Department of Labour ICT TRANSITION AREAS OF CONCERN 10 September 2013

AREAS OF MAJOR CONCERN Has the DoL ICT strategy been finalised? Yes the DoL ICT Strategy has been finalised and approved. Is the strategy being implemented? Components of the strategy are being implemented eg. governance, in- house resourcing etc, but implementation is dependent on available resources eg. finances Is the DoL still going on tender for services? No. The DoL cannot go on tender due to budgetary constraints, as well as Section 197 of the LRA mandates that current resources providing the IT services must be taken over by DoL. When this happens, most IT services will be provided in-house.

Why was the PWC process stopped, and does this construe wasteful expenditure? There were initial delays with the PWC process, as the scope could not be agreed. PWC wanted to play a Transition Advisor Role, rather than a Transaction Advisor role. The PWC process was stopped because the funding for this project was not rolled-over from the previous financial year to the current. The work done by PWC was the specifications for the IT services required by DoL and this is being used by SITA to understand the detailed DoL service requirements which is a form of contingency. The specifications drafted will always be required as they form a framework of IT services in the DoL and will be used in future. Can the work done by PWC be re-used? Yes. The work completed will be re-used, and is currently being used by SITA to review services required by DoL. It will also be used when other services are required eg. systems development. AREAS OF MAJOR CONCERN

When did the Department know that it was no longer going to issue an ICT tender? After considering all the necessary requirements eg. SCM processes, budget, SIAT Act etc, the Department decided not to issue tenders in July Why did the Department not know about the deviation factors? This was relooked and reviewed, when re-alignment was being done against the strategy. It was then that it was realised that these factors were not fully considered during strategy development, and were constraints to the initial plan. Why were these factors not highlighted as strategic constraints or raised at executive structures? The issues raised at operational management level, did not filter through to executive level. This has been addressed through a full time team being appointed to manage the ICT Transition. AREAS OF MAJOR CONCERN The issues raised at operational management level, did not filter through to executive level. This has been addressed through a full time team being appointed to manage the ICT Transition.

ICT CONCERNS What will happen to ICT services post the EOH Termination support? The DoL and EOH are engaging on the take-over of IT resources who are providing the current services. SITA is assisting with service gaps that cannot be provided as in-house services. Will all the deliverables of the Termination Support be met? The development of the outstanding deliverables are in progress. However, there is a high possibility that some of the deliverables may not be met, due to the limited time left, which was hampered by the suspension of EOH for four months, which did not allow them to focus on systems development.

Was EOH paid for the period when they were suspended? Yes. Due to contractual obligations, EOH ensured that IT services continued and that systems and infrastructure was available for DoL to continue delivering services. How many systems are outstanding? Five systems – The Human Capital Module, business desk, CF Management Information Systems reporting, the Inspection and Enforcement system and Financial system for UIF. Progress has been made with some of these systems already in the testing phase. ICT CONCERNS

RISK MANAGEMENT What are top 5 priority risk areas? 1.Disruption of service delivery due to discontinuation of IT services 2.Litigations arising from EOH employees due to failure to finalize S197 3.Budget constraints 4.Political Risk 5.Reputational Risk

HUMAN RESOURCE CONCERNS What is the position of EOH employees involved with the daily ICT services of the Department? We are negotiating with EOH on the possible takeover of those employees involved in the daily provision of ICT services to DoL. Will DoL takeover all the EOH employees employed on the PPP contract? The worst case scenario is that DoL might have to take-over all the resources of EOH on the PPP contract. How will the EOH employees be accommodated at the DoL? The DoL will accommodate the employees on the approved ICT structure. Non-ICT employees will be accommodated in their fields eg. Finance, HR etc.

What budget has been approved in the 2013/14 financial year for ICT? FINANCE CONCERNS The ICT budget is located under Programme 1: Administration, sub- programme: Corporate Services. R135,3 million has been allocated to ICT for the 2013/14 financial year – which includes Compensation of Employees of R30,4 million, Computer Services of R87,6 million and R4,2 million for capital equipment procurement. What is the estimated cost for the Termination support from EoH for the period December 2012 until November 2013? In terms of the Termination Support agreement entered into between the DoL and EoH, an agreed service charge of R16,4 million per month was negotiated. The total value will be R194,8 million for the termination support period. The DoL will pay 37%, the UIF 32% and the CF 31%. This equates to R72,1 million, R62,3 million and R60,4 in respect of the DoL, the UIF and the CF respectively.

What is the total amount paid by the Department in respect of the IT-PPP contract? As reported in the DoL Annual Report for 2012/13, the total value of the IT- PPP contract over the ten (10) year period was R2,02 billon. R1,85 billion related to the Unitary Fee payments for the IT-PPP contract and R164 million related to additional services procured from the Private Partner. The expense in relation to the Unitary Fee was split equally between the DoL, the UIF and the CF. This equates to R619,8 million in respect of the DoL, the UIF and the CF over the ten year period. FINANCE CONCERNS

Should LRA S197 be implemented, what will the estimated financial impact be in respect of the transfer of EoH staff to the DoL? The DoL and EoH are currently engaged in discussions relating to the implementation of LRA S197. Current indications from EoH are that the current wage bill in respect of all staff connected to the DoL contract equates to R12,4 million per month. This calculates to an annual wage bill cost of R148,8 million. When subjected to the DoL, UIF and CF split, R55,1 million, R47,6 million and R46,1 million will need to be defrayed by DoL, the UIF and the CF respectively. FINANCE CONCERNS

Have all outstanding claims emanating from the IT-PPP been completed by the DoL? The only outstanding claim is in respect of the implementation of SAP. The parties are engaged in discussions to clarify the basis for this claim and to reach an agreed settlement. In this respect, the EoH Account Manager and the DoL OCFO have had various interactions and a final meeting between the DoL – DG and EoH – CEO has been proposed. Post this interaction, it is believed that this matter will be amicably concluded. FINANCE CONCERNS

LEGAL CONCERNS Will there be any litigation between EOH and the DoL? The parties are trying to address all issues amicably and resorting to compromise where possible and where allowed. However, if necessary the DoL will litigate or defend itself.