SUBMISSION TO THE DEFENCE PORTFOLIO COMMITTEE ON THE MAINTENANCE OF STATE FACILITIES UITILISED BY THE DEPARTMENT OF DEFENCE (DOD): 5 APRIL 2005

Appendix A: Funds required in order to address the Deteriorating Condition of State Facilities Utilized by the DOD


INTRODUCTION

1. The Portfolio Committee on Defence has requested a briefing by the Department of Defence (DOD) about the maintenance of State Facilities utilized by the DOD.


AIM

2. The aim of this briefing is to respectfully solicit support from the Portfolio Committee on Defence to obtain additional funds to address the deteriorating condition of facilities


MANDATE
OF THE DEPARTMENT OF DEFENCE

3. Section 200 (2) of the constitution provides that Quote the primary object of the defence force is to defend and protect the Republic, its territorial integrity and its people in accordance with the Constitution and the principles of international law regulating the use of force. Unquote.


FACILITIES
IN SUPPORT OF THE MANDATE OF THE DOD

4. The DOD is continually striving to improve its efficiency and effectiveness, driven by the need to fulfill its constitutional obligations to the people of the Republic of South Africa. In its endeavor to fulfill this obligation and honour the promise of the Constitution, the DOD utilizes a large number of State facilities. In fact there are very few activities in the DOD that can take place without some direct or indirect connection with facilities.


ROLE
PLAYERS INVOLVED IN THE REPAIR AND MAINTENANCE OF STATE FACILITIES

5. The following role-players are involved in the repair and maintenance of State Facilities:


a. The National Department of Public Works (NDPW) acts as the building and construction department for the State. Being the custodian of all State facilities, NDPW is responsible for repair and maintenance of all State facilities.


b. User Departments. User Departments, eg, the DOD does not own or act as custodian of State facilities. State Facilities are entrusted to the DOD for usage thereof.


c. Department of Labour. This Department is mandated to act as "watchdog" for the State in order to ensure that facilities conform to minimum occupational and health standards. This Department could declare a facility unsafe due to the lack of sufficient maintenance thereof.


d. National Treasury. Being the organization that contributes to the financial management of the Government, National Treasury is the only body that allocates funds in order to satisfy requirements in Government. The priority of the requirement/s for the Government is taken into consideration before funds are approved and allocated.


INSUFFICIENT
ALLOCATION OF FUNDS TO ADDRESS MAINTENANCE OF STATE FACILITIES UTILISED BY THE DOD

6. The modus operand! of NDPW in the past has been reactive, rather than a pro-active prevention approach. Over the past three years NDPW allocated the following funds for Planned Maintenance of facilities utilized by the DOD:

a. Financial year 2002/03 R63 395 775,00

b. Financial year 2003/04 R62 871 132,00

c. Financial year 2004/05 R77 262 698,00


7. In addition to the funds indicated in paragraph 5 above, both NDPW and the DOD also allocate funds on an annual basis for day-to-day maintenance. Figures allocated for this purpose during the financial year 2004/05 were as

follows:

a. NDPW for maintenance exceeding R5 000,00 per case R38 000 000,00

b. DOD for maintenance not exceeding R5 000,00 per case R 28 000 000,00


8. The total allocated funds for the financial year 2004/05 were therefore:

a. Allocated by NDPW for Planned Maintenance R 77 262 698,00.

b. Allocated by NDPW for day-to-day- maintenance R 38000000,00.

c. Allocated by the DOD for day-to-day-maintenance R 28000000.00.

d. Total R143 262 698.00.


9. Taking the facilities portfolio of the DOD into consideration, it is estimated that an amount of R500 000 000,00 (unsubstantiated) per annum would be needed to maintain its facilities on a preventative maintenance programme.


NATIONAL
TREASURY POLICY TO FUND REPAIR AND MAINTENANCE OF STATE FACILITIES WITH SPECIFIC REFERENCE TO THE DOD


10. NDPW renders a building service (repair and maintenance of facilities) to all State Departments. The concern of the DOD is that it seems as if NDPW does not receive sufficient funds from National Treasury to allocate what is needed to address the maintenance requirements of the DOD. A clear understanding of National Treasury's policy to finance repair and maintenance of facilities of a large State Department such as the DOD, is lacking. Surely the billions of capital investment being made by Government could not be maintained without sufficient maintenance funds. The State will eventually lose this, or part of this, investment due to the lack of maintenance thereof.


RESULT
OF LACK OF SUFFICIENT ALLOCATION OF FUNDS TO ADDRESS MAINTENANCE ON FACILITIES UTILIZED BY THE DOD

11. The DOD fulfills its constitutional obligations with pride and honour. However, unprecedented risks during a time of peace is experienced due to the poor condition of state facilities utilized by the DOD. The lack of sufficient funds to maintain facilities creates a situation where both service delivery to the people of this country, operational readiness, morale of members of the DOD and working conditions are negatively affected. Many facilities no longer conform to the minimum requirements of the Occupational Health and Safety Act.


12. The lack of proper repair and maintenance work already created numerous life-threatening situations in many facilities. The risk of closing down of facilities by the Department of Labour has already materialized and we believe will increase.


PROPOSED
SOLUTION TO ADDRESS THE LACK OF SUFFICIENT MAINTENANCE TO FACILITIES

13. Recently NDPW embarked on a fresh approach to address repair and maintenance to facilities. This is called the Repair and Maintenance Programme(RAMP). The intention of the RAMP is to systematically reduce the existing maintenance backlog. The RAMP consists of three phases which includes investigating of the present state of facilities, detail design of the necessary repair and maintenance to be done and thereafter to first repair and then to maintain the same facilities for a period of 36 months.


14. Inspections on a representative number of defence facilities have determined that an amount of three and a half billion rand (RB3,5) would be necessary to implement the programme on these facilities. To implement the programme on all defence facilities would require an amount of ten an a half billion rand (RB10,5). Transformation imperatives are however expected to reduce defence facilities by at least twenty five percent (25%), thereby reducing the funding requirements to seven billion eight hundred and seventy five million rand (RB7.875) over a period of ten years.


STEPS
THE DOD TOOK TO OBTAIN FUNDS TO ADDRESS THE MAINTENANCE BACKLOG

15. The DOD approached National Treasury to make funds available to address the ever-increasing maintenance backlog. The following request for funds was motivated:

Serial No

 

Financial Year 2005/06

Financial Year 2006/07

Financial Year 2007/08

 

a

b

c

d

1

Funds needed

RM275

RM440

RM620

16. Details of this request are attached as Appendix A.


17. The Department of Finance allocated the following funds to the DOI

Serial No

 

Financial Year 2005/06

Financial Year 2006/07

Financial Year 2007/08

 

a

b

c

d

1

Funds needed

RM10

RM450

RM250

18. The National Department of Public Works (NDPW) was briefed and requested to prepare a number of options in order to spend the allocated funds in the best interest of the State. The DOD indicated the priorities (bases) on which funds should be spend. These priorities were also communicated to the Department of Finance during the request for funds as indicated in par 13 above. The DOD and NDPW are currently in the process of finalising the projects that should be addressed with the available funds.


MANAGEMENT
OF FUNDS ALLOCATED BY THE DEPARTMENT OF FINANCE

19. Both the DOD and NDPW approached the determination of required funds in a scientific manner. Likewise, the management thereof will also be approached in this manner in order to ensure a 100% expenditure of the allocated funds. Funds will be managed by dedicated project managers and will only be spend on facilities where the return to the DOD and therefore to the State will be the highest.


20. The DOD's Facilities Ten Year Plan will identify facilities that are redundant as well as those that lend themselves to Public-Private Partnerships, and will ensure optimal utilization of facilities thereby reducing the projected funding even further.


CONCLUSION

21. The DOD appreciates the good will shown by the Department of Finance by making funds available to address the maintenance backlog. However, the finances made available are not sufficient to address the risks involved for the DOD as indicated in paragraphs 11 and 12 above.


22. In view of the large expenditure incurred by the DOD on the acquisition of new armaments and the ever-increasing peace keeping role in Africa, serious consideration should be given to the maintenance of facilities in order to eliminate the risks to the DOD and therefore to the State as indicated in paragraphs 11 and 12 above.


REQUEST

23. The DOD respectfully request the Portfolio Committee on Defence to assist with the following:

a. To establish the policy of National Treasury regarding the allocation of funds in order to address repair and maintenance of facilities in the DOD.

b. To influence the decision to allocate funds by National Treasury to the DOD to address repair and maintenance of facilities in the DOD.


REPORT ON THE FUNDING OF MAINTENANCE OF INFRASTRUCTURE FACILITIES FOR THE DEPARTMENT OF DEFENCE


INTRODUCTION

1.1 Post 1994, the Department of Defence (DoD) inherited a large portfolio of infrastructure (approximately half the extent of the all state owned portfolio) which is largely in a poor maintenance condition. It goes without saying that a substantial investment by the state went into the acquisition of these facilities, which if not properly maintained will deteriorate to a point where rehabilitation will not be economical. Largely, the DoD facilities were not maintained properly over a number of years.

1.2 The DoD has approximately 455 complexes containing 35 589 buildings which translates into 356 612 hectares of land. The extent of buildings/structures is approximately 4 155 047 m2


1.4 Although the DoD utilises the largest state property portfolio, its maintenance budget is inadequate to address comprehensive planned maintenance project where proactive maintenance is required.


1.5 The National Department of Public Works (NDPW) has had various discussion' with the National Treasury (NT) and has, on various memoranda to cabinet highlighted the seriousness and urgency to address the maintenance backlog on various facilities utilised by DoD and other national departments.


1.6 Inspections on a representative number of facilities have determined that an amour approximately R3.5 billion' would be necessary to implement the programme on these facilities. This translates into an amount of approximately RIO.5 billion if the entire portfolio is taken into account.


1.7 In order to ensure alignment with its strategic objectives, the DOD is embarking on a process of optimising its portfolio. This will result in an overall reduction of at least 25% of current space utilisation , thereby reducing the funding requirement to R7.875 billion over an implementation period often years.


1.8 In order to assist the NDPW to proactively plan for maintenance, the DoD is in a process of finalising its Base Closure Programme.


2
MAINTENANCE:

2.1. Although the maintenance budget falls under the jurisdiction of NDPW, there is a shared understanding that DoD prioritises planned maintenance services. The NDPW as custodian of state property can however, intervene in exceptional cases where critical maintenance is required (e.g. compliance with Occupational Health and Safety Act requirements) and reprioritise projects.


2.2. Over the past three financial years the Department of Defence expenditure on planned maintenance was as follows:-

2002/2003 R63 395 775 m

2003/2004 R62 871132m

2004/2005 R77 262 698 m

TOTAL R203 529 605


3.
REPAIR AND MAINTENANCE PROGRAMME (RAMP)

3.1 The Department of Public Works has developed a specialised Repair and Maintenance Programme (RAMP) to systematically address the maintenance backlog by inspecting and repairing the facilities, and then maintaining them over the balance of a 36-month contract period, to pre-determined standards.


3.2 Owing to the success of this programme, the DoD requested a full and comprehensive status quo investigation into 69 of its strategically important bases.


3.3 The current RAMP on DoD facilities has been prioritised into 3 groups as follows :-

Group 1 consists of 47 projects and are currently either under construction or design. The estimated final contract value of all projects is R159 million and expenditure to date is R110 million.


Group
2 consists of 2 phases:-

Phase 1 includes 41 projects and

Phase 2 includes 28 projects.

Status quo reports revealed the contract value for all projects under Group 2 is approximately R1 809 billion. To date, expenditure to the value of R53.346 million has been spent on emergency repairs to 15 bases and on the repair and maintenance of the SAAF Head Quarters and Blenny Complexes in Pretoria.


Group
3 addresses the critical military area south of Thaba Tshwane in Pretoria. The contract value to address 17 bases is estimated at R1 026 billion. To date R14. 946 million has been spent on the compilation of a detailed status quo report.


3.4 In the estimation of the costs/contract values, it has been assumed that approximately 20% of the infrastructure indicated in Group 2 (69 bases) shall not be utilised and will be identified as either redundant / surplus property. Also approximately 30% of infrastructure indicated in Group 3 (Thaba Tshwane) is expected not to be utilised.


4.ADDITIONAL FUNDING SOURCED FROM NATIONAL TREASURY

4.1 Although NDPW and the DoD made a joint submission to National Treasury in April 2002, no funding was allocated to address the maintenance backlog.


4.2. However, in September 2004, based on the information supplied by NDPW, the DoD approached National Treasury for funding to address the deteriorating condition of the buildings currently occupied by their units.

4.3. The DoD confirmed that National Treasury has made the following funds available.

FINANCIAL YEAR

FUNDS REQUIRED BY DEPARTMENT OF DEFENCE

FUNDS CONFIRMED BY NATIONAL TREASURY

2005/2006

R 275 190 515

R 10 000 000

2006/2007

R 440 126 286

R 50 000 000

2007/2008

R 620 030 860

R 250 000 000

TOTAL

R 1 335 347 661

R 310 000 000


4.4.The DoD and the NDPW are in the process of finalising project priorities in terms of the funding confirmed by National Treasury over the MTEF cycle. It is estimated that the programme will be able to deal with only nine (9) facilities over a 3-year period.


RUNWAYS

The Department of Defence (SAAF) currently utilises 9 main runways and several forward airfields. The replacement value of these runways, taxiways and parking areas equals R8.5 billion.


The cost estimates to address emergency repairs and the rebuilding of certain runways is mentioned hereunder:-


5.1.
South African Air force Runways: Pavement Management System:

Currently no mechanism exists in the SAAF to assess the overall pavement condition and to implement proactive maintenance interventions.


Due to the afore-mentioned situation the DoD has requested the NDPW in February 2005 to assist with the implementation of a pavement management system on 6 of the 9 main runways. The DoD (SAAF) has made and amount of R885 400 per annum available to undertake the required investigations.


5.2.
Waterkloof Air force Base: Rebuilding of main and secondary runway

Due to the increase in usage, the pavement, over time becomes structurally incapable of withstanding heavy loading from large aircrafts currently utilising the facility. Severe rutting and cracking are a visual manifestation of this lack of sufficient capacity.


Even though corrective measures to the value of R16.1 million have been undertaken during 2004/2005, the engineers have indicated that usage of the runway should exclude all medium to heavy wide bodied aircraft. The DoD was advised of these findings on 7 March 2005.


The cost estimate to rebuild the main and secondary runway to address the afore-

mentioned problems, spread over four financial years is as follows:-


2005/2006 R 14 770 655.00


2006/2007 R 93 108 373.00


2007/2008 R 10 490 185.00


TOTAL R124
599 163.00


5.3.
Ysterplaat Air force Base: Rebuilding of main runway

The cost estimate to rebuild the main runway spread over three financial years is as follows:-


2005/2006 R 5536917


2006/2007 R 27 963 852


2007/2008 R 1 772 040


TOTAL R
35 272 809


5.4
Hoedspruit Airforce Base: Runways and Taxiways

Status quo reports were completed in October 2004 and forwarded to the DoD for prioritisation and confirmation of funding purposes.


The cost to repair and maintain is estimated at R51 764 075.


5.5.
Bredasdorp: Overberg Air force Base: Runways

Status quo reports were completed in October 2004 and forwarded to the DoD for prioritisation and confirmation of funding purposes.


The cost to repair and maintain is estimated at R22 950 654.


5.
CONCLUSIONS

It is evident from the information supplied on the funding on the repair and maintenance of DoD facilities that the gross under-funding currently experienced will result in further deterioration in the assets. This will ultimately have a negative impact on the strategic imperatives of the DoD.


The NDPW is however continuously investigating innovative ways of executing mandatory repair and maintenance within the limited financial resources.