Presentation to Select Committee on Finance on the PPPF Act

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Presentation toSelect Committee on Financeon
the PPPF Act
September 2003
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• Presentation byPeter Silbernagl
• Immediate Past President
• South African Association of Consulting Engineers

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Greetings and apologies

• SAACE President Dempsey Naidoo
• President Elect Craig Clarke
• Vice-President Althea Povey
• Vice-President Elect Webster Ndodana
• Executive Director Graham Pirie

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What is this presentation about?

• Background to SAACE and Civil Engineering
• Brief comment on PPPFA
• Procurement of Professional Services

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South African Association of Consulting
Engineers(SAACE)

• 51 years old
• 420 firms are members
• employing over 11 000 staff
• Gross fees earned gt R4.0 billion/year

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SAACE

• Provide intellectual technology-based services in
  built, natural human environment to clients for
  a fee
• We are not builders or contractors
• We plan, design, advise, study and report,
  supervise and train, mainly in the construction
  and building industry

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Some historical perspectives

• Gross fixed Capital formation
• Employment trends

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• Black representation in Civil Engineering and
  Consulting Engineering
• Registrations with ECSA (Engineering Council of
  South Africa), a statutory body formed in terms
  of the Engineering Professions Act (Act 46 of
  2000)

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ECSA registrations 1 April 2003 (Civil
Engineering)
PrEng Eng-in-T PrTech Tech-in-T Black
male female 2.8 23.8 9.4 62,1 White male
female 97,2 76,2 90,6 37,9 Total
(no.) 5987 676 393 169

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Professional Engineers as registered with ECSA in
the civil engineering discipline
Total number of engineers
HDI
7000
252 of 6824
266 of 6575
163 of 6625
6500
265 of 6447
277 of 5987
6000
Number
5500
5000
4500
4000
Jun-00
Dec-96
Jun-97
Jun-98
Jun-99
Jun-01
Jun-02
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
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New registrations Professional Engineers (Civil)
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New registrations Candidate Engineers (Civil)
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Response byConsulting Engineers
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SAACE Management Information Survey - Dec 2002

Partner/ PrEng/ Director Associate Tech Black
12 12 5 White 88 88 95 Total
(no.) 1156 612 521
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Education and training efforts by Consulting
Engineers

• R35 million p.a. on training education
• 700 bursaries to Black students
• Ongoing social responsibility programmes, e.g.
  assistance at schools

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That was the background
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Brief comments on PPPF Act
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Detailed comments provided in written submissions

• SAACE (South African Association of Consulting
  Engineers)per Mr Len Dekker
• SAICE (South African Institution of Civil
  Engineering)per Mr Alain Jacquet
• CIDB (Construction Industry Development
  Board)per Mr Malcolm Rautz

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Four aspects need detailed comment

• Procurement by tender only
• Tariff-based fees
• Promotion of gender
• Promotion of Black professionals

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Brief comment

• In general, good piece of legislation
• Serves as a good framework, needs refinement-
  harmonize regulations with Act- harmonize Act
  with Constitution

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Brief comment

• Framework interpreted loosely by organs of state,
  esp. local authorities
• Current procurement systems outside the PPPFA and
  also Constitution e.g. set asides
• Current procurement systems lead to fronting and
  destruction of capacity and expertise

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Brief comment

• PPPF Act recognises need to encourage
  participation by black people and women in
  procurement very much needed in construction
  and consulting engineering
• PPPF Act can be tailored to promote participation
  by black professionals in professional practices
• ? need to tighten up Act and regulations

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Procurement by tender only

• Constitution and PPPF Act fair , equitable,
  transparent, competitive and cost-effective
• No requirement for tenders
• Lowest price ? cost effective
• Competitive e.g. proposal with social
  benefits or least environmental damage could be
  most competitive
• ? Tenders are an option, but not obligatory or
  always desirable

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Green Paper on Public Sector Reform, 1997 (from
Ministries of Finance Public Works)

• The calling for open tenders under all
  circumstances, even for routine assignments, is
  neither in an organ of States, nor the
  consultants interests. Apart from an organ of
  States costs in preparing and adjudicating such
  tenders and and consultants costs in submitting
  tenders, such practices will favour the
  established large consultancies who have greater
  capacity to absorb the costs.

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• Medium and small companies and, in particular,
  emerging consultants, are at a distinct
  disadvantage. Elaborate and complex adjudication
  systems are required for the satisfactory
  adjudication of tenders for consulting services.

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• A major problem with competitive tendering
  relates to the definition of the scope of
  services to be performed. Consultants cannot
  price their services if these are ill defined.
  In research and development, policy formulation,
  human resource development, community-based
  developments and the like, the scope of services
  can seldom be well defined prior to the
  commencement of the project or commission.

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• For engineering and construction projects, life
  cycle costs are most critical and are largely
  dependent on design quality. Any potential
  saving in the design fee would form only a
  miniscule portion of the life cost of the project
  and should not be allowed to jeopardise the best
  value for money option on the project as a whole.

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USA Brooks Act

• Federal Government and 44 of 50 states
• illegal to procure professional services by means
  of tender
• essentially quality-based

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Tenders appropriate

• Well defined brief and scope quality major
  criterion
• Larger projects
• Client capacity to manage
• Routine work
• Always use quality as major criterion

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Tariff-based appointments

• PPPFA regulation provision for pre-determined
  tariff-based professional appointments
• Engineering Professions Act Public health and
  safety and the general public interest

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Tariff-based appointments

• Small projects
• Difficult to define
• Client capacity
• Complex or specialist
• Client protection and guide
• Quality based criteria

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Procurement in the Construction Industry, esp.
Consulting Engineering

• CIDB Formed to develop and transform
  construction industry in South Africa
• SAACE Guidelines for the Engagement of
  Consulting Engineers
• FIDIC International Federation of Consulting
  Engineers (67 member countries)
• World Bank Procurement guidelines

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Procurement in the Construction Industry, esp.
Consulting Engineering

• CIDB suite e.g. Practice Guide 12
  Preferential Procurement in the Construction
  Industry
• - Practice Guide B2 Methods and
  procedures for implementing preferential
  procurement policies
• - Standard Rules for Public Procurement

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Way forward

• Engage further with recognised institutions
  (SAACE and others) and statutory bodies (ECSA and
  CIDB)
• Harmonize PPPF Act and regulations with
  Constitution and BEE strategy

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Thank you for your attention