INFRASTRUCTURE PROGRAMME FOR DCS PRESENTATION TO PORTFOLIO COMMITTEE ON JUSTICE AND CORRECTIONAL SERVICES DATE: 04 AUGUST 2015

1. OBJECTIVES OF THE PRESENTATION To Present to Portfolio Committee the Infrastructure Programme implemented by Department of Public Works on behalf of Department of Correctional Services To provide an update on issues raised during the oversight visit conducted in Limpopo The challenges in delivering the Programme Options being Investigated to correct the situation and prevent future occurrences

2. GENERAL PERSPECTIVE Over the past years DPW experienced significant drop in performance in the delivery of infrastructure and this was attributed to various factors, amongst them: Contractor disputes with their subcontractors, General under-performance by contractors, Contractors’ cash flow challenges. Tedious process of liquidation and termination of non-performing contractors and subsequent delays in appointing the new contractors after termination. Delays in decision making from the client’s side. DPW remains responsible to maintain the existing facilities through service contracts under the Repair and Maintenance Programme (RAMP), and the more reactive means referred to as day-to-day maintenance The Users are delegated attend to minor maintenance services to the tune of R100 000 per assignment (maximum).

2. GENERAL PERSPECTIVE Cont… DPW has been implementing a turnaround plan that has resulted in the establishment of Programme Management Office (PMO), the Ministerial Joint Task Team and has seen improved performance on expenditure from the 2014/15 Financial Year. As part of the efficiency enhancement phase (phase 2) of the DPW turnaround plan, we are in the process of separating the Capital Programme and the Facilities Management Programme, as focused business centres to improve planning and accountability.

3. DCS CAPITAL PROGRAMME The NDPW implements construction projects and operation of facilities for DCS as per instructions issued and budgeted for. This includes the following: Construction of New Correctional Facilities Upgrading of existing facilities Improvement of Security Measures Improvement of Fire detection services Upgrading and maintenance of Mechanical & Electrical Services Provision of water to facilities outside municipal networks Operate and maintain Waste Water Works, and contribute to recycling for irrigation Operation and maintenance of Boilers Repair and Maintenance of Kitchen Equipment In providing these services DPW utilises the services of Consultants and Contractors appointed through the tender process.

4. DCS CAPITAL PROGRAMME – PERFORMANCE MEASURES / REPORT The Performance Measures the NDPW uses are mainly the following: Expenditure of Allocation (Financial Measures): DCS approves an annual capital allocation following the review process of Progress made in Planning Stages of Projects and Budget Estimates, as informed by Projected Cash Flows for Committed Contracts. Delivery of Completed Projects/ Facilities: Performance in Execution and Completion of construction projects is linked to the Delivery Date as informed by contract period. Each Project has its planned / projected date which Users use to plan their occupation. Maintenance of Services (Facilities Management) : Water Supply; Fire Fighting Equipment; Kitchen Fittings; Waste Water Management; Servicing of Boilers The Financial Performance is discussed starting from 2013/14 – 2014/15

5. DCS CAPITAL EXPENDITURE – END MAY 2014 (2013/14) OFFICE ALLOCATION R’ EXPENDITURE B’ALANCE % EXP CORRECTIONAL SERVICES 709 687 967 333 936 845 375 751 122 47% HEAD OFFICE 27 089 449 11 802 250 15 287 199 44% KAM 118 019 0% PROF SERV:TOWN PLANNING 646 849 1 063 671 -416 822 164% SPECIAL & MAJOR PROJECTS 26 324 581 10 738 579 15 586 002 41% REGIONAL OFFICES 682 598 518 322 134 595 360 463 923 BLOEMFONTEIN 106 245 471 27 126 577 79 118 894 26% CAPE TOWN 63 137 268 61 119 687 2 017 581 97% DURBAN 153 979 908 73 725 835 80 254 073 48% JOHANNESBURG 21 848 480 13 729 094 8 119 386 63% KIMBERLEY 3 653 884 2 191 520 1 462 364 60% MMABATHO 88 897 704 33 256 507 55 641 197 37% NELSPRUIT 104 330 930 46 796 037 57 534 893 45% POLOKWANE 31 223 020 1 986 864 29 236 156 6% PORT ELIZABETH 40 023 908 7 024 775 32 999 133 18% PRETORIA 66 926 565 55 086 694 11 839 871 82% UMTATA 2 331 380 91 005 2 240 375 4% TOTAL  

6. DCS CAPITAL EXPENDITURE – END MARCH 2015 (FY 2014/15) OFFICE ALLOCATION R’ EXPENDITURE BALANCE % EXP CORRECTIONAL SERVICES 472 773 924 383 559 172 89 214 752 81% HEAD OFFICE 25 718 854 13 183 516 12 535 338 51% PROF SERV:TOWN PLANNING 1 171 724 0% SPECIAL & MAJOR PROJECTS 24 547 130 11 363 614 54% REGIONAL OFFICE 447 055 070 370 375 656 76 679 414 83% BLOEMFONTEIN 42 309 695 22 184 843 20 124 852 52% CAPE TOWN 26 568 679 14 551 381 12 017 298 55% DURBAN 106 308 354 86 338 295 19 970 059 JOHANNESBURG 11 439 180 5 220 860 6 218 320 46% KIMBERLEY 2 813 374 2 486 609 326 765 88% MMABATHO 74 490 989 57 275 693 17 215 296 77% NELSPRUIT 84 432 019 122 458 619 -38 026 600 145% POLOKWANE 9 266 981 1 954 810 7 312 171 21% PORT ELIZABETH 25 501 782 36 793 425 -11 291 643 144% PRETORIA 62 083 712 21 111 121 40 972 591 34% UMTATA 1 840 305  TOTAL

7. DCS CAPITAL EXPENDITURE – END JUNE 2015 (FY 2015/16) OFFICE ALLOCATION R’ EXPENDITURE % EXPENDITURE SPECIAL & MAJOR (HO) 31 220 861 0% BLOEMFONTEIN 60 970 750 4 589 534 8% CAPE TOWN 11 790 000 13 646 664 116% DURBAN 84 947 380 9 200 536 11% JOHANNESBURG 6 433 210 357 911 6% KIMBERLEY 1 970 602 MMABATHO 54 689 396 12 508 742 23% NELSPRUIT 104 882 857 43 452 995 41% POLOKWANE 17 543 878 2 214 PORT ELIZABETH 52 625 404 45 010 169 86% PRETORIA 8 203 329 1 632 892 20% UMTATA 83 434  TOTAL 435 361 101 130 401 656 30%

8. CONTRIBUTING FACTOR TO UNDER EXPENDITURE/ PERFORMANCE IN THE PAST TWO PERFORMANCE YEARS Withdrawal of Security Projects from tender stage due to unhappiness expressed by DCS over dominance of the sector by one supplier. Generally poor workmanship and inability to schedule the sequence of Work on Site properly by contractors leading to spending lower than the projections. Six Prison Contracts (Ceres, Vanrhynsdorp, Kgoši Mampuru, Escort, North End, and Tzaneen) contractor experienced cash flow problems leading to liquidation and contract cancellations. Shortage of Prison Window Supplies in the Market, implying that building works cannot continue without windows due to the installation method. Because the Cash Flow Expenditure is linked to monthly work progress and acquisition of capital fittings (mechanical, Electrical), if this is not realised on site, Budget is not spent.

9. TZANEEN CORRECTIONAL CENTRE The Contractor for this project has been liquidated. The Liquidators identified new service provider (replacing contractor) to complete remaining portion of work. However the challenge with the proposal requires that the department have a direct contract with the identified service provider. The legal opinion has been received, which indicates that another contractor can complete the works, however the original contractor will still be held accountable as per the conditions of the contract. The DPW had successful engagements with the liquidator and started discussions with the guarantor. The guarantor will conclude negotiations with the new contractor on the 31st August 2015. The negotiations will include the new date for the new contractor to be on site. Assessment to recover any additional costs emanating from the delays, where applicable will be done once the project has reached final completion.

10. PARYS CORRECTIONAL CENTRE The project was advertised; however bids received were higher than the actual estimate. The DPW negotiated with CIDB to waive 6 month cooling period and re-advertisement is scheduled for 31 July 2015. We anticipate award by 31 October 2015.

11. KGOŠI MAMPURU – C-MAX CORRECTIONAL CENTRE The contract was terminated due to poor performance and this termination was done at 70% completion. However this contractor was subsequently liquidated. Consultants were appointed to conduct assessment and finalise the Final account. The processes to appoint the new contractor have commenced and the anticipated award date is mid-November 2015. This project was visited jointly by DPW and DCS on the 15/07/205 as part of close monitoring and weekly report will be provided by the project manager and professional team. Assessment to recover any additional costs emanating from the delays, where applicable will be done once the project has reached final completion.

KGOŠI MAMPURU – C-MAX 1 Concrete Works Completed Prior To Termination of Contract   2 Concrete Walkways 3 Concrete & Structural Work Completed Prior Cancellation Of Contract

12. VANRHYNSDORP CORRECTIONAL CENTRE The initial contractor was liquidated. The guarantor started in February 2015 to complete the remaining works and the project is anticipated to be completed by October 2015. Progress to date is 99% on the work completed by the original contractor and currently finalising electrical compliance matters. Assessment to recover any additional costs emanating from the delays, where applicable will be done once the project has reached final completion.

VANRHYNSDORP CORRECTIONAL CENTRE 1 Main Entrance to the Facility   2 Dining Hall 3 Laundry Facility 4 Visitors Facilities

13. CERES CORRECTIONAL CENTRE The initial contractor for this project was liquidated and the guarantor appointed a new contractor and the new contractor completed the project in April 2015. Final delivery taken in July 2015. There is no need to recover costs as there were no additional costs incurred.

CERES CORRECTIONAL CENTRE 1 Main Entrance to the Facility   2 Kitchen Facilities 3 Laundry Facility 4 Training Facility

14. ESTCOURT CORRECTIONAL CENTRE The initial contractor for this project was liquidated and the guarantor has appointed the new contractor to complete the remaining work. Work progress on site is at 43%, however delays have been experienced due to lack of consistent supply of specialised (manganese) windows and door frames. Upon assessment, the realistic completion date is January 2017 given the above mentioned delays and weather inclination extension of time claims under consideration.

ESTCOURT CORRECTIONAL CENTRE

15. NORTH END CORRECTIONAL CENTRE Repair & Renovations of the Facility. The initial contractor for this project was liquidated and the guarantor appointed the new contractor in August 2014 to complete the remaining work. Progress is about 48% complete. The completion date as per contract is end of March 2016.

North End CORRECTIONAL CONTRE Visitor Receiving Centre Newly Constructed Dining Hall Male Juvenile Toilet Generator Fencing

15. MATATSHE (THOHOYANDOU) CORRECTIONAL CENTRE First contract was terminated due to non-performance. The new contractor is already appointed and was handed over site on the 12th June 2015. Site establishment will be completed end of July 2015. Construction period is for 24 months, including maintenance.

16. GLENCOE CORRECTIONAL CENTRE The prison was burnt down in May 2015. An assessment was conducted and different options were proposed, including demolition and rebuilding of affected areas with brick and mortar and ensure that the existing corrugated facility is fire compliant. The proposal has been submitted to DCS for consideration.

Glencoe Correctional Centre

17. PERFORMANCE REPORT ON DCS FOR 2015/16 The Capital budget allocation for DCS for 2015/16 is R435 361 101 Expenditure as per end of June 2015 is R130 401 656 (representing 30% of budget allocated vs 25% time lapsed) The programme has a total of 246 projects, with an allocation/budget of R435 361 101 for the 2015/16 financial year. 108 Projects are in planning and 138 projects are committed (status 5b-9) with a budget of R388 007 563

18. CHALLENGES Construction of New Correctional Facilities is very complex and requires a longer sustained cash flow. We have realised that Contractors experienced cash flow problems when they are at about 60% of the contract because of the following: At this stage of project most mechanical and electrical installations are required on Site and Suppliers require higher deposits to confirm orders. These components in most cases are under-priced by contractors far below the Retail Costs, and contractors have to somehow source cross-subsidise the purchases from other projects, which leads to collapse of cash management. Repetition of works due to correction of defective works Idling resources or Labour on sites because of improper work scheduling which increases labour costs Failure to pay Supplier / Creditors on time leads to applications for Administration or Liquidation Specification for Security Contracts and Supplier Monopoly

19. OPTIONS INVESTIGATED TO PREVENT THE RECURRENCE OF CHALLENGES CURRENT CONTROLS OPTIONS BEING IMPLEMENTED/ UNDER REVIEW Appointment of Competent Contractors Current Controls are based on SCM Policies linked to Points for Competitive Price & Preference, and Risk Assessment The SCM evaluation method now include Functionality Replacement of Defaulting Contractors The Department still follows the open tender approach, which is far time consuming Internal Policy development in consultation with National Treasury to allow for Nomination of Capable Contractors to submit bids to complete the remaining works Poor Programming of Works Contractors submit Programme of Works Improve the condition of tender to include Appointment of Professional Construction Managers for specific value threshold of contracts

THANK YOU