Striving Towards Excellence in SCM

1. Institute of Municipal Finance Officers

2. Striving Towards Excellence in SCM • There are key areas which are being addressed through various projects and initiatives in order to achieve excellence in SCM • The projects and initiates being undertaken are: • Implementing a Quality Management System based on ISO 9001 standards • Review of SCM Policy • Improved Capital Expenditure: • Procurement Planning/Procurement Schedules • Tracking Contract requests through the Bid Committee process • Preventing/Reducing Irregular Expenditure: • Centralized contracts register • Electronic procurement system (first phase addressing <R200,000 procurement)

3. ISO 9001

4. What is ISO 9001 • ISO 9000 is the generic name given to a family of international standards developed to provide a framework around which an effective Quality Management System can be developed • ISO 9001 is the auditable standard in the ISO 9000 family • ISO 9001 is based on eight quality management principles: • Focus on your customers • Provide leadership • Involve your people • Use a process approach • Systems approach to management • Encourage continual improvement • Factual approach to decision making • Mutually beneficial supplier relationships

5. What is ISO 9001 • Benefits of implementing a Quality Management System developed in accordance with ISO 9001 requirements: • Motivate staff by defining key roles and responsibilities • Cost savings can be made though improved efficiency and productivity • Improvements can be developed which will assist reducing waste, rejected work and fewer complaints • Customers satisfaction is improved “The sight of an achievement is the greatest gift a human being could offer others” – Ayn Rand

6. ISO 9001 - A Process Based Approach • ISO 9001 does not specify the requirements for the goods and services being procured, ISO 9001 is a set of requirements against which a Quality Management System can be developed • ISO 9001 makes it very clear that organisations must identify and manage the process which make up their Quality Management Systems • What is a Process? • A process is an integrated set of activities that use resources to transform inputs into outputs • A system exists whenever several processes are inter-connected using input-output relationships “To double your income, triple your rate of learning – Robin Sharma

7. ISO 9001 - A Process Based Approach • In effect processes are “glued” together by means of such input-output relationships • As the output of one process becomes the input of another process: inputs and outputs are in effect the same entity • Inputs and outputs • Inputs and outputs (from a process based perspective) can be grouped into four general categories: • Products • Services • Resources • Information “Only the mediocre die always at their best. Real leaders are always improving – and raising their bar on how superbly they can perform and how quickly they can improve” – Jean Giraudoux

8. A Quality Management System Illustrated • “Document what you do – and do as is documented” CUSTOMER and LEGISLATIVE REQUIREMENTS Requirements SCM Service Service Service Service QUALITY MANGEMENT SYSTEM Process Process Process Process Process Process Processes connect by input-output relationships. Several interconnected processes form a system A process takes inputs and though a set of activities translates these into outputs Required for each process Work Instruction Procedure Document (s) Record (data)

9. Contract Management

10. Procurement Scheduling and Contract Request Tracking Institute of Municipal Finance Officers

11. Tracking Contract Requests Through Bid Committees • An electronic tracking system has been implemented to track both procurement schedules and contract requests (created from procurement schedules) • Each contract request is tracked through the various bid committees (Bid Specification, Bid Evaluation, Bid Adjudication and Award Finalisation) • The information extracted from the electronic tracking assist in highlighting any blockages/delays in the process which allows for these to be addressed • All Bid Committees convene on a weekly basis “The 5 Rules to being a great leader: See clearly, Health is wealth, Inspiration matters, Neglect not your family, Elevate your lifestyle.” – Robin Sharma (SHINE)

12. Procurement Schedule for Top 150 Budget Line Items • SCM is complete for 62.98% of top 150 Capital Budget line items for 13/14 budget • For 2014/2015 – all procurement will be completed by June 2014 Institute of Municipal Finance Officers

13. Contract Register • A centralized contracts register is being put in place to ensure all contracts awarded are recorded in the centralized register • Weekly meetings between CFO and SCM Management review contract expiry dates to ensure new contracts are put in place timeously to avoid irregular expenditure • Essential information being recorded in the register: • Contract number • Contract Award Date • Contract Start Date • Contract End Date • Contract Value • Vendor details “Money, influence and position are nothing compared with brains, principles, energy and perseverance” – Orison Sweet Marden

14. eProcurement

15. SSS System • Clause 18 of SCM policy requires the accounting officer to develop a system for procuring goods or services through written or verbal quotations and formal written price quotations • Policy requirement that all procurement in excess of R30 000 (VAT included) that are to be procured by means of formal written price quotations must, in addition to the requirements of paragraph 17, be advertised for at least seven days on the website and an official notice board of the municipality • Supplier Self Service (SSS) • RFQ’s are being advertised on the internet All Suppliers will be able to view all advertised RFQ’s • Suppliers are required to logon to the new Quotations System in order to view the RFQ’s advertised by eThekwini • All supplier quote responses must be Captured On-Line

16. SSS System • Launched supplier self-service (SSS) system on JDE - went live on 1 July 2013 • It caters for the procurement of stock and non-stock goods <R200 000 • Caters for the following transactions • - management of requisitions • - online quote gathering with the option to re-publish • - automated supplier selection, override available with approval • - standard JDE approval routing • - conversion to purchase order • - reselection available on non-performance of supplier “Take care of your relationships & the money will take care of itself”- Sharma

17. SSS System - Benefits • Directly transforms JDE system information into a web interface • Guarantees accuracy due to no integration being required • Improves security protocol – using Secure Socket Layer • Provides reliable iSeries technology • Easier and faster to use • Automated adjudication of preferred supplier response • Built-in approval route processing • Familiar JDE business processes • Added value to suppliers: order information; account information; automated supplier communication “Lift your teammates up versus tear your teammates down. Anyone can be a critic. What takes guts is to see the best in people.” – Robin Sharma

18. SSS System • Some Statistics: • Supplier Responses since 1st July 2013: 34,455 • No of Suppliers Registered on SSS: 1,882 • RFQs Currently on the Web: 13,143 • Purchase Orders Converted since 1st July 2013: 6,527 “Life begins at the end of your comfort zone.” – Neale Donald Walsch

19. SCM Policy

20. SCM Policy Review Continual Review New Policy Current Policy RevisedPolicy Start Future Phase 2 Phase 1 • Continual Review • Continual review of policy on an annual basis • Phase II • Review structure and format of Policy • Develop Policy guidelines, tools, templates and procedures • Release new policy that is ground breaking in both format and application • Input and Consultation with line departments, and review of external policies • Timeline is highly dependant on resources • Immediate Steps • Project Charter • Project Plan • Project Objectives • Project Milestones • Project Phases • Phase I • Identify operational issues • Identify legislative gaps • Identify supplementary guidelines/ circular/ legislation gaps • Release revised interim Policy • Consultation with Policy users • Presentation to Committees for approval

21. SCM Policy Improvements Definitionsthat have been the cause for some concern and confusion have also been added to increase consistency in application: • Amendment to contracts has been defined in keeping with MFMA Circular 62. • The definition for persons ‘in the service of the state’ has been amended to include for exemptions provided for non-executive board members of municipal entities. Also, employees are taken to be full-time employees, and part-time employees, etc. need to be specifically cleared via the conflict of interest task team. “You get the best of others when you give the best of yourself”- Harry Firestone

22. SCM Policy Improvements (Cont.) System of Demand Management • The requirement for the submission of procurement plans during the budget approval process has now been included in keeping with MFMA Circular 62. • The procurement methods for all budget line items are to be approved by the bid Specification Committee to ensure that inappropriate unbundling of contracts is avoided. • All contracts exceeding R10 million are to be accompanied by project-specific procurement & BEE strategies developed by multi-disciplinary teams. “If everyone was satisfied with themselves, there would be no heroes.” – Mark Twain

23. SCM Policy Improvements (Cont.) Section 36: Deviations from, and ratification of minor breaches of, procurement processes: • Report to EXCO for noting only • Report to BAC for support • Final approval via Accounting Officer • Monthly reporting to Finance & Procurement Committee (further oversight by Audit Committee and Municipal Public Accounts Committee) (Emergencies require AO's prior approval, formalised by a report within 24 hours, and report to next possible EXCO) “This day – and every one that follows for the rest of your life – offers a platform of possibility. Every day is your life in miniature.” – Robin Sharma

24. SCM Policy Improvements (Cont.) Special Deviations from SCM Policy • Allows for certain contracts, for which following any SCM process is not prudent. • Prior approval from the CFO, Head: SCM or designated official, and annual reports are to be produced for the Accounting Officer on expenditure incurred, and/or to be incurred. • It covers areas like computer software systems licensing and approved maintenance contracts - where these systems have appropriate authority via the normal SCM policy. “You tell the world what you believe via how you behave. Complain all day and you reveal a deeply in grained set of beliefs that you are powerless and apathetic. Present work that has typos and poor wording and you express a belief that average is cool with you.” – Robin Sharma

25. SCM Policy Improvements (Cont.) Additional areas receiving special focus (and discussion with NT and CFO’s Forum): • Conflict of Interest Task Team • Blacklisting Committee • Appeals • Extension and amendments to contracts – MFMA Section 116(3) • Validity and timing of certificates (Tax Clearance, BEE, etc.) • MFMA Circular 68 - Unauthorised, Irregular, Fruitless and Wasteful Expenditure “Remember that genius is much less about natural talent and much more about out-studying, out preparing, out-practicing, and out-learning everyone around you.” – Robin Sharma

26. Irregular Expenditure

27. Unauthorised, Irregular, Fruitless and Wasteful Expenditure • Key Highlights of MFMA Circular 68 Issued on 10th May 2013: • Register of irregular expenditure to be kept with effect from 01 July 2013 • All irregular expenditure must be recovered from liable official unless the expenditure is certified by Council, after investigation, as irrecoverable • No distinction made in terms of unauthorised, fruitless and irregular expenditure • All expenditure that is non-compliant needs to be regularised • In particular, the irregular expenditure reports must be considered by MPAC prior to submission to Council • In discussion with National Treasury’s SCM Unit to reconsider – meeting on 9 October 2013 “Brilliant things happen when you go the extra mile for the customer” – Robin Sharma

28. Unauthorised, Irregular, Fruitless and Wasteful Expenditure • Outstanding irregular expenditure in the AFS is only R60 M • This relates to employees in the service of the State – due to lack of accessibility to Persal database • All other expenditure has been regularised and condonement sought “Leadership’s no longer about position. Now it’s about passion. And having an impact through the genius-level work that you do.” – Robin Sharma

29. Service Level Agreement

30. Service Level Agreement • An SCM service level agreement has been introduced so that customers know the level of service they can expect from the SCM Unit • Bid Committee (BAC, BEC and BSC) decision circulars will be posted on the intranet within 48 hours • Bids over R10 Million will also be posted on the intranet within 48 hours • All letters of awards will be released within 48 hours “I’ll be blunt. If you are not building leaders, then you are not leading, you’re following. Your job is to help people do work they never dreamed they could.”- Robin Sharma

31. Service Level Agreement • All verification and auditing of tender documentation will be done within 21 days – also looking to reduce this further by doing pre-screening and doing checks in parallel with evaluation undertaken by line department • Delays between BEC and BAC are strictly monitored and will be kept to a minimum • Templates will be provided by SCM to ease the work of line departments “A title, position and a large office do not guarantee people will respect you. Nope. You’ve got to earn that gift. And the quickest way to earn respect is to give it. No need to say much more.” – Robin Sharma

32. Conclusion • Special thanks and appreciation to National Treasury for continued support to Local Government • Kenneth Brown as Chief Procurement officer, and the commitment of his team under the leadership of the Chief Director Henry Malinga • Remember that it is our duty, however, to: • Plan appropriately • Be proactive • Have zero tolerance for non compliance “Victims make excuses while leaders drive exceptional results. You can spot a victim a mile away. They blame and complain and are negative and cynical. You are not a victim” – Robin Sharma

33. Conclusion • Confident that these SCM initiatives will attest to be fair, transparent, equitable, competitive and cost- effective • Especially the revised processes for contract management, ISO 9001 and the SSS System • Is the foundation for monitoring spending on capital projects and operational expenditure, fostering spending that advances service delivery, economic development initiatives, and ensuring value for money “According to the Financial Times we collectively spend 100 000 000 minutes a day playing Angry Birds on smartphones. Most people in business are spending the absolute best hours of their days being busy being busy.” – Robin Sharma

34. The End Institute of Municipal Finance Officers