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TENDERS MUST BE TRANSPARENT AND OPEN TO PUBLIC SCRUTINY

27 APRIL 2016

By Pumi Motsoahae – CEO of Richards Bay Industrial Development Zone Company

In order to grow, small businesses need to compete for work in the government and private sectors. This process often involves the submission of tenders.

It is unfortunately so that tenderers often get little feedback on why their tenders were unsuccessful. They may never get to know that their tender was rejected because they omitted a tax clearance certificate or were scored down because they failed to submit curriculum vitae of one of the experts in their team.

This may lead to them making the same mistake in multiple tenders and submitting tenders in vain, costing both time and effort, all because they did not realise that they were doing something wrong.

To avoid this situation and to empower its suppliers, the Richards Bay Industrial Development Zone Company SOC Ltd (RBIDZ) holds debriefings after each of its public tenders.

Unsuccessful tenderers are invited to a meeting where the tender is discussed, common problems pointed out, the specific items which disqualified a tender or caused it to score badly are pointed out and the scoring system explained.

This system not only empowers suppliers but benefits the RBIDZ as fewer tenders are disqualified or fail the reach the threshold for functionality.

It also serves to demonstrate that the RBIDZ has fair, equitable, transparent and competitive processes where tenderers can be assured that their tenders will be dealt with fairly, avoiding any perception that there is no point in submitting a tender as some tenderers will be favoured.

According to section 217 of the Constitution, procurement by government and public sector entities must be done in a manner that is fair, equitable, transparent, competitive and cost-effective.

The fundamental and broadly accepted principle underlying a modern procurement system is open competition, which ensures unrestricted, universal access to the procurement market. The tenderer who best meets the demand, at the best price, wins.

In South Africa this has been enhanced to seek to empower black empowered tenderers by allowing them to compete and be successful in their tenders even if they do not have the lowest price, provided that their prices are within the threshold of the lowest priced tenderer.

This threshold depends on the size of the tender and the BEE levels of the competing tenderers, but does not exceed 11% for tenders above R1 million and 25% for tenders below R1 million.

Tenders are thus used to empower small emerging businesses while limiting the premium paid for such empowerment to reasonable levels.  

In terms of the United Nations Development Programme guidelines for public-private partnerships for the urban environment, a  transparent procurement system ensures that all qualified suppliers have equal access to all elements of the system, including methods of procurement; legislation; evaluation criteria and technical specifications and due process.

Public procurement should to the greatest extent practicable, be transparent in its practices, processes, policies and relationships with all stakeholders, while ensuring protection of confidential information.

Research has shown that public tenders in South Africa equate to at least 20% of gross domestic product.

The tender system, however, requires proper controls to be put in place as it creates a risk of fraud and corruption. Tenders can be awarded to entities with no track record, scores can be manipulated, tenders can be disqualified on petty or bogus grounds or the tender can simply be awarded to an entity which did not score the highest.

In his 2016 Budget Speech, the Minister of Finance, Pravin Gordhan, announced that he, President Zuma and other ministers had engaged business leaders to understand their concerns and views, which included the issue of tenders. Working groups have since been established with several practical proposals for joint action, including a collaborative initiative to combat corruption and abuse of tender procedures.

The RBIDZ is a state-owned company, which is licensed to develop and operate the Richards Bay Industrial Development Zone.

Wholly-owned by the Provincial Government of KwaZulu-Natal through its Department of Economic Development, Tourism and Environmental Affairs, the RBIDZ is an integral part of Government’s macro-economic policy to develop South Africa’s manufacturing sector.

This is done through encouraging investment in export-orientated manufacturing industries, centered on beneficiation of the country’s natural resources and thereby creating opportunities for employment, and has already entered into agreements with locators who will bring billions of rands of investment to the Richards Bay area.

In addition to spending by investors, the RBIDZ is spending hundreds of millions of rands developing the zone and this year alone will commence construction projects worth over R200 million for developing Phase 1F of the zone and upgrading infrastructure municipal roads near Phases 1A and 1F. .

Given the magnitude of its tenders, the RBIDZ wishes to ensure that it meets the requirements of the Constitution in ensuring that its processes are fair, equitable, competitive, transparent and cost effective.

It has adopted best practices like setting up three bid committees; having the Chief Financial Officer chair the bid evaluation committee and the CEO the bid adjudication committee, with the other members of the committees revolving; encouraging members of bid committees to raise any concerns; recording all bid committee meetings; having all present at bid committee meetings declare if they have any interests in any matters before the committee in a book kept for this purpose; and providing for appeals against decisions of the Committee to the Audit and Risk Committee of the Board.

Initially created to give feedback to tenderers and to try and ensure that for future tenders tenderers avoid basic mistakes which could see their tenders disqualified or marked down, the introduction of tender debriefing by the RBIDZ also assists in preventing corruption related to tenders and to garner confidence in the RBIDZ as a potential customer for tenderers.

Thus debriefing provides tenderers with an opportunity to obtain feedback which can be used to improve future submissions, increase their competiveness and the likelihood of successfully bidding for future projects.

The process also benefits the RBIDZ as tenderers have the opportunity to avoid mistakes and thus prevent price competitive tenders being disqualified or marked down at the earlier stages of the process.

A fair process also encourages tenderers to tender because they know their tenders will be treated fairly rather than not bidding because they perceive that the result will be a forgone conclusion. This results in very competitive pricing. Since introducing the tender debriefing sessions, the RBIDZ has been commended by tenderers who have indicated they had benefited greatly from the exercise.

Tenderers spend a lot of time and money preparing proposals. The debriefing ensures that a respondent also understands the activities of the RBIDZ in evaluating tenders. It explains the RFP evaluation process as well as the amount of time and effort expended by the evaluation committee.

Most importantly, debriefings are good for everyone concerned. Tenderers cannot improve if they do not understand their failings.

Debriefings will encourage and help them submit better proposals in the future while the RBIDZ benefits from getting more tenders through to the price and preference evaluation stage and from having stronger suppliers.