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Briefing on the operation and management of Public Private Partnerships (PPP)

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SCOPE

1. Introduction2. Fundamental principles3. Parties to the concession contract4. Current status5. Scope of operations6. Risk profile7. Management of operations8. Budget9. Challenges

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1. INTRODUCTION

The two PPP Correctional Centres were opened in 2001 & 2002 respectively.

The main rationale behind the initiative was to improve on the cost effectiveness of the correctional system by making additional accommodation available, more quicker and flexibly than would otherwise be possible.

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2. FUNDAMENTAL PRINCIPLES

Value for money:

Accomplished by significant risk transfer and quality of

services that are procured.

Risk transfer:

Design

Construction

Maintenance

Funding

Affordability

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3. PARTIES TO THE CONTRACT

MANGAUNG PPP CENTRE

LENDERSInvestec Bank LtdABSA Bank Ltd

BLOEMFONTEINPRISONFINANCETRUST

RSAGOVERNMENT

BLOEMFONTEINCORRECTIONAL

CONTRACTS(Pty) LTD

SHAREHOLDERS•Old Mutual (20%)•G4s (20%)•10 Alliance Mangaung (20%)•Fikile Mangaung (20%)•Ikhwesi Community Trust (20%)

25 year custodialservices

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3. PARTIES TO THE CONTRACT

KUTAMA-SINTHUMULE CENTRE

LENDERSFirst Rand Bank LtdBOE Merchant Bank

SOUTH AFRICANCUSTODIALSERVICES

SECURITY TRUST

RSAGOVERNMENT

SOUTH AFRICANCUSTODIALSERVICES(Pty) LTD

SHAREHOLDERS

•South African Custodial Management•Kensani Corrections (50%)

25 year custodialservices

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4. CURRENT STATUS Mangaung Correctional Centre•Contractor : G4S( previously GSL)•Date opened: 01 July 2001•Certified normal accommodation : 2928•Population: 2928•Type of Correctional Centre: Maximum•Contractual period: 25 years

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4. CURRENT Status( Cont)

Kutama-Sintumule Correctional Centre

•Contractor: SACM•Date opened: 01 March 2002•Certified normal accommodation: 3024•Population: 3024•Type of Correctional Centre: Maximum•Contractual period: 25 years

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5.SCOPE OF OPERATIONS

Schedule A, B, C

Construction

Equipment( quality & quantity)

MaintenanceSchedule D

Operational Specification

Goal 1: keep inmates in safe custody

Goal 2: maintaining order, control, discipline and safe

environment.

Goal 3: providing decent conditions and meeting inmates’

needs.

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5.SCOPE OF OPERATIONS (continue)

Goal 4: providing structured day programmeGoal 5: preparing inmates for their return back to the

communityGoal 6: delivering prison servicesGoal 7: community involvement

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6. RISK PROFILE

• Design and constructionDelays in construction- no payment until completedFailure to provide facility as specifiedCost overruns on construction

• MaintenanceFacility not properly maintained Costs related to maintenance more than anticipated

• Operations Contractor fails to meet performance standards

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6. Risk Profile ( cont)

• Insurance– Insurance against third parties

• Availability of bed spaces– Less available places than contractually specified DCS pays only for

available spaces• Technology changes

– Improvement in technology which reduces the operational costs DCS secures reduction in contract fee.

• Financial– Increase in the CPI increases contractor fees

• Residual Value– Facility reverts back to DCS but has a designed life of 50 years

• Staffing– Contractor solely responsible for Human Resources matters

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DIRECTORATE CONTRACT MANAGEMENT

DEPUTY DIRECTORCONTRACT INFORMATION

PROVISION(VACANT)

DEPUTY DIRECTORCONTRACT POLICY

FORMULATION(MJ KOTO)

DIRECTORCONTRACT MANAGEMENT

(MJ MAAKO)

DEPUTY DIRECTORCONTRACT COMPLIANCE

(JDE BASSON)

7. MANAGEMENT OF OPERATIONS

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7.1. QUALITY & QUANTITY CONTROL OF SERVICES

Governed by contract (concession & direct agreement)

between the two parties.

Contracted operators to function independently.

DCS Contract Management Directorate to act as a

regulatory body that must manage the contracts and

ensure that inspections and audits are performed regularly

at the two PPP Correctional Centres.

Regional Commissioners to have oversight function on

the management of the two centres.

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7.2. MONITORING

Correctional Services ControllerMonitors operationsMonitors empowerment related issues of contract

Supervisory Committee:To rule on the merits of the notices of breach and the extent of penaltiesTo undertake the annual review

Inspectorate, Audit & Auditor–General’s OfficeTo conduct inspections and audits on the two Correctional Centres

Judicial InspectorateTo facilitate the inspection of the Correctional Centres & report on the treatment of inmates in prisons and on conditions and any corrupt or dishonest practices.

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7.2. Monitoring (cont)

• Directorate Contract ManagementTo monitor contract compliance( operations & empowerment)

To conduct site visits

To attend to operational and empowerment meetings with contractors

To attend quarterly meetings with Corrections & Contractors

• Penalties– Fixed penalties= 0– Variable penalties= 0

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8. BUDGET ACTIVITY: PPP CORRECTIONAL CENTRES: FINANCIAL YEAR 2009/2010Goods & Services

Indexed fee = R 566 459 700,00Payment on Capital Assets

Fixed fee = R 194 734 273,00

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9. CHALLENGES

Gang fightsHunger strikesRe-classification of inmatesRequests for transfersProvision of ARV’sMedical releases

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Business Unusual: all hands on deck to detain, rehabilitate and

reintegrate offenders for a safer South Africa