Enterprise Resource Planning: DPWI/PMTE briefing; with Minister

Public Works and Infrastructure

31 May 2023
Chairperson: Ms N Ntobongwana (ANC)
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Meeting Summary

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The Committee received a presentation from the Department of Public Works and Infrastructure on the Enterprise Resource System (ERP), and was told which management system modules were operational and how far the system was from completion, as well as the financial implications of the development and the reasons for delays in the process.

Members raised concerns about the over-customisation of the system and the risk of not being supported by the original developers. They were worried about the cancellation of service provider contracts and the amount of money spent on each service provider without the necessary progress and finalisation.

The Committee reiterated the need for a comprehensive and integrated system to ensure all government branches and entities could retrieve and submit information and data on the same system, to ensure accurate data and information.

The Department confirmed that the first phase of the project, with all modules operationalised, would be completed by the end of the financial year at a total cost of R50 million, whereas the long-term project to incorporate all provinces and entities would be completed at a cost of R200 million.

Meeting report

DWPI briefing on enterprise resource planning

The Chairperson reminded the Committee that they were again looking at enterprise resource planning (ERP), as recommended by the Auditor-General of South Africa (AGSA). The Committee would concentrate on procuring the Archibus integrated workplace management system, the Sage computerised accounting system, and the money spent.

Ms Nyeleti Makhubele, Acting Director-General (DG), Department of Public Works and Infrastructure (DPWI), requested the Chief Information Officer, Ms Tsemedi Malapela, to lead the presentation.

Ms Malapela said that the presentation would be on the objectives of the integrated resource planning  system, the expenditure to date, and which service providers had been involved in the process.

The approval of the ERP system was started in 2011 when National Treasury granted approval. Tenders were published, and they had opted for the SAGE solution, with an American Institute of Certified Public Accountants (AICPA) system that would provide for the immovable asset register functionality.

Deloitte was contracted to implement the SAGE, but due to variables and time constraints, the Department appointed LDM Accounting Services. This first service provider then had a contract in KwaZulu-Natal (KZN). They started working on modules that were available on AICPA.

In 2018, the Deloitte contract expired and there were performance issues with LDM, so the Department then embarked on acquiring another service provider, which was Asset Life Cycle Management (ALCM) Solutions. Because the Department did not have the in-house capacity to develop deviations, the decision was made to get an off-the-shelf solution for the core business processes for real estate management, capital projects, and immovable asset management. National Treasury granted permission to procure this solution.

Because the off-the-shelf application needed some customisation, the DPWI had to look at the number of records it could take, integration and mobility.

The final two solutions that were decided on were ARCHIBUS for immovable asset management, movable asset management, lease administration, project management and facility management, and SAGE would be used for financial management. It was also decided that a robust integration system between ARCHIBUS and SAGE had to be built.

ARCHIBUS was able to implement the immovable asset management module and the unscheduled maintenance module for facility management. The lease-in module for the rentals also moved into implementation. In terms of the lease-out module, the Department could only manage to define the user requirements with the business stakeholders. The customisation could not be completed because the key stakeholders were focused on this lease-in module.

Regarding preventative maintenance, the Department only managed to document the requirements with the business stakeholders, but could not move with the rest of the activities to implement this module. Regarding infrastructure budgeting and the condition and construction project management module, the Department documented the user requirements and then completed the engagement with their respective branches. The solution came with end-to-end project management processes, and the "vanilla" version was opted for. However, the Department could not implement it and get sign-off from the respective branches as the data was not ready to be loaded into this module for capital projects. 

Ms Malapela said that with the modules that could not go live, the availability of the stakeholders to confirm the user requirements, the system's functionality, and the provision of data required for those modules had been a challenge. Further, there was no support in the programme itself, as information communication technology (ICT) were working with the technical managers and they had to decide what must be done with those modules. It was problematic that the two service providers had poor project governance in terms of accountability, sticking to the deliverables and timelines, and the milestones of those projects. A further delaying factor in the implementation and completion of these modules was the fact that the Department had no documented business processes.

Detailing the expenditure on the project, Ms Malapela informed the Committee that R22 million was awarded for the first two contractors and at the end of the project, R16.5 million had been spent. For the second service provider that came on board, R22.8 million was awarded and R19 million was spent. There were two contracts in place for SAGE, which started in 2012. The first one was with Deloitte, where the award amount was R18.2 million, and R15.4 million was spent. Thereafter ACTEC was appointed as service provider. R49.8 million was awarded, and R49.3 million was spent.

An executive committee (Exco) sub-committee was established to focus on this programme. They meet monthly, and on a technical and management level, an ICT operations committee was established where all the branches and the stakeholders were represented.

The risk of poor data availability had a huge impact on the success of the programme, because as much as solutions were brought, if there was no complete and accurate data to feed into this system, it was problematic. Previously, almost 80% of the modules had to be rolled back to deal with the data issues.

Cost overruns had been identified as potential threats and uncertainties that may impact on the financial budget of this project.

Ms Malapela indicated that they were in the final stages of appointing a service provider for ARCHIBUS, bearing in mind the lessons learned from previous service providers that had performed poorly. As for the SAGE service provider, the Department had not successfully found a suitable service provider. It was currently looking at the areas to prioritise for implementation, taking into consideration the lessons learned and the functionality requirements whilst considering the AGSA issues raised around the existing systems in terms of security controls. 

Discussion

Ms M Hicklin (DA) raised a concern about the extent of the customisation of the system to suit the DPWI's needs. She recalled that whilst being a councillor in the City of Johannesburg, they had customised the system to such an extent that SAP did not want to support the system any longer. She asked if that might be the reason why the likes of Deloitte had failed to meet the expectations and were therefore fired for poor performance. She asked if there was too much interference in what was asked of them or what was done from the Department's side.

She raised a further concern around the adjustments to the source code of a software system, and the possibility that it could open that system up to manipulation and therefore, corruption. In addition to that, if the person who had manipulated the system, or who had adapted the system to whatever specifications they needed to make, left the Department they would take all that knowledge with them and therefore one would lose all the institutional knowledge of how to actually reverse or actually keep the system going. 

Ms Hicklin also raised a concern around the amount of money spent, whilst only limited functionality had been achieved. She also recalled mention of other software architecture being evaluated, and raised a concern around integrating the systems and again, the opening of loopholes for corruption.

She pointed out that Parliament itself was not trusting the DPWI with rebuilding Parliament and would be paying contractors and management agents directly. She asked if there was a trust deficit of the DPWI within its own client Department because of the fact that there were so few modules within the DPWI that were functional. 

Ms Hicklin pointed out that it was limited only to the immovable asset register and unscheduled maintenance and, to an extent, the lease-in that was functional with over-customised software and a lack of accountability, severe overruns both in time and cost, with the Auditor General finding material irregularities, particularly pertaining to the Property Management and Trading Entity (PMTE) in procurement non-compliance. She raised a further concern that the ERP system did not address any of the issues that were raised by the Auditor-General's report on material irregularities, or by the BDO report on cost and time overruns

Mr W Thring (ACDP) asked if all the entities of DPWI were on the Generally Recognised Accounting Practice (GRAP) accounting system, because one could only imagine the kind of confusion that would emanate from not using the same accounting system. He also asked who had access to the modules on ARCHIBUS, who determined who uses which module, and how effective these modules were.

Mr Thring asked what the timeline was for the remaining modules to go live. He raised a concern that the need for a service provider on a number of functions indicated a lack of capacity within the Department and accumulated added costs. He agreed with Ms Hicklin bout the tampering with IT systems, and mentioned how the internal revenue system in eThekwini had caused numerous problems because of over-customisation. He also asked the Department how dependent the success of ARCHIBUS was on provinces and municipalities concerning the data they must put into the system.

Ms A Siwisa (EFF) asked what the rate of success had been since the implementation of the new model of billing systems. What were the financial implications of the delay in this process and the changes in service providers? She also raised a concern about the lack of project management monitoring and cost effectiveness of the project. Contractors did not complete the requirements of their contracts, but still got paid the full amount, and she asked if there was any reimbursement by the non-performing service providers.

She asked what the challenges had been, working with only some of the modules being operational.
She also asked if the system would be operational on a national and regional basis, and if regions were included, what monitoring and evaluation tools were in place to ensure proper implementation and use.

Ms S van Schalkwyk (ANC) asked which service providers the ARCHIBUS and SAGE systems were procured from in the different years, and what went wrong with each contract. She also wanted to know if there had been any assessment reports that provided reasons for what had transpired in terms of those contracts.

She noted that the expenditure on this project had been substantial, and that contracts with service providers were ended every time just before the funds were exhausted. She asked if the expenditure aligned with a percentage of work expected to be done by each service provider, if it was done within the required timeline, and whether there were any consequence management or penalty clauses. She raised her concern about the fact that the PMTE was still operating with a manual system, as this posed a high risk of a loss of information

Mr T Mashele (ANC) asked if the Department just put out enquiries around known systems, or if they asked for a system to be developed for the specific needs of the Department. He was of the opinion that a specific system could be developed within South Africa that was custom-made and developed to fit the unique and specific needs of the DPWI.

Ms L Mjobo (ANC) raised her concern about the termination of the contracts of service providers and the financial implications of this. The project was still ongoing, and each time the money was used. Not only did contractors get paid, but they left with crucial information about government properties.

Ms Hicklin mentioned that the lease-out portion of the module that had not been activated as yet was a preventative maintenance module. That was a serious part of the PMTE, but as infrastructure budgeting had not been operationalised, this meant that the PMTE could not be operationalised. One of the biggest problems with the PMTE was that it was only the property management entity. It could not become the property management trading entity because it was not operationalised. 

Ms Hicklin shared the Chairperson’s concern that every time a new contractor was appointed, they had access to sensitive government information and they took that information with them. She asked if these companies signed non-disclosure agreements, and if they were sticking to them.

DPWI's response

Ms Makhubele informed the Committee that ARCHIBUS was sold to them as a system that could accommodate plug-ins. It was therefore decided that, in light of the failures of previous service providers, to go to the mother company ARCHIBUS to assist with the development of a customised system.

She referred Members to the presentation for the names of the different service providers used over the years. She said that two different financial systems were currently used, but that the new system would ensure that all branches and levels of the Department worked according to one financial system. A more detailed Word document would be forwarded to Members to provide further information.

Ms Malapela said that the active modules could be accessed by staff in both the national and regional offices, but that functions were role-based, as determined by the access management policy.

She confirmed that the Department did not have the internal capacity to implement the required systems. The reason service providers were released from their contracts was because they lacked the required capacity or skills to implement the solutions, therefore they were not paid the full contract amounts. The service providers were paid for work delivered and their efforts to develop those milestones. Regarding intellectual property, she said that all companies sign non-disclosure agreements. The security also did a vetting exercise to ensure that all the resources coming on board met the security requirements in terms of state security.

Ms Malapela confirmed that an open tender had been published, and from the responses, the appropriate evaluation took place and the most appropriate solutions were decided on. It was envisaged that all outstanding modules would be functional by the end of the financial year.

Further discussion

Mr I Seitlholo (DA), through the chat function, noted that while the immovable asset register remained ineffective or not working, properties continued to be illegally invaded with high levels of crime. Why was this not a priority to resolve?

Ms Makhubele said that the invasion of DPWI properties was not related to the asset register or to knowledge as to whether the property belonged to the DPWI -- it was other community issues that led to the invasions. She said an existing asset register had been audited, as loopholes and weaknesses had been identified.

Ms Makhubele informed the Committee that the ARCHIBUS contract would cost R50 million in total.

Ms Malapela confirmed that the cost for the initial function would be R50 million over the next three years, but that the total project would cost R200 million.

Ms van Schalkwyk asked that more clarity be provided around the poor performance of the service providers to ensure the same companies did not receive other contracts in government and become repeat offenders.

Ms Hicklin expressed concern about the amount spent and the budget for ARCHIBUS. and was of the opinion that a customised programme would have cost less. She also asked if the State Information Technology Agency (SITA) could not provide the necessary expertise for such a programme.

The Chairperson asked if ARCHIBUS was still relevant, with all the need for changes.

Ms Makhubele said that the biggest criticism of the immovable asset register was that it did not include all government entities controlling government property. The new system therefore had to include the DPWI, national departments, provinces and other government entities in control of properties. The first step would be to have a fully functional departmental asset register, and thereafter other asset registers would be brought on board, and this was where the R200 million would come into play.

Ms Makhubele confirmed that ARCHIBUS was still relevant for now, but that this might change in the future as requirements changed.

Concerning the termination of contracts, she indicated that service providers did not perform, in that they could not complete the required tasks and were not doing proper project management. The necessary monitoring was not in place to deliver milestones on time and within the agreed budget. The root cause of that was lack of capacity and expertise.

Minister of Public Works and Infrastructure, Mr Sihle Zikalala, thanked the Committee for their questions and inputs. He agreed that the planning stages could have been done better and that adding modules as they went along was problematic. He said it was essential that a comprehensive plan with milestones had to be developed, implemented and completed. It was essential that there was one integrated system, although there might be some capacity problems, and updates might be needed.

The Chairperson reminded the Minister that the Committee would deal with the Immovable Asset Register at the next meeting, which would be a physical meeting.

Committee minutes

Consideration of the minutes of the meeting held on 30 May was deferred to the next meeting, as Members did not have time to read through them.

The Chairperson reminded members that the next meeting would be a physical meeting in Committee Room 1, 120 Plein Street, on 7 June. A report would be drafted on the considerations of the Brackenhurst and Brackendowns residents' petition, with a recommendation that a progress report be submitted after six months.

The meeting was adjourned.                                                                                                                                          

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