Regulatory Reformed of Local Government Supply Chain Management

Transcription

1 Date: 29 July 2009 Regulatory Reformed of Local Government Supply Chain Management Johannesburg South Africa- Auckland Park Country Club Presented by: Mr. Sandile Ngcobo; MCIPS Director of the Institute of Purchasing and Supply South Africa (IPSA) 1

2 Introduction My paper is not an attempt to define what should be the proposed reform or bureaucratic supply chain management system that government should adopt; rather it should be viewed as an attempt toward evolution on the progress we have made as a country within procurement fraternity. For starter we know that the government of South Africa has been and is committed to good financial governance and the elevation of previously marginalized communities. According to the green paper reform report of 1997; the total procurement by the different Organs of State is estimated at R56 billion. Obviously after 14 years such figures must have changed significantly as a result of more budgets required and granted for service delivery; and inflation changes (with its ups and down). And seriously speaking this amount calls for strict control through good financial governance and while at the same time efforts on economic transformation are necessary. Furthermore; we all recognize that public sector procurement in South Africa is regarded as a tool by government to achieve economic ideals, including certain socio-economic objectives. Undoubtedly this view formed the foundation and the bases of the procurement reform process with the subsequent development of national policies; practice notes and procedures as noticed over the past 14 or so years through relevant ministerial departments and portfolio committees of parliament. This include but not limited to implementation and adoption of Preferential Procurement Policy Act; CIDB Act 38 of October 2000; Broad Based Black Economic Empowerment Act; and recently in 2003 the promulgation of a framework for Supply Chain Management as Treasury Regulations, issued in terms of section 76(4)(c) of the PFMA. At the same time, these initiatives in a form of regulations and Acts by government are specially targeted and recognizing the importance of an effective and efficient procurement system to permit organs of State to deliver the quality and quantity of services demanded by South African s. If my assessment and pointers above are correct and valid, government will have to spend more effort toward transforming and leading procurement reform in this country; giving support and guidance to industry bodies where necessary; as a result of its interest to achieve good governance in procurement and socioeconomic objectives through procurement or supply chain management as it may be referred to this days. And my presentation below will be based on this and hopeful will be able to start and lead the discussion around good procurement governance; and secondly transformation in a form of reform. One will hope that such emphases and reform will come to bear under the new planning and performance commission led by Trevor Manuel. This commission together with other relevant ministries; including National Treasury should 2

3 monitor the developments of these policies and regulations with an aim of giving further strategic policy direction and where possible assess whether political objectives are achieved by such regulations and Act s; including evaluating their relevancy at some point in time. Achieving Good Governance Procurement in South Africa To achieve this certain institutional reform needs to take place in order to promote efficient and effective procurement systems, as well as to achieve value for money and best in class supply chain management systems. Fore example: Different tendering cultures and processes are still prevalent as unacceptable as they are; i.e. suppliers are still being hindered by different payment systems and late payments; some organs of state still trying to comply and to standardize their processes; including reporting systems on SCM implementation and compliancy with statutory reporting guidelines The nature and complexity of public sector procurement is at least comparable to that in the private sector, and must be given at least similar priority as a result. This is pure business process and public sector procurement is no difference to that of private. The challenge is to meet the public s demands for increasingly high quality public services at good value for money and in a sustainable way. To do this the Government needs to harness the benefits that businesses can offer through their commercial expertise and ability to innovate, through a procurement function. To bring about a step-change to government s approach to supply chain management: A higher caliber of Supply Chain Practitioners is needed to deliver the improved standards, focused on driving better value for money from procurement on a whole-life costing basis. Government to focus its top talent on its most complex and critical procurement projects, i.e. GAUTRAIN Projects; 2010 soccer world cup projects ect ; with a GPS that is flexible and able to focus resources where they can best be deployed; Recognizing its importance to public service delivery and value for money, departments and all organ of state must strengthen their procurement capability with greater direction and support from the accounting officers/authorities ; State department/organs must collaborate procurement initiatives more in the purchase of goods and services common across more than one department, to get better value for money; and At a high level government must form Major Projects Procurement Review Group; specifically for its procurement needs to ensure that most important and complex projects are subject to effective scrutiny at the key stages before rolled out to respective ministries and authorities for implementation and roll out. 3

4 What is good procurement? According to Wikipedia, the free online encyclopedia- Procurement is the acquisition of goods or services at the best possible total cost of ownership, in the right quantity and quality, at the right time, in the right place for the direct benefit or use of governments, corporations, or individuals generally via, a contract. Good procurement means getting value for money that is, buying a product that is fit for purpose, taking account of the whole-life cost. A good procurement process should also be delivered efficiently, to limit the time and expense for the parties involved. Successful procurement is good for the public, good for the taxpayer, and good for businesses supplying government. While there is no single method that will guarantee the delivery of those Good objectives for all procurements, the following general principles set out the key steps to successful procurement in most cases; according to the Office of Government Commerce report in 2000: A procuring authority/organ of state should: Be clear on the objectives of the procurement from the outset; Be aware of external factors that will impact on the procurement such as the policy environment or planning issues; Communicate those objectives to potential suppliers at an early stage, to gauge the market s ability to deliver and explore a range of potential supplies Consider using an output or outcome based specification, to give suppliers who naturally know more about their business than potential buyers more scope to provide innovative solutions to solve the underlying problem the procurement is designed to deal with, rather than deciding what the precise solution should be at the outset; Follow a competitive, efficient, fair and transparent procurement process, and communicate to potential suppliers at the outset what that process will be. This will give suppliers greater certainty about the costs and benefits to them of submitting a bid, which should encourage effective competition. As all suppliers will have the same knowledge going into the process, and will be assessed in the same way, the successful bidder can be chosen purely on its ability to provide the best solution. 4

5 Conclusion A good progress has been made by our government to transform procurement in this country; as indicated above and this progress can be traced from procurement reforms in1995 which was directed at two broad focus areas, namely the promotion of principles of good governance and the introduction of a preference system to address certain socioeconomic objectives. The procurement reform processes were supported by the introduction of a number of legislative measures, including the adoption of the PFMA and the PPPFA and the promulgation of the Broad Based Black Economic Empowerment and later the BBBEE Codes. One will hope that our national government is in a process to either merge BBBEE with the PPPFA or to repeal PPPFA and replace with the new BEE codes; either way is necessary and will be a recommendable progress going forward. South African public demands ever-higher quality public services, driven in part by the transformation. As you have seen protest around the country for better and faster service delivery; they have seen in the quality of goods and services provided by private business, which they increasingly expect the public sector to match. The Government s aim must be to deliver world-class public services through sustained investment matched by far reaching reform. Procurement will be a key route through which such reforms are delivered. Innovative procurement tools and technology have driven businesses quality and productivity improvements. To bring about the transformation needed to deliver high quality public services at good value for money, the Government will need to harness that innovation. This will require Government to be more open to adopting an outcome based approach to procurements where appropriate working with suppliers to solve problems rather than attempting to specify the precise solution at the outset. To take full advantage of innovation across public services procurement will require a significant stepchange in the Government s procurement capability in terms of skills, the framework in which procurement operates, and tools available to purchasers. Until then; I thank you Mr. Sandile Ngcobo; MCIPS 5