Standard Operating Procedures - AT THE HEART OF IT ALL

Standard Operating Procedures : Contract & Performance Management of 24

Standard Operating Procedures

Contract

& Performance Management

Legal Services

Version 2

July 2019


INDEX PAGE

NR. DESCRIPTION PAGE

1. INTRODUCTION .................................................................................................................................... 3

2. WHAT IS CONTRACT MANAGEMENT ................................................................................................. 3

3. CONTRACT MANAGEMENT COMPONENTS ....................................................................................... 5

4. CONTRACT REGISTER ........................................................................................................................ 6

5. AUDIT QUERIES ................................................................................................................................... 7

6. DELEGATED AUTHORITY .................................................................................................................... 7

7. TERMINOLOGY .................................................................................................................................... 7

PART A PROCUREMENT CONTRACTS ......................................................................................................... 8

8. CONTRACT DRAFTING ........................................................................................................................ 8

9. DEVIATIONS ....................................................................................................................................... 10

10. PAYMENT PROCEDURES .................................................................................................................. 10

11. PRICE INCREASES ............................................................................................................................ 11

12. VARIATION ORDERS FOR ENGINEERING & CONSTRUCTION CONTRACTS................................. 12

13. INCREASE IN SCOPE OF WORK ....................................................................................................... 12

14. BREACH OF CONTRACT ................................................................................................................... 13

15. NOTICE OF TERMINATION ................................................................................................................ 13

16. EXTENSION OF PROCUREMENT CONTRACTS ............................................................................... 14

17. TERMINATION OF PROCUREMENT CONTRACTS ........................................................................... 14

18. PERFORMANCE OF SERVICE PROVIDER ........................................................................................ 15

19. PERFORMANCE MONITORING ......................................................................................................... 15

20. PENALTIES ......................................................................................................................................... 16

21. REGISTER OF RESTRICTED SUPPLIERS ......................................................................................... 16

PART B NON-PROCUREMENT CONTRACTS .............................................................................................. 17

22. CONTRACT DRAFTING ...................................................................................................................... 17

23. BREACH OF CONTRACT ................................................................................................................... 18


25. EXTENSION OF NON PROCUREMENT CONTRACTS ....................................................................... 18

26. TERMINATION OF NON PROCUREMENT CONTRACTS ................................................................... 19

PART C LEASE AGREEMENTS ...................................................................................................................... 19

27. CONTRACT DRAFTING ...................................................................................................................... 20

28. PAYMENTS, DEFAULT AND DEBT COLLECTION ........................................................................... 21


30. EXTENSION OF LEASE AGREEMENTS ............................................................................................ 22

31. TERMINATION OF LEASE AGREEMENTS ........................................................................................ 22

32. EVICTION ............................................................................................................................................ 22

33. WORKING PROCEDURES.................................................................................................................. 23

34. CONTRACTS MANAGEMENT COMMITTEE………………………………………………………………24

35. IMPLEMENTATION & REVIEW ........................................................................................................... 24


36. RESOURCES ...................................................................................................................................... 24

ANNEXURES

ANNEXURE A : INSTRUCTION SHEET : PROCUREMENT CONTRACTS ANNEXURE B : INSTRUCTION

SHEET : DEVIATION CONTRACTS ANNEXURE C : CIVIL CONTRACT CHECKLIST ANNEXURE D : MBD

3.1; MBD 3.2; MBD 3.3 ANNEXURE E : EXAMPLE PERFORMANCE CHECKLIST ANNEXURE F :

STANDARD PERFORMANCE CHECKLIST FOR PURCHASE CONTRACTS ANNEXURE G : PRO FORMA

QUARTLERY PERFORMANCE REPORT ANNEXURE H : INSTRUCTION SHEET : NON PROCUREMENT

CONTRACTS ANNEXURE I : INSTRUCTION SHEET : LEASE AGREEMENTS

CONTRACT MANAGEMENT

1. INTRODUCTION

1.1 The Contract & Performance Management Section provides administrative support and assistance to the

Municipality in order to provide a high standard of service to User Departments and the Public and to

ensure the proper protection of the Municipality’s interests and compliance with its obligations, which

includes inter alia the following:

• Drafting, amending, negotiating and signing of Contracts

• Administration and Management of Contracts throughout the lifespan of each Contract

• Assist in the implementation and management of the terms and conditions of the Contract for the

duration of the Contract period

• Assist in the performance monitoring and compliance during Contract period

• Verification of payments, sureties, guarantees, insurances, increases etc.

• Extensions and terminations of Contracts

• Contract Variations and Price Increases

• General advice and legal opinions on Contracts

• Filing of Contracts and Contract related documents

• Maintaining a Contract register and filing system

2. WHAT IS CONTRACT MANAGEMENT

2.1 Definition of a Contract


A contract is an agreement, based on consensus between legal subjects with contractual capacity, which is

legal, physically possible and complies with the prescribed formalities and which is reached with the

intention of creating a legal obligation with resultant rights and duties.

2.2 Legislative Basis

The Municipal Finance Management Act (MFMA) outlines the prerequisites of Contracts and Contract

Management within a Municipality.

2.3 The benefits of good contract management are:

• Optimises delivery of service

• Specifies management techniques and processes for all types of Contracts

• Encourages achievement of value for money and continuous improvement

• Identifies savings and additional revenue opportunities

• Enhances risk management

• Provides clear and complete records for audit

• Encourages communication between all parties to the Contract

2.4 Failure to implement adequate contract management could result in the following Risks :

• Paying for goods and services which do not meet the standards as set out in the Contract

• Significantly higher costs

• Revenue collection delays

• Customer and supplier dissatisfaction

• Overcharges by suppliers

• Erroneous payments

• Service delivery issues

• Missed savings opportunities

• Failed compliance with regulatory requirements

• Increased risk

• Complications associated with audits

• Accidental renewal of goods and services

• No verification of timelines and accuracy of payments, receipts and deliverables

• No monitoring of use of discounts and rebates

• No monitoring of supplier performance across contracts

• No enforcement for non-performance


2.5 The Contract & Performance Management Section was established under Legal Services in the Municipality

to oversee the day-to-day management of Contracts as set out in Section 116(2)(c) of the MFMA.

3. CONTRACT MANAGEMENT COMPONENTS

Figure 1 : Contract Management Components

3.1 Contract Drafting

Contract Drafting is a process which includes the pre & post processes involved in the actual drafting of

the contract, from the negotiation phase up to the final Contract where consensus is reached by all

parties.

3.2 Performance Monitoring

Performance monitoring is the process which ensures that the actual implementation of the terms and

conditions of the contract are in line with the signed contract. Non-performance is dealt with through

issuing notice of breach / or invoking of the penalty clause.

The MFMA compels a municipality to ensure performance monitoring of its Service Providers and its

critical impact on municipalities’ performance and service delivery.

CONTRACT MANAGEMENT

Contract Drafting

(3.1)

Performance Monitoring

(3.2)

Payment Procedures

(3.3)

Contract Administration

(3.4)

Record Management

(3.5)


The Contract Management Team is therefore responsible to ensure that performance procedures and

measurements are in place at the commencement of the project to ensure that the performance of

Service Providers is monitored from day one.

3.3 Payment Procedures

Advanced payments are prohibited. The User Department must ensure that the Contract obligations are

met and that payment is done in accordance with the services rendered. Contract & Performance

Management will assist the User Departments with the implementation of penalties as and when needed.

3.4 Contract Administration

Contract Administration is the process from the opening of a contract file, issuing of notices, extensions,

terminations, breach of Contract and Contract variations and to ensure compliance at all times, as well

as record management and the capturing of information on the Contract Register.

3.5 Record Management

The management & administration of all contracts of the Municipality have been centralized to Legal

Services Sub-Department.

Access to Contract documents is restricted to Contract & Performance Management officials only. All requests

for Contract documents should be directed to the Contract & Performance Manager or his/her delegated

authority.

4. CONTRACT REGISTER

A Contract Register for all contracts is managed and updated on a daily basis by Contract & Performance

Management and is classified as follows:


Access to the Contract Register is available on request.

5. AUDIT QUERIES

All audit queries on Contracts must be referred to Contract & Performance Management. Auditors may

view Contracts by prior arrangements.

6. DELEGATED AUTHORITY

6.1 Delegations on contact related matters shall be in accordance with the approved Delegation of Powers Policy

of the Municipality and signed Delegated Powers.

6.2 Copies of signed Delegated Powers should be forwarded to Contract & Performance Management to ensure

that delegations are strictly complied with.

7. TERMINOLOGY

MFMA : Municipal Finance Management Act

SCM : Supply Chain Management

CPM : Contract & Performance Management

BSC : Bid Specification Committee

BEC : Bid Evaluation Committee

BAC : Bid Adjudication Committee

User Department : The Department responsible for the implementation of the Contract.

Project Managers : The person responsible for the implementation and overall co-ordination of a project.

• Contractors Agreements

• Consultancy Agreements

• Purchase Contracts

• Rental Agreements

• Licensing Agreements

• Maintenance Agreements

• Civil Contracts

Procurement Contracts

• Funding Agreements

• Land Availability Agreements

• Services Agreements

• MOU

• Employment Contracts

• Learnerships

Non Procurement Contracts

• Lease Agreements

• Usage Agreements

• Advertising Agreements

Lease Agreements


PART A PROCUREMENT CONTRACTS

Procurement Contracts are contracts entered into with Service Providers in compliance with the SCM process.

Figure 2 : Procurement Contract Life Cycle

“Orange indicates possible process that might occur during the contract cycle.”

8. CONTRACT DRAFTING

8.1 Committee Services will within 3 (three) days after approval of the minutes and recommendations by the City

Manager, provide an execution letter in respect of each approved bid to the User Departments and CPM.

8.2 CPM forwards an email to the User Department with an Instruction Sheet (Annexure A) to be completed by

the Project Manager and returned to CPM. CPM will correspond with Project Managers on all Contract

related matters.

8.3 SCM forwards the tender documents of the successful bidders to CPM for contract drafting.

Contract Register

Contract Drafting

Contract Signing &

Distribution

Payment Process

Price Increases Increase in

Scope of Work

Breach of Contract

Notice of Termination

Extension of Contract

Termination of Contract

Contract Close Out

Record Management


8.4 A Contract file is opened & captured on the Contract Register.

8.5 CPM will draft Appointment Letters to the successful bidders based on the information of the BAC Execution

Letter & the Instruction Sheet and distribute to all relevant stakeholders.

8.6 After drafting, the Contract will be circulated for comments to all the relevant stakeholders. Comments are

incorporated into the contract.

8.7 CPM will arrange for signature and attach all relevant documents that will form part of the Contract (i.e.

Tender Document, Appointment Letter, Payment Schedule, etc).

8.8 The original Contract will be filed at Legal Services Records. One copy will be forwarded to the Service

Provider and another copy to the Project Manager.

8.9 The Project Manager must ensure that he/she is familiar with the contents of the Contract and that Service

Providers comply with the provisions of the Contract. Poor performance and breach procedures should

be addressed in consultation with the CPM.

8.10 Project Managers are requested to only allocate work to the Service Providers for which they were appointed

for. Expenditure incurred from instructions outside the original scope of work shall be regarded as irregular

and unauthorised expenditure.

Capital Contracts

8.11 The User Department or the appointed Consultant drafts an additional letter to the Service Provider,

requesting further information (Performance Guarantee, Public Liability Insurance, Approved Health &

Safety Plan) to be submitted within 14 (fourteen) days of appointment.

8.12 The Project Manager/Consultant must submit all documents to CPM who will arrange for the signing of the

Tender Contract.

8.13 CPM will notify the Project Manager when the Contract has been fully signed by both parties in order to

commence with the project.

8.14 Capital Contracts commence on the date of site handover and the Project Managers must submit written

proof of such date to CPM for inclusion in the Contract Register.

8.15 An additional copy of the Contract will also be forwarded to the Project Manager who must ensure that it is

distributed to the relevant Consultant.


9. DEVIATIONS

9.1 Formal Contracts must be drafted for all approved deviations above R200 000,00 which is approved by way

of a deviation.

9.2 The Project Manager must complete the Instruction Sheet (Annexure B) and submit all documents to CPM for

the drafting of an Appointment Letter and a suitable Contract.

9.3 A copy of the deviation report must be submitted to SCM for inclusion in the Deviation Register.

10. PAYMENT PROCEDURES

Operational Contracts

Figure 3 : Operational Contract Payment Process

10.1 User Departments must submit an external purchase requisition to SCM to generate an official order for the

specified work to be completed.

10.2 SCM will verify the validity of the Contract with CPM.

10.3 Service Providers must commence with work once an official order has been received. In case where

quantities and amounts are uncertain prior to the commencement of the specified work, requisitions shall

be generated after the submission of an invoice.

10.4 After completion of the specified work, the Service Provider shall submit an invoice to the relevant Project

Managers.

Generate Order

Deliver Service

Submission of Invoice

Verify performance

Pay Invoice


10.5 The relevant Project Managers are required to verify the work completed by the Service Provider by

completing a performance checklist, which performance checklist must be attached to the invoice for

payment. Project Managers should copies of the performance checklists for their own records.

10.6 Project Managers must ensure that Service Providers invoice the Municipality as per the approved prices in

the Tender/Contract.

10.7 Invoices and performance checklists are then submitted to Finance for payment.

10.8 Payments must be effected within 30 (thirty) days from date of invoice.

10.9 Under no circumstances may invoices be paid for services not yet rendered, nor may invoice be submitted

for work not actually performed, as performance can only be verified after completion of the services.

Capital Contracts

Figure 4: Capital Contract Payment Process

10.10 The Project Manager must submit the payment certificate with a Civil Contract Checklist on all Capital

Contracts (Annexure C) to CPM, who will verify that the SCM process was followed and that a valid and

binding Contract exists.

10.11 CPM will sign the Checklist, hand it back to the responsible person who brought it for signing to take it to

Finance for the processing of payments.

11. PRICE INCREASES

Deliver Service

Civil Contract Checklist

Payment Certificate

Payment


11.1 Price increases shall be dealt with as stipulated in the SCM Policy.

11.2 All requests for price increases must be submitted to CPM.

11.3 The Project Manager will be requested to submit a report on the financial implications of the requested

price increase.

11.4 CPM will prepare a report for approval by the delegated authority who signed the Contract.

11.5 All requests and approvals will be attached to the original Contracts and will form part thereof.

11.6 No increases will be implemented prior to the approval by the delegated authority who signed the Contract.

Refer to Annexure D for examples of MBD 3.1; 3.2; 3.3.

12. VARIATION ORDERS FOR ENGINEERING & CONSTRUCTION CONTRACTS

12.1 Variation orders shall be approved by the delegated authority who signed the Contract or according to

signed delegations.

12.2 Variation orders must be properly controlled to avoid extending projects beyond the original intent.

12.3 Variation orders should be restricted to the absolute minimum through proper planning when inviting bids

or quotations.

12.4 Project Managers must ensure that copies of variation orders are submitted to CPM for record and audit

purposes.

13. INCREASE IN SCOPE OF WORK

13.1 In the event that additional work becomes necessary to complete a project, the scope of work of the Contract

may be increased, which increased amount should not exceed 15% of the original Contract amount (as

prescribed in the approved SCM Policy).

13.2 The User Department should obtain a quote from the Service Provider for the additional work and submit a

report with the increase in scope of work to the City Manager for approval.

13.3 In the event that the increase is more than 15%, a report must be submitted to BED for recommendation and

BAC/City Manager for approval.


13.4 All documents must then be forwarded to CPM for the drafting and finalisation of an addendum to the initial

Contract.

13.5 CPM will ensure that the signed addendum is filed and copies are distributed to all relevant parties.

14. BREACH OF CONTRACT

14.1 In the event of poor or non performance, the Project Manager must convene a meeting with the Service

Provider to inform them of their poor or non-performance. Minutes as well as attendance registers must

be provided to CPM.

14.2 In the event that the Service Provider continues with poor or non performance, the Project Manager must

provide all the information to CPM for the drafting of a Breach Notice in terms of the Contract.

14.3 After the breach period (normally 14/30 days) the Project Manager will be requested to confirm whether the

Service Provider remedied the breach.

14.4 In the event that the Service Provider did remedy the breach, the Contract will continue. In the event that the

Service Provider did not remedy the breach, the Contract will be terminated and an alternative Service

Provider should be appointed in consultation with SCM.

15. NOTICE OF TERMINATION

15.1 CPM will distribute a notice of termination to the Project Manager and relevant stakeholders 6 (six) months

prior to termination of Contract in order for the User Department to commence with the tender process for

the appointment of new Service Providers (if necessary).

15.2 A reminder notice is again forwarded to all relevant stakeholders 1 (one) month prior to termination of the

Contract.

15.3 In the event that no feedback is received from the Project Manager on the due date as provided in the notice,

the Contract will be terminated on the termination date.

Capital Contracts


15.4 The above shall not apply to Capital Contracts. Project Managers are however requested to inform CPM

when a contract has been completed in order to update the Contract Register accordingly.

16. EXTENSION OF PROCUREMENT CONTRACTS

16.1 A full report, approved by the delegated authority who signed the Contract, with the following information

should be submitted to CPM :

• Reasons for extension

• Duration of Extension

• Financial Implications to MMM

• Past performance evaluation of Service Provider(s) concerned

16.2 CPM will submit the report with extension letters to the City Manager for signature and distribution.

16.3 Extensions may not exceed 15% of the original Contract amount or exceed 3 (three) years as

stipulated in Section 33 of the MFMA, unless the prescribed procedures were followed.

16.4 All extensions will be attached to the original Contract and will form part thereof.

16.5 A notice of termination will be forwarded 1 (one) month prior to the new termination date.

Capital Contracts

16.6 Project Managers must provide CPM with copies of all documents pertaining to the extension of time on their

projects. Copies of these documents will be attached to the original Contract for audit purposes and the

updating of the Contract Register.

17. TERMINATION OF PROCUREMENT CONTRACTS

17.1 Contracts will terminate on the termination date1, unless prior approval is received from the User Department

for the extension.

17.2 Contracts may only be terminated in accordance with the termination provisions set out in the Contract and

will be done by CPM.

1 Terminations Letters are distributed out of courtesy and therefore no approval is required unless when the Contract is

terminated prematurely as a result of non performance or breach of Contract.


17.3 CPM will distribute copies of terminations to all relevant stakeholders.

17.4 Once the Contract has reach termination, the Contract file will be closed and forwarded to Records for

archiving.

Capital Contracts

17.5 Project Managers must inform CPM in writing when the project has been completed in order to close the

file.

18. PERFORMANCE OF SERVICE PROVIDER

18.1 In the event that the Service Provider encounter conditions impeding timely delivery of goods or services, the

Service Provider shall within a reasonable time notify the Project Manager in writing of the fact of the

delay, it’s likely duration and its cause(s). As soon as practicable after receipt of the Service Provider’s

notice, the User Department must evaluate the situation and decide to extend the Service

Provider’s time for performance, with or without the imposition of penalties.

18.2 Should the Service Provider fail to deliver services in accordance with the terms as agreed upon in the

Contract, the Project Manager must inform the Service Provider in writing to re-do the work within 5 (five)

days at no additional cost to the Municipality.

19. PERFORMANCE MONITORING

19.1 User Departments are required to submit a performance checklist on how performance of the Service

Providers will be measured with their Specifications to SCM to be included in the tender document.

Performance checklists must be adapted for each Tender Contract and should not be used as a generic

document. Performance on each Contract will vary and should be measured on its own merit (example

attached as Annexure E).

19.2 The standard performance checklist attached hereto as Annexure F should be used for all Purchase

Contracts.

19.3 Project Managers must ensure that performance monitoring is done throughout the contract period and

submit the reports to CPM on a monthly basis or at agreed intervals of reporting on performance.


19.4 Project Managers must provide performance reports to CPM on a monthly basis on the overall performance

of the Service Providers for period under review, which reports shall be filed in the Contract file for audit

purposes (see example attached hereto is Annexure G).

19.5 Performance Reports are filed on the Contract file.

20. PENALTIES

20.1 In the event that the Service Provider fails to perform the services within the period(s) specified in the

Contract, the User Department may deduct from the Contract price, as a penalty, the sum as stipulated

in the Contract for the unperformed Services.

20.2 Imposing of penalties must be approved by the delegated authority who signed the Contract and all such

approvals must be attached to the invoice.

20.3 The Service Provider must be informed in writing of any deductions from the Contract price. All such

correspondence must be submitted to CPM for record purposes and should also be reported in the

quarterly performance reporting.

21. REGISTER OF RESTRICTED SUPPLIERS

21.1 CPM will keep a register of Service Providers who’s Contracts were terminated prematurely as a result of

non/poor performance or breach of Contract.

21.2 The inclusion of Service Providers on National Treasury’s list of Restricted Suppliers shall be determined on

a case-by-case basis.

21.3 The Service Provider shall be informed of the decision by the Municipality.

21.4 The register shall also be made available on the intranet and should be taken into account during the

evaluation of bids.


PART B NON-PROCUREMENT CONTRACTS

Non Procurement Contracts are contracts entered into with entities after being approved by Council or the City

Manager as the case may be.



22.1 After approval for the specified project, the User Department must complete an Instruction Sheet (Annexure

H) and submit all information to CPM.

22.2 The person completing the Instruction Sheet will be regarded as the Project Manager for the said Contract

and CPM will correspond with this person on all Contract related matters.


22.4 After drafting, the Contract will be circulated for comments to all the relevant stakeholders.

22.5 CPM will arrange for signature and attach all relevant documents.

Figure 5 : Non Procurement Contract Life Cycle

Approval Contract Drafting

Contract Signing &

Distribution

Payment Process

Breach of Contract




Record Management


22.6 The original Contract will be filed at Legal Services Records. One copy will be forwarded to the Contracted

Party and another copy to the Contract Administrator.

22.7 The User Department is responsible to ensure that the provisions of the Contract are complied with.

Breach of contract should be addressed in consultation with the CPM.

23. BREACH OF CONTRACT

23.1 In the event of a breach, the User Departments must provide all the information to Contract & Performance

Management for the drafting of a Breach Notice in terms of the Contract.

23.2 After the breach period (normally 14/30 days) the User Department will be requested to confirm whether the

breach was remedied.

23.3 In the event that the guilty Party did remedy the breach, the Contract will continue. In the event that the guilty

Party did not remedy the breach, the Contract will be terminated.


24.1 CPM will distribute a notice of termination to the User Department 1 (one) month prior to termination.

24.2 In the event that no feedback is received from the User Department on the due date as provided in the notice,

the Contract will be terminated on the termination date.

25. EXTENSION OF NON PROCUREMENT CONTRACTS

25.1 In the event that the contract should be extended, the User Department must forward a report, approved

by the delegated authority who signed the Contract, to CPM.

25.2 CPM will submit the report and extension letter to the City Manager for signature and distribution.

25.3 The provisions of Section 33 of the MFMA shall comply for all extensions with budgetary implications.


25.5 A notice of termination will be forwarded 1 (one) month prior to the new termination date.


26. TERMINATION OF NON PROCUREMENT CONTRACTS

26.1 Contracts will terminate on the termination date2, unless the CPM received an approved request for

extension.

26.2 Contracts may only be terminated in accordance with the termination provisions set out in the Contract and

will be done by the CPM.


26.4 Once the Contract has reach termination, the Contract file will be closed and forwarded to Records for

archiving.

PART C LEASE AGREEMENTS

Lease Agreements are contracts entered into with lessees for the use of municipal property after being approved

by Council

2 Terminations Letters are distributed out of courtesy and therefore no approval is required unless when the Contract is

terminated prematurely as a result of non performance or breach of Contract.

Approval Contract Drafting

Contract Signing &

Distribution

Deposits

Annual Escalations

Breach of Contract

Debt Collection and/or Eviction




Record Management


Figure 6 : Lease Agreement Life Cycle


Leasing of Property by the Municipality

Section 217(1) of the Constitution and Section 112(1) of the MFMA stipulates that when an organ of

state in the national, provincial, or local sphere of government, or any other institution in national

legislation, contracts for goods or services, it must do so in accordance with a system which is fair,

equitable, transparent, competitive and cost-effective.

All properties to be leased by the Municipality must therefore follow the normal SCM processes.


27.1 An application to lease council property (or advertising rights) is submitted to the User Department3.

27.2 The User Department obtains a valuation of the property to ensure that a market related rental is secured for

the leased property.

27.3 The User Department submits a report to Council for approval.

27.4 After Council approval is obtained, the User Departments informs the applicant (Lessee) of the terms and

conditions of the lease.

27.5 Once the Lessee accepts the terms and conditions, the User Department submit all documents to CPM with

an Instruction Sheet (Annexure I) for the drafting of a contract.


27.7 The Billing Section in Finance creates an account number, which account number is then included into the

Contract.

27.8 After drafting, the Contract will be circulated for comments to all the relevant stakeholders.

3 The following User Departments are responsible for the leasing of council property : Property Management – Properties

& Buildings / Facility Management – Sport Grounds / Environmental Management – Outdoor Advertising


27.9 CPM will arrange for signature and attach all relevant documents.

27.10 The original Contract will be filed at Legal Services Records. One copy will be forwarded to the Lessee and

another copy to the User Department and Billing Section.

27.11 The User Department is responsible to ensure that the Lessee comply with the provisions of the Contract.

28. PAYMENTS, DEFAULT AND DEBT COLLECTION

28.1 The User Department and Billing Section must ensure that the Lessee pays the prescribed deposit prior to

handing over of the keys to the leased property.

28.2 The User Department must ensure that the necessary inspections are done on date of occupation.

28.3 The Billing Section must ensure that annual escalations are properly implemented in time.

28.4 The Debt Collection Section must inform the User Department and CPM on a monthly basis of any default in

payments.

28.5 Should a Lessee be in default, CPM shall send a letter of breach to the Lessee to inform them of the amount

in default in accordance with the breach clause of the Contract.

28.6 In the event that the Lessee pays the defaulted amount, the Contract will continue. In the event that the

Lessee does not pay the defaulted amount, the Debt Collection and Eviction process (if necessary) should

be followed.

28.7 If a Lessee remains in default after the breach notice, CPM shall write a letter of termination to the Lessee

and provide copies to the User Department, Billing and Debt Collection.

28.8 Billing must ensure that all municipal services are disconnected on the termination date.

28.9 Debt Collection should refer the matter to an attorney for debt collection and provide copies to the User

Department and Billing and must ensure proper administration of the debt collection process.



29.1 CPM will forward a notice of termination to the User Department 6 (six) months prior to termination of Contract

in order for the User Department to commence with the renewal process in terms of the Contract.

29.2 A reminder notice is again forwarded to the User Department 1 (one) month prior to termination of the

Contract.

30. EXTENSION OF LEASE AGREEMENTS

30.1 The User Department shall draft a report the relevant HOD with the new contract period and rental amount

for approval.

30.2 Once approved, the User Department shall inform the Lessee of the new terms and conditions and submit

copies therefore to CPM and Billing Section.

30.3 No lease may be extended if the Lessee is default.


30.5 A notice of termination will again be forwarded 6 (six) months prior to the new termination date.

31. TERMINATION OF LEASE AGREEMENTS

31.1 Upon termination, the Lessee should vacate the leased property by the termination date. It is the

responsibility of the User Department to ensure that the property is vacated.

31.2 The User Department must conduct a site inspection, which inspection report should be provided to CPM

and the Billing Section.

31.3 All deposits must be refunded to the Lessee upon such termination.

31.4 The User Department shall ensure that a new Lessee is assigned to the leased property.


31.6 After termination and the filing of all relevant documents, the Contract file will be closed and forwarded to

Records for archiving.

32. EVICTION


32.1 In the event that the Lessee does not vacate the premises on the termination date, the User Department

must refer the matter to Legal Services to institute eviction processes

33. WORKING PROCEDURES

Figure 7 : Working procedures for revenue collection & defaulting lessees

NO YES

Billing

Provides monthly list of defaulting Lessees to :

• Property Management/Facility Management

• Legal Services

Legal Services

• Drafts & sends breach notice

• Copies to Billing / Debt Collection / Property Management / Facility Management

Legal Services

• Follows up with Debt Collecti on whether breach was remedied or not

Legal Services

• Issues termination letters to Lessees.

• Lessees notified of evacuation of building, disconnection of services & outstanding amounts to be paid within due dates.

• Copies to Billing / Debt Collection / Property Management / Facility Manager / Records for execution.

Lease continues & all stakeholders are notified

Property / Facility Management

• Follow - up on due date

• Instruct Legal Services to evict (if necessary)

• Keys retrieved

• Disconnection of serv ices

• Deposit

• Refer matter to Debt Collection

Debt Collection

• Instruct Attorneys for debt collection

• Provides monthly reports to all stakeholders

• Implement debt collection agreements

Property / Facility Management

• Report to Council

• Re - allocate property

• Obtains approval for new lease

• Instruct Legal Services to draft Lease Agreement

Records

Ensures that all correspondence received and sent out is filed in relevant files.

Legal Services

• Ensures eviction


34. CONTRACTS MANAGEMENT COMMITTEE

22.1 The Municipality shall establish the Contracts Management Committee whose functions shall be to deal

with matters of contracts within the City.

22.2 The Committee shall be chaired by the Head of Corporate Services and all Heads of Departments shall be

members including the General Manager: Legal Services, General Manager: Internal Audit and the

Chief Risk Officer.

2.3 The Manager: Contracts and Performance Management as well ALL project Managers shall be invited to the

meetings of the Committee as and when required.

2.4 The committee shall draft its terms of reference, processes and procedures of its meetings and the

frequency thereof and shall be annexed to this SOP once approved by the Accounting Officer

35. IMPLEMENTATION & REVIEW

This Standard Operating Procedural Manual on Contract& Performance Management shall be effective

from the date of approval and shall be reviewed on as and when required basis.

36. RESOURCES

Municipal Finance Management Act, Act 56 of 2003

MFMA: Supply Chain Management Regulations

Supply Chain Management Policy

Delegation of Powers Policy

Approved by:

ADV. TANKISO MEA Date

CITY MANAGER

Standard Operating Procedures - AT THE HEART OF IT ALL

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