Will the new framework be effective?
IT HAS been an interesting
couple of years for
government travel. In
2013 and 2014 there
was a massive crackdown
on wasteful government
expenditure, with former
Finance Minister, Pravin
Gordhan, putting strict
containment measures in
place for government travel.
As a result, the government
and Asata have been
working together over the
past year to develop an
effective travel procurement
framework and code of
conduct to help improve
compliance with Treasury
regulations with regard to
wasteful expenditure; to
address budget deficits
as a result of inaccurate
tracking of expenditure
and misallocation; and to
help government officials
obtain the best return on
investment.
Ceo of Asata, Otto de
Vries, says government’s
Chief Directorate of Strategic
Procurement together
with the industry Member
Advisory Forum (MAF),
which was set up by Asata,
have conducted intensive
research, engaged with
stakeholders and end users,
analysed spend patterns
and looked at improvement
opportunities to develop
a sourcing strategy for
travel and accommodation.
This includes travel
agents or TMCs, domestic
accommodation, domestic
car rental and domestic air
transport.
Gary Mulder, financial
director for Club Travel,
says although it is too soon
to see any improvements,
Club Travel is optimistic
that the work performed
will significantly improve
the entire process between
TMCs and government
departments.
“This is a new process,
which will take time to turn
around within government,”
agrees Themba Mthombeni,
ceo of Duma Travel. He
says the framework is
going to help TMCs a great
deal, noting that previously,
procurement discussions
within government took place
in isolation. “If they can get
industry input, it will take the
process further,” he says.
“We’re owed a lot of
money by government, so
we have welcomed this
intervention by Asata – it
came at the right time
for us,” says Themba. He
says Asata’s intervention
helped initially as there
was sudden compliance
from most government
departments. However, there
was also some backlash as
government officials felt TMC
partners had “complained
about them behind their
backs”, creating a negative
sentiment, he said.
“I think the relationship
between the travel trade and
government is fundamentally
flawed due to government’s
lack of understanding that
travel is not like other
service procurements in
that the bulk of the cost
comes from air, car and
hotel providers and not the
TMC,” says Mike Gray, ceo
of Uniglobe Travel.
Government’s requirement
for credit from TMCs and
prepayment of accounts on
their behalf, coupled with
their inability to handle travel
lodged cards, is going to
remain a problem, he adds.
What’s more, the
government’s inability to
structure tenders for travel
differently to those for
other consumables and
services, and its inability to
properly design a coherent
and relevant travel policy
framework, prevent progress,
Mike says. “This is a recipe
for continued abuse and
fraud.
“Government is paying
dearly for this through poor
service and marked-up
prices to compensate for
their tardiness in payment
and lack of proper travel
policies and procedures,”
he says.
Late payments
The main challenge TMCs
face in their dealings
with government is the
issue of non-payment or
late payment. “We have
addressed ongoing poor
payment habits that saw our
members owed R350m at
the end of August last year.
The framework will not only
guide how we as an industry
and government engage
but will also guide industry
engagement with private
sector too,” says Otto.
A special unit has been
established to ensure that
suppliers are paid within 30
days, provided a legitimate
invoice has been submitted.
Minister in the Presidency
responsible for Planning,
Monitoring and Evaluation,
Jeff Radede, says: “A
comparative analysis of
national departments
between 2013 and 2014
showed that there had been
improvement in the average
number of invoices paid
within 30 days.”
The travel industry,
however, has not seen a
significant improvement. As
long as there is no obligation
for government departments
to use lodged cards, the
cash-flow risk is still a
serious one, says Gary.
“I would caution smaller
agencies to tread carefully
until processes are working
as they should.”
Themba believes
there should be a more
constructive intervention
in the back office when it
comes to payments.
He says the departments
that don’t pay often
don’t have the capability
or manpower to chase
travellers to sign off
invoices. “We should be
taking stock of why certain
things are not happening. Do
these departments have a
sufficient number of people
to handle payments? If you
come up with a policy, are
there sufficient hands to
ensure that this policy
is enforced?”
Asata could be pivotal in
this process, Themba says.
“We have to look at each
government department and
the problems they have,
asking ourselves how we can
intervene at that level. Let’s
not point fingers but help
streamline the process.”
The end of ‘ridiculously
low’ fees
Should all TMCs comply with
Asata’s code of conduct,
it would put an end to
“ridiculously low” service
fees being submitted in
tenders and, consequently,
agents earning revenue
from hidden margins in
travel items booked, Gary
says. “This will then ensure
a more level playing field
between TMCs that do
operate ethically and those
that haven’t in the past,”
he says.
The main challenge is that
government officials tend to
focus on travel agency fees,
agrees Themba. “They are
blinded by fees, which are
only a very small percentage
of the travel spend, without
realising how much a
travel agency or TMC can
reduce their travel spend in
general.”
He adds that once TMCs
have passed the technical
evaluation for their tender,
everything comes down to
pricing. “No matter how
capable you are, you might
end up not winning because
of your fees. If you are a
capable agency and you
really want the account,
you’ll have to do something
about pricing, and that’s not
always the best thing to do.”
New database will save time and money
THE newly launched Central
Supplier Database (CSD),
where travel agents can
self-register, is the first
step towards an easier
procurement process for
both government officials
and TMCs.
Phumza Macanda,
National Treasury’s
acting chief director of
Communications, says
the establishment of the
CSD would significantly
reduce duplication of
effort and costs for both supplier and
government.
Travel agencies will only need to
register as a supplier with government
once. Thereafter, they should confirm
at least once a year that their data is
still current and updated, she says.
“TMCs will therefore have exposure to
all spheres of government.”
At the launch of the CSD, Minister
of Finance, Nhlanhla Nene, said the
system would increase transparency.
“As you automate you remove the
human element and there is a huge
possibility of the reduction of corruption
because that platform is transparent.”
Only Asata-accredited
travel agents and TMCs
will be able to register on
the new CSD. “This is as a
direct result of months of
engagement between Asata
and National Treasury to
define terms against which
government will procure
travel and accommodation
in future,” says Otto de
Vries.
The fact that government
departments are only able
to procure through Asata
agents is a big step towards ensuring
that the integrity of the TMC industry is
upheld in the government sector, says
Gary Mulder.
He adds that the CSD could see
more TMCs tendering for government
work, which would be an advantage
for government officials. “Increased
competition will always be to the
benefit of procurement managers.
However, it is important that the
procurement managers are educated
about best practice in travel, the
tools available and how best to work
with TMCs to ensure optimal travel
management.”
Dispute resolution mechanisms
The National Treasury and the
MAF (through Kitso Consulting)
have agreed on a process to be
followed with regard to outstanding
amounts. All contract payment
disputes must be brought to
the attention of the Governance,
Monitoring and Compliance Unit
within the Office of the Chief
Procurement Officer (OCPO) at
the National Treasury and will be
resolved as outlined below:
Process steps:
1. If a business has outstanding
amounts owed by government,
the business should log
the issue with its industry
association and upload an
accurate age analysis (split on
separate tabs by province and
department) on a monthly basis;
2. If a business has experienced
ill practice by a government
official or department, a formal
complaint may be logged
with the relevant industry
association;
3. The association will extract the
case log and submit it monthly
to the dedicated person at
Treasury;
4. The business’s age analysis
or official complaint will be
attached to each case log
submitted;
5. Treasury will send a letter with
the applicable information for
comment from the offending
department;
6. Treasury will provide feedback
to the industry association
regularly in this regard;
7. The department will
simultaneously resolve the
issue directly with the business
concerned;
8. If no resolution is found, the
business may request that it
meets directly with the offending
department and a mediation
process may begin;
9. Progress regarding case logs
will be shared continuously and
managed at quarterly meetings
between National Treasury and
industry;
10. Contract disputes (Asata
members will co-operate with
any inquiry conducted by Asata
to facilitate resolution of a
dispute involving government
or another Asata member or
service provider).
