systems
· Certain Listed services may, if required, be rendered to departments (optional services)
e.g. maintenance services for IT software/infrastructure training & management services for IT systems

Duties & powers of SITA Clause 5 (section 7(2)&(3))
· Under current Act SITA must act as procurement agency for IT requirements
To accord therewith, National Treasury's transferred relevant State Tender Board's functions to SITA with effect 1 April 2002
Amendment Bill will unequivocally establish SITA's role as sole IT ood5 S services procurement agency for all departments
· Departments requiring compulsory service must-
Acquire it from SITA or
If SITA can't provide it, procure it through SITA
· Departments requiring optional service may choose to acquire it from SITA or through procurement, i.e. not obliged to use SITA
· Therefor, current system of phased-ill (full) participation of departments are replaced by more flexible arrangement

Duties & powers of SITA Clause 20
· Departments must conclude business & service level agreements with SITA to regulate compulsory & optional services that it intends to use
· Compulsory terms of business agreement to be prescribed by regulation
· Existing business & service level agreements to be phased out within 36 months

Duties & powers of SITA Clause 7(5)
· SITA must set standards for-
interoperability of information systems
information systems security environment
· SITA must certify all acquisition of IT goods/service for compliance with these standards
· SITA may-
exclusively sell or provide authentication products or services far all departments & other organs of state
apply far accreditation under any law of those products/services

Duties & powers of SITA Clause 5(section 7(5)(d) & (6))
· SITA may conduct research regarding use of IT to improve efficiency of public administration
· In performing functions SITA must-
eliminate unnecessary duplication of IT goods/services
leverage economies of scale to provide cost-effective service
comply with.
- government policies on information management s IT
- regulations made under SITA Act & Public Service Act
- Preferential Procurement Policy framework Act

Constitution of Board Clause 6

· Maximum number of Board members increased from 10 to 14
reason...
· Limitation of 3 executive directors removed, but majority of members to be non-executive
reason - -
· Provision made for alternate members for non-executive members
reason

Transfer of staff & assets Clause 12
· SITA must offer employment to IT practitioner of department associated with compulsory/optional service when department uses SITA for that service
· When compulsory services are used, all assets must be transferred to SITA
- includes intellectual property rights
· When optional services are used, only those assets that both parties agreed to, are transferred to SITA

Rates for services Clause 9
· Minister for Public Service & Administration to determine rates for SITA's services
- after consultation with all Ministers & MECs
- with approval of Minister of Finance

Share Capital Clause 10
Current Act (s18) stipulates that SITA must be issued with fully paid-up shares as stipulated in agreement in exchange for transferred assets valued on method acceptable to State Assets are regularly transferred while at same time depreciating
· Propose that SITA has share capital of one ordinary share with nominal value of R1

Regulations Clause 15
· Minister for Public Service & Administration empowered to make regulations on-
IT procurement-
- alter consultation with all Ministers & MECs
- subject to Minister of Finance's approval
- requiring participation of client departments in procurement process
- requiring support of local economies
- regarding exemption from procuring through SITA
information systems security for all departments, with Minister of Intelligence's approval
procedure to resolve disputes between departments & SITA

Consultation process
· Before Cabinet's approval was sought, comment requested from all national a provincial departments, SITA & GITO Council
· Those that submitted comment Listed in Memorandum on Objects of Bill (par 5)

The full text of the SPPP document may be accessed on the SITA web site: www.sita.co.za

The purpose of this brochure is to explain the role that ITAC plays, and outline the procedure our clients should follow in order to procure goods and services.

2. E-GOVERNMENT IT HOUSE OF VALUES
The government has established the widely recognised concept of "The IT House of Value"

ITAC (and SITA as an organisation) supports this vision and has designed processes that adhere fully to these requirements.

ITAC endeavours to deliver on a timely basis:
· the best value product or service to the customer,
· while maintaining the public's trust,
· and addressing the e-Government IT House of Values to achieve increased productivity and reduced costs.

An enhanced service will be delivered by ITAC through reducing duplication realising economies of scale, ensuring system security, enabling inter-operability and compatibility, and introducing Historically Disadvantaged Communities to the ICT industry.

3. ITAC MISSION
ITAC's mission is:
· To align government CT initiatives with the e-Government IT House of Values
· To develop a centre of excellence for managing tendering processes and contracts within SITA e-Services
· To standardise the procurement policy and procedures for government
· To ensure the government benefits from economies of scale (group buying, etc)
· Deliver on a timely basis, the best value product or service to the client
· Assist government in developing BEE and SMME value added presence in the CT sector
· Ensure fairness, transparency and competitiveness in all dealings

4. ITAC OBJECTIVES AND SERVICE DELIVERY
ITAC's core objective is to define and implement the policy and guidelines for CT procurement on behalf of government, through the introduction of the SPPP, which enables acquisition that is the most efficient, productive, and cost-effective method to acquire the necessary goods or services.

ITAC will:
· Manage tenders for government CT requirements
· Negotiate and manage contracts on behalf of government
· Leverage government buying power to increase the value of all ICT investments
· Source and provide technology hat serves as a vehicle for enhancing governments' service delivery to citizens.

The ITAC value chain clearly defines the relationships with between ITAC and its client in the con-tract management and procurement process and thus enables ITAC to manage these relationships. Cur client has a clear role in enabling and managing supplier contracts, thereby creating a relationship between government departments and suppliers for ongoing procurement and support.

5. THE BENEFITS OF USING ITAC
· ITAC ensures economies of scale by identifying duplications that can be consolidated into a single transverse period contract thus saving time, money and effort.
· ITAC will make sure that client's procurement needs are aligned with the e-Government IT House of values so that systems are interoperable and the highest security levels are inherent.
· ITAC has "up-to-date" supplier information for CT goods and services nationally and ensures that you receive the right product at the right price from the nearest supplier.
· ITAC has access to a pool of skilled resources that are exclusively ICT focused so that procurement initiatives are accorded the highest level of attention.
· ITAC makes our specialised Contract Management service a priority by managing the entire life of the contract from the "cradle to the grave".
· ITAC's close consultation and co-operation with clients promotes a thorough understanding of the client's requirements.

6. ITAC SERVICE OFFERINGS
ITAC provides the following core services to government (amongst others):
· Tender Management.
· Contract Management

7. ITAC OPERATING FRAMEWORK
LEGAL FRAMEWORK
The ITAC public sector procurement policy (also known as the SPPP) was drawn up in collaboration with National Treasury to ensure its compatibility with current legislature, with specific reference to:

· The Constitution of the Republic of South Africa 1996.
· Public Finance Management Act (Act 1 of 1999, amended by Act 29 of 1999).
· State Information Technology Act (Act 88 of 1998).
· Preferential Procurement Policy Framework Act (Act 5 of 2000).

EXTENDING THE ECONOMIC BASE
The SPPP's point of departure recognises the urgent need for economic reform and accepts government's primary responsibility to bring this about, as the biggest ICT spender in the country. ITAC pledges to play a role in the government's objective to increase value added BEE involvement in this sector

8. STAKEHOLDERS
1. Cabinet and DPSA as Shareholders
2. Government as the regulator
3. Government as the client
4. SITA
5. Core suppliers e.g.: SUN, IBM, VAR's - Value Added Resellers

9. ITAC GOVERNANCE STRUCTURE
GOVERNMENT
The set of standing procurement policies and procedures making the provision for ITAC to execute this mandate is collectively derived from the State Information Technology Act (SITA Act) No. 88 of 1998, National Treasury Procurement Guidelines, Public Finance Management Act (PFMA Act), Act 1 of 1999, amended by Act 29 of 1999, the Preferential Procurement Policy Framework Act (PPPFA Act) Act 5 of 2000, and The Constitution of the Republic of South Africa 1996.

The SITA Act states in paragraph 7. (1). (g) that the State Information Technology Agency will "act as procurement agency in respect of information technology requirements, in accordance with state procurement policy".

The Public Finance Management Act appoints National Treasury as the author and custodian of rules and regulations with regard to public spending. SITA recognises this and operates closely with National Treasury with regards to procurement. In support of this agreement, National Treasury plays a pivotal role in approving both the policy and the related procedures from a legal perspective.

DPSA (DEPARTMENT OF PUBLIC SERVICES & ADMINISTRATION)
SITA is governed by the DPSA as mandated by the Minister in accordance with the SITA Act. The DPSA is therefore the primary stakeholder in both SITA and any of its guiding policies and procedures, including the SPPP.

SITA
The Minister of the DPSA has appointed a Board of Directors to govern SITA in its actions. In terms of the SITA Act, the Board reports to the Minister and is therefore the ultimate body charged with the responsibility for ensuring that SITA achieves its goals. The Board will therefore also be the final body to mediate on any issues that cannot be resolved internally within SITA.

DEPARTMENTS
The SPPP acknowledges the responsibility of the Accounting Officer or his/her delegate to govern the expenditure in his/her Department and therefore to carry the ultimate responsibility for procurement. In recognition of this fact, the client will determine their own business requirements and related business cases.

SITA, however, is accountable for ensuring adherence to the requirements of the e-Government IT House of Values. These are elimination of duplication; interoperability; IT security; and leveraging economies of scale. Therefore the business case will be handed to ITAC on completion and acceptance by the Departmental ITC and FCC, and after approval by the Accounting Officer or his/her delegate.

10. THE ITAC VALUE CHAIN
ITAC does not hold the accountability for developing the business case, but advises in the preparation of the business case by providing the information that will be required in the assessment.

10.1 PREPARATION OF THE BUSINESS CASE
The Business Case details the specifications of the lCT goods or services required. Government departments have ultimate responsibility and accountability for their lCT expenditure and ITAC acknowledges the role of the department's Accounting Officer (AC). Hence all business cases submitted to ITAC must have obtained prior approval from the AC.

The Business Portfolio Manager from SITA e-Services and the Contact Manager from ITAC will work closely with the government department3 in compiling the Business Case. The Business Portfolio Manager then forwards the approved business case to ITAC

10.2 BUSINESS CASE REGISTRATION
Business Case Registration: The e-Services Customer Service Centre (CSC) will register the approved Business Case in a central database at ITAC. The Business Case is then forwarded to Certification (another division within services) for Certification and then to ITAC for tender processing. Government departments will be able to access the database to track the progress.

10.3 BUSINESS CASE CERTIFICATION
On receipt of the Business Case, ITAC Will consult with the e-Services Certification division on the specifications that are required for the business case to adhere to the e-Government IT House of VaLues. These are,

· Does the proposed solution comply with security standards? (ISO 177799)
· Is the business case requirement interoperable with the other government Systems?
· Is the business case requirement duplicated elsewhere within the government Systems landscape?

It is critical that the department involves the Certification division in the early Stages of development of their business case order to expedite the process. The certified business case architectures will then be registered on a central repository, which will be accessible to all departments.

10.4 TENDER MANAGEMENT
All government lCT procurement initiatives with a value of more than R100 000 will be forwarded to ITAC for processing. The tender management process will include the following (simplified) steps:

· Registration: Tenders are registered at the ITAC Tender Office and forwarded to the Registration Unit within the Tender Office.

· Policy Adherence: Tenders are checked to ensure compliance with the legal and procedural requirements

· Contract Management: A Contract Manager is appointed to manage both the tender during the tendering process and also the contract once the tender has been awarded.

· Publication: The tender is published, and the responses are logged.

· Tender Evaluation Committee (TEC): A TEC comprising all the skills needed, including client representation, to evaluate the tender against the necessary criteria, is constituted and chaired by the Contract Manager. The TEC must ensure adherence to policy and procedure, safeguarding government against possible future litigation. All tenders are evaluated against the following 6 criteria before being submitted to the SSB.

· Solution usability

· Technical suitability

· BEE and SMME issues

· Financial and commercial aspects

· Human resources and People issues

· Change management and communication issues.

· Supplier Selection Board (SSB): The SSB, chaired by the ITAC Head, comprises client representation, ITAC, Certification and advisory services, reviews and confirms the recommendations from the TEC and determines whether all evaluation criteria have been taken into account. The risks to both SITA and the client are assessed, and the AO is consulted to endorse the recommendations. The recommendations then pass to the Supplier Selection Authority (SSA), the final SITA authority for the awarding of tenders.
· Supplier Selection Authority (SSA): The SSA is appointed by, and operates under the mandate of the SITA Board of Directors. The SSA comprises the Chief Executives of SITA-O, SITA-D, & SITA e-Services, a National Treasury representative, the ITAC General Manager and a non-executive chair appointed by the board. The SSA is responsible and accountable for tender awards by appraising recommendations and ensuring compliance with the tender regulations.

· Approval: On approval by the SSA, the Contract Manager will prepare a Letter of Acceptance to be issued to the successful tenderer (s).

10.5 CONTRACT MANAGEMENT
Successfully managed contracts are critical to ensure that the maximum return on any lCT investment is leveraged. Thus ITAC's Contract Management function is invaluable in the procurement process. Contract Management includes (but is not limited to) the following activities:

· Price Adjustments on contracts.
· Managing exchange rate fluctuations.
· Replacing 'end of life' products on contracts with similar products that comply with the necessary specifications.
· Facilitating and monitoring adherence to Contract terms and conditions.
· Dealing with Contract changes (breach of contract, liquidations etc).
· Consultations with vendors, clients, SITA, Technology Lab etc

11. SUPPLY CHAIN MANAGEMENT
The Supply Chain Management (SCM) area within ITAC is responsible for the maintenance, management and publication of the Supplier Database. The Supplier Database is used by Contract Managers to identify possible suppliers on tenders and is especially important for closed tenders where there are only a limited number of possible suppliers.

SCM also offers guidance on evaluating supplier performance and feeding this information to ITAC, and can highlight those suppliers with existing contractual agreements with ITAC which can also service other government departments. The opportunity exists on-line for suppliers to apply to be listed as an approved provider to ITAC.

Where government has formal permission to procure outside of existing contracts, they will refer to the Supplier Database for quotes. Where this is not possible, SCM will solicit quotes on their behalf, inform the client of the decision, and then update the database for future reference.

Supply Chain Management is also the procurement arm of ITAC for SITA Holdings and SITA e-Services, i.e. goods and services required in house.