COMBINED REPORT TO PORTFOLIO COMMITTEE ON NUTRITION SERVICES By: NATIONAL COMMISSIONER 22 FEBRUARY 2012
BACKGROUND – EKHUSENI & WATERVAL • 1996 Ekhuseni Youth Development Centre, in Waterval Management Area, established as pilot education facility for young offenders. All activities funded through Nelson Mandela Children’s Fund. Funding taken over by DCS after year or two. • Nutrition services at Ekhuseni were provided by Fedics. • 30 August 2006, on basis of tender HK5/2006, DCS expanded outsourcing of nutrition services from just Ekhuseni Centre to rest of Waterval Management Area & awarded 5 year contract to BOSASA which was signed on 07 September 2006 & expired on 30 September 2011. • Implementation on this contract only started on 16 February 2007 due to renovations - order was only issued in February 2007. • In January 2012 National Bid Adjudication Committee (NBAC) was approached to extend this contract
CORRECTING INFORMATION • In relation to Waterval Contract HK5/2006, subsequent to submission of presentation it has become clear that NC had been misled on information relating to issuing of order & initiation of delivery on contract signed in September 2006. • In previous presentation DCS stated that “Implementation on this contract only started on 16 February 2007 due to renovations – order was only issued in February 2007.” DCS has now identified that although National Commissioner was informed that order was only issued in February 2007, in fact order was signed in November 2006 & delivery on contract only started in early 2007. • This is subject to investigation.
BACKGROUND – 7 MANAGEMENT AREAS • DCS published tender HK2/2004 for provision of nutrition services in 7 Management Areas (St Albans, Polsmoor, Johannesburg, Pretoria, Modderbee, Krugersdorp, Durban Westville), on basis of need to: • comply with Act re three meals day; • staffing challenges due to 5day establishment and level of overcrowding about 164%; • address challenges of state of these DCS kitchens & equipment as result of challenges in DPW delivery; • as part of determining what was core business & what was not given new strategic direction of focus on rehabilitation & security, & how DCS should ensure delivery on core & non-core functions. • 27 July 2004 National Bid Adjudication Committee awarded tender HK2/2004. 3 year contract was signed with BOSASA starting 01 August 2004.
BACKGROUND – 7 MANAGEMENT AREAS • Evaluation Committee established in 2006 or 2007 to evaluate impact of outsourcing through HK 2/2004 & advise to enable decision making on provision of nutrition services going forward. By end of contract, Evaluation Committee had not evaluated all dimensions required by Management – tasked to complete outstanding areas. • Contract HK2/2004 was extended by 12 months in July 2007 to allow for completion of evaluation of contract to enable decision making about means of provisioning of nutrition services going forward; • Contract HK2/2004 then extended for a further 6 months in July 2008 as evaluation was still not complete. • Allegations of corruption surfaced, contract investigated by SIU. • SIU Report only received by Department in September 2009. • DCS laid criminal charges, currently subject to investigation by Hawks. DCS working with them to provide necessary documentary evidence to support/confirm affidavits. • This contract has expired and been replaced by HK14/2008
BACKGROUND – SECOND CONTRACT - 7 MANAGEMENT AREAS • In2008, DCS developed new specifications for outsourcing of nutrition services • In August 2008, DCS published tender HK 14/2008 for nutrition services in 7 Management Areas (St Albans, Westville, Pollsmoor, JHB, Pretoria, Krugersdorp and Modderbee). • In December 2008, DCS awarded tender to BOSASA, with contract period starting from on 1 February 2009. • This contract is subject to legal challenge by Royale Sechaba which is currently sub judice. DCS is defending this legal challenge. • This contract was due to expire on 31 January 2012. • In January 2012 National Bid Adjudication Committee (NBAC) was approached to extend this contract
BACKGROUND – FEASIBILITY STUDY • In 2008/9 DCS published tender HK1/2009 & awarded contract to service provider (Bergstan South Africa) to do feasibility study on provision of nutrition services. • Evaluation of Feasibly Study Report which was received in June 2010 was inadequate and did not enable decision making on provisioning of nutrition services through in or out sourcing • Further investigation exposed that terms of reference for feasibility study had not focused study on consideration of options of in-sourcing and out-sourcing; • Early 2011 DCS determined that Terms of Reference/Task Directive of feasibility study contract did not enable exploration of options of in-sourcing or outsourcing of nutrition services.
DECISION & PREPARATION RE INSOURCING OF NUTRITION SERVICES • 31 March 2011 NatManCo decision to in-source nutrition services at end of contract period; Regions & Development & Care tasked to ensure monthly reporting on this against appropriate plans. • National Task Team/Steer Comm consisting of Development and Care & relevant Area Commissioners was established - tasked to manage preparation for take over of nutrition services. • September 2011 Steer Comm noted concern about state of readiness • October 2011 Budget Committee informed that state of readiness is not where it should be for take over of nutrition services by DCS.
DECISION & PREPARATION RE INSOURCING OF NUTRITION SERVICES Budget Committee Decision 14 of 27 October 2011: • Development & Care was requested to submit report by 15 November 2011 to Commissioner on readiness of DCS to take over catering contract as from 31 January 2012. Report must be circulated to all RC’s before submission to Commissioner. • Bid Adjudication Committee must be convened as soon as report of Development & Care is available if necessary. • Development & Care was also requested to engage with service provider & to arrange meeting with Commissioner to discuss take over of catering contract.
DECISION & PREPARATION RE INSOURCING OF NUTRITION SERVICES • Report provided by Task Team/Steering Committee on state of readiness 28 October 2011 & report on state of readiness provided by EPMO on state of readiness • Agenda item at November NatManCo, but matter referred to Executive Management Committee, which convened in 12 December 2011 – reports on state of readiness tabled at Executive Management Committee; all RCs confirmed not ready to take over nutrition services • Submission made to National Commissioner in 12 January 2012 proposing extension of contracts HK 5/2006 & HK 14/2008 – was referred to National Bid Adjudication Committee (NBAC) on 16 January 2012
BID ADJUDICATION COMMITTEE PROCESS • National Bid Adjudication Committee (NBAC) met on 16, 20, 26, 27, 30 & 31 January to deliberate on proposal • Given that HK14/2008 is subject to legal challenge legal opinion was sort - received & considered on 20 January 2012. • Legal opinion advised that • given lack of readiness to take over insourcing of nutrition services and in compliance with Constitution, PFMA and Treasury regulations re transparency in procurement processes, new tender for provision of nutrition services should be published; • In order to obviate disruption of services at correctional centres and out of sheer necessity, that contract be extended for minimum period that it would take to advertise, consider, adjudicate and award the tender for provision of nutritional services
BID ADJUDICATION COMMITTEE PROCESS • Negotiation Team mandated to explore contract extension of 6-7 months with service provider who indicated since they had already prepared for expiry of contract in relation to employees, contracts for perishables & alternative contracts, 6 month extension was not feasible & could not be considered. • Options of 12, 18 & 24 months extensions proposed by Service Provider – Negotiation team mandated to explore only 12 & 18 month options.
BID ADJUDICATION COMMITTEE PROCESS • Further legal opinions were sourced on 28 January 2012 by National Commissioner, leading to further deliberation on 30 & 31 January 2012. • One considered use of Treasury Regulation 16A6.4 which is designed to enable emergency procurement, and advised that DCS can proceed to negotiate with service provider for extension of contract for a reasonable time taking into account all the issues raised in submission, and for DCS to use the extended period to engage in an open tender process as stipulated by the PFMA. • Second considered use of Treasury Regulation 16A6.4 and advised that DCS could consider use of this provision. NBAC disregarded this advice
BID ADJUDICATION COMMITTEE PROCESS • Cost of extended contract for 11 months for Waterval is estimated to be R46,990,715.61 • Cost of extended contract for 12 months for 7 Management Areas is estimated to be R410,778,704.78 • Nutritional services is fully budgeted for over the MTEF. • National Bid Adjudication Committee and Accounting Officer were faced with the dilemma of either approving extension of contract or facing the consequences within correctional centres of the discontinuity of food services to inmates, which could easily have resulted in riots in centres
BID ADJUDICATION COMMITTEE DECISION National Bid Adjudication Committee decision in 3 parts: • Contract HK 5/2006 & HK 14/2008 extended by 11 months & 12 months respectively so that both contracts expire on 31 January 2013. • Immediate work to be initiated to develop specifications for new short term tender on nutrition services Potential bidders would be invited to tender such that DCS can award tenders to specific service providers for specific management area & not for all management areas to avoid monopoly and cover necessary time (judged to be 18 months from end of January 2012) for preparation of DCS for final decision making. • Project to be established with appropriate project plan, & appropriate governance Project Plan to cover appropriate budgeting, infrastructural issues in kitchens & cooler rooms; procurement & management of assets covering pots, kitchen equipment & vehicles; approval of appropriate post establishments with appropriate specialist staff; recruitment of necessary staff; training of such staff; procurement of perishables – either through self-sufficiency or external procurement
DECISIONS BY EXEC MANAGEMENT CTTEE 2012-02-13 • EMC meeting convened by Minister on 2012-02-13 noted that Contracts HK 5/2006 & HK 14/2008 have been extended by 11 months & 12 months respectively so that both contracts expire on 31 January 2013 and decided: • Policy directive of Minister that nutrition services will be insourced was re-affirmed. Executive Management is bound by policy directive - there shall be no further debate amongst managers about need to deliberate on outsourcing versus insourcing of nutrition services. • Furthermore timeline for nutrition services to be insourced by end of January 2013. Therefore there will be no work initiated to develop specifications for new short term tender on nutrition to cover additional 6 month period after expiry of current contracts. Readiness for insourcing of nutrition services will be completed within time period of extension of the current contracts. • CDC Development and Care will take steps to initiate registered project with appropriate project plan, with timeline of one year & with appropriate governance structures.
DECISIONS BY EXEC MANAGEMENT CTTEE 2012-02-13 CONT’D • Nutrition Services Project Steer Committee should be convened by CDC Development and Care, & consist of CDC Corrections, CDC Corporate Services, RC ECape, Gauteng, KZN, and WCape. • Must be dedicated project manager appointed with appropriate competency to manage development & implementation of project plan. • Project Plan must have appropriate work streams to cover: appropriate budgeting; infrastructural issues in kitchens & cooler rooms; procurement & management of assets covering pots, kitchen equipment & vehicles; approval of appropriate post establishment with appropriate specialist staff; recruitment of necessary staff; training of such staff; procurement of perishables – either through self-sufficiency or external procurement. • There is no need for feasibility study to be procured, as development of the project plan will address issues of how to operationalise policy decision. Dedicated project manager should be someone who has competencies to develop appropriate project plan that will ensure operationalising of policy decision. • Above process will be overseen personally by National Commissioner and his office. Accounting Officer will provide Portfolio Committee with monthly one pager status report on management of these two processes until nutrition services is fully insourced.
ACTION BY ACCOUNTING OFFICER • Investigation initiated into management of nutrition services in DCS since 2010, covering amongst other things: • Management of expiry of HK5/2006 Waterval Contract; provision of services in that Management Area between expiry of contract & date of NBAC decision on extension of contract; misleading of NBAC re expiry date of contract; • Management of expiry of contract HK14/2008 that resulted in decision by NBAC being made in last month of contract that militated against consideration of various preferable options; • Management of preparation for insourcing of nutrition services in DCS from receipt of Feasibility Study in June 2010 to end of Jan 2012 • Purpose of investigation: to determine any possible managerial failures, any possible system failures, any possible misconduct, to enable DCS to avoid such situations in future. Where appropriate, action will be taken against officials who are implicated.
THANK YOU A YEAR OF ACTION TO ENSURE THAT ALL PEOPLE IN SOUTH AFRICA ARE AND FEEL SAFE