PRESENTATION TO THE PORTFOLIO COMMITTEE ON LABOUR 09 FEBRUARY 2011 PRESENTATION TO THE PORTFOLIO COMMITTEE ON LABOUR 09 FEBRUARY 2011

2 Briefing on the progress made with regard to the Public Private Partnership (PPP) IT Contract with Siemens

BACKGROUND TO THE PPP 3

MOTIVATION FOR THE PPP The need to partner with the private sector for improving IT capability, leverage of expertise and specialist knowledge, and exploit international standards and best practice To address a high turnover of DOL IT staff The need to integrate labour market services and systems to offer better service To form part of the move towards automation of services towards e-government initiatives Achieving maximum IT benefits and objectives against budgetary constraints 4

COMPONENTS OF THE PPP Risk sharing – Department of Labour articulation of the business requirements – Siemens systems design, build, operation and maintenance upfront capital investment ======================= Deliverables –IT Operations and infrastructure : 70% of contractual deliverables –Systems development : 30% of contractual deliverables 5

CURRENT CHALLENGES PPP - STRATEGIC IT partner delays to systems development arising from lack of capability, poor project/quality and resource management. IT Partner retrenchments, contract terminations and high staff turnover resulting in loss of skills\knowledge to service the DOL. Cession of PPP contract by Siemens Limited Carve out of Siemens PPP - OPERATIONAL System operational challenges Outdated equipment in the DoL environment Increased demand for mobile computing (laptops) 6

STRATEGIC PLAN TOWARDS COMPLETION OF PPP -Diagnostic review of the PPP on areas identified by the DoL -Done -Development of the Exit and Transfer plan -Draft Plan currently in consultation -Establishment of an internal steering committee to manage the transition to a new IT delivery model -Done -Development of a new DoL ICT strategy -Process underway by SITA -Conducting of a feasibility study on a new ICT delivery model -Will commence as soon as strategy is completed -Resourcing of the current Office of the Chief Information Officer (OCIO) office to manage closure and transition -Process underway 7

SCOPE OF DIAGNOSTIC REVIEW KPMG External assistance was sought to: Determine the impact of the Siemens carve-out and cession of the contract by DoL Determine the business rationale for the use of SAP as the solution platform Determine responsibility and liability to purchase software licenses Investigate and identify current termination options Penalties due to the Department Determine whether "Additional Services” have been appropriately costed Identify measures to address current delivery challenges 8

KPMG HIGH LEVEL FINDINGS ITEMFINDINGSRECOMMENDATION Carve out-Siemens has “outsourced” the delivery of its services to a sub-contractor” -The DoL has not agreed to this arrangement nor is obliged to agree to the cession of the contract -The outsourcing of services constitutes a contractor default DoL to request Siemens to rectify the situation within specified timeframes Business rationale for the use of SAP platform -No agreement from the DoL for the use of this platform -No formal feasibility study conducted to determine if this is the most suitable platform DoL to decide whether to continue with this platform Responsibility for licenses - no reconciliation done by Siemens against the baseline in the contract for licenses - no approval given by the DoL for the use of the SAP platform DoL not liable for additional costs with regard to licenses. If the DoL continues with the SAP platform, then usage over the contract baseline will be DoL’s responsibility 9

HIGH LEVEL FINDINGS contd. ITEMFINDINGSRECOMMEN DATION Terminatio n options -Termination due to contractor default – onerous process -Voluntary early termination -Negotiated arrangement to contract termination To seek a negotiated arrangement as the legal route will be too costly, lengthy and non- beneficial to the DoL Penalties due to DoL There are areas where the DoL can implement penalties eg. late commencement of services. These must be fully investigated and penalties instituted where identified. Costing of additional services There is evidence of billing inconsistent with the intention of the contract. DoL to review invoices and costing applied and to identify where over billing has occurred and to reclaim this. 10

PROJECTS IN PROGRESS PROJECTPURPOSECURRENT STATUSTIMELINERISKS Business DeskPortal to all systems within DoL for client services Prototype developedMay 2011Dependency on completion of other projects Information Portal Information portal for DoL employees System development completed. Testing in progress April 2011None Integrated Client Database To provide a single view of clients across all DoL areas Majority of systems development completed May 2011Obtaining information from other government Departments Inspection and Enforcement To automate and IES processes Development and configuration completed. Integration testing in progress. July 2011Service provider staff turnaround and project management capability Financial Management system - CF Financial management system for Compensation Fund Slightly behind schedule in training of users May 2011Inter-dependency with claims system. Data migration 11

PROJECTS IN PROGRESS PROJECTPURPOSECURRENT STATUSTIMELINERISKS Claims management system Automated claims management system for Compensation Fund Core claims system developed. User acceptance testing underway. April 2011Data cleansing and migration. Dependency on the ICD Financial management system - UIF Financial management system for the Unemployment Insurance Fund Project stopped and to be de-scoped from contract. - Siyaya MISManagement information for UIF Completed, business to sign-off. February 2011 Exit and Transfer Closure of PPP and transition to new ICT environment Strategy document developed and in consultation. IT steering committee setup to manage process. October 2011 None yet. 12

PROGRESS TO DATE Letter of termination / intention not to renew contract was given to Siemens. Secured involvement and participation of National Treasury, SITA and the State Attorney to assist in resolving current PPP contract problems. Strengthened governance structures to oversee current IT projects - Management Committee receives regular progress reports and provides guidance to the IT Steering Committee. -Increased participation of business stakeholders at forums SITA Contract manager appointed to oversee the PPP contractual matters High level engagement with Siemens Limited is underway -implementation of recommendations of the PPP KPMG diagnostic report Engagement with SITA on the development of the ICT strategy 14

Thank you 15