A lot of corruption seems to involve tenders. Is the government always required to put out a tender when it procures goods and services, or does it have other options? What circumstances have to be present for it to bypass the tender route?
Worried
Dear Worried
Competitive procurement is a requirement in terms of section 217 of the constitution. But the government is sometimes allowed to depart from that requirement, particularly below a certain cost threshold. It is generally undesirable for this to happen.
Tenders are designed to create competition among service providers. If a number of service providers compete with one another to offer the government the best services at the lowest prices, the government will be able to obtain value for the money it spends.
Competitive tenders are also a safeguard against corruption and nepotism. They prevent the secretive award of lucrative tenders to well-connected individuals and build a certain degree of transparency into the system.
When the competitive tender system functions as it is supposed to, it ensures that we, the taxpayers, get the best deal for our money and that the best service provider is appointed. It also removes opportunities for corruption.
When the government contracts goods and services without going out to tender, it loses all the benefits of this competitive system.
Because of these considerations, all contracts of a high value must go out to tender.
However, there are cases in which requiring the government to go out to tender would be counterproductive. Our law permits the government to bypass the tender requirement when:
- It would be impractical to invite competitive bids;
- There is an emergency and the service must be procured very quickly; and
- There is only one service provider who could possibly provide the required service.
If this route is taken, the department involved is required to record its reasons for departing from the tender process and report the departure to a higher authority, such as the Treasury.
Corruption Watch recently investigated a case in which the Mpumalanga department of health awarded a contract to circumcise boys and men in the province in a deal potentially worth hundreds of millions of rands.
The contract was awarded without a competitive tender.
The head of the department at the time said that the company offered a unique solution in that it was willing to go to the rural areas where most doctors would not go. The department has seemingly moved away from this position under new leadership, suspended the contract with the company and initiated a probe into the matter.
It is doubtful whether this explanation would have been good enough to justify departing from the requirement of open tenders. It is unlikely that only one company would be prepared to offer services in the rural parts of the province.
More importantly, how would the department know that only one company would be prepared to do so unless it advertised the tender and assessed the bids objectively and transparently?
This case illustrates why, when it comes to high-value contracts, it is only when it is genuinely impractical to go out to tender, or there is a real emergency in providing the service, or there is only one service provider capable of performing the contract that the tender process should be bypassed.
A competitive tender process lends itself to better decision-making. If run properly, it should also protect against the expenditure of public funds at inflated prices and uncover other irregularities, such as conflicts of interest.
• This article was first published in Sunday Times: Business Times
