CURRENT PRACTICE ON TOURISM PPP PROCUREMENT PROCESS
4.8 Project Approval Processes
There are many activities associated with the planning and development phase but the key deliverables are the needs assessment, development of the strategic business case and the readiness for procurement. The initial phase is the crucial phase as it determines whether the process can go forward. The first phase, therefore, in the planning and development phase, is to put the appropriate organisational structure in place. Recognition of the structure as an official structure is when it is approved by the respective Member of the Executive Committee from the political structure (MEC). This then allows the project inception stage to start.
4.8.1 Project inception stage
According to the National Treasury Public Private Partnership Manual (October 2002: Version 3) and as provided in the Government Gazette (25 May 2002 No. 23463) as a principle for control, “only an accounting officer or an accounting authority may enter into a PPP agreement on behalf of the organisation.”
According to the National Treasury PPP Practice Note: Number 01 of 2005:
The accounting authority may not proceed with a PPP without the prior written approval of the National Treasury; or the relevant provincial treasury, if it is a provincial institution and the National Treasury has, in terms of section 10(1) (b) of the Act, delegated the appropriate powers to the provincial treasury.
Upon identifying the PPP project, the institution through the accounting officer and the accounting authority, is expected to inform the relevant treasury in the form of an application to registering the project as a PPP. As part of the application, the institution informs the treasury of the expertise within the institution. If the relevant treasury so requests, the institution appoints a specialized consultant for this purpose-referred to as a transaction advisor. The organisation must also appoint the person to manage the project, preferably from within the organisation that is capable and qualified to manage the project.
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According to Treasury Regulation, (PFMA No 16 of 1999: module 3) “a transactional advisor means a person appointed in writing by an accounting officer or accounting authority of an institution, who has or have appropriate skills and experience to assist and advise the institution in connection with PPP, including the preparation and conclusion of a PPP agreement”. The South African National Treasury (National Treasury PPP Manual 2002:21) Version 2 defines it as “a consortium of professional consultants, from one or more firms, who work as a team”. The transactional advisors are contracted with the organisation through the principal or lead firm. Members of the consortium participate via a joint venture arrangement or by being subcontracted with the lead firm. Once these elements are in place, the transactional adviser is ready to embark on the feasibility study stage.
4.8.2 Feasibility Study: Treasury Approval 1
The PPP practice notes, (section76 (4) (g) of the PMFA), presents that to determine whether a proposed PPP is in the best interest of an institution, the accounting officer or the accounting authority must undertake a feasibility study that explains strategic and operational benefits of the PPP agreement for the institution in terms of its strategic objectives and government policy.
A written application, for the feasibility study approval Treasury Approval 1, (S. A. National Department of Treasury, 2006: 20) “must be submitted to the relevant treasury together with the feasibility study containing a brief sector needs and options analysis, and priority ranking of the PPP being proposed on the basis of the analysis.” According to of the PFMA No. 19 of (1999: Section 76(4) this should cover the demonstration of affordability; risk transfer and an initial indication of how value for money will be realized and the institutions arrangements for monitoring the implementation of the PPP as a project.
The institution may not proceed with the PPP procurement phase without the feasibility study having been formally approved, (S. A. National Treasury PPP Toolkit, Module 3, 2005).
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At the start of the procurement phase, the feasibility study is now complete and approved.
According to of the PFMA No. 16 of 1999 Section 76(4) prior to the issuing of the procurement documentation to any prospective bidders, the institution must obtain approval from the relevant treasury for procurement documentation, including at least the main terms of the proposed agreement, the aspects of affordability, value for money and the risk transfer.
The procurement procedure, (Gopalan, 2013), must be according to a system that is transparent, competitive, fair, equitable, and cost effective. The National Treasury PPP Toolkit for Tourism, module 3 (2005:1) states that “there are five stages to the procurement phase for large capital tourism PPP projects, namely; request for qualifications and treasury approval II A; request for proposals and treasury approval II A; evaluate bids, choose the preferred bidder and get treasury approval II B; after the evaluation of the bid, but prior to appointing the preferred bidder, the institution must submit a report for approval by the treasury. If approved, the treasury should refer to this as treasury approval II B.
4.8.4 Agreement: Treasury Approval III
The next stage of the partnership application process is negotiations, getting Treasury Approval III and signing of the Agreement. According to the Domestic Tourism Growth Strategy (National Department of Tourism, 2011:31) “public private partnership (PPP) agreement management enables both parties to the contract (the private party and the institution) to meet their respective obligations.” The central aim of the agreement management is to ensure that the project continues to be affordable and provides value-for- money outcomes for the institution, and that the private party continues to manage the project risk. This section has expounded the legislative framework that guided the strategic framework and the policy dimensions. Views from the Domestic Tourism Growth Strategy by the National Tourism department (2011) have also been covered to expound the broad spectrum of disciplines considered in developing the process. It also covers the influence of the Public Finance Management Act 19 of 1999 and highlights other related regulations.
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