VENDOR PERFORMANCE MANAGEMENT POLICY 2015

VENDOR PERFORMANCE MANAGEMENT POLICY 2015 1 P a g e

Index Preamble Page 2 1.) INTRODUCTION Page 3 2.) DEFINITIONS Page 3 3.) PRELUDE Page 4 4.) MONITORING OF SUPPLIERS Page 4 5.) MONITORING OF SUPPLY CHAIN MANAGEMENT UNIT Page 4 6.) SERVICE DELIVERY REALISATION Page 4 7.) VALUE FOR MONEY Page 5 8.) DATABASE MANAGEMENT Page 5 9.) IMPLEMENTATION OF POLICY Page 5 10.) POLICY OBJECTIVES Page 5 11.) PRESCRIPTIVE/LEGAL FRAMEWORK Page 5 12.) POLICY APPLICATION Page 6 13.) POLICY PRINCIPALS Page 6 14.) EXCEPTIONS TO THE PRINCIPLES OF THIS POLICY Page 7 15.) ROLES AND RESPONSIBILITIES Page 7 16.) RESPONSIBILITIES OF ACCOUNTING OFFICER Page 8 17.) MONITORING AND EVALUATION Page 8 18.) COMMENCEMENT OF THE POLICY Page 8 PREAMBLE The Hibiscus Coast Municipality has adopted a Supply Chain Management Policy in terms of S111 of the Municipal Finance Management Act 56 of 2003 (MFMA) which stipulates that the SCM Policy must be fair, equitable, transparent, competitive and cost-effective. The Municipality, in an attempt to continuously improve the manner in which it manages public funds under its custodianship, has identified that weaknesses may exist with regard to its efforts to manage the receipt of goods and services in a cost effective manner. The Vendor Performance Management Policy has been developed in this regard. 2 P a g e

1) INTRODUCTION The Vendor Performance Management policy is to be read and implemented in conjunction with the Municipality s Supply Chain Management Policy. This policy is not meant to guide the selection of vendors, but only the performance of vendors with regard to orders and/or a contract entered into with such vendors, subject to the SCM Policy. 2) DEFINITIONS MFMA Local Government: Municipal Finance Management Act 56 of 2003 Municipal Systems Act Local Government: Municipal Systems Act 32 of 2000 Municipal Structures Act Local Government: Municipal Structures Act 117 of 1998 Supply Chain Management Policy The Municipality Contract Vendor User Department Annexure A Municipal Supplier Database Accounting Officer Non Performance Poor Performance Restriction Supply Chain Management Policy of Hibiscus Coast Municipality Hibiscus Coast Municipality The agreement to provide goods and/or services to the Municipality by a vendor pursuant to and in accordance with the Municipal Supply Chain Management Policy, or any official instruction by an authorised official of the Municipality. Such agreement may take the form of an official order, a written agreement or Service Level Agreement and or a letter of instruction issued by the Municipality A Service Provider who is listed on the Municipal Supplier Database and provides good and/or services to the Municipality A functional unit or section of the Municipality which requires the support of Supply Chain Management in the provision of goods or services. Vendor Evaluation and Performance Report A comprehensive listing of all service providers who supply or are prospective suppliers of goods and/or services to the Municipality; which includes amongst others, contact details and range of goods and /or services which such service providers offer to the Municipality The Municipal Manager, as contemplated by S82 of the Municipal Structures Act, or his/her delegate Performance of a vendor regarding the provision of goods and/services to the Municipality, where the provision of such goods and/or services is not in compliance with the specifications communicated to the vendor at the procurement of the goods and/or service Performance of a vendor regarding the provision of goods and/services to the Municipality, where the provision of such goods and/or services is not in compliance with the specifications communicated to the vendor at the procurement of the goods and/or service; and where such non-compliance has been communicated to the vendor on more than one occasion during the contract period, but no adequate or sufficient corrective measures have been implemented The demerit of a service provider which results in said service provider being excluded from contracting with the Municipality for a specific period 3 P a g e

3) PRELUDE The broad objectives of Supply Chain Management in the Public Sector are improved governance and preferential procurement for socio-economic empowerment. Performance Management and its application to specific functional areas like Supply Chain Management can therefore be seen as a key driver in the institutionalization of good governance practices. What is Performance Management in Supply Chain Management? Performance Management depicts the final element in the Supply Chain Management cycle but should not be seen in isolation as the monitoring processes often occur concurrently with all the other elements in the Supply Chain Management cycle. The process consists of a retrospective analysis to determine whether the proper process was followed and whether the desired outcomes were achieved. An effective Supply Chain Management Performance Management System (Vendor Performance Management System) should be developed and implemented in accordance with departmental policies and procedures and applicable legislative requirements. Broadly speaking, Supply Chain Management performance can be measured in terms of the following: Suppliers of goods and services The Supply Chain Management Unit Service Delivery Realisation Value for money Database management. 4) THE MONITORING OF SUPPLIERS The monitoring of suppliers should form the basis of Contract Management activities where certain aspects should be monitored and reported on. These reporting elements include but are not confined to the following: A database of contracts awarded, conclusion of Service Level Agreements Monitoring of the supplier according to the stipulations of the SLA, Documenting any deviation or non-performance by the supplier, It is also recommended that at the completion stage of each project, an assessment of the supplier/service provider (including consultants where applicable) be undertaken and that this assessment be available for future reference i.e. Close out Report with final payment made to supplier. A review of the relationship with suppliers and the improvements needed to enhance efficiencies across the supply chain. 5) MONITORING OF THE SUPPLY CHAIN MANAGEMENT UNIT The various elements of the Supply Chain Management Cycle should be monitored for adherence to the relevant legislative requirements and internal departmental policy and procedure. The Supply Chain Management Unit should further be monitored for key requirements under the following elements: Monitoring and evaluation of Supply Chain Management policy and its delegations, training obligations, the constitution of bid committees and all relevant statutory requirements; Planning and budgeting for all procurement and service delivery needs; Compliance to Supply Chain Management policy and prescripts in respect of acquisitions; logistics; disposal and contract management; Reporting requirements to key stakeholders 6) SERVICE DELIVERY REALISATION Monitoring of procurement for: The extent to which the objectives of Council were met through procurement activities i.e. Socio-economic targets, financial targets etc. 4 P a g e

7) VALUE FOR MONEY Adherence to the five pillars of procurement especially value for money, which is defined as the best available outcome when all relevant costs and benefits over the acquisition period is considered 8) DATABASE MANAGEMENT The management of vendor performance prior and during the Supply Chain management process must be dealt with via the MUNSOFT system. Present, past and current performance is available per vendor / supplier 9) IMPLEMENTATION OF THE POLICY. The Vendor Performance Management Policy is to be read and implemented in conjunction with the Hibiscus Coast Municipality s Supply Chain Management Policy. This policy is not meant to guide the selection of vendors, but only the performance of vendors with regard to orders / SLA s and/or a contract entered into with such vendors, subject to the Supply Chain Management Policy. The negotiations between two parties, the service provider and the Council, come with its own challenges. It is important that the expectations of both parties are met. To be able to manage the expectations of a Service Level Agreement (SLA) it becomes a necessary tool to monitoring and evaluating vendors supplying goods and services. A service Level agreement (SLA) helps two parties improve communications, manage expectations, clarify responsibilities and build the foundation for a satisfactory relationship. 10) POLICY OBJECTIVES The objectives of the Vendor Performance Management Policy are as follows: 10.1 To ensure that the Municipality receives goods and services in a cost effective manner 10.2 To ensure that service providers contracted to the Municipality adhere to the provisions of such contracts in the provision of goods and services 10.3 To define the processes to be followed in the event of any instances of poor or nonperformance of the Vendor / Service Providers 10.4 To provide for a framework within which any deviations from contracts are managed 11) PRESCRIPTIVE/LEGAL FRAMEWORK Hibiscus Coast Municipality s Vendor Performance Management Policy has been developed with recognition of the prescriptive context within which it needs to comply, and policy imperatives of national and provincial government; as indicated, but not limited to, below: MFMA; PPPF Act Municipal Structures Act; Municipal Systems Act; Municipal Supply Chain Management Regulations (Government Gazette No. 27636) Hibiscus Coast Municipality Supply Chain Management Policy 5 P a g e

12) POLICY APPLICATION This policy applies to all the Municipality s departments and sections and external contractors that may provide support and/or assistance in the implementation of any aspect of the Municipality s Supply Chain Management Policy. 13) POLICY PRINCIPLES 13.1 KEY PRINCIPLES AND GUIDELINES PERTAINING TO THE MANAGEMENT OF VENDOR PERFORMANCE. 13.1.1 Performance, for the purposes of this Policy, refers to quality of goods and/or services received by the Municipality; inclusive of delivery time and adherence to the prescribed specification for such goods or services. 13.1.2 Adherence to this policy is mandatory for administration of all contracts concluded with the Municipality towards the provision of goods and services to the Municipality. 13.1.3 Comprehensive, sound Contract Management principles are to be adhered to by all Departments in order to ensure that the performance of vendors is strictly managed. 13.1.4 Where the provisions of this policy clash with the provisions of any of the legislative provisions referred to above, the provisions of such legislation shall prevail. 13.1.5 Prior to acquiring of any good or service by the Municipality, the user department shall, at acquisition stage, clearly articulate a detailed product specification against which the particular good or service will be procured. 13.1.6 Supply Chain Management and the user department shall engage with regard to product specification against what is received from vendors/service providers, prior to an order number or contract being entered into with a vendor/service provider. 13.1.7 Departments will manage and report on performance of vendors who are responsible for the provision of goods and/or services procured by the affected departments. 13.1.8 Management of vendor performance will be documented by user departments, with such documentation including agreed upon corrective measures and time frames within which corrective measures are to be attained. 13.1.9 Where vendors are advised of being restricted from the provision of goods and/or services to the Municipality, such vendors have recourse to an appeal against such decision, in line with the prescripts of this Policy. 13.1.10 Appeals regarding the decision to terminate or restrict a vendor shall be made, in writing, to the Accounting Officer within seven (7) days of the vendor receiving such decision. 13.1.11 Appeals will be attended to within twenty one (21) working days of receipt of same. 13.1.12 The decision of the Appeals Committee in respect of Restriction is final. 6 P a g e

14) EXCEPTIONS TO THE PRINCIPLES OF THIS POLICY 14.1 Exceptions to this policy shall only be granted by the Accounting Officer under the following conditions: 14.1.1 Compliance would adversely affect the ability of the service to accomplish a critical function. 14.1.2 Compliance cannot be achieved due to an emergency or lack of alternatives. 15) ROLES AND RESPONSIBILITIES 15.1 Responsibilities of Heads of Department 15.1.1 Provides technical advice and assistance to Supply Chain Management with regards to product specification required by the department. 15.1.2 Provides a monthly performance report to the CFO / Manager Supply Chain Management in accordance with Annexure A. Such monthly reports are to be supplied per contract or order number. 15.1.3 Provides monthly performance reports by the third (3rd) working day after the end of each month to the CFO / Manager Supply Chain Management. 15.1.4 Retains all evidence to support the abovementioned report, and provide such evidence as and when required by the CFO / Manager Supply Chain Management, Vendor Performance Committee and/ or Municipal Manager. 15.1.5 Make representation to Vendor Performance Committee on monthly reports, as and when required. 15.2 Responsibilities of the CFO / Manager Supply Chain Management 15.2.1 Receives monthly performance reports from Heads of Department on vendor performance. 15.2.2 Ensures that the Municipal Contracts Register is updated with information from the abovementioned performance reports. 15.2.3 Reports monthly in a consolidated manner on vendor performance to the Municipal Manager by seventh (7th) working after the end of each month. 15.2.4 Chairs the Vendor Performance Committee. 15.3 Responsibilities of Vendor Performance Committee 15.3.1 The Committee will comprise of the CFO / Manager Supply Chain Management, who will be the Chairperson of the Committee. Members of the Committee will include Manager Internal Audit, Manager Legal Services. The Head of Department of an affected department or a delegated official will make representation to the committee. 15.3.2 The Vendor Performance Committee shall meet, where called by the Chairperson, by no later than the fifteenth (15th) working day at the end of each quarter of the Financial Year. 15.3.3 The Committee shall make recommendations to the Municipal Manager for termination of contract with a vendor, or for the restriction of a vendor. 7 P a g e

15.4 Recommendations for restriction shall be made in accordance with the following guide: a) Where a contract is terminated due to non/poor performance, such vendor will be restricted on the Supplier Database; and thereby be excluded from contracting with the Municipality for a period of twelve (12) months from date of notification of restriction, subject to the appeals process detailed in this policy. In the event of an appeal against restriction, the date of notification of restriction shall be the date of notification after the appeals process has been finalised b) Where the Municipality has received poor performance from a vendor, as evidenced by the monthly Vendor Performance Reports; and the total value of the contract is in an amount above R200 000.00, such vendor will be restricted on the Supplier Database; and thereby be excluded from contracting with the Municipality for a period of twelve (12) months from date of notification of restriction, subject to the appeals process detailed in this policy. In the event of an appeal against restriction, the date of notification of restriction shall be the date of notification after the appeals process has been finalised c) Where the Municipality has received poor performance from a vendor, as evidenced by the monthly Vendor Performance Reports; and the total value of the contract is equivalent to an amount from R30 001.00 and R200 000.00, such vendor will be restricted on the Supplier Database; and thereby be excluded from contracting with the Municipality for a period of six (6) months from date of notification of restriction, subject to the appeals process detailed in this policy. In the event of an appeal against restriction, the date of notification of restriction shall be the date of notification after the appeals process has been finalised d) Where the Municipality has received poor performance from a vendor, as evidenced by the monthly Vendor Performance Reports; and the total value of the contract is up to an amount of R30 000.00, such vendor will be restricted on the Supplier Database; and thereby be excluded from contracting with the Municipality for a period of three (3) months from date of notification of restriction, subject to the Appeals process detailed in this policy. In the event of an appeal against restriction, the date of notification of restriction shall be the date of notification after the appeals process has been finalised 16) RESPONSIBILITIES OF THE ACCOUNTING OFFICER 16.1 Shall receive recommendations from the Vendor Performance Committee. 16.2 Shall terminate or restrict vendors, as recommended by the Committee. 16.3 Shall convene an Appeals Committee, inclusive of the Accounting Officer and two other Heads of Department to consider appeals against termination or restriction lodged. The Heads of Department serving on the Appeals Committee shall not be a Head of Department from whose department of responsibility the appeal emanates. 17) MONITORING AND EVALUATION This Policy shall be monitored and evaluated by the Chief Financial Officer or delegated official. Treasury will submit regular monitoring reports to CORPMANCO, the Finance Portfolio Committee, Executive Committee and Council. 18) COMMENCEMENT OF THE POLICY This Policy shall come into effect on the date of the adoption by the Hibiscus Coast Municipality. 8 P a g e

Annexure A BID/ ORDER NO. VENDOR DATE OF AWARD PROJECT VALUE START DATE END DATE TARGETS (INCL. TIME FRAME) AMENDED DATE REASON FOR AMENDMENT ACTUAL PROGRESS/PERFORMANCE (PER MONTH) Mth1 Mth2 Mth3 POE/CORRECTIVE MEASURE 9 P a g e