BRIEFING TO THE PORTFOLIO COMMITTEE ON POLICE ON THE REPORT OF THE AUDITOR GENERAL ON A PERFORMANCE AUDIT ON THE USE OF CONSULTANTS BY THE SAPS 19 MARCH 2013

SUPPLY CHAIN MANAGEMENT REFURBISHMENT OF 200 NYALA VEHICLES

BACKGROUND Focus of the contract was to refurbish 200 armoured Nyala vehicles to the original manufacturer’s specification Armoured vehicles very specialized Condition of the identified 200 vehicles varied – all vehicles older than 15 years. Process for refurbishment included vehicle being stripped from bumper to bumper, physical inspection of all components, physical inspection of the parts within these components, obtaining quotations from sub-contractors (agents) and the preparation of a final quotation amount.

BACKGROUND Basket of 48 items identified for pricing and comparative purposes regarding the bidding process Basket included items that most likely require replacement on all or majority of vehicles Special conditions of bid required successful bidder to  compile a detailed quotation per vehicle for submission and approval to the SAPS prior to the repairs being conducted. The procurement in essence took place through a bidding process, but also by way of quotations from the successful bidders Bidding process – To appoint providers with relevant knowledge and skills to perform the service and focus on those items anticipated to be replaced or refurbished on the identified Nyalas Quotations – once full assessment of the Nyalas were completed full quotations prepared (as per items in baskets AND additional items needed for refurbishment) Bid was evaluated and awarded to 2 providers at an estimated cost of R 79 537 771.20 based on the identified basket of 48 items.

FINDINGS Comprehensive needs assessments not done Competitive procurement processes not followed Expectations on milestones, timelines and cost not clearly specified Effective oversight and internal controls not executed prior to payments Lack of proper project management and monitoring Cost overruns not motivated and approved Failure to retrospectively analyse projects

RESPONSE Expert Assistance could have been included during the planning process i.e. Armscor to support specification to avoid big escalation Basket could have been defined better Future projects will specifically address sub-contracting and associated fees Ensure better contract management with clear milestone and deliverables Monitoring mechanisms have already been implemented to monitor warranties and motor/maintenance plans (Early warning information on Asset Register) The finding of possible irregular expenditure is currently being clarified with National Treasury

ABET PROGRAMME HRD

BACKGROUND Service Provider C in joint venture with D was appointed in 2006 to deliver the ABET Programme Midstream, Provider C misinterpreted 9 sites not to be 9 Provinces which had been made clear from the start. Provider C had promised at the beginning to use computer aided training and Midstream needed more money which HRD refused. Provider C ceded the programme to Provider D to finalize what they had started. Another bid was advertised and Service Provider D applied but fell off due to non-compliance and then contested the appointment of another provider. This circumstance resulted in the late appointment of Consultant E in November 2008. Training commenced in November 2008. The contractual period for the full project was 3 years (36 months).

FINDING BY AUDITOR GENERAL Terms of contract were amended without written agreement How it happened? Division : HRD agreed with Provider E to change contractual years to financial years. It was agreed that the first year would have started in November 2008 and end 31st March 2009. 1st April 2009 was agreed by the two parties as the second financial year without documenting it. ABET is priced per learner. The cost for the first year was: R3 800/learner, 2nd year R4 085/learner and 3rd year R4 510/learner. From the 1st of April 2009, Service provide E was paid according to the 2nd year costs. The AG in their finding indicated that we then overpaid the provider by R647 444.00.

RESPONSE/CLARIFICATION True, terms of contract with service provider E were amended without written agreement. Firstly, at the end there was no overspending in the full implementation project, instead savings were made because: The project was completed in 29 months instead of 36 months which then offsets what appears to be overspending according to AG. The actual amount spent was R10 240 119.00 which is less than what was budgeted for. An amount of R 5 million per year was allocated and ring fenced for ABET during the 2008/09 to 2010/11 years totalling R15 million over the 3 financial years. Secondly, the Quality Service beyond expectation was delivered by the provider as it was delivering service based on the IEB – Independent Examinations Board) standard. The Provider delivered some learners with GETC (full General Education and Training Certificate) – first ever beyond what is expected of the ABET programme.

INTERNAL AUDIT The department co-sourced the Internal Audit function due to capacity and skills transfer and appointed a consultant on 4 December 2002 for a period of three years at a cost of R29.3 million. The contract cost increased by R17 273 088 due to an extension. The consultants was again appointed on 19 April 2007 to continue their service for another three years at a cost of R 33 894 000, which was extended at cost of R 6 778 800. However, the total payments over the duration of the two contracts amounted to R77 million instead of the contracted R87 million.

Aloe Consortium R87.2 Million Some contractual obligations relating to formal training initiatives were not achieved. A lack of equipment specifically laptops within the Internal audit division resulted in the sharing of laptops which hindered the provision of training by the consultants and the completion of work by internal audit staff. Non performance of retrospective analysis or assessment of the consultants' performance.

The training was initially not part of skills audit/plan but in future it will form part of it. The contract was extended to transfer skills and train members because it was not yet sufficient. Capacity has been built- SAPS Internal Audit has one of the largest staff establishments in government. The procurement process in SAPS was very long with regard to the purchase of the laptops, but that it will be improved in future. Responsible role player: Internal Audit and Technology Management Service.

Closing the project: Six contracts R169.3 million Non performance of retrospective analysis or assessment of the consultant’s performance Closing of projects will be done by means of a letter to SCM in future. The provisions of the contract will be compared to the value delivered and the impact will be monitored (impact assessment) Responsible role player: Internal Audit and Supply Chain Management

TECHNOLOGY MANAGEMENT SERVICES Audit findings: Division: TMS Areas where deficiencies were identified during the audit Training and transfer of skills Performance Management and monitoring Extension of contracts Contract Specific Challenges Addendums that gave rise to a total contract value of R412,542,779 FCS not completed within 70 months after the system was to be handed over to the department Contract did not include a skills development plan to equip SITA resources to maintain the system after development and implementation

Current Contractual Status Termination of Services rendered by Waymark Infotech On 30 August 2012 Waymark Infotech was notified of the termination of the relationship between Waymark Infotech and the SAPS with immediate effect. Request for Legal Assistance: SAPS Legal opinion was requested regarding the SLA’s and the Addendums The matter is still with Senior Council

FCS Contract and Addenda FCS CONTRACT & ADDENDA DATE SIGNED Projected Completion date VALUE FCS Tender 232 Awarded 2004-03-08 R 77 065 753 FCS Contract (Original/Core) 2004-09-30 2006-07-05 R 92 849 822 FCS Addendum 1 2005-05-31 R 115 177 413 FCS Addendum 2 2005-08-22 R 130 590 191 FCS Addendum 3 2006-02-14 2007-05-18 R 149 657 803 FCS Addendum 4 2007-02-27 2008-04-18 R 129 951 568

FCS Reasons for Addenda

Corrective Actions An independent Audit on the FCS project deliverables as verification of the 80% of completed deliverables is in progress. An investigation by the Directorate for Priority Crime Investigation is still in progress to assess if there was any wrongdoing by any member of SAPS, and if all procurement was legitimate. A reconstituting internal project team will be established and the body shop tender will be used to obtain the necessary skilled consultants to finish the project. The project will be driven by the internal project team.

Thank you