1. Supply Chain Management Policy Amendments
21 February 2017

2. CONTENT Key Legislative Elements uMhlathuze SCM 5th Amendment Policy
- Objectives
- Clause 19
- Clause 34
How to achieve this 40%?
Application

3. Key Legislative Elements
THE LEGISLATIVE REASONS FOR AMENDMENTS
In terms of the SCM Regulations S3 (1) (a) – the AO must at least annually review the implementation of the policy. (b) when AO considers it necessary submit proposal for amendment of the policy to Council.
S3 (2) When amending this SCM policy the need for uniformity in supply chain practices, procedures and forms between organs of state in all spheres, particularly to promote accessibility of SCM systems for small businesses must be taken into account.

4. Key Legislative Elements
Looking at the Constitution of SA
Section 217(1) Indoctrinate for a procurement system that is fair:
Fair, Equitable, Transparent, Competitive and Cost-effective
Section 217(2) Subsection (1) does not prevent the organs of state or institutions referred to in that subsection from implementing a procurement policy providing for— (a) categories of preference in the allocation of contracts; and (b) the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination.
Section 217(3) National legislation must prescribe a framework within which the policy referred to in subsection (2) must be implemented. (Preferential Procurement Framework Act)

5. Key Legislative Elements
Preferential Procurement Framework Act
2. Framework for implementation of preferential procurement policy.-(1) An organ of state
must determine its preferential procurement policy and implement it within the following framework:
(a) A preference point system must be followed;
(b) (i) for contracts with a Rand value above a prescribed amount a maximum of 10 points may be allocated for specific goals as contemplated in paragraph (d) provided that the lowest acceptable tender scores 90 points for price;
(ii) for contracts with a Rand value equal to or below a prescribed amount a maximum of points may be allocated for specific goals as contemplated in paragraph (d) provided that the lowest acceptable tender scores 80 points for price;
(c) any other acceptable tenders which are higher in price must score fewer points, on a pro rata basis, calculated on their tender prices in relation to the lowest acceptable tender, in accordance with a prescribed formula;

6. Key Legislative Elements
(d) the specific goals may include (i) contracting with persons, or categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender or disability; (ii) implementing the programmes of the Reconstruction and Development Programme as published in Government Gazette No dated 23 November 1994; (e) any specific goal for which a point may be awarded, must be clearly specified in the invitation to submit a tender; (f) the contract must be awarded to the tenderer who scores the highest points, unless objective criteria in addition to those contemplated in paragraphs (d) and (e) justify the award to another tenderer; and (g) any contract awarded on account of false information furnished by the tenderer in order to secure preference in terms of this Act, may be cancelled at the sole discretion of the organ of state without prejudice to any other remedies the organ of state may have. (2) Any goals contemplated in subsection (1) (e) must be measurable, quantifiable and monitored for compliance.

7. Key Legislative Elements
Constitution of SA
Chapter 7
Objects of local government.— (1)
to provide democratic and accountable government for local communities;
(b) to ensure the provision of services to communities in a sustainable manner;
(c) to promote social and economic development;
to promote a safe and healthy environment; and
(e) to encourage the involvement of communities and community organisations
in the matters of local government.
(2) A municipality must strive, within its financial and administrative capacity, to achieve the objects set out in subsection (1).

8. Key Legislative Elements
Constitution of SA
CHAPTER 7
153. Developmental duties of municipalities.—A municipality must—
(a) structure and manage its administration and budgeting and planning processes to give priority to the basic needs of the community, and to promote the social and economic development of the community; and
(b) participate in national and provincial development programmes.

9. Key Legislative Elements
Municipal Systems Act
Mechanisms for provision of services.—A municipality may provide a municipal service in its area or a part of its area through—
(a) an internal mechanism, which may be—
(i) a department or other administrative unit within its administration…
  (b) an external mechanism by entering into a service delivery agreement
with— (i)……
(ii)……
(iv) a community based organisation or other
non-governmental organisation legally competent to
enter into such an agreement; or

10. SCM POLICY 5TH AMENDMENT
On 13 July 2016Council took a resolution CR to amend the SCM policy to address:
OBJECTIVES
Foreign companies must have a partnership with the local company where the local company holds not less than 40% share on the project.
To spend a minimum of 40% (forty percent) of its annual procurement budget with Historically Disadvantaged Individuals (HDIs) - youth, women, people with disabilities within the jurisdiction of the City of uMhlathuze, through the application of Preferential Procurement Policy and relevant policies.
40% Youth
40% Women
20% People with disabilities

11. EXAMPLE OF CAPEX SPLIT
Total Capex for 2016/17 (40%) R 416,397,000 (40%) = R166,558,800 40% Youth = R 66,623,520 40% Women = R 66,623,520 20% People with Disabilities = R 33,311,760 NB: All the above sectors are also legible for bidding on the 60% without being prejudiced by the above.

12. How to achieve 40%? 19. Competitive bidding process –
S(3) unbundling strategies – (a) in order to encourage
increased participation and the sustainable growth of the small business sector,
the unbundling of larger projects into smaller, more manageable, contracts may
be encouraged.
(b) unbundling must however be considered in the context of:-
(i) economies of scale being lost;
(ii) abortive work becoming necessary;
(iii) additional demands (not only financial) being placed on the Council resources; and
(iv) the risk of later phases not being completed as a result of budget cuts becoming
necessary in the future.
(v) unbundling, and all of its associated implications, must therefore be carefully
considered at the planning stage of any project and the budgets for, and design
thereof, should be structured accordingly.
(vi) the practice of breaking out projects in order to circumvent the formal bid process is
not permitted, as per section 19.(2) of this policy .

13. How to achieve 40%?
PROUDLY SA CAMPAIGN AND SUPPORT OF COMMUNITY BASED VENDORS AND COUNCIL AND OTHER SPHERE GOVERNMENT SOCIO-ECONOMIC INITIATIVES
Community Based Vendors
(2) The accounting officer must determine internal operating procedures supporting the community based vendors to promote Small Micro Medium Enterprise development including cooperatives through initiatives from Local Economic Development (Vukuphile, Enterprise Development, Incubation programs and any other community based initiatives)
Clause 34(2), is the enhancement of Local Economic Development initiatives.

14. How to achieve 40%? Subcontracting
34 (5) (a) If a tender is awarded to a big contractor, as determined by the tender value and complexity of the project, 25% would be allocated to local black emerging contractor(s) or local youth emerging contractor(s) inclusive of women and contractors of people with disabilities and co-operatives.
(b) If a tender of R10 million and above was awarded to a well-established black contractor, 25% would be sub- contracted as 34(5)(a).
(c) Where a contract is of R10 million and above, 25% must be sub-divided into valuable sizes of two or more sub- contractors.

15. How to achieve 40%?
Provisional Sums and Prime Cost or Sub-contract Allowances
34(6) Where monetary allowances in excess of R in respect of provisional sums or prime cost items have been included in the bid documents, and where the work or items to which the sums relate are to be executed/supplied by sub-contractors/suppliers, then one of the following processes, as determined by the Bid Specification Committee, shall be followed in respect of these allowances:
What is Provisional Sums and Prime Costs?
Most building contracts include provision for prime cost items and provisional sums. A prime cost item is an allowance in the contract for the supply of necessary items not yet finally selected, for example sanitary fittings, water supply fittings, tilling, electrical works, air-conditioning or door furniture etc. Prime cost generally is an allowance for articles to be provided by the contractor, of which price cannot be fixed at the time of tender. A specific amount will be earmarked in the BOQ for execution of such items.

16. How to achieve 40%?
Provisional Sums and Prime Cost or Sub-contract Allowances 34(6.1) An open competitive bidding process in which bid documents are prepared by the Responsible Agent in consultation with and to the approval of the contractor, invitations to bid are advertised in the media, and whereby the selected sub-contractor/supplier is chosen by the SCMU and/or Responsible Agent together with the contractor from the responses received. The contractor may, on reasonable grounds, elect not to employ a particular sub- contractor/supplier.

17. How to achieve 40%?
34(6.2) A two-stage selection process, whereby the Responsible Agent will advertise (in the media) for expressions of interest from suitably qualified sub- contractors/suppliers. From the responses received, the Responsible Agent and the contractor, in conjunction with SCMU, shall compile a list of at least three (unless less than three responses were received) suitable sub-contractors/suppliers who will then be asked to submit prices for the works/items required. The contractor will assume the risk for the performance of the selected sub-contractor/supplier identified through this process.

18. How to achieve 40%?
(6.3) A nominated process, whereby the City instructs the contractor to appoint a particular (typically specialist) sub-contractor/supplier. In this process the sub-contractor/supplier is a nominated sub- contractor/supplier, and the risk is transferred from the contractor to the City. The use of this process must therefore be motivated to, and approved by, the Head: SCM prior to its implementation. A preference point system must be applied in respect of the processes described in clauses 6.1and 6.2 above.

19. How to achieve 40%?
(6.4) When monetary allowances of less than R have been included in the bid documents, and where the work or items to which the sums relate are to be executed/supplied by sub-contractors/ suppliers, the contractor must be required to obtain a minimum of three written quotations from SCMU approval by the Head: Supply Chain Management

20. APPLICATION
OPEX – SCMU will ensure that we channel more work as prescribed by our objectives but also guided by the end user.
CAPEX – The user-department will ensure that their specifications addresses the issue of empowerment as prescribed by the policy.

21. THANK YOU