ELECTRICAL DISTRIBUTION FRAMEWORK CONTRACTS Presented by: Chris J van Rensburg to -- AMEU -- Date: 11 November 2015 Municipal Infrastructure Support Agent

Contents  Background  Applicable Regulation 32 of the Municipal Supply Chain Management Regulations  NEC 3 Contract  Updated process and progress  ESKOM Collaboration  Way Forward  Closing - questions 2

Background on MISA  The Municipal Infrastructure Support Agent (MISA) was established in 2012 to develop the capacity of municipalities to sustainably deliver and manage infrastructure.  To date, it has focused on providing technical support to municipalities and training of technical staff for municipalities.  It has now extended its focus to also include infrastructure procurement with the initial focus of procurement of electrical distribution equipment. 3

Background on the process  Project was initiated by the PICC in September 2012  MISA mandated to coordinate the Project under regulation 32 of the MSCMR (GG of 30 May 2005)  The challenges faced:  Perception that prevailing legislation would prevent this from being viable  Potential resistance by municipalities relating to issues of their Supply Chain process  The question of “ compulsory” vs. “optional” participation by municipalities  Identification of a particular “Organ Of State” that can participate positively in the process of Framework Contracts 4

LOCAL GOVERNMENT: MUNICIPAL FINANCE MANAGEMENT ACT, 2003 MUNICIPAL SUPPLY CHAIN MANAGEMENT REGULATIONS Procurement of goods and services under contracts secured by other organs of state 32. (1) A supply chain management policy may allow the accounting officer to procure goods or services for the municipality or municipal entity under a contract secured by another organ of state, but only if – (a)the contract has been secured by that other organ of state by means of a competitive bidding process applicable to that organ of state; (b) the municipality or entity has no reason to believe that such contract was not validly procured; (c) there are demonstrable discounts or benefits for the municipality or entity to do so; and (d) that other organ of state and the provider have consented to such procurement in writing. National Treasury is in the process of putting in place a Standard for Infrastructure Procurement and Delivery Management which: a)makes provision for framework agreements; and b)permits one organ of state to make use of another organ of state’s framework agreement 5

NEC 3 Contract  Previously New Engineering Contract  Now NEC 3 contract  Other types of contract: JBCC, FIDIC Silver book, and GCC 6

 The NEC 3 NEC 3 Contract ConsiderationNEC 3JBCCGCCFIDIC Contracting Strategy Design by Employer Management contract Develop and construct Design and Build Pricing Strategy Activity schedule Lump sum Bill of quantities Cost reimbursable Target cost 7

 The NEC 3 NEC 3 Contract ConsiderationNEC 3JBCCGCCFIDIC Contracting Strategy Design by Employer YES Red Book Management contract NO Silver Book Develop and construct YESYellow and Silver Design and Build Pricing Strategy Activity schedule YES NO Lump sumYES Yellow and Silver Bill of quantitiesYES RED Cost reimbursableNO Target costNO 8

NEC 3 Contract  NEC 3 approach The NEC 3 family of contracts facilitates the implementation of sound project management principals and practices as well as defining legal relationships. Drafted around three main objectives: 1. Stimulus to good project management 2. Clarity 3. Flexability 9

Updated process  MISA obtained the services of an individual to pursue the goal with very little success and a lot of resistance.  New CEO appointed and took the responsibility to complete the project  Various options discussed and workshopped  ESKOM chosen as the “Other Organ of State  It was agreed that Framework Contracts be put in place where Municipalities and ESKOM could place orders against.  NT would scrutinise the ESKOM contract and propose additions for legislative compliance and to develop the applicable model of contract to be used.  MISA to be invited to all meetings involved in the Bid specification process. MISA to invite and involve AMEU where applicable. 10

 Meetings held to compile NEC 3 contract framework  Specifications compiled from NRS, SANS 780 and “old” ESKOM specifications  Identification of first procurement Item  Pole and Ground mounted transformers picked to be the pilot item for sorting the “unknowns” of the contract  Process of bid specification agreed too by all parties  Existing contract with suppliers made available to NT and MISA by ESKOM for studying and adoption/modification  Pole transformer specifications made available for scrutiny by MISA and AMEU – NDC to be signed  ESKOM approved Framework Contract collaboration but wanted a “Fire wall” between them and any other Organ of State. ESKOM collaboration 11

Way Forward  MISA will do Framework Contracts on it’s own  Electricity Distribution Equipment  Water and Sanitation  Roads and Storm Water  Solid Waste  Professional services  Electricity Distribution Equipment  Pole and Ground Mounted Transformers  MV and LT Cables  Mini-substations  MV switches  Metering  ± 35 other components 12

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