Smart Procurement Article - Centralised SCM in the Public Sector or Implementing a monitoring, compl

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By Henry Malinga and Helen Venter Earlier this year government commenced with talks about centralising tenders, which resulted in the question: “Will Government be more effective with a centralised supply chain management (SCM) function or should such a function be limited to monitor SCM performance and resolve disputes, objections, complaints and appeals?” A centralised SCM function... The objective of Chief Directorate Policy, Norms and Standards is to manage the development and implementation of the State’s SCM policy, norms and standards for national, provincial and local government in order to influence the State SCM transformation agenda, explains Henry Malinga, Chief Director: Policy, Norms and Standards. To achieve this objective the Minister of Finance has established an Office of the Chief Procurement Officer (OCPO) and appointed a Chief Procurement Officer (CPO) in the National Treasury as its executive. However, for the OCPO to fulfil this executive mandate, it must have the status and influence, in all levels of government, of an autonomous legal entity responsible for public procurement oversight: it must have direct access to the accounting officers and accounting authorities of government procurement entities to undertake performance audits and be able to recommend sanctions against any organ of State, explains Malinga. While accounting officers and authorities remain primarily responsible for implementing procurement rules and the procurement function of their particular entities, they would be legally and uniformly subjected to the regulatory oversight and guidance of the OCPO. This initiated a project to research the feasibility of specific legislation for National Treasury’s newly established Office of the Chief Procurement Officer. The objective of the first phase of the project was to review and assess the SCM legislative landscape and benchmark against international public procurement best-practices. It was found that there is a need for national SCM regulatory oversight to resolve the current fragmented regulatory approach and non-compliance, which has an adverse effect on service delivery and the socio-economic agenda in the country, explains Malinga. The Chief Directorate is currently engaged in the second phase of the project to develop a Public Procurement Regulatory Legal Framework. The research process will, amongst other objectives: review all legislation affecting SCM; recommend how the broader objectives of government can be achieved through a non-fragmented legislative environment; and recommend specific procurement laws for South Africa. ...or an SCM performance monitoring and dispute resolution function Helen Venter, a SCM advisor to the public sector, advocates that a Monitoring, Complaints and Appeal Board (MCAB) will achieve significantly more improvements in government SCM than would centralising the SCM function in totality or trying to manage service delivery from a centralised platform. However, establishing a Monitoring, Complaints and Appeal Board (MCAB) will require leadership commitment as well as policy and maybe even regulatory reforms. Since 2009, Government’s commitment towards a MCAB body has been evident from the proceedings of the Extended Public Committee Parliamentary Monitoring Group, during which it was confirmed that “work is currently under way to establish a supply chain management compliance monitoring unit in the National Treasury”. A centralised MCAB, argues Venter, can significantly assist public sector institutions and contribute to bridging the gap between traditional methods of procurement and reformed principles of supply chain management. At the same time it can address procurement related matters that are of strategic importance. Importantly, establishing the MCAB will not hamper service delivery as SCM activities will continue as per the prescripts of the PFMA and MFMA on a decentralised basis, with a centralised MCAB monitoring performance and trends and dealing with costly SCM appeals and/or complaints. Venter has suggested a framework that government may consider for such a MCAB, see Suggested MCAB Framework (see the bottom of this article) The impetus behind centralising SCM “Widespread non-compliance with public procurement law has a detrimental impact on service delivery: and may lead to interruptions in the procurement of goods, services and works, causing consequent delays in securing service delivery contracts and programmes at the right price, at the right time and at the right place to citizens." - Henry Malinga “Where public sector SCM implementation is concerned, various oversight bodies and internal and external audit reports have highlighted issues of insufficient controls as well as policy and procedure gaps in relation to monitoring SCM performance and managing SCM-related complaints and appeals. Furthermore, when applying SCM-related legislation it is evident that various pieces of legislation contradict each other, which results in confusion, delays and costly legal representation.”

- Helen Venter Suggested MCAB Framework OBJECTIVES a) Establish an independent and impartial point of access for: (i) reporting, investigating, determining and treating SCM system abuse, -disputes, -objections, -complaints or -appeals. (ii) measuring performance output of government SCM. b) Establish an independent board to promote, monitor, report and advise government on the fairness, equitability, transparency, competitiveness and cost-effectiveness of the SCM System whilst achieving the following: (i) Instil SCM best practice. (ii) Prevent irregular expenditure. (iii) Strengthen the control environment. (iv) Prevent the undermining of the financial management system. (v) Assist management to act appropriately on incidents of SCM system abuse and complaints. (vi) To strengthen the ability to manage the SCM system. c) Establish a board to independently review and advise government on the determination of ‘Liability in Law ’ of any perpetrator abusing the SCM system. FUNCTIONS The MCAB must do all that is necessary or expedient to achieve its objectives, and for that purpose: (a) must promote a fair, equitable, transparent, competitive and cost-effective SCM system; (b) must monitor, evaluate and report on the fairness, equitability, transparency, competitiveness and cost-effectiveness of the SCM system; (c) must advise government on the fairness, equitability, transparency, competitiveness and cost-effectiveness of the SCM system; (d) may review and advise government on proposed SCM system policies, procedures and practices, inclusive of prescribed preferences; (e) must assess and report on draft SCM system policies, procedures and practices referred to the committee by government institutions; (f) must monitor and report on access to the SCM system; (g) must monitor and report on the access and quality of advisory and educational support to potential suppliers and institutions in government; (h) must consider and advise government on the reporting, investigation, determination and treatment of SCM system abuse, -disputes, -objections, -complaints or –appeals; and (i) must advise government on its measurement of performance output of Public Sector SCM. POWERS The MCAB must do all that is necessary or expedient to perform its functions, and for this purpose: (a) may invite expert or technical advice; (b) may procure experts, technical advice or research capacity; (c) may require the submission of reports, returns, notices and other information from an institution; (d) exercise such powers as may be prescribed; and (e) must review all reported SCM system abuse, -disputes, -objections, -complaints or –queries cases and make recommendations with regard to liability in law and other related actions and for this purpose hold in-camera committee hearings. HEARINGS Government may instruct the MCAB to conduct, or cause to be conducted, open or in-camera hearings, enquiries and investigations in respect of: (a) any matter which is necessary for the effective implementation of the provisions of this instruction and the achievement of its objectives; and (b) anything that must or may be investigated in terms of its mandate. REPORTING The MCAB must submit to government via the Office of the Chief Procurement Officer, a quarterly report on the activities of the MCAB during that quarter, which must include a summary of all recommendations made and all complaints received.