Draft Supply Chain Management Regulations & Responses in terms of the Financial Management of Parliament Act, 2009: Parliament of the Republic of South Africa briefings

Meeting report

Parliament Draft Supply Chain Management Regulations made in terms of the Financial Management of Parliament Act (No. 10 of 2009) Presentation
Dr Fatima Ebrahim, Parliamentary Legal Adviser, briefed the Committee on the draft supply chain management (SCM) regulations as prescribed by the Executive Authority and published for public comment in the Government Gazette on 4 February 2013. These regulations would only come into effect after approval by Parliament. The Speaker and the Chairperson referred the draft SCM regulations to the Interim Joint Committee on the Scrutiny of Delegated Legislation and the Standing and Select Committees on Finance. In terms of the respective mandates, the finance committees, conferring, were required to facilitate public involvement and consider and report on whether the draft regulations should be amended. The Interim Joint Committee had to consider and report on whether the NA and the National Council of Provinces (NCOP) should approve the draft regulations. The Interim Joint Committee’s was mandated to scrutinise whether the regulations imposed money bills provisions, complied with procedural aspects related to delegated legislation, impinged on the jurisdiction of the courts, used unauthorised retrospective operation, or conformed with the objects of the parent Act.

This Committee met on 5 June 2013 to consider the draft regulations. It resolved that:
● Except for the issue of drafting style, the draft regulations complied with the scrutiny criteria, including conformity with the objects of the Financial Management of Parliament Act (FMPA);
● The style of the draft regulations should conform to the legislative style usually used for regulations (Legal Services had prepared a draft accordingly); and
● It would wait for the process in the Standing and Select Committees to be completed before giving its final approval of the draft regulations.

The regulations covered the following:
● Guidelines of demand for acquisition, logistics, disposal and risk management;
● Procurement processes for petty cash, written quotations, formal written price quotations, competitive bidding, participation in transversal contracts of other organs of state, unsolicited offers, emergencies and exceptional circumstances;
● Procedures for bid committees (bid specification, bid evaluation, bid adjudication);
● Governance issues such as compulsory disclosure of conflict of interest of prospective suppliers, barring persons from participation, combating the abuse of the SCM system, contract management (internal control) and dispute resolution procedures; and
● Regular review of SCM performance.

Ms Rozalle Singh, Management Consultant, KPMG, said that 65 comments were received internally from parliamentary officials. “Close to 60%” of the comments were accepted and “close to 40%” were rejected. Most of the accepted comments sought clarity regarding the meaning of the regulations. Some of the rejections were for reasons of non-compliance with the requirements of Chapter 6 of the FMPA and Schedule 3. The only key content change related to the inclusion of verbal quotations for spend below R10 000. Those comments that were accepted would be included in the further draft and once approved by the committees and houses, would be submitted to the Interim Joint Committee.

Presentation on the Responses to the Draft Financial Management of Parliament Amendment Bill
Mr Michael Prince, Parliamentary Legal Adviser, briefed the Committee on the responses to the public comments on the Draft Financial Management of Parliament Amendment Bill (see report). There were comments on the Bill from four sources: the Western Cape Provincial Legislature, the Western Cape Provincial Treasury, the Auditor-General and the Financial and Fiscal Commission.

Western Cape Provincial Legislature
The first comment was received from the Western Cape Provincial Legislature and referred to Clause 5 of the Bill. The person commented that in the current context it was not clear whether Section 5 of the Act, read together with the proposed Section 3 of the Act, should be interpreted to mean that the Speaker of a provincial legislature would be the Executive Authority of that particular provincial legislature. He also wanted to know whether these sections should be interpreted to mean that a provincial legislature could not identify a body as the Executive Authority of that particular provincial legislature. The Senior Parliamentary Legal Adviser responded that the amendment meant that a provincial legislature could not identify a body as the Executive Authority. The Speaker must be the Executive Authority and was accountable to the legislature for the sound financial management of the institution. However, there was nothing that prevented the Speaker from being advised by a body on authority of Section 116 of the Constitution, but the responsibility for the functions of the Executive Authority was the Speaker’s.

Western Cape Provincial Treasury
The second comment was received from the Western Cape Provincial Treasury and also dealt with Clause 5 of the Bill. The comment referred to Section 4(1) of the FMPA, which, if read with Section 3 of the FMPA, meant that the oversight mechanism of a provincial legislature had to manage the legislature’s financial affairs through an oversight mechanism, which would be the Rules Committee in most cases. In most instances the Speaker would chair the Rules Committee. However, if the Speaker was the Executive Authority and Chairperson of the oversight mechanism, it would create a conflict of interest and negate sound checks and balances as originally intended. The Western Cape Provincial Treasury proposed that whenever the Rules Committee/oversight mechanism sat to address an administrative matter, the Speaker should recuse him/herself and another person should be nominated to act as Chairperson. Alternatively, it suggested an amendment to section 65(1) of the FMPA that would require the Executive Authority to issue regulations that might facilitate the application of the Act. The Senior Parliamentary Legal Adviser responded by stating that the Rules Committee of a legislature was established in terms of the rules of the legislature as envisaged in section 116 of the Constitution. The rules of the legislature were the appropriate tool to address the internal procedures of any committee of the legislature. This concern was effectively a concern about the internal procedures of the Rules Committee. The proposed amendment required that representation on the oversight mechanism must be in accordance with section 116. Furthermore, Schedule 2 of the FMPA provided for a code of ethics for the Executive Authority to ensure that it acted in a way that would bear the closest public scrutiny. Lastly Section 66 of the FMPA allowed the Executive Authority to issue written instructions, not inconsistent with the Act, to implement the Act. If the rules were silent on the issue of a conflict of interest, the Executive Authority would be allowed to fill the lacuna with such instructions as provided for in Section 66.

The Western Cape Provincial Treasury also commented that provincial legislatures did not have oversight committees such as a public accounts committee or a finance committee. It wanted to know how unauthorised expenditure would be addressed, who would approve unauthorised expenditure and who would monitor the findings of the auditor-General. The Provincial Treasury suggested that it would be prudent to indicate in the regulations who and how “irregular expenditure” would be condoned. Parliament and provincial legislatures should be held to the same set of rules that was demanded from other state organs of state as per the Public Finance Management Act (No. 1 of 1999) (PFMA). The Senior Parliamentary Legal Adviser replied that provincial legislatures could, in terms of the proposed amendment to the FMPA, authorise unauthorised expenditure in terms of section 20(2). Most provincial legislatures had a committee on public accounts that reported to the House on authorising unauthorised expenditure. Such authorisation by a House would be translated into a money bill introduced by the member of the Executive Council responsible for financial matters in the relevant province. The implementation of the FMPA and the proposed amendments to make it applicable to provincial legislatures ensured accountability and sound financial management. Irregular expenditure, which differed from unauthorised expenditure, could be regularised in terms of Section 65(4) (a), which provided that the Executive Authority was allowed to approve departures or condone a failure to comply with a regulation, provided that the objects of the Act were not undermined. In the case of irregular expenditure, the Executive Authority could condone the non-compliance with the supply chain management regulations if the issues of transparency and accountability were not compromised. Irregular expenditure could thus be reported in the financial statements, but condoned the following year to clear the opening balance for the new financial year.

The Western Cape Provincial Treasury submitted an additional comment related to Section 2 read with sections 20(2)(b) and 20(3) of the FMPA. It commented that in view of the objects of the Act set out in Section 2, it would be prudent to seek concurrence of the Treasury as opposed to merely consult. It suggested that Section 20(2)(b) should include additional wording (as italicised) to read: “the expenditure is unauthorised for another reason and Parliament authorises the expenditure in concurrence with the relevant Treasury as a direct charge against the relevant (National) Revenue Fund.” The Senior Parliamentary Legal Adviser responded by stating that one of the objects of the FMPA was to ensure a consultative relationship with the relevant Treasury. The concurrence of the relevant Treasury was manifested in the “constitutional requirements for the tabling of Money Bills’. Only the MEC would be able to table a Money Bill in the provincial legislature. The proposed amendment included much of the submission in any event.

Referring to sections 65(1), (2), (4), and (6) of the FMPA, read with Clause 3 of the Bill, the Western Cape Provincial Treasury commented that the proposed amendment in Clause 5 (submission referred incorrectly to Clause 3) of the Bill would allow the Speaker of the provincial legislature to authorise such regulations. It said this would be in conflict with the objects of the Act set out in section2; namely to ensure a consultative relationship between Parliament and National Treasury, conducted at high level and based on respect for the treasury norms and standards established in terms of the Public Finance Management Act. It suggested that authority to make regulations as envisaged in Section 65(1), (2), (4), (5) and (6) must only be for the Executive Authority of Parliament and not empower the Executive Authority of provincial legislatures. This would ensure uniformity. The Senior Parliamentary Legal Adviser responded that the making of regulations in terms of the FMPA must be consistent with the Act in any event. The Act required respect for uniformity, as the submission correctly indicated. Therefore the making of regulations, which must be approved by the relevant legislature, must respect the issue of uniformity to pass the principle of legality.

Auditor-General of South Africa
The following comments were made by the Auditor-General of South Africa (AGSA). The first comment referred to Clause 2 (amending the Preamble). The AGSA wanted the Preamble to include a reference to “performance management’. The Senior Parliamentary Legal Adviser responded by stating that the Preamble was a broad statement of the Act. The issue of performance management/performance plan was addressed in the FMPA. However, the issue of performance management was regulated pursuant to the objects as stated in the Preamble and the Objects clause. It was not an object in itself.

The second comment by the AGSA referred to Clause 4 (amending Section 2: Objects of this Act. The AGSA said that it should be noted that National Treasury (NT) norms and standards also included the NT frameworks for performance management (both the framework for managing programme performance information and framework for strategic and annual performance plans). The AGSA suggested the inclusion of a reference to NT frameworks for performance management in this section. The AGSA recommended that paragraph (d) be rephrased to read; “to provide for oversight of Parliament’s budgeting and expenditure through appropriate oversight mechanisms as provided for in section 4 of the Act.” The Senior Parliamentary Legal Adviser responded that, consistent with the response to the first comment, performance management was a tool to achieve the objects. It was not an object in itself. The suggestion related to Section 2(d) amounted to repeating what Section 4 provided. Section 4 provided the tool to achieve the object in Section 2(d).

The third comment by the AGSA referred to Clause 5 (amending Section 3). The AGSA wanted to know what was meant with “necessary changes’. Did it refer to the amendments of the principal Act? If so, the AGSA recommended that these words be substituted with “with these amendments”. The AGSA also wanted to include “or committee of Parliament”. The Senior Parliamentary Legal Adviser responded that “necessary changes” referred to changes in interpretation as a result of the context of the provision. It was a standard way of drafting. It was also unnecessary to include “or committee of Parliament” as there was no reference in the FMPA to the same.

The AGSA’s fourth comment related to Section 2(b)(iv) of the FMPA. The AGSA recommended that, in order to align this Section to make it also applicable to provincial legislatures, a paragraph be included to state that a reference in the Act to national government must be construed as a reference to provincial government. The Senior Parliamentary Legal Adviser responded that provincial government’s fiscal policy must be aligned to national government’s fiscal policy. In any event, fiscal policy was not a provincial matter in terms of Section 216 of the Constitution. The Limpopo judgement confirmed this.

Further comment submissions from the AGSA were related to Clauses not in the draft Bill (see document for more detailed submissions, suggestions and responses in this regard).

There were also comments and suggestions from the FFC related to Clauses not in the draft Bill (see this and the Senior Parliamentary Legal adviser’s responses in the document).

Discussion
Mr D Joseph (DA, Western Cape) asked whether the officials or staff who made the comments worked in the departments where these procurements would take place.

Ms Singh replied that the comments received were from division managers and section managers who have to deal with procurement through the Department. There were one or two internal supply chain comments from people who have to procure via the supply chain. Their comments were mostly related to their experience of the system.

Mr D Ross (DA) said the word “guidelines” confused him, as these regulations have to be enforced. It was not just a guideline. Was that correct?

Ms Ebrahim replied that Mr Ross was correct in his assumption. The status of these regulations was that of subordinate law, and in this particular instance the regulations relating to those matters were quite detailed.

Mr B Mashile (ANC, Mpumalanga) wanted to know whether the comments made by the AG were a desktop analysis or if there were engagements with the AGSA directly before the AGSA made final comments.

Mr Prince replied that it was a desktop exercise. Most of the AGSA’s comments were in addition to the amendment Bill and he considered that they would delay the processing of the Bill. He requested the Committee’s guidance in this regard.

Mr Mashile raised the issue of final approval. If a specific legislature wanted to make changes, should those changes not first be concurred with the national Parliament to ensure those changes were of good value?

Mr Prince replied that provincial regulations had to go through the provincial legislatures. And the regulations should not “go against” the principal Act. This constituted the framework in which those regulations must be drafted.

Mr T Harris (DA) referred to Comment 2 and asked for more clarity on the Parliamentary Legal Offices (PLO’s) response.

Mr Harris referred to Comment 4 and asked why the PLO had a problem not including the wording “in concurrence with the relevant Treasury” as suggested by the Western Cape Provincial Treasury.

Mr Harris referred to Comment 7 and said that he agreed with the AGSA’s suggestion that the object of the Act should be amended to be more specific, particularly his reference to include NT Frameworks. It would reflect a more accurate summary of the Act to include it there.

Mr Harris referred to Comment 13. He said the AGSA was correct in asking what was meant by “qualified” and suggesting that it be defined differently.

Mr Prince replied that the PLO thought those were the correct provisions that applied. Some of the provisions suggested were already mentioned in the Act. He said that if the Committee felt that it would be better to specifically state those suggested provisions then the PLO would not object.

Mr Ross referred to Clause 8 and the Department’s response; “It’s a question of value for money.” He said the response was a bit vague and would not do enough to keep people accountable. Was the response the correct one?

Mr Prince accepted Mr Ross’s point that the PLO’s response might be a bit vague. He said that, other than the one stated, the PLO would offer no other response at this time.

Mr N Koornhof (COPE) referred to Clause 16 where the AGSA asked for the inclusion of the words “or the annual performance report”. The PLO’s response was that those words were reflected later on. Was it sure that it was reflected later? And what harm will it do to include those words?

Mr Prince replied that at the time the PLO had researched the suggestion in question, it came to the conclusion that it had been adequately covered in the Act.

Ms Baby Tyawa, Deputy Secretary of Parliament, explained that the Secretary to Parliament, in line with national regulations and guidelines, had had a meeting with the AGSA and the National Treasury to align the annual performance plan (APP) with the stipulations of the NT framework. She said that the AGSA would be auditing performance information in future.

The meeting was adjourned.