PROCUREMENT

Bidding for local government

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The EthicsSA booklet Understanding the Municipal Procurement Process: A guide for businesses, was designed to help businesses understand the municipal procurement process. Lindsay King takes a closer look at the contents of the booklet.
 
Municipalities spend billions of rands every year in procuring products and services from companies both large and small. Many companies find themselves at a disadvantage because they do not fully understand the often-complex tender processes, or how to question what they see as irregularities in the awarding of tenders.

Kris Dobie, Manager: Organisational Ethics Development at EthicsSA, says there is strong evidence of irregularities in the municipal procurement process, as shown by the persistently high number of qualified audit reports for municipalities issued by the Auditor General. As a result, government has introduced numerous checks and balances to help prevent corruption, but these also introduce complexity into the tender process. 

The EthicsSA booklet Understanding the municipal procurement process: A guide for businesses, written by Dobie and colleague Namhla Xinwa, was designed to help businesses understand the municipal procurement process, and what their rights are if they suspect irregularities. The handbook provides a clear guide to each step in the process, and how to raise questions. It also aims to simplify the procurement procedures and to make businesses aware of the regulations that are intended to foster transparency and accountability in the process. “If businesses know their rights they can hold municipalities accountable to follow the procedures correctly.”

One practical example of how a business can keep track of the process is to be present when the tender box is opened. That way, it will have first-hand knowledge of submitted bids and what their value was. Armed with this knowledge, it is then easy to check that the eventual award of the tender dovetails with the original bids.

It’s also very important to recognise that many companies are unaware of their obligations in terms of keeping the tender process fair and above board, and the booklet also spells out businesses’ responsibilities. These include avoiding anti-competitive business practices, BEE fronting and conflicts of interest. It also deals with the ever-present topic of gifts and entertainment. Dobie, who has also developed Anti-corruption and Ethics Management training courses on behalf of Government, and has assisted a number of organisations with the development of their Codes of Ethics and Ethics Management Programmes, warns that even relatively low-cost gifts or entertainment could be construed as bribes.

“We would like to see the booklet become a reference document for all businesses doing work with municipalities and have made it available for free download on our website. We encourage business chambers and other business bodies to distribute the booklet to their members.”

“Creating an ethical tender system that is fair to all depends on strong mutual accountability, something this booklet will advance if used correctly. We aim to empower business by making it aware not only of how the process should work and what to do if it suspects irregularities, but also by pinpointing its own responsibilities,” says Dobie, who also played a key role in the development of the Anti-Corruption Capacity Requirements guideline booklet applicable to all government departments.

In a nutshell, Understanding the municipal procurement process: A guide for businesses answers the following four important questions:

How does the process work?
How does it prevent corruption?
What are the risks to your company?
What can you do if you think there is corruption?

"The book was written to help businesses understand the municipal procurement process. Knowledge is power. By knowing how the process should work, you can hold the municipality accountable to a process which is fair and free from corruption. Remember that the municipality belongs to its citizens, and as a citizen you can (and should) hold them accountable. We also set out what businesses' responsibilities are, and we give some guidance on what to do if you believe you have been the victim of a corrupt procurement process," says Dobie.

Most importantly

In the booklet, Dobie and Xinwa list (and explain) the most important things contractors involved in the municipal bidding process should know:

1. There are different processes for different contract amounts. The higher the amount the more checks and balances are in place.

2. All contracts above R30 000 must be advertised.

R30 000 to R200 000: 7 days on the municipal website and notice boards.
R200000 to R10 million: 14 days prior to bid closing, in appropriate media.
Above R10 million,  or of a long-term nature: 30 days prior to bid closing, in appropriate media.
3. If you submit a quote or a bid for any amount above R30 000 it must be submitted in the tender box by the specified time. You are allowed to be present when the box is opened. The official must read the names of  all the bidders and ‘if it is practical’ also their bid amounts in public. Ask for it if they don't! ( Reading bid amounts may be impractical if the bid called for unit prices for a large number of different items.) 

4. For contracts above R200 000 the details of all bidders must be placed on the municipal website within 10 days from bid closure. It must include the following information: Bid reference number and description of the deliverables; names of all bidders who submitted in time; B-BBEE status level of contribution of all bidders; local content percentages (where applicable); and total price of the bids (where practical). This information must remain on the website for 30 days and must also be available at municipal offices and libraries. 

5. If you've won the bid you must be sure that the person signing your contract has the authority to do so.

6. If you were not successful you have the right to know why. You can ask the Supply Chain Management unit informally, but you may also be required to fill in forms to get access to the information.  

7. If you have a dispute you can raise it with the municipal manager in writing within 14 days of the decision being made. If your concern is not resolved in 60 days you may refer it to the relevant  provincial treasury. If it is not resolved there you may refer it to National Treasury. You can also take the matter to court. 

8. Businesses may be barred from doing business with municipalities, or may have their bids rejected if:

They have not performed adequately in previous contracts with organs of state (including municipalities);
They, or any of their directors, have been convicted of fraud and corruption and have been placed on National Treasury's list of tender defaulters;
Their tax matters are not in order with SARS;
Their accounts (e.g. rates and taxes) are outstanding for more than three months with any municipality or municipal entity; or
Any of their directors, managers, principle shareholders are in service of the state. 
9. Businesses are not allowed to discuss pricing or other competitive information with each other prior to a bid (unless they are submitting a joint bid). It could be seen as price fixing. 

Opportunities

As for how contractors can find out about what opportunities are available for tender, Dobie says all municipalities must be fair and transparent in making people aware of potential contracts. For contracts below R200 000 the municipality may contact you if you are registered on their list of accredited prospective providers.

"Any contracts above R30 000 must also be advertised on the municipality's website and notice boards. Any long-term contracts and those above R200 000 must also be advertised in appropriate media such as local, regional or national newspapers, and the Government Gazette. It is important to note that not all contracts will be advertised in the Government Gazette, so you have to keep checking the newspapers and municipal websites. There are companies who track newspapers and tender bulletins. If you subscribe to their service they will keep you updated on opportunities."

Posing the question whether the procurement process is the same in all municipalities, the answer is a definite 'no'. The Municipal Supply Chain Management Regulations set a minimum standard which all municipalities have to adhere to. These standards are explained in this booklet. Municipalities are allowed to have stricter standards, but must at least keep to this minimum.

Many contractors and service providers are not informed about the administrative criteria when bidding for municipal contracts and Dobie says bidders must read the bid documentation very carefully and comply with all the requirements. "If you do not submit all the necessary information your bid may be disqualified. Among other things you have to give all required personal and company information, submit the required documentation and sign at all the required places, especially the pricing schedule.

So if there are so many checks and balances, why is there still corruption, one might wonder?

"The checks and balances are primarily based on human oversight. One person cannot make all the decisions. That is why all the committees are involved. There are however instances where powerful people manipulate the outcomes by pressuring others to support their decisions illegally. Many employees do not want to rock the boat and may also fear that they may lose their jobs. There is also the possibility that a number of role-players may collude to make a specific bidder win a tender," concludes Dobie.

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