BRIEFING SESSION ON APPOINTMENT OF A SERVICE PROVIDER/S TO CONDUCT LEASE REVIEW 20 TH SEPTEMBER 2012 Ms. L. BICI

2 BACKGROUND One of the key functions of the Department is to provide office accommodation to 41 National Client Departments. This accommodation is provided through state-owned and leased accommodation. Majority of the leasing periods range from 1 year to 9 years 11 months with a rand spend in excess of approximately R3 billion per annum. The Department seeks to appoint a qualified service provider/s to conduct a comprehensive review of the leases portfolio the NDPW has entered into with private sector. This is a priority project because the Department is currently faces a number of service delivery challenges. These relate to among others: –Certain weaknesses which compromise achievements of realising the value for money and service delivery in the leasing environment.

BACKGROUND… which led to the withdrawal of the delegations for signing of new leases and lease extensions from the Regional offices. This situation has placed significant pressure on the approval process which is exacerbated by high month-to-month lease, renewals and new leases which requires processing. The Minister brought a Turnaround Team as well as National Treasury on board to assist the Department with these leasing challenges and to put systems in place to stabilise the environment. 3

4 Steering Committee NT NDPW Lease Review And Improvement Team Lease Review And Improvement Team NDPW Lease Operations Team PROJECT MANAGEMENT & GOVERNANCE PROTOCOL

LEASE PORTFOLIO Overall Size of the Lease Portfolio for Office Accommodation RegionNumber of LeasesEstimated Value of leases per YearMonth-to-month leases Bloemfontein Cape Town Durban Johannesbur g Kimberley Mmabatho Mthatha Nelspruit Polokwane Port Elizabeth Pretoria TOTAL

6 BIGGEST CLIENT DEPARTMENTS Client DepartmentNo of leases Estimated Annual rental payable South African Police Services Labour Defence and Military Veterans Home Affairs Correctional Services Justice and Constitutional Development Total for main clients %’age to Total lease78.4%55.6% 6

Scope of the Work and Expected Outputs The required service is made up of three distinct phases for which the bidders are requested to provide proposals. The bidders’ proposals must distinguish the resources as well as the costs associated with each of the phases. 7

Scope of work (phase 1) Audit of the Leases ( approximately 2 788) (1)Procedures for the desktop audit of the lease files: Verify that there is a valid lease agreement in place for the premises; Whether the lease agreement is signed by both parties; Whether the lease agreement is DPW standard lease agreement, has been modified or it’s lessor’s; If the bank account details changed since the inception of the lease of lease expiry; What process was followed to secure the lease (negotiated/ nominated/open tender etc) and reasons for the choice of process; What is the lease period; Escalation in the lease agreement; 8

Scope of work ….(phase 1 ) Whether Landlord is BEE compliant according to the Department’s BEE Strategy; Square meters occupied; Verify information from Property Management Information System (PMIS) with lease agreement including the rental amount and descriptions; All documents are in the file including lease agreement and confirmation of client needs to procure the lease; Confirmation of rental amount and tenant installations costs; Verify if the rate per square meter charged in terms of the lease is market related; Whether the annual escalation rate is market related; Whether the tenant installation is amortized into the rental; 9

Scope of work.. (phase 1) (2) Procedures for the physical verification of the leased premises Verify that the client is in physical occupation of the premises; Approximate the square meters occupied; Confirmation from user department for occupation. (3) Lease Information System –Reconcile the lease details (period; expiry date; rental; square meterage etc) with PMIS system. –Verify whether the current rental paid is in line with what the lease stipulates; 10

Scope of work (phase 2) Immediate support to eliminate the current backlog of the approximate 400 leases at various stages of the lease process: Create a lease data base; Assess critical needs to deal with backlog and reduction of month to month leases, renewal of leases that have expired or about expire; Correct rates per square metre are market related rentals (escalation, tenant installations etc. are in place); 11

Scope of work….(phase 2) Submissions are in line with the Departmental policies and procedures including the Supply Chain Management Processes, Departmental BEE Strategy etc; Verification of the size of the accommodation required by clients; Confirmation of Clients Needs Assessments and funds; Terms and conditions of the lease agreement are in favour of the Department; Rates per square metre are market related rentals and have been benchmarked outside the Department; 12

Scope of work…..(phase 2) Escalation, tenant installations etc. are in place; Conclude an assessment and benefit received for Operating Cost Charges; Be part of the advisory team to advice the Acting Director- General on the signing and approval of lease documents; Develop processes moving forward to mitigate the risk of future backlogs arising. 13

Scope of work …. (phase 2) Leases reaching expiry (approximately 700) –Whether the client confirmed if they still need premises; –Submission of Client Needs Assessment and confirmation of funds; –Procurement Instruction has been issued to the Regional Offices; –New Procurement processes have commenced if the client still need accommodation. 14

Scope of work (phase 3 : Stabilization) Business Process re-engineering of the Lease Function: Review and align business processes and delegations; Shortcomings on the lease management process including SCM in relation to leases, their root causes and economic and service delivery impacts thereof; Alignment of existing Lease Management policies and provide recommendation based on best practice (This includes the lease agreement contract template); Review the current BEE Strategy and its implementation; 15

Scope of work …. (phase 3) Draft recommendations for change and propose new operating model for approval by the project steering committee; Review human resources structure and recommend a structure relevant for the Lease Management function; Propose a change management plan; Review of Property Management Information Systems for leases. 16

Required Expertise of the Team –Demonstrated experience in lease management and appropriate contracting modalities; –Demonstrated experience in Property Law; –Demonstrated experience in best practice; Financial Management and Property Management policies; –Demonstrate knowledge of commercial property market structure and economics; –Demonstrated experience in data analysis and data mining and knowledge of applicable tools; 17

Required Expertise of the Team –Understanding of facilitating business process improvement in government; –Understanding of Business support systems; –Proven success in undertaking lease management and turnaround functions; –Change managements experience; –Building of capacity in client departments; –Demonstrated experience in specialised audits; –Demonstrated experience in forensic data analysis and investigation; –Understanding of public sector programme evaluation; –Understanding of public sector programme management. 18

Contract period –Phase 1 and phase 2 of the Lease Review and Improvement must be executed simultaneously. Phase 2 of the project is targeted for completion by 30 November 2012 Phase 1 of the project is targeted for completion by 30 December 2012 Phase 3 is targeted for commencement in February

EVALUATION CRITERIA A two envelope system will be applicable with the technical proposal and commercial proposal being in separate envelopes Evaluation criteria will be in two stages: STAGE 1: Functionality Criteria Experience in lease contract management; Qualification of the project team; Relevant experience and expertise; Strength of the proposal. STAGE 2: Short listed bidders will be evaluated on price and preference, where price is 90 points and preference is 10 points. Service providers may be requested to make presentations on their proposals once shortlisted. 20

EMPOWERMENT The National Department of Public Works is an equal opportunity, affirmative action employer. In this light of this, the formation of consortium or the inclusion of proposals on how this project can best be used to further the broader aims of transformation is strongly encouraged. 21

CONFILCT OF INTEREST The consultant should not receive any remuneration in connection with the assignment except as provided in the contract. The consultants and its affiliates should not engage in consulting activities that conflict with the interests of the client/principal under the contract, and should be excluded from downstream supply of goods or construction works or purchase of any asset or provision of any other service related to the assignment other than a continuation of “service under the on-going contract. All landlords and brokers are excluded from tendering due to the inherent conflict of interest that may exist should their services be engaged. Service Providers are required to declare in writing, as part of their proposals submission, that they have no conflict of interest in acting for the NDPW in this assignment. 22

23 I THANK YOU! Questions!