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This presentation provides an update on the infrastructure programme implemented by the Department of Public Works on behalf of the Department of Correctional Services, including challenges faced and options being investigated for improvement.
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INFRASTRUCTURE PROGRAMME FOR DCSPRESENTATION TO PORTFOLIO COMMITTEE ON JUSTICE AND CORRECTIONAL SERVICES DATE: 04 AUGUST 2015
1. OBJECTIVES OF THE PRESENTATION To Present to Portfolio Committee the Infrastructure Programme implemented by Department of Public Works on behalf of Department of Correctional Services To provide an update on issues raised during the oversight visit conducted in Limpopo The challenges in delivering the Programme Options being Investigated to correct the situation and prevent future occurrences
2. GENERAL PERSPECTIVE • Over the past years DPW experienced significant drop in performance in the delivery of infrastructure and this was attributed to various factors, amongst them: • Contractor disputes with their subcontractors, • General under-performance by contractors, • Contractors’ cash flow challenges. • Tedious process of liquidation and termination of non-performing contractors and subsequent delays in appointing the new contractors after termination. • Delays in decision making from the client’s side. • DPW remains responsible to maintain the existing facilities through service contracts under the Repair and Maintenance Programme (RAMP), and the more reactive means referred to as day-to-day maintenance • The Users are delegated attend to minor maintenance services to the tune of R100 000 per assignment (maximum).
2. GENERAL PERSPECTIVE Cont… • DPW has been implementing a turnaround plan that has resulted in the establishment of Programme Management Office (PMO), the Ministerial Joint Task Team and has seen improved performance on expenditure from the 2014/15 Financial Year. • As part of the efficiency enhancement phase (phase 2) of the DPW turnaround plan, we are in the process of separating the Capital Programme and the Facilities Management Programme, as focused business centres to improve planning and accountability.
3. DCS CAPITAL PROGRAMME • The NDPW implements construction projects and operation of facilities for DCS as per instructions issued and budgeted for. This includes the following: • Construction of New Correctional Facilities • Upgrading of existing facilities • Improvement of Security Measures • Improvement of Fire detection services • Upgrading and maintenance of Mechanical & Electrical Services • Provision of water to facilities outside municipal networks • Operate and maintain Waste Water Works, and contribute to recycling for irrigation • Operation and maintenance of Boilers • Repair and Maintenance of Kitchen Equipment • In providing these services DPW utilises the services of Consultants and Contractors appointed through the tender process.
4. DCS CAPITAL PROGRAMME – PERFORMANCE MEASURES / REPORT • The Performance Measures the NDPW uses are mainly the following: • Expenditure of Allocation (Financial Measures): • DCS approves an annual capital allocation following the review process of Progress made in Planning Stages of Projects and Budget Estimates, as informed by Projected Cash Flows for Committed Contracts. • Delivery of Completed Projects/ Facilities: • Performance in Execution and Completion of construction projects is linked to the Delivery Date as informed by contract period. Each Project has its planned / projected date which Users use to plan their occupation. • Maintenance of Services (Facilities Management) : • Water Supply; Fire Fighting Equipment; Kitchen Fittings; Waste Water Management; Servicing of Boilers • The Financial Performance is discussed starting from 2013/14 – 2014/15
8. CONTRIBUTING FACTOR TO UNDER EXPENDITURE/ PERFORMANCE IN THE PAST TWO PERFORMANCE YEARS • Withdrawal of Security Projects from tender stage due to unhappiness expressed by DCS over dominance of the sector by one supplier. • Generally poor workmanship and inability to schedule the sequence of Work on Site properly by contractors leading to spending lower than the projections. • Six Prison Contracts (Ceres, Vanrhynsdorp, KgošiMampuru, Escort, North End, and Tzaneen) contractor experienced cash flow problems leading to liquidation and contract cancellations. • Shortage of Prison Window Supplies in the Market, implying that building works cannot continue without windows due to the installation method. • Because the Cash Flow Expenditure is linked to monthly work progress and acquisition of capital fittings (mechanical, Electrical), if this is not realised on site, Budget is not spent.
9. TZANEEN CORRECTIONAL CENTRE • The Contractor for this project has been liquidated. The Liquidators identified new service provider (replacing contractor) to complete remaining portion of work. However the challenge with the proposal requires that the department have a direct contract with the identified service provider. • The legal opinion has been received, which indicates that another contractor can complete the works, however the original contractor will still be held accountable as per the conditions of the contract. • The DPW had successful engagements with the liquidator and started discussions with the guarantor. The guarantor will conclude negotiations with the new contractor on the 31st August 2015. The negotiations will include the new date for the new contractor to be on site. Assessment to recover any additional costs emanating from the delays, where applicable will be done once the project has reached final completion.
10. PARYS CORRECTIONAL CENTRE • The project was advertised; however bids received were higher than the actual estimate. The DPW negotiated with CIDB to waive 6 month cooling period and re-advertisement is scheduled for 31 July 2015. We anticipate award by 31 October 2015.
11. KGOŠI MAMPURU – C-MAX CORRECTIONAL CENTRE • The contract was terminated due to poor performance and this termination was done at 70% completion. However this contractor was subsequently liquidated. Consultants were appointed to conduct assessment and finalise the Final account. The processes to appoint the new contractor have commenced and the anticipated award date is mid-November 2015. • This project was visited jointly by DPW and DCS on the 15/07/205 as part of close monitoring and weekly report will be provided by the project manager and professional team. Assessment to recover any additional costs emanating from the delays, where applicable will be done once the project has reached final completion.
12. VANRHYNSDORP CORRECTIONAL CENTRE • The initial contractor was liquidated. The guarantor started in February 2015 to complete the remaining works and the project is anticipated to be completed by October 2015. Progress to date is 99% on the work completed by the original contractor and currently finalising electrical compliance matters. Assessment to recover any additional costs emanating from the delays, where applicable will be done once the project has reached final completion.
13. CERES CORRECTIONAL CENTRE • The initial contractor for this project was liquidated and the guarantor appointed a new contractor and the new contractor completed the project in April 2015. Final delivery taken in July 2015. There is no need to recover costs as there were no additional costs incurred.
14. ESTCOURT CORRECTIONAL CENTRE • The initial contractor for this project was liquidated and the guarantor has appointed the new contractor to complete the remaining work. Work progress on site is at 43%, however delays have been experienced due to lack of consistent supply of specialised (manganese) windows and door frames. Upon assessment, the realistic completion date is January 2017 given the above mentioned delays and weather inclination extension of time claims under consideration.
15. NORTH END CORRECTIONAL CENTRE • Repair & Renovations of the Facility. The initial contractor for this project was liquidated and the guarantor appointed the new contractor in August 2014 to complete the remaining work. Progress is about 48% complete. The completion date as per contract is end of March 2016.
15.MATATSHE (THOHOYANDOU) CORRECTIONAL CENTRE • First contract was terminated due to non-performance. The new contractor is already appointed and was handed over site on the 12th June 2015. Site establishment will be completed end of July 2015. Construction period is for 24 months, including maintenance.
16.GLENCOE CORRECTIONAL CENTRE • The prison was burnt down in May 2015. An assessment was conducted and different options were proposed, including demolition and rebuilding of affected areas with brick and mortar and ensure that the existing corrugated facility is fire compliant. The proposal has been submitted to DCS for consideration.
17.PERFORMANCE REPORT ON DCS FOR 2015/16 • The Capital budget allocation for DCS for 2015/16 is R435 361 101 • Expenditure as per end of June 2015 is R130 401 656 (representing 30% of budget allocated vs 25% time lapsed) • The programme has a total of 246 projects, with an allocation/budget of R435 361 101 for the 2015/16 financial year. • 108 Projects are in planning and 138 projects are committed (status 5b-9) with a budget of R388 007 563
18. CHALLENGES • Construction of New Correctional Facilities is very complex and requires a longer sustained cash flow. We have realised that Contractors experienced cash flow problems when they are at about 60% of the contract because of the following: • At this stage of project most mechanical and electrical installations are required on Site and Suppliers require higher deposits to confirm orders. • These components in most cases are under-priced by contractors far below the Retail Costs, and contractors have to somehow source cross-subsidise the purchases from other projects, which leads to collapse of cash management. • Repetition of works due to correction of defective works • Idling resources or Labour on sites because of improper work scheduling which increases labour costs • Failure to pay Supplier / Creditors on time leads to applications for Administration or Liquidation • Specification for Security Contracts and Supplier Monopoly
19. OPTIONS INVESTIGATED TO PREVENT THE RECURRENCE OF CHALLENGES
