MDP OPERATIONS & SUPPLY CHAIN MANAGEMENT

Transcription

1 MDP OPERATIONS & SUPPLY CHAIN MANAGEMENT Public Sector Context What are the key constructs, cursory issues and challenges? Professor Mogie Subban (UKZN) September 2018

2 Introduction Lets begin with a story we are all familiar with, and one that generates a lot of conflict and disagreement in the workplace around SCM and public sector procurement..

3 PERCEPTIONS or REALITY??

4 How do we strike a balance between these 3 key determinants to instill quality in SCM and public procurement?

5 Introductory approach to Public Sector SCM CONCEPTS CONTEXT OPERATIONS

6 CONTRACT MANAGEMENT Why BPR PARADIGM SHIFT IT CANNOT BE BUSINESS AS USUAL!!! WHAT IS THE MODUS OPERANDI?

7 LATIN TWIST. (C) COPYRIGHT NATIONAL TREASURY

8 Inputs-Outputs-Outcomes-Impact What is the nexus? Why this approach? What are the cursory issues? What is the linkage/synergy? How can value be instilled? Whereto from here? Clean audits & unqualified audits What is the significance for SCM and public sector procurement?

9 3 Es (Statutory Performance Measures linked to SCM & Public Procurement) Efficiency Effectiveness Economy Fiduciary responsibilities Public value system Impact on the triple bottom line

10 S195 Constitutional obligations Transparency Responsibility Accountability Values and Principles of Public Admin How do they resonate with SCM? How do they resonate with public Procurement?

11 CORPORATE GOVERNANCE & PUBLIC FINANCE Why this focus? (C) COPYRIGHT NATIONAL TREASURY

12 WHAT CONSTITUTES GOOD GOVERNANCE IN PUBLIC FINANCE? (C) COPYRIGHT NATIONAL TREASURY

13 PUBLIC ADMINISTRATION ENVIRONMENT INPUTS STRUCTURE FUNCTIONS OUTPUTS FEEDBACK

14 CLEAN AUDITS & UNQUALIFIED REPORTS What are the cursory issues? (C) COPYRIGHT NATIONAL TREASURY

15 PFMA Accountability and responsibility framework: national & provincial Regulate financial performance: individual vs institutional PFMA provides a clear regulatory framework for the integration of planning and budgeting Constitutional basis and imperatives Sect: 214/5 3 significant typologies

16 MFMA Accountability and responsibility framework: municipal context Regulate municipal financial governance Geared towards effective and efficient municipal service delivery

17 SPATE OF REFORMS From administration to management Fiscal decentralization Financial autonomy Inputs to outputs Silo to whole-of-government approach Annual reporting to in-year monitoring Cash-based accounting to accrual system Linking planning to strategic planning Normative guidelines: GRAP & GAAP, GAMAP, SCOA & MSCOA

18 SPATE OF REFORMS From administration to management Fiscal decentralization Financial autonomy Inputs to outputs Silo to whole-of-government approach Annual reporting to in-year monitoring Cash-based accounting to accrual system Linking planning to strategic planning Normative guidelines: GRAP & GAAP, GAMAP, SCOA & MSCOA

19 WHAT IS THE STATE OF SUPPLY CHAIN MANAGEMENT & FINANCIAL MANAGEMENT? CONFLICT OF INTEREST POOR / NON SERVICE DELIVERY FRAUD CORRUPTION DISHONESTY UNETHICAL BEHAVIOUR LACK OF VALUES GREED POOR M & E LACK OF OVERSIGHT ROLE POLITICAL PROFITEERING PLUNDERING OF STATE RESOURCES ROBBING THE POOR POOR GOVERNANCE FLOUTING THE LEGISLATION OUTPUTS NOT LINKED TO OUTCOMES FRUITLESS, IRREGULAR, UNAUTHORISED & WASTEFUL EXPENDITURE

20 FINANCIAL RISK MANAGEMENT & GOVERNANCE Risk register Pre-risk strategies Post-recovery strategies Mitigating factors EWS DRR

21 CONSTITUTIONALITY OF PUBLIC FINANCE Section (C) COPYRIGHT NATIONAL TREASURY

22 CONSTITUTIONALITY OF PUBLIC PROCUREMENT S217(1) When an organ of state in the national, provincial or local sphere of government, or any other institution identified in the national legislation contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.

23 LINKED TO SCM SCM in the public sector - integral part of Financial Management that seeks to introduce internationally accepted best practice. Bridges the gap between traditional methods of procuring goods and services and the balance of the supply chain whilst addressing procurement related matters that are of strategic importance (Policy to Guide Uniformity in Procurement Reform Processes in Government: 2003)

24 KEY ELEMENTS (link to outputs & outcomes) DEMAND MANAGEMENET ( Planning, specifying, analysis, research) ACQUISITION MANAGEMENT (Management, compliance, bid documents, criteria for evaluation and adj.) LOGISTICS (Stock/ inventory management, warehousing, transport, supplier payment, vendor, performance DISPOSAL ( Obsolescence planning, disposal strategy)

25 TRANSFORMATION EVENTS IN SCM 1994 Election of 1st Democratic Government of South Africa 1995 Identification of broad focus areas for government procurement reform: promotion of principles of good governance and introduction of preferential system to address socio-economic objectives 1996 Task Force produced a 10 Point Interim Strategy which included principles and policies for equitable and transparent public procurement and simplification of the procedures

26 CONTINUED 1996 The Constitution of the Republic of South Africa, 1996 adopted on 8 May 1996 and amended on 11 October 1996 by the Constitutional Assembly. It was amended by the Constitution of the Republic of South Africa Amendment Act, 1997 (Act No 35 of 1997) 1997 Green Paper on Public Sector Procurement Reform in South Africa produced for public discussion 1999 Public Finance Management Act (No 1 of 1999 as amended by Act No 29 of 1999) promulgated

27 CONTINUED 2000 Preferential Procurement Policy Framework Act, 2000 (No 5 of 2000) promulgated 2000 The Report on Opportunities for reform of Government Procurement in South Africa was endorsed for implementation in November Preferential Procurement Regulations, 2001 in terms of S5 of the PPPFA gazetted which incorporated the 80/20 and 90/10 preference point system 2001/2 Joint Country Procurement Assessment Review (CPAR) undertaken by Government and the World Bank

28 2003 The CPAR Report on Refining the Public Procurement System: Summary of Findings and Recommendations was presented in February NCOP conducted hearings to assess the success of the PPPFA Policy to Guide Uniformity in Procurement Reform Processes in Government was approved by Cabinet on 10 September National Treasury issued General Procurement Guidelines or 5 Pillars of Procurement to serve as the basis for transformation of procurement practices within the public sector. The Regulatory Framework of SCM was gazetted in December 2003 as part of National Treasury Regulations.

29 2003 In December 2003, National Treasury issued Amendment to Regulations of the State Tender Board Act in terms of Section 13 of the State Tender Board Act, 1968 (Act 86 of 1968); and Regulations in terms of the PFMA, 1999: Framework for Supply Chain Management 2003/4 Broad Based Black Economic Empowerment Act (No 53 of 2003) promulgated 2003/4 Municipal Finance Management Act, 2003 (No 56 of 2003) promulgated 2004 National Treasury issued Supply Chain Management: A Guide for Accounting Officers/Authorities in February Local Government MFMA: Municipal Supply Chain Management Regulations were gazetted on 30 May 2005

30 2005 Supply Chain Management Guidelines for Accounting Officers of Municipalities and Municipal Entities were issued by National Treasury in October MFMA Circulars issued on various SCM topics to assist with implementation

31 PRINCIPLES FOR SCM National Treasury issued General Procurement Guidelines basis for transformation of procurement practices within public sector: Enhance government s commitment to preferential procurement Assist in transformation process Broader understanding by all stakeholders National Treasury Website: INES%20-%202.pdf

32 Rationale for SCM Principles These guidelines are issued by the Government not only as a prescription of standards of behaviour, ethics and accountability which it requires of its public service, but also as a statement of the Government s commitment to a procurement system which enables the emergence of sustainable small, medium and micro businesses which will add to the common wealth of our country and the achievement of enhanced economic and social well-being of all South Africans (National Treasury)

33 FIVE PILLARS OF PROCUREMENT Proper and successful government procurement rests upon the five pillars of procurement FIVE PILLARS OF PROCUREMENT VALUE-FOR-MONEY OPEN AND EFFECTIVE COMPETITION ETHICS AND FAIR DEALING ACCOUNTABILITY AND REPORTING EQUITY

34 LEGISLATIVE FRAMEWORK Linkage between the Constitution and the other key acts affecting Local Government and Municipal Supply Chain Management

35 SIGNIFICANT CONSTITUTIONAL LINKAGE TO FINANCIAL MANAGEMENT Constitution S217(1) When an organ of state in the national, provincial or local sphere of government, or any other institution identified in the national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective. S217(3) issues national legislation with the requirement to prescribe a framework which provides for preferential procurement to address social and economic imbalances of the past.

36 MFMA LINKAGE S112(1) The supply chain management policy of a municipality or municipal entity must be fair, equitable, transparent, competitive and costeffective and must comply with a prescribed regulatory framework for municipal supply chain management

37 ENABLING LEGISLATION FOR PREFERENTIAL PROCUREMENT SYSTEM (PPPFA) PPPFA gives effect to S 217 (3) of the Constitution Provides framework for implementation of procurement policy contemplated in S 217(2) of the Constitution Provide for matters connected therewith

38 CONTINUED Promulgation and implementation of PPPFA and regulations were followed by the publication of a Broad Based Black Economic Empowerment Bill and supporting strategy Basis on which amendments to the Preferential Procurement Regulations were to be undertaken.

39 BBBEE PRINCIPLES (BBBEE STRATEGY)

40 ROLE-PLAYERS, FUNCTIONS AND SUPPORT STRUCTURES FOR SCM What are the responsibilities of some of the key-role players in SCM? NATIONAL TREASURY: Monitor implementation of SCM in all spheres of government Develop policies, procedures and practice notes/circulars to assist the three spheres of government in achieving the broader policy objectives as set out in the PFMA/MFMA and further legislation

41 CONTINUED PROVINCIAL TREASURY: Promote co-operative government among role-players Assist NT by monitoring delegated municipalities in terms of compliance to National and Provincial Treasury norms and standards Measure improvements in supply chain performance Set complementary standards Monitor and publish reports by municipalities and share information Take intervention measures for breach of the act by a municipality

42 CONTINUED MUNICIPAL COUNCIL AND COUNCILLORS: Provide political leadership and direction to a municipality s operation through policy and oversight responsibilities Oversee financial management and service delivery of a municipality Approve the SCM policy for a municipality Monitor and evaluate SCM implementation process through regular reporting to political structures.

43 Role of the Accounting Officer ACCOUNTING OFFICER: Implementation of SCM system Establish a SCM unit within the CFO s structure with the necessary delegations. Develop municipal SCM policies and procedures in accordance with national and provincial guidelines and directives Establish the necessary SCM Committees with clear delegations and responsibilities Ensure that adequate controls are in place to prevent over- or under-expenditure Ensure efficient anti-corruption and anti-fraud mechanisms are implemented Contribute towards local economic development, SMME development and BBBEE through targeted procurement spending Report to National Treasury/Provincial Treasury on SCM implementation

44 Role of Other Officials (C) COPYRIGHT NATIONAL TREASURY

45 FINANCIAL GOVERNANCE FRAMEWORK linked to NATIONAL TREASURY Responsibility Oversight Accountability

46 SCM in Municipalities (eg) SCM Units required to be established within all municipalities and municipal entities Where possible, unit must operate under Chief Financial Officer or an official to whom this duty has been delegated in terms of S79, 82 and 106 of the MFMA

47 COMMITTEE SYSTEM FOR COMPETITIVE BIDS The following committees are required to be established in terms of the SCM guidelines: Bid Specification Committee Bid Evaluation Committee Bid Adjudication Committee

48 SUPPLY CHAIN MANAGEMENT POLICY (value add) S111 of the MFMA is very specific in the requirements of a Supply Chain Management Policy (SCMP) within a municipality and gives Effect to S217 of the Constitution. The SCMP must: be fair, equitable, transparent, competitive and cost-effective; comply with the regulatory framework for municipal supply chain management; be consistent with other applicable legislation and with the national economic policy concerning the promotion of investments and doing business in the public sector; not undermine the objective of uniformity in SCM systems between organs of state in other spheres.

49 COMBATING ABUSE OF SCM SYSTEM It is the responsibility of the AO, through the SCMP to provide measures: To take reasonable steps to prevent abuse of the SCM system; To investigate all allegations against an official or other roleplayer of fraud, corruption, favouritism, unfair or irregular practices or failure to comply with the SCMP and where justified Take appropriate steps against such official or role-player; Report any alleged criminal conduct to SAPS;

50 How can public financial management be improved? CAPACITY BUILDING WHISTLEBLOWING RECOGNITION OF HONEST SCM STAFF MORE MGT. VIGILANCE EFFECTIVE INTERNAL AUDIT MORE VISIBLE PUBLIC PROTECTOR CREATE CULTURE OF PRIDE AND PROFESSIONALISM CLEAN SCM CAMPAIGN PROFESSIONAL BODY OF SCM PRACTITIONERS RESOURCE CENTRES BENCHMARKING SHARE BEST PRACTICES POLITICAL WILL

51 Concluding remarks

52 Thank You