Presentation to Select Committee on Finance on the PPPF Act September 2003

Presentation by Peter Silbernagl Immediate Past President South African Association of Consulting Engineers

Greetings and apologies SAACE PresidentDempsey Naidoo President ElectCraig Clarke Vice-PresidentAlthea Povey Vice-President ElectWebster Ndodana Executive DirectorGraham Pirie

What is this presentation about? Background to SAACE and Civil Engineering Brief comment on PPPFA Procurement of Professional Services

South African Association of Consulting Engineers (SAACE) 51 years old  420 firms are members  employing over staff  Gross fees earned > R4.0 billion/year

SAACE Provide intellectual technology-based services in built, natural & human environment to clients for a fee “We are not builders or contractors” “We plan, design, advise, study and report, supervise and train, mainly in the construction and building industry”

Gross fixed Capital formation Employment trends Some historical perspectives

Black representation in Civil Engineering and Consulting Engineering Registrations with ECSA (Engineering Council of South Africa), a statutory body formed in terms of the Engineering Professions Act (Act 46 of 2000)

ECSA registrations 1 April 2003 (Civil Engineering) PrEngEng-in-TPrTechTech-in-T %% Black male & female ,1 White male & female97,276,290,637,9 Total (no.)

277 of of of of of Dec -96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Number Total number of engineersHDI Professional Engineers as registered with ECSA in the civil engineering discipline

New registrations: Professional Engineers (Civil)

New registrations: Candidate Engineers (Civil)

Response by Consulting Engineers

SAACE Management Information Survey - Dec 2002 Partner/PrEng/ DirectorAssociateTech Black 12%12%5% White 88%88%95% Total (no.)

Education and training efforts by Consulting Engineers R35 million p.a. on training & education 700 bursaries to Black students Ongoing social responsibility programmes, e.g. assistance at schools

That was the background

Brief comments on PPPF Act

Detailed comments provided in written submissions SAACE (South African Association of Consulting Engineers) per Mr Len Dekker SAICE (South African Institution of Civil Engineering) per Mr Alain Jacquet CIDB (Construction Industry Development Board) per Mr Malcolm Rautz

Four aspects need detailed comment Procurement by tender only Tariff-based fees Promotion of gender Promotion of Black professionals

Brief comment “In general, good piece of legislation” “Serves as a good framework, needs refinement - harmonize regulations with Act - harmonize Act with Constitution”

Brief comment Framework interpreted loosely by organs of state, esp. local authorities Current procurement systems outside the PPPFA and also Constitution e.g. set asides Current procurement systems lead to fronting and destruction of capacity and expertise

Brief comment PPPF Act recognises need to encourage participation by black people and women in procurement: very much needed in construction and consulting engineering PPPF Act can be tailored to promote participation by black professionals in professional practices  need to tighten up Act and regulations

Procurement by tender only Constitution and PPPF Act “fair, equitable, transparent, competitive and cost-effective” No requirement for tenders Lowest price  “cost effective” “Competitive”: e.g. proposal with social benefits or least environmental damage could be most competitive  Tenders are an option, but not obligatory or always desirable

Green Paper on Public Sector Reform, 1997 (from Ministries of Finance & Public Works) “The calling for open tenders under all circumstances, even for routine assignments, is neither in an organ of State’s, nor the consultant’s interests. Apart from an organ of State’s costs in preparing and adjudicating such tenders and and consultant’s costs in submitting tenders, such practices will favour the established large consultancies who have greater capacity to absorb the costs.

“Medium and small companies and, in particular, emerging consultants, are at a distinct disadvantage. Elaborate and complex adjudication systems are required for the satisfactory adjudication of tenders for consulting services.

“A major problem with competitive tendering relates to the definition of the scope of services to be performed. Consultants cannot price their services if these are ill defined. In research and development, policy formulation, human resource development, community-based developments and the like, the scope of services can seldom be well defined prior to the commencement of the project or commission.

“For engineering and construction projects, life cycle costs are most critical and are largely dependent on design quality. Any potential saving in the design fee would form only a miniscule portion of the life cost of the project and should not be allowed to jeopardise the best value for money option on the project as a whole.”

USA: Brook’s Act Federal Government and 44 of 50 states: -illegal to procure professional services by means of tender -essentially quality-based

Tenders appropriate Well defined brief and scope; quality major criterion Larger projects Client capacity to manage Routine work Always use quality as major criterion

Tariff-based appointments PPPFA regulation: provision for “pre- determined tariff-based professional appointments” Engineering Professions Act: “Public health and safety and the general public interest”

Tariff-based appointments Small projects Difficult to define Client capacity Complex or specialist Client protection and guide Quality based criteria

Procurement in the Construction Industry, esp. Consulting Engineering CIDB: Formed to develop and transform construction industry in South Africa SAACE: “Guidelines for the Engagement of Consulting Engineers” FIDIC: International Federation of Consulting Engineers (67 member countries) World Bank: Procurement guidelines

Procurement in the Construction Industry, esp. Consulting Engineering CIDB suite: e.g. Practice Guide 12: “Preferential Procurement in the Construction Industry” - Practice Guide B2: “Methods and procedures for implementing preferential procurement policies” - Standard Rules for Public Procurement

Way forward Engage further with recognised institutions (SAACE and others) and statutory bodies (ECSA and CIDB) Harmonize PPPF Act and regulations with Constitution and BEE strategy

Thank you for your attention