0. Department of Defence
REPUBLIC OF SOUTH AFRICA

1. The Procurement Process
Presentation to the Portfolio Committee on Defence
08 October 2009

2. Contents Introduction Procurement Process Procurement System
Anti-corruption and Transparency

3. INTRODUCTION

4. Aim
To orientate the Members of the PCD to the Procurement process within the Department of Defence

5. Definitions
Authorising entity: A board or committee established to monitor compliance to procedures and to authorise bid submissions.
Delegan: a person or entity who has powers delegated upon them.
JIT: Just-in-time; concept of rapid deliveries and inventory reductions.
Material Value Chain: the process, system and infrastructure pertaining to movement and handling of material from requisition to disposal

6. Definitions…Cont.
Procurement entity: DoD establishment whose primary function is to procure or sell goods / services
SCM: supply chain management
TQM: total quality management; concept of continuous improvement with emphasis on quality throughout the supply chain
Transversal contracts: centrally-managed contracts applicable to more than one government department.

7. Scope
The content of this presentation only applies to the GDA [or FMS folio 01] procurement transactions, i.e. two thirds of the DOD budget.

8. PROCUREMENT PROCESS

9. Procurement Objectives
To support the Material Value Chain in accomplishing optimal materiel readiness
To ensure delivery of cost-effective quality services to services / divisions through good procurement practices
To align procurement systems and processes with DoD Strategic Objectives
To ensure compliance of the procurement execution process with the GRC framework
To develop partnership arrangements with suppliers, and other procuring organisations and explore opportunities for SC collaboration
To promote the principles of BBBEE, industry development and environmental sustainability

10. Procurement Prescripts
RSA Constitution Sect. 217:
Execute Procurement Function through a system that is fair, competitive, transparent, equitable and cost-effective.
PFMA Sect 38(1)(a)(iii):
Have an appropriate procurement system which is fair, competitive, transparent, equitable and cost-effective.

11. Procurement Prescripts
PPPF Act 5 of 2000
National Treasury SCM Practice Notes
DODI No Acq/2/99/Edition 2
JDP No Acq/00003/04/Edition 1
Secretary for Defense Delegations
BBBEE Act

12. Procurement Process Flow
Proc Unit/Centre
Proc Committees
End User
Depot/Unit
Finance
Initiate reqs
Draw Specs
Budget
Verify Req & Specs
Draw up PQ/Bid Doc’s
& Advertise
Receive
Goods
Print
Receipt
Voucher
(Quality
check)
Verify
Bid doc
Invoices
Receipt
Voucher
Evaluation
Acceptance
Approval
Receive PQ/Bids
Technical
Evaluation
acceptance
Capture PQ/Bids
PQ/Bid evaluation
Recommendation
Make
payment
Request FA
Approve FA
LOA/Order
Process Pay’t Docs
Suppliers

13. Procurement Execution
Level 3
2x Procurement Service Centres [PSC’s]
Thaba Tshwane and Simons Town
SAMHS: Procurement Unit [Medical specific]
Procure at a Corporate Level [central]
Requirements come from Formations and/or PSMs
Purchase through contracts, bids and / or price quotations

14. Procurement Execution
Level 4
Regional Procurement Sections
SA Army: 15
SAAF: 10
SA Navy: 2
SAMHS: 1
J Ops: 2
DHQ Unit: 1
Regional requirements [FSEs]
Purchase through contracts or price quotes

15. Procurement Categories
Procurement transactions fall within the following categories:
Petty Cash:- R5,000-00
Price Quotes:- <R500,000-00
Bids:- >R500,000-00
Contract item:- Any Value

16. Sourcing Process
Price quotations - fwd docs to selected suppliers. Suppliers chosen (rotation) from a database
Bids - advertised in government tender bulletin, all suppliers have access to this
All PQ’s and bids have closing dates and times.
Received, evaluated administratively & technically, ranked for acceptance and recommended to the relevant committee for approval

17. Authorising Entities NAME ABB PROC FIN THRESHOLD
Regional Commercial Procurement Committee
RCPC
R1,000,000-00
Corporate Commercial Procurement Sub-committee
CCPSC
R5,000,000-00
Corporate Commercial Procurement Committee
CCPC
R10,000,000-00
Departmental Commercial Procurement Board
DCPB
Unlimited

18. Payment Procedure Proc process ends when supplier is paid in full
Rule (National Treasury prescribed) - payment 30 days after receipt of invoice
Advance payments to suppliers is not done unless agreed to as part of the contract conditions, and approved by CFO
FASC – responsible for finalising supplier payments. PSC’s only deliver the payment packs

19. Payment Documents
For FASC to process payment, ff documents are required:
Delivery note
Invoice
Receipt voucher (accounting)
Order / contract
Completion certificate (services/repairs)

20. Alternative Service Delivery
A mix of flexible delivery programmes, activities and mechanisms that can be strategically used to achieve service delivery objectives by outsourcing or PPPs
Legislated by
- PFMA
- Treasury Regulation 16 (PPP’s)
- DOD Policy - DODI/00003/2000
DOD Defence Review, April 1998 stated that all non-core functions must be considered for outsourcing, the DOD must focus on its core business

21. Types of Procurement Transactions
Transversal Contracts
Common Products / Services
Division-Specific Services
Control and Management
National Treasury / SITA / DPSA
Central Procurement via mid-term contracts
Central Procurement via tender process
Co-ordination and Admin
Corporate Procurement [Log Div]
Execution
Services / Divisions
Monitoring Compliance
Materiel GRC
Material GRC

22. PROCUREMENT SYSTEM

23. System Design Principles
Combining the principles of JIT, TQM and SCM
Responsible Procurement Officials shall be of the rank of SO1/Assist.Director/Lt Colonel/Cdr upwards
Separate ‘oversight’ function from the ‘execution’ function.
System must allow ‘pro-active’ monitoring
Centralise control, and localise execution

24. Procurement Delegans SECDEF : by law CSANDF : by SECDEF
Authorising Entities : by SECDEF
Senior Proc Officials : by SECDEF / CSANDF
Proc Officials : by SECDEF / CSANDF

25. Financial Delegans SECDEF : by law CSANDF : by SECDEF
Div / Serv. Chiefs : by SECDEF / CSANDF
Senior Personnel : by SECDEF / CSANDF

26. Procurement Structures: Execution
Procurement offices /
sections at units
Day-to-day procurement
Procurement officials coordinated
One for each service / division
Procurement
Unit
Supporting Procurement Units
Handling central procurement activities
Handling tender processes
3 of them
Managed by senior procurement officials
Procurement
Centre
Supporting procurement centres
A directorate within Log Division
Central control of procurement strategy
Issue directives and execution frameworks to the lower structures
Corporate
Procurement

27. Procurement Structures: Oversight
Regional Proc Committee
Corporate Commercial Proc Sub-Committee
Corporate Commercial Proc Committee
Departmental Commercial Proc Board

28. The New Procurement Framework
Services / Divisions
Financial Delegations
CSANDF Procurement Delegation - Prerogative
Procurement
Delegations
Procurement Unit 1
SA Army
Procurement Centre
Central
Procurement
Delegations
Procurement Unit 2
SAAF
Corporate Procurement
SANDF Log Div
Procurement Unit 3
SA Navy
Procurement Centre
Simons Town
Goods/services
Delivery of
Procurement Unit 4
J Ops
Procurement Unit 5
SAMHS
Procurement Centre
Waterkloof
Procurement Unit 6
DHQ
Compliance
To Gov.
Framework
GRC Support
GRC Support
Regional Procurement
Committee
Corporate Commercial
Procom
DCPB
Procurement
Delegations
Procurement
Delegations

29. Exercising Procurement Delegation: CSANDF
CSANDF shall exercise his Procurement Delegation within the Authorising Entities
However CSANDF may use his procurement delegation outside the normal procurement process in cases of emergency as defined in JDP: ACQ 0003/2004
Provided a condonment is prepared and submitted to the authorising entity within 14 days.

30. CORRUPTION PREVENTION / CONTROL

31. Prevention / Control Mechanisms
Submission of needs by DOD end-users. All procurement requests are scrutinized by the DOD Corporate Procurement Centre’s prior to inviting tenders to ensure that specifications/contracts are not drawn up to favour particular suppliers.
Segregation of duties. All persons involved in the procurement process/cycle perform a single procurement task only i.e. person inviting tender is thereafter not involved in either evaluating, recommending or serving on approval committee’s/board’s to award the tender.
Invitation of suppliers to tender for DOD work. As prescribed by National Treasury, the DOD utilises an electronic database (Proquote) which chooses suppliers by a rotation system per commodity category. DOD also advertises in the Government Tender Bulletin.
Recommendation to Award Tenders. Entire procurement process is electronic on E-Proqure. (Capturing of PPPFA points).

32. Prevention / Control Mechanisms
Approval of Tenders. Not vested in any individual in the DOD. Only authorised constituted committees and boards approve awards. Members serving must also declare their interests regarding awards under consideration.
Effective Procurement Governance. Achieved through proactive monitoring by GRC to ensure compliance of procurement policies and procedures.
GRC also retains Chairmanship of the procurement Committees and Boards that award tenders.
GRC provides specialist advice and guidance to all DOD entities executing procurement.
Procurement Training and Corruption Awareness. DOD procurement officials are regularly exposed by attending workshops, seminars, formal DOD courses, etc.

33. Prevention / Control Mechanisms
Interaction with National Treasury. DOD regularly engages NT for clarification of specific procurement issues. NT also promulgates SCM Practice Notes that regulate procurement and the DOD must implement same.
Procurement Deviations. Are only approved by the Accounting Officer and must be reported to NT and AG.
Procurement Delegations. Only issued by the Accounting Officer [or CSANDF sub-delegations] iaw PFMA. No DOD official is authorised to execute procurement without a delegation from either SecDef or CSANDF.
Compliance to Legislation. DOD confirms strict compliance to all procurement prescripts as a measure to prevent corruption.

34. Challenges within Procurement
Declaration of Interest. No legislation that prevents DOD officials from tendering for DOD work whilst in the employ of the DOD. Members need to only declare to higher authority that they own a business.
Segregation of Duties. Enforcement is problematic due to personnel shortages.
Electronic Procurement System Downtimes. Can result in specific suppliers being asked by procurement personnel to tender.

35. THE END