National Treasury
Asset Management Seminar
Proposed Standard Terms of
Reference
25 November 2010
Introduction
Consultants assist in a wide range of activities :
 Financial services, consulting engineers, procurement services , policy
reform management , etc.
• The appointment includes various processes;
 selecting;
 contracting;
 monitoring
• Consultants should only be engaged
 lack of necessary skills;
 resources to perform;
 accounting officer cannot be reasonably expected either to train or to recruit
people in the time available.
• Public funds are allocated in the process of appointing consultants
and the significance of it being prudent and transparent in a manner
which is fair and effective.
• These actions entail cohesion of measures, accountability and
responsibility, established by the respective Municipality and the
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identified consultant.
Purpose
The purpose of this paper is to provide
standard terms of reference for the
appointment of consultants in the
municipal sphere.
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Legislative Framework
• Section 217 of the Constitution Act No. 108 of 1996
• MFMA Section 110 (1) (c) specifies that Chapter 11
of the MFMA is applicable
• SCM Regulation 35
• MFMA Circular 2 of 2004, paragraph 4
• Practice Note Number SCM 3
• Construction Industry Development Board (CIDB)
Practice Notes
• The Guide for Municipal Accounting Officers
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Process of appointing
consultants
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•
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Reasons for appointing consultants
Appointment by means of a formal contract
Selection methods
Preparation of Terms of Reference (TOR)
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Preparation of Terms of
Reference (TOR)
• The scope of the services described should be
compatible with the available budget.
• The Accounting Officer should prepare the Terms of
Reference.
• The TOR should clearly define:
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the task directive (methodology);
objectives;
goals;
scope;
background information.
• Timeframes linked to various tasks should be specified,
as well as the frequency of monitoring actions.
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Preparation of Terms of
Reference (TOR)
• The respective responsibilities of the Accounting
Officer and the consultants should be clearly
defined.
• The evaluation criteria should include at least the
following:
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Consultants experience relevant to the project;
The quality of methodology;
The qualification of key personnel;
The transfer of knowledge (where applicable).
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Construction Related
Contracts
• Eligibility criteria in terms of CIDB related contracts.
• Bid evaluation methods in terms of CIDB related
contracts:
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Method 1: Financial offer
Method 2: Financial offer and preference
Method 3: Financial offer and quality
Method 4: Financial offer, quality and preference
• Evaluating quality offered in submissions in terms of
CIDB related contracts.
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Contract Management
• Monitoring and evaluating contractor performance
and outputs against project specifications and
targets.
• Take remedial action if performance is below
standard.
• The respective responsibilities of the Accounting
Officer and the consultant should be clearly
defined in the contract.
• An ongoing analysis of progress towards achieving
planned results, with the purpose of improving
management decision making.
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Analysing Risks
Municipalities must be able to mitigate risk in the
following areas:
• Selection method;
• Scope of works (Clear Deliverables);
• Evaluation criteria/process;
• Pricing;
• Adjudication Process;
• Contract Management (Monitoring the contract
output);
• Effective Dispute Process.
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Performance Management
• The Accounting Officer must evaluate the
consultant’s performance.
• The consultant must exercise due diligence in
accordance with prevailing standards in executing
the project.
• The contract should indicate measures the
Municipality can implement if the deliverables in the
consultant’s contract cannot be achieved.
• Modifications to the contract may only be
concluded by mutual agreement.
• Substantial extension on the stipulated time of the
contract must be subject to approval by the
Accounting Officer.
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Transfer of knowledge and
skills
• The terms of reference should indicate the
objectives, nature, scope and goals of the training
programme.
• Details on trainers and trainees
• Skills to be transferred
• Timeframes
• Monitoring and evaluation arrangements to enable
consultants to estimate the required resources.
• Transfer of skills should at all times be part of the
deliverables of the contract and never a verbal
agreement or “gentlemen’s agreement”.
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Remuneration
• The consultant should not receive any remuneration
in connection with the project except as provided
in the contract.
• The payments may be at regular intervals (as under
time-based contracts) or for agreed outputs (as
under lump sum contracts).
• Payment provisions, including amounts to be paid,
schedule of payments, and payment procedures,
should be agreed upon during negotiations.
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Concerns related to the
appointment of consultants
• Drafting the terms of reference can be intricate and have an
adverse effect in fulfilling the provisions of Section 217 of the
Constitution.
• Municipalities do not consider life-cycle costs and quality of work
in the planning stage.
• Multi-year projects are often condensed into single-year projects
which do not aid long term strategic projects, lasting services to
communities and overall value for money.
• Procurement and provisioning activities often operate in isolation
from management activities, with minimal or no linkage to
budgetary and strategic planning.
• Lack of uniformity in documentation causes uncertainty and
inefficiencies in the process of procurement.
• Lack of professional skills.
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The way forward
• The following needs to be addressed to enhance
service delivery:
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Resources;
Timeframes of contracts;
Quality;
Life cycle cost;
• Identifying possible solutions for all critical concerns.
• More interactive consultation between consultants
and Municipalities.
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Conclusion
• The appointment of consultants in the municipal sphere has
become critical for municipalities to spend on its capital
budget.
• If the challenges and concerns are not addressed, service
delivery will be compromised.
• Emphasis on skills and competencies of procurement
practitioners and consultants at large.
• Retrospective analysis should be conducted on a regular
basis.
• Best practices should be shared between municipalities to
eradicate poor performance.
• Effective and efficient service delivery should be the core of
any project.
• Misinterpretation of Supply Chain Management legislation
should be eradicated, for example Regulations 32 and 36.16
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