Has there been an effective change in the public sector tender regimes since 2003?
In 2003 Business Day reported on the Black Business Media Summit. At this summit, Shadrach Appanna, then an Economist from the Development Bank of South Africa (DBSA), spoke on the topic of ‘Preparing black businesses to excel in Public Private Partnerships’ (PPPs).
In this specific talk, Mr. Appanna, pointed out that when PPPs are used correctly it is a useful service delivery tool that provides operational gains and strategic clarity, as resources are used more effectively by government departments. He continued by offering some criticism against black businesses, especially in the area where there is a lack of understanding in terms of tender procedures. Mr. Appanna said that most tender proposals received from black businesses for public / private partnerships “revealed a lack of understanding of tender procedures” and thus these tenders failed. He made recommendations as to how organisations should present their tender proposals. These recommendations include:
- Business profiles must demonstrate careful thought and strategic planning.
- Businesses must have a clearly defined mission, vision, values and skills.
- Businesses must display a detailed shareholding structure.
- Staff profiles and skills must be transparent.
- There must be an adequate demonstration of alliances, joint venture partners and good trading references.
- Corporate governance issues must be demonstrated (e.g. VAT registration, tax numbers, company registration number, key accounting personnel).
- There must be a link between the key strengths of the business to the tender criteria detail (an ability to deliver).
- The proposal must demonstrate a good financial track record and understand project financing issues.
- The tender proposal should be written as if the tender has already been won, and thus the proposal is a document detailing the process that the business will follow in delivering on the tender.
Mr. Appanna went further when commenting on the fact that tender boards are seldom called on to specify their credentials and why they are qualified to make the decision on awarding the tender. He stated that “it is the right of the public and business to know what qualifications the tender board has”.
During the summit proceedings, a delegate commented that demanding such information leads to being called a ‘trouble maker’. Other delegates also commented, and the following viewpoints were aired:
- The tender process is seen as ‘incorrect’ and it seems that tenders are awarded before they are made public, thus it is a waste of the private sector’s money and time to tender.
- Bribes and corruption is rife, therefore smaller companies are marginalised as they cannot afford to pay these bribes or buy gifts.
- Once a tender has been awarded and the project is finished, payment is not received for several months.
- There is no resource containing information with regards to the rights of businesses, or recourse if these rights are infringed upon.
Mr. Appanna responded that transparency is, indeed, a problem and that measures taken to improve the system have been faced with many problems. It was said that the decentralisation of the process back to local governments and agencies would make a difference. Another comment was that a document detailing information about the rights of tenderers, the ‘rules of the game’, and the recourse actions available, would be a great asset.
The burning question: Has there been an effective change in the tender regime since 2003? An expert opinion…
It is acknowledged that Government, and in particular National Treasury, has strived to change the public procurement regime in such a way that it should improve the tender process, but this is a very slow process. The changes that have, however, occurred since the Black Business Media Summit of 2003, are:
The Broad-Based Black Economic Empowerment Act (B-BBEE), no 53, was gazetted in January 2004, paving the way for a more broad-based approach to economic empowerment. To support the B-BBEE Act, the Department of Trade and Industry (DTI) developed the Codes of Good Practice for B-BBEE which was published on 9 February 2007. This paved the way for B-BBEE accreditation agencies and recognition levels for all suppliers, with a window period that was set for February 2008.
Various sector charters were published during the period of 2004 and 2008, aligning these charters to either the B-BBEE Act or to the Codes of Good Practise for B-BBEE. There are, however, still a few under ‘work in progress’.
During August 2004, National Treasury also launched their PPP Manual with the aim of standardising the PPP process in Government.
“As can be seen from the above, many new legislations, charters and manuals were issued to improve the procurement system, leaving other legislation behind such as the Preferential Procurement Policy Framework Act (PPPFA) which only concentrate on equity ownership for preference, making the Codes of Good Practise for B-BBEE useless, as public entities are still evaluating tenders based on equity by Historic Disadvantaged Individuals (HDIs) and not the supplier’s contribution to economic empowerment”, Tjaart van der Walt, an Independent Consultant and recognised expert on Tenders and Tendering, told SmartProcurement.
The PPPFA had the intention to provide preference to HDIs by allocating points for BEE depending on the value of the tender. It further stated that a price preference will be allocated to submissions that meet the technical criteria “for contracts with a Rand value above a prescribed amount where a maximum of 10 points may be allocated for specific goals as contemplated in paragraph (d) provided that the lowest acceptable tender scores 90 points for price”, meaning that only submissions that fully comply with the technical specification will be evaluated further on price and BEE. This was overruled by a practise note issued by National Treasury saying that the price points can be split between technical and price. The effect of this is that government can potentially purchase inferior products because the price and BEE status of the supplier was better than its competition.
“What has changed since 2003? Nothing except that tender documents are more complex and less user friendly; government is paying more for inferior products; organisations are not supporting B-BBEE as HDI equity is still the driving force; it is more difficult for organisations to apply for inclusion on the supplier database as there are so many, and due to the large number of documents that need to be submitted; etc”, Van der Walt concluded.
SmartProcurement wishes to thank Tjaart van der Walt, an Independent Consultant and recognised expert on Tenders and Tendering, for his input in this article.
SmartProcurement will be hosting The Tenders & Contracts Best Practises in SA Conference on 29 & 30 July 2009.