SIPDM Guidelines

The intent of National Treasury Instruction No 4 of 2015/2016 and Municipal Circular 77 is to separate the supply chains for infrastructure procurement and delivery management from those for general goods and services. There is a need to understand the differences between procurement and supply chain management, the different types of procurement, and the major differences between these two different types of supply chains in order to understand the thinking behind this separation.

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The Standard for Infrastructure Procurement and Delivery Management defines value for money as ¡°the optimal use of resources to achieve intended outcomes¡±. The control framework for the planning, design and execution of infrastructure projects, the tracking of projects, and the monitoring of performance provided in this standard is, amongst other things, designed to ensure that any infrastructure acquired or to be acquired offers value for money. A focus of the gateway reviews for major capital projects is on value for money. The concept of and issues surrounding value for money need to be understood, as well as the threats and opportunities associated therewith.

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The National Treasury Standard for Infrastructure Procurement and Delivery Management (SIPDM) provides a control framework for  he planning, design and execution of infrastructure projects, the tracking of such projects and the monitoring of performance which enables risks to be proactively managed. This control framework can also be audited. An organ of state¡¯s supply chain management (SCM) policy for infrastructure procurement and delivery management is, in terms of the SIPDM, required to assign responsibilities for approving or accepting deliverables associated with a gate (control point) in this control framework.

There is a need to understand the thrust and intent behind this control framework and what needs to be considered when assigning responsibilities for approving or accepting deliverables at the associated gates.

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The Standard for Infrastructure Procurement and Delivery Management (SIPDM) establishes requirements for institutional arrangements for organs of state who are responsible for infrastructure delivery. Such requirements relate to:

• the establishment of a suitable infrastructure procurement and delivery supply chain management policy to implement the standard, which as a minimum:
  • assigns responsibilities for approving or accepting deliverables associated with a gate in the control framework, or authorising a procurement process or procedure
  • establishes committees that are required by law, or equivalent quality management and governance arrangements
  • establishes delegations for the awarding of a contract or the issuing of an order
  • establishes ethical standards for those involved in the procurement and delivery of infrastructure; and
• the entering into agency agreements between organs of state where responsibilities for implementation are delegated or assigned to other organs of state.

There is a need to understand the roles and responsibilities of the client and delivery teams in order to develop a suitable supply chain management (SCM) policy to implement the standard and to structure an agency agreement which satisfies the minimum requirements of the SIPDM.

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The Standard for Infrastructure Procurement and Delivery Management (SIPDM) defines the following two generic terms:

• Portfolio: collection of projects or programmes and other work that are grouped together to facilitate effective management of that work to meet a strategic objective.
•  Programme: the grouping of a set of related projects in order to deliver outcomes and benefits related to strategic  objectives which would not have been achieved had the projects been managed independently.

Projects can be linked to programmes and portfolios. It is therefore important to understand how projects are managed within an infrastructure context at a project, programme and portfolio level, and what the linkages are between these different types of management. 

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The Standard for Infrastructure Procurement and Delivery Management (SIPDM) establishes developmental or secondary procurement policy relating to Broad Based Black Economic Empowerment (B-BBEE), and where appropriate, work opportunities for target groups and national development goals.

The SIPDM furthermore establishes targeted procurement procedures that may be used to promote social and economic objectives, as well as those for specifying minimum local content.

It is important to understand the context within which developmental procurement policies are implemented and how targeted procurement procedures are applied.

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The Standard for Infrastructure Procurement and Delivery Management introduces a stage in the delivery management control framework for strategic resourcing. This stage requires that a procurement strategy be developed. This standard defines a procurement strategy as the ¡°selected packaging, contracting, pricing and targeting strategy and procurement procedure for a particular procurement¡±. Users of the standard need to understand what precisely a procurement strategy is.

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The Standard for Infrastructure Procurement and Delivery Management includes provisions for framework agreements. Framework agreements have similarities with term service and transversal contracts, but are different in several important

aspects. Internationally framework agreements have different meanings. It is therefore important to understand what precisely a framework agreement is and how it is to be implemented in terms of the National Treasury Standard for Infrastructure Procurement and Delivery Management.

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A procurement system comprises procedures and methods, procurement documents, governance or quality arrangements to manage and control procurements, and organisational procurement policies. The Constitution of South Africa in this regard requires the public procurement system to be fair, equitable, transparent, competitive and cost-effective. It also permits procurement policy which provides for categories of preference in the allocation of contracts and the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination.

The National Treasury Standard for Infrastructure Procurement and Delivery Management (SIPDM) establishes a control framework and minimum requirements for infrastructure procurement. An organ of state¡¯s Supply Chain Management (SCM) Policy for Infrastructure Procurement and Delivery Management is required in terms of the SIPDM as a minimum to assign responsibilities for approving or accepting deliverables associated with a gate (control point) in the control framework or authorising a procurement process or procedure, establish committees which are required by law (or the equivalent thereof) and delegate authority for the award of contracts and orders.

There is a need to understand the thrust and intent behind this control framework and the minimum requirements for infrastructure procurement when establishing a suitable SCM policy and the setting up and implementation of an infrastructure procurement system within an organ of state which complies with the requirements of the SIPDM.

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The Standard for Infrastructure Procurement and Delivery Management (SIPDM) establishes requirements for infrastructure contracts and contract management. Organs of state are required to select and use a contract selected from a prescribed list of standard forms of contract. Those responsible for the management or administration of the contract on behalf of an organ of state need to act as stated in the contract that is entered into. They also need to be professionally registered with an appropriate built environment council where such contracts involve the provision of new infrastructure or the rehabilitation, refurbishment or alteration of existing infrastructure.

Infrastructure procurement involves the development or maintenance of a product on a site. A central issue that needs to be dealt with in infrastructure projects is the financial liability related to uncertainty of future events, who takes the risk for

the difference between the actual prices paid in terms of the contract and those estimated at the time of tender, and how changes to the information are used to produce the works assessed and paid for. Standard forms of contract have been

developed by industry to enable risks to be allocated between the parties to a contract. Those responsible for administering a contract on a client¡¯s behalf need to do so in accordance with the provisions of these standard forms of contract. The provisions in the SIPDM for infrastructure contracts and contract management need to be understood in this context.

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The Standard for Infrastructure Procurement and Delivery Management (SIPDM) defines procurement documents as ¡°documentation used to initiate or conclude (or both) a contract or the issuing of an order¡±. Procurement documents need to:

• present requirements in a clear, unambiguous, comprehensive and understandable manner;
• require tenderers to submit particulars sufficient for the employer to evaluate their tenders;
• set out the criteria by which tenders are to be evaluated;
• define the risks, liabilities and obligations of the parties to the contract and the procedures for the administration of the contract;? define the nature, quality and quantity of goods, services or works to be provided in the performance of the contract; and
• establish the means by which the contractor is paid for performing the contract.

Procurement documents as such capture the procurement strategy and tactics that are decided upon. They are in effect a tool for identifying a suitable contractor during the tender process and managing risks during the execution of a contract. The SIPDM establishes a number of requirements for procurement documents. It is important to have a working knowledge of these requirements, as procurement documents form the backbone of the infrastructure procurement system.

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The Standard for Infrastructure Procurement and Delivery Management makes no reference to ¡°functionality¡±. It does make reference to ¡°quality¡± which may be used in the evaluation of tenders as other objective criteria and provides detailed

procedures for doing so. This enables contracts to be awarded not only on the basis of lowest price adjusted for a preference, but also on the most economically advantageous or cost effective offer that is submitted.

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