Construction Industry Development Board & Agrément SA on their 2013/14 Annual Reports

Meeting report

Construction Industry Development Board (cidb) 2013/14 Annual Report presentation
Mr Mzwandile Sokupa, Chief Operations Officer, Construction Industry Development Board, informed the Committee that the Construction Industry Development Board (cidb or the Board) had set priorities, during the 2013/14 financial year, around managing and improving the Construction Registers Service, that comprises the Register of Contractors and Register of Projects; reviewing and aligning the Construction Industry Development Regulations; monitoring industry performance and skill delivery; development of Best Practice Standards; enforcing compliance and regulations; and improving infrastructure delivery.

Highlights from the annual performance achievements were tabled, and the presenter emphasised the amendments to the Construction Industry Development Regulations, which were gazetted on 2 July 2013. These changes resulted in the reduction of the turnover and removal of Method B and Registered Professionals. They provided clarification on Classes of Work between General Building and Fencing and improved Joint Venture Calculation, and brought a reduction in Track Record.

The production of the Construction Registers Services had been stabilised. The entity achieved 90% (against a target of 91%) in the processing of contractor applications within 21 working days. The target was missed due to a backlog of applications brought into the first quarter of the year under review, and this was because of the implementation of a new registration software system. All targets were met after the first quarter.100% of queries were administered within the stipulated turnaround time of 48 hours (against a target of 95%). 96% of data capture errors for processing Grades 2-9 applications were rectified within a period of 10 working days, compared to the target of 95%.

The year under review had seen a significant growth in the registration of Grades 7 to 9. A slow rate had been identified in the growth for black owned contractors in Grades 7 to 9. A focus on development and transformation was required. The proportion of black-owned companies at higher grades was increasing but at a slow pace. A low number was recorded in registrations of black ownership in specialist classes.

Around 49% of Grade 2 to 4 contractors are women owned but there is a sharp decrease in Grades 7 to 8 at 22% in Civil Engineering and around 27% in General Building. The presenter pointed out that the overall women ownership has declined from 47% in General Building and 49% in Civil Engineering at the end of the first quarter of 2013, to 42% in General Building and Civil Engineering at the end of the first quarter of 2014.

During the year under review the cidb developed Practice Notes. The Notes provided actions that the organs of state could take against non-performing contractors. They provided for a consistent and uniform method of assessment of the performance of the contractor in terms of health and safety management, management of site conditions, management of subcontractors, and time, cost and quality management. The Notes further provided for a contract participation goal for workplace training on public sector contracts in tender Grades 7 to 9.

Mr Sokupa spoke to the quality of construction and said that it had emerged from a survey that clients were neutral or dissatisfied with the performance of contractors on 12% of the projects surveyed in 2013. Around 8% of the projects surveyed had levels of defects which were regarded as inappropriate. Quarterly indicators for the level of compliance and non-compliance with the Register of Projects showed that state owned companies were standing at 72%, while provincial governments were at 63%. Metropolitan Councils and High Capacity Municipalities achieved 66% and 70% respectively.

Following up on compliance to the code of conduct, formal inquiries were conducted on 19 cases for this financial year. Of these, three cases were withdrawn and the respondents on the remaining 16 cases were found to have been guilty. The investigation by the cidb into collusive practices by 15 firms who were found guilty by the Competition Commission had commenced. The outcome of the investigation would be reported in the next financial year.

Mr Sokupa noted that further legislative improvements were under way. Draft standards for Construction Procurement Competence had been developed as part of the strategy to build construction procurement skills within the public sector. The standards would be finalised in the 2014/15 financial year, and they would seek to address the skills deficiencies among procurement , and to set the threshold for the assessment of training outcomes. Consultations on the draft regulations for Prompt Payment and Dispute Resolution were completed and these  regulations would be finalised during the 2014/15 financial year.

The Employment Equity statistics at the cidb showed a huge concentration of African females in the lower ranks, but not so many in the higher ranks, and the higher ranks revealed that equity was not so good either in relation to females, but also for African candidates in general. The cidb accepted that there was an urgent need to address the employment of females in higher ranks.

On the issue of finances, Mr Sokupa reported that the cidb achieved an unqualified audit report, with emphasis of matter which called for the restatement of figures of the previous financial year to correspond with figures of the year under review. The Auditor-General (AG) had raised some findings, as contained in the management letter for the 2013/14 financial year. In response to these matters, the cidb had designed a Corrective Action Plan monitoring tool. There was progress in terms of making sure that the necessary controls were in place to ensure matters raised would be addressed and that repeat findings would be prevented. (See attached presentation for all tables and graphs that were presented to illustrate revenue and expenditure)

Discussion

Mr S Masango (DA) wanted, firstly, clarity on the blacklisting of contractors for non-performance. Secondly, he wanted to know why the Department was giving out work to contractors that were not registered on the cidb database. Lastly, he enquired how the cidb was responding to the investigation reported by the Auditor-General.

Mr Sokupa said, in relation to the blacklisting, that the practice notes were given out to contractors so that they should not have an excuse of ignorance or inability to manage the completion of the work. These notes clearly set out the steps that that were taken before a blacklisting would happen.

Mr Sokupa noted that the use of non-registered contractors was essentially a compliance issue. The cidb was currently working on this matter, especially for clients who procured the services of contractors who were not registered on the database of the cidb. The issue was investigated first, and then appropriate action would be taken.

Mr Sokupa confirmed that the Auditor-General's investigation was an issue that was on-going. The cidb had been told that it should "clean up its own act" first before it attempted to regularise the construction industry. It had been found there were employees who colluded with contractors, and action had been taken against them.

Mr P Sithole (IFP) asked if the entity had a system in place that helped to develop and capacitate smaller contractors, especially those located in the rural areas.

Mr Sokupa informed the Committee that the cidb provided guidelines on contractor development. It did not do contractor development itself, but merely advised its clients on contractor development. The cidb expended its energies on regulations.

Ms N Mjobo (ANC) wanted to establish what the cidb would do if there was an accident on a site.

Mr Sokupa said that was the responsibility of the Department of Labour, and the cidb would not be involved.

Mr Masango asked for clarity on the cellphone bill of R151 000.

Ms Hlengiwe Khumalo, Chief Financial Officer, cidb, elaborated that this transaction happened in 2011, over a weekend. A particular staff member was using the phone in terms of a contract for qualifying staff members. This staff member was mugged in Hillbrow, on a Friday night. According to the staff member, although the theft of the phone was reported to MTN, that company was unable to blacklist the phone because it belonged to another person or company, who could not confirm the ownership until Monday, when the blacklisting was finally done. By then, cellphone charges of R151 000 had already been incurred on that stolen phone. An investigation done afterwards revealed that the cidb did not have a cellphone policy, but one had subsequently been introduced, and the new controls allowed the entity to give qualifying staff members allowances. Cellphone contracts had been cancelled. Because it was clear the money would not be recovered, the Board decided to declare this as a fruitless expenditure.

Mr Sokupa said that it seemed that Members were confused by the difference between registration and grading. He sought to explain this, saying that some contractors approached cidb with minimum information for registration. They would be registered into the database. Others, who came with proof of work already done, would be processed differently. It took longer to process those that had a track record and work portfolio, and they would also be sent to the assessment committee for grading. No one would be turned away, provided that they paid the registration fee. Grade 2 to Grade 9 registration meant that the contractors would have to submit necessary documents and proof that grading had been done by the assessment committee.

The Chairperson asked Mr Sokupa to reply in writing to questions that time did not permit him to answer in full during the meeting.

Agrément SA: 2013/14 Annual Report Presentation

Mr Joe Odhiambo, Chief Executive Officer: Agrément South Africa, briefed the Committee on Agrément's 2013/14 Annual Report. This entity is an agent of the National Department of Public Works (NDPW), with a mandate to offer an opportunity for the introduction and use of modern and improved innovative construction technologies to the market, in order to accelerate infrastructure roll-out.

Its activities were defined as centering around providing assurance of fitness-for-purpose of innovative, non-standard construction methods, as well as on-going quality assurance. It would disseminate correct, objective and relevant information in respect of the technical, socio-economic and regulatory aspects of building. It supported the application of the National Building Regulations, and supported policy makers in the use of innovative technologies. It worked with the industry in the development of cost-effective, innovative technology and non-standardised construction technology.

Mr Odhiambo stressed that the entity had met annual targets and projections of outputs. Its strategy had been aligned to support key priority areas of the government and it had started to lay a foundation for a higher growth in infrastructure development.

Comparing the annual performance against planned targets, Mr Odhiambo indicated that the entity achieved 90% on applications received, against a target of 16. Regarding evaluation offers, it scored 80% against a target of 16. Regarding evaluation offers accepted, the organisation, again against a target of 16 attained 137, 5%. Concerning issued certificates, the agent got 65% against a target of 16.

The Minister of Public Works had approved the 2014/15 – 2018/19 strategic plan of  Agrément SA and it was delivered to the Parliamentary Stores in March 2014 for tabling. By undertaking technical assessments of innovative systems for and on behalf of the government, the entity had made a great contribution in the safe introduction of innovative technologies in the country with commensurate benefits.

Agrément SA was continuing its strong emphasis on the development of human resources to enhance the skills level and efficiency of technical staff. The technical committee had improved hugely, in terms of both the number and expertise of its staff.  The percentage of black employees was currently standing at 93%.

Mr Odhiambo explained that in relation to technical outputs, the organisation issued certificates, which were  technical documents that, amongst other things, described the system or product, summarised the assessed performance, stated which National Building Regulations were deemed to be satisfied by the subject of the certificate, and gave the conditions and requirements that must be met if the assessed performance was to be attained.

In relation to building systems, various aspects would be assessed, as follows:

-         structural strength and stability
-         behaviour in fire
-         water penetration
-         acoustic performance
-         durability and maintenance required
-         thermal performance and energy requirements
-         the quality management system of the applicant

With regard to the quality management system, some of the requirements that Agrément SA advocated for certification was that each certificate holder must have a quality management system in place that was documented in a quality manual, which was approved by Agrément SA. No certificate would be granted until a satisfactory quality manual has been received and the quality management system had been approved by the Board of Agrément SA. The applicant must comply with the quality management system of Agrément SA, which was based on the SANS 9001 standards.

Mr Odhiambo tabled a number of graphs (please see attached presentation) to demonstrate the technical outputs.

In relation to financial matters, it was reported that the Centre for Scientific and Industrial Research (under whom Agrément's financial statements were audited) had received an unqualified audit opinion. The grant funding for this entity was channelled from the Department of Public Works. The funds were ring-fenced within the Built Environment Unit, in a separate Competence Area. He tabled further tables and graphs to illustrate the revenue and expenditure of the entity, including tables on remuneration of staff and Board Members)

Discussion

Mr K Mubu (DA) asked why the revenue of the entity had decreased by 30%. He asked if the bonuses paid to staff members were based on performance.

Mr Odhiambo explained that the entity relied mostly on grants and fees from applications for its income. Interest received by the entity was based on the amount of money available in the account. The bonuses were paid on the basis of performance by the CSIR and its units.

Ms P Adams (ANC) wanted to know which companies were using the AquaFriction Paving, and for what reasons.

Mr Odhiambo told Members that SANRAL was using it in the making of particular roads, like highways, across the country.

Ms D Mathebe (ANC) enquired if there were any projects the entity had started, so that the Members could see the products in use.

Mr Odhiambo said there were projects that had been started at eMbekweni, near Paarl, in the Western Cape and in Soshanguve, to the north of Pretoria.

Mr Sithole wanted to know what time it would take to approve certificates by independent producers, and what was deemed to be the life cycle of the innovative products.

Mr Odhiambo responded that the certificate approvals usually took six months, because better and faster methods of assessments were used. Although the life cycles differed from one product to the next, he indicated that on average they could be expected to last 50 to 60 years.

The meeting was adjourned.