Presentation to the Parliamentary Portfolio Committee on Public Works

11 November 2014

cidb Annual Report - 2013/14

Presentation layout

Legislative Mandate Priorities, Achievement and challenges in

2013/14 Annual Performance Summary Employment equity as at 31 March 2014 Financial report Audit Outcomes and Corrective Action Plan

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cidb Mandate

The mandate of the cidb is to:

Provide strategic leadership to construction industry stakeholders;Promote sustainable growth of the construction industry and the participation of the emerging sector in the industry;Promote improved performance and best practice of public and private sector clients, contractors and other participants in the construction delivery process;Promote uniform application of policy throughout all spheres of government and promote uniform and ethical standards, construction procurement reform, and improved procurement and delivery management – including a code of conduct;Monitoring and regulating the performance of the industry and its stakeholders, including the registration of projects and contractors.

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2013/14 - Priorities

Highlights for 2013/14

Priorities– Manage and improve the Construction Registers Service

comprising: • Register of Contractors• i-tender/Register of Projects– Regulations: Review and align the Construction Industry

Development Regulations, 2004 as amended– Contractor Development– Monitoring Industry Performance– Industry Skill delivery– Development of Best Practice standards– Infrastructure delivery improvement– Compliance and regulations enforcement

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Annual Performance Summary Achievements - 2013/14

Regulation Amendments – July 2013

• Construction Industry Development Amendment Regulations - Gazetted 2 July 2013– Annual Turnover reduced– Registered Professionals removed– Method B removed– Track Record reduced– Joint Venture Calculation

improved– Clarification on Classes of Work

between General Building and Fencing

– Tender Value Limits• Provision for mandatory, periodic review

Construction Registers Service (CRS)

• Production stabilised– 90% achievement for processing contractor

applications within 21 working day target. Target of 91% missed due to a backlog of applications brought into the first quarter of 2013-2014 due to implementation of new registration software system. All targets met after the first quarter.

– 100% of queries were administered within the stipulated turnaround time of 48 hours against target of 95%.

– 96% of data capture errors for processing grade 2–9 applications were rectified within a period of 10 working days against target of 95%.

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Construction Registers Service (CRS) – Growth in Number of Registrations: 2011Q2 to 2014Q1

Significant growth in registrations: Grades 7 to 9

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State of Transformation: Growth in Number of Registrations: 2011Q2 to 2014Q1 – Black Owned

Slower rate of growth for black owned contractors in Grades 7 to 9. Transformation and development focus required.

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Construction Registers Service (CRS) – Increase in Proportion of Black Owned companies in General Building and Civil Engineering

The proportion of black owned companies at higher grades is increasing but at a slow pace. Transformation focus required at Grades 7 to 9 in General Building and Civil Engineering. The low numbers of registrations (not shown in this slide) of black ownership in specialist classes e.g. electrical requires a focus at Grades 2 to 9.

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Construction Registers Service (CRS) – Women Ownership: General Building and Civil Engineering

Around 49% of Grade 2 to 4 contractors are women owned but this decreases sharply at Grades 7 and 8 at 22 % in Civil Engineering (CE) and around 27% in General Building (GB). It is to be noted that overall women ownership has declined from 47% in GB and 49% in CE at the end of the first quarter of 2013 to 42% in GB and CE at the end of the first quarter of 2014.

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cidb Practice Notes

Practice Note 30: Blacklisting of Contractors for Non-Performance (May 2013): Actions that organs of State can take against contractors for non-performance.  

Practice Note 31: Requirements for Registered Professionals on Construction Works Contracts (February 2014): Guidelines to clients to specify eligibility requirements for registered professionals to undertake the management of the construction works contract. 

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Best Practice Standards: Contractor Performance Reports

cidb Standard for Contractor Performance Reports for use on Construction Works Contracts (Grades 2 to 9): Provides for a uniform and consistent method of assessment of the performance of a contractor:•time, cost and quality management;•health and safety management;•management of site conditions; and•management of subcontractors (including payment).

Published in Government Gazette, August 2013.

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Best Practice Standards: Construction Management Systems

SANS 1393 Construction Management Systems; Requirements: Customised standard based on recognisable construction industry minimum standards covering:•health and safety management;•quality management; and•environmental management (covering air, water, land and waste).•This cidb Standard allows for expansion and conversion to meet ISO or OHSAS requirements in the future. The Standard has been developed with the endorsement and in collaboration with SABS. It was released by the SABS in December 2013 as SANS 1393 Construction Management Systems; Requirements.

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Best Practice Standards: Developing Construction Skills

cidb Standard for Developing Skills through Infrastructure Contracts: Provides for a contract participation goal for workplace training on public sector contracts in tender Grades 7 to 9.

Published in Government Gazette, August 2013.

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Best Practice Standards: Developing Construction Skills

cidb Standard for Developing Skills through Infrastructure Contracts: Provides for a contract participation goal for workplace training on public sector contracts in tender Grades 7 to 9.

Published in Government Gazette, August 2013.

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Monitoring Industry Performance

Construction Industry Indicators (CIIs): Indicators of the performance of the industry focusing on clients, the client’s agent / consultant and contractors.

Quarterly Monitor: Overview of supply and demand, and structure of industry (state of contractor development and transformation).

SMME Business Conditions Survey: Indicators of business conditions, competition, employment and access to credit in Grades 2 to 8 contractors

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Construction Quality

• Clients were neutral or dissatisfied with the performance of contractors on 12% of the projects surveyed in 2013.

• Around 8% of the projects surveyed had levels of defects which are regarded as inappropriate.

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Monitoring compliance to i-tender/ Register of Projects

cidb Compliance Monitor: (Quarterly) indicators of the level compliance and non-compliance with iTender/Register of Projects.

National and SOC

ProvincialMetropolitan

CouncilsHigh Capacity Municipalities

72% 63% 66% 70%67%

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Compliance to the Code of Conduct • The cidb is mandated to investigate all cases of transgressions to the

Code of Conduct for all parties engaged in construction procurement.• Such cases include, among others:

– fraudulent activity during registration on the Register of Contractors (RoC)

– procurement fraud– collusive behaviour– deviations to the requirements of the cidb regulations and

supporting prescriptions• Formal enquiries were conducted on 19 cases for this financial year. Of

these, 3 cases were withdrawn and the respondents on the remaining 16 cases were found to have been guilty.

• The cidb’s investigation into collusive practices by 15 firms found guilty by the Competition Commission have commenced. The outcome of the investigation will be reported in the next financial year.

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Improving compliance to cidb prescripts

• Capacitation sessions were conducted at no charge to public sector clients on the following learning areas:– Legislative requirements for construction procurement– SCM powers and functions– Procurement documents for construction and

engineering projects– Solicitation of tender offers– Evaluation of tender offers– Implementation and management of infrastructure

projects

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Strengthening Delivery Capacity

• The Infrastructure Delivery Improvement Programme (IDIP) was primary aimed at improving infrastructure delivery in the education, health and public works sectors at national and provincial levels.

• The IDIP has had a positive impact on public sector delivery as reported at the quarterly Technical Committee meetings hosted by the cidb.

• Technical support and training on the Infrastructure Delivery Management System (IDMS) has continued in this financial year in the roll out of the IDMS across government departments.

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Knowledge sharing in Construction Procurement• Construction Procurement Officer (CPO) forums were established in

the 2012/13 financial year and continued to be rolled out in the 2013/14 financial year with great success.

• The purpose of the CPO Forum was to facilitate and improve knowledge sharing on:– Procurement Best Practices– Contractor Development– Legislative Framework– Compliance to cidb prescriptions

• The CPO Forum caters for representation by the Heads of Projects and SCM in the public sector. These individuals have provided robust and meaningful debates on construction matters.

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Legislative improvements• Draft standards for Construction Procurement Competence have

been developed as part of the strategy to build construction procurement skills within the public sector. The standards aim to address the skills deficiencies among procurement practitioners and to set the threshold for the assessment of training outcomes. The standards will be finalised in the 2014/15 financial year.

• Consultation on the draft regulations for Prompt Payment and Dispute Resolution were completed. The regulations will be finalised in the 2014/15 financial year. These regulations seek to – provide greater certainty on payment to service providers – optimise on payment periods to minimise interest charges for the

client. – deter deliberate late payment by clients as unjustifiable and

ethically unacceptable

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Provincial offices and Contractor Development (PCD) Enterprise Development Support

National Contractor Development Programme (ncdp)– Policy review process– Client Capacitation was completed at all

provinces to promote awareness of NCDP framework and guidelines at PCDF’s and 1-1’s: Web-based E-Learning ‘RICKY’ system also utilised. Municipal outreach with SALGA/CoGTA.

– Provincial contractor training in all 9 provinces completed as support to contractor development and increased participation of the emerging sector.

– NCDP monitoring and evaluation framework was approved by the Board, NCDP and MinMEC to assist in monitoring compliance with framework.

– On-going CIDB CD Strategy implementation

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Provincial offices and Contractor Development (PCD)

Enterprise Development Support

Provincially:

- Stakeholder engagements: PSLM’s and PCDF’s x4- Contractor ‘business management’ training x2 (over

400 contractors)- Catalytic ED projects- 1500 contractors in + 20 CDP’s

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Provincial offices and Contractor Development

Quality services at Provincial offices

– Quarterly contractor satisfaction report indicated that contractors were generally (+90%) satisfied with overall service provided: Remedial and corrective action taken for all suggestions and complaints surveyed.

– Contractor Tips and advice brochures issued to more thousand contractors.

– Grade 1 registration within 48 hours was compromised and the 96% target was missed. KZN, GP, EC and NC experienced operational challenges including staffing, and increased contractors influx contributed to the 72% deliverable – these have been addressed and there is + 85% compliance in 2014/15.

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Challenges Highlights - 2013/14

Highlights for 2013/14

ChallengesThe targets that were not achieved are as follows:

90% of contractor applications processed within 21 working days against a target of 91% due to a backlog of applications carried into the first quarter of 2013-2014 as a result of the implementation of the new registration software system.

Draft model for the competence standard was developed but not approved by the Board at the end of financial year.

Anti corruption model to promote transparency and combat Fraud in the construction industry was developed but not approved by the Board at the end of financial year.

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Highlights for 2013/14

Challenges

Lengthy consultative process with stakeholders resulted in :– Draft standard for gateway reviews to be delayed to

ensure it is aligned to standard for Delivery. Management System to be published by National Treasury.

– Revision and review of cidb prescripts to be delayed in finalisation.

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2013/14 EMPLOYMENT EQUITY

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Employment EquityThe EE status as at end of March 2014

Occupational Levels

TotalMale Female

Foreign Nationals

A C I W A C I W MaleFemal

e

Top management 1 0 2 1 1 0 1 0 0 0 6

Senior management 7 1 0 0 4 0 0 0 0 0 12

Professionally qualified and experienced specialists and mid-management

12 1 2 1 9 0 0 1 0 0 26

Skilled technical and academically qualified workers, junior management, supervisors, foremen, and superintendents

13 1 0 0 19 2 0 1 0 1 37

Semi-skilled and discretionary decision making

28 2 1 1 47 6 1 3 0 2 91

Unskilled and defined decision making

0 0 0 0 2 0 0 0 0 0 2

TOTAL PERMANENT 61 5 5 3 82 8 2 5 0 3 174

Total Fixed-Term Contracts 5 1 0 0 8 1 0 0 0 0 15

Employees with disabilities 0 0 0 0 0 0 0 0 0 0 0

Temporary employees 4 0 0 0 8 1 1 1 0 0 15

GRAND TOTAL 70 6 5 3 98 10 3 6 0 3 204

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Employment EquitySummary Staff Breakdown

Employment Equity Statistics The employment equity levels at the cidb show a huge concentration of African

females in the lower ranks than in the higher ranks.

Furthermore, the higher ranks show not only a lower concentration of female employees but also lower levels of African candidates in general. There is an urgent need to address the employment of female employees in higher ranks.

There are no disabled employees employed at the cidb and this situation needs to be addressed.  

No. of Staff Representative %

Males 84 41%Females 120 59%People with disability 0 0%Total staff 204 100%

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2013/14 FINANCIAL REPORT

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Financial Performance (Actual vs. Budget)

ACTUALSRESTATED

RevenueRegister Revenue 47,448 59,562 -12,114 42,568 Interest Income 3,078 4,318 -1,240 4,142 Government Grant 72,361 72,361 - 67,614 Other Income 1,212 -1,212 840 Total Revenue 122,887 137,453 -14,566 115,164

Expenditure

Administrative Expenditure 45,131 48,978 -3,847 48,702

Personnel Expenditure 77,756 73,258 4,498 69,111

Finance Costs - 587 -587 2

Total Expenditure 122,887 122,823 64 117,815

Operating surplus/(deficit) - 14,630 -14,630 -2,651

Loss on disposal - -1,653 1,653 -434

Surplus/(Deficit) for the year - 12,977 -12,977 -3,085

BUDGET (R'000) ACTUAL (R'000) VARIANCE (R'000) 2012/13

2013/14

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2013/14 AUDIT OUTCOMES & CAP

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Unqualified Audit opinion Emphasis of matter:

Restatement of corresponding figures – provision for performance bonuses as per AG advice

Legal and regulatory: Additional matters:

Adjustment of material misstatements in the annual performance report & CFS – subsequently corrected

Compliance with legislation Expenditure management – prevention of irregular

expenditure (IE) and consequent management: this relates to IE for prior year/s

Other reports Investigation into the registration of contractors – still in

progress

Auditor-General’s report to cidb for the 2013/14 period

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Audit Findings Status to date

1. Consequence ManagementSufficient appropriate audit evidence could not be obtained that effective and appropriate disciplinary steps were taken against officials who incurred or permitted irregular expenditure, as required by section 51(1)(e)(iii) of the Public Finance Management Act. Investigations were not conducted into all allegations of financial misconduct committed by officials, as required by Treasury Regulation 33.1.1.  

In progress We are engaging with National Treasury (NT) to report on the internal control measures that have been put in place since the 2012/13 audit so as to give evidence of their effectiveness. NT will assess the reports and make a determination on the basis of the interventions that have been implemented. The second best option would be to treat the said transactions in terms of Practice Note 04 of 2008/09 .

Corrective Action Plan (CAP)

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AG Management Letter & Corrective Action Plan

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AG Management Letter & Corrective Action Plan

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THANK YOU!

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