Public Service Commission: Evaluation of Supply Chain Management Practices, Strategic Plan and budget 2010 – 2013

Meeting report

Public Service Commission (PSC) Strategic Plan and budget 2010 to 2013
Mr Ralph Mgjima, Chairperson, Public Service Commission, introduced Ms Phelele Tengeni, Deputy Chairperson of the PSC and Commissioner for KwaZulu-Natal, and Mr Mashwahle Diphofa, Director General of the Public Service Commission (PSC).

Mr Diphofa tabled and took Members through the Strategic Plan. The Commission had been covering certain areas for some time and intended to continue to do so, to ensure that progress over time could be measured. It had also commissioned an independent evaluation of the impact of its work and the findings and recommendations emanating from that study were taken into consideration in shaping the medium term Strategic Plan. The Plan also encompassed the critical priorities of government such as anti corruption and fighting crime, issues relating to rural development; and issues relating to local government.

The strategic focus remained on the promotion of values and principles of administration contained in the Constitution, ensuring professional ethics, accountability, achieving an equitable, efficient and effective corruption-free public administration, that was responsive to the needs of the people of South Africa.

The PSC played a key role over the years in resolution of grievances in the Public Service (PS) and the promotion of good labour relations. In 2009/10, 563 grievances were referred to the PSC, but half had not followed the correct internal processes of being dealt with firstly within the department concerned. There was now provision, through amendments to the Public Service Act, for Heads of Departments to lodge their grievances with the PSC, which meant that rules for Heads of Department needed to be in place. The PSC had submitted draft rules to the Department of Public Service and Administration (DPSA) for inclusion in the Senior Management Service (SMS) Handbook. It was expected that the number of grievances lodged might increase.

The Commission assessed labour relations practices, advised on good practice and  would be looking at collective bargaining practices in the Public Service. It was doing a comparative study on how collective bargaining was taking place in the Public Service and elsewhere, and how it could be improved.

Mr Diphofa noted that a hearing must be held within sixty days when officials were suspended, under precautionary suspensions, where the Department must conduct an investigation. If not properly managed, these suspensions could run over into substantial period of time.

Strategic partnerships already established with the Public Service Coordinating Bargaining Council (PSCBC) would be strengthened through the co-hosting of the Labour Relations Conference for the Public Service in August 2010.

The PSC supported processes that enhanced the quality of public service leadership through evaluation of the performance of Heads of Departments, providing advice on the quality of the performance agreements of Heads of Departments, and reporting compliance trends to key stakeholders. It produced evaluations on the implementation of the Performance Management and Development System for senior managers in various provinces. If management was not taken seriously at the highest level of administration, it was likely that a similar trend permeated down through all levels of the departments.

The PSC focused on skills development, capacity building, assessing the effectiveness of practices and how they could be improved, and the area of employee satisfaction in the Public Service workplace. The assessment of recruitment and selection practices of senior managers for local government would contribute to a better understanding of the challenges and good practices in that area in municipalities, and steps that could be taken to improve current practice.

Mr Diphofa noted that 131 departments had been assessed since 2001. Departments identified for assessment for 2010/11 were the Department of Agriculture, Forestry and Fisheries, and the Office of the Premier in the Provinces. Once all departments had been assessed, a consolidated report would be produced to compare trends across provincial departments.

The PSC also identified and evaluated the effectiveness of programmes of government. There was a focus on poverty reduction as a priority of government, and on programmes in the agricultural sector, because of their critical role in rural development.

PSC also studied the satisfaction levels of citizens, because their comments on the quality of service delivery mattered. It piloted a set of key drivers of citizen satisfaction and would be applying that instrument more widely. It would also be looking at the effectiveness of agencies that were established to deliver services on behalf of government departments, and would see where the gaps were, and, if that kind of model was to be continued, what measures would be put in place to ensure that they did contribute effectively to service delivery.

The PSC would intensify its work on the inspection of service delivery sites, to ensure that information on the quality of service delivery was gathered first hand and was reported. During 2010/11 it would inspect service delivery at the Department of Police, focusing on detective services at police stations. The inspection would include an assessment of the nature and challenges faced by police officers, including the availability of resources needed to ensure effective detective services.

The Constitution had mandated the PSC to conduct public administration investigations either of its own accord, or on receipt of complaints lodged through various mechanisms. The investigations related to maladministration, allegations of corruption and poor service delivery, and other areas. These could be lodged through the PSC’s Complaints Rules or through the National Anti-corruption Hotline (NACH). The hot line was established strictly for corruption-related allegations, but people were also using it to report service delivery complaints. An analysis of the number of complaints lodged, their origin, nature and status would be taken and would provide useful information to Parliament, the legislatures, and the Executive and Public Service leadership on the areas of risk in the Public Service. PSC would also continue reporting on financial misconduct in the Public Service on an annual basis. Departments were required by the Public Finance Management Act (PFMA) to report to the PSC annually on their finalised cases of misconduct, and what types of sanctions were meted out.

The NACH had achieved tangible results in the relatively short time of its existence. Due to the number of complaints referred, departments were placed under severe strain with regard to their investigation capacity, and as a result finalisation of investigations was taking longer than would reasonably be expected. 7 185 cases were reported, feedback was received on 2 567 cases and only 1 247 cases were closed, which indicated that there were a number of cases reported through the NACH which had still to be finalised by departments. It was necessary to ensure capacity for these investigations.

Where investigations were conducted successfully, disciplinary action was taken against officials, there was dismissal of employees found guilty of misconduct, and large sums of money involved in the acts of corruption were recovered as well. This would be strengthened when more cases were investigated.

A critical area for PSC would be strengthening its internal processes around investigation of cases If would be rolling out a web-enabled system and at the feasibility and potential value of lifestyle audits.

The PSC was also secretariat to the National Anti Corruption Forum (NACF), a forum comprising business, civil society and government, brought together to collectively fight against corruption; PSC’s role here extended to the National Anti Corruption Programme (NACP). Over the years the PSC had been assessing the state of professional ethics in one province at a time; during 2010/11 it would be assessing the North West Province.

Mr Diphofa then presented the expenditure estimates per programme. Administration accounted for R67 million, Leadership and Management Practices for R21 million, Monitoring and Evaluation for R21 million, and Integrity and Corruption for R22 million. The total allocation for 2010/11 of R133 million would increase to R151 million for 2012/13. The largest part of that went to compensation of employees. Mr Diphofa emphasised that the resources had been reduced by R1, 951 million, R3 million and R5 million over this period, as a result of the deterioration of the current global economic environment.

Mr Diphofa then outlined the main challenges faced in relation to the resource issue. The PSC, as a knowledge-based organisation, tended to be labour intensive, but restrictions and limitations in terms of resources placed a strain on the scope of oversight work it could undertake. Over the past Medium Term Expenditure Framework (MTEF) period the average growth of the PSC was 7.7%. Measures were put in place to do more with less. The introduction of a Single Public Service would have profound implications for the PSC, because the expectation was that the oversight work of the PSC would expand to the sphere of local government as well. That would add about 284 municipalities to he 140 existing departments, which must be seen against the current resources. Relevant stakeholders had been requested to solicit additional funding in order for the PSC to be able to carry out its mandate.

The PSC played a pivotal role in the launch and establishment of the African Public Service Commissions (AAPSComs), and the Chairperson of the PSC was appointed the first President of AAPSComs, with the Office of the PSC as Secretariat. This office hoped to promote good governance in the public services throughout Africa. The Secretariat appointment had financial and human resource implications.

Mr Diphofa stressed that although in the past the PSC managed to achieve beyond its actual capacity, that was not sustainable. The impact of the resource restraints confronted by the PSC in fulfilling its mandate were outlined in the Strategic Plan. There was a need to strengthen labour relations, promote Public Service leadership, strengthen Monitoring and Evaluation, intensify professional ethics and strengthen capacity to manage the NACH.

Discussion
Ms A Dreyer (DA) found the presentations by the PSC to be of great value as a resource to the Committee.

Ms Dreyer noted that the National Anti Corruption Hotline of the PSC, the inter ministerial anti-corruption Task Team, and the Presidential hotline dealing with service delivery problems would surely all have to coordinate with each other. She wondered if the multiplicity of efforts would not cause the need for more administration, to avoid duplication, which would in turn require more staff and more funding. She asked how these bodies interacted and coordinated.

Mr Mgjima welcomed the recognition of the work of the Commission and also the support for the budget.
He noted that dealing with corruption remained the priority programme in South Africa, and the PSC welcomed all the measures taken in fighting corruption. The PSC played a role in the Secretariat in the National Anti Corruption Forum and the Portfolio Committee related directly to that. The forum was composed of business, government and civil society; so there should be sharing of ideas across those sectors, including suggestions as to how to deal with business, and what the responsibilities of civil society were. The PSC had presented on how the Presidential hotline was funded, and the interaction between the hotlines. The Anti Corruption hotline was formed at the request of the Executive and coincided with the mandate of the PSC.

Ms Dreyer noted that mention was made of providing names of offenders who had failed to disclose their interest, and who had not signed service contracts. She encouraged the PSC very strongly to do that. The Committee was often presented with very comprehensive reports giving tables and graphs that showed how many SMS employees had failed to do as required, but this was anonymous. The public was tired of senior public officials doing things without being brought to book, and wasting the taxpayers’ money and it was time to take action. There were enough strategies and integrity commissions, and she believed that now stern action was needed. She asked that the Committee be provided with the names of offending people so that it could make recommendations to the Executive about dealing with them. They should be exposed.

Ms Dreyer noted that the Committee was sympathetic to the plea regarding the budget, because PSC did very good work in helping with the fight against corruption, which was one of the biggest challenges facing the civil service. If that scourge was not eradicated, government would not be delivering services, and it was always the poorest of the poor who suffered the most.

Mr Mgjima welcomed the Committee’s expression of support for the budget of the Commission to be increased. PSC would be reverting to the Committee with more concrete suggestions on how the PSC could achieve self sufficiency in being able to carry out its mandate.

Ms Dreyer cautioned that the proposed Single Public Service would be more demanding of time, manpower and budget, and questioned if it could it be afforded at this stage.

Ms Dreyer made a comment on the availability of reports. This report was circulated to the Committee several weeks ago, so Members had time to study it before the meeting. That did not always happen in the Committee and sometimes Members of Parliament read reports in the media about matters that had not been brought to their attention in Parliament. She asked that the matter be taken up at Parliamentary level, to ensure that all reports were distributed to Members of the Portfolio Committee before they were released. Towards the end of last year there had been a major controversy about the appointment of the Director General of Justice. The PSC had investigated allegations, a report was submitted to Cabinet, but Members had not seen that report, although the media quoted from it. She requested that that should not happen again. Members had to see these reports to enable them to perform proper oversight.

Mr Mgjima said that the mandate of the Commission was to report to Parliament, and it did table the reports to the Speaker of Parliament, and with the Speakers of all the Legislatures throughout the country. It then became the responsibility of each legislature as to how it dealt with those reports.

Mr Diphofa emphasised that the PSC did not publish all its reports and table them in Parliament. For example, reports on cases in a particular department against a certain individual – a Public Administration investigation – would not be published or tabled in Parliament. This would have applied to the report requested by the Minister involving the former Director General of the Department of Justice and Constitutional Development. This was not copied or distributed in Parliament. That explained why it was not tabled.

 Ms Mbikane added that official reports coming in to the Committee had to take a particular trend in assisting the Committee to be focused when undertaking oversight visits. Very often, when doing oversight, the Committee did not really target the key problems areas related to Public Service and Administration.

Ms Dreyer noted that the PSC did investigation and research, and she asked what happened to reports and statistics, as there was no indication as to the way forward. Money was spent, investigations were done, and there were findings, but she wanted to know how these then contributed to improved service delivery.

Mr Mgjima said the PSC did have Heads of Departments or Managers that inspected service delivery points and made recommendations. PSC did get information when it was needed, and when it was thought to be very urgent PSC would do an inspection. The report and recommendations must be presented to the stakeholders to facilitate.

Mr E Rasool (ANC) raised the issue of the simultaneous appointments of the new Chairperson and Deputy Chairperson of the PSC, and suggested that this change of leadership provided the ideal opportunity to review what the PSC did. He noted that the planning, monitoring and evaluation capacity now in the Presidency could also lead to a reordering and a farming out of the work. In the face of declining budgets the Committee could be lobbied for additional budget, but at the end of the day the PSC had to deal with that declining budget. There was a need to see how the niche work of the PSC could be strengthened.

Mr Mgjima commented on the remodelling and repositioning of the PSC. The environment in which the PSC operated was continually changing, and it was impacted upon by lack of resources and also by restructuring within government, and globally. Development, such as took place in the Presidency, was welcomed by the PSC, especially in the area of planning, monitoring and evaluation. Government had specific priorities. When speaking of monitoring and evaluation, this really meant monitoring outcomes in a chosen few areas. It was necessary to bear in mind the mandate and separation of powers, the role of Parliament was, and the role of the PSC that strengthened the oversight function of Parliament.

There would always be a need for monitoring and evaluation, which was a burden in all work of government.
In the sense that the mandate was increasing and resources were decreasing, both in the local government sphere and in the nature of the demands by stakeholders, the PSC had to be continually remodelling its work. The various programmes of the PSC resulted in a thinning-out of resources, rather than deepening the work to be done, especially in regard to the additional local government mandate.

A rough calculation showed that 76% of the budget of the PSC went to personnel related expenditure. The Commission was knowledge intensive and therefore people-driven. A further breakdown of the staff would show how much of that budget went to knowledge-related expertise to improve the efficacy of the work of the PSC.

Mr Rasool said it would have been useful to see how the budget was balanced across the four programmes, in order to see whether the PSC was giving sufficient resources to Programme No. 3, dealing with service delivery improvements. The Committee could have the perception that everything about the PSC was its ethical and anti corruption drive, but could find that very little money went into that, and the efficacy of that intervention was not that strong. In order to hold the PSC to account, the Committee would need to be equipped with far more detailed information as to how the money was apportioned across the problematic areas.

Mr Mgjima responded that PSC could give a breakdown as to how money was allocated across programmes.

Ms H van Schalkwyk (DA) asked what was the level of satisfaction of citizens, and what were the key drivers applied to determine that level of satisfaction.

Mr Mgjima responded that research was striving to assess this. The PSC was continuously trying to improve the methodology to reflect what citizens felt.

Mr Diphofa added that the citizen satisfaction studies that the PSC had conducted thus far focused on specific services, such as social grants, or agricultural services, or the criminal justice system, so PSC was not yet able to assess the general satisfaction level of citizens. The overall figure may be deceiving depending on the specific questions asked. The key drivers were a combination of the Batho Pele principles and other measures. PSC asked South African citizens what they found to be the most important things – whether these be courtesy, timeliness, availability of information or redress if a person did not get the promised level of service. The next level would be to take those drivers that citizens rated highly and apply those consistently.

Ms M Mohale (ANC) raised the matter of the 563 grievances referred to the PSC, 336 of which were not considered to be of merit. She asked if that meant that someone was not doing their work, so that disciplinary action had to be taken, or if it indicated a problem of capacity.

Mr Diphofa responded that it was a combination of factors. Sometimes a public servant lodged grievances internally, sometimes it happened because of frustration, because that person had lodged the grievance internally but the thirty days allocated had expired with no feedback, in which case they would then approach PSC directly. In other instances the Labour representative tried to deal with the department, with no progress and went to the PSC.

Ms Mohale asked if the PSC was assessing the satisfaction levels on their own, or through a questionnaire in the department concerned, and whether this was a true reflection of the situation.

Ms Tengeni responded that the PSC did not outsource citizen satisfaction surveys. Officials of the Office of the Public Service Commission (OPSC) went out in the field and did those surveys. She sensed that people were making an outcry, and it was probably about the samples, which were done according to resources. Statistics South Africa would do 30 000 households and give results of a particular survey, so their validity was very high. The PSC had very limited samples, but it was informed by the resources.

Ms Mohale asked if the PSC was able to assist with the recruitment of senior managers at Local Government level.

Mr Diphofa responded that it could not assist in the exact function of the recruitment process itself, but would give input on the process of oversight, how it was being done, what were the prescripts, the challenges, whether those prescripts were being observed and how the process could be strengthened. It did not form part of the recruitment and selection chain.

Ms Mohale asked for clarification as to whether managers would first be going to the strategic planning sessions, and then signing the performance agreements.

Mr Diphofa clarified that strategic plans were the foundation of the contracts. They must be linked. There was a strategic plan, an annual performance plan or work plan of the department, then the performance agreement. By the end of the first month of the financial year, the performance agreements must have been signed.

Mr L Ramatlakane (COPE) referred to the mechanism for Heads of Departments to submit their grievances. He asked how the PSC would intervene and resolve issues where HoDs probably had serious grievances.

Ms Tengeni responded that the PSC functioned within the ambit of the Grievance Rules, which currently said that the grievance must be resolved as close as possible to the point of auditing. When a HoD had a grievance this should be referred to the office of the Premier of the particular province, or, if it was at National level, should be referred to the Presidency. However, PSC would conduct follow ups, by going back to the sources to which those grievances were referred, and ask what had been done about them. Ideally HoDs should be able to lodge their grievances directly with the PSC.

Mr Ramatlakane had hoped that Mr Diphofa would have mentioned the issue of the service provided by parastatals; as he wanted to link that to the issues of professionalism and ethics, how financial disclosure was dealt with in the public service generally, and how disclosure extended to the parastatal public enterprises. He noted that more money was being spent, and more conflicts of interest could be happening in the sphere of public enterprises, particularly around the issue of tenders.

Mr Mgjima said that the State owned entities were not the only area over which the PSC had a question mark. It was also concerned about Local Government. That was why it welcomed the support and endeavours of the Public Administration and Management Bill, that opened up possibilities for investigation of ethics and integrity in Local Government and all the entities, to ensure there was a system. The PSC was obtaining legal opinion on this. These areas were not previously examined by the PSC, but it could add a lot of value in terms of accommodation and the oversight function at provincial and local level. Both areas, local government and entities, were areas of public administration

Mr Ramatlakane said that it was mentioned that research would be done into the issue of the lifestyle audit. It was interesting to see how the police had dealt with that and whether there was involvement in organised crime, which could be tracked back through lifestyle audits, which might be very telling.  He wondered whether the PSC process was perhaps putting the target out of reach, when there was an outcry around the issue of the lifestyle audit, particularly insofar as State officials were concerned. He wondered if research was needed, and, if so, how long should this take, as the topic was repeating itself. He asked about time frames for implementation.

Mr Diphofa responded that when the PSC went into an oversight process, it had an internal protocol as to what steps had to be taken and under what circumstances PSC conducted lifestyle audits. Its own internal accountability protocol must be applied

Ms J Maluleke (ANC) was concerned that suspension in the Pubic Service was serious and cascading into the municipalities, where several people were on paid suspension, and that slowed down service delivery. She urged the PSC to focus on the issue.

Mr Mgjima said when the regulations were implemented they were already a product of bargaining in the bargaining council and there was acceptance on how to deal with grievances. The sixty days was enough time to prepare a case and have a hearing, without causing prejudice or undue spending of resources. There was, however, a possibility that the sixty days be extended, by mutual agreement, for a complex case. The PSC regarded that as adequate, fair, Constitutionally-compliant and reasonable. Where there was non-compliance with this, it tended to result in stretching of the suspension over many months, with full pay. The reasons for a precautionary suspension was to prevent a person interfering with the evidence in the information gathering process.

Ms Maluleke noted that there had been complaints about the issue of Acting Directors and Acting Managers in the Public Service. She asked how PSC would advise departments to deal with those issues.

Mr Mgjima responded that recommendations had been made to the Committee and other committees.

Ms F Bikani (ANC) raised concerns around the Commission’s models and the research work. The budget was very specific. She was, however, concerned that after research had been done, there was no publicity about it, or indication as to what should happen.

Mr Mgjima said that had been dealt with earlier.

Ms Bikani said that the Committee should be part of the gatherings and conferences; so that it could contribute to what needed to be done to improve the Public Service.

Mr Mgjima replied that the PSC recognised the role of the legislature and Parliament and the need to invite and to share ideas, and it had already done so in the Labour Relations seminar. He welcomed the suggestion.

Ms Bikani noted that last year the Commission gave a presentation on research and investigations into vacancies in the Public Service. She asked how this had aided in closing the gap around acting positions, and how best could money be saved on these positions.

Ms Dreyer reiterated her question about publicising the names of offenders, especially regarding non-compliance with disclosure of interests and signing performance contracts.

Mr Diphofa responded that the Commission did not mention names in its reports because at the time that the report was compiled, the PSC focused on the task itself. The information on the names was made available, to the Executive, and to committee Chairpersons of Parliament, on request, but was not included in the report, as it would make the report too long and expensive, especially with the number of copies to be printed and distributed.

Mr Rasool felt that the allocations of the budget across the four programmes was too equal. PSC should be establishing a niche. It must ensure that service delivery was improved over the next twelve months, which was the main strategic objective. He was not getting a sense of how the PSC was using declining budgets to try and make the most impact of the indicative factors. It would otherwise be quite possible for PSC to continue to chase those at lower ranks for corruption, but miss the senior employees who were at the head of tender processes, for example.

Mr Mgjima clarified that that type of exercise was already taking place within the programmes, where the emphasis was on delivery that would make a big impact. The Commission would later be talking about supply chain management practices.

Ms Tengeni added that the mandate of the Commission was very broad, so it tried to strike a balance, but that was very difficult without resources. If the PSC focused on one area then others would fall between the cracks.

Ms Bikani said the Committee also needed to look at Vote 11 for the Public Service Commission, which could also affect lobbying for more funds.

Mr Ramatlakane reminded the Commission that it did not answer the specific question relating to the HoD or Director General of Correctional Services. In all the processes followed, including the intervention when the other mechanism had failed, he wanted to know whether something was done.

Mr  Ramatlakane also said that he still did not have clarity about the reliability factor of the anti corruption hotline, in terms of verification of information when people alleged that something had happened. He wondered if a person’s name would be recorded.

Ms Bikani said that there was still an issue around the budget of the PSC being included in the DPSA. She got the impression that that would make it even more difficult to negotiate for more funds.

Mr Mgjima agreed, and said that had been a concern of the PSC for some time. It applied also to the Chapter Nine institutions supporting democracy.  An ad hoc Committee of Parliament was set up to review those institutions, including the PSC, and came out with a report and recommendations, including the statement that the perception of independence should be protected, in the sense that the budget, the vote, and the money should come directly from Parliament for those institutions, including the PSC. Prior to that there were proposals from National Treasury that the budget of the PSC should be included within the budget of the DPSA. The previous Chairperson of the Public Service Commission made a submission to National Treasury, supported by the Minister, along the lines of the recommendations of the ad hoc Committee. PSC was opposed to its budget coming from DPSA. He personally believed that a separate Parliamentary allocation should be made. That would protect the independence of the Public Service Commission. He was not fully sure what the monetary difference would be if there was a separate vote for the PSC or if a budget was voted out of the DPSA budget, but the latter created the impression that PSC was not independent.

Ms Dreyer agreed that was a very valid point and asked what was the situation regarding the other Chapter Nine institutions.

Mr Mgjima said that the budgets of Chapter Nine institutions fell under various ministries. He urged that the PSC budget come from Parliament so that its independence could be protected.

Evaluation of Supply Chain Management practices within the R200 000 threshold
Mr Diphofa briefed the Committee on the report of the PSC focusing on transactions in Parliament between 2004 and 2007 in the area of supply chain management. The focus was on the threshold that then applied, of R200 000 (which had since been raised to R500 000). No tenders would have to be advertised below that threshold. Because the requirements were less strict compared to the larger figures, the risk was also higher.

The PSC had comprehensive legislation in place to help government departments to manage risk of fraud and corruption in the procurement environment. However, there was still a prevalence of incidents involving allegations of fraud and corruption, as seen by complaints lodged for the PSC to follow up and investigate, in the area of supply chain management. It was also seen in the number of hotline cases received.

The focus of the study had been on two departments – Departments of  Public Works and Housing (as it was then named) and across their national and provincial offices, given the large amount of funds being made available for tenders in those departments.

The legislative framework focused on how procurement processes should be facilitated in departments. The PFMA required the Accounting Officer to ensure that departments maintained an appropriate, fair, transparent, accountable, and competitive system of procurement. Section 76 of the PFMA provided for National Treasury to make the necessary regulations to guide the process further. Section  of the Preferential Procurement Policy Framework Act (PPPFA) prescribed that an organ of State must determine and document preferential procurement policy. The Supply Chain Management Regulation 3 of National treasury specified that the accounting officer must develop and implement an effective and efficient supply chain management system. Practice Note SCM 2 of 2005 set the threshold value for the procurement of goods and services from outside, up to a value of R200 000 (at that time). The key issue was that where there were verbal quotations, there had to be documentary evidence as to who made the call, and when it was made, and other details to create an accountable auditory trail that could be followed up. Procurement between R10 000 up to R200 000 (VAT included) required written quotations, using a database that the department may be running.

The study looked at the regulatory framework and the key procurement steps that needed to be followed. The first step involved inviting quotations. PSC had decided to look at the extent to which there was documentary evidence in the sample of transactions, to demonstrate the extent to which appropriate steps were followed and whether the required number of quotations was obtained, whether these were properly evaluated through an accountable process in the department and whether, once the decision was made to aware the tender, there was documentary evidence demonstrating that the appropriate request for delivery of services was then issued. Once the services were delivered, there should be proper evidence in the department of an original invoice against which the payment was done. Those were the five steps against which the PSC assessed transactions in the departments. It had taken a sample of transactions against which to assess compliance.

The findings were summarised. In respect of evidence of invitation of quotations, the average rate of compliance was 71%. National departments showed 54% compliance, which was low; and in the provincial departments the lowest compliance was seen in the Western Cape, at 47%, and the highest in Mpumalanga at 97%. Figures were based on a sample of transactions. However, they already showed insufficient compliance.

In regard to the requirement for three quotations, and proper approval of any deviations in doing so by an authorised person, there was a lower than average compliance rate across departments being 55%. Of this, 40% were complying at national level, and the lowest provincial level was Gauteng, at only 19%.

The average rate of compliance to procurement rules relating to the evidence of quotations was 54%, which was unacceptably low, and indicated that the application for the criteria for awarding of orders for goods or services was not well controlled and monitored and was therefore prone to abuse. National compliance was at 38% and Gauteng only 19%.

Compliance to procurement rules relating to requests for goods/services from service providers was at an average of 69%. Failure to issue specific instructions and/or orders to service providers exposed the departments to, amongst other irregularities, the risk of incorrect deliveries and inferior quality of goods/services. The average was 69%, with the lowest being in KwaZulu Natal, at 24%.

Compliance with the payments process was high with an average rate of compliance of 94%, indicating that due diligence was taken over the payment process and should be encouraged.

It was stressed that now that the threshold had been raised to R500 000, there would be more and more transactions within this threshold, and it was very important to be more rigorous with regard to compliance.

Based on its findings, the PSC made several recommendations to improve supply chain management. It recommended that there should be:

- Ongoing forensic or other specialised audits within the supply chain management process;
- Regular fraud detection reviews across supply chain management;
- Attempts to ensure segregation of duties. This was critical so that the people inviting the tender, the people who evaluated those quotations, the people who issued the directives for services, and the people who paid, were all separated to minimise possibilities of abuse of the systems;
- Adequate supervision of the procurement process;
- Encouragement given to whistle blowing on maladministration and corruption;
- Emphasis on the issue of formal requests for quotations; and insistence that there must be documented evidence in terms of verbal quotations;
- Recordal of any deviations in the supply chain management process;
- Payment of invoices only on the basis of the original quotation, order forms and invoice;
- An updated list of service providers maintained. Now that the threshold was being increased to R500 000, quotations could be asked from the internal list, but if the database was not updated it would be a problem;
- Declaration of conflicts of interest from Members of Parliament, and those that were involved in the procurement process; and
- Performance ratings of suppliers contracted to departments, to be assured of good service.

Discussion
Ms Bikani said that the Committee should consider the recommendations put forward in Parliament. This should be cross cutting with SCOPA and other areas of work.

Ms Bikani asked whether the average rate of compliance was based on all the provinces’ consolidated figures.

Mr Diphofa replied that it was.

Ms Dreyer referred to the last table in respect of transactions evaluated, noting there was suddenly a huge improvement in the level of compliance, with an average of 94%, which related to diligence in the payment process. While it was comforting to see some compliance with some of the requirements, it was actually also worrying because if the previous steps were not complied with until payment, then the process was already corrupted. This increased the risk of fraud – nothing was properly evaluated, but payment was made quickly, and this created the suspicion that payment was being made to a friendly party. The lack of consistency was of concern. This also showed that this was not a matter of consistent neglect.

Mr Mgjima said the PSC recognised the compliments in terms of the quality of reporting. He agreed with Ms Dreyer that this was of concern; only at the stage where people wanted to pay were documents found showing that certain things had never happened. The average rates were not good. It was further worrying to see the breakdown between provinces. Gauteng, for instance, showed only 19% evidence of evaluation of quotations, which was very worrying. There was a huge problem there and was something that Members of Parliament should take up.

Mr Ramatlakane said supply chain management was a very critical area in the issue of calling for tenders.
The Committee must be worried not only about the two departments that were evaluated, but also about those who had not yet been sampled. He feared that a widening of the sample would only show a worse situation. He commended the PSC for the good work done, but was concerned about the widespread non-compliance.

Mr Ramatlakane also noted that the threshold had since been extended to R500 000, which presumably made the problem still bigger. He asked what had informed this increase.

Mr Mgjima explained that the reason for increasing the threshold from R200 000 to R500 000 was that of expediency and the fact that costs and prices were increasing. It was at these levels that administration should always be checked because that was where the irregularities and corruption were likely to be.

Mr Diphofa added that this was a National Treasury action under the PFMA to regulate the process. National Treasury rated the threshold. The problem was that the Treasury processes actually allowed accounting officers to lower the threshold at their discretion, but could not increase them.

Mr Ramatlakane asked how the work could be coordinated to communicate warning signs to the various committees and other bodies. He also asked how, if recommendations were adopted, the work would be synchronised to have one template for all levels.

Mr Mgjima reminded the Committee that PSC  also presented to other Committees of Parliament. It was important that the Portfolio Committees of Housing and Public Works should be made aware of the report, but that this also be conveyed to the provincial legislatures. All should go into this report and call the departments to account, and also tighten their controls.

Mr Mgjima noted again the concerns about the budget and the work that had to be done. Perhaps it was necessary to hold discussions about what work should receive more focus. He noted that Supply chain management was the crux of the issue.

Ms Dreyer thought the Committee was happy with the recommendations but suggested that the Committee should follow up on these. She formally proposed writing to each of the DGs or Heads of Department of the respective national and provincial departments that were part of the investigation, to tell them about the findings and recommendations, and ask them to comply with the list of recommendations and report back to the Committee.

Ms Dreyer further proposed that the Committee should call in the KZN Department of Housing, the Western Cape Department of Public Works and the Eastern Cape Department of Housing, as well as the National Department of Public Works, who had been the departments who either did not comply at all with the requests or sent their information so late that they could not form part of the investigation. She was worried that they might indeed have been trying to hide something, by ignoring the PSC. They should be interrogated and called to account.

Ms Bikani said it was an issue that the Committee should also present to the Cluster, to incorporate other areas. This was a cross cutting issue, and should involve those committees overseeing the departments mentioned. She agreed that this Committee should interrogate the issues more, and go into further details on their findings, and also look at the possibility of oversight work. This Committee should also perhaps communicate with the ad hoc Committee on Public Service Delivery, and try to get information coordinated. For the matter to end here would not do justice to the Public Service Commission. This study must be brought out to be an implementable instrument and presented in Parliament.

Ms Dreyer asked whether the Committee was accepting her recommendations.

Ms Bikani said that the recommendations should not just end at this Committee, but should also go through to the Cluster.

Ms Dreyer commented that that could be done, but it would postpone action. She felt that getting more committees involved and asking for their input would dilute the issue. There was a thorough investigation and a thorough report by the PSC, and it was up to this Portfolio Committee to take action. It was time the Committee showed its teeth by calling in offending departments, in the same way that Standing Committee on Public Accounts (SCOPA) was doing. Whilst SCOPA was overseeing the spending, this Committee had oversight on governance and should do its work. She stressed that although other committees should be informed, it was this Committee that should act.

Mr Ramatlakane said the two proposals were complementary. The Committee was accepting the recommendations but beyond that also recognised the need to take this to the Clusters.

Mr Ramatlakane said that no recommendations were entertained in the previous presentation. He suggested that, given the issue of non-compliance with the sixty days mentioned, the Committee should also call in the offending departments. Suspensions should be done within sixty days, yet were stretching out into several months. He recommended that the Committee call in those that were outside of the required period, whether this was the Director General or even the Minister, as executing authority. He suggested starting with the Department of Correctional Services. The Committee must get the facts and call on the Department to explain why they were not complying with the time periods.

Ms Mohale supported calling the cluster, and the Chairperson of the PSC to present to departments.

Mr Mgjima responded on the issue of coordination of the oversight recommendations. He had previously said that he would like to present departments’ specific recommendations to the Committee on such issues. In this case PSC would also be presenting to the oversight committees for the departments.  He understood that with or without that process, the Managers of those Departments should be called to account to this Committee.

Ms Bikani said the Committee needed to reach consensus on the issue of coordination, but still maintained that it was important to consult the Clusters, the largest platform in which the portfolio committees came together. Joint hearings might also cut down on the sitting time of committees. In essence the PSC had done its investigation and research, presented the answers, and now the Committee must implement recommendations. She said that this Committee and the other relevant Portfolio Committees might be doing the same work.

Ms van Schalkwyk said Hon Dreyer and herself would agree with that - as long as it did not take sixty days or more!

The meeting was adjourned.