BRIEFING SESSION ON APPOINTMENT OF A SERVICE PROVIDER/S TO CONDUCT LEASE

REVIEW

20TH SEPTEMBER 2012

Ms. L. BICI

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BACKGROUND

• One of the key functions of the Department is to provide office accommodation to 41 National Client Departments. This accommodation is provided through state-owned and leased accommodation. Majority of the leasing periods range from 1 year to 9 years 11 months with a rand spend in excess of approximately R3 billion per annum.

• The Department seeks to appoint a qualified service provider/s to conduct a comprehensive review of the leases portfolio the NDPW has entered into with private sector. This is a priority project because the Department is currently faces a number of service delivery challenges. These relate to among others:

– Certain weaknesses which compromise achievements of realising the value for money and service delivery in the leasing environment.

BACKGROUND…which led to the withdrawal of the delegations for signing of new leases and lease extensions from the Regional offices. This situation has placed significant pressure on the approval process which is exacerbated by high month-to-month lease, renewals and new leases which requires processing.

The Minister brought a Turnaround Team as well as National Treasury on board to assist the Department with these leasing challenges and to put systems in place to stabilise the environment.

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SteeringCommittee

NT NDPW

Lease ReviewAnd

Improvement Team

NDPW Lease Operations

Team

PROJECT MANAGEMENT & GOVERNANCE PROTOCOL

LEASE PORTFOLIOOverall Size of the Lease Portfolio for Office Accommodation

Region Number of Leases Estimated Value of leases per Year Month-to-month leases  

Bloemfontein 199 86 900 714 107  

Cape Town 354 286 410 443 86  

Durban 448 291 868 032 69  

Johannesbur

g 214 338 904 177 3 

Kimberley 212 58 664 392 1  

Mmabatho 166 101 459 989 127  

Mthatha 191 67 670 835 60  

Nelspruit 205 136 342 263 108  

Polokwane 199 121 508 759 113  

Port

Elizabeth 360 213 919 758 85 

Pretoria 240 1 545 625 944 91  

TOTAL 2 788 3 249 275 311 850  

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6 BIGGEST CLIENT DEPARTMENTSClient Department No of leases Estimated Annual rental

payable

South African Police Services 1253 927 105 776

Labour 212 124 880 725

Defence and Military Veterans 203 218 980 561

Home Affairs 201 201 333 032

Correctional Services 192 85 713 722

Justice and Constitutional Development 126 250 128 176

Total for main clients 2 187 1 808 141 994

%’age to Total lease 78.4% 55.6%

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Scope of the Work and Expected Outputs

• The required service is made up of three distinct phases for which the bidders are requested to provide proposals.

• The bidders’ proposals must distinguish the resources as well as the costs associated with each of the phases.

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Scope of work (phase 1) Audit of the Leases ( approximately 2 788)

(1)Procedures for the desktop audit of the lease files:(2)Verify that there is a valid lease agreement in place for the premises;(3)Whether the lease agreement is signed by both parties;(4)Whether the lease agreement is DPW standard lease agreement, has been modified or it’s lessor’s;(5)If the bank account details changed since the inception of the lease(6)of lease expiry;(7)What process was followed to secure the lease (negotiated/ nominated/open tender etc) and reasons for the choice of process;(8)What is the lease period;(9)Escalation in the lease agreement;

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Scope of work ….(phase 1 )

• Whether Landlord is BEE compliant according to the Department’s BEE Strategy;

• Square meters occupied;• Verify information from Property Management Information System

(PMIS) with lease agreement including the rental amount and descriptions;

• All documents are in the file including lease agreement and confirmation of client needs to procure the lease;

• Confirmation of rental amount and tenant installations costs;• Verify if the rate per square meter charged in terms of the lease is

market related;• Whether the annual escalation rate is market related;• Whether the tenant installation is amortized into the rental;

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Scope of work.. (phase 1)

(2) Procedures for the physical verification of the leased premises

•Verify that the client is in physical occupation of the premises;•Approximate the square meters occupied;•Confirmation from user department for occupation.

(3) Lease Information System  

– Reconcile the lease details (period; expiry date; rental; square meterage etc) with PMIS  system.

– Verify whether the current rental paid is in line with what the lease stipulates;

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Scope of work (phase 2)Immediate support to eliminate the current backlog of the approximate 400 leases at various stages of the lease process: •Create a lease data base;•Assess critical needs to deal with backlog and reduction of month to month leases, renewal of leases that have expired or about expire;•Correct rates per square metre are market related rentals (escalation, tenant installations etc. are in place);

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Scope of work….(phase 2)

• Submissions are in line with the Departmental policies and procedures including the Supply Chain Management Processes, Departmental BEE Strategy etc;

• Verification of the size of the accommodation required by clients;

• Confirmation of Clients Needs Assessments and funds;• Terms and conditions of the lease agreement are in favour

of the Department;• Rates per square metre are market related rentals and

have been benchmarked outside the Department;

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Scope of work…..(phase 2)

• Escalation, tenant installations etc. are in place;• Conclude an assessment and benefit received for

Operating Cost Charges;• Be part of the advisory team to advice the Acting Director-

General on the signing and approval of lease documents;• Develop processes moving forward to mitigate the risk of

future backlogs arising.

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Scope of work ….(phase 2)• Leases reaching expiry (approximately 700)

– Whether the client confirmed if they still need premises;– Submission of Client Needs Assessment and confirmation

of funds;– Procurement Instruction has been issued to the Regional

Offices;– New Procurement processes have commenced if the client

still need accommodation.

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Scope of work (phase 3 : Stabilization)

Business Process re-engineering of the Lease Function:

•Review and align business processes and delegations; •Shortcomings on the lease management process including SCM in relation to leases, their root causes and economic and service delivery impacts thereof;•Alignment of existing Lease Management policies and provide recommendation based on best practice (This includes the lease agreement contract template);•Review the current BEE Strategy and its implementation;

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Scope of work …. (phase 3)

• Draft recommendations for change and propose new operating model for approval by the project steering committee;

• Review human resources structure and recommend a structure relevant for the Lease Management function;

• Propose a change management plan; • Review of Property Management Information Systems for

leases.

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Required Expertise of the Team– Demonstrated experience in lease management and appropriate

contracting modalities;– Demonstrated experience in Property Law;– Demonstrated experience in best practice; Financial Management

and Property Management policies;– Demonstrate knowledge of commercial property market structure

and economics;– Demonstrated experience in data analysis and data mining and

knowledge of applicable tools;

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Required Expertise of the Team– Understanding of facilitating business process improvement in

government;– Understanding of Business support systems;– Proven success in undertaking lease management and turnaround

functions;– Change managements experience; – Building of capacity in client departments; – Demonstrated experience in specialised audits;– Demonstrated experience in forensic data analysis and

investigation;– Understanding of public sector programme evaluation;– Understanding of public sector programme management.

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Contract period

– Phase 1 and phase 2 of the Lease Review and Improvement must be executed simultaneously.

• Phase 2 of the project is targeted for completion by 30 November 2012

• Phase 1 of the project is targeted for completion by 30 December 2012

• Phase 3 is targeted for commencement in February 2013

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EVALUATION CRITERIA

• A two envelope system will be applicable with the technical proposal and commercial proposal being in separate envelopes

• Evaluation criteria will be in two stages:

• STAGE 1: Functionality CriteriaExperience in lease contract management;Qualification of the project team;Relevant experience and expertise;Strength of the proposal.

• STAGE 2: Short listed bidders will be evaluated on price and preference, where price is 90 points and preference is 10 points.

• Service providers may be requested to make presentations on their proposals once shortlisted.

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EMPOWERMENT • The National Department of Public Works is an equal opportunity,

affirmative action employer. In this light of this, the formation of consortium or the inclusion of proposals on how this project can best be used to further the broader aims of transformation is strongly encouraged.

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CONFILCT OF INTEREST

• The consultant should not receive any remuneration in connection with the assignment except as provided in the contract. The consultants and its affiliates should not engage in consulting activities that conflict with the interests of the client/principal under the contract, and should be excluded from downstream supply of goods or construction works or purchase of any asset or provision of any other service related to the assignment other than a continuation of “service under the on-going contract.

• All landlords and brokers are excluded from tendering due to the inherent conflict of interest that may exist should their services be engaged.

• Service Providers are required to declare in writing, as part of their proposals submission, that they have no conflict of interest in acting for the NDPW in this assignment.

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I THANK YOU!

Questions!