State moves to cut procurement costs by R25bn in two years

09 December 2016 - 18:10 By Penwell Dlamini
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The government has started the process of renegotiating all contracts it has through the chief procurement officer in a bid to save money.

Speaking to TMG Digital on Friday‚ chief procurement officers Kenneth Brown said the Treasury has committed him to saving R25-billion in about two years by reviewing contracts with various companies.

“We are busy renegotiating big contracts to generate the required savings. We have renegotiated with Telkom. That contract alone will save us about R400-million‚” Brown explained after the dialogue hosted by the African Entrepreneurs Council in Johannesburg.

“We have renegotiated with Microsoft [for] all the licensing … this will lead to a possible discount of anything between 26% and 40% on existing licenses. We are expecting to save another few hundreds of millions of rands.”

He said property leases were also being assessed‚ particularly because some were between 20% and 30% above market value.

“We are finalising a property management strategy which looks at leases‚ acquisition of properties‚ and disposal of properties. The property programme is done with Public Works. We are providing them with support and guidance.

“Part of it is to renegotiate the existing leases. Government is paying between 20% and 30% above market value on some of the leases. Some of the properties that government is leasing are not in a good state.”

Brown added that some property owners have already offered government 15% to 20% discounts.

The office of the chief procurement officer was established to centralise and improve government procurement and thus address fraud and corruption involved in tenders.

Government spends between R13-billion to R14-billion a year in maintaining the properties it owns and Brown believes there is “big chunk” of properties that can be dispose of to cut these costs.

Brown said he has started workshops on with various spheres of government to introduce the infrastructure procurement standards meant to establish uniformity in the tendering environment.

He wants government to plan procurement so that entrepreneurs can anticipate business opportunity.

“Gauteng must be able to tell us that they are going to build the following amount of schools for the next three years. They should be able to tell us where the schools will be located the actual projected costs of all of that. They can put their plans together and say how they sequence their tenders in such a way which makes sure that the tenders go out on time and are adjudicated properly‚” he said.

“As business‚ if you know that this province is going to build so many schools in this particular location‚ you can plan for the tenders. People can open hardware stores so that they can supply bricks for these projects.

“The same can be done for the housing programmes and other projects‚” Brown added.

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