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Strategic Decision Strategic Decision MakingMaking
Joint Response Team - DWAF, SALGA, NT Joint Response Team - DWAF, SALGA, NT and dplgand dplg
Following due process to
facilitate good decision making
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Purpose of this presentationPurpose of this presentation
The purpose of this presentation is:
To provide an overview of the decisions required at various stages of a s78 process
To strengthen s78 process management and decision making
To highlight legal decisions and risks
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What does the presentation What does the presentation cover?cover?
This presentation provides an overview of the following decisions through the s78 process:
Statutory decisions - triggers, 78(2) and 78(4)
Scoping decisions
Internal assessments 78(1)
External assessments 78(3)
Mechanisms for consulting labour and the local community
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Types of decisions requiredTypes of decisions required
The S78 process is comprised of a series of statutory and strategic decisions
These decisions build on one another towards selecting the most appropriate mechanism/s for improved service delivery
In addition to the decisions set out in the legal process, s78 requires decisions about: the scope of the assessment whether and who to appoint to provide technical
assistance in undertaking the assessment selecting an internal project officer to lead the process the mechanisms to be used for consulting with labour and
the local community
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OR
Status Quo and Needs Analysis
Macro Scoping
Internal Assessment section 78(1)
Implement Internal Mechanism
S78 Process
External Assessment and Feasibility Study
section 78 (3)
Implement External
Mechanism
T R I G G E R S
S78 (4) decision
S78 (2) decision
Terms of ReferenceTerms of
ReferenceInception
ReportInception
Report
Status Quo
Report
Status Quo
Report
Internal Assessment
Report
Internal Assessment
ReportExternal
Assessment Report
External Assessment
Report
Stakeholder involvement
Stakeholder involvement
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Statutory decisions required
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What are the statutory What are the statutory decisions?decisions?
The Systems Act requires 3 major decisions when choosing mechanisms for service provision: Decision 1: Must a S78 assessment be conducted?
Decision 2: Should an internal mechanism be selected without considering external mechanisms?
Decision 3: Should an internal or external mechanisms be selected?
We call these ‘Statutory Decisions’ because they are required by the Municipal Systems Act
Other strategic decisions are also needed in order to make a good informed decision, but these decisions are not required by legislation
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Conduct section 78?
DECIDE EXPLORE EXTERNAL
MECHANISMSSELECT APPROPRIATE INTERNAL MECHANISM 2
Implement appropriate internal mechanisms
Assess external mechanisms
DECIDE
INTERNAL MECHANISM
EXTERNAL MECHANISM
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DECIDE
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Decision 1 - To conduct a S78? Decision 1 - To conduct a S78?
A municipality must review and decide on appropriate mechanism/s to provide a municipal service in the municipality or a part of the municipality when –
A review is required by an intervention in terms of the Constitution
A new municipal service is to be provided
Requested by the local community through mechanisms, process and procedures established in terms of the Municipal Systems Act
A review of its IDP requires a review of the delivery mechanism
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Decision 1 - the Section 77 Decision 1 - the Section 77 TriggerTrigger
If a municipal service is provided internally – do a section 78 when:
The existing service is to be significantly upgraded, extended or improved or
A review is required by the performance management system
The municipality is restructured or reorganised in terms of the Municipal Structures Act
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Decision 1 - the Section 77 Decision 1 - the Section 77 TriggerTrigger
If a municipal service is provided externally – do a section 78 when: A review of the SDA is required by the
performance management system, or
The SDA is likely to terminate within 12 months, or
The existing service is to be significantly upgraded, extended or improved – beyond the terms of the SDA
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Guidance on Decision 1Guidance on Decision 1
Decision 1 can be difficult – particularly when the current mechanism is internal
For example, when is a service significantly upgraded, extended or improved? Judgment must be exercised
Note that a s78 process is not for functions that are not “municipal services” , e.g. credit control functions, meter reading
Legal Risk: If a decision is taken not to conduct a s78 process, this can be challenged. Advice
should be obtained if there is uncertainty.
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Decision 2Decision 2
Decision 2 is required by section 78(2) of the Systems Act
After conducting an internal assessment, a municipality may: Decide on an internal mechanism or
Explore external mechanisms
The decision in section 78(2) is really a decision to postpone the final decision about what kind of mechanism should be selected. It is a decision to get more information before making the final decision
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Decision 3Decision 3
Decision 3 is required by section 78(4) of the Systems Act and is the final decision on an appropriate internal or external mechanism
The municipality must make a decision at this point – it cannot choose to leave the matter undecided
It could, however, request further information before making the decision
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Who Makes These Decisions?Who Makes These Decisions?
Municipal Councils must make the statutory decisions
The decision to enter into a service delivery agreement (SDA) with an external mechanism cannot be delegated to any committee of Council, e.g. the Mayoral Committee or Exco or a s80 “portfolio” committee
However, Decision 1 and Decision 2 can be made by a Committee of the Council
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How are these decisions made?How are these decisions made? Section 78 sets out the process for making Decision
2 and Decision 3 - these decisions cannot be made using any other process
For example, it is not possible to make Decision 3 without first considering internal mechanisms. It is also not possible to make Decision 3 without (a) consulting organised labour, (b) consulting the local community and (c) conducting a feasibility study
These are called “mandatory procedures”
Legal Risk: If a municipality does not follow the mandatory procedures before making a decision
– the decision could be invalid.
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Decisions can be challengedDecisions can be challenged
Decisions may be challenged if they are made without following the requirements of the legislation - “mandatory procedures” must be followed
However, the grounds on which a decision can be challenged are complex and advice should be obtained if an entity seeks to challenge a s78 decision
At this stage the key challenge is from organised labour – who have taken the City of Cape Town, for example, to court twice already
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Enhancing Decision MakingEnhancing Decision Making
Because a municipality must exercise its judgment before making a decision, it must be fully informed of all the issues
The purpose of s78 reports is to provide a full briefing on these issues
Decision making can be enhanced by creating steering committees or stakeholder committees to consider issues along with the consultants writing the s78 reports
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Scoping decisions
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The importance of macro The importance of macro scopingscoping
Before undertaking a S78 process, the munciplaity needs to think holistically about service delivery and understand its needs and challenges, as well as the desired outcomes of the assessment
Macro scoping enables the municipality to decide:
The area where the services will be provided
The needs that the mechanism should be designed to address
The different service delivery mechanisms or options
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Section 78(1) process and decisions
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The ProcessThe Process
Section 78(1) requires an assessment of:
capacity – both current and potential future capacity -- to provide the service internally
the views of organised labour
direct and indirect costs and benefits – note that consideration should be given to both financial and non-financial benefits
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The S78 (1) decisionThe S78 (1) decision Before taking a final decision to go internal a
municipality can explore the possibility of providing the service through an external mechanism
A municipality can still implement an internal mechanism after exploring external mechanisms, although a lot of time and cost will have been spent exploring external options
A municipality will not know if there are benefits and efficiencies from restructuring to another entity (e.g. regional), unless it explores external options
s78(3) provides information to compare internal and external options before Council takes a final decision
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Section 78(3) process and decisions
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External AssessmentExternal Assessment Section 78(3) is the process a municipality must embark upon
if it wants to explore the possibility of providing a service through an external mechanism
Section 78(3) is far more rigorous than s78(1)
It requires an assessment of all 6 external options
It also requires:
An assessment of the views of local communities
A further assessment of the views of organised labour
A detailed feasibility study
Regulator involvement
Consideration of issues required in a Service Delivery Agreement if an external mechanism is chosen
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Steps of an external Steps of an external assessmentassessment
ASSESS the 6 legislated service delivery options against
legislated criteria and against
the service delivery needs and challenges of the area
Take into account the VIEWS of the local community and organised labour when assessing the options
Conduct or commission a FEASIBILITY STUDY of preferred mechanism/s
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External assessment criteriaExternal assessment criteria
Each option (municipality, municipal entity, NGO, CBO, organ of state, or private sector operator) must be assessed against: Direct and indirect costs and benefits
Capacity and potential future capacity of prospective service providers
The likely impact on development, job creation and employment patterns
The views of the local community and organised labour
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The Feasibility StudyThe Feasibility Study
A Feasibility Study should include: Developing a financial model Testing sensitivity of assumptions Addressing legislated criteria Articulating non-financial costs and benefits
Key issues: Value-for-money: will there be a benefit (in
financial and non-financial terms) if there is change as a result of restructuring
Affordability: an external service provider does not divest the municipality from understanding and supporting how the provision of services is to be funded (funders will not lend money unless they can be sure it will be repaid over time)
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Feasibility Study issues to be Feasibility Study issues to be assessedassessed
Assess how the preferred mechanism will: Provide value for money
Address the needs of the poor
Be affordable
Transfer risk
Consider the projected impact on the WSA's: staff, assets and liabilities
IDP
Budget (impact on revenue, expenditure, borrowing, debt and tariffs)
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The Service Delivery Agreement The Service Delivery Agreement “SDA”“SDA”
The key difference between an internal and external mechanism is the SDA
The SDA regulates the relationship between the WSA and the WSP
It sets out who has to what and when
There are “generic” types of SDAs
Each WSA must ensure that its SDA is appropriate to its specific needs, risk allocation, and also allows the WSA to “ensure service delivery”
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Which Service Delivery Mechanism is Which Service Delivery Mechanism is for you?for you?
The type of output specification (i.e. what the WSA wants to achieve through the service delivery mechanism) and the risk transfer will influence which external mechanism is appropriate for your needs
The communities’ needs should drive the assessment of external mechanisms, rather than the other way around!
Review s81 of the Municipal Systems Act and s19 of the Water Services Act
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What to think about when What to think about when considering external considering external
mechanismsmechanisms Affordability – matching needs (service levels)
against revenue (tariffs collected and grant funding)
Securing and allocating grant funding – MIG for capital expenditure for the poor
Formula for allocating equitable share to WSP to provide free basic services
Responsibility of WSP to collect water revenue
Consolidated invoice or separate invoices
By-laws in place to allow revenue collection and credit control
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Consultation processes required
Assessing the views of organised labour and the local community
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Involving labourInvolving labourLessons learnt:
If the views of labour are not adequately assessed, s78 decisions can be challenged
Employees need to be kept informed
Good governance is needed to create a positive environment for s78 assessments
Labour consultation should be seen in the context of change management and not merely as legal compliance
Local labour forums should be used to deal with employer-labour issues
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Recommendations for Recommendations for involving labourinvolving labour
A labour engagement strategy is needed upfront
Involve labour from the start although this is not legally required
S78 requires that the views of labour are assessed through effective information exchange with reasonable timeframes – it does not require a bargaining process
Labour relations officer or appointed official should engage directly with labour, not consultants
Engagement with labour should happen through existing channels such as the Local Labour Forum
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In most circumstances, unions should not be consulted separately - this can lead to mistrust
Engagement with labour to be based on accessible documents and the process to be properly documented
Engagement with labour to happen ‘informally’ through steering committee representation AND formally through labour forums
S78 requires that the views of labour are formally assessed when (i) an internal mechanism decision is taken and (ii) if external mechanisms are assessed
Recommendations for Recommendations for involving labour (cont.)involving labour (cont.)
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Community participation Community participation Section 78 (3) requires that the local community is
given notice if external mechanisms for service delivery are to be explored
Chapter 4 of the Systems Act obliges municipalities to:
encourage and create conditions for the local community to participate in the affairs of the municipality, including in strategic decisions relating to the provision of municipal services,
contribute to building the capacity of the local community, councillors and staff to enable participation, and
use its resources and budget to implement community participation
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Why is community participation Why is community participation important?important?
Community participation:
increases community responsibility as consumers
strengthens participatory governance
strengthens problem solving and participatory skills and abilities
increases the likelihood of community satisfaction with water services
helps identify and mange potential areas of conflict
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How should communities How should communities participate?participate?
Participation must take place through political structures in terms of the Structures Act such as Ward Committees
In addition, municipalities must establish appropriate mechanisms, processes and procedures to enable communities to participate, such as:
public notification and comment
public meetings and hearings
consultative sessions with locally recognised community organisations and traditional authorities where appropriate
report back
The special needs of people who cannot read or write, people with disabilities, women and other disadvantaged groups must be taken into account
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Implementation Considerations
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What decisions follow the What decisions follow the assessment?assessment?
Important decisions must be made after the s78 assessment has been concluded.
If an internal mechanism is selected:
Resources must be allocated to the provision of the service – this involves budgetary, planning and human resources decisions
If an external mechanism is selected:
A procurement process must be conducted – this may involve the appointment of consultants and a decision about which bid to accept following a procurement process
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Implementation… Life after s78Implementation… Life after s78
The WSA remains the authority responsible for ensuring service delivery
Some considerations regarding implementation:
Monitoring capacity
Contract Management Plan
Performance capacity: budgets, tariff setting, passing and enforcing by-laws
Customer Care
Political Support
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Thank You
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