SUPPLY CHAIN MANAGEMENT POLICY - Msunduzi

MSUNDUZIMSUNDUZIM U N I C I P A L I T Y

SUPPLY CHAINSUPPLY CHAIN MANAGEMENTMANAGEMENT

POLICYPOLICY

27 October 2005FINAL

INDEXINDEX PAGEPAGEPolicy Statement 1Introduction .................................................................................................................................. 2

Legislative Framework and Objectives ...................................................................................... 2

Policy ............................................................................................................................................ 3New Partnership for Africa’s Development (NEPAD) ..................................................................... 4Competition Law ............................................................................................................................ 5The National Small Business Act ................................................................................................... 5Anticorruption Measures and Practices ......................................................................................... 6Trade Policy ………...........................................................................................................................6Labour Issues ............................................................................................................................6Safety, Health and Environment .................................................................................................... 7Public/Private Partnerships ........................................................................................................... 7 Broad-based Black Economic Empowerment ................................................................................. 7Proudly South African .................................................................................................................... 8Information Technology .................................................................................................................. 8National Industrial Participation Programme .................................................................................. 8 Supply Chain Management System ........................................................................................... 9

1. Demand Management .............................................................................................. 91.1 Preferential Procurement ................................................................................ 9

1.1.2 Regulations............................................................................................. 91.1.3 General Conditions and Principles........................................................ 101.1.4 The 80/20 Preferential Point System..................................................... 101.1.5 The 90/10 Preferential Point System...................................................... 12 1.1.6 Small Professional Services Development Programme – Masithuthuke . 141.1.7 Eyethu ……..............................................................................................151.1.8 Masiphakamisane....................................................................................15

1.2 Specifications .................................................................................................. 161.3 Analyses ....................................................................................................... 16

2. Acquisition Management ........................................................................................ 16

2.1 Value and Strategy .......................................................................................... 172.2 Authorisations...................................................................................................172.3 Urgent and Emergency Acquisition ................................................................. 182.4 Verbal Quotations..............................................................................................182.5 Data Base of Accredited Prospective Providers .............................................. 182.6 Written Price Quotations ................................................................................. 192.7 Competitive Bids ............................................................................................. 192.8 Committee System for Competitive Bids ......................................................... 192.9 Unsolicited Bids.................................................................................................202.10 Appointment of Advisors .................................................................................. 202.11 Competitive Bid Documentation ..................................................................... 20 2.12 Advertising Bids ............................................................................................... 212.13 Bidder Submission Requirements ................................................................... 212.14 Submission Requirements for transactions greater than R10m....................... 222.15 Receiving Bids ................................................................................................ 222.16 Handling, Opening and Recording Bids .......................................................... 232.17 Adjudication Criteria ........................................................................................ 232.18 Disqualification Criteria......................................................................................232.19 Preferences...................................................................................................... 242.20 Target Groups.................................................................................................. 242.21 Negotiations .................................................................................................... 242.22 Two Stage Bidding .......................................................................................... 252.23 Single Source ...................................................................................................25

INDEX cont.INDEX cont. PAGEPAGE

2.24 Sole Source.......................................................................................................252.25 Award of Contracts .......................................................................................... 252.26 Prohibitions on awards .................................................................................... 262.27 Awards to close family members of persons in the service of the state............26

3. Logistics Management ............................................................................................ 263.1 Stock Levels .................................................................................................... 263.2 Placing Orders ................................................................................................. 263.3 Supplier Performance ...................................................................................... 273.4 Warehouse Management ................................................................................ 27

4. Disposal Management ............................................................................................. 274.1 Adjudication of Disposals..............................................................................284.2 Special Disposals ............................................................................................ 28

5. Risk Management .................................................................................................... 295.1 Sureties ........................................................................................................... 295.2 Retention ....................................................................................................... 295.3 Payments ........................................................................................................ 305.4 Cessions.......................................................................................................... 305.5 Assignment.......................................................................................................305.6 Joint Ventures...................................................................................................305.7 Penalties ......................................................................................................... 305.8 Insurance ........................................................................................................ 305.9 Price Adjustments Due to Escalation ............................................................... 305.10 Escalation Due to ROE (Rate of Exchange) .................................................... 31

6. Supply Chain Performance ..................................................................................... 31

7. Codes of Conduct and Ethics ................................................................................ 317.1 General Principles ........................................................................................... 317.2 Conflict of Interest ........................................................................................... 327.3 Accountability .................................................................................................. 327.4 Openness ........................................................................................................ 327.5 Confidentiality .................................................................................................. 327.6 Bid Evaluation/Adjudication Teams ................................................................. 337.7 Combative Practices ...................................................................................... 33 7.8 Combating of Abuse of SCM policy.................................................................. 337.9 Inducement, rewards, gifts and favours............................................................ 347.10 Sponsorships................................................................................................... 347.11 Objections and Complaints............................................................................. 34 7.12 Objection/Appeal Fees....................................................................................34

8. Delegation of Supply Chain Management Powers and Duties ............................ 348.1 Delegations ..................................................................................................... 348.2 Sub Delegations .............................................................................................. 358.3 Prohibitions on Sub-delegations....................................................................... 358.4 Disputes........................................................................................................... 358.5 Role of Council ................................................................................................ 36

9. Targeted Construction Procurement ..................................................................... 3710. Consultants Appointments ..................................................................................... 3711. Public Private Partnerships .................................................................................... 3712. Definitions and Abbreviations ................................................................................ 37

Policy Statement

The Msunduzi Municipality, noting it’s Vision and Mission statement and in complying with the relevant legislation as indicated hereunder as “Legislative Framework and Objectives” undertakes to implement a Supply Chain Management Policy that:

· Achieves the objectives of the IDP· Sets out to achieve Economic Transformation· Sets the goal of implementing a Fair, Transparent and Equitable System of

Supply Chain Management.

Broad Objectives of Policy

48568.To guide the Municipality in the proper administration processes relating to the Acquisition of goods and services, Appointments of Professional Services providers and the Disposal of Municipality Assets.48569.To create a Supply Chain Management system that is simple and uniformly implemented throughout the Municipality.48570.To reduce the Financial Risk to the Municipality through proper Supply Chain Management Systems and Policy implementation thereby reducing wasteful , fruitless and unauthorised expenditure. 48571.To eliminate Fraud, Corruption and any other unethical practices and irregularities relating to Supply Chain activities.48572.To create conditions which are conducive to the Empowerment of Small, Medium and Micro- enterprises and the development of the “Third Economy” creating a link into the “First Economy”.48573.To promote Economic Transformation and the achievement of Economic Equity through measures designed by legislation to assist and/or promote Historically Previously Disadvantaged Individuals.48574.To achieve specific Economic Transformation goals or Targets as set by the Council of the Msunduzi Municipality and the Government of Republic of South Africa.

INTRODUCTIONINTRODUCTION

In terms of the Local Government: Municipal Finance Management Act and Regulations, each municipality must in terms of Section 110 implement a supply chain management policy that-(a) gives effect to-

(i) section 217 of the Constitution; and(ii) Part 1 of Chapter 11 and other applicable provisions of the Act;

(b) is fair, equitable, transparent competitive and cost effective;(c) complies with-

(i) the regulatory framework prescribed in chapter 2 of the Regulations; and

(ii) any minimum norms and standards that may be prescribed in terms of section 168 of the Act;(d) is consistent with other legislation

Amendment and Adoption of Supply Chain Management Policies

This draft policy document is tabled in terms of the Act and Regulations in response to the requirement that the Accounting Officer must promptly prepare and submit a draft supply chain management policy to the council of the Municipality for adoption.

The council of a municipality must delegate powers and duties to the Accounting Officer to enable the Accounting Officer to discharge the responsibilities conferred on the Accounting Officer and to build capacity.

Capacity building would include the establishment of supply chain management unit in the relevant CFO structures, the establishment of clear lines of authority and accountability and performance criteria for the minimizing of risk, quicker and more efficient sourcing and better asset and inventory management

LEGISLATIVE FRAMEWORK AND OBJECTIVESLEGISLATIVE FRAMEWORK AND OBJECTIVES

This policy reflects and represents government policy within the provisions of the Local Government: Municipal Finance Management Act of 2003 and other legislative prescripts which include:

The Constitution of the Republic of South Africa Act 108 of 1996;The Preferential Procurement Policy Framework Act 5 of 2000 and its associated regulations; andThe Broad-Based Black Economic Empowerment Act, 2003 (Act 53 of 2003) BBBEEA;Local Government: Municipal Finance Management Act, 2003: Municipal Supply chain Management Regulations

In response to the provisions of National Treasury’s guidelines, this policy will provide for at least the following systems:

1. Demand Management;2. Acquisition Management (including Contract and Contract Management);3. Logistic Management;4. Disposal Management;5. Risk Management and Regular Assessment of Supply Chain Management;6. Supply Chain Performance.

OBJECTIVES OF THE POLICY

The principal objective is to provide, promote and implement processes and procedures within the supply chain management system when:

Procuring goods or services;Disposing of goods no longer needed;Selecting contractors to provide assistance in the provision of municipal services otherwise that in circumstances where Chapter 8 of the Municipal Systems Act applies or;Selecting external mechanisms referred to in section 80 (1) (b) of the Municipal System Act for the provision of municipal services in circumstances contemplated in Section 83 of that Act;Appointing Consultants;Awarding contracts for Building and Construction in compliance with the Construction Industry Development Board Act.

This in turn provides a framework within which to further implement the provisions of section 217 of the Constitution and part 1 of Chapter 11 and other applicable provisions of the Act on order to:

create and promote consistency with other applicable legislation including PPPFA and BBBEEA;create a common understanding and interpretation of the Government’s Preferential Procurement Policy objectives.

POLICYPOLICY

Government’s supply chain policies and practices impact on a broad range of other policies and regulations and also influence the economic behaviour of people, both within and outside of the borders of the country. It is therefore imperative that procurement reform initiatives remain fully aligned with Government’s broader policy focus and accounting officers/authorities should be aware of the following:

The Msunduzi Municipality will therefore base their Supply Chain Policy on Government’s broader policy objectives and will be consistent with:

New Partnership for Africa’s Development (NEPAD)

The New Partnership for Africa’s Development is an initiative to accelerate a new relationship with the highly industrialized countries to overcome the widening development chasm between them and the African content.

A commitment is fostered on the part of governments, the private sector and other institutions of civil society towards the meaningful integration of all nations into the global economy. This requires the recognition of global interdependence in respect of production and demand, the protection of the environmental base that sustains the planet, reversal of the skills-loss from the continent and a global financial architecture that rewards good socio-economic management and global governance.African leaders will, amongst others, take joint responsibility for the following:

Restoring and maintaining macro-economic stability, especially by developing appropriate standards and targets for fiscal and monetary policies and introducing appropriate institutional policies to achieve these standards;Instituting transparent legal and regulatory policies for financial markets and auditing of private companies and the public sector;Promoting the role of women in social and economic development by reinforcing their capacity in the domains of education and training; by the development of revenue-generating activities through facilitating access to credit; and by assuring their participation in the political and economic life of African countries.

For each sector, however, the objective is to bridge existing gaps between Africa and the developed countries so as to improve the continent’s international competitiveness and to enable her to participate effectively in the global market.

South African supply chain management practices should thus aim to support the objectives of NEPAD by:

Being sensitive to possibilities for increasing production and improving the competitiveness and diversification of the domestic private sector, especially in the agro-industrial, mining and manufacturing sub-sectors, with potential for exports and employment creation;Promoting uniform standards;Harmonizing technical regulatory policies;Being sensitive to opportunities for the development of new industries, or upgrading of existing ones, where comparative advantages are prevalent, including agro-based industries and energy and mineral resource-based industries; Facilitating partnership through the development of mechanisms, such as joint business councils for information sharing between non-African and African firms and for facilitating processes towards the establishment of joint ventures and subcontracting arrangements.

Competition Law

Competitive business practices are regulated by the Competition Act 89 of 1998, which aim to outlaw:

Restrictive practices between businesses, or between businesses, their supplier(s) and customers, which hinder competition;Price-fixing, collusive tendering, restricting output and investment and market sharing; and the abuse of a dominant position (which, according to the Act, is defined as a market share of 35% or more; andMergers and acquisitions where it is deemed likely that the merger will prevent or reduce competition to a degree that will outweigh the benefits of the merger

The National Small Business Act

The National Small Business Act of 1996 establishes a National Small Business Council (NSBC) to:Represent and promote the interests of small business, with emphasis on those entities contemplated in the National Small Business Support Strategy; andAdvise the national, provincial and local spheres of government on social and economic policy that promotes the development of small business.The Act also establishes the Ntsika Enterprise Promotion Agency (Ntsika). The main functions of Ntsika are:To expand, co-ordinate and monitor the provision of training, advice, counselling and any other non-financial services to small business in accordance with the National Small Business Support Strategy;To provide financial support to service providers that provide the services to small business;To consult with any organ of government, the NSBC or a service provider in order to: –

Facilitate the provision of business advice and counselling services to small business;Facilitate access by small business to raw material and other products;Facilitate international and national market access for products and services of small business;Generally, strengthen the capacity of:

Service providers to support small business; andSmall business to compete successfully in the economy;

To formulate and co-ordinate a national programme of policy research, collection and dissemination of information concerning small business.

Anticorruption Measures and Practices

The Constitution provides for rights such as just administration and access to information and requires high standards of ethics within public administration. Acts passed in recent years relating to transparency and anti-corruption measures have enhanced the ability to combat corruption. It also protects

employees making disclosures against their employers in both the public and private sectors.

Legislation that is aimed at preventing corruption is:

Public Protector Act of 1998;Anti-corruption Act of 1994;Protected Disclosure Act of 2000;Promotion of Administrative Justice Act of 2000;andPromotion of Access of Information Act 2000Prevention and Combating of Corrupt Activities Act 12 of 2004

Trade Policy

South Africa’s offer to the World Trade Organisation (WTO) through its endorsement of the Marratech Agreement in 1995 consisted of a five year tariff reduction and rationalization programme. The only exceptions to the five year tariff rationalization programme were the clothing and textiles industry and automotive sectors that were granted 8 years to attain the levels made in the WTO offer.

Government’s commitment to trade liberalization should also be reflected in its supply chain practices, by not precluding foreign companies from bidding for government procurement contracts.

However, where justified, preference points may be awarded to further government’s preferential procurement policy objectives.

Labour Issues

Government subscribes to international best practice principles of equitable and fair labour practices. It is therefore incumbent upon accounting officers to ensure that suppliers/contractors comply with all provisions of national Labour Laws. To this extent, it is advisable for accounting officers/accounting authorities to:

Designate suppliers, service providers or contractors who abuse labour standards, as non-preferred suppliers;Ensuring that contracts in contractor development programmes be awarded to emerging contractors only after an independent party has verified that the sum tendered has the potential to meet minimum labour standards;Striving for a common wage order applicable to all engineering and construction works projects, which is flexible enough to accommodate payment on the basis of outputs in specific circumstances, in order to remove market distortions and enable bidders to bid on an equitable basis; andLinking employment equity to procurement contracts only in instances where it can be adequately defined, quantified, measured, verified, audited and be implemented in a manner in which companies of different sizes are treated equitably.

Safety, Health and Environment

Government is committed to the highest standards of safety, health and environment protection and promotes a culture of “non tolerance”. In this regard government promotes occupational health and safety for its employees and that of contractors’ employees performing work on site at any of the organs of State. Government subscribes and operates within the framework of all national and international legal requirements, including but not limited to the Occupational Health and Safety Act, Act 85 of 1993.

Public/Private/Partnerships

Whenever goods, works and/or services are procured by means of public private partnerships or part thereof, Treasury Regulation 16 should be adhered to.

Broad-Based Black Economic Empowerment Act

Objectives of ActThe objectives of this Act are to facilitate broad-based black economic empowerment by –

a) Promoting economic transformation in order to enable meaningful participation of black people in the economy;

b) Achieving a substantial change in the racial composition of ownership and management structures and in the skilled occupations of existing and new enterprises;

c) Increasing the extent to which communities, workers, cooperatives and other collective enterprises own and manage existing and new enterprises and increasing their access to economic activities, infrastructure and skills training;

d) Increasing the extent to which black women own and manage existing and new enterprises, and increasing their access to economic activities, infrastructure and skills training;

e) Promoting investment programmes that lead to broad-based and meaningful participation in the economy by black people in order to achieve sustainable development and general prosperity;

f) Empowering rural and local communities by enabling access to economic activities, land, infrastructure, ownership and skills; and

g) Promoting access to finance for black economic empowerment.

Interpretation of ActAny person applying this Act must interpret its provisions so as: -

a) To give effect to its objectives; andb) To comply with the Constitution.

Proudly South African

To showcase South Africa as an advanced manufacturing economy the Department of Trade and Industry has become a key sponsor and strategic partner of the “Proudly South Africa” campaign.

In terms of the campaign, South African companies are encouraged to submit interesting and innovative achievements in the manufacturing fields – new products, export achievements, new partnerships and successes and milestones.

The objectives of the campaign must be supported through the Governments SCM process, whenever the opportunity arises.

Information Technology

State Information Technology Agency (SITA) Act, (Act no. 88 of 1998, as amended by Act No 38 of 2002): The Act requires that SITA may act as the procurement agency for every department’s information technology requirements. This Act prescribes that all departments are compelled to procure all information and technology goods and services through SITA. The accountability remains with the accounting officer.

National Industrial Participation Programme

The Industrial Participation (IP) Policy, which was endorsed by Cabinet on 30 April 1997, is applicable to contracts that have an imported content . This programme is intended to enable the DTI to negotiate obligation agreements, such as investments, joint ventures, sub-contracting, licensee production, export promotion, sourcing arrangements, research and development collaboration, along with service providers that are contracted to supply institutions with goods, works or services that have imported content.

To this end, Accounting Officers are required to utilize the Standard Bidding Document for NIPP (SBD5) when inviting bids that are subject to IP obligations. Clearance must be obtained from the DTI prior to the award of any bid that has an imported content in excess of R10 million (ten million Rand).

SUPPLY CHAIN MANAGEMENT SYSTEMSUPPLY CHAIN MANAGEMENT SYSTEM

1.1. Demand ManagementDemand Management

Demand management will be conducted to ensure that goods and services are planned for in accordance with budget provisions and that municipal service delivery is assured and provided in the most cost effective and efficient manner.

An analysis of past expenditure, per vote, will be conducted to understand future needs and to more accurately forecast future requirements. The

Municipalities Integrated Development Plans, budgets and past expenditures will be used to determine and understand future needs.

Demand management is a cross functional exercise that includes Strategic Executive Managers, end users and SCM officials.

1.2 Preferential Procurement Strategies

The Bid Specification Committee (BSC) will be responsible for identifying specific goals and point allocations that may be awarded in terms of the Preferential Procurement Policy Framework Act. The Broad-Based Black Economic Empowerment Act and scorecards will be incorporated into the Preferential Procurement Strategies, once regulations are finalised. The BSC will obtain approval from the Accounting Officer prior to the publication of invitations for bids.

1.2.1 Regulations

The Msunduzi Municipality identified the following categories for empowerment as contemplated in Regulation 17 of the Preferential Procurement Regulations 2001:-

a) Promotion of Historically Disadvantaged Individuals (HDI’s); b) Promotion of Sub-Contracting work to BEE and BE

Enterprises c) Promotion of Women Equity (WEO) and/or Disabled Equity

Ownership (DEO);d) Promotion of Local Businesses and Local Contractors

within the jurisdiction of the Msunduzi Municipality.

Points scored will be rounded off to the nearest two decimals.

The points scored by a tenderer in respect of specific goals under consideration, will be added to the points scored for tender price to determine the tenderer’s overall score.

The tenderer with the highest number of combined total pointsscored will be selected, subject to the tender being considered responsive in terms of all the Conditions of Tender.

1.2.2 General Conditions and Principles

Only a tenderer who has completed and signed the declaration partof the tender will be considered for procurement preference points.

Preference points may not be claimed in respect of individuals whoare not actively involved in the management of an enterprise orbusiness and who do not exercise control over an enterprise orbusiness commensurate with their degree of ownership.

Preference points may not be claimed and cannot be awarded topublic companies and tertiary institutions.

Equity claims for a Trust will only be allowed in respect of those persons who are both trustees and beneficiaries and who are

actively involved in the management of the Trust. Documentation to substantiate the validity of the credentials of the trustees must be submitted with such preference claims.

A Consortium or Joint Venture may, based on the percentage of the contract value managed or executed by their HDI members, be entitled to equity ownership in respect of an HDI. The number of points scored for achieving specified goals, will be added to the points scored for price, in order to establish the total number of points scored.

The Accounting Officer may, before the tender is adjudicated or at any time, require a tenderer to substantiate claims it has made with regard to preference.

1.2.3 The 80 / 20 Preference Point System

The Procurement Preference Points in respect of tenders with a Rand value up to R 500 000Inc Vat will be calculated in accordance with the breakdown of points as reflected hereunder:-

Price Points : 80 Points Maximum

The following formula will be used to calculate the points for price in respect of tenders with a Rand value of up to R 500,000:- Ps = 80 {1 - ( Pt - Pmin ) } PminWhere:-

Ps = Points scored for price of tender under consideration.

Pt = Rand value of tender under consideration.

Pmin = Rand value of lowest acceptable tender.

HDI Status: Points (NOP) will be allocated for HDI Equity, calculated in accordance with the formula and the targeting strategy:-

NEP = NOP x EP 100Where:-

NEP = Points awarded for equity ownership by an HDI.

NOP = The maximum number of points awarded for equity ownership by an HDI.

EP = The percentage of equity ownership by an HDI within the enterprise or business

and/or for subcontracting work to a BEE, BE or WEO with a contract participation goal to be determined in the bid documents.

Women Equity: Points will be allocated for Women Equity

Disabled Equity: (WEO) and/or Disabled Equity Ownership (DEO) calculated in accordance with the formula:-

WEO = NOW x WEP and/or DEO = NOD x DEP 100 100Where:-

WEO = Points awarded for women equity ownership.

DEO = Points awarded for disabled equity ownership.

NOW = Max Points awarded for women equity ownership

NOD = Max Points awarded for disabled equity ownership

WEP = The percentage of equity ownership by women.

DEP = The percentage of equity ownership by disabled persons.

Local Firms: Points will be allocated for entities with a registered office based within the jurisdiction of the Msunduzi Municipality. Nil points for firms based elsewhere.

Example of Adjudication Schedule

Contract: Supply and Delivery of Safety ShoesSTAGE

1STAGE

2STAGE

3STAGE

4STAGE

5STAGE

6STAGE

7STAGE

8STAGE

9

Name of Tenderer

Price as Tendered per

hour or cost of item

Is Tender Responsive(Comply ?)

Is Price Realistic Points for

Price

Points for HDI Equity or

Subcontract to ABE

Points for WEO and/or

DEOLocal

ContractorTotal

Points

A 50 NO NO 0 0 0 0 0

B 200 YES YES 80 7 2 0 89

C 225 YES YES 70 10 5 5 90

D 235 YES YES 66 7 5 5 86

E 235 YES YES 66 7 1 5 80

F 600 NO NO 0 0 0 0 0

Tenderer “C” is therefore the Preferred Contractor for the Supply and Delivery of Safety Shoes:-

Calculation of Price Points - Tendered Calculation of Development Points-Tendered

Ps = 80(1-(Pt-Pmin)} Pmin

Ps = 80 (1- (225 - 200)} 200 = 0.125

Ps = 80 (1- 0.125)

= 0.875 Ps = 80 x 0.875

Np = 70

Equity owned by HDI + Women Equity Ownership + Local Contractor

= 10 + 5 + 5 = 20 points

TOTAL ADJUDICATION POINTS = 70 + 20 = 90 POINTS

1.2.4 The 90/10 Preference Point System

Price Points: 90 Points Maximum

The following formula will be used to calculate the pints for price in respect of tenders with a Rand value greater than R 500,000:-

Ps = 90 {1 - ( Pt - Pmin )} Pmin

Where:-Ps = Points scored for price of tender

under consideration

Pt = Rand value of offer tender consideration

Pmin = Rand value of lowest acceptable tender”

HDI Status Points (NOP) will be allocated for HDI Equity, calculated in accordance with the formula and the targeting strategy:-

NEP = NOP x EP 100Where:-

NEP = Points awarded for equity ownership by an HDI.

NOP = The maximum number of points awarded for equity ownership by an HDI.

EP = The percentage of equity ownership by an HDI within the enterprise or business

and/or for subcontracting work to a BEE, BE or WEO with a contract participation goal to be specified in the bid documents, calculated in accordance with the formula:-

Nc = Z (D – Ds) (X – Ds)

Nc = the number of bid evaluation points awarded for specific goalsD = the Contract Participation Goal tendered Ds = the minimum Contract Participation Goal, if any, stated in the bid document (Equal to O if

no minimum is stated in the bid document) X = the maximum Contract Participation Goal

Percentage specified in the bid documents

above which no further evaluation points are

awardedZ = the number of points specified in the Bid

document (Not more than 10 or 20)

Local Firms: Points will be allocated for enterprises with a registered office situated within the jurisdiction of the Msunduzi Municipality. Nil points for firms based elsewhere.

Example of Adjudication Schedule

STAGE 1

STAGE2

STAGE 3

STAGE4

STAGE5

STAGE6

STAGE 7

STAGE8

STAGE9

STAGE 10

STAGE11

STAGE12

Name of

TendererPrice

Tendered

Is Tenderer Respon-

sive

Has Tenderer

got Capacity

Proposed Execution Method

Proposed Contract Period

Is Price

Realistic

Points for

Price

Points for HDI

Equity or

Sub-contr.to HDI

Points for Women Equity

Ownership

Local Business Enterprise

Total Points

A 50 000 Yes Yes Acceptable 6 Months NO 0 0 N/A 0 0

B 200 000 Yes Yes Acceptable 5 Months YES 90 2 0 0 92

C 210 000 Yes Yes Acceptable 6 Months YES 85.5 3 0 5 93.5

D 235 000 Yes Yes Acceptable 7 Months YES 73.8 5 0 5 83.8

E 235 000 Yes Yes Acceptable 5 Months YES 73.8 5 0 5 83.8

F 600 000 Yes Yes NotAcceptable 6 Months NO 0 0 0 0 0

G 240 000 No N/A N/A N/A N/A 0 0 0 0 0

Calculation of Price Points - Tendered Calculation of Development Points - Tendered

Ps = 90 {1 - ( P- Pmin )} Pmin

Ps = 90 {1- ( 210 000 - 200 000 )} 200 000 = 0.05

Ps = 90 { 1 – 0.05 }

= 0.95

Ps = 90 x 0.95

Np = 85.50

Equity owned by HDI + Local Contractor

= 3 + 5 = 8 points

TOTAL ADJUDICATION POINTS = 85.50 + 8 = 93.50 POINTS

1.3 Small Professional Services Development Programme “Masithuthuke”

As part of the transformation and SCM reform policy adopted by the Msunduzi Municipality, the Masithuthuke program is an initiative that will directly target small, professional enterprises and firms that are owned and operated by HDIs in order to develop their experience, capacity and numbers.

The Masithuthuke program is a roster that is introduced to meet the following principles and objectives:

(a) To enable small, professional enterprises and firms owned and operated by HDIs to obtain work and thereby develop their experience and capacity

Msunduzi Municipality Supply Chain Management Policy: (27 October 2005)Page 16 of 40

(b) To ensure that work done by small, professional enterprises and firms is executed to acceptable standards through close monitoring and support by the Municipality through its officials or appointed agents.

(c) To ensure that the system of appointment for work, not exceeding R 100 000Inc Vat or as shall be stipulated from time to time, is thorough, equitable, fair and transparent is monitored to avoid manipulation or unfair practices.

(d) The Roster as set out in Masithuthuke (SECTION 3) this document is consistent with other national policies and practices and embraces the Preferential Procurement Policy Framework Act No.5 of 2000 and Regulations pertaining to the Preferential Procurement Policy Act No.5 of 2000. The roster is operated by a computer programme.

1.4 Development Programme for Emerging Contractors - Eyethu

As part of the procurement transformation policy, the Municipality has embarked on a programme to accelerate the progress made on supporting Emerging Contractors. The principles and objectives of this programme include:

Enablement of emerging contractors to obtain work and thereby develop their experience and capacityTo encourage established business to enter into joint ventures with emerging enterprises in order to transfer skills To ensure that work for which the Municipality is responsible is executed to acceptable norms and standards and shared equally among various businessesTo Ensure that the system of award is fair, equitable, transparent, competitive and cost effective

1.5 Development Programme for Suppliers and Service Providers - Masiphakamisane

To further assist in the transformation process, the Municipality has embarked on an initiative that will target small enterprises owned and operated by HDI’s in order to develop their capacity, experience and numbers. The principles and objectives of this programme include:

To enable small businesses to obtain work and thereby develop their capacity and experience To ensure that work completed by small businesses is executed to acceptable standards through the close monitoring and support by the Municipal officials and agentsTo ensure that the system of award is fair, equitable, transparent. competitive and cost effective

1.6 Specifications


Specifications will be drawn up by the Bid Specification Committee and drafted in an unbiased manner to allow all potential suppliers to offer their goods or services.

Specifications must be based on relevant characteristics and performance requirements. Accepted standards such as SABS, ISO or any other authority recognised by SANAS.

1.7 Analyses

SCM Officials will be required to conduct industry and commodity analyses to ensure that all purchases of goods and services are conducted in the best interests of the Municipality and to ascertain whether alternatives are available. This will include an analysis of strategic goods and services, the frequency of the need and the identification of lead times and critical delivery dates.

All needs identified will be linked to budgets to ensure that unauthorized and unnecessary expenditure is eliminated. The identification of needs analysis must include the most cost effective manner in which to acquire requirements, including term supply contracts, obtaining requirements from other institutions or on transversal or ad hoc contracts.

Economic order quantities (EOQ’s) must be calculated as a guide but subjective analysis of past usage and expenditure must also be included.

2.2. ACQUISITION MANAGEMENT ACQUISITION MANAGEMENT

The sourcing strategy must include all available options which may include:

Purchasing from other institutions

Obtaining goods or services from transversal term contracts

Obtaining obsolete or redundant goods listed by other institutions

Negotiating in emergency situations or single source items

Investigating local as opposed to international markets

Utilising E-procurement when appropriate

Public/Public or Public/Private Partnerships

Consideration must be given to Total Cost of Ownership (TCO) Life Cycle Costs and inventory carrying costs of purchases.

2.1 Value and Strategy

Classification of Procurement NB – All values must include Vat – SIGNING AUTHORITY FOR REQUISITIONS


STRATEGY VALUE AUTHORISATIONVERBAL QUOTATIONS Acquisition not exceeding R2, 000 C1 to C3 Salary level

WRITTEN PRICE QUOTATIONS

Acquisition above R2, 000 and not exceeding R10,000.00 CU to D3 Salary level

Acquisition above R10,000 and not exceeding R60,000 DU Salary level

Acquisition above R60,000 and not exceeding R100,000 Process Manager level

Acquisition above R100,000 and not exceeding R200,000 Strategic Executive Manager

COMPETITIVE BIDDING

Acquisition above R200,000 and not exceeding R2 million Strategic Executive Manager

Acquisition exceeding R2 million and not exceeding R10million

Chief Financial Officer or Another designated Senior Manager

Acquisition exceeding R10 million Accounting Officer

The financial limits imposed for each of the financial categories of procurements are in respect of the actual offer amounts received i.e. including any trade or similar discounts (excluding settlement discounts) or valid quality compliance preferences which are deducted or claimed respectively by a tenderer and which therefore form an integral part of an actual offer.

2.2 Authorisation for Goods and Services not held at General Stores 1.4.1 Authority to award

VALUE AUTHORISED SIGNATORY

PRO-FORMA TYPE

Petty Cash – Below R2000.00

Ruling imprest limits apply

Above R2000 not exceeding R10 000 (including vat)

CU and DU Salary LevelType 1

Above R10 000 not exceeding R60 000 (including vat)

DU and Process Manager Salary Level

Type 2

Above R60 000 not exceeding R100 000 (including vat)

Process Manager and Strategic Executive Manager Level

Type 3

Exceeding R100 000 but not exceeding R200,000 (including vat)

Strategic Executive Manager Bid Evaluation Committee and Bid Adjudication Committee

Type 4

Exceeding R200,000 Bid adjudication Committee Type 5

2.3 Urgent and Emergency Acquisition


Urgency means a situation requiring prompt action i.e. an occurrence involving actual or potential material losses to Council of less than R 100 000 including VAT.Emergency means a sudden and dangerous occurrence i.e. an occurrence involving actual or potential threat to human life and / or actual material financial losses to Council in excess of R 100 000 including VAT.

The financial limits listed in 2.2 above with their applicable conditions do not apply:

a) In the cases of urgency, or otherwise in the best interests of Council, limited to R100,000.00 Inc Vat, provided that the authority of the responsible Strategic Executive Manager is obtained and the relevant voucher is so endorsed by the responsible Strategic Executive Manager.

b) In the cases of emergency or otherwise in the best interests of Council,

where the expenditure exceeds the upper limit of R100 000, the authority and endorsement of the payment vouchers by the Chairperson of the Bid Adjudication Committee acting in consultation with Strategic Executive Manager; Finance and the Strategic Executive Manager responsible for the expenditure is required.

c) Where it is not possible to obtain three quotations in terms of regulations this fact must also be recorded on the payment voucher and be approved by the SEM Responsible; SEM Finance and the Bid Adjudication Committee.

2.4 Verbal Quotations

Verbal quotations will be solicited from at least three providers who are listed on the approved supplier’s database. If this is not possible, quotations may be solicited from suppliers who are not listed but the reasons for the deviation must be reported to the unit manager who will be required to report to the SEM – Finance.

2.5 Database of Accredited Prospective Providers

The Accounting Officer will ensure that a list of accredited prospective providers of goods, services and contractors is established and updated on a regular basis; i.e. at least once per quarter.

Prospective providers will be invited to apply for evaluation and listing against criteria for accreditation purposes.

The names of all directors, shareholders, members and partners of entities will be checked against the National Treasury’s database for persons prohibited from doing business with the public sector. The list of accredited suppliers will be used to ensure and promote:

Competition amongst potential suppliers and a rotation system for awards, where appropriate


The objectives of the BB-BEE ActThe correct application of the PPPFA

2.6 Written Price Quotations

Written price quotations must be solicited from at least three suppliers who are listed on the approved supplier database. Only if there are no suitable suppliers listed, may quotations be solicited from suppliers who are not on the database, provided that the Supplier is able to meet the listing criteria. SCM officials responsible must record the reasons for the deviation to the SEM – Finance.

2.7 Competitive Bids

All estimated expenditure in excess of R200, 000 (Inclusive of Vat) may only be procured by means of a public bid process, unless it is an emergency.

The splitting of requirements to reduce the estimated value to below R200, 000 to avoid the competitive bidding process, is prohibited.

Requirements which consist of various parts or items must as far as practically possible, be treated as a single transaction.

Where appropriate and cost effective, the unbundling of large projects or contracts to meet the objectives of Preferential Procurement may be considered.

The Municipality may award contracts in whole or in part

2.8 Committee System for Competitive Bids

The Accounting Officer is responsible for electing members and must have at least the following committees:

A bid specification committeeA bid evaluation committeeA bid adjudication committeeDisposal committee

The committee system and terms of reference must be consistent with Sections 26, 27 and 28 of the regulations and the MFMA, PPPFA and BBBEEA. A municipal entity may procure goods and services by utilising the committee system of another municipality after agreement with the other municipality has been reached.

2.9 Unsolicited BidsIn terms of section 113 of the Act, the Municipality is not obliged to consider unsolicited bids received outside of a normal bidding process. In the event that the Municipality decides to consider an unsolicited bid, it may do so only if-


(a) the product or service offered is a demonstrably or proven unique innovative concept;

(b) the product or service will be of exceptional benefit to or have exceptional cost advantages for the municipality;

(c) the person who made the bid is the sole provider of the product or service; and

(d) the reasons for not going through the normal bidding processes are found to be sound by the accounting officer

If the municipality decides to consider an unsolicited bid it will make its decision public in accordance with section 21 A of the Municipal Systems Act.

2.10 Appointment of Advisors/Adhoc Appointments

The Accounting Officer or his/her delegated official may appoint advisors to assist in the execution of the SCM function provided that:

The appointment may only be made through a competitive bidding process or through a roster system based on set fees as determined by Council;That no advisor may participate in the final decision making process regarding the award of bids; andThat no decision making authority may be delegated to an advisor

2.11 Competitive Bid Documentation

The bid documents must include general and special conditions of tender, contract and any requirements contained in National Treasury’s guidelines and any other provisions of legislation and regulations. In particular, the evaluation and adjudication criteria must be clearly stated in the invitation for bids. The bid documents must include all relevant information pertaining to the nature of the contract that will be entered into by the Municipality and the successful bidder. Information that must be included:

General and Special Conditions of ContractDispute resolutionClear and precise specificationsDetails of compulsory site inspections, both before the bid submission and if necessary, during the duration of the contract.Payment termsPreferential Procurement point system that will be applied in adjudicationsEscalation, price currency fluctuations and formula that will be applicable. Validity periodDisqualification criteriaPerformance criteria

2.12 Advertising of Bids

Bids shall be invited publicly through the general press, the website and the Municipal Manager’s Notice Boards.


For quotations between R2, 000 and R29, 999 Inc Vat, requirements will be solicited from prospective suppliers and service providers who are listed on the approved supplier data base. Prospective suppliers will be required to submit their quotations within the period stipulated on the enquiry documents.

For formal price quotations in excess of R30 000 Inc Vat, requirements will be advertised for at least 7 calendar days on the website or official notice boards of the Municipality.

For competitive bids the closing date shall not be less than 14 calendar days from the date on which the advertisement is published in the press.

For transactions with an estimate above R10 million or that is of a long term nature, the closing date shall not be less than 30 days from the date of advertisement.

The Accounting Officer may determine a closing date less than that stipulated in cases of urgency or emergency or other exceptional cases.

The advertisement must include:

Closing date, time, place and process for submissions of bidsBids must be submitted on the bid documentation provided by the MunicipalityBids must be submitted in sealed envelopesThe validity period for which the submission must hold firmInformation relating to compulsory site inspections or briefing sessionsEvaluation and adjudication criteriaNon refundable bid documents costs

2.13 Bidder Submission Requirements

All bidders must provide the following information and certificates with their bids and may not consider any quotation or bid submitted by a service provider who fails to submit the following information:

All potential or actual conflicts of interestsThe name of the entity or person Whether the owner is or has been in the service of the state in the previous 12 monthsIf the provider is not a natural person, whether any of its directors, managers , principle shareholders or stakeholders is in the service of the state or has been in the previous 12 months Whether a spouse, child or parent of the provider or of a director, manager shareholder or stakeholder is in the service of the state or has been in the previous 12 monthsTax reference numbers, including Tax, PAYE, UIF and SDL and Vat, if applicableIdentification or company registration numbersA validTax clearance certificates issued by SARS


Registration with relevant bodies or controlling authorities if such registrations are mandatoryEmployment Equity Registration Numbers from the Department of Labour, if applicable Proof of registration and a letter of good standing from the Compensation Commissioner in compliance with COID ActProof that rates, taxes and service charges accounts are in order

2.14 Bidder Submission Requirements for Transactions in Excess of R10 millionIn addition to the requirements of clause 5.12, if the estimated award value is likely to exceed R10 million, the following information must be furnished:

If the bidder is required by law to prepare annual financial statements for auditing, their audited annual financial statements-

(a) for the past three years; or(b) since their establishment if established during the past 3 years

A certificate signed by the bidder certifying that the bidder has no undisputed commitments for municipal services towards a municipality or other service provider in respect of which payment is overdue for more than 30 days.Particulars of any contracts awarded to the bidder by an organ of state during the past 5 years, including particulars of any material non-compliance or dispute concerning the execution of such contract;A statement indicating whether any portion of the goods or services are expected to be sourced from outside the Republic, and if so, what portion and whether any portion of payment from the municipality is expected to be transferred out of the Republic.

2.15 Receiving Bids

All bids must be submitted in a sealed envelope and deposited into the tender box situated at the City Hall or as stated in the tender document. Bids received after the closing time and date will not be considered and will be recorded as late submissions. Each bid received on time will be stamped as proof of receipt. Bidders may not correct or withdraw qualifications or reservations once the bids have been opened.

Bidders must be advised for the reasons that their submissions were not considered. The responsible officials must provide a list of the results to the SCM unit and the responsible SEM.

2.16 Handling, Opening and Recording Bids

Bids must be opened in public at the specified venue, date and time. The results of bids must be read out with the bidder’s name, price and preference points claimed. No preference points will be allocated in the event of the bidder not completing the preference point section of the bid document.


All bids must be recorded in the bid register and the register must be made available for public inspection.

The entries in the register must be published on the Municipality’s web site and on notice boards at the City Hall.

After the receipt of bids information relating to the examination, clarification, recommendations or evaluation of bids may not be disclosed to bidders or any other person not officially concerned with the process, until the successful bidder has been officially notified.

2.17 Adjudication Criteria

Adjudications will be conducted in accordance with the prescribed formulae as indicated in the Preferential Procurement Policy Framework Act and the Broad-Based Black Economic Empowerment Act and scorecards. Adjudication criteria will be clearly stated in the bid documents. The award must be made to the bidder scoring the highest number of points unless objective criteria indicate that the award should be made to another bidder. The reasons for deviating from the prescribed norms and standards must be documented by the bid adjudication committee and reported immediately to the Accounting Officer. The Accounting Officer may at any stage, refer any recommendations made by either the bid evaluation or bid adjudication committees back to those committees for reconsideration.

2.18 Disqualification CriteriaThe Municipality may disqualify any offer or bid submitted for the following reasons:

(i) The bidder failed to comply with all submission requirements as stated in the tender document.

(i) The entity or one of its directors is listed on National Treasury’s data base as a person prohibited from doing business with the public sector

(iii) There are outstanding municipal rates and taxes or service charges from any Municipality by the entity or any of its directors that are in arrears for longer than 3 months unless credit arrangements have been made in terms of council policies.

(iv) The entity has failed to perform satisfactorily on previous contracts with any Municipality or other organ of state, after that entity was given written notice that performance was unsatisfactory

(v) Any of the directors committed a corrupt or fraudulent act in competing for a particular contract or in the execution of a contract

(vi) An Official or other role player committed any corrupt or fraudulent act during the bidding process or the execution of a contract that benefited that person

(vii) The entity or any of its directors abused the supply chain management system or committed any improper conduct in relation to such system

(viii) Any director has been convicted for fraud or corruption during the past 5 years


(ix) Has wilfully neglected, reneged on or failed to comply with any government, municipal or other public sector contract during the last 5 years

(x) Misrepresentation of facts or information in the tender document submitted.

(xi) Submission of two tender documents (from the same company) unless the other tender document is an alternative offer.

(xii) Any persons whose tax matters have not been declared as being in order by the South African Revenue Services for awards in excess of R15, 000 Inc Vat.

2.19 Preferences

Preference shall be given to Historically Disadvantaged Individuals: Women and Disabled people but only in compliance with the provisions of the Preferential Procurement Policy Framework Act and Regulations.

2.20 Target Groups

The following groups may be targeted on certain projects these being: Youth Women, and Disabled. On certain projects which the Municipality may identify for the development of SMME, Preference points will be given for being an SMME of for joint venture/subcontracting with SMME’s.

2.21 Negotiations

The Accounting Officer may negotiate the final terms and conditions of a contract with the preferred bidder only after the bidder has been identified through a competitive bidding process provided that such negotiations:

Does not give the preferred bidder a second or unfair opportunity; andIs not to the detriment of any other bidderDoes not change the price offered in the original bid

Minutes of such negotiations must be kept for record and audit purposes.

The Accounting Officer may approve direct negotiations with suppliers in the event of urgent or emergency situations owing to catastrophic events which could not have been foreseen, providing that the preferred bidder was identified through a competitive bidding process.

2.22 Two Stage Bidding

The Accounting Officer may in the case of large and very complex projects, where it is impossible or impractical to prepare detailed specifications, utilise the two stage bidding system.

Bidders will be required to submit unpriced technical proposals on the basis of conceptual design or performance specifications subject to technical as well as commercial clarifications and adjustments. Amended bidding documents and the submission of final technical proposals will only be called for from bidders who qualified on their technical submissions. Priced bids are called for in the second stage.


2.23 Single SourceMay be used provided that a thorough analysis of the market has been undertaken and a transparent and equitable pre-selection process has been followed. This will enable the Municipality to select only one bidder from amongst a few to submit proposals.

2.24 Sole SourceThis may be used in circumstances where there is only one bidder or when there is sole distribution rights or patents rights involved.

2.25 Awarding of Contracts

The awarding of contracts will be in accordance with the Municipalities administration procedures.

A risk assessment must be conducted prior to the award of any contract.

Contracts with an estimated value of R10 million or more must be submitted to the DTI for clearance relating to the National Industrial Participation Programme.

Bidders will not be required to undertake additional work or responsibilities not stipulated in the bidding documents. The municipality must award the contract within the tender validity period to the bidder scoring the highest number of points.

The legal department must approve the contract document prior to the parties signing the contract.

Bidders must be cleared through the offices of the SCM unit at National Treasury to ensure that they are not restricted from doing business with the public sector.

The responsible SCM official will issue an official order or confirmation to the successful bidder and conduct the contract administration process.

The Municipality reserves the right not to award any tender or to award a tender in whole or in part.

2.26 Prohibitions on Awards

The municipality may not award any order or contract : in excess of R15, 000 inclusive of vat to a person whose tax matters

have not been declared by the SARS to be in order; unless no reply is received from SARS within 7 days of raising a query.

To any person if that person is not a natural person, of which any director, manager, principal shareholder or stakeholder is a person in the service of the state; or

Who is an advisor or consultant contracted with the Municipality.

2.27 Awards to close family members of persons in the service of the state


The notes to the annual financial statement of the municipality must disclose particulars of any award of more than R2, 000 inclusive of vat to a person who is a spouse, child or parent in the service of the state, or has been in the service of the state in the previous 12 months including:

(a) The name of that person; (b) The capacity in which that person is in the service of the state; and (c) The amount of the award

33. LOG T C A M NTLOGISTICS MANAGEMENT

3.1 Stock Levels

Each Strategic Executive Manager is responsible for the care and custody of the assets, stock and stores in their business units and under their control.

SCM officials responsible for inventory purchases must ensure that items kept in stock are analysed on a regular basis. This analysis will ascertain the following:

Identification of items and quantities that should be heldMinimum and maximum levels ascertained by historical data and inputs from user departments Safety or buffer stocks of approximately 20% above minimum quantities may be set to cover unforeseen circumstances

Concepts such as JIT and term supply contracts should be considered to reduce the risk exposure of the municipality and to reduce costs of storage of stocks and pilferage.

3.2 Placing Orders

Orders should be placed for stock items when the minimum stock level is reached. If the item is on contract, an order can be placed directly with the supplier. In the event of items not on annual supply or service contract, the appropriate bidding process must be followed.

3.4 Supplier Performance Suppliers and service providers must be monitored for compliance to terms and conditions of purchase as agreed to between the supplier and the Municipality.

Delivery, quality, reliability and prices should be monitored and all problems of non performance must be relayed to the supplier, in writing, by the responsible SCM official and the user of the goods or services.

3.5 Warehouse Management

Warehouse management will be conducted in accordance with the Municipalities procedures and will include the following:


Orders will be expedited to ensure delivery dates are adhered toOn receipt of goods, items will be checked for quantity and quality against the order and a receipt voucher generatedAll items will be stored in accordance with legal and safety regulationsPhysical stock taking will be done at least annually and verified against records and discrepancies accounted for and reported to the executive council.Stock items with limited shelf life will be rotated on a first in first out basis to reduce the occurrence of expired or obsolete stocksIssues will be made against an official issue voucher and delivered promptly to the end user. All relevant documentation will be delivered to accounts payable timeously to ensure that suppliers and service providers are paid within the agreed time

The accounting officer will ensure that damages and losses are accounted for in accordance with legislation and that all damages and losses are investigated and recovered and where possible any surpluses to be recorded.

4.4. DISPOSAL MANAGEMENT DISPOSAL MANAGEMENT

The disposal of capital assets must be dealt with in accordance with the provisions of the MFMA, Sections 14 and 90.

The Accounting Officer must establish a disposal committee to deal with the disposal of assets. All items for disposal must be authorised in terms of the MFMA.

Items should be classified under one of the following headings:

Unserviceable – The item is irreparable or the costs of repairs exceed the replacement value.Outdated or obsolete – The item is no longer used by the Municipality or in the case of items with a shelf life, the expiry date has lapsed.Redundant – Stock balances exceed requirements or are no longer required.Disposal policy – as adopted by the municipality

Once the disposal is approved, one or a combination of the following methods may be used to conduct the disposal:

Transfer to another institution in terms of the provision of the Act (MFMA)Transfer to another organ of state at a market related value or, if appropriate, free of chargeSell the asset per price quotation, competitive bid or auctionBy negotiation e.g. Trade in Destroy the asset

If a movable asset is sold by price quotation, competitive bid or auction and does not fetch a market related value, the reasons for the disposal should be motivated, certified and recorded for audit purposes by the SEM - CSP.


Assets transferred to another institution should be accompanied by means of an issue voucher containing all the relevant details of the assets.

4.1 Adjudication of Disposals

Adjudication of disposals will be conducted in terms of the PPPFA and the following formula will be applied:

The 80/20 or 90/10 preference point system for the sale and letting of assets

Ps = 80/90 1 + Pt - Ph Ph

WherePs = Points scored fro price of tender under considerationPt = Rand value of tender under considerationPh = Rand value of highest acceptable tender

4.2 Special Disposals

IT Equipment - In the case of computer equipment, the relevant Department of Education should be approached for suitability and if required, arrangements made for the free transfer to educational institutions.

Trade-Ins – In the case of trade-ins, the highest possible price is to be negotiated. The order placed should be for the net amount charged against the vote but the actual value of the new item must be reflected in the asset register.

Firearms – Firearms may not be sold or donated to any person or institution within or outside of the RSA without the approval of the National Conventional Arms Control Committee.

55. RIS AN M NT RISK MANAGEMENT

The SEM, Community Services and Social Equity is responsible for preparing and implementing the Council's Risk Management Policy, for promoting it throughout Council and for advising SEM and the Executive Committee on risk management and on proper insurance where appropriate. The SEM, Community Services and Social Equity will maintain a risk register that identifies and assesses all known risks and the action taken to manage those risks. The register will be regularly updated and the outcome reported to the Executive Committee. The risk management for SCM must include:

The identification of risks on a case-by-case basisThe allocation of risks to the party best suited to manage such risksAcceptance of the cost of the risk where the cost of transferring the risk is greater than that of retaining it


The management of risks in a pro-active manner and the provision of adequate cover for residual risksThe assignment of relative risks to the contracting parties through clear and unambiguous contract documentation

The SEM, Finance shall effect all insurance cover and maintain a record of all policy details for notified financial risks. Strategic Executive Managers are responsible for the implementation of the Risk Management Policy, including financial risk within their business units.

5.1 Sureties (Construction Contracts and wherever Applicable)

Project sureties shall be determined according to affordability and risk for different categories of contracts as follows:

JBCC GCC OTHERSMicro 0% 0% To be determinedSmall 0% 0% To be determinedMedium 5% 5% To be determinedMajor JBCC GCC To be determined

5.2 Retention (Construction Contracts and wherever Applicable)

The limits for retention monies held from a contractor during the construction period shall be determined according to affordability and risk for different categories of contracts as follows:

PROJECT TYPE JBCC GCC OTHER FORMS OF CONTRACT

Micro 2.5% 2% To be determinedSmall 3.5% 3% To be determinedMedium 5% 5% To be determinedMajor JBCC GCC To be determined

5.3 Payments

The payments for Small and Micro projects shall be made within 14 days after submission of an acceptable invoice which has been approved by the Municipality’s Representative or as specified in the Municipality’s Special Conditions of Contract.

5.4 Cessions

The Municipality shall, at its discretion, accept signed cessions by SMMEs to suppliers so that payments are made directly to suppliers for the supply of materials as a form of assisting the SMMEs.

All cessions shall be in terms of the conditions of the GCC or JBCC, whichever is appropriate.

5.5 AssignmentMsunduzi Municipality Supply Chain Management Policy: (27 October 2005)

Page 31 of 40

The Service Provider may not cede or assign this contract or any moneys due or that may become due to it, without the prior written consent of the Municipality.

5.6 Joint Ventures

The Municipality will only accept Joint Venture agreements that are formed as a new legal entity and where an acceptable and legal agreement is submitted to the municipality. Any payments due to the Joint Venture will be made to the JV bank account.

5.7 Penalties (Construction Contracts and where Necessary)

Penalties on late completion of work shall be as per the GCC or JBCC or as specified in the tender documents.

5.8 Insurance

The Strategic Executive Manager: Finance shall affect all insurance cover and maintain a record of all policy details for notified financial risks. The Strategic Executive Manager: Finance, with assistance from relevant Strategic Executive Managers, shall carry out all negotiations with insurers, in respect of insurance claims, where necessary.

The value and responsibility for specific insurances required by contractors and service providers shall be specified in the tender documents.

5.9 Price Adjustments due to Escalation

In some instances it may be in the best interests of the Municipality to allow price adjustments based to escalation. A careful analysis of escalation clauses and formulas should be undertaken to ensure the best interests of the Municipality are served. If the accounting officer resolves to allow escalation, this must be specified in the bid documents, including the formula and the time frames at which intervals such price adjustments will be considered.

5.10 Escalation due to ROE (Rate of Exchange)

Exchange rate fluctuations must be considered when items are imported or have imported content. The future fluctuations of the Rand are particularly important if the contract period is over a specified period or if delivery is due at a date some time in the future. The accounting officer must make a decision as to whether or not the Municipality will take the risk or whether suppliers will be allocated the risk.

66. S P HAIN PE ORMANCE SUPPLY CHAIN PERFORMANCE

In the monitoring process of supply chain performance, the Accounting Officer together with SEM’s, must set goals and performance criteria for SCM officials against which performance can be measured. Issues that need to be included in the reviews include:


Achievement of goalsCompliance to norms and standardsSavings generatedStores efficiencyCost variances per item and across business unitsContract management Cost efficiency of the procurement processesSCM objectives in line with Government’s strategic policy objectives Building and Construction standards comply with the provisions of the CIDB Act and regulationsPrinciples of co-operative governance as expounded in the Constitution are observedRegional economic disparities are being addressed and promoted

7.7. CODES OF CONDUCT AND ETHICSCODES OF CONDUCT AND ETHICS

National Treasury is required to issue a Code of Conduct for Supply Chain Management Practitioners that should be adhered to by all officials and other role players involved in supply chain management.

7.1 General Principles

The Government of South Africa commits itself to a policy of fair dealing and integrity in the conducting of its business. The position of a supply chain management (SCM) practitioner is, therefore, a position of trust, implying a duty to act in the public interest. Practitioners should not perform their duties to unlawfully gain any form of compensation, payment or gratuities from any person, or supplier/contractor for themselves, their family or their friends.

Practitioners should ensure that they perform their duties efficiently, effectively and with integrity, in accordance with the relevant legislation and regulations including the Public Service Regulations issued by the Department of Public Service and Administration, National Treasury Regulations and practice Notes and directives issued by accounting officers/authorities.

Practitioners should be fair and impartial in the performance of their functions. They should at no time afford any undue preferential treatment to any group or individual or unfairly discriminate against any group or individual. They should not abuse the power and authority vested in them.

Practitioners should comply with the Code of Conduct for the Public Service as contained in Chapter 2 of the Public Service Regulations, 2001 especially items C4.5 to C4.12 and C5 to C5.4 thereof.

7.2 Conflict of Interest

SCM practitioners, to the extent required by their position, should declare any business, commercial and financial interests or activities undertaken for financial gain that may raise a possible conflict of interest.


They should not place themselves under any financial or other obligation to outside individuals or organizations that might seek to influence them in the performance of their official duties.

Practitioners should not take improper advantage of their previous office after leaving their official position.

7.3 Accountability

Practitioners are accountable for their decisions and actions to the public.

Practitioners should use public property carefully.

Only accounting officers/authorities or their delegates have the authority to commit the Municipality to any transaction for the procurement of goods and/or services.All transactions conducted by a practitioner should be recorded and accounted for in an appropriate accounting system. Practitioners should not make any false or misleading entries into such a system for any reason whatsoever.

7.4 Openness

Practitioners should be as open as possible about all the decisions and actions that they take. They should give reasons for their decisions and restrict information only if it is in the public interest to do so.

7.5 Confidentiality

Any information that is the property of the government or its suppliers should be protected at all times. No information regarding any bid/contract/bidder/contractor may be revealed if such an action will infringe on the relevant bidder’s contractor’s personal rights.

Matters of a confidential nature in the possession of supply chain practitioners should be kept confidential unless legislation, the performance of duty or the provisions of law requires otherwise. Such restrictions should also apply after separation from the service.

7.6 Bid Evaluation/Adjudication Teams

Bid evaluation/adjudication teams should regulate supply chain management on behalf of the institution in an honest, fair, impartial, transparent, cost-effective and accountable manner in accordance with the accounting officer’s /authority’s directives/delegated powers.

The evaluation/adjudication team may be authorised to deal with all supply chain management matters and finalize bids/price quotations in accordance with the directives/delegated powers of the accounting officer/authority.

Bid evaluation/adjudication teams should be familiar with and adhere to the prescribed legislation, directives and procedures in respect of supply chain management in order to perform effectively and efficiently.


All members of bid adjudication teams should be cleared at the level of “CONFIDENTIAL” and should be required to declare their financial interest annually.

No person should:-

Interfere with the supply chain management system of an institution; orAmend or tamper with any bid after its submission

7.7 Combative Practices

Combative practices are unethical and illegal and should be avoided at all cost. They include but are not limited to:

(i) Suggestions to fictitious lower quotations(ii) Reference to non-existent competition(iii) Exploiting errors in bids(iv) Soliciting bids from bidders whose names appear on the list of

restricted bidders/suppliers/persons.(v) Submission of two bids by a bidder.

7.8 Combating of Abuse of Supply Chain Management System The Accounting Officer will take the necessary steps to combat abuse of the supply chain management system. This will include: (i) The investigation of any allegations against an official or other role player of

fraud, corruption, favoritism, unfair or irregular practices or failure to comply with the supply chain management policy.

(ii) When justified, take appropriate steps against any official or other role player; or report any alleged criminal conduct to the South African Police Service.

7.9 Inducement, rewards, gifts and favours to municipalities, officials and other role players

No person who is a provider or prospective provider of goods or services to a municipality or a recipient or prospective recipient of goods to be disposed of , may either directly or through a representative or intermediary promise, offer or grant –(a) any inducement or reward to the municipality for or in connection with

the award of a contract or;(b) any reward, gift, favour or hospitality to-

(i) any official of the municipality(ii) any other role player involved in the implementation of the

supply chain management policy of the municipality

7.10 SponsorshipsThe Accounting Officer must promptly disclose to the National Treasury and the relevant provincial treasury any sponsorship promised, offered or granted to the municipality, whether directly or through a representative or intermediary, by any person who is-(a) A provider or prospective provider of goods or services to the

municipality; or(b) A recipient or prospective recipient of goods disposed of or to be

disposed of, by the municipality.


7.11 Objections and Complaints Any person aggrieved by decisions or actions taken by the municipality in terms of an award or appointment may lodge within 7 days of the decision, a written objection or complaint to the Accounting Officer of the Municipality.

In the event that the service provider is not satisfied with the response received, the service provider may refer the matter to the relevant Treasury, Public Protector or a court of law.

7.12 Objection /Appeal Fee An objection/appeal fee of R2000.00 or 0.5% of value of contracts

(whichever is the greater) as determined by the Accounting Officer will be levied on all appeals. In the event of the appeal being successful, the said fee will be refunded.

8.8. DELEGATION OF SUPPLY CHAIN MANAGEMENT POWERSDELEGATION OF SUPPLY CHAIN MANAGEMENT POWERS AN IEAND DUTIES

8.1 The council of a Municipality and the board of a municipal entity must delegate such supply chain management powers and duties to the accounting officer in order to enable the accounting officer:–

a) to maximise administrative and operational efficiency in the implementation of the supply chain management policy;

b) to enforce reasonable cost-effective measures for the prevention of fraud, corruption, favouritism and unfair and irregular practices in the implementation of the supply chain management policy; and

c) to comply with his or her responsibilities in terms of section 115 and other applicable provisions of the Act.

Sections 79 and 106 of the Act apply to the sub delegation of powers and duties delegated to an accounting officer in terms of sub regulation (1).

No supply chain management powers or duties may be delegated or sub delegated to:-

a) a person who is a councillor of any municipality or a director of any municipal entity; or

b) a committee of which a councillor of any municipality or a director of any municipal entity is a member.

8.2 Sub Delegations

An accounting officer may in terms of section 79 or 106 of the Act sub delegate any supply chain management powers and duties, provided that when sub delegating the power to make a final award the accounting officer must impose: –

a) A threshold value for such awards; andb) A condition that the award of bids above a threshold value must be

referred to the accounting officer.


8.3 Prohibitions on Sub-delegations in Terms of Municipal Supply Chain Management Regulations (Gazette 27636)

The Accounting Office may not sub-delegate the power to make a final award in the following circumstances:

a) The value of the award is above R10 million, including vatb) The value is above R2 million but does not exceed R10 million, the

Accounting officer may sub-delegate but only to-i) the chief financial officerii) a senior manager; oriii) a bid adjudication committee of which the chief financial officer or

a senior manager is a member; or

(c) Not exceeding R2 million including Vat may be sub-delegated but only to-

i) the chief financial officerii) a senior manager; oriii) a manager directly accountable tot the chief financial officer or a

senior manger; oriv) a bid adjudication committee

An official or bid adjudication committee to which the power to make final awards has been sub-delegated in accordance with sub regulation 2 in terms of the Regulations, must within five days of the end of each month submit to the official referred to in subsection (4) a written report containing particulars of each final award made by such official or committee during that month, including-

a) the amount of the awardb) the name of the person to whom the award was made; andc) the reason why the award was made to that person

A written report must be submitted –

a) in the case of an award by , to the –i) the chief financial officerii) a senior manager; oriii) a bid adjudication committee of which the chief financial officer or

a senior manger is a member; or

b) to the chief financial officer or the senior manager responsible for the relevant bid, in the case of an award by-

i) a manager referred to in sub regulation 2(2) (c) (iii); orii) a bid adjudication committee of which the chief financial officer or

a senior manager is not a member .

Reports do not apply to procurements out of petty cash.

This regulation may not be interpreted as permitting an official to whom the power to make a final award has been sub delegated, to make a final award in a competitive bidding process otherwise than through the committee system provided for in regulation 26.


No decision-making in terms of any supply chain management powers and duties may be delegated to an advisor or consultant.

8.4 Disputes

Disputes will be settled by means of mutual consultation, mediation (with or without legal representation), or when unsuccessful, in a South African court of law.

8.5 Role of Council

The council of the municipality must oversee the implementation of its supply chain management policy.

For the purposes of Council’s role the accounting officer must-(i) Within 30 days of the end of each financial year, submit a report on the implementation of the supply chain management policy to the council

(ii) Whenever there are serious and material problems in the implementation of the supply chain management policy, submit a report to council

(iii) Within 10 days of the end of each quarter, submit a report on the implementation of the supply chain management policy to the Mayor

(iv) The reports must be made public in accordance with section 21A of the Municipal systems Act.

9.9. TARGETED CONSTRUCTION PROCUREMENT TARGETED CONSTRUCTION PROCUREMENT

The Standard for Uniformity in Construction Procurement contained in the Schedule is published in terms of section 4 (f), 5(3)(c) and 5 (4) (b) of the Construction Industry Development Board Act, 2000 and with Regulations 24 of the Construction Industry Development Regulations, issued in terms of section 33 of the Act.

Compliance with this standard is mandatory for organs of state who solicit tender offers in the construction industry.

Uniformity in construction procurement documentation, procedures and practices is essential to improved industry performance and improved value to clients. It engenders a culture of consistency and predictability within the procurement process.

This standard establishes minimum requirements for uniformity in construction procurement and is based on Construction Procurement Best Practices published by the Board.”

10.10. CONSULTANTS APPOINTMENTSCONSULTANTS APPOINTMENTS


The appointment of consultants shall be in terms of the guidelines issued by National Treasury in respect of professional services.

Consultants will be appointed by means of a competitive bidding process, whenever possible. All bids and contracts will be subject to the General Conditions of Contract (GCC) issued by the National Treasury.

Professional Service Providers and Advisors may only submit proposals and bids on documentation issued by the SCM unit.

1111. P L C P AT PARTNER I SPUBLIC PRIVATE PARTNERSHIPS

If, in the opinion of the Accounting Officer, the Municipality does not have the resources, skills or expertise, the Accounting Officer may investigate the feasibility of a Public/Public or Public Private Partnership. The Accounting Officer will ensure that in the event of this occurring, the provisions of the Regulatory Framework for Public Private Partnerships, will be taken into consideration

112. DE INITI A ABBR VIATDEFINITIONS AND ABBREVIATIONS

The following definitions and abbreviations apply for the purpose of this policy

Accounting officer The official referred to in section 60 of the MFMA and includes a person acting as the accounting officer.

Ad hoc contract A contract for only one department or unit for once off demand for goods or services

BE Black Enterprise – 50, 1% owned by black persons and where there is substantial management control. Ownership refers to economic interest while management refers to membership of any board or similar governing body of the enterprise

BEE Black Empowered Enterprise – 25,1% owned by black persons and where there is substantial management control. Ownership refers to economic interest while management refers to executive directors. This is whether the black enterprise has control or not.

BBBEE Broad-Based Black Economic Empowerment BWE Black Women owned enterprise – 25,1% representation of

Black Women within the black equity and management portion.

Bid A written offer in a prescribed or stipulated form in response to an invitation by the municipality for the sale, letting of assets, buying of goods or for the rendering of services.

Bidder Any natural or juristic person who makes an offer in response to a request to submits a bid or price quotation

Bid committees Refers to committees duly constituted by the Municipality for purposes of specifications, evaluation


and adjudication. CBE Community or Broad Based Enterprise – Has an

empowered shareholder who represents a broad base of members such as local community or where the benefits support a target group, e.g. black women, people living with disabilities, the youth and workers. Shares are held via direct equity, non profit organisations and trusts.

CCE Co-operative or collective enterprise – Is an autonomous association of persons who voluntarily join together to meet their economic, social and cultural needs and aspirations through the formation of a jointly-owned enterprise and democratically controlled enterprise.

CFO Chief Financial Officer - A person designated in terms of section 80 (2)(a)

CIDB Construction Industry Development BoardCOID Compensation for Occupational Injuries and Diseases Contract A written agreement entered into between the municipality

and the service provider or supplier, as recorded in the contract form and signed by the parties, which includes all attachments and appendices, amendments and all documents incorporated by reference therein.

Closing time The date and hour specified in the bidding document for the receipts of bids.

DTI Department of Trade and IndustryDelegation The power and duties that are legally delegated to an

official of the municipality in terms of the Local Government Municipal Finance Management Act.

Disability Is a circumstance of a person in relation to personalimpairment of a physical, intellectual, or sensoryfunction, which results in restricted, or lack of ability to perform an activity in a manner, or within a range, considered normal for a human being.

EOQ Economic Order Quantity Equity ownership A percentage of ownership and control, exercised

by individuals within an enterprise.GCC

General Conditions of Contract Historically Disadvantaged Individuals (HDI)

“Historically Disadvantaged Individual (HDI)” means a

South African citizen –(1) who, due to the apartheid policy that had been in

place, had no franchise in national elections prior to the introduction of the Constitution of the Republic of South Africa, 1983 (Act No 110 of 1983) or the Constitution of the Republic of South Africa,1993 (Act No 200 of 1993) (“the Interim Constitution”); and / or

(2) who is a female; and / or

(3) who has a disability: Provided that a person who


obtained South African citizenship on or after the coming into effect of the Interim Constitution, is deemed not to be an HDI;

ISO International Standards Organisation JBCC A principal building agreement issued by the Joint Building

Contracts Committee JIT Just in timeOrder An official written order or instruction issued for the supply

of goods, works or the rendering of the service.PSA Public Service ActPPPFA Preferential Procurement Policy Framework Act no 5 of

2000 and its accompanying regulation prescribing a frame-work for a preferential procurement system.

Prices A value expressed in currency or monitory terms of charges by the supplier of goods delivered or services rendered under an order or contract.

Price quotation An official written offer on any document which is invited and dealt with in terms of this policy in which the date items or services to be rendered and the value, attached by the bidder or his delegate, is recorded.

SABS South African Bureau of StandardsSANAS South African National Accreditation SystemSARS South African Revenue ServicesSBD Standard Bidding DocumentSCM Supply Chain Management.SCC Special Conditions of ContractSEM Strategic Executive ManagerSITA State Information Technology AgencySMME Small, Medium or Micro Enterprises Splitting of Projects The deliberate splitting of orders or contracts into smaller

packages to circumvent the authority levels and SCM processes

TCO Total Cost of OwnershipTOR Terms of referenceUnbundling Packaged in a manner that facilitates the engagement of a

range of targeted groups or enterprises. e.g. Making turnkey projects into separate projects, when appropriate and cost effective


SUPPLY CHAIN MANAGEMENT POLICY - Msunduzi

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