Noting that the South African public sector spent an “enormous” R500-billion on goods and services and construction works in the 2013/14 fiscal period, National Treasury has called for various reforms of government’s strategic sourcing, procurement and supply chain management (SCM) practises.

It noted in a SCM review published this week – the first major assessment of the system of buying goods and services by the public sector since 2004 – that several factors prevented the public SCM system from performing optimally.

Among these, it found that those working in the system were either inexperienced or underskilled and did not understand the strategic importance of SCM and, specifically, the economic and social power of their decisions.

In addition, there appeared to be a high staff turnover and a lack of motivation in the public SCM space, as well as a lack of suitable equipment or information and few, if any, consequences for those who failed to perform at the required level.

Moreover, policies and regulations were often confusing and cumbersome, while
the roles and responsibilities of technical staff and political officer bearers were not clearly defined and, even when they were, the separation of responsibilities was not observed.

“There is also the challenge of finding the best balance between the use of public procurement as a means of development and transformation and the buying goods and services at the best price, in the right qualities, at the right time and in the right place,” read the report.

POSSIBLE REFORMS
Proposing several reforms, the review recommended that legal instruments applicable to SCM be consolidated under one piece of legislation similar to the Public Finance Management Act or the Municipal Finance Management Act.

It further advised the Office of the Chief Procurement Officer (OCPO) to oversee the use of procurement for socioeconomic transformation and suggested changes to SCM documentation to standardise but allow differentiation, depending on product categories.

Treasury further proposed a greater use of strategic sourcing and an expansion of the list of nationally negotiated SCM contracts.

TRANSVERSAL CONTRACT EXTENSIONS
It noted that the list of nationally negotiated transversal contracts – currently worth more than R16-billion – would be expanded over the next three years to include banking services, with a feasibility study currently under way to assess the cost and benefits of negotiating banking services centrally.

Multinational information technology company Sita was, meanwhile, implementing a procurement improvement plan to reduce leakage and increase value for government in terms of its spend on information and communication technology (ICT) infrastructure and services, desktops and laptops.

Government expenditure on ICT was about R10-billion a year.

Treasury added that a process was under way to procure audit and financial management consulting services centrally, thus lowering government’s yearly R12-billion spend on consultants.

Nationally negotiated contracts would also be expanded to include security services, physical security and access control, on which government currently spent R3.5-billion a year.

Research into travel and accommodation services had, meanwhile, been concluded and information about how these services were to be managed would be released “soon”.

Government spent about R5-billion a year on these services.

Research work involving a strategic sourcing methodology for school textbooks and stationary was currently under way for implementation on January 1, 2016, while work had started to identify opportunities that would reduce expenditure on healthcare equipment and research.

Moreover, Treasury advised that the newly established State Property Management Agency would develop a strategy to manage government’s entire property portfolio.

In terms of telecommunications, on which the State spent R2.4-billion on fixed line telephony and R800-million on mobile, government said it was in discussions with the mobile industry about how best to manage its mobile communications.

Research on fixed line telephony was also being done.

STANDARDISATION
Other SCM reform measures included the streamlining and standardisation of business processes, the removal of unnecessary steps in the SCM process, as well as the establishment of a centralised database.

“This will significantly reduce the administrative burden within the system, as the mandatory administrative documents will only need to be submitted once in a predetermined period,” outlined Treasury.

Government should, meanwhile, develop a reporting framework to standardise SCM reporting across the public sector, it held.

“Accounting officers and authorities will be expected to report on a range of information including procurement plans, tenders to be advertised, tenders awarded, supplier company information, the value of each award and progress in implementing tenders,” it noted.

Also advocated was the creation of a culture of cooperation between suppliers and the public sector.

Central to this would be the creation of a website for the OCPO, which would house all SCM information for suppliers and public sector institutions, allowing “easy” interaction between suppliers, public institutions and civil society.

PROCUREMENT POLICY REVIEW
Treasury, meanwhile, confirmed that, as part of the examination of the sector’s “fragmented” legal environment, a review was being conducted of the Preferential Procurement Policy Framework Act and its regulations.

Investigations were under way to ensure the strengthening of the OCPO to ensure that public sector SCM made the “maximum contribution” to socioeconomic transformation.

National targets for achieving these objectives would likely be set, alongside the issuing of directives describing the socioeconomic goals to be attained by provinces and municipalities.

Progress made in implementing preference measures would be monitored, as would the manner in which preference targets were set and attained, while
cost premiums related to socioeconomic preferential procurement would be monitored.

Treasury noted further that measures to promote preference and socioeconomic transformation would be conditional on their alignment with Section 217 of the Constitution, their ability to keep cost premiums to a minimum and their adherence to a code of conduct to be used by procuring institutions and the private sector to ensure sustainability, efficiency, cost-effectiveness and delivery.

“Noting that government’s approach to procurement is rules-driven, the review proposes that more intelligent ways be identified to realise value for money, create opportunities and promote beneficial change.

“These include strategic sourcing, which requires that government adopts a differentiated approach that looks at the strategic importance of the purchase, as well as the supply market complexity,” the report stated.