POLICY ON PURCHASING Overview

POLICY ON PURCHASING Overview Preamble The purpose of this document is to establish a framework for the management of the commercial purchasing function of the University. UNISA undertakes to promote and maintain a purchasing ethos which is fair, equitable, transparent, competitive and cost effective. It is the responsibility of the Vice Chancellor, Management Committee, the Department responsible for Finance and all the accountable Cost Centre Managers to institute and ensure proper financial accountability and control over the expenditure of public funds (student fees and Government subsidies). The University supports the Government in addressing the problems of economic inequality created by racially biased policies of the past Government. We are committed to the economic empowerment of previously marginalised sectors of our society. UNISA pledges support to historically disadvantaged individuals (HDI) and businesses who can demonstrate true upliftment of HDI s in line with the requirements laid down in legislation, without compromising time, cost, quality and service. UNISA has embraced the Preferential Procurement Policy Framework Act, by incorporating its tenets in this policy. This policy must be read in conjunction with the UNISA s Public Tender policy, purchasing procedures, signing of contracts and other financial policies. Mission Based on the principles of honesty, fairness and integrity and through the use of a transparent, centralised purchasing system, we are committed to the efficient and cost effective purchasing of goods and services which meet the requirements and standards of a higher educational institution. Application This policy applies to all UNISA s purchasing activities including those of colleges, business units, institutes, empowerment projects and cost centres. purchasing Page 1 of 19

Overview, Continued Objectives To provide a framework that ensures proficient supply of goods and services through the promotion of sound and best purchasing practices. To ensure that UNISA conducts business with entities that are demonstrably committed to Black Economic Empowerment, the principles underlying Preferential Procurement Policy Framework Act and Employment Equity Act. To establish a framework, guidelines and authority levels that guides commercial purchasing. To ensure that the University s purchasing activities are conducted in a manner that is equitable, fair, transparent, competitive and cost effective. To achieve commercial equity targets as determined by Finance Committee of Council (Fincom). The benchmark is a minimum of 40% purchasing to be placed through HDE s. Definitions The words and terms shall, unless the context indicates otherwise, have the meanings ascribed thereto hereunder. Word Asset/s BEEP : Black Economic Empowerment Purchasing Historically Disadvantaged Enterprise HDIP Enterprises Meaning The term applies to purchases of items of a capital nature, as defined in the Policy on Asset Management. Black Economic Empowerment Purchasing is a programme that provides commercial purchasing opportunities to HDE s as well as HDIP enterprises. HDE s are business entities, which are more than 50% owned and controlled by HDI s and who are properly registered with all applicable regulatory authorities. HDIP enterprises are business entities, which have a percentage HDI ownership, but are not owned and controlled by HDI s. However, the HDIP enterprises have a programme of HDI empowerment efforts in place, which includes an Employment Equity Policy, training programmes etc. purchasing Page 2 of 19

Overview, Continued HDI Means a South African Citizen : Who, due to the apartheid policy that had been in place, had no franchise in national elections prior to the introduction of the Constitution of the Republic of South Africa, 1983 (Act No. 110 of 1983) or the Constitution of the Republic of South Africa, 1993 (Act No. 200 of 1993) ( the Interim Constitution ); and/or Who is a female; and/or Who has a disability: Provided that a person who obtained South African citizenship on or after the coming to effect of the Interim Constitution, is deemed not be an HDI. Tender Commercial purchasing Means a written offer or bid in a prescribed format in response to an invitation by the University for the provision of services or goods. Means the acquisition of services and goods for business purposes, excluding employment of personnel. Abbreviations Abbreviation HDI SMME HDE Meaning Historically Disadvantaged Individual. Small, Medium and Micro Enterprise as defined in the National Small Business Act 102 of 1996. Historically Disadvantaged Enterprise. Change Control Any change to this policy must be effected in accordance with University accepted procedure. The BEEP rating form (Annexure A) may only be amended through formal changes to this policy. purchasing Page 3 of 19

Overview, Continued Policy Violation Staff members who do not adhere to this policy will be subject to disciplinary action. Executive Authority In exceptional circumstances transactions, that do not conform to the provisions and limitations of this policy can be authorised, provided that each transaction is subject to the following authorisation criteria : It is authorised by the Management Committee member, from whose area of responsibility the transaction originates, or the Executive Director Finance if the amount does not exceed R50 000.00. If the amount exceeds R50 000.00, the matter must be submitted to the Management Committee for approval. A monthly exception report must be forwarded to the Management Committee. In this document This document deals with the following topics: Topic See Page 1 General Guidelines and Concepts 5 2 Approved Supplier List and Purchasing Department 7 Responsibilities 3 Quotations 9 4 Capital Replacements 12 5 Implementation 13 BEEP rating form (Annexure A) 15 Certificate of Due Diligence (Annexure B) 16 purchasing Page 4 of 19

1 General Guidelines and Concepts 1.1 Centralised system UNISA uses a system of centralised purchasing. All purchases of a capital nature (assets) as well as all consumables and services must be channelled through the Purchasing Department by means of a duly authorised requisition. The following must be noted : All procurement must be from UNISA approved suppliers. No supplier may be instructed to deliver goods or services without an official order number; All invoices and delivery notes from suppliers should reflect the official UNISA order number; Only the Purchasing Department or other Purchasing units as approved by Fincom may process or place official orders. 1.2 No official order no payment The University s official order is an acceptable and binding contract between UNISA and the suppliers. No payment will be made to any supplier for goods, services or equipment delivered, if such purchase is not covered by an official order. It is essential that orders be generated prior to the purchasing of goods or services. The only exception will be a signed legal contract between UNISA and a third party. These contracts must be signed in accordance with UNISA s Policy regarding official signing powers. 1.3 Restrictions on purchases of assets Requisitions for assets may only be made for those assets which were budgeted for and approved by Fincom as per the capital budget or asset replacements from the replacement fund. Savings on capital purchases may not be used for additional items. purchasing Page 5 of 19

General Guidelines and Concepts, Continued 1.4 Approval of requisition Purchase expenditure less than R200 000.00 must be authorised by the designated Cost Centre Manager or his/her official duly appointed signatory. Purchase expenditure exceeding R200 000.00 must be authorised by the Cost Centre Manager and the relevant Management Committee Member. The aforementioned is subject to provisions of paragraph 3.2 of this policy. A requisition signed by a nonauthorised signatory will not be accepted and returned to the relevant cost centre. Paragraph 1.1 and 1.2 do not apply to Purchasing Card transactions. purchasing Page 6 of 19

2 Approved Supplier List and Purchasing Department Responsibilities 2.1 Approval All suppliers must be approved by UNISA s Purchasing Manager and BEE Officer in respect of their quality, price, service, reliability to perform and BEEP rating. The BEEP rating will be assessed by using the official BEEP rating form (Annexure A) attached hereto. 2.2 Assessment of suppliers UNISA s public tenders will be administered and assessed in accordance with the policy on UNISA s public tenders. The assessment and approval of regular suppliers should be carried out as follows: Technical Assessment: Buyer and/or relevant Technical Advisor. Financial Capability: Buyer. Supplier application form to be completed by all suppliers and evaluated in accordance with paragraph 2.1 above. BEEP Ratings according to Annexure A. The use of Small, Medium and Micro Enterprises (SMME s) is to be encouraged particularly at the Regional branches so that local trade can be developed. The list of approved suppliers must be revised annually, in order to ensure that BEEP targets and quality standards are maintained. purchasing Page 7 of 19

Approved Supplier List and Purchasing Department Responsibilities, Continued 2.3 HDI Empowerment Purchasing Policy Guidelines It is the objective that at least 40% of all UNISA s commercial expenditure must be spent with businesses that have a BEEP rating of at least 50. The Vice Principal : Finance will act as the custodian of the BEEP programme. All UNISA s staff need to seek and promote suppliers with high BEEP ratings. BEEP will at all times employ competitive purchasing processes to select suppliers, which meet all UNISA s requirements. 2.4 Collaborative purchasing The University will enter into collaborative agreements where it is advantageous. purchasing Page 8 of 19

3 Quotations 3.1 Requirement Any purchase of assets, consumables and services require valid and comparable quotations from a bona fide supplier(s). 3.2 Types and number of quotations The following stipulations will apply for the types and numbers of quotations needed for purchases: IF item(s) Cost less than, but not exceeding R5 000.00 THEN it requires one telephonic quotation from an approved supplier. Cost R5 001.00 to R20 000.00 requires three telephonic quotations from approved suppliers, the details of which must be indicated on the requisition. Cost more than R20 000.00 and up to R100 000.00 Cost more than R100 000.00 and up to R499 999.00 Cost R500 000.00 and more requires three written quotations from approved suppliers, which must accompany the requisition. requires close Tender procedure. it is subject to the public tender policy and procedures and will be evaluated by the UNISA Tender Committee. Note where contracts are negotiated by the Purco Consortium, it should not be necessary to call for tenders/quotations. Note the amount referred to is the gross amount e.g. inclusive of taxes and levies. Bypassing the Tender Committee will be reported to the Management Committee. 3.3 Evaluation of quotes An end-user may make recommendations regarding the assets, consumables and services they require, but they should be aware that the Purchasing Department reserves the right to verify information on quotes supplied by an end-user and after consultation with the enduser may appoint another supplier. purchasing Page 9 of 19

Quotations, Continued 3.4 Negotiations on technical/ commercial matters The following general rules apply: The technical staff nominated by the end user will carry out negotiations on technical matters. The Buyer will carry out negotiations on commercial matters. Where technical and commercial matters are interlinked negotiations should be in the presence of both technical and commercial representatives. 3.5 Error in quotation If an error is made in the quotation or an apparent error is detected, the supplier may be asked to confirm its prices. Revised quotations will only be allowed under exceptional circumstances and on the understanding that all bidders will be given this opportunity. 3.6 Quotations from staff members A member of staff or any relative who wishes to be a supplier to the University, and responds to a request for quotations, must declare his/her interest in writing and can only participate once Fincom has approved the application of the prospective supplier. The staff member with declared interest will be excluded from the decision making process. Non declaration of interest may lead to disciplinary action. 3.7 Exceptions In the following highly exceptional cases quotation requirements will not apply: Emergency repairs and services e.g. broken gas pipe, mainframe break-down, etc. Verified sole suppliers of specialised equipment or materials. Specialised professional services. In the above cases the exceptional reason must be indicated in writing on the purchasing requisition. purchasing Page 10 of 19

Quotations, Continued 3.8 Forward cover - Orders to be paid in foreign currency Forward cover for orders that have to be paid in foreign currency will only be initiated when the monetary value of the order and circumstances warrant it. Due to the expensive nature of forward cover, it should be requested by the Cost Centre Manager of the requesting department and approved by Executive Director : Finance. purchasing Page 11 of 19

4 Capital Replacements 4.1 Authorisation Capital replacements must be authorised in line with the Policy on the Utilisation of the Capital Replacement Fund and Policy on Asset Management. purchasing Page 12 of 19

5 Implementation 5.1 Development and maintenance of a supplier database UNISA s Purchasing policy is implemented through the following activities : UNISA must establish a database of HDE s for all key commodities. The Finance Committee of Council must set targets for commercial purchasing targeted towards HDE s. This target must be a minimum of 40% of annual commercial spending. A database containing a register of HDE s, SMME s and all other suppliers who comply with employment equity legislation (where applicable), have valid registration documents (where applicable), and are registered with the South African Revenue Services, must be maintained by the Finance Directorate for sourcing as well as for internal marketing of UNISA s preferential purchasing programme. The Department responsible for Finance must ensure that there is always a sufficient pool of suppliers of SMME s and HDE s on the database for goods and services identified in conjunction with the end-users by continuously identifying potential suppliers that could be included and registering them in the category in which they have undergone a qualification process. 5.2 Reporting The commercial purchasing performance will be reported monthly to Management Committee and quarterly to Fincom. purchasing Page 13 of 19

5 Implementation, Continued 5.3 Assessment of suppliers to UNISA All suppliers will be evaluated and scrutinised on an equal basis in respect of quality, price, expected service levels, preferential purchasing, or any other commercial or technical requirements. All suppliers must tender in open competition according to the tender procedures of the University. In the process of applying for registration as an approved supplier and when tendering to UNISA, suppliers will be required to provide a statement of their ownership, shareholding and Employment Equity Programmes. This information will be used in the qualification of the supplier as well as assessment of the actual tender. Areas that will receive attention are: HDI status and percentage ownership. The number of HDI s in Senior Management. Skills Transfer initiatives to HDI s. Contracting with HDI s. Empowerment initiatives undertaken by the enterprise. Fronting will not be tolerated and will disqualify a tender. purchasing Page 14 of 19

ANNEXURE A : BEEP RATING FORM SUPPLIER NAME:... DESCRIPTION MAX RATING COMMENT 1. HDI Ownership (% HDI Share holding) 30 >50% 30 >35-50% 25 >25-35% 20 >15-25% 15 > 5-15% 10 > 0-5% 5 0% 0 2. HDI Management as at beginning of current calendar year 2.1 Top Management (All General Managers and Executive 7.5 Directors) HDI in top management 5 Formula: (Total no. of HDI total no. of top management) x 5 Women in top management 2.5 Formula: (Total no. of women total no. of top management) x 2,5 2.2 Middle management (Head of Divisions/Section in a Supervisory Capacity HDI in middle management Formula: (Total no. of HDI total no. of middle management) x 14,5 Women in middle management Formula: (Total no. of women total no. of middle management x 6 20.5 14.5 3. HDI Employment 22 Formula: (Total no. of HDI total no. of employees) x 12 12 Women employees (Total no. of women total no. of 5 employees) x 5 Differently abled employees (Total no. of differently abled 5 total no. of employees) x 5 4. HDI Training 10 4.1 Internal 5 Is there an employment equity plan YES/NO Formula: yes = 5; no = 0 Amount spent per year 2.5 Formula: (Training amount spent on HDI s total training amount spent) x 2,5 4.2 External Grants, loans, or other support to HDI or any other Human Resource Development and amount 2.5 5. Purchasing from HDI owned enterprises Formula: (Purchasing from HDI in Rand total purchasing in Rand) x 5 6. Other Corporate Social and Economic Development and Social Responsibilities investment 5 TOTAL OBTAINED 100 Evaluated by : Date : 6 5 purchasing Page 15 of 19

ANNEXURE B: CERTIFICATE OF DUE DILIGENCE NEGOTIATION AND SIGNING OF CONTRACTS This certificate is to be completed and attached to all contracts presented for signature. Accurate and complete quantitative data should be given where relevant. The presentation of a contract (with the completed certificate attached) should take place so as to give the official, signing the contract, adequate time to give due consideration to the matter. Purpose of the contract : Term : Value : # ITEM FOR ATTENTION REQUIRED INFORMATION SIGNATURE 1 Cost/Benefit Statement Justify the cost in terms of the benefit to UNISA. (A full cost/benefit analysis document should not be attached but must be available if required) 2 Total cost implications over time (contract value) This should include the actual financial obligations of UNISA under the contract for the period of the contract, and an estimate of potential costs that may be incurred in the future. VAT must be included in the actual costs. A clear indication must be given of how the VAT is included. purchasing Page 16 of 19

ANNEXURE B: CERTIFICATE OF DUE DILIGENCE, Continued # ITEM FOR ATTENTION REQUIRED INFORMATION SIGNATURE 3 Risk Analysis State the key risks to UNISA emanating from this contract. Is it a reasonable risk under the circumstances? (A full risk analysis document should not be attached but must be available if required) 4 Ability of UNISA to deliver Has UNISA the capacity to fulfil its side of the contract so as to avoid accusations of breach of contract or alternatively to realise the full value of potential benefits. 5 5.1 Legal Soundness Has the contract been subjected to legal scrutiny so as to ensure that the contract is legally and technically sound and acceptable? 6 Policy compliance Does the substance of the contract comply with UNISA policies and procedures? Signature of Legal Officer : Yes is not a sufficient answer - the particular policies and procedures that are being complied with should be named) 6.1 Does the manner in which the supplier was identified comply with UNISA policies and procedures? 6.2 Does the manner in which the contract was negotiated comply with UNISA Purchasing policies and procedures? Signature of Purchasing Manager : Signature of Purchasing Manager or Financial Director Procurement : purchasing Page 17 of 19

ANNEXURE B: CERTIFICATE OF DUE DILIGENCE, Continued # ITEM FOR ATTENTION REQUIRED INFORMATION SIGNATURE 6.3 Has the Tender Policy Signature of Purchasing Manager : been complied with? 6.4 Does contract include the tender specification? 7 Financial Provision Has adequate financial provision been made for the contract, Including the upkeep and maintenance? YES / NO 7.1 Give details of source of funds and approvals, i.e. Cost Centre, Account number, budget amount. 8 Monitoring/Evaluation A brief description of the monitoring/evaluation arrangements should be given. These arrangements must ensure that UNISA gets value for money by realising the benefits. 9 Reporting Lines How will progress be reported on? 10 Previous performance When re-contracting, or extending the contract of a provider a report on previous performance should be attached. With a brief summary in the adjoining block. 11 Financial Risk : Verify that all the financial policies have been adhered to. Financial Director : purchasing Page 18 of 19

ANNEXURE B: CERTIFICATE OF DUE DILIGENCE, Continued # ITEM FOR ATTENTION REQUIRED INFORMATION SIGNATURE 11.1 Check that all the accounting implications and reporting implications have been considered and provided for. 11.2 Verify budget provisions. The accuracy of the above information is hereby certified. Signature of person presenting the contract for signature : Date : Signature of person recommending contract (if applicable) : Date : purchasing Page 19 of 19