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Department of Defence
REPUBLIC OF SOUTH AFRICA
1
The Procurement Process
Presentation to the Portfolio Committee on Defence
08 October 2009
Contents
Introduction
Procurement Process
Procurement System
Anti-corruption and Transparency
3
INTRODUCTION
Aim
To orientate the Members of the PCD to the Procurement process within the Department
of Defence
5
Definitions
Authorising entity: A board or committee established to monitor compliance to procedures and to authorise bid submissions. Delegan: a person or entity who has powers delegated upon them.JIT: Just-in-time; concept of rapid deliveries and inventory reductions.Material Value Chain: the process, system and infrastructure pertaining to movement and handling of material from requisition to disposal
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Definitions…Cont.
Procurement entity: DoD establishment whose primary function is to procure or sell goods / services SCM: supply chain managementTQM: total quality management; concept of continuous improvement with emphasis on quality throughout the supply chainTransversal contracts: centrally-managed contracts applicable to more than one government department.
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Scope
The content of this presentation only applies to the GDA [or FMS folio 01] procurement transactions, i.e. two thirds of the DOD budget.
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PROCUREMENT PROCESS
Procurement Objectives
To support the Material Value Chain in accomplishing optimal materiel readinessTo ensure delivery of cost-effective quality services to services / divisions through good procurement practicesTo align procurement systems and processes with DoD Strategic ObjectivesTo ensure compliance of the procurement execution process with the GRC frameworkTo develop partnership arrangements with suppliers, and other procuring organisations and explore opportunities for SC collaborationTo promote the principles of BBBEE, industry development and environmental sustainability
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RSA Constitution Sect. 217: Execute Procurement Function through a system that is
fair, competitive, transparent, equitable and cost-effective.
PFMA Sect 38(1)(a)(iii): Have an appropriate procurement system which is fair,
competitive, transparent, equitable and cost-effective.
Procurement Prescripts
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PPPF Act 5 of 2000
National Treasury SCM Practice Notes
DODI No Acq/2/99/Edition 2
JDP No Acq/00003/04/Edition 1
Secretary for Defense Delegations
BBBEE Act
Procurement Prescripts
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Procurement Process Flow
End User Proc Unit/Centre Proc Committees Depot/Unit Finance
Initiate reqsDraw Specs
Budget
Verify Req & SpecsDraw up PQ/Bid Doc’s
& Advertise
Receive PQ/Bids
Capture PQ/BidsTechnicalEvaluationacceptance
PQ/Bid evaluationRecommendation
EvaluationAcceptance
Approval
Request FA
Approve FA
LOA/Order
Suppliers
ReceiveGoodsPrint
ReceiptVoucher(Qualitycheck)
Process Pay’t Docs
VerifyBid docInvoicesReceiptVoucher
Makepayment
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Level 3 2x Procurement Service Centres [PSC’s]
Thaba Tshwane and Simons TownSAMHS: Procurement Unit [Medical specific]
Procure at a Corporate Level [central] Requirements come from Formations and/or
PSMs Purchase through contracts, bids and / or price
quotations
Procurement Execution
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Level 4 Regional Procurement Sections
SA Army: 15SAAF: 10SA Navy: 2SAMHS: 1J Ops: 2DHQ Unit: 1
Regional requirements [FSEs] Purchase through contracts or price quotes
Procurement Execution
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Procurement transactions fall within the following categories: Petty Cash:- R5,000-00 Price Quotes:- <R500,000-00 Bids:- >R500,000-00 Contract item:- Any Value
Procurement Categories
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Price quotations - fwd docs to selected suppliers. Suppliers chosen (rotation) from a database
Bids - advertised in government tender bulletin, all suppliers have access to this
All PQ’s and bids have closing dates and times.
Received, evaluated administratively & technically, ranked for acceptance and recommended to the relevant committee for approval
Sourcing Process
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NAME ABB PROC FIN THRESHOLD
Regional Commercial Procurement Committee
RCPC R1,000,000-00
Corporate Commercial Procurement Sub-committee
CCPSC R5,000,000-00
Corporate Commercial Procurement Committee
CCPC R10,000,000-00
Departmental Commercial Procurement Board
DCPB Unlimited
Authorising Entities
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Proc process ends when supplier is paid in full
Rule (National Treasury prescribed) - payment 30 days after receipt of invoice
Advance payments to suppliers is not done unless agreed to as part of the contract conditions, and approved by CFO
FASC – responsible for finalising supplier payments. PSC’s only deliver the payment packs
Payment Procedure
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For FASC to process payment, ff documents are required: Delivery note Invoice Receipt voucher (accounting) Order / contract Completion certificate (services/repairs)
Payment Documents
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A mix of flexible delivery programmes, activities and mechanisms that can be strategically used to achieve service delivery objectives by outsourcing or PPPs
Legislated by - PFMA - Treasury Regulation 16 (PPP’s) - DOD Policy - DODI/00003/2000
DOD Defence Review, April 1998 stated that all non-core functions must be considered for outsourcing, the DOD must focus on its core business
Alternative Service Delivery
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Types of Procurement Transactions
Transversal Contracts
Common Products / Services
Division-Specific Services
Control and Management
National Treasury / SITA / DPSA
Central Procurement via mid-term contracts
Central Procurement via tender process
Co-ordination and Admin
Corporate Procurement [Log Div]
Corporate Procurement [Log Div]
Corporate Procurement [Log Div]
Execution Services / Divisions Services / Divisions Services / Divisions
Monitoring Compliance
Materiel GRC Materiel GRC Material GRC
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PROCUREMENT SYSTEM
System Design Principles
Combining the principles of JIT, TQM and SCM
Responsible Procurement Officials shall be of the rank of SO1/Assist.Director/Lt Colonel/Cdr upwards
Separate ‘oversight’ function from the ‘execution’ function.
System must allow ‘pro-active’ monitoring
Centralise control, and localise execution
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Procurement Delegans
SECDEF : by law
CSANDF : by SECDEF
Authorising Entities : by SECDEF
Senior Proc Officials : by SECDEF / CSANDF
Proc Officials : by SECDEF / CSANDF
25
Financial Delegans
SECDEF : by law
CSANDF : by SECDEF
Div / Serv. Chiefs : by SECDEF / CSANDF
Senior Personnel : by SECDEF / CSANDF
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Procurement Structures: Execution
ProcurementUnit
ProcurementCentre
CorporateProcurement
•Day-to-day procurement•Procurement officials coordinated•One for each service / division
• Supporting Procurement Units•Handling central procurement activities•Handling tender processes•3 of them•Managed by senior procurement officials
•Supporting procurement centres•A directorate within Log Division•Central control of procurement strategy•Issue directives and execution frameworks to the lower structures
Procurement offices / sections at units
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Procurement Structures: Oversight
Regional Proc Committee
Corporate Commercial Proc Committee
Departmental Commercial Proc Board
Corporate Commercial Proc Sub-Committee
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The New Procurement Framework
Services / DivisionsFinancial Delegations
Procurement Unit 1SA Army
Procurement Unit 2SAAF
Procurement Unit 3SA Navy
Procurement Unit 4J Ops
Procurement Unit 5SAMHS
Procurement Unit 6DHQ
Regional ProcurementCommittee
Procurement CentreCentral
Procurement CentreSimons Town
Procurement CentreWaterkloof
Corporate CommercialProcom
Corporate ProcurementSANDF Log Div
DCPB
CSANDF Procurement Delegation - Prerogative
Deliv
ery
of
Good
s/serv
ices
ProcurementDelegations
ProcurementDelegations
ComplianceTo Gov.Framework
ProcurementDelegations
ProcurementDelegations
GRC Support GRC Support
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Exercising Procurement Delegation: CSANDF
CSANDF shall exercise his Procurement Delegation within the Authorising Entities
However CSANDF may use his procurement delegation outside the normal procurement process in cases of emergency as defined in JDP: ACQ 0003/2004
Provided a condonment is prepared and submitted to the authorising entity within 14 days.
30
CORRUPTION PREVENTION / CONTROL
Prevention / Control Mechanisms
Submission of needs by DOD end-users. All procurement requests are scrutinized by the DOD Corporate Procurement Centre’s prior to inviting tenders to ensure that specifications/contracts are not drawn up to favour particular suppliers.
Segregation of duties. All persons involved in the procurement process/cycle perform a single procurement task only i.e. person inviting tender is thereafter not involved in either evaluating, recommending or serving on approval committee’s/board’s to award the tender.
Invitation of suppliers to tender for DOD work. As prescribed by National Treasury, the DOD utilises an electronic database (Proquote) which chooses suppliers by a rotation system per commodity category. DOD also advertises in the Government Tender Bulletin.
Recommendation to Award Tenders. Entire procurement process is electronic on E-Proqure. (Capturing of PPPFA points).
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Approval of Tenders. Not vested in any individual in the DOD. Only authorised constituted committees and boards approve awards. Members serving must also declare their interests regarding awards under consideration.
Effective Procurement Governance. Achieved through proactive monitoring by GRC to ensure compliance of procurement policies and procedures.
GRC also retains Chairmanship of the procurement Committees and Boards that award tenders.
GRC provides specialist advice and guidance to all DOD entities executing procurement.
Procurement Training and Corruption Awareness. DOD procurement officials are regularly exposed by attending workshops, seminars, formal DOD courses, etc.
Prevention / Control Mechanisms
33
Interaction with National Treasury. DOD regularly engages NT for clarification of specific procurement issues. NT also promulgates SCM Practice Notes that regulate procurement and the DOD must implement same.
Procurement Deviations. Are only approved by the Accounting Officer and must be reported to NT and AG.
Procurement Delegations. Only issued by the Accounting Officer [or CSANDF sub-delegations] iaw PFMA. No DOD official is authorised to execute procurement without a delegation from either SecDef or CSANDF.
Compliance to Legislation. DOD confirms strict compliance to all procurement prescripts as a measure to prevent corruption.
Prevention / Control Mechanisms
34
Declaration of Interest. No legislation that prevents DOD officials from tendering for DOD work whilst in the employ of the DOD. Members need to only declare to higher authority that they own a business.
Segregation of Duties. Enforcement is problematic due to personnel shortages.
Electronic Procurement System Downtimes. Can result in specific suppliers being asked by procurement personnel to tender.
Challenges within Procurement
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THE END