NATIONAL CONTRACTOR DEVELOPMENT PROGRAMME Progress Update PARLIAMENTARY PUBLIC

NATIONAL CONTRACTOR DEVELOPMENT PROGRAMME Progress Update PARLIAMENTARY PUBLIC WORKS PORTFOLIO COMMITTEE : 18 AUGUST 2015

Slide 1 Presentation Outline Purpose of the report Background NCDP Objectives and evolution Statistics / Successes / Progress Challenges & CIDB interventions Recommendations

Slide 2 Purpose of the report The purpose of this submission is to appraise PPC on progress regarding the NCDP i. e: – progress to incorporate local government into uptake of the NCDP – the implementation of the National Contractor Development Programme (NCDP), within Public Works Stable – Successes and Challenges – cidb Pipeline initiatives / Strategy

Background: Why Contractor Developmen Slide 3 ? • The Construction industry as a Vehicle for Development and Transformation - Sustained growth of contractors - Meeting socio-economic objectives - Transforming the industry

Leadership Role of Public Works in Contractor Development Mandate Slide 4 – DPW being custodian of asset maintanance and with a huge infrastrcuture budget recognised the need to ensure meeting of socioeconomic objectives, and transformation of the industry, whilst spending on project and maintance projects… – …promote sustainable growth of the construction industry and the participation of the emerging sector… (CIDB Act 38 of 2000) – The 2008 DPW-CIDB MINMEC mandate to the CIDB was to design and drive the implementation of a Contractor Development Framework that must uniformly apply throughout South Africa in respect of registered contractors – NDPW Chairs the NCDP Steering Committee and oversee the NCDP implementation

Slide 5 Leadership Role of Public Works in Contractor Development Mandate ü 21 September 2012 : DPW Political Mi. NMEC endorsed NCDP ü 06 December : Minister Nxesi launches NCDP at KZN Extract 2012 from National DPW DG letter to cidb CEO: (03 October 2012): Min. MEC 6

Incorporation of local government (COGTA, SALGA and municipal interactions)… DPW and CIDB have heeded the DPW Min. MEC request for ‘incorporation of local government’ on the NCDP and for ‘collaboration with SALGA and COGTA’. DPW Min. MEC – March 2015 : Asked for further municipal interactions via MISA engagements Slide 6

Present N. DPW-IGR & Policy, CIDB, Date 08 November 2012 Resolution. Slide Purpose NCDP introduction 7 To be presented to DG. SALGA, COGTA, & MISA December 2012 government Presentation of NCDP to DG COG 2. Incorporation 03 of local N. DPW Policy and CIDB & DG Department of COG for buy-in for taking to Mi. NMEC To be placed on future Min. MEC agenda 11 February 2013 NCDP framework and guidelines COGTA political Min. MEC (COGTA, SALGA and municipal interactions)… DG’s, Ho. D’s, SALGA, officials noting and support – to be N. DPW Policy and CIDB, COGTA takenof to Political DPW and CIDB have heeded the DPW Min. MEC request for ‘incorporation local COGTA Min. MEC of 16 August 2013 government’ on the NCDP and for ‘collaboration with SALGA and COGTA’. SALGA - CIDB 08 May 2013 Way forward on SALGA and COGTA To present to SALGA NEC of support and municipal roll-out July-first engage & participate with provincial working group structures of May/ June SALGA Local Economic 16 May – 6 June 2013 Development and Infra planning Support from Provincial SALGA Capacitation and discussions structures with unanimous NCDP Working Groups (Councillors support for taking to SALGA and officials), CIDB NEC SALGA National Working Group 24 June 2013 - CIDB SALGA National Working Group SUPPORTED for NEC approval NEC adoption 27 June 2013 - CIDB SALGA NEC Support from WG and proposal for SUPPORTED for NEC approval NEC adoption 05 August 2013 Endorsement as Policy for APPROVED municipal promotion/ rollout COGTA Political Min. MEC 26 September 2013 Endorsement as Policy for APPROVED

• The N. DPW Min. MEC of March 2015 resolved: CIDB was to further now engage with the Municipal Infrastructure Support Agency - MISA to further support Municipal NCDP awareness and rollout: • The CIDB Executive and MISA CEO and Executive met and agreed on a strategy to forge cidb and NCDP collaborations. Between June and July 2015 all MISA Technical Consultants were capacitated on CIDB including the NCDP. Contractor Development policy assistance, and reporting will now form part of the input to municipalities receiving MISA support PROVINCE – MISA/ CIDB CAPACITATION DATE 1. Gauteng / HO 19 -June-15 2. Limpopo 23 -June-15 3. North-West 29 -June-15 4. Free State 3 -July-15 5. Northern Cape 7 -July-15 6. Mpumalanga 9 -July-15 7. Kwazulu-Natal 21 -July-15 8. Western Cape 24 -July-15 9. Eastern Cape 27 -July-15 Slide 8 Uptake and implementation at Local Government is a challenge

Slide 9 NCDP: OBJECTIVES • Improve contractor grading status • Increase black /women-owned companies in targeted categories • Promote sustainable contracting • Improved delivery and performance on infrastructure projects

Slide 10 NCDP definition of Contractor Development… CD is a deliberate and managed process to achieve targeted developmental outcomes that improves contractor: Components of Development: LEARNERSHIPS Grades 1 to 2 ENTERPRISE / CONTRACTOR DEVELOPMENT Grades 2 to 6 PERFORMANCE IMPROVEMENT Grades 4 to 7

Methods of delivering Contractor Development a. Direct (incubator) NCDP: Contractor Development Generic model (Incubator) WORK OPPORTUNITIES SCM TARGETS, ENTRY AND EXIT CRITERIA CONTRACTOR DEVELOPMENT PROGRAMME TRAINING, MENTORING, ENABLING ENVIRONMENT SKILLS, PERFORMANCE, EVALUATION, GRADUATION Slide 12 b. Indirect targeting (using procurement)

Slide 11 Contractor Development Indirect targeting Direct Targeting • Incubator Programmes • CDPS • Structured JVs • Subcontracting • Construction Management • Unbundling • Delivery • Empowerment, transformation • Sustainable emergence

Slide 13 a. Direct / incubator Guidelines: Guidelines for implementation of CDP’s (published September 2011 and also available at www. cidb. org. za)

b. In-Direct targeting (use of procurement/ packaging) Guidelines + cidb practice notes: Slide 14 practice notes 1 -33 Procurement methods in support of CD 1. 2. Unbundling Using Potentially Emerging Status 3. Using Joint Ventures 4. Using subcontracts 5. Bundling and Targeting – CIDB Practice Note 1 6. Term Contracts – CIDB Practice Note 1 Issuing of practice notes to support clients and consultants

Slide 15 Guidelines…. Tips and Practice Note #29…Clarity on ‘set-asides / ringfencing’ - Constitutionality: Section 217 a + b - Alignment to NT 2 Pract note of 2006 - Client capacitation support FACILITATING IMPLEMENTATION. . . - Practice note - Tip Brochure

Slide 16 NCDP: Evolution Towards Sustainable Contractors Workshops (2000 & 2005) CDP GUIDELINES 2011 DPW Mi. NMEC (2008) NCDP FRAMEWORKS (2008 and 2010) NCDP FRAMEWORK (2011) STATUS QUO REPORT (2009) BASELINE / M&E (2011)

Slide 17 Transformation (Jan 2015)

Slide 18 Supply; Black Ownership Of concern is that, overall, black ownership representation has not increased significantly over the past three years.

Slide 19 Supply; Black Ownership

Slide 20 Black Owned by Grading - All Provinces – All grades as at: August 2015 versus March 2011 2015 Designation Total Black 2011 % of Total Designation Total Black % of Total Owned 1 68 665 66 109 96 2 3 707 3 468 93 2 4292 3951 92 3 1 409 1 286 91 3 1370 1187 87 4 1 866 1 543 82 4 2111 1641 78 5 1 284 1 004 78 5 1834 1287 70 6 1 408 1 026 72 6 1394 956 69 7 740 484 65 7 554 284 51 8 283 134 47 8 190 62 33 9 115 22 19 9 126 10 8

What the stats are telling us (Summary) Slide 21 • Clients were neutral or dissatisfied with the performance of contractors on 16% of the projects surveyed in 2014 • From the stats it can be seen that around 95% of cidb registered Grade 2 to 4 General Building(GB) and Civil Engineering (CE) contractors are black-owned. • Furthermore, around an average of 86% of all Grade 5 and 6 General Building (GB) and Civil Engineering (CE) contractors are black-owned, while • around 70% of all Grade 7 and 8 General Building (GB) and Civil Engineering (CE) contractors are black owned. • Black-ownership of Grade 9 contractors is significantly lower – around 25% to 30%. • Of concern is that, overall, black ownership representation has not increased significantly over the past three years

Slide 22 10 -Year View; SA: GB & CE (backward looking) Contractor Upgrades (1 or more); 2005 Q 3 to 2015 Q 2; SA GB CE Maximum Grade 9 7&8 5&6 Total Number % 32 548 1 591 2 171 42% 75% 60% 62% 66 665 1 705 2 436 56% 77% 59% 63% About 80% of Grade 2 -4 contractors have upgraded by at least 1 grade

Slide 23 Incorporation of local government onto NCDP We conducted a Review and Assessed the Status Quo of CDPs within District and Metropolitan Municipalities and their State of Implementation Readiness. The analysis sought to establish: – Number of existing CDPs at municipality level within each province and their current state of adoption and implementation, and – Degree of alignment of the existing programs with the NCDP Framework and Guidelines

Slide 24 Findings of the review/assessment The degree of conformance to the NCDP Framework and Guidelines varies from municipality to municipality, but in general is low and needs addressing with the help of the cidb. In the next reporting cycle the CIDB has already scheduled sessions to continue client capacitation and alignment of CDPs to the NCDP Framework and guidelines

Slide 25 Analysing and Drawing some lessons… Province Eastern Cape Free State CDP Kwa. Zulu-Natal Limpopo Mpumalanga Northern Cape Gauteng North Western Cape Incubator COEGA (IDZ) Chris Hani DM (Vuk’uphile) Mainstream Outreach Masakhesonke SCI – Mainstream SCI - Outreach Contractor Development Programme (CDP) e. Kurhuleni (Vuk’uphile) Seda Construction Incubator (SCI) Vukuphile Dept. of Transport (Vukuzakhe) Contractor Develoment Programme IDT (Sakabakhi) Prov. Roads and Transport (Upington Hospital) Construction Incubator Programme (CIP) Vukuphile Department of Transport & Public Works (Senyuka) Number of Contractors 96 31 22 11 14 35 5 34 163 121 31 22 464 10 40 5 11 9 65 15 14

Slide 26 Registrations; CDPs: GB & CE

CDP Upgrades; 3 years; GB (forward looking) - Baseline One or more Contractor Upgrades; 2012 Q 3 to 2015 Q 2 Initial Grade Number % GB 7&8 0% 5&6 27% 2 to 4 48% 1 28% Total 35% Baseline Slide 27

CDP Upgrades; 3 years; CE (forward looking) - Baseline One or more Contractor Upgrades; 2012 Q 3 to 2015 Q 2 Initial Grade % CE 7&8 0% 5&6 46% 2 to 4 50% 1 46% Total 48% Baseline Slide 28

Current Status of DPW’s CD & CDPs Refer to report Annexure 1 for CDPs/ statistics Progress/ Initiatives: • • + 1500 DPW incubated contractors DPW SCM POLICY N. DPW CFO’s & SCM FORUM CAPACITATION SCM CIRCULAR CIP UPDATE/ APPROVAL N. DPW CHAIRING NCDP STEERING COMMITTEE FOSAD (DG to DG’s) NATIONAL CD FORUM Slide 29

Slide 30 Contractor Development • Improvements in: – targeted equity ownership – grading status – performance and quality of work

Slide 31 Performance of the contractor Clients were neutral or dissatisfied with the performance of contractors on 16% of the projects surveyed in 2014 – which reflects a slight but noticeable decrease compared to the 2013 survey results. Contractors were neutral or dissatisfied with the performance of clients on 20% of the projects surveyed. Contractors were neutral or dissatisfied with the quality of tender documents and specifications obtained from clients on around 22% of the projects surveyed. (CIDB CII - 2014)

Slide 32 Quality of Completed Work

Slide 33 CIDB QUALITY/ PERFORMANCE INTERVENTIONS cidb Contractor Recognition Scheme • cidb Standard for Contractor Performance Reports • cidb Competence Standard for contractors

Slide 34 Challenges / Risks The primary challenges faced in the implementation of the NCDP are: • Slow pace of uptake into SCM policies and Performance Plans/ IDP’s of Contractor Development best practices, frameworks, standards and guidelines. In this regard the cidb interventions include: – Client awareness and capacitation of officials on NCDP, Guidelines, best practices, standards and Practice Notes – Reporting to HOD’s, MEC’s and Mi. NMEC – Assessment of SCM and Contractor Development policies – Proposals on Policy refinements

Risks / Challenges …cont/2 Slide 35 • Inadequate institutional capacity in the public sector, and the inability to allocate, target and spend budgets. The cidb interventions include: – Approval and rollout of CDP guidelines eg. targeting and budgeting strategies – Inform cidb Practice Notes – Client awareness and capacitation of officials • Lack of proper monitoring and evaluation systems The cidb interventions include: – Guidelines aligned to manual checklists and reporting templates – Final stages of development of an electronic CDP M&E system

Risks/ Challenges …cont/3 Slide 36 • Delayed payments to contractors had a crippling effect on growth of the emerging sector The cidb interventions include: – Prompt Payment Regulations for payment within 30 days gazetted for public comment – Inform cidb Practice Notes issued to guide prompt payment • Collusion cartels / Corruption has had a detrimental impact on the SA construction industry The cidb interventions include: – Code of Conduct – Anonymous Fraud reporting hotline – Forensic Investigations, hearings - sanctions issued to guilty parties – Transparency initiatives being rolled out for Contractors and Clients

Risks / Challenges …cont/4 Slide 37 • Contractor Development is not mandatory and is at the ‘will’ of clients. The cidb interventions include: – Client awareness and capacitation of officials on NCDP and CD – Support to clients in crafting policies, SCM circulars and policy directives to entrench CD – Inform cidb Practice Notes – Adoption of Standards eg. Standard for Indirect Targeting for Enterprise Development – Role in incorporating into future reviewing of the cidb Act and upcoming Public Works Act

CIDB CONTRACTOR DEVELOPMENT STRATEGY 1. 1. Access to work eg. IDIP, Procurement 1. 2. Access to financial support/ finance 1. 3. Prompt payment 1. 4. Improved registration process 1. 5. Amendments to reg’s 8. 1. NSF 8. 2. PSLM’s 8. 3. PCDF’s 8. 4. CPO’s 8. 5. Events/ material CIDB Slide 38 5 YE 7. 1. Industry Devt eg. ¼ ly monitor, Bus cond survey, CII’s 7. 2. CDP’s AR R 2. 1. Standard for assessment/ recog of contractors 2. 2. Standard for developing skills through contracts 2. 3. SDA 2. 4. World skills 2. 5. Youth in construction EVIE 3. 1. Guidelines 3. 2. M&E 3. 3. Exploring legislating W 4. 1. Best practice contractor compet recog eg. Standard for indirect targeting for ED 4. 2. Construction Mgt Systems 4. 3. Contractor Perf reports 6. 1. Revenue stream 6. 2. Direct training 6. 2. Compliance 6. 4. Skills devt 5. 1. Balancing Delivery and Devt 5. 2. Standard for indirect targeting for ED

Recommendations Slide 39 It is recommended: – the Portfolio Committee note and endorse the continued and accelerated promotion and championing of the NCDP Framework and its related guidelines (Guidelines for Implementing Contractor Development Programmes) as a government-wide Contractor Development Policy, and its reporting upon in terms of the NDPW SCM and cidb CDP monitoring processes. – the Portfolio Committee continue to provide support in the implementation of the NCDP and entrenching as Policy directive across DPW and infrastructure departments, municipalities and instilling into the PICC- SIPPS and other major infrastructure platforms.

Slide 40 THANK YOU Gerard Naidoo German Mphahlele Web-site: http: //www. cidb. org. za

NCDP: communicating … ST RE AKEH LA TIO OLD NS ER