Transcript Supply chain management

Supply Chain Management
1
Integrated supply chain
management
Availability
 Operational performance
 Reliability
 Cost efficiencies
 Resource optimization
 Total quality management
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Operational performance
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Stock out frequency
Fill rate
Full orders shipped
Cycle time
Consistency
Flexibility
Quality compliance
Dependability of information (R+I)
Performance measurement
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Cost efficiencies
Optimization of costs across the SC
 Purchasing
 Production
 Total logistic costs
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Resource optimization
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Optimization of all resources in the SC
Finance
 Human
 Technology
 Capacity
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Total Quality Management
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TQM - Quality
Formal quality assurance systems
 Continuous improvement
 Statistical process control
 Incoming quality assured
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TQM - costs
Open book costing
 Cost transparency
 Total acquisition cost
 Total cost of ownership
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Financing
 Holding
 Replacement through theft
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TQM - logistics
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JIT where required
Continuous improvement
Physical location
Active on TQM
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KPA’s and KPI’s
Knowledge of world class standards
R&D commitment
Value analysis
Project management
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TQM - Design
Warranty management
 Reduced set up times
 Short cycle manufacturing
 Sufficient for all demands
 Forecasting systems
 Committed to TQM
 TQM part of performance management
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SC decisions and support
techniques
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Demand management
SC and network design
Inventory analysis and planning
Segment assignment
Distribution planning
Inventory management
Facility location and deployment
Fleet planning
Lead time quotation
Production scheduling
Workforce scheduling
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Demand management
Accurate and instant demand information
 Data mining, simulation and statistical
analysis
 Determine warehouse, distribution centre
and manufacturing locations
 What inventory to hold, in which
warehouses and at what times
 Appropriate routes and inventory policies
 Dispatching, carrier selection, routing
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KPI’s for supply chain
(supply chain scorecard)
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Quantitative
Customer satisfaction
 Time
 Costs
 Assets
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Qualitative
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Innovation
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Supply chain scorecard
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Information includes:
Input data required
 Frequency of measurement
 Responsible person
 Goal or target
 Current performance
 Initiatives to improve
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Benefits of measurement
Understand the customer – improve
service delivery
 Higher quality and efficiency goals
 Measurement = important communication
tool
 Reduce poor management decisions
 Focused approach on waste reduction and
supply chain optimization
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Reporting
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Relies on comprehensive reporting
systems and structures
Status reports
 Exception reports
 Ad-hoc reports
 Trend reports
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KPI – customer satisfaction
P104 SCM
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Process order fulfilment
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Right quantity, right time, right condition, right place
Processing accuracy
Forecasting accuracy
Budget planning accuracy
Delivery performance
Level of customer satisfaction
Product quality
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KPI - Time
Supply chain response time
 End-to-end pipeline time
 Order cycle time
 Production flexibility in terms of:
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Labour
 Material
 Capacity
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Time based-control techniques
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Dependent demand techniques
Quantity and timing depends on the need for
the end product
 JIT
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 Better
lead time management
 Eliminates waste
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Requirements planning
 Integration
with upstream suppliers
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Time based control techniques
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Independent demand techniques – rapid
response to occurences in business
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Quick response
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Continuous replenishment
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As above, but continuously
Automatic replenishment
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Computer driven – captured demand on a real-time basis
Logistics and manufacturing time reduced and more efficient
Supplier estimates the need and replenish – fast moving
items
Efficient consumer response
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Retail (groceries) – optimal allocation of shelf space, efficient
management of promotions , product range, efficient
replenishment
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KPI - Costs
Total supply chain costs
 Finished goods inventory turns
 Total delivered costs – supplier to
customer
 Costs of excess capacity
 Cost of capacity shortages
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KPI - Assets
SC inventory expressed in inventory days
 Net asset turns
 Cash-to-cash cycle time
 Capacity uitilisation
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KPI - Innovation
New product technology
 New process technology
 Strategic partnership development
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Demand Management
Introduction and Interface to Strategic
Planning and Budgeting
 Procurement Planning
 Inventory Planning
 Strategic Asset Planning
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Responsibilities- demand management
AO must:
• establish and implement appropriate
demand management
• ensure resources required support:
• its operational commitments and
• its strategic goals outlined in Strategic
Plan.
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System of demand management
Demand management system must :(a)
(b)
(c)
(d)
include timely planning and management processes to
ensure that all goods and services required are quantified,
budgeted for and timely and effectively delivered at the right
locations and at the critical delivery dates, and are of
appropriate quality and quantity at a fair cost;
take into account any benefits of economies of scale that may
be derived in the case of acquisitions of a repetitive nature;
provide for the compilation of the required specifications to
ensure that its needs are met; and
provide for an appropriate industry analysis and research to
ensure that innovations and technological benefits are
maximized.
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Demand management
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Demand Management - start of SCM.
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Needs assessment - determine demand for goods and
services;
Actual usage of goods/ services analysed - ways are
sought to optimise usage;
Specification of goods/ services are described accurately;
Requirements are linked to budget;
Supplier industry is analysed/ sourcing strategies are
developed.
Demand management –
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used to optimise usage and
reduce procurement spend whilst
increasing the Department’s capacity to execute.
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Demand Management in the context
of Planning and Budgeting
Strategic
Plan
Asset
Management
Policies
Strategic
As s e t
Management
Plan
The Strategic Asset
Management Plan
must also prov ide
input to the
Procurement Plan and
theInv entory Plan
Demand
Management
Procurement
Policies
Procurement
Plan
(includes usage
f orecast)
Annual
Plans
and
Budgets
Bottom-up
Top-Down
Inv entory
Policies
Inventory
Plan
The Budget
Prov ides Targets or
Allocations
(Top-Down)
but the Budget can
also be inf luenced
by the Procurement
and Inv entory Plans
(Bottom-Up)
Top-Down
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Objectives - procurement planning
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To support improved service delivery through proactive and
planned procurement processes;
To implement Government’s Preferential Procurement Strategy;
To improve department’s purchasing advantage;
To improve purchasing efficiencies and effectiveness;
To improvement procurement processes and disciplines;
To provide a basis for longer term contracts; and
To provide a basis for performance management and continuous
improvement.
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Procurement planning benefits
Include:
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Better alignment of procurement activities with objectives;
Better value for money outcomes;
Better planning effectiveness and efficiencies;
Better risk management;
More proactive application of innovations in procurement;
Better partnerships between suppliers and Department;
More opportunities for achieving goals and objectives;
Improved basis for development of longer term contracts; and
Better integration of strategic sourcing practices with proven
demand management practices.
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Procurement Planning Committee
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Team should be established on an annual basis for duration of
procurement planning cycle. Once the plan has been
developed, the monitoring of procurement effectiveness and
efficiencies occurs within the different cost centres.
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Historical overview analysis
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Actual procurement spend and actual usage is
analysed on an annual basis. The analysis is typically
done across the following categories:
 Commodity;
 Business unit; and
 Supplier.
 The high-level analysis is meant to cover the entire
procurement spend and all commodities.
 The usage analysis is meant to focus on what was
consumed or used and is not meant to focus on
what was procured.
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Strategic Imperatives + Budget
Constraints
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In determining opportunities and priorities for procurement
planning cycle, the Procurement Planning team ensures they
have a thorough understanding of strategies and strategic
objectives.
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The budget constraints are equally important in the development
of procurement plan. The Planning team should understand the
budget limitations and potential trade-offs that may be required.
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Identifying Opportunities
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High-level spend and usage analysis and insights gained in
understanding the strategic imperatives and budget constraints
provide the Procurement Planning team with a basis for
identifying the opportunities.
 Opportunities are identified to realise the benefits of
procurement planning:
 Improved service delivery;
 Reducing demand/usage;
 Reduced procurement spend / expenditure;
 Improved procurement efficiencies; and
 Fewer redundant items.
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Setting Priorities
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Ability to achieve all identified opportunities will be constrained
by its capacity and appetite for change. It is therefore important
to prioritise the focus areas for the procurement planning cycle.
 Priorities should be set be assessing the benefit potential
against the ease of implementation.
 Benefit potential – The benefits would depend on
the degree of leverage that the department has over
suppliers. Other benefit factors would include the
extent of “quick wins” and early successes that
possible.
 Ease of implementation – The complexity of the
supplier environment, the time it takes to qualify
suppliers, the incumbents and the switching potential
are all aspects that need to be considered in
deciding the ease of implementation.
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Usage and Sourcing Analysis
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Usage and Sourcing analysis must answer
the following questions:
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What is the historical annual volume of purchases by user (R and
units)?
What is the extent of seasonality?
What is the forecasted demand?
Who are the current and anticipated buyers?
What is the annual number of orders?
What purchases are outside of the normal order cycle?
What are the functional, design, and quality specifications?
What is the level of customisation?
What is the level of standardisation?
Who owns the product specifications?
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Outcomes of Demand Management
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Demand Management.
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To identify opportunities to reduce usage or consumption;
and
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To provide a solid forecast to be used as a basis for better
budgeting, smarter sourcing and improved inventory
planning.
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Demand management relies on solid analysis at a commodity
level.
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Forecasting Usage/Demand:- developed for specific
commodity and is best developed at the lowest level of
usage or demander.
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Needs Analysis:- ensures that demand is based on well
thought through needs and wants.
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Demand Drivers. The cause of the demand is called the
“Demand Driver”. The driver can drive demand up or down.
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Total Cost Model
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For items - cost implication >12 months, develop a total
cost model.
Total cost model must include all externally + internal
costs.
External costs - aspects such as maintenance
contractors; annual license fees; regular servicing costs;
costs of breakdowns and repairs; and finally, the cost of
disposal.
Internal costs - personnel costs associated with
processes from acquisition through to disposal;
personnel costs for the operations of the equipment or
service; transportation and distribution costs; and
inventory holding costs.
Total cost used for identifying alternate sourcing
opportunities.
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Audit demand management
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Governance process
Process overview flowchart
SCRE
Audit objective
Risks
Preventative and detection control
Control Adequacy Assessment
Audit program
Control Effectiveness Assessment
Audit opinion
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Demand management - risk assessment
Demand Management
Functions
Our needs: Determination of the
resources (goods and services)
required in achieving the outcomes
envisaged within the business plan.
Documents / Records
Needs assessment:
Documentation
Input
Process
Output
Risks
E – Effectiveness
Business plan activities not defined in sufficient
detail to facilitate effective determination of
resources required.
Lack of involvement of end-users / program
managers in determining the required activities.
Lack of understanding or non-uniform
interpretation of the required format.
R – inaccurate/incomplete/Untimely/Unauthorized
How were our needs satisfied in the
past: Performing an analysis of past
expenditure trends per sub-program
structure (aligned to strategic plan
structure).
Historical overview:
Documentation
Input
Process
Output
R – inaccurate/incomplete/Untimely/Unauthorized
Inaccurate/incomplete information used in the
historical overview. Mathematical errors made
during the performance of the historical overview.
R – inaccurate/incomplete/Untimely/Unauthorized
Misallocations and classification errors in source
data used to perform historical overview.
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Needs analysis
Operational
plan
Standardised
request and
instructions
R E
Completed
forms
S(ac) R
Capture data
R
Application program
processing
R
Consolidated
needs analysis
Exception
reports
R
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Audit objective
To evaluate the adequacy and effectiveness of the
controls relating to:
 Safeguarding of assets – access control in the
capturing phase
 Reliability and integrity of information in the:
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Preparations of the manual needs analysis forms;
Capturing
Processing
Updating the consolidated needs analysis
assessment;
Exception reports
Effectiveness of the needs analysis
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Risks
Inadequate access control (1)
 Inaccurate, Incomplete, Untimely, Unauthorized
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Manual forms (4)
 Capturing (4)
 Processing (4)
 Updating needs analysis (4)
 Exception reports (4)
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Ineffective Needs analysis (1)
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Historical overview
Analysis of
history
R E
S(ac) R
Capture data
R
Application program
processing
R
Updated
historical
overview
Exception
reports
R
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Demand management - risk assessment
Demand Management
Functions
What is available in the
market:
Conducting an industry and
commodity analysis aligned to
the needs identified.
Documents / Records
Industry and commodity analysis
Documentation
Input
Process
Output
What
methods
are
available:
Identification
of
different
methods to satisfy the needs
identified, for e.g. other
government institutions, ad
hoc contracts, etc.
Method analysis
Documentation
Input
Risks
Limitations placed on the scope of the
industry and commodity analysis.
Required skills profile not readily
available.
High costs associated with the
performance of an industry and
commodity analysis.
Incomplete
identification
of
procurement options available during
the performance of the method
analysis.
Process
Output
How many times do we
have this need: Specification
of frequency of needs.
Frequency analysis
Documentation
Input
Process
Output
Lack of involvement of end-users /
program managers in determining the
frequency of their needs.
Mathematical errors / inappropriate
assumptions made during the
performance of the frequency
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analysis.
Industry + commodity analysis
Suppliers based
on industry
Standardized
forms
Commodities
needed as from
needs analysis
R E
S(ac) R
Capture data
R
Application program
processing
R
Industry
analysis
Commodity
analysis
Exception
reports
R
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Demand management - risk assessment
Demand Management
Functions
Best method of ordering:
Calculation of the economic order
quantity (EOQ).
Documents / Records
Economic Order Quantity analysis
Risks
R–
inaccurate/incomplete/Untimely/Unauthorized
Mathematical errors / inappropriate
assumptions made during the performance of
the EOQ analysis.
Timely satisfaction of our need:
Identification of the lead and
delivery times for each need based
on the chosen method.
Lead and delivery time analysis
R–
inaccurate/incomplete/Untimely/Unauthorized
Mathematical
errors
/
inappropriate
assumptions made during the performance of
the lead and delivery time analysis.
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Economic order quantities
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Economic order quantities
Useful to establish the optimal frequency
and quantity which should be ordered for
each stock item
 Formulas are built into LOGIS
 Based on:
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Cost per unit
 Delivery times
 Cost of ordering
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EOQ analysis
Annual
consumption
and cost per
order
Inventory
carrying costs
Delivery and
lead time
Stock levels
R E
S(ac) R
Capture data
R
Application program
Processing
R
Pre printed order
for approval
Updated EOQ
analysis
Exception
reports- out of
stock items
Inventory
status file
Bill of
Materials
BOM
R
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EOQ – practical use
50
45
40
35
30
25
20
15
10
5
0
Reorder
levels
Safety
levels
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
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Costs of stock
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Holding cost
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Setup cost
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Materials and equipment
Ordering cost
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Storage facilities
Handling
Insurance
Theft
Obsolescence
Opportunity cost of capital
Administration cost of procurement function
Tracking order progress
Shortage cost
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Cost incurred when item out of stock
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Limitations of EOQ
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Total demand over a given period should be
known
Inventory consumption constant, distributed
evenly over time
Purchasing price + transport costs are constant,
independent of quantity or time of order
Suppliers are reliable, no shortages in supply
and inventory
No limitation to the availability of capital
Cost of inventory holding is known and constant
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Lead and delivery time analysis
Usage report
Stock levels
report
Order, delivery,
production lead
times
R E
Historic supplier
delivery times
S(ac) R
Capture data
R
Application program
processing
R
Lead and
delivery time
analysis
Exception
reports – out
of stock
Exception
reports and
KPI’s
Exception
reports –
performance
of suppliers
R
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Implications of lead time
Timing issues critical when planning
inventory
 Complexity of lead time = each stage of
the supply must determine the demand
from its customer
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Risk assessment
RISKS
IMPACT
LIKELIHOO
D
Business plan activities not defined in
1 sufficient detail to facilitate effective
determination of resources required.
Catastrophi
c
Likely
Lack of involvement of end-users /
2 program managers in determining the
required activities.
Catastrophi
c
Moderate
3
Lack of understanding or non-uniform
interpretation of the required format.
Moderate
Moderate
4
Mathematical errors made during the
performance of the historical overview.
Moderate
Unlikely
Misallocations and classification errors
5 in source data used to perform historical
overview.
Major
Almost
certain
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Risk assessment (continued)
6
Limitations placed on the scope of the industry
and commodity analysis.
7
Required skills profile not readily available.
8
High costs associated with the performance of an
industry and commodity analysis.
9
Incomplete identification of procurement options
available during the performance of the method
analysis.
Lack of involvement of end-users / program
10 managers in determining the frequency of their
needs.
Mathematical errors / inappropriate assumptions
11 made during the performance of the frequency
analysis.
Major
Modera
te
Modera Modera
te
te
Minor
Likely
Modera
te
Unlikel
y
Major
Modera
te
Modera
te
Unlikel
y
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Risk assessment (continued)
12
Mathematical errors / inappropriate assumptions
made during the performance of the EOQ
analysis.
Moderate
Unlikely
13
Mathematical errors / inappropriate assumptions
made during the performance of the lead and
delivery time analysis.
Moderate
Unlikely
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Audit objective
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Reliability and integrity
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To evaluate the system of internal control that
ensures accurate, complete, timely and valid
information have been used to complete the
needs assessment
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Audit program
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Document the system of internal control
that ensures that all information is
accurately included in the needs
assessment overview throughout the:
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documentation phase,
Input phase,
Processing phase
Output phases
61
Control risk assessment
Risks – inadequate preventative
controls
Risks – inadequate detective controls
R13
Inadequate process to ensure
validity of transactions
(authorisation) – Changes made to
the supplier’s database not
authorised.
Inadequate process to ensure validity
of transactions (authorisation) –
Changes made to the supplier’s
database not authorised.
R14
Inadequate process to ensure
accurate processing of
transactions - changes to suppliers
database not done accurately.
Inadequate process to ensure
accurate processing of transactions changes to suppliers database not done
accurately.
R15
Inadequate process to ensure
complete processing of
transactions – all new suppliers not
updates in the suppliers database.
Inadequate process to ensure
complete processing of transactions
– all new suppliers not updates in the
suppliers database.
R16
Inadequate process to ensure
timely processing of transactions
– suppliers database not updated
timely resulting in purchases being
made from old suppliers with more
expensive prices.
Inadequate process to ensure timely
processing of transactions – suppliers
database not updated timely resulting in
purchases being made from old
suppliers with more expensive prices.
Control
objectives
SCO
Reliability and
integrity of
information
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Adequacy assessment
Control
objective
Reliability
and integrity
of
information
Risk
Impact
Likelihood
Assessment
Type
Preventative
/
Detective
Nature
Manual/
IT
CA
A
CE
A
Inaccurate …
Incomplete….
Invalid/unauthorised
Untimely
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STRATEGIC ASSET PLANNING
COMMITTEE
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Strategic Asset Planning Committee.
Communicate Planning Process and Key Milestones.
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Process Monitoring and Control.
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Executive Level Communication and Commitment.
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Reporting Status.
 Planning Milestones achieved and missed.
 Strategic Asset Planning committee meetings that
have been held and attendance.
 The status of the Strategic Asset Plan.
 Financing and budgeting and issues that should be
investigated in more detail by finance.
 Sponsorship and performance issues to be
addressed by the Executive Committee.
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Needs assessment
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Need for assets directly linked to provision of
services. Asset planning phase involves
assessment of existing assets (and planned
acquisitions) against service delivery
requirements.
Proposals for new assets must be justified by
thorough evaluation of all service delivery
options and be the subject of a comprehensive
appraisal or investment evaluation.
The service delivery strategy is described in
the context of the strategic objectives and
strategic plan.
65
Programme delivery strategy
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Typically covers:
 Definition of scope, standard and level of services
to be delivered
 Assessment of methods of delivering these
services. Service options are typically evaluated on
financial, economic, social and environmental
grounds
 Determining, where appropriate, methods of
containing demand for services
 An identification of the resources, including assets,
required to deliver services. When identifying
resource requirements consider 'non-asset'
solutions – (leases)
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Non-asset solutions
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Three broad types of non-asset solutions should be
considered:
 Re-designing the service to reduce the need for
assets;
 Increasing the utilisation of existing assets so that
the acquisition of a new asset can be avoided; and
 Using private sector contractors to provide parts or
all of the service. Assets may still be required for
the service, but they will be controlled and
operated by the contractor rather than being
controlled by the department.
67
EVALUATING EXISTING ASSETS
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Evaluation of existing assets determines whether performance
is adequate to support service delivery. This process presupposes appropriate condition and performance standards
are set for assets.
Where these standards have not been defined, the
performance of the asset should be assessed against
benchmarks.
Programme evaluations, where applicable, should include the
evaluation of asset performance.
Asset performance should be reviewed regularly to identify
assets that are under-performing, or costly to own or operate.
It is also possible to over-invest in assets.
The evaluation should reveal assets that provide more than
their required capacity, or are surplus to requirements.
Assets that have been inadequately maintained may pose
potential safety or health risks, disrupt services, or incur
unforeseen expenditures for the correction of the defects.
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Effectiveness of current asset use
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All assets being used to deliver service need to be identified and
registered. How effectively these assets support the services has to be
determined.
Assets should be evaluated in terms of their:
 Physical condition: Is the asset adequately maintained? Is there
a maintenance backlog that requires attention? Are major
replacements or refurbishments likely to be required during the
planning period?
 Functionality: How well suited is the asset to the activities and
functions it supports?
 Utilisation: How intensively is the asset used? Could it be used
more productively by extending its working hours, or by
accommodating additional functions?
 Financial performance: Are the asset's operating costs similar to
those for other comparable assets? (Use benchmarking to
establish this wherever possible.) Are the energy, cleaning and
maintenance costs reasonable? Are user charges being made, and
how do they relate to the total operating costs of the asset (including
the cost of capital)?
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Effectiveness of new assets
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
Assessment of existing assets must include those assets in the
process of being acquired or that are committed
Evaluation of existing and anticipated new assets provides a
statement of assets that are available, or expected to be
available, to support service delivery:
 Existing assets that are required and are presently capable of
supporting delivery needs;
 Existing assets that are required but are below the necessary
standard and need refurbishment to service delivery needs;
 Assets that are surplus to service delivery needs and can be
disposed of; and
 Assets that must be acquired to meet service delivery needs.
70
DEVELOPING ASSET STRATEGY

The asset strategy uses the statement of needs and
the evaluation of assets as a basis for the
development of the Asset Strategy.

The strategy must be a five-year forward strategy
covering acquisition, safeguarding, maintenance,
refurbishment, redeployment and disposal, together
with the capital and operating costs.

A detailed evaluation of the life-cycle costs and the
benefits and risks informs the strategy.

Each stage of the life-cycle needs to be planned to
identify what needs to be done to ensure that assets
effectively support service and programme delivery.

The individual plans consider the needs of the other
stages of the life-cycle to ensure an integrated
approach is achieved.
71
Asset Management plan




Asset Management Plan, consisting of:
 Acquisition Plan;
 Operational Plan;
 Safeguarding Plan
 Maintenance Plan;
 Disposal Plan;
 Funding Plan; and
 Risk Management Plan;
Service Delivery Method;
Performance Monitoring; and
Procedures, Systems and Training.
72
Acquisition, safeguarding and
maintenance
Acquisition plan
 Assets to be acquired may be purchased, either on the open market,
or from another government department. They may also be leased
or hired. The asset acquisition plan should define the type and
timing of asset requirements, and set out the proposed method of
acquisition and financing.
Operations, Safeguarding and Maintenance plan
 The operations plan defines operating policies and practices in
respect to working hours, security, safeguarding, cleaning, energy
management and the responsibilities and resources required to
manage the asset.
 The operational management of individual assets should be
assessed to determine:
 The total operating costs that should be considered in the
funding plan; and
 Whether this function can be contracted out in whole or in part.
73
Procedures
Procedures, Systems and Training
 Procedures support consistent application of definitions,
standards and efficient work practices - It is essential
they are disseminated and available to users of the
different assets.
 The management information system is more than an
asset register. It should support budgeting, planning and
management of assets and provide an effective means
of reporting asset performance.
 Training programmes need to be tailored to the needs of
staff who will require an understanding of the principles
of asset management and the associated budgeting and
management processes. Staff with responsibility for
operation, maintenance and disposal will require more
in-depth training.
74
Procedures
Safeguarding plan
 To be managed effectively, assets must be protected
against theft or fraudulent use and other hazards such
as fire. The consequences of not having the asset
available for service delivery must be carefully
considered.
 This plan must describe asset protection approaches
that will be used.
Maintenance plan
 The maintenance plan defines maintenance standards,
describes how work is to be carried out, and forecasts
necessary maintenance expenditure for planning period.
 Modifications or enhancements are work that is required
because of change in the use of the asset, or a need to
improve its functional performance - capital expenditure.75
Disposal and funding
Disposal plan
 Disposal options include transfer for alternate use,
rental, sale and/or lease-back, and demolition.
Funding plan
 The options available for funding both capital and
operating expenditures for assets must be described.
New assets may be funded in whole or in part:
 from the disposal of unused assets;
 by leasing or other form of private investment; or
 from borrowings, including appropriated funds.
 Revenues to support borrowing or leasing charges, or to
supplement operating expenses, may be obtained from
user charges or levies.
 The funding plan should be based on an analysis of all
available possibilities, including utilising private sector 76
funding wherever appropriate.
Risk Management plan





Asset management related risks may include:
 risks related to method of acquisition
 asset failure due to inadequate maintenance or operation
 lack of safeguarding of assets.
The nature of certain assets making them more susceptible to fraud
or misuse should specifically be considered.
It should be noted that the state does not normally insure its assets,
which strengthens the need for an effective risk management plan.
The asset risk management plan describes the risk management
strategies and actions to be implemented for the assets under
control. They are to be:
 aimed at effective and timely outcomes;
 geared to meeting the quality standards of industry; and
 determined in line with best practice.
The monitoring and evaluation of the risk management measures
implemented must be continuous.
77
Performance Monitoring

Periodic reviews of asset performance are an essential
element of the asset management framework. They aim
to provide factual and quantitative information on the
performance of the asset in meeting service and
programme delivery needs.

Performance monitoring forms the basis of management
of the asset throughout its life. It facilitates adjustments
to the various plans, ensuring service delivery needs are
met and providing increased efficiencies.
78
CAPITAL FUNDING AND
BUDGETING



The funding process allows for consideration
of asset acquisition and enhancement options
effectively and to establish priorities.
Funds can then be applied to new projects and
investments to satisfy objectives, and to obtain
best value for money.
The sources of funding must be identified.
79
Inventory analysis
OBJECTIVE

The analytical technique determines the stock level and also
which stores items and the quantities thereof must be obtained
as well as which items must be kept in stock.
ADVANTAGES OF INVENTORY ANALYSIS/PLANNING






Stores are purchased directly according to requirements (as
and when required when possible).
Stores could be purchased in most economical way.
Storage space is optimised by avoiding unnecessary stock
holding.
Available capital can be utilised to better effect.
Quicker satisfaction of requirements.
Saving in manpower.
80
Performance benchmarks
Measure / KPI
Benchmark*
Target** Year 1
< 7 days
7 days, excluding
Tender cycle
District – Logistics using LOGIS and manual
inspection of registry
3 days
5 days
District – Logistics using LOGIS and manual
inspection of registry
< 5% of the total
stock value
10% reduction on
current value
Head: Acquisition and Demand Management
< 10% of the total
stock value
10% reduction on
current value
Head: Acquisition and Demand Management
Value of Declared (Non-Authorised)
Redundant Stock
value < 0.6% of
Total Stock
Value
value < 1% per
month of Total
Stock Value
Head: Acquisition and Demand Management
Value of Declared (Non-Authorised)
Obsolete Stock
value < 0.05% per
month of Total
Stock Value
value < 0.01% per
month of Total
Stock Value
Head: Acquisition and Demand Management
Value of Declared (Non-Authorised)
Damaged Stock
value < 0.05% per
month of Total
Stock Value
value < 0.01% per
month of Total
Stock Value
Head: Acquisition and Demand Management
Value of Declared (Non-Authorised)
Unserviceable Stock
value < 0.01% per
month of Total
value of
moveable
assets
value < 0.2% per
month of Total
Stock Value
Head: Acquisition and Demand Management
Timely Item Codification (Non-contract
items)
Timely Item Codification (Contract items)
Value of Stock with no consumption
Value of Surplus to Requirement (A and
E-class Accountable)
Responsibility and Measurement
Tool/Report
81
Acquisition Management
82
System of acquisition management
AO must establish an effective system of acquisition
management to ensure –
(a) goods
and services are procured in accordance with authorized
processes only;
(b) expenditure on goods and services is incurred ito of an approved
budget in terms of section 15 of the PFMA;
(c) threshold values for the different procurement processes are
complied with;
(d) bid documentation, evaluation and adjudication criteria, and
general conditions of a contract, are in accordance with any
applicable legislation; and
(e) Treasury guidelines on acquisition management are properly
taken into account.
83
Range of procurement processes
(2) The AO may, in writing; (a) lower, but not increase, different threshold values specified in sub-par
number (1); or
(b) direct that –
(i) only formal written quotations be obtained for any specific
procurement of a transaction value lower than R5 000
[VAT included];
(ii) a competitive bidding process be followed for any specific
procurement of a transaction value lower than R200 000 [VAT
included].
(3) Goods or services may not deliberately be split into parts or items of a
lesser value merely to avoid complying with requirements of policy.
When determining transaction values, a requirement for goods or services
consisting of different parts or items must as far as possible be treated and
dealt with as a single transaction.
84
Sourcing Opportunities

Sourcing improvement opportunities could include:
 Changes to specification of the good/service;
 Increasing length of contract to drive down procurement costs;
 Changes to nature of relationship with the service provider (for
example change to a risk and benefits sharing relationship);
 Aggregate demand across a wider range of users and obtain bulk
discounts;
 Introduce increased levels of competition amongst suppliers;
 Issue “lots” for common products to encourage competition amongst
multiple suppliers;
 Exclude intermediaries (“middle-men”) that add cost and do not
provide value added services;
 Improved level of specification so that service provider avoids
building in contingency costs;
 Reduce costs of procurement (i.e. the supplier’s sales cost) by
reducing procurement processing time and reducing delays and
changes to the procurement process.
85
Sourcing Strategy Development

Final sourcing strategy takes into account the analysis;
the identified opportunities; and the risk profile.
 Analysis - cover category usage analysis, the supplier
industry analysis and TC model that was developed.
 The sourcing strategy will describe the approach that
will be followed to procure the commodity. Approach
options could include:






A longer term contract;
A national transversal contract;
Outsourcing the service;
Three quote system;
An open tender; or
A Public Private Partnership.
86
Supplier Screening



External market is analysed before
suppliers are screened.
Market analysis – profile:
 total number of suppliers;
 their relative size;
 empowerment profile;
 geographic spread; and
 understand the challenges that
suppliers are facing.
Suppliers - screened using Request for
Information (RFI) techniques.
87
Lists of accredited prospective providers
(1) AO must –
(a) keep a list of accredited prospective providers of goods and
services that must be used for the procurement requirements
through written or verbal quotations and formal written price
quotations;
(b) at least once a year through newspapers commonly circulating
locally, the website and any other appropriate ways, invite
prospective providers of goods or services to apply for evaluation
and listing as accredited prospective providers;
(c) specify the listing criteria for accredited prospective providers;
and
(d) disallow the listing of any prospective provider whose name
appears on the National Treasury database as a person/company
prohibited from doing business with the public sector.
88
Lists of accredited prospective providers
The list must be updated at least quarterly to include any
additional prospective providers and any new
commodities or types of services. Prospective providers
must be allowed to submit applications for listing at any
time.
The list must be compiled per commodity and per type of
service.
No bids or quotations may be solicited from any
supplier/service provider/contractor who is not registered
and verified by the appropriate branch on the
Procurement Unit’s Supplier Database, or is in a position
to be so before the award.
89
Single or Selected Suppliers/Brand or
Trademark



Practice of obtaining price quotations from single or
selected suppliers for a specific brand or trademarks
is to be cautiously dealt with.
If a product or a specific brand only will satisfy the
requirement, for example where existing equipment is
involved and the item required is a component
thereof, or price quotations are to be invited from
single or selected suppliers only, the approval of the
BAC are to be obtained prior to the invitation of the
price quotations.
Requests for approval must be fully motivated and
accompanied with documentary proof.
90
Bid administration
91
General preconditions for consideration of written
quotations or bids - conflict of interest
Written quotation or bid not considered unless provider who submitted quotation/bid –
(a) has furnished that provider’s –
(i) full name;
(ii) identification number or company or other registration number;
(iii) tax reference number and VAT registration number, if any;
(iv) tax clearance from the South African Revenue Services which proves
that the provider’s tax matters are in order;
(v) Statement (s) proving that water, electricity, rates and business levy
accounts are up to date or formal payment arrangement; and
(b) Conflict of interest –
(i) whether he/she is in service of the state, or has been in the service of
the state in the previous twelve months;
(ii) if the provider is not a natural person, whether any of its directors,
managers, principal shareholders or stakeholder is in service of the
state, or has been in the service of the state in the previous 12 months; or
(iii) whether a spouse, child or parent of the provider or of a director,
manager, shareholder or stakeholder referred to in subpar (ii) is in the
92
service of the state, or has been in the service of the state in the previous
12 months.
Public invitation for competitive bids
Procedure for the invitation of competitive bids:(a) Any invitation to prospective providers to submit bids must be by means of
a public advertisement in newspapers commonly circulating locally, the
website of the municipality or municipal entity or any other appropriate
ways (which may include an advertisement in the Government Tender
Bulletin)
(b) the information contained in a public advertisement, must include –
(i) the closure date for the submission of bids, which may not be less than 30
days in the case of transactions over R10 million (VAT included), or which
are of a long term nature, or 14 days in any other case, from the date on
which the advertisement is placed in a newspaper
(ii) a statement that bids may only be submitted on the bid documentation
provided by the municipality or municipal entity; and
(iii) date, time and venue of any proposed site meetings or briefing
Sessions - indication regarding compulsory attendance
93
Public invitation for competitive
bids
AO may determine a closure date for the submission of
bids which is less than the 30 or 14 days requirement,
but only if such shorter period can be justified on the
grounds of urgency or emergency or any exceptional
case where it is impractical or impossible to follow the
official procurement process.
Bids submitted must be sealed.
Where bids are requested in electronic format, such bids
must be supplemented by sealed hard copies.
94
Procedure for handling, opening and
recording of bids
Procedures for the handling, opening and recording of bids;(a) Bids–
(i) must be opened only in public; and
(ii) must be opened at the same time and as soon as possible after
the period
for the submission of bids has expired;
(b) Any bidder or member of the public has the right to request that the
names of
the bidders who submitted bids in time must be read out including each
bidders total bidding price;
(c) No information, relating to bid other than one in sub-par (b) may be
disclosed to bidders or other persons until an official award is made; and
(c) AO must –
(i) record in a register all bids received in time;
(ii) make the register available for public inspection; and
(iii) publish the entries in the register and the bid results on the
website.
95
Negotiations with preferred bidders
AO may negotiate the final terms of a contract with bidders
identified through a competitive bidding process as
preferred bidders, provided that such negotiation–
(a) does not allow any preferred bidder a second or
unfair opportunity;
(b) is not to the detriment of any other bidder; and
(c) does not lead to a higher price than the bid as
submitted.
Minutes of such negotiations must be kept for record
purposes.
96
Two-stage bidding process
A two-stage bidding process is allowed for –
(a) large complex projects;
(b) projects where it may be undesirable to prepare
complete detailed technical specifications; or
(c) long term projects with a duration period exceeding
three years.
In the first stage technical proposals on conceptual
design or performance specifications should be invited,
subject to technical as well as commercial clarifications
and adjustments.
In the second stage final technical proposals and priced
bids should be invited.
97
Committee system for competitive bids
AO is required to –
(a) establish a committee system for competitive bids
consisting of at least –
(i) a bid specification committee;
(ii) a bid evaluation committee; and
(iii) a bid adjudication committee;
(b) appoint the members of each committee,
(c) provide for an attendance or oversight process by a
neutral or independent observer, appointed by AO, when
this is appropriate for ensuring fairness and promoting
transparency.
The AO may apply the committee system to formal written price
quotations.
98
Bid evaluation committees
(1) Bid evaluation committee must –
(a) evaluate bids in accordance with –
(i) the specifications for a specific procurement;
(i) the points system
(b) evaluate bidder’s ability to execute contract;
(c) check iro recommended bidder whether municipal
rates taxes/municipal service charges not in arrears, and;
(d) submit to adjudication committee report &
recommendations regarding award of bid
(2) BEC composed of at least one procurement rep, one
technical rep, one legal rep as minimum, and may when
appropriate, include an external specialists advisor.
99
Procurement of Banking Services
(1) A contract for banking services
(a) must be procured through competitive bids;
(c) may not be for a period of more than five years at a
time.
(2) Process for procuring a contract for banking services must
commence at least nine months before the end of an existing
contract.
(3) The closure date for the submission of bids may not be
less than 60 days from the date on which the advertisement is
placed in a newspaper in terms of par 22(1). Bids must be
restricted to banks registered in terms of the Banks Act, 1990
(Act No. 94 of 1990).
100
Procurement of IT related goods or services
(1) AO may request SITA to assist with the acquisition of IT related goods
or services through a competitive bidding process.
(2) Both parties must enter into a written agreement to regulate the
services rendered by, and the payments to be made to, SITA.
(3) AO must notify SITA together with a motivation of IT needs if –
(a) the transaction value of IT related goods or services required in
any financial year will exceed R50 million (VAT included); or
(b) the transaction value of a contract to be procured whether for one
or more years exceeds R50 million (VAT included).
(4) If SITA comments on the submission and the municipality disagrees
with such comments, the comments and the reasons for rejecting or not
following such comments must be submitted to the council, the National
Treasury, the relevant provincial treasury and Auditor General.
101
Procurement of goods and services under
contracts secured by other organs of state
AO may procure goods or services under a contract secured
by another
organ of state, but only if –
(a) the contract has been secured by that other organ of
state by means of a competitive bidding process applicable
to that organ of state;
(b) there is no reason to believe that such contract was not
validly procured;
(c) there are demonstrable discounts or benefits to do so;
and
(d) that other organ of state and the provider have
consented to such procurement in writing.
102
Procurement of goods necessitating special
safety arrangements
(1) The acquisition and storage of goods in bulk (other than water) which
necessitate special safety arrangements, including gasses and fuel, should be
avoided where ever possible.
(2) Where the storage of goods in bulk is justified, such justification must be
based on sound reasons, including the total cost of ownership, cost advantages
and environmental impact and must be approved by the AO.
103
Appointment of consultants
AO may procure consulting services provided that any Treasury guidelines in
respect of consulting services are taken into account when such procurements
are made.
Consultancy services must be procured through competitive bids if –
(a) the value of the contract exceeds R200 000 (VAT included); or
(b) the duration period of the contract exceeds one year.
In addition to any requirements prescribed by this policy for competitive bids,
bidders must furnish particulars of –
(a) all consultancy services provided to an organ of state in the last five
years; and
(b) any similar consultancy services provided to an organ of state in the last
five years.
(4) AO must ensure that copyright in any document produced, and the patent
rights or ownership in any plant, machinery, thing, system or process designed or
devised, by a consultant in the course of the consultancy service is vested in the
104
municipality
Deviation from, and ratification of minor breaches
of, procurement processes
AO may –
(a) dispense with the official procurement processes established by this
policy and to procure any required goods or services through any convenient
process, which may include direct negotiations, but only –
(i) in an emergency;
(ii) if such goods or services are produced or available from a single
provider only;
(iii) for the acquisition of special works of art or historical objects where
specifications are difficult to compile;
(v) in any other exceptional case where it is impractical or impossible to
follow the official procurement processes; and
(b) ratify any minor breaches of the procurement processes by an official or
committee acting in terms of delegated powers or duties which are purely of
a technical nature.
AO must record the reasons for any deviations of this policy and report them to
the next meeting of the council and include as a note to the annual financial
statements.
105
Unsolicited bids
In accordance with section 113 of MFMA there is no obligation to consider
unsolicited bids received outside a normal bidding process.
AO may decide in terms of section 113(2) of the Act to consider an
unsolicited bid, only if –
(a) the product or service offered in terms of the bid is a
demonstrably or proven unique innovative concept;
(b) the product or service will be exceptionally beneficial to, or
have exceptional cost advantages;
(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 AO.
106
Unsolicited bids
If the AO decides to consider an unsolicited bid,
the decision must be made public in accordance
with section 21A of the Municipal Systems Act,
together with –



(a) reasons as to why the bid should not be open to
other competitors;
(b) an explanation of the potential benefits if the
unsolicited bid were accepted; and
(c) an invitation to the public or other potential
suppliers to submit their comments within 30 days of
the notice.
107
Unsolicited bids
(5) The adjudication committee must consider the unsolicited bid and
may award the bid or make a recommendation to the AO, depending
on its delegations.
(6) A meeting of the adjudication committee to consider an unsolicited
bid must be open to the public.
(7) When considering the matter, the adjudication committee must take
into account –
(a) any comments submitted by the public; and
(b) any written comments and recommendations of the National
Treasury or the relevant provincial treasury.
(8) If any recommendations of the National Treasury or provincial
treasury are rejected or not followed, the AO must submit to the
Auditor General, the relevant provincial treasury and the National
Treasury the reasons for rejecting or not following those
recommendations.
(9) Such submission must be made within seven days after the
decision on the award of the unsolicited bid is taken, but no contract
committing the municipality to the bid may be entered into or signed
within 30 days of the submission.
108
Combating of abuse of supply
chain management system
AO must establish measures for combating of abuse of the SCM system, which
must stipulate the following:
(1) AO must–
(a) take all reasonable steps to prevent abuse of the supply chain management
system;
(b) investigate any allegations against an official or other role player of fraud,
corruption, favouritism, unfair or irregular practices or failure to comply with this
supply chain management policy, and when justified –
(i) take appropriate steps against such official or other role player; or
(ii) report any alleged criminal conduct to the South African Police Service;
(c) take all reasonable steps to ensure that no recommended bidder, or any of
its directors, is listed as a person prohibited from doing business with the public
sector;
(d) reject any bid from a bidder if any municipal rates and taxes or municipal
service charges owed by that bidder or any of its directors to the municipality, or
to any other municipality or municipal entity, are in arrears for more than three
months; or
109
Combating of abuse of supply
chain management system
(e) reject a recommendation for the award of a contract if the recommended
bidder, or any of its directors, has committed a corrupt or fraudulent act in
competing for the particular contract;
(f) cancel a contract awarded to a person if –
(i) the person committed any corrupt or fraudulent act during the bidding
process or the execution of the contract; or
(ii) an official or other role player committed any corrupt or fraudulent act
during the bidding process or the execution of the contract that benefited
that person; and
(g) reject the bid of any bidder if that bidder or any of its directors –
(i) has abused the supply chain management system of the municipality or
has committed any improper conduct in relation to such system;
(ii) has been convicted for fraud or corruption during the past five years;
(iii) has willfully neglected, reneged on or failed to comply with any
government, municipal or other public sector contract during the past five
years; or
(iv) has been listed in the Register for Tender Defaulters In terms section 29
of the Prevention and Combating of Corrupt Activities Act (No 12 of 2004).
110
(2) The AO must inform the National Treasury and relevant provincial treasury
in writing of any actions taken
Acquisition Management
Introduction to Acquisition Management
 Quotations Process
 Competitive Bid Process

111
OVERVIEW OF ACQUISITION MANAGEMENT
Best interest of the Public.



Since the Government uses public funds to finance its procurement of
goods and services, it is obliged to ensure that the best interest of the
public is served when these funds are spent.
“Best interest” includes satisfying requirements at the most
favourable conditions, including price, ensuring that businesses and
industries are afforded the best possible opportunity to satisfy such
requirements on a competitive basis.
Bid system.


It is common practice that governments utilise a bid system to
procure their goods and services and to sell government goods.
Such a system, with conditions and procedures formulated by the
powers concerned, best protects the interest of the customers and
the suppliers.
112
OVERVIEW OF ACQUISITION MANAGEMENT

Contracts.




During the procurement of goods and services, or the selling of
government goods, in accordance with the bidding system,
contracts are concluded by the issuance of letters of acceptance
and government orders.
If price quotations are processed under delegated powers,
contracts are concluded by the issuance of government orders.
In addition, the procurement of requirements of the
State/Province can also be embodied in legal written formal
contracts in which the specific obligations and prerogatives of all
parties concerned are stipulated.
It must be ascertained that bidders accept all the relevant
stipulations of the general conditions of bid and contract or any
other additional conditions indicated in the bid document and as
approved by the Department.
113
GOVERNMENT PROCUREMENT
INITIATIVES
Historically Disadvantaged Individuals (HDI)

In accordance with the PPPFA HDI’s are defined as South African
citizens who fall into population groups that had no franchise in
national elections prior to the introduction of the 1983 and 1993
constitutions; and/or who is a female; and/or who has a disability. To
comply with the PPPFA these HDI’s are allowed to claim such status
in their bids and be granted preference points according to a
preference point system.
Small, Medium and Micro Enterprises (SMME’s).

The SMME’s are an integral part of the RSA’s economy and form the
basis from which businesses are developed. The classification of
businesses within this category is done in accordance with guidelines
provided by the Department of Trade and Industry. The advancement
of SMME’s is done in accordance with guidelines provided by the
PPFA and is achieved through the awarding of contracts of small or
reasonable contract amounts.
114
Limit structures
Less than R5,000, including
VAT and other expenses.
Quotation. Verbal or telephonic quotes
are acceptable. The agreed quote should
be in writing.
Quotations are typically requested from
suppliers that are registered with the
Department.
Between R5,000 and under
R100,000.
Quotation. At least three written
quotations that must be kept on record.
As with the smaller quotes, these should
also be requested from suppliers that are
registered with the Department.
Above R100,000.
Bid or Tender. The different bidding
processes are described in the sections
that follow.
115
Quotations and bids

Quotations.


Price quotations may under certain conditions be invited
telephonically, by- e- mail, or in writing, within cost-effective
limits from all possible suppliers, or from a limited number
of suppliers, provided that the order is placed against
confirmation by letter, telex, telefax, e- mail, or facsimile of
the price quotation by the only bidder or the bidder whose
offer is the lowest according to specifications or deemed
realistic value for money if not the lowest.
Bids.

A bid is a written offer on the official bid documents forming
part of an invitation to bid, which has been dealt with in
accordance with the requirements of SCM regulations and,
unless otherwise determined by the Head of Department,
has been advertised in the Government Bid Bulletin.
116
ESTABLISHING THE BID COMMITTEES
There are at least three committees involved in the Bidding process:

Bid Specification Committee;

Bid Evaluation Committee; and

Bid Adjudication Committee.
Delegated authority will vary across different committees,
particularly the Bid Adjudication Committee. In some instances
the Bid Adjudication Committee will have the delegated authority
to award a bid to supplier.
In some instances, Bid Adjudication Committee will make a
recommendation to the AO who will make the final award.



The policies and ethics governing the different committee should be
described in the Department’s SCM Policy Manual.
117
DELEGATED POWERS OF BID ADJUDICATION
COMMITTEE


Need to delegate. It is essential to know that the power to
arrange for the procurement of goods and services or selling
of moveable department property is vested in terms of MFMA.
To allow for effective workload management, powers are
delegated to officials
Delegations to Departments.



National Treasury has delegated a set of powers to provincial
departments - powers are coupled to financial limits, with redelegation levels and conditions prescribed.
These powers are not commodity bound and they enable
departments to carry out their functional activities in the most
responsible manner, without the intervention of National or
Provincial Treasury.
The requirements to which the delegated powers are subject
must be strictly observed.
118
Delegations to SCM
Application of Procurement delegations.



Delegated powers relate to the processes and activities followed
in procurement and sales, whereby contractors are identified
from whom goods or services should be procured or to whom
movable property will be sold.
The delegated powers indicate at hand who, depending on the
value of each case at hand, may follow what processes and
activities. Once the contractors are identified, the actual
procurement of goods or services is done by means of an order
Concerning the approval of finances for the placing of orders or
for cash purchases, separate delegations are applicable
pertaining to financial authorities.
119
Implementation of Delegated powers

It is imperative that supply chain officials take
cognisance of the following:



Powers are delegated to the AOs of departments in order to
prevent their activities being impeded and to grant
departments management autonomy in line with the MFMA.
Powers are delegated to the AOs of departments in person
and may not be exercised by department officials without the
express written re-delegation or empowerment by the AO
concerned to the holders of certain posts.
Before an official takes any action regarding any part of the
procurement or selling process, it must be ascertained
whether the authority to do so is delegated to him/her and
he/she is empowered to do so.
120
Non-compliance with Delegated Powers





Cognisance must be taken of the fact that any action regarding
procurement in the public sector which does not adhere strictly to the
stipulations and conditions contained in delegated powers, shall be
unauthorised or irregular, unless ex post facto approval has been
granted by the BAC.
The delegations of powers to a person or body of persons does not
exempt the AO from accountability. AO will exercise strict control
measures to ensure that delegations will be executed in a responsible
manner. In cases of misuse, delegated powers may be withdrawn.
No guarantee exists that such requests for ex post facto approvals will
be favourably considered and approved by the AO or his/her delegate.
When requests for ex post facto approval for irregular expenditure
actions are not approved, it could transpire that the cost incurred as a
result of such action is carried by the person(s) responsible for such
actions.
Such irregular expenditure actions will be reported to the Auditor
General, Treasury and the Legislative.
121
PREFERENCE POINT CLAIM IN TERMS OF THE
PREFERENTIAL PROCUREMENT
REGULATIONS 2001
The application of preferential procurement and broad
base black economic empowerment must be
consistent with.






The Preferential Procurement Framework Act and its
Regulations
The Broad based Black Economic Empowerment Act
Set target - achieve through preferential procurement.
Stipulate the preference point system in bid documents to be
applied in adjudication. Documentation must include criteria
for the evaluation of quotations/bids to identify the
quotation/bid that represents the best value for money. No
preferential procurement system has to be applied in respect
of acquisitioning with a rand value less than R30 000 per case.
The relevant preference point formula as per the PPPFA must
be used to calculate the points for price in respect of
acquisitioning with Rand value above R30 000.
122
ACQUISITION MANAGEMENT
DEVIATIONS

Urgent and emergency situations.



Cases of urgency or emergency may arise which necessitate
procurement sections to deviate from existing procedures in order
to obtain goods and services. Such cases are catered for and are
to be dealt with according to standing delegated powers.
It should be noted that poor planning is not a ground to justify
urgency.
Irregular actions.


Whenever the SCM directives delegations, and the Department
supporting policy, instructions and procedures are deviated from,
such actions are considered as irregular.
Ex post facto approvals for such unauthorised actions will have to
be obtained from the HoD or his/her delegate through the normal
service channels. These can only be regularised if recommended
by the BAC and approved by the HoD or his/her delegate. If not
there are to remain irregular and should be dealt with in terms of
applicable legislation.
123
QUOTATIONS PROCESS



The quotation process is initiated primarily by a user, who then
developed the cost estimate, with or without the assistance of
acquisition management.
Needs Memo. A needs memo is typically created by the chief
user or end user. The memo is then forwarded to the acquisition
management team to assist with the determination of the cost
estimate and determine the acquisition process to be followed
Cost Estimate. The cost of the product or service must be
estimated as accurately as possible to determine the approach to
be followed for the acquisition. The different approaches that can
be followed to estimate the costs include:

Obtaining an amount from the Chief User on an amount
that he/she is willing to spend on the specific request;

Review prior orders;

Obtain telephonic quotations for budgeting purposes;

Scan newspapers and adverts; and

Reviewing standard price lists.
124
FORMAL PRICE QUOTATIONS


Delegated Power.

Procurement officer to invite and accept price quotations
instead of tenders. It is the responsibility of the procurement
officers to ensure that procurement is done in accordance with
a system, which firstly, is fair and competitive and secondly,
promotes the Provincial Government’s reform initiatives.
Documents.

Price quotation documents compiled by procurement officials
must be simplified, with sufficient space for the offerer to
endorse its offer and accept all conditions indicated therein.
On the documentation it must be indicated that the price
quotations will be subject to EC 36 conditions. The documents
have to clearly indicate:
 The required goods or services required;
 The closing date and time by which the price quotations
are to be returned; and
 The validity period.
125
FORMAL PRICE QUOTATIONS

Time Scales.
 Procurement
officers may determine the closing
date and time of price quotations. The period
involved does not have to be the same as that
applicable to tenders. It must also be determined
what the validity period will be.

Recording.
 The
required information must be recorded in the
price quotation register. The price quotation must
also be diarised so that it could be monitored.
126
OBTAIN EXPENDITURE APPROVAL




The chief user clerk completes the requisition form VAS 2 (or
LOG 1 where LOGIS is used).
If the item is not available in stock or the item requested is not
a store item, a request is send to the budget section, at the
District Office, to draw an Expenditure Control (Commitments)
Report from BAS. The report is provided to the Chief User.
The Chief User or EDO (depending on circumstances)
evaluates the Expenditure Control (Commitments) Report to
check if there is sufficient Budget available to accommodate
the request. If there is sufficient budget available and the Chief
User is satisfied with the request, the VAS2 or LOG1 is
approved.
If no budget is available a determination will take place to see
whether the request is an urgent need or not. In the event of
the request not being urgent the request (VAS 2 or LOG1) is
cancelled / rejected and the functionary is notified.
127
Urgent need - budget
If item requested supports an urgent need,
the Chief User will forward a formal
memorandum to Head Office to request for
budget to be made available by means of
virement.
 Head Office will inform the Chief User
whether the memorandum was approved or
not.
 With reference to the feedback received from
Head office, the LOG1 will be approved or
cancelled accordingly and the requestor will
be informed of this decision.

128
RECEIPT OF FORMAL PRICE
QUOTATIONS



Confidentiality.

Price quotations are confidential and must be treated as such.
Alterations on Price Quotations.

The procurement officials are to ensure that the offerer initials
any alterations on price quotations. In the event of price
quotations being received with no initials against alterations,
they are to be submitted to the supervisor for initialling in order
to confirm that personnel attached to the procurement office
did not do the alterations.
Price Quotation Receipt Register.

The Tender Receipt Section records all price quotations
received in the Price Quotation Receipt Register, after being
numbered so that the total number of price quotations received
for a specific quotation can be controlled. The following
minimum information is required in the register.
 Price quotation number.
 Closing date.
129
 Price quotation received and the numbers allocated
thereto.
EVALUATION OF FORMAL PRICE
QUOTATIONS

During the scrutiny of the price quotations, the
following must be attended to:

Correctness and Availability of information. Study the
price quotations thoroughly and note the following:





Are the required documents correctly completed and signed?
Are prices and delivery periods indicated as firm or not?
What is the basis of delivery?
What other information does the offerer in a covering letter
furnish?
What are the conditions set by the offerer?
130
EVALUATION OF FORMAL
PRICE QUOTATIONS

Specification. Check all price quotations for deviations from the
specified requirement and note the nature and influence thereof.

Price. Study the price for completeness and reasonableness.

Comparative Schedule - Scoring. After scrutiny of the price
quotations received, the maximum information must be noted on a
comparative schedule. The positions of each offer in relation to the
offer being the lowest in price (points) must be indicated.

Validity. All steps must be taken to ensure that price quotations are
dealt with whilst they are valid. If not, request all offerers by letter or
fax to extend the validity periods of their offers. The responsibility to
timely request and finalise extension of the validity periods of price
quotations rests with the procurement office that invited the price
quotations.
131
RECOMMENDATIONS

Recommendations by Users.


The users must be requested to timely evaluate and submit
written recommendations on the price quotations. The
basic guidelines for acceptance of price quotations are
firstly, to consider only price quotations received if their
prices are reasonable, and secondly, to consider price
quotations being the lowest in price or highest in points and
complying with the specifications where more than one
price quotation is received.
Submissions.

Procurement officials must establish the format and
manner in which recommendations are to be submitted for
consideration.
132
ACCEPTANCE OF PRICE QUOTATIONS
Administrative Acceptance.


The recommendations in respect of price quotations must be
considered and accepted/amended, prior to approval by procurement
officers or their delegated procurement officials.
Signing of Comparative Schedules.


The signing of the relevant comparative schedules by procurement
officers or their delegated procurement officials does not indicate
acceptance of price quotations within the Education Department.
Only once the comparative schedules have been signed, indicating
that the recommended price quotations are accepted, may the price
quotations be processed. If the signing of the comparative schedules
indicates that the recommendations are referred back or not
approved, appropriate actions are to be taken.
133
CATEGORIES OF BIDs




Open Bids.

Bid invitations are published in the Government Bid Bulletin and
bids documents are supplied to all prospective bids on their
request. All bids, which are submitted timely and in the
prescribed manner, are considered.
Bids by means of approved lists (bidders from pre-selected
suppliers).

In certain circumstances it is not practicable to invite open bids.
In these cases it is advertised in the Government Bid Bulletin
that firms/persons who are interested to render a specific
service, or supply specific items, are to bid in the normal
manner to have their names included on an approved list.
Bids from sole suppliers.

If there is only one supplier a bid document is posted to the sole
supplier. However, the invitation to bid must also be advertised
in the Government Bid Bulletin.
Restricted bid.

In certain cases, the AO can approve that bids need not be
134
advertised, but may be invited from selected potential suppliers
only.
Verbal quotations
Conditions that must be followed when procuring goods or services through
written or verbal quotations are as follows :(a) quotations must be obtained from at least three different providers
preferably from, but not limited to providers whose names appear on the
list of accredited prospective providers of the municipality or municipal
entity.
(b) to the extent feasible, providers must be from Priority Business
Enterprises and/or Black Business Enterprises;
(c) if it is not possible to obtain at least three quotations, the reasons must
be recorded and reported quarterly to the AO or another official
designated by the AO;
(f) if a quotation was submitted verbally, the order may be placed only
against written confirmation by the selected provider.
135
Formal written price quotations
(1) Conditions for the procurement of goods or services through formal written
price quotations:-–
(a) quotations must be obtained in writing from at least three different
providers whose names appear on the list of accredited prospective
providers of the municipality or municipal entity;
(b) quotations may be obtained from providers who are not listed, provided
that such providers meet the listing;
(c) to the extent feasible, providers must be from Priority Business
Enterprises and/or Black Business Enterprises;
(c) if it is not possible to obtain at least three quotations, the reasons must
be recorded and approved by the chief financial officer or an official
designated by the chief financial officer, and
(d) the AO must record the names of the potential providers and their
written quotations.
136
Procedures for procuring goods or services
through written or verbal quotations and formal
written price quotations
The procedure for the procurement of goods or services through written or
verbal quotations or formal written price quotations is as follows :(a) all requirements in excess of R30 000 (VAT included) that are to be
procured
by means of formal written price quotations must, be advertised for at least
seven days on the
website and an official notice board of the municipality or municipal entity;
(b) when using the list of accredited prospective providers the AO
must promote ongoing competition amongst providers by inviting providers
to submit quotations on a rotation basis;
(c) offers received must be evaluated on a competitive basis taking into
account unconditional discounts
137
Procedures for procuring goods or services
through written or verbal quotations and formal
written price quotations
(d) Offers below R30 000 (VAT included) must be awarded based on
compliance to specifications and conditions of contract, ability and
capability to deliver the goods or services and the lowest price;
(e) acceptable offers above R30 000 (VAT included) are subjected the
preference points system and must be awarded to the bidder with
the highest points;
(f) the AO must take all reasonable steps to ensure that the
procurement of goods and services through written or verbal
quotations or formal written price quotations is not abused;
(g) the AO or chief financial officer must on a monthly basis be notified
in writing of all written or verbal quotations and formal written price
quotations accepted by an official acting in terms of a subdelegation, and;
(h) municipal requirements for proper record keeping must always be
observed.
138
Competitive bidding process
(1) Goods or services above transaction value of R200 000
(VAT included) and long term contracts may only be
procured through a competitive bidding process, subject to
par 11(2) of this policy; and
(2) No requirement for goods or services above an
estimated transaction value of R200 000 (VAT included),
may deliberately be split into parts or items of lesser value
merely for sake of procuring the goods or services
otherwise than through a competitive bidding process.
139
Process for competitive bidding
Procedures for the following stages of a competitive bidding process:(a) compilation of bidding documentation as detailed in par 21
(b) public invitation of bids as detailed in par 22
(c) site meetings or briefing sessions, if applicable as detailed in par
22
(d) handling of bids submitted in response to public invitation as
detailed in par 23
(e) evaluation of bids as detailed in par 28
(f) awarding of contracts as detailed in par 29
(g) administration of contracts, should include a written agreement
between the municipality and the bidder after approval of the bid; and
(h) proper record keeping must be such that original /legal copies of
written agreements are kept in a secure place for reference
purposes.
140
Bid documentation for competitive bids
Criteria to which bid documentation for a competitive bidding process must
comply, must :(a) take into account –
(i) the general conditions of contract and any special conditions of
contracts, is specified;
(ii) any Treasury guidelines on bid documentation; and
(iii) the requirements of the Construction Industry Development
Board, in the case of a bid relating to construction, upgrading or
refurbishment of buildings or infrastructure;
(b) include preference points system to be used, goals as
contemplated in the Preferential Procurement Regulations and
evaluation and adjudication criteria, including any other criteria
required by other applicable legislation;
141
Bid documentation for competitive
bids
(c) compel bidders to declare any conflict of interest they may have in
the transaction for which the bid is submitted;
(d) if the value of the transaction is expected to exceed R10 million
(VAT included), require bidders to furnish–
(i) if the bidder is required by law to prepare annual financial
statements for auditing, their audited annual financial statements –
(aa) for the past three years; or
(bb) since their establishment if established during the past
three years;
(ii) 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;
(iii) particulars of any contracts awarded to the bidder by an organ of
state during the past five years, including particulars of any material
noncompliance or dispute concerning the execution of such
contract;
142
ROLE OF PROCUREMENT SECTION


The Procurement Section will invite bids on behalf of the
Department.
All specifications of the Department have to be ratified by the
Bid Adjudication Committee before bids can be invited.
BID REGISTRATION



A bid number is to be allocated to the relevant case from the
Bid Register. The bid number consists of at least three parts,
namely a prefix indicating the procurement office involved,
letter “T” for Bids and sequential number from the bid register.
A separate file must be used for each requirement to be
processed, wherein all bids and subsequent related
correspondence will be filed.
143
BID DOCUMENTS RELATING TO OPEN
BIDS

Time scales. Determine time scales involved with the bid that is firstly
the date of advertising, secondly the closing date and time of bid and
lastly the validity period of the bid.

Closing date and time. All Bids close at 11:00 on the closing date
indicated in the bids documents. Bids close at least 30 days after the
date of publication in the Government Bid Bulletin. If the materials are to
be stocked outside of the RSA the Bid Bulletin may be longer. If a
shorter closing period is required, approval from the Bid Adjudication
Committee is to be obtained. Bids may not close over a pre-determined
period during December / January of each year. If the closing date falls
on a Saturday, Sunday or Public Holiday, the closing date must be
forwarded to the first following working day.

Validity period. The period offers are to remain valid is normally not
longer than sixty days, but in the case of period contracts not longer
than ninety days. The validity period is calculated from the day after
closing date of the bid.
144
Bid documents

When compiling bid documents ensure that the following are included:
 Prepare the advertisement by completing the form in the prescribed
manner.
 The form indicates the exact address and the route to the bid box
concerned.
 The form provides for the obtaining of the required “Tax Clearance
Certificate” by bid.
 The form covers the general conditions of contract as approved
 The form provides for the particulars of the item required, closing
time, validity period, etc, and also makes provision for the Bidders
price and other information required, from the Bidder. The following
information must be entered by the Procurement Section:
 Bid Number
 Closing Date and Time
 Validity Period
 Description of requirement, which must correspond with the
advertisement
 Location of delivery of where the service is required.
145
Bid documents continued
 These
forms provide for the claiming of
preferences relating to products bearing the SABS
Mark and having local content and equity
ownership by Historically Disadvantaged
individuals (HDI’S) and are to be filled in by the
Bidder.
 The form provides for the required “Declaration of
interest” by the Bidder.
 Special bid conditions. Any other special bid
conditions, if applicable and as approved by the
Department. In this regard the opinion of the Legal
Section is to be obtained, prior to Bidding.
146
Specification committees
Bid specification committee must compile specifications for
each procurement of goods or services
(1) Specifications –
(a) must be drafted in an unbiased manner to allow all
potential suppliers to offer their goods or services;
(b) must take account of any accepted standards such as
those issued by Standards South Africa, the
International Standards Organisation, or an authority
accredited or recognised by the South African National
Accreditation System with which the equipment or
material or workmanship should comply;
(c) where possible, be described in terms of performance
required rather than in terms of descriptive
147
characteristics for design
Specification committees
(d) may not create trade barriers in contract requirements in the forms of
specifications, plans, drawings, designs, testing and test methods,
packaging, marking or labeling of conformity certification;
(e) may not make reference to any particular trade mark, name, patent, design,
type, specific origin or producer unless there is no other sufficiently precise
or intelligible way of describing the characteristics of the work, in which case
such reference must be accompanied by the words “equivalent”;
(f) must indicate each specific goal for which points may be awarded in terms of
the points system set out in the Preferential Procurement Regulations 2001;
and
(g) must be approved by the AO prior to publication of the invitation for bids in
terms of par 22 of this policy. The accounting officer, may sub-delegate this
function to the chair of the bid specification committee.
148
Specification committees
(3) The bid specification committee must be
composed of multi-disciplinary team of municipal
officials which include at least one procurement
rep, one technical rep and one legal rep as
minimum, and may when appropriate, include an
external specialists advisor.
(4) No person, advisor or corporate entity involved
with the bid specification committee, or director
of such a corporate entity, may bid for any
resulting contracts.
149
Specifications

The format of the specification can be one of the following or a combination
thereof:



User requirement
Functional Specification
Statement of work



Recording of Bids



Formal contracts. In the event that a formal contract will be concluded, the concept
formal contract is to form part of the bid documents. It is to be ensured that approval
from both the Legal Section, through the chief of finance, and the Department Bid
Adjudication Committee and the office of the Procurement Section has already been
obtained.
Task directives for professional services. It is important that due attention is given to
the correctness of the task directive as it can ensure that the bid process runs more
smoothly which shortens the turnaround time on the process.
Enter the required particulars of the bid in the Bid Register.
Diarise the date that the file is to be held over for and give an instruction on the file to
the registry to pend the file.
Despatching of Bid

Forward forms and bid documents to the despatch section for the advertising of bids
and distribution of bid documents to interested or potential bidders.
150
DEVELOPING SPECIFICATIONS

User requirements.


Technical specifications


The user with the need for the product or service usually initiates the drafting
of the specification. It is always better to identify and adapt an existing
specification that meets, or is close to meeting, expectations and
requirements.
usually differ to user requirements, as they are mainly observable
characteristics, such as dimensions of the product or materials that the
product is made from. User requirements on the other hand describe the
results or outcomes to be achieved.
Standards bodies.

Wherever possible, standards and specifications from bodies such as the
SABS should be used. The SABS is available to assist in the drafting of
specifications even if the specification does not carry a SABS number. In the
latter case, the Department must carry the cost and the specification then
becomes the property of the Department.
151
DEVELOPING SPECIFICATIONS

Technical equipment. In the case of technical equipment, apparatus,
machinery and fragile goods, the following must be clearly specified:





Whether installation or erection is required;
Whether servicing and / or maintenance is required;
Whether demonstrations and or training is required; and
The guarantee that is required.
Statutory requirements. The Department must ensure that
specification adhere to statutory requirements set by other bodies.
Examples of some of the acts that may be applicable include:






The Hazardous Substances Act , 1973, (Act No 15 of 1973);
The Medicines and Related Substances Control ACT , 1965 (Act No 10 of
1965);
The Foodstuffs, Cosmetics and Disinfectants Act, 1981 (Act No 85 of 1993);
Occupational Health and Safety Act, 1993 (Act No 85 of 1993);
The Post Office Act, 1958, (Act No 44 of 1958); and
Second Wage Amendment Act, 1981, (Act No 58 of 1981).
152
Total Cost of Ownership (TCO) or Lifecycle
Costing

In the development of the specification it will be important to address all elements of
the cost of the product or service. The terms sometimes used are Total Cost of
Ownership (TCO) or Lifecycle Costing. This is particularly important for assets. Here
all elements of the cost of an item are considered during the usable life of the asset.
These elements would include:











The planning cost;
The original acquisition cost;
The cost of maintenance and services;
The cost of risk for items such as insurance (even though the State is self insured, this is a
cost that must be considered);
The cost of repairs and spares;
The interim replacement cost whilst an item is undergoing maintenance and/or repairs; and
The cost of labour to the Department where this is required;
The cost of transport and holding costs;
The cost of disposing of the asset where this is applicable; and
Other factors that will either drive up or drive down the total cost during the time that the
department requires the asset.
The total cost of the asset is not the cost that is reflected in the asset register.
That cost is typically the value of the asset used for financial accounting practices.
153
Lifecycle costing

The lifecycle cost can be divided into four cost areas:




Planning costs. These are the costs associated with the development of
the acquisition strategy and the specifications. With some acquisitions it is
important to also include environmental impact assessments and feasibility
studies.
Acquisition costs. This is traditionally the cost that receives the most
attention. For assets this would include the costs of manufacturing or
constructing the solution as well as the cost of transporting the solution.
Another cost to consider is the cost of commissioning.
Operation and maintenance costs. Here the recurring expenditure is
determined. This will include items such as the cost of electricity, water and
other utilities; the cost of specialised staff that may be needed; and cleaning
costs. If insurance costs are not applicable, then it is important to include a
portion of the security costs that can be attributed to the product.
Disposal costs. Sometimes agents are needed to dispose of an asset. In
other instances, costs may be incurred in dismantling and removing the
product. With some assets there may even be a revenue component if there
is a residual or intellectual value associated with the item.
154
BID DOCUMENTS RELATING TO LISTS OF
APPROVED / PRE-SELECTED BIDDERS


Need for approved lists

Different circumstances sometimes necessitate that a panel of
persons/firms from which bids may be invited, be available. It
may, for instance, be that specific repetitive requirements,
although anticipated, for some reason or other cannot be
planned for in advance, or that the service/product is usually
required on a very short notice, or a specific project is
extensive and requires the inclusion of a number of specialist
fields.
Invitations for inclusion on approved lists

Invitations of bids with the purpose of being included in an
approved list basically follow the steps similar to those
regarding the invitation of open bidders. The difference,
however, lies in the fact that the bid document consist of the
item, or more often, the service required, a questionnaire
which must be filled in by the bidder and the criteria against
which applications to be included in the approved list will be
155
evaluated.
BID DOCUMENTS RELATING TO LISTS OF
APPROVED / PRE-SELECTED BIDDERS


Maintenance of approved lists
 From time to time the Procurement Section publishes
particulars of supplies or services, in respect of which there
are approved lists of bidders, in the Government Bid Bulletin
and invites any potential bidders to apply for inclusion in such
lists. If a department finds that a bidder on the approved
panel does not fully comply with the set requirements, his
name may be deleted from the approved list.
Invitation to bid for actual requirement
 If and when the item or service is required, the Department
invites bidders in the same manner as that applicable to open
bidders, from some of, or from all bidders whose names
appear on the approved list, depending on the
circumstances.
156
BID DOCUMENTS RELATING TO SOLE
SUPPLIERS




Source. Although only sole suppliers are referred to, it must be borne in mind
that it may be possible that more than one manufacturer / distributor may be in a
position to supply the specific item, but this item is not available in the open
market. Under these circumstances all known suppliers will be invited to bid, as
well as having the bid advertised in the Government Bid Bulletin.
Invitation to bid. The procedures for inviting a bid from a sole supplier are
similar to those used for inviting open bidders, but the following differences exist:
 The request for the invitation of a bid from sole supplier must be
submitted for approval to the BAC prior to the invitation. Included in the
request must be documentary proof that the status of the sole suppliers
or sole agent must produce documentary proof from their parent
companies or main suppliers that they are in fact the sole suppliers or
agents.
 The invitation to bid must also be advertised in the Government Bid
Bulletin.
 The bid documents to be used, differ slightly from those used to invite
open bidders in the following way:
Addressed to the specific bidder is added to those used for open bidders.
The appropriate form is amended by adding the following “Indicate nett
percentage commission or profit before tax…”
157
ADVERTISING OF BIDDERS



To ensure that the biding system is open, fair, and
competitive, as required in the MFMA, bids are
advertised in the Government Bid Bulletin.
The Government Printing Works advertises annually
in December, a list containing publication dates and
numbers of the following year’s Government Bid
Bulletins. This list is to be used to establish the
dates by which the forms are to be submitted.
On receipt of the bulletin containing the list, an own
programme is to be compiled, by fixing dates by
which the submission of forms is required. The
publication dates and the numbers of the various
bulletins are also to be included in the program.
158
PREPARATION OF ADVERTISEMENTS

File. Open a file for each category of advertisement as it is categorised in the bulletin,
namely:




Verification of advertisement notifications. Ensure the form contains the following
information:








Invitation of bidders for the categories supplies, services and disposals.
Results of Bidders awarded concerning supplies and services.
Information of cancelled bidders.
Publication date
Bid number
Closing time and date
Where the supply / service is required
Description of the supply / service required
Information concerning dates and venues set aside for compulsory site inspections, explanatory
meetings or briefing cessions, if applicable.
Submission of advertisements. On the Government Printing Work’s submission date, files
containing the form received during the preceding week are drawn. A list of all
advertisements in the various categories is then compiled so that it can be correctly
published in the Government Bid Bulletin. The list is then submitted to the Government
Printing Works for publication.
Verification of actual advertising. Copies of all the forms are to be kept, so that it can be
verified that the advertisements had in fact appeared in the Government Bid Bulletin. Such
verification will be done by attaching to the relevant forms, copies of the applicable pages of
the Government Bid Bulletin in which the invitations had been advertised.
159
DISTRIBUTION OF BID DOCUMENTS


Date of distribution. Under no circumstances may the bid documents be
posted before the published date of bid. On the day the bid is advertised in
the Government Bid Bulletin, the bid documents must be posted to all those
known potential bidders.
Requests for documents. Requests for bid documents to be forwarded to
interested bidders are to be recorded on a suitable application form and dealt
with as follows:

Personal requests: After the applicant has completed and signed the application
form, the relevant bid document may be handed over. The following information
must appear on the form:







Bid number
Name and address of bidder
Supplier’s contact person, telephone and fax number
Date of collection
Name and signature of the recipient
Telephonic requests: The application form is to be completed on behalf of
the applicant and the relevant bid document posted thereafter.
Facsimile requests: The application form is to be completed on behalf of the
applicant and the relevant bid document posted thereafter. The facsimile is to
be attached to the completed form.
160
EXTENSION OF CLOSING DATES


Advertising. Should it be necessary to extend the closing date of a bid, the extension is to be advertised
before the original closing date. Furthermore, the bidders to whom bid documents had already been
forwarded must be advised in writing of the intended extension. For this purpose a form may be used.
RECEIPT OF BIDDERS

Actual receipt of bids. Bids must at all times be deposited in the bid box, even if delivered by hand. If
bidders are received through the post, it must immediately be channelled to the bid receipt section, without
being opened. In the latter case, the date and time it is received are stamped on the envelopes and it is
then sorted according to the closing dates in “Pigeon-Holes” Each “Pigeon Hole” represents a specific day of
the month. Bulky bidders received must be kept securely with reference in the relevant “Pigeon-Hole” as to
where it is being kept.

Bid box keys. Procurement officers are to ensure that bid box keys are controlled and not left unattended.
When not in use, the keys are to be locked away.

Opening of Bid Box. Concerning the bid box, the following procedure must be followed by two members of
the Bid Receipt Section when the box is opened:
 At 10:50 the exact time is confirmed by calling telecom, whereafter own watches are synchronised
with the telecom time.
 At 10:55 the bid box is unlocked in the presence of the two persons, whereafter the bid box is emptied
and the bidders put in a canvass bag provided for this purpose. If there are a few bidders involved,
the use of a canvas bag may be dispensed with.
 At 11:00 sharp the outer opening of the bid box is closed, the bid box is inspected to ensure that it is
completely empty, the door of the bid box is locked, the canvas bag is locked and taken to the sorting
table where it is unlocked and the contents deposited on the sorting table.
 The bid boxes should generally be open for 24 hours per day, 7 days a week. However, the bid boxes
are to be closed at the closing time for bidders for about 1 hour, to compel bidders to hand in their late
bidders and obtain receipts for such late bidders
 Sorting of envelopes. Each envelope is stamped with a stamp indicating the date and time (11:00)
that it was received. The bidders are sorted numerically according to the closing dates, together with
the bidders that have been taken from the relevant “Pigeon-Holes” earlier on. Late bidders must be 161
kept in an allocated “Pigeon-Hole” until all bidders received timeously are dealt with, where after they
are handed to the supervisor for the necessary attention.
Preparation prior to opening of bidders




The bid receipt section draws the following and place it on the sorting table:
The files of all those bidders that will close on a specific day.
The bidders previously posted, received and placed in the “Pigeon-Holes” for the
specific day.
The bidders deposited in the bid box, removed earlier on and applicable for the
specific day.





Opening of bidders for a specific date. Concerning the bidders for the date involved, all envelopes
are opened on two sides to ensure that no documents are left inside. If an envelope contains any
loose pages, these must be stapled to the bid document. Care must be taken that the respective
bidders are kept separately. In order to achieve the object of transparency, bidders must be opened in
public.
Verification of opened bidders. Place all the bidders received and opened in the relevant file and
hand to the supervisor. The supervisor checks each bid to ensure that all the documents have
reference to the correct bid and reads out the names of all bidders.
Opened envelopes. The Supervisor of the Bid Receipt Section checks all the envelopes
for the specific day to ensure that no documents are left behind. The empty envelopes are then bound
together and kept in a cabinet for approximately three months, whereafter it can be discarded.
Unmarked envelopes. In the event that envelopes have not been endorsed in the required manner
and the bid particulars thus not displayed on the outside, the envelopes may be opened by the
Supervisor of the Bid Receipt Section to establish the bid number and closing date. This information is
then endorsed on the outside of the envelope, where after the envelope is sealed and placed in the
appropriate “Pigeon-Hole”, if it is not a late bid.
Bidders from only or sole suppliers. If a bid was originally invited from one bidder only, or sole
bidder, the bid may be opened if it is received prior to the closing date. If more than one bidder was
invited to bid, all the bidders must be opened in the normal manner on the closing date and directly
after the closing time.
162
OPENED BIDDERS



Authentication. All bidders received are perforated, or marked in a manner
unique to the Bid Receipt Section to prevent the inclusion of late documents or
replacement of documents already received. The bidders are also stamped
with a number so that the total number of bidders received for a specific bid
can be controlled.
Alterations on bidders. The bidders are all checked for any alterations
made by the terderer and, if applicable, submitted to the supervisor of the Bid
Receipt Section for initialling, to confirm that personnel attached to the
procurement section did not make the alterations.
Bid receipt register. All bidders sorted per specific bid number on the day
that they are opened, are recorded in a bid receipt register by the bid receipt
section. The following minimum information is required in the register:





Bid number
Closing date
Bidders received and the numbers allocated thereto.
Names and signatures of two persons opening the bidders.
Forwarding to users. In the case of bidders received by the office of the
Department Bid Board, a covering letter, that contains the names of bidders, is
despatched either by hand, or by post together with the bidders received, to
the relevant Department.
163
LATE BIDDERS

General. A late bid is not opened, except where the envelope was not endorsed with the
bid number and/or return address. Bidders are late if they are received at the address
specified in the bid document, after closing time (11:00) on the specified date. No late
bidders shall be admitted for consideration, except under the following circumstances:

Initial steps in handling a late bid. The bid receipt section is to establish the reason for the late
bid, as the delay could have been caused by an official at the address where the bid had to be
delivered, with the result that the bid could then be allowed for consideration. The initial steps in
the handling of a late bid differ depending on the manner in which it was received. The initial steps
taken for the three different categories are as follows:




Late bid handed in by hand. Receive the bid and immediately affix the stamp indicating the date and precise
time of receipt on the envelope. Issue a receipt indicating the bid number, date and exact time of receipt, name
of bidder, reason for late submission and the name of person handing in the late bid. Obtain the signature of the
person submitting the late bid, sign the receipt and hand the original copy of the receipt to the person.
Bid deposited in the bid box after closing time/date. Receive the late bid from the sorting clerk and fill in the
necessary information in the designated spaces of the additional stamp affixed to the envelope and which
contains the following:

Bid removed from bid box at 11:00 on …

Bid closed

Signature
Late bid received from registry. Affix a stamp indicating the date and exact time received from the registry.
Final steps in handling a late bid. All late bid are to be returned to the bidder, under cover of an
explanatory letter.
164
EVALUATION OF BIDDERS


Recusation from handling of bidders - It may
occur that procurement is to be done for the specific
requirement of an official of a procurement section.
In such an event, the official concerned must recuse
him/herself, where bidders for such a requirement
are being processed.
Scrutiny of bidders - It is imperative that all bid
documents must be thoroughly studied to ensure
that they comply in all respects with the stipulations
of SCM regulations.
165
Correctness and availability of
documents

Study the bidders thoroughly to establish the following:




All necessary certificates and the tax clearance certificate issued by the SA
Revenue Services are correctly completed, signed in ink and are in the original.
All necessary forms are correctly completed, signed in ink and are in the original.
Necessary documents such as Bank Guarantees, Certificate, Deposits, Reports
and Sureties are attached.
Correctness and availability of information. Study the bidders
thoroughly to establish the following:



Prices and delivery periods indicated as firm or not.
Basis of delivery.
Any other information furnished by the bidder in a covering letter, such as
offering an alternative product, setting of own conditions, comments on concept
formal contract, etc.





Samples. Establish whether the required samples were included.
Comparative prices. Calculate the comparative prices by:
Deducting preferences.
Adding additional costs as specified by the bidder, if applicable.
Deducting unconditional discounts where offered, if applicable.
166
Preferences for equity ownership


Establish position of bidders with regards to equity ownership in respect of historically
disadvantaged individuals (HDI). Provided that a person who obtained South African
Citizenship on or after the coming to effect of the interim constitution, is deemed not to be an
HDI.
Preference point system. Calculate the number of points gained in respect of the following:

The 80/20-preference point system must be used to calculate the points for price in respect of
bidders/procurement with a rand value equal to, or above R500 000. The department may,
however, apply this 80/20-point system for procurement with a value less than R500 000, if and
when appropriate.

The 90/10-preference point system must be used to calculate the points for price in respect of
bidders/procurement with a rand value above R500 000.
 Formal Contracts. When formal contracts are involved, the Legal Division is to be
consulted to ensure that bidders have noted and accepted the contents thereof, and have not
responded with counter-proposals. In the event of counter-proposals, the Legal Division will
investigate and pronounce thereon. The inputs of the Legal Department in this regard is thus
of vital importance.
 Comparative Schedule - Scoring. After scrutiny of the bidders received, they are
scheduled on a comparative schedule and submitted for evaluation and formulation of a
recommendation to the BEC. It is imperative that the schedule contains the maximum
information to make the evaluation of the bid easier.
167
Validity of bidders



Check the diary for pending dates to ensure that recommendations
are made in good time to be verified and submitted for approval and
that letter of acceptance may be posted before the validity of the bid
expires.
If recommendations have not been received, enquiry must be
directed to the procurement section concerned, as well as initiating
the process to extend the validity of the bidders if necessary.
On receipt of the recommendation ascertain whether offers are still
valid. If not, request all bidders in writing to extend the validity of
their offers. Extension of thirty days is usually required and may be
requested by facsimile. The responsibility to timely request and
finalise extension of the validity periods of bidders rests with the
procurement office.
168
Bid Adjudication Committees


Role. The role of the bid committees is to adjudicate bids submitted
and, either award them or recommend acceptance thereof to higherlevel committees.
Functions. The functions to be performed by the BAC are the
following:





To objectively evaluate and award bids or recommend to higher-level
committees, officials or AO the acceptance of successful bidders.
To give guidance in respect of procurement policy matters.
To exercise overall control concerning the compliance with directives and
procedures.
To ensure procurement procedures are efficiently complied with.
The BAC comprises of the following members:


The Chairperson, with the rank of at least a Director and appointed by the
AO. The Chairperson is to preside over each meeting.
Three additional knowledgeable members, of whom at least one is to be a
SCM functionary, as appointed by the official who has been delegated to
procure supplies and services. The members must assist in deciding on
matters submitted for decision.
169
Bid adjudication committees
(1) The bid adjudication committee must –
(a) consider the report and recommendations of the bid evaluation committee; and
(b) either –
(i) depending on its delegations, make a final award or a recommendation to
the AO to make the final award; or
(ii) make another recommendation to the AO how to proceed with
the relevant procurement.
(2) The bid adjudication committee must consist of at least four senior managers of the
municipality or municipal entity which must include –
(i) the chief financial officer or, if the chief financial officer is not available,
another manager in the budget and treasury office reporting directly to the
chief financial officer and designated by the chief financial officer; and
(ii) at least one senior supply chain management practitioner who is an official of
the municipality; and
(iii) a technical expert in the relevant field who is an official, if such an
expert exists in an advisory capacity.
170
Bid adjudication committees
(3) The AO must appoint the chairperson of the committee. If the chairperson is absent from a
meeting, the members of the committee who are present must elect one of them to preside at
the meeting.
(4) Neither a member of a bid evaluation committee, nor an advisor or person assisting the
evaluation committee, may be a member of a bid adjudication committee.
(5) (a) If the bid adjudication committee decides to award a bid other than the one recommended by
the bid evaluation committee, the bid adjudication committee must prior to awarding the bid –
(i) check in respect of the preferred bidder whether that bidder’s municipal rates and taxes and
municipal service charges are not in arrears, and;
(ii) notify the AO.
(b) The AO may –
(i) after due consideration of the reasons for the deviation, ratify or reject the decision of the bid
adjudication committee referred to in par (a); and
(ii) if the decision of the bid adjudication committee is rejected, refer the decision of the
adjudication committee back to that committee for reconsideration.
(6) The AO may at any stage of a bidding process, refer any recommendation made by the
evaluation committee or the adjudication committee back to that committee for reconsideration
of the recommendation.
171
(8) AO decides to award the bid other than that recommended by the bid adjudication committee for
bids above, R10m, S114 of the Act must be complied with within 10 working days.
Bid Adjudication Sub Committees

Evaluation Committee. The evaluation committee evaluates bids for
recommendation to the Bid Adjudication Committee.

Bid secretariat. The Bid Secretariat must comprise of members of the procurement office,
which will best support the applicable BAC and perform the role of the Secretary of the BAC
concerned. The bid Secretariat will see to the administrative matters of the various evaluation
and adjudication committees. This will entail the following:
 Establish from the bid documents whether the applicable directives have been complied
with to ensure a valid bid.
 Establish from the contents of the bid documents and the recommendations compiled
by the users of the following:
 In the case of a sole bidder whether the price is reasonable
 Whether the price and delivery periods are firm or not. In respect of non-firm
prices, whether there is reference to any price indices according to which price
escalation will be calculated.
 The calculated comparative prices and the points gained according to a
preference or evaluation point system.
 Whether the offer complies with specification.
 The order of the bids based on comparative prices and points gained for equity
ownership.
 To ensure that the motivations, provided by the user for the passing over of bids, which
are lower in price or higher on points, give sufficient reasons for it.
172
Bid Adjudication Sub Committees



Co-opted Members. The Chairperson of the various
evaluation and adjudication committees approves that
members may be co-opted to attend meetings on an
ad hoc basis if it is necessary. This may include the
user or his/her representative.
Quorum. The Chairperson and two full members one
of which must be a SCM functionary form the quorum.
Meetings. Bid Adjudication and Evaluation
committees are to meet regularly so that matters to be
dealt with by them are not delayed.
173
Bid Adjudication Sub Committees






Right to Vote. All full members of the committees have the right to vote. The Chairperson
has a casting vote as well as a deliberate vote. Co-opted members have no right to vote.
Method of voting. The raising of the hands will do, unless at least two-thirds of the
members present decide on voting by secret ballot.
Minutes. The minutes of the BAC meetings must be compiled in a brief, clear and impartial
manner directly after the meetings. All decisions, with the specific reasons against each bid
for the awarding, recommending or non-acceptance of bids, must be reflected in the minutes
for any future enquiry. Should a member want a specific matter to be recorded, other than a
decision, it must be formally requested. A members’ reason for a dissenting voice must also
be recorded. Correct minuting of decisions will enable procurement officials to reply to any
query on bids dealt with. The minutes, signed by the Chairperson, will serve as proof of the
decisions of the meeting.
Comparative Schedules. Bids within the Department are accepted, referred back,
cancelled or not approved by the signing of the comparative schedules by the chairpersons
of the Bid Adjudication committees concerned. This will allow bids to be processed further.
Validity of bids. Bid Secretariats must ensure all actions are directed at finalising bids
without delay. The requirement to finalise bids within the validity periods of bids cannot be
over emphasised. The necessity to request the extensions of validity periods of bids must be
the exception. If the validity period is allowed to expire and bids increase their bided price,
avoidable expenses will occur.
Register. All members will sign a register at each meeting serving as attendance register,
as well as the prescribed undertaking to confidentiality of that meeting.
174
Rights/Powers

The rights/powers of the Chairperson are as follows:





The authority to chair the meeting.
Rulings on points of order are final and may not be questioned.
May adjourn a meeting.
May withdraw any proposal or other matters for discussion
before it is put to the vote.
The Chairperson retains all his/her rights as a member.

The rights/powers of a member are as follows:




Have advance knowledge of the agenda
Submit proposals and participate in discussions
May have a dissenting voice, and have reasons therefore recorded
A member may also excuse himself or herself if feelings strongly
about an issue. The meeting will continue depending on the
quorum requirements
175
Duties + Responsibilities (CP)










Maintain order during a meeting and ensure that business is
conducted in an orderly manner.
Before opening the meeting ensure that it is properly constituted
Protect the rights of every member.
Regulate participation in discussions.
Deal with items in sequence of the agenda and ensure that
members do not indulge in irrelevant discussions/tedious repetition.
Ensure that members know exactly on what they are required to
vote.
Ensure that only one member holds the floor at any one time.
Provide guidance by directing the meeting but shall not dominate.
Conduct meetings in a formal manner.
Sign comparative schedules after approval by the bid committees.
176
Duties + Responsibilities (M)










Be fully conversant with the powers and limitations of the
committees they are serving in.
Have a working knowledge of SCM regulations and standing
delegated powers.
Attend all meetings.
Be punctual for meetings and stay for the duration of a meeting.
Prepare properly for each meeting by studying the agenda and
preparing thoroughly therefore.
Be familiar with meeting procedures in order to make a contribution
in the correct manner.
Refrain from repeating what other members have already said.
Respect that time is precious.
Become familiar with the rights and duties of members in order to
expedite proceedings.
Listen attentively to what other members have to say.
177
Prohibition on awards to persons in the
service of the state
The AO must ensure that irrespective of the procurement
process followed, no award may be given to a person –
(a) who is in the service of the state; or
(b) 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
(c) a person who is an advisor or consultant contracted
with the municipality or municipal entity.
178
Awards to close family members of persons in the
service of the state
The notes to the annual financial statements must disclose particulars
of any award of more than R2000 to a person who is a spouse, child
or parent of a person in the service of the state, or has been in the
service of the state in the previous twelve 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.
179
Declaration of Interest Statement
As a member of the bid evaluation panel, you are required to declare any interest,
as far as you are aware that you have, in any of the bidders and their consortium
member companies.
An interest includes, but not limited to:-








Your shareholding in a bidding company or any of its consortium member companies.
Clearly indicate the extent of your shareholding and links to the bid
Family members, friends or associates employed by a bidding company or any of its
consortium members. Clearly indicate the extent of this relationship and links to the bid
Family members, friends or associates’ shareholding in a bidding company or any its
consortium members. Clearly indicate the extent of their shareholding and links to the
bid.
Family members, friends or associates contracted to provide services to a bidding
company or any of its consortium members. Clearly indicate these individuals links to the
bid.
You, or any of your family members, friends or associates receiving, or in agreement to
receive, any gifts, favours, payments, sponsorships, subsidies, or any other benefits from
any bidders or any members of any of the consortia, within the last 12months of the date
of this declaration.
Any other personal interest that may reasonably be deemed relevant to protect integrity of
the bid evaluation.
180
Risk management

Risk management. Users must consider risk management in the development of
specifications. This is a structured process that must performed to ensure that risks
are understood, minimised and effectively managed. The risk management process
involves the following:






Evaluation criteria. The evaluation criteria should be described ahead of the
evaluation process and included in the specification. The exact details that are
included in the Bid document may vary, but the overall criteria must be included. This
ensures that the bidding process is transparent and adheres to ethical practices.
As a guide, there are four evaluation areas that should be included in the evaluation
process:





Identifying the risks.
Evaluating the seriousness of risks.
Mitigating or minimising the risk.
Monitoring risks.
Administrative compliance;
Technical evaluation;
Commercial evaluation; and
Empowerment evaluation.
Bid closing period and validity period. In developing the specification the users
must determine the date that the service or product is required. This provides a basis
for establishing the submission date and validity period of the quotations and/or bids.
181
Logistics management

Part of supply chain management that
plans, implements and controls the
efficient, effective flow and storage of
goods, services and related information
from the point of origin to the point of
consumption to meet customer
requirements
182
Logistics – cost management



Identify and include all cost elements
Manage costs to the lowest possible expense
Major elements include:






Inventory handling cost
Lot quantity costs – material handling and
procurement
Order processing and information costs re demand
forecasting and planning
Warehousing costs
Transportation costs
Cost of lot sales
183
Logistics management
AO must establish an effective system of logistics
management in order to provide for:
• the setting of inventory levels,
• placing of orders,
• receiving and distribution of goods,
• stores and warehouse management,
• expediting orders,
• transport management,
• vendor performance,
• maintenance and
• contract administration.
184
Order administration
Duties of officials in charge of placing orders separated from other procurement
mechanisms e.g. requesting of quotations or the tender process in order to
avoid negative implications.
Appoint the officials that are entrusted with the issuing of orders in writing.

FINANCIAL AUTHORITY (FA)
 Financial Implications of an Order. When the official authorised to issue an
order, receives the procurement file from pre-order administration, he/she must
ensure that the ‘funds certificate’ as prescribed by the finance section, has been
obtained and that funds have been allocated for the purchase.

CONTROL OVER ORDERS
 Official order forms. All government orders must be placed with the order form
Z492.
 Allocation of serial numbers - the forms are to be provided with serial numbers
– completeness controls.
 Blank Order forms. The order forms are face value forms. The misuse thereof
can thus have serious financial implications – safeguarding of assets.
185
Order administration
Order forms in stock. All unused order forms :
 Safeguarded by being locked away in a safe place;
 Accounted for by quantity and serial number
 Issued per required quantity and serial number
against signature of the recipient; and
 Verified regularly.
186
VERIFICATION AND SIGNING



Original Orders. The procurement official must compare the
orders with the source documents and checks it for
correctness.
Signing of orders. Prior to the despatching of orders to or
collection of orders by contractors, the orders are to be signed
by the procurement officials concerned and only those who are
duly empowered and delegated to sign the orders. The
signatures are to appear on each copy of the order, and are to
be over both the official stamp of the procurement section and
printed number, rank and name of the procurement officer
concerned.
Source documents. The source documents must be kept for
inspection purposes with the file copy of the order.
187
Inventory analysis
188
Holding inventory

Reasons
Cost savings and hedging against price
increases
 Protection against demand and lead time
uncertainties
 Purchasing costs

189
Symptoms of poor inventory
management







Increase in number of outstanding orders
Increase in the Rand investment in stock
Differences in stock turnover rates
Increase in the number of out-of-stock
occurrences
Lack of storage space
Excessive increases in inventory carrying costs
Increases in obsolete inventory or expired stock
190
Inventory management
performance measures








Return on inventory investment
Inventory investment/working capital investment
% increase in stock level
Stock write offs
Customer service levels over time
Inventory accuracy – counts
Number of out-of-stock instances
Percentage of demand supplied from stock
191
Just in time stock
management
192
Definition

Disciplined and continuous problem
solving approach which eliminates all
forms of wastage by employees, suppliers,
product design and process design to
deliver all goods and services at the right
time and place
193
Critical elements







Commitment by top management to JIT and
continuous improvement and elimination of
waste
Participatory management approach
Increased emphasis on TQM
Reduced purchase quantities
Regular deliveries and highly reliable delivery
schedules
Reduction in the number of suppliers
Shortened and highly reliable internal and
external lead times
194
Advantages
Lower inventory levels
 Small buffer stocks – minimum stock
levels
 Quality improvement
 Cost savings

195
ABC inventory management
196
ABC inventory management

Line items graded based on quantities
kept
 A-Items - high monetary value, not high
quantities are tightly controlled and
monitored - never stock outs on A items
 B-items require less control and
monitoring, lower monetary value and
quantities, stock is kept on hand
 C-items are only ordered when
requested by clients
197
ABC - example
Item code
1
2
3
4
5
6
Totals
Average
%
ABC system
investment average
units
1 700
21.3%
A
270
3.4%
C
1 440
18.1%
A
720
9.0%
B
3 300
41.4%
A
540
6.8%
C
7 970
100%
198
Disposals and Asset
Management
Asset Disposals
 Asset Maintenance
 Fixed Asset Management

199
Disposal management
(1) The AO must establish an effective system of disposal management for
the disposal or letting of assets, including unserviceable, redundant or
obsolete assets, subject to sections 14 and 90 of the Act, which must be in
terms of the municipal financial regulations.
(2) The disposal of assets must–
(a) be by one of the following methods –
(i) transferring the asset to another organ of state in terms of a
provision of the Act enabling the transfer of assets;
(ii) transferring the asset to another organ of state at market related
value or, when appropriate, free of charge;
(iii) selling the asset; or
(iv) destroying the asset;
200
Disposal management
(b) provide that :(i) immovable property may be sold only through a competitive
bidding process except when the public interest or the plight of the
poor demands otherwise;
(ii) movable assets may be sold either by way of written price
quotations, a competitive bidding process, auction or at market
related prices, whichever is the most advantageous;
(iii) in the case of the free disposal of computer equipment, the
provincial department of education must first be approached to
indicate within 30 days whether any of the local schools are
interested in the equipment; and
(iv) in the case of the disposal of firearms, the National Conventional
Arms Control Committee has approved any sale or donation of
firearms to any person or institution within or outside the Republic;
201
Disposal management
(c) furthermore ensure that –
(i) immovable property is let at market related
rates except when the public interest or the
plight of the poor demands otherwise; and
(ii) all fees, charges, rates, tariffs, scales of fees
or other charges relating to the letting of
immovable property are annually reviewed; and
(d) ensure that where assets are traded in for
other assets, the highest possible trade-in price
is negotiated.
202
THE DISPOSAL PROCESSES

Composition of stores disposal boards
 Boards to be established depending on the
workload and geographical requirements.
 Each board must have a chairperson, appointed
in writing and his/her duties must be detailed in
full.
 The chairperson must be assisted by technical
experts.
 Persons in charge of stores to be disposed of,
may not serve on stores disposal boards or sign
disposal certificates.
203
Proceedings of disposal boards




The board convenes and inspects the stores in loco;
 gathers the necessary evidence by taking down written
statements, which can be supplemented by its own findings if
necessary;
 compiles its recommendation; and
 presents its report in duplicate to the convening authority.
Each member of the board is to sign the board’s report. Should a
member not concur with the recommendations of the board, he/she
is not to sign the board’s report, but is to submit a minority report.
Minority reports are to be submitted to the convening authority
together with the board’s main report.
 The convening authority now confirms the recommendations;
or
 refers it back to the board for further investigation if found
necessary; or
includes additional executive instructions if found necessary;
forwards the necessary instructions, together with the copy of the
report, to the district/warehouse responsible for the execution of the204
confirmed/amended recommendation;