SEKHUKHUNE DISTRICT MUNICIPALITY Public Request for Comment FOR THE Smart Meter System Revenue Enhancement Project June 2017 Version 1 PREPARED FOR: Sekhukhune District Municipality 3 West Street Groblersdal 0470 CONTRACT NUMBER NO. SK8/3/1-43/2015/16 Contact Person: Busisiwe Matjie Tel: +27 13 262 7680 email: [email protected]
28
Embed
SEKHUKHUNE DISTRICT MUNICIPALITY · The SDM are faced with significant challenges in the rollout of water and sanitation infrastructure, as part of the service upgrade process. Despite
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
OVERVIEW ............................................................................................................................................................. 1-1 PROJECT SCOPE ....................................................................................................................................................... 1-1 APPROACH AND METHODOLOGY TO THE FEASIBILITY STUDY .............................................................................................. 1-1
SCOPE OF THE PROJECT ............................................................................................................................................. 2-6 Meter Management ....................................................................................................................................... 2-6 Implementation .............................................................................................................................................. 2-7
OPTIONS CONSIDERED .............................................................................................................................................. 3-8 EVALUATION AND ASSESSMENT ................................................................................................................................ 3-10 RECOMMENDATIONS .............................................................................................................................................. 3-11
4 SERVICE DELIVERY OPTIONS ANALYSIS ............................................................................................................... 4-12
OPTIONS CONSIDERED ............................................................................................................................................ 4-12 EVALUATION AND ASSESSMENT ................................................................................................................................ 4-12 RECOMMENDED OPTION ......................................................................................................................................... 4-13
5 PROJECT DUE DILIGENCE .................................................................................................................................... 5-14
LEGAL ASPECTS ...................................................................................................................................................... 5-14 SITE ENABLEMENT .................................................................................................................................................. 5-14 SMART METER SYSTEM REQUIREMENTS ..................................................................................................................... 5-15 SMART METER SYSTEM ROLLOUT PLAN ..................................................................................................................... 5-15 SOCIO-ECONOMIC AND BEE .................................................................................................................................... 5-16
6 VALUE ASSESSMENT ........................................................................................................................................... 6-17
APPROACH ........................................................................................................................................................... 6-17 EXTERNAL REFERENCE MODEL ................................................................................................................................. 6-17 OUTPUTS OF THE FINANCIAL MODEL ......................................................................................................................... 6-19
Value for money ........................................................................................................................................... 6-19 Risk transfer .................................................................................................................................................. 6-19
CONCLUSION AND RECOMMENDATION ...................................................................................................................... 6-19
7 PROCUREMENT PLAN ......................................................................................................................................... 7-20
8 COMMENTS, VIEWS AND RECOMMENDATIONS ................................................................................................. 8-22
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
iv
LIST OF FIGURES FIGURE 2-1: LOCATION OF MUNICIPAL AND PROVINCIAL GROWTH POINTS WITHIN SDM ......................................................................... 2-3 FIGURE 2-2: NUMBER OF HOUSEHOLDS WITH ACCESS TO WATER (ADAPTED FROM STATSSA CENSUS 2011 AND COMMUNITY SURVEY 2016) . 2-4 FIGURE 2-3: THE AGE ANALYSIS OF THE DEBTOR’S BOOK OF SDM FOR WATER AND SANITATION RELATED SALES .......................................... 2-5 FIGURE 2-4 THE METER READING LIFECYCLE ................................................................................................................................... 2-7 FIGURE 2-5: EXAMPLE OF THE ETERNAL SERVICE DELIVERY ARRANGEMENTS WITH PREPAID METERS ........................................................... 2-7 FIGURE 3-1: DOMESTIC (RESIDENTIAL) CUSTOMER METERING APPLICATIONS ......................................................................................... 3-9 FIGURE 3-2: COMMERCIAL CUSTOMER (BULK) METERING APPLICATIONS .............................................................................................. 3-9 FIGURE 3-3: COMMUNAL (SHARED) METERING APPLICATIONS ........................................................................................................... 3-9 FIGURE 3-4: BULK (ZONAL) METERING APPLICATIONS (NON-BILLING RELATED) ...................................................................................... 3-9 FIGURE 3-5: EXAMPLE OF THE SPATIAL ANALYSIS AVAILABLE WITHIN A METER MANAGEMENT SYSTEM ..................................................... 3-10 FIGURE 5-1: TYPICAL LOCATION OF THE CUSTOMER WATER METER ................................................................................................... 5-15 FIGURE 6-1: ALTERNATIVE UNITARY FEE STRUCTURES AVAILABLE FOR THE PROJECT .............................................................................. 6-18 FIGURE 6-2: POTENTIAL FLOW OF MONEY .................................................................................................................................... 6-19 FIGURE 7-1: PROPOSED PROJECT STRUCTURE .............................................................................................................................. 7-20
LIST OF TABLES TABLE 2-1: SDM HOUSEHOLD DISTRIBUTION AND AVERAGE WATER DEMAND (ADAPTED FROM STATSSA COMMUNITY SURVEY 2016) ........... 2-2 TABLE 3-1: RISK OVERVIEW FOR THE ROLLOUT OF VARIOUS METER TECHNOLOGIES .............................................................................. 3-11 TABLE 4-1: RECOMMENDED TECHNOLOGIES BASED ON CURRENT SERVICE DELIVERY ARRANGEMENTS ...................................................... 4-12 TABLE 4-2: SUMMARY ASSESSMENT OF SERVICE DELIVERY OPTIONS ................................................................................................. 4-12
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
3-10
Figure 3-5: Example of the spatial analysis available within a meter management system
Evaluation and assessment
The technologies were assessed at each stage within the meter lifecycle based on their technical capabilities
and limitations, compliance requirements, financial considerations, and major risks of the technologies. The
technologies were detailed separately and were evaluated accordingly, based on the PPP Municipal Guidelines,
including an evaluation of the:
• Technical capabilities;
• Risks;
• Human resources;
• Site issues;
• Delivery arrangements;
• BEE and other socio-economic factors;
• Evaluation to the Output Specifications;
• Qualitative factors;
• Financial implications;
• Funding and affordability;
• Transitional management considerations;
• Considerations for external service delivery.
All technical options had risks and opportunities. These risks were considered within a risk register and
mitigating measures must be put in place to mitigate these risks as far as possible. A summary of the benefits
and disadvantages of each technology is summarised in Table 3-1.
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
3-11
Table 3-1: Risk overview for the rollout of various meter technologies
Conventional Meters
Token-based Prepaid
Meters
STS-based Prepaid
Meters AMR Meters
Advantages
Low capital start-up
costs
Low maintenance
requirements
Payment is received
upfront
Meter readers are not
used for billing purposes
Statements don’t have
to be printed or posted
by Municipality
Reduction in bad debt
Customer is responsible
for water service
payment
Payment is received
upfront
Meter readers are not
used for billing purposes
Statements don’t have
to be printed or posted
by Municipality
Reduction in bad debt
Accurate meter
readings
Meter reading can be
obtained ad hoc, or at
selected times
Disadvantages
Limited guarantee of
revenue collection by
SDM
Payment is invoiced
after services are used
Customer water leak
may flow for extended
periods before it is
repaired
SDM is responsible for
customer payment
High capital start-up
costs
Increased monitoring
and evaluation
requirements
Additional maintenance
requirements
Additional fees for the
payment of vendors (1%
- 6% of each
transaction)
High capital start-up
costs
Increased monitoring
and evaluation
requirements
Additional maintenance
requirements
Additional fees for the
payment of vendors (1%
- 6% of each
transaction)
High capital start-up
costs for the Automatic
Metering Infrastructure
Limited guarantee of
revenue collection by
SDM as payment is
invoiced after use
Customer water leak
may flow for extended
periods before it is
repaired
Additional maintenance
SDM is responsible for
customer payment
Recommendations
The multi-criteria analysis indicated that the prepaid solutions provided the most benefit for the SDM in terms
of the needs analysis and output specifications for smart meter solutions. Specifically, the STS-based prepaid
system provided the most benefit for domestic customer metering applications. However, the technological
limitations of the STS-based prepaid system means that this option is not viable for all metering applications
within the SDM. The selected solution for each metering applications is indicated below:
• Domestic customer metering: STS-based prepaid meter
• Bulk customer metering: STS-based prepaid meter (for meter diameter up to 50mm)
AMR meter (for meter diameter greater than 50mm)
• Bulk zonal metering: AMR meter
• Communal metering: Token-based prepaid meter
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
4-12
4 SERVICE DELIVERY OPTIONS ANALYSIS
Options considered
The current institutional arrangements for the meter management lifecycle are indicated in Table 4-1 for each
meter technology. The SDM are currently performing the administrative roles within the meter management
lifecycle and are making use of external services providers for discrete work packages.
Table 4-1: Recommended technologies based on current service delivery arrangements
Meter Process Prepaid STS
(Domestic Customers)
Prepaid Token-based
(Communal Customer)
AMR
(Bulk Customers)
AMR
(Bulk Zonal Meter)
Meter Installation External External External External
Meter Reading External External External External
Meter Auditing External External External External
Billing Processes External External Internal N/A
Credit Control N/A N/A External N/A
Receipting Internal Internal Internal N/A
Indigent Management External External N/A N/A
Meter Replacement External External External External
The Service Delivery Options considered two approaches, the first was internalising all services within the SDM
and the second was making use of an external service provider to implement and manage the entire meter
management lifecycle.
Evaluation and assessment
The assessment of the service delivery option is summarized in Table 4-2 based on a detailed assessment of
each component of the meter management lifecycle. The assessment evaluated the advantages and
disadvantages of implementing the metering lifecycle through either internal or external delivery mechanisms.
Based on the assessment, the most viable service delivery option was using the external service delivery option.
Table 4-2: Summary assessment of Service Delivery Options
Option Advantages Disadvantages Risk transfer
Internal Service Delivery • Internal management of services
• Direct and indirect job creation opportunities;
• Enhanced management of water losses;
• Internal capacity building.
• Large capital expenditure requirements;
• Limited funding available will mean a slow rollout of the meter installations;
• Slow increase in revenue from slow meter rollout;
• Limited experience in implementing the meter lifecycle through internal processes;
• Municipal procurement processes require long lead time for supply of goods and services; and
No risk transferred
• Technical Risk: SDM
• Financial Risk: SDM
• Operational Risk: SDM
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
4-13
• High financial risk of employing permanent staff whilst potentially not receiving revenue.
External Service Delivery • External service providers’ performance managed based on contractual obligations;
• Rapid rollout of meter installations;
• Direct and indirect job creation opportunities;
• Enhanced management of water losses;
• All procurement and contracts managed through external service provider;
• Payment for metering distributed through contract lifecycle.
• High transitional management requirements in transferring data from the SDM to the external service provider. This is to ensure that current meters are still read and that all information is accurately transferred onto the metering systems.
All risk transferred
• Technical: External
• Financial: External
• Operational: External
Recommended option
The SDM have shown a willingness to internalise operational services. However, within the current metering
service offering, a large portion of the metering lifecycle is conducted through external service providers (meter
installations, reading and audit, invoicing, and credit control). Thus, there is limited technical skill to rapidly
internalise these services. It is suggested that a phased rollout strategy could be used for the development of
such capacity. However, there is an urgent need to increase the SDM’s internal revenue generation whilst
reducing their water losses. This is driven by the limited existing water supply capacity and the burden of water
infrastructure development required within the SDM (as detailed in the Water Services Development Plan and
Master Plan). This will require large capital and operational allocations for such infrastructure development.
Hence, the main limitation to implementing an extensive meter rollout programme will be capital and the
required cash flow to rapidly rollout the meter installation and sustain the meters’ continued operation.
The service delivery options analysis recommended the external service delivery mechanism based on the
benefits to an external service delivery option. The major benefit being that the smart meter process can be
rapidly rolled out to areas within the SDM.
The analysis identified that there was capacity within the private sector to manage projects of this scale, based
on the current technology and infrastructure available, both locally within South Africa, and internationally.
There is also capacity within the private sector to fund such projects through an annuity based income. The
exact funding model for the Project rollout will be evaluated through the Value Assessment stage. Making use
of an external service provider to build and operate the metering lifecycle provides a mechanism for the SDM
to rapidly increase internal revenue generation whilst reducing their water losses.
Despite the recommendation for an external service delivery arrangement, the SDM will be responsible for
performing its constitutionally mandated metering activities. The SDM will remain accountable for efficient
delivery of the metering lifecycle, despite contracting the tasks.
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
5-14
5 PROJECT DUE DILIGENCE
Legal aspects
The SDM have the constitutional mandate to provide basic services to all, which must be implemented and
monitored through a strategic plan which relates to the water policies and bylaws of the SDM. Importantly, it is
noted that the Mazibuko case (Mazibuko and Others v City of Johannesburg and Others - CCT 39/09 [2009] ZACC
28) provided clarity that the citizen’s right to basic services is not without limitation, and that the customer has
responsibilities to inter alia pay for their water services, where it exceeds the free basic water allocation.
The legal due diligence indicates that the SDM have the authority to make use of an external service provider
for implementing the metering lifecycle. The SDM can make use of the service tariffs, grants, or other revenue
sources to pay for all such services.
There is motivation to investigate the appropriateness of the tariffs within SDM for sustainable cost recovery
based on a high-level assessment of the reported figures within the Annual Financial Statement 2015/16. At this
stage, no conclusive recommendation can be made, as the assessment does not consider operation or
maintenance costs related to the delivery of water, nor factors such as water losses or customer non-payment.
Should the prepaid solution be used for as the technical solution, then the SDM will have to re-evaluate their
tariff structure for variable consumption rates to ensure that the revenue collected from the prepaid meters
does not result in a loss of revenue to the SDM.
The SDM are required to make provision within their policies and water bylaw so as to provide procedures
through which a reasonable period is clearly defined with application to prepaid, AMR, and conventional meter
payment for services. It is recommended that the Credit Control Policy provide such clarity on the permanent
and temporary discontinuation of water services, which are inherent functions of the prepaid water metering
systems. The SDM are required to have metering guidelines in place to ensure that the customer meters are
equitably installed for all customers. These guidelines can either be adopted as part of the water bylaws or as a
separate guideline or policy.
Site enablement
The site enablement issues which are specifically related to the project include the following areas, namely the:
• construction site camp;
• sites where meters are installed;
• sites where the prepaid vendors are located; and
• operations site camp.
The PPP Operator shall require a site during the construction and operational stages. Such sites must be
available to the PPP Operator for storage of new meters (where meters are to be installed) and old meters
(where faulty/defunct meters are to be removed), and all the ancillary materials, equipment and tools. The site
must have access to infrastructure, such as access roads, water, electricity, and internet connectivity. The PPP
Operator shall be responsible for the leasing of such land.
Where the smart meters make use of prepaid meter technologies, customers must be able to purchase credit
from a physical vendor. These prepaid vendors must be strategically based within the areas where prepaid
meters are installed. The vendors shall, where required, consist of one or more local or franchise stores, service
stations, or other points of sale, where access to electricity and internet connectivity is available.
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
5-15
Domestic water meters are to be installed where there is water reticulation to the customers, whether a yard
or house connection. Communal water meters are to be installed where stand pipes are provided to
communities who do not have access to an on-property water connection. The meters are to be installed based
on the municipal water meter installation policy or guideline. The location of the meters is preferably within the
road reserve, or within the customer property. A typical installation schematic diagram is indicated in Figure
5-1. The location of the meter cannot inter alia obstruct the flow of traffic.
Figure 5-1: Typical location of the customer water meter
Smart Meter System requirements
The technology associated with the smart meters (whether prepaid or AMR meters) must input all information
into the meter management system with the output data in required mSCOA formats. The tariff structure on
the prepaid meters should be as per the current tariff structures, including block tariffs and free basic water
provision for indigent households. It is recommended that prepaid water meters are annually provided with a
once-off emergency water volume – which is paid back the next time that the customers purchase and load
credit.
Furthermore, the SDM will require a meter management system to manage the metering information provided
by the PPP Operator and the metering information obtained from the areas outside of the PPP Operator’s
jurisdiction. It is recommended that the SDM negotiates the use of the PPP Operator’s system for internal use
and that all existing systems be integrated with the selected meter management system proposed by the private
party.
Smart Meter System Rollout Plan
The project rollout is expected to consist of three stages, namely:
• Handover Stage;
• Development Stage; and
• Operations Stage
It is noted that the PPP Operator shall have to identify a project rollout plan based on the available data provided
to the bidders during the RFP documentation.
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
5-16
Socio-economic and BEE
Socio-economic recommendations suggested that community leaders and ward councillors need to be
consulted before and during construction to ensure community buy-in during the construction works related to
the meter installation and replacement. This will not only be for community buy-in, but also in sourcing local
labour, and the identification and confirmation of appropriate vendors which can be used to sell credit, if
required for the system’s operations. Customer communications will be provided by the PPP Operator and will
include communications related to the operations of the metering system.
Customer Socio-Economic Factors
The SDM predominantly services indigent households within its jurisdiction. The effect of the high percentage
of indigent households within the SDM will mean that there will be a substantial reliance on the free basic water
allocation. The Project will focus on the Growth Areas, as indicated in Figure 2-1, and the Project will focus on
the economically active customers who have access to municipal water connections in their property. This will
enable the SDM to enhance their revenue collection capacity and fulfil their mandate to deliver services to all.
Job creation opportunities
The Project consists of both construction works, i.e. works related to the installation, replacement, or repair of
the water meters and the associated infrastructure, and the operations works, i.e. works related to the meter
reading, auditing, billing, collections, and reconciliations. It is expected that opportunities would be created
through the construction works and opportunities would be created through the operations works. It is
important to define annual work opportunities as the number of jobs created in a single year, which have an
employment, or opportunity, term of one year. Therefore, the project may expect a total of 600 annual work
opportunities throughout the project term this translates into, for example, approximately 20 full-time
permanent jobs for the construction works, and 200 temporary work opportunities with a temporary
employment term of one year. The operations works would create approximately 80 permanent jobs during the
project term, and approximately 1 500 temporary work opportunities with a temporary employment term of
one year.
The effects of this project are estimated to be a net positive impact within the community. The job opportunities
created through the project are expected to have a direct impact on the local economic environment. Although
not accounted for, there are also ancillary jobs in related industries (i.e. material supplies, increased turnover
in local shops during construction, etc.) which were not taken into account.
Project Structure
Project structure recommendations are that the SDM will require an internal project structure to interface
directly with the private party in order to ensure compliance against the objectives of the project and the related
key performance indicators. The information obtained from the private party will need to be processed and
analysed into the required SDM systems and integrated into the metering being implemented by the SDM.
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
6-17
6 VALUE ASSESSMENT
Approach
Two possible approaches exist for the development of the Value Assessment. These options were:
1. Full value assessment: Under this approach, the value assessment prepares a risk-adjusted Public Sector
Comparator (PSC) model and compares the results of this against the results of a risk adjusted external
reference model in order to determine affordability, value for money and risk transfer.
2. Simplified value assessment: Under this approach, the value assessment is not required to prepare a
Public Sector Comparator (PSC) because a preliminary assessment arrives at the conclusion that the
public sector procurement option does not present a feasible option. Affordability, value for money and
risk transfer are therefore assessed based on quantitative parameters and qualitative considerations.
The simplified value assessment was used for the project based on the following criteria:
1. The nature of the project under consideration;
2. The capacity of the government institution to undertake the project. More specifically, capacity relates
to legal, technical, financial capacity among other factors incidental to the project;
3. How the project will be funded;
4. Whether the municipality has the technical capacity and experience to execute the project with minimal
risk.
External Reference Model
The risk-adjusted external reference model was developed through a financial model setting out financial
projections. The financial model took into account a set of assumptions based on the Technical Options. The
financial model primarily covered:
1. Periodic unitary fee paid to the service provider by SDM
2. Capital expenditure estimates i.e. the costs of installing the smart meter system, other supplementary
non-current assets such as storage facilities and vehicles, and associated project development costs
3. Operating (lifecycle) costs for the smart meter system
4. Bulk water purchases: This cost is allocated to SDM
5. Financing of capital and operating costs
A risk matrix detailing the various technical, financial and legal risks of the project was prepared for the risk
adjustment of the model. These costs were subsequently costed on the basis of estimates of:
1. Probability of occurrence
2. Impact of occurrence
3. Base cost factors (nominal totals for capital expenditure and/or operating expenditure over the
projection period and the estimated unitary fee arising from the relevant number of households
covered)
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
6-18
4. Allocation of risks according to which party between SDM and the private party is best placed to manage
it
An indicative value for money assessment was based on estimation of the net revenue (sale of water revenue
less variable unitary fee (commission) paid to the service provider over the 15 year period). The final value for
money assessment shall be the product of the evaluation of financial and technical proposals that would be
provided by a preferred bidder in a PPP procurement process.
The term of the proposed PPP was based on the following assumptions and factors:
1. The initial rollout of meters is expected to be concentrated over the development period i.e. the first 4
years. Thereafter, installations shall relate to organic growth in number of households.
2. All meters have a 10 year expected useful life. On transfer of the meter system back to SDM, SDM should
receive a functional system with most meters still having a reasonable time to the end of their useful
life
3. The private party should make an adequate return over the term
4. A summary evaluation of the above criteria and the basis for a 15 year term
The various payment structures available for the project were based on Figure 6-1. All four payment structure
options were considered and the appropriate payment structure for the Project will be decided during the
procurement stage, based on the bidder responses and the views and recommendations from National
Treasury. The SDM’s preferred option is Option 1 in Figure 6-1.
Figure 6-1: Alternative unitary fee structures available for the Project
INCREASING RISK TO SDM
OPTION 1
Variable unitary fee
based % commission of value of tokens sold
OPTION 2
Variable unitary fee based on a
monthly fee per meter installed and operational
OPTION 3
Partially fixed unitary fee:
1. Fixed portion to cover debt service costs incurred by private party
2. Variable portion based on a monthly fee per meter installed and operational
OPTION 4
Fully fixed unitary fee payable
periodically based on a fee per meter
installed
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
6-19
Figure 6-2 presents a high-level representation of the possible flow of money under the selected option:
Figure 6-2: Potential flow of money
Outputs of the Financial Model
Value for money
In the context of this project, a key aspect of value for money is the extent to which revenue to SDM is enhanced
through the rollout of the meters. The indicative value for money shows a net positive position after adjusting
for estimated risks to be retained by SDM over the development and operations periods. The value assessment
concluded that the external reference model offers greater value for money than a continuation of the status
quo.
Risk transfer
The PPP model offers opportunities for significant risk transfer from SDM to the private party. On the whole,
the risks retained by SDM are less than those that it would have to bear if the status quo was to continue for
the foreseeable future. The value assessment concludes that the PPP model is a more favourable option than
the continuation of status quo with regard to risk transfer.
Conclusion and Recommendation
The results of the value assessment conducted conclude that the external reference model demonstrates value
for money over the option of continuing under the status quo. It is therefore recommended that SDM adopts a
PPP model as the preferred procurement option for the project.
SEKHUKUNE DISTRICT MUNICIAPLITY
RING-FENCED COLLECTION
ACCOUNT
PRIVATE PARTY CONSUMERS
DEBT CAPITAL PROVIDERS
EQUITY CAPITAL PROVIDERS
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
7-20
7 PROCUREMENT PLAN
Overview
The Feasibility Study will be presented to Council for a resolution whether to proceed to procurement. This
section outlines the procurement stage which will be implemented should SDM Council resolve to proceed with
procurement. The procurement plan is considered to consist of the following phases:
• preparation for the bidding process;
• bid process;
• evaluation of the bids received; and
• negotiation with the Preferred Bidder.
The procurement plan details each of these components including the factors influencing procurement,
governance and decision making, bid evaluation processes (technical and financial evaluation), quality
assurance, and stakeholder involvement. This plan is established around two legislative requirements. Firstly,
processes and procedures to ensuring equity, transparency, competitiveness and cost-effectiveness of the
procurement process in terms of the constitution and the SDM’s Supply Chain Management policy. Secondly,
the ability of the SDM to procure, implement and enforce monitor and report on the project.
The SDM have appointed the Transaction Advisors for both the Feasibility and Procurement stages of the PPP
project, and therefore have budgeted sufficient funds and procured advisors to achieve TVR III. The project team
and roles and responsibilities are detailed within the Procurement Plan and the project stakeholders and the
extent of their involvement in the PPP option are indicated in Figure 7-1.
The procurement methodology used within this Project is the full concession PPP. The proposed project
structure indicates that the external operator (PPP Operator) will manage all financing, risk, and technical
matters and will deliver a turnkey meter management solution to the SDM. The envisioned payment mechanism
is that the SDM will pay the service provider monthly based on a revenue share model, which is based on the
contractually agreed performance indicators.
The procurement plan will follow the National Treasury Municipal Service Delivery and PPP Guidelines. The
following tasks are expected to take place during the procurement stage of the Project.
Figure 7-1: Proposed Project Structure
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
7-21
• Obtain Treasury Views and Recommendations (TVR IIA) for relevant procurement documentation
• Request for Qualification (RFQ)
o Prepare and issue documentation, and receive and evaluate responses
• Request for Proposal (RFP)
o Prepare and issue documentation, and receive and evaluate responses
• Prepare Value Assessment report
• Obtain Treasury Views and Recommendations (TVR IIB)
• Negotiate with preferred bidder and finalise contract management plan
• Obtain comments from interested stakeholders (general public and government institutions)
• Obtain Treasury Views and Recommendations (TVR III)
• Council passes resolution authorising execution of the PPP contract
• SDM accounting officer signs PPP agreement
The appointment of the PPP Operator will only be considered after Treasury Views and Recommendations and
input is obtained from interested stakeholders. The Project must also indicate Value for Money.
The procurement plan was expected to be implemented within the next two financial years. Challenges related
to delays in approvals or internal supply chain management processes or any other deviations will be managed
by the SDM Project Officer to ensure that the processes are followed and that the procurement plan is
successfully implemented.
SMART METER SYSTEM REVENUE ENHANCEMENT PROJECT
SEKHUKHUNE DISTRICT MUNICIPALITY PUBLIC REQUEST FOR COMMENT
8-22
8 COMMENTS, VIEWS AND RECOMMENDATIONS
In terms of the National Treasury Municipal Services and PPP Guidelines, the Feasibility Study was submitted to
the National Treasury for views and recommendations and a summary is herein made available to interested
parties, including the general public and government bodies. This document is provided 60 days before the
Feasibility Study will be presented to Council. All interested stakeholders are provided 30 days within which to
submit feedback on the Feasibility Study.
You are invited to submit all comments, clarifications or feedback to Busisiwe Matjie from the Sekhukhune District Municipality at:
Address: Cnr Chris Wiid & van Reebek Street, Groblersdal
Please include the following with your feedback:
Full Name and Surname:
Address:
Contact Number(s):
Email:
Affiliation (company or institution):
All feedback must be provided within 30 calendar days from the issue of this notice. All responses will be collected and incorporated into the Feasibility Study as an annexure for Council consideration. The completed feasibility report will then be distributed to all pertinent municipal departments 20 days prior to the Council meeting and to the council members with department comments 10 days prior to the Council meeting. Based on feedback from the general public and the views and recommendations from National Treasury, the SDM Council will table a resolution whether to proceed with procurement.