Portfolio Committee on Public Works: DPW Turnaround

1. Portfolio Committee on Public Works:DPW Turnaround 9 June 2015 Mr M Govender – Head of BIU

2. PART A: BACKGROUND & CONTEXT Mr M Govender 9 June 2015

3. 1. BACKGROUND • DPW Key Mandate: custodian & manager of State’s immovable assets (under Minister of PW) => directly impacts efficiency and effectiveness of all client departments and service delivery. • Corruption, mismanagement and poor performance led to DPW failing to deliver on its mandate. • Turnaround Strategy (7 Year Business Improvement Plan) was launched Jan 2012 (Ownership with DPW). • Core of the strategy (2 pillars) => • Zero tolerance of fraud & corruption • Improving business (Property Management) • Prior attempts at change failed due to leadership instability and ineffective change management. 7 Year Plan to rebuild DPW

4. 1. BACKGROUND (Cont.) DPW Performance DPW audit PMTE audit 7 Year Plan to rebuild DPW

5. 1. BACKGROUND (Cont.) • In 2011, following adverse audit findings and the then new Minister’s engagements with the Departmentconfirmed that the department was in a dire state, with areas of dysfunction. • High levels of fraud and corruption was evident in the findings of the Special Investigation Unit and the Public Protector. • In November 2011, the Minister requested assistance from the Technical Assistance Unit (TAU) of National Treasury, to provide a rapid diagnostic on the state of affairs within the Department. • The report and findings presented in January 2012, comprehensively detailed problems of mismanagement and misalignment and pointed to the need for fundamental reorganisation, and immediate interventions to stabilise the Department. 7 Year Plan to rebuild DPW

6. 2. TAU’s DIAGNOSTIC FINDINGS Diagnostic findings assisted department to identify and set priorities for stabilisation actions . • Leadership instability - high rate of change of executive and administrative leadership. • Asset Management - Asset Register incomplete and inaccurate; • Prestige– poor planning and management; lacked policy, norms and standards. • Property and Facilities Management – state properties underutilised whilst private sector leasing-in expanding; below market rates for leased-out properties; over-expenditure on maintenance; maintenance backlog; aging properties; lack of professional property management skills; poor lease management systems; large number of bad debtors; and lack of client relations management. 7 Year Plan to rebuild DPW

7. 2. TAU’s DIAGNOSTIC FINDINGS (Cont.) • Construction Project Management – lack of professional and technical skills; cost and time over-runs; poor quality control; under spending and maintenance backlog. • Inner City Regeneration (ICR) – delays in the implementation; partnership not translated into action; and under spending. • EPWP– performing well although there was poor reporting and only 50% of the incentive grant was disbursed in 2010. • Corporate Services – key skills shortage; lack of systems and controls; ICT system not supporting the DPW core business; ineffective management reporting systems; ineffective internal auditing; inappropriate organisational structure; poor controls in SCM; overpriced tenders; and lack of HR plan. • Policy and Regulation – The Department is implementer and regulator => conflict of interest. 7 Year Plan to rebuild DPW

8. 3. STRATEGIC FOCUS • DPW role (MTSF & NDP) => job opportunities and jobs (EPWP) & infrastructure development. • Contribute towards other priorities (social, health, and security) => through accommodation provision. • Reconfigure strategic direction => • Projecting demand by establishing client needs • Address requirement for remedial attention: transparency, accountability, and oversight. • Business Improvement Unit (BIU) created => drive Organisational Review / Turnaround Strategy • initiated short-term stabilisation interventions. • 7 Yr Plan & Business Improvement Programme Three discrete phases: Stabilisation=>Efficiency=>Sustainability & Growth 7 Year Plan to rebuild DPW

9. 4. IMPLEMENTATION PLAN (Time Line) Launched separate projects under the Turnaround umbrella limited to the Stabilisation Phase, others will continue for several years. 7 Year Plan to rebuild DPW 9

10. 4. IMPLEMENTATION PLAN • Stabilisation– focused on immediate challenges. Stabilised areas, create the potential for more fundamental change => large efficiency gains. 2. Efficiency Enhancement – systematic improvements - redesign processes, systems and structural elements. Focus on key strategic areas to improve efficiencies and effectiveness 3 Operational Programmes: Property Management, DPW Business Improvement; and Transversal Business Improvement (PMTE & DPW) 3. Sustainability & Growth– policy review (refresh mandate of DPW family) – Public Works Act. Focus on sustainability & growth. 7 Year Plan to rebuild DPW

11. PART B:STABILISATION PHASE & ACHIEVEMENTS Mr M Govender 9 June 2015

12. 1. STABILISATION OF MANAGEMENT LEADERSHIP & REVIEW OF ORGANISATIONAL STRUCTURE • Key management positions filled: • Director-General, • Chief Financial Officer, • DDG: Corporate Services, • Acting DDG: Governance, Risk and Compliance, and • Acting Head: Property Management Trading Entity • The review of the organisational structure has been completed. • Separate DPW as regulator from PMTE as implementer • Re-model and professionalize our property business in order to optimally utilise our massive property portfolio productively • To improve service delivery in the context of Government’s priorities and to save costs to the Department and the fiscus 7 Year Plan to rebuild DPW

13. 13

14. 2. OPERATIONALISATION OF PMTE2.1 Timeline • In 1997, DPW White Paper – User charges • In 1999, Cabinet approved establishment State Property Agency • In 2002, a joint NT/ DPSA Technical Committee recommended a trading entity approach. • In 2006, NT approved PMTE (subject to specified conditions) • Budgets were devolved to user departments • PMTE => became vehicle to effect user charges on accommodation. • NT directive not fully complied with => 8 years under performance culminating in adverse audit findings, (2 consecutive disclaimers by AG largely due to failure to operationalize the PMTE). • In 2012 Minister launched Turnaround Strategy with the operationalization of PMTE at core of strategy. • In 2014Cabinet Approval => Phased Implementation Plan to establish PMTE as a Government Component. Operationalisation of the PMTE

15. 2. OPERATIONALISATION OF PMTE 2.2 Rationale & Focus • To improve service delivery in the context of Government’s priorities and to savecosts to the Department and the fiscusby: • Maintaining the value of Government’s assets • Improving access to and quality of Government’s assets • Optimal utilisation of State stock and move away from leasing-in • Utilise State’s vacant properties productively to create a funding stream for capital maintenance and improvements to extend the life-cycle of existing state properties; • To reclaimmandate of Public Works • develop small proclaimed and unproclaimed harbours • develop Government precincts in small towns and rural areas • safeguarding the State’s assets from vandalism, theft and invasion • reclaiming all misappropriated State land • preserve Government assets, structures, building, land parcels Operationalisation of the PMTE

16. 2. OPERATIONALISATION OF PMTE2.3 Progress - National Treasury Conditions • Operate a separate and complete GRAP-compliant set of accounts – ACHIEVED • Effective financial controls in place – ACHIEVED • Policy and reporting framework in place to track both commitments and cash flow – ACHIEVED • All people and institutional arrangements in place – ACHIEVED 2014 (2015 REVEIW IN PROCESS) • Draft Delegations developed and responsibilities of the departmental key account managers specified – ACHIEVED 2014 (2015 REVEIW IN PROCESS) • DPW must seek approval from National Treasury to establish a Property Management Trading Entity. The PMTE must comply with all the conditions for trading entities contained in Treasury Regulation 19. - ACHIEVED Operationalisation of the PMTE

17. 2. OPERATIONALISATION OF PMTE2.4 Progress - organisational • Acting Head of PMTE & key property management specialists appointed to drive the full operationalization of the PMTE. • Functions and immovable assets were transferred from DPW to PMTE • PMTE Account, moved from a disclaimed to a qualified opinion. • The PMTE business model developed to address the AG’s issues. • PMTE budget programme structure developed with National Treasury • The PMTE SP and APP developed in with DPME, NT, DPSA and Public Service Commission and tabled in Parliament (March 2015). • Business Case for establishing PMTE as Government Component developed and endorsed by Cabinet in August 2014. • PMTE structure developed with DPSA 7 Year Plan to rebuild DPW

18. 3. IMMOVABLE ASSET REGISTER • State assets (land parcels) estimated at approx. 1, 2-million. (+/- 980 000 municipal, 125 000 provincial and 33 000 national). • Lack of clarity on the nature & extent of assets due to magnitude, extent and complexity • Need for mechanism to determine extent => comprehensive / holistic overview to reflect appropriately on the balance sheet of the SA. • Background: • 1995 - 1999, compiled computer-based inventory of immovable assets (national & provincial custodians) • 2005 - 2008 = Enhancement Programme on the identified 33 555 propertiesto address identified gaps • 17 May 2006 = Cabinet approved general land audit (DPW; Agriculture & Land Affairs; Provincial & Local Government; and Public Enterprises) • December 2007 => conduct physical verification, • 2009= put on hold => to verify the authenticity of data. 7 Year Plan to rebuild DPW

19. 3. IMMOVABLE ASSET REGISTER • 2011 Turnaround launched =>IAR Programme (2011-2013) • Focused on the completeness of land parcels. • Moved from a disclaimer to qualification for immovable assets for 2012/13 (Qualification on valuation of immovable assets). • The IAR progressed from modified cash to accrual basis of accounting (GRAP) • Progress • Physical verification commenced in October 2013 => completed end of fin year 2014/15. • To date => verified 99.1% of the properties that were identified in July 2013 (Verification excluded Defence (verified by CSIR). • 37,012 (including deemed Provincial) properties • 6,567 State Domestic Facilities • DPW applied municipal values on approximately 66% of DPW’s immovable assets in 2013/14 - 14/15 • Vested 16,161 of 33 000 (finalise by 31 March 2016). 7 Year Plan to rebuild DPW

20. 4. REAL ESTATE AND FACILITIES MANAGEMENT • Lack of lease-in management systems contributed significantly towards: negative audit outcomes / fraud & corruption. • Stabilisation Intervention focussed on audit of lease-ins and the reengineering of the lease-in business process. • Progress: Real Estate Management • Review of 2,162 office leases has been completed • Physical verification of occupancy and size of 2,143 leased buildings. • NT approved dispensation on renewal for leases that have expired. • As at April 2015, 1455 (92%) out of 1566 leases renewed with fixed 5.5% escalation rate => approx. saving of R33 million p/a • Of 112 NDPW “unoccupied but paid for” were investigated, 41 resolved and 71 handed to the SIU for forensic investigation. • Of 29 “occupied by other” properties, 6 have been resolved and 23 referred for forensic investigation. 7 Year Plan to rebuild DPW

21. 4. REAL ESTATE AND FACILITIES MANAGEMENT • Progress: Real Estate Management (Continued) • Realigned Business Processes => payment of invoices within 30 days • Verification of 10,590 freehold properties for payment of rates & taxes • Verification of 7,700 freehold properties for payments of services • Lease Policy developed • Transferred assets to the PMTE: • 71 397 state owned structures that are leased out to 29 User Departments; • 1840 state owned structures that are privately leased out with 2 294 tenants; • 695 state owned prestige buildings leased out to 1062 prestige clients; • 2671 active leasehold portfolio 7 Year Plan to rebuild DPW

22. 4. REAL ESTATE AND FACILITIES MANAGEMENT • Facilities Management => State’s property portfolio underutilised and neglected => numerous properties vacant, susceptible to theft, vandalism, vagrants, illegal occupation. (Services & security still paid) • PMTE delivery model and associated plans (SP/APP) developed to: • Project demand accurately by establishing client needs => Client Centric Approach • Optimally utilise our property portfolio productively to create funding streams for capital & planned maintenance programmes. • Progress • Worx4You – Single entry contact centre 24/7 (365) internally established (In-house)for Facilities/Prestige/ICT - trained 34 gradates • Needs assessments of key / identified buildings conducted • Cost analyses for key buildings conducted • Pilot energy & water saving initiatives • 50 public buildings retrofitted with energy efficiency technology +/- 672 mil Kwh saved since 2011 • 12 retrofitted with water efficiency technology +/- 7.5 mil kl saved 7 Year Plan to rebuild DPW

23. 5. CONSTRUCTION PROJECT MANAGEMENT • Building technical and professional capacity in construction project management was at the centre of the stabilisation intervention. • 48 professional and technical positions were filled in the 2013/14 • As part of this capacity building programme: • contracts of 50 young professionals were extended, • 11 were absorbed into permanent positions, • 4 mentors were appointed to provide mentorship, and • 148 Water Care personnel were appointed. • With ‘growing our own’ intervention, DPW is running a Schools Programme supporting 10,000 learners for Maths and Science, and • Awarded 182 bursaries to students registered for tertiary level built environment courses. 7 Year Plan to rebuild DPW

24. 6. CLEAN AUDIT Key objectives: • To assist the Department with: • Enhancement of the Financial Management function for both the NDPW (main account) and PMTE to improve audit outcomes • Enhancement of the Supply Chain Management function • Analysis of the challenges in delivering infrastructure projects • Development & implementation of change management strategy • Implementation of a skills transfer programme for existing staff – no unilateral delivering of outcomes (comprehensive involvement of staff in all deliverables) • To appoint unemployed graduates to assist with the implementation of this project. A clearly structured skills development plan for these unemployed graduates must be in place 7 Year Plan to rebuild DPW

25. 6. CLEAN AUDIT Our Approach: Cycle 1 Cycle 2 Cycle 3 Planning & Set up 165 133 82 As-is To-Be Consortium design & implement Policies & Procedures Quality Control Protect-A- Partner Guidelines & Checklist Road Shows Quality Control Consortium Consortium implement On-the-job training DPW Staff Implement Hand over Quality Control Internal audit DPW Staff Implement Consortium Technical guidance 7 Year Plan to rebuild DPW 25

26. 6. CLEAN AUDIT6.1 Audit Outcome baseline 27

27. 6. CLEAN AUDIT6.2 Audit Outcome 2013 28

28. 6. CLEAN AUDIT6.4 Audit Outcome 2014 29

29. 7. FIGHTING FRAUD AND CORRUPTION • The Department has revised and adopted an Anti-Fraud and Corruption Strategy. • Internal investigation backlog of 250 cases has been reduced significantly and investigations are currently instituted within 30 days of receipt of allegations. • Progress • To date => GRC received 296 allegations (39 in 2014/15), • 190 have been completed, • 67 at various stages of investigation, • 39 were referred to other Business Unit/ SIU / SAP • Emanating from investigations, • 156 disciplinary actions were recommended (100 finalised) • Sanctions issued ranges from dismissals, final written warnings, written warnings etc. 7 Year Plan to rebuild DPW

30. 7. FIGHTING FRAUD AND CORRUPTION • To date 121 fraud awareness presentations conducted within DPW • Comprehensive Fraud Risk Assessment 2014/15 • identify, assess, and rate high fraud risks i.t.o. likelihood & impact • to incorporate in Fraud Prevention Plan. • Branches incorporated fraud risk mitigation plans in Business Plans • Implementation of the pilot phase of the Infrastructure Transparency Delivery Model. => roll-out July 2015. • Re-launching OBB (Operation Bring Back). Reclaiming State properties misappropriated or unlawfully occupied • Internal OBB programme to investigate and possibly recover properties: • disposed to other state custodians, private individuals, companies • transferred incorrectly/ unlawfully, • occupied unlawfully or encroached • sold at below market value where not donated for valid reasons. 7 Year Plan to rebuild DPW

31. 8. SCM • SCM Policy aligned with the current procurement regulatory framework • Training on policy conducted across the entire DPW family. • New SCM structure developed to align with core business areas of DPW • SCM operational processes have been reviewed and improvements have been effected in the following areas: • An acquisition framework for both bid administration and quotations have been developed with checklists, templates, registers, etc. to ensure compliance and proper audit trail of SCM processes • Procedures for the registration of suppliers and management of the DPW’s supplier database enhanced. • Procurement aligned and executed in accordance with the DPW’s procurement plan. • Concept of a War Room to track progress of tenders to prevent under-expenditure and improve on service delivery, introduced. 7 Year Plan to rebuild DPW

32. 9. EPWP • EPWP Phase 2 closed out, and planning for implementation for Phase 3 has been completed to give effect to the manifesto commitment to create 6 million work opportunities by 2019. • In November 2013, Cabinet approved the continuation of EPWP into Phase III with a target of creating 6 million work opportunities and commenced on the 1st of April 2014. • The revised Grant disbursement processes have improved Grant disbursement from 50% to 100% in 2012/13 and 2013/14. • Third phase of EPWP has already created 1.24 mill work opportunities against targeted 1,04 mill in first year of Phase III • Over achieved by approx. 120% 7 Year Plan in first year.

33. 10. ICR • In collaboration with the City of Tshwane, the Master Plan for Tshwane Inner City has been completed and provides for the creation of 4 Precincts; • Seventeen (17) departments have been prioritised with high level needs. • Land parcels for development have been identified, and engagements with NT on funding models are being developed • As at February 2015, the Development Framework for Salvokop was completed and the Township Establishment application was submitted for approval. • The vision is to establish 6 – 9 head offices on Salvokop. A consent use for StatsSA Head Office on Salvokop was approved and the building of project is progressing well. 7 Year Plan to rebuild DPW

34. 11. PRESTIGE • Prestige portfolio approx. 250 assets in Western Cape, KZN and Gauteng, (including: Parliamentary Estates, Parliament Precinct, Union Buildings and executive housing). • Key clients include: Presidency, Judiciary (Chief & Deputy Chief Justice), Ministers, Deputy Ministers, DGs (in Cape Town only) • Progress • Management Board established to oversee parliamentary villages. • Prestige services centralised in the Office of Director- General • Prestige structure approved • Norms and Standards developed for consideration by Cabinet. • Backlog on provision of furniture has been significantly reduced • Turnaround times on provision of furniture has been improved 7 Year Plan to rebuild DPW

35. 12. 2012/13 EXPENDITURE REPORT 7 Year Plan to rebuild DPW

36. 12. 2013/14 EXPENDITURE REPORT 7 Year Plan to rebuild DPW

37. 12. 2014/15 EXPENDITURE REPORT 7 Year Plan to rebuild DPW

38. PART C:FUTURE – TURNAROUND PLANPHASE 2 EFFICIENCY ENHANCEMENT Mr M Govender 9 June 2015

39. TURNAROUND IMPLEMENTATION PLAN Phase 2: Efficiency Enhancement has been designed to include the 7 key areas identified as priorities for PMTE & DPW

40. TURNAROUND IMPLEMENTATION PLAN • Turnaround for second phase – Efficiency Enhancement - 2015/16 to 2017/18, to fast track efficiencies within the PMTE / DPW. • Projects will be funded from funding mechanisms within PMTE for a period of three (3) years. • Bulk of projects are specific to areas within the PMTE where improvement in service delivery is critical to the overall Turnaround • The following plans detail the respective project objectives, outputs, outcomes, and the cost associated with the interventions. • The Efficiency Enhancement Business Case and the comprehensive Turnaround plan is yet to be submitted to National Treasury. Once done – we will circulate it to Portfolio Committee. 7 Year Plan to rebuild DPW

41. TURNAROUND IMPLEMENTATION PLAN SUMMARY • Project 1: Establishment of the Turnaround PMO; • Project 2: Water Management; • Project 3: Small Town Precinct Development; • Project 4: Property rates and municipal services in arrears; • Project 5: Immovable Asset Register; • Project 6: Energy and Water efficiency monitoring &verification; • Project 7: Asset Management System Development; • Project 8: Small Harbours Unit: • Project 9: Public Private Partnership Office; • Project 10: Project “P” Project Office; • Project 11: Fight against fraud and corruption: • Project 12: Development and implementation SDMF; and • Project 13: Efficiency enhancement intervention towards a Clean Audit 7 Year Plan to rebuild DPW

42. TURNAROUND BUDGET 7 Year Plan to rebuild DPW

43. PROJECT 1: Turnaround Project Management Office 7 Year Plan to rebuild DPW

44. PROJECT 1: Turnaround Project Management Office (Cont..) 7 Year Plan to rebuild DPW

45. PROJECT 2: Water Management 7 Year Plan to rebuild DPW

46. PROJECT 3: Small Town Precinct Development 7 Year Plan to rebuild DPW

47. PROJECT 4:Property Rates and Municipal Services in Arrears 7 Year Plan to rebuild DPW

48. PROJECT 5:Immovable Asset Register 7 Year Plan to rebuild DPW

49. PROJECT 6:Energy and Water efficiency monitoring &verification 7 Year Plan to rebuild DPW

50. PROJECT 7:Asset Management System Development 7 Year Plan to rebuild DPW