A recent probe by Corruption Watch into a R13.6-million Department of Transport communication tender, which revealed several serious irregularities, highlights problems faced by government in trying to police billions of rands’ worth of tenders annually.
The Corruption Watch report, which was given to the public protector on Thursday 23 June, revealed a parent company of the bidder already doing work for department (something which is required to be disclosed), incomplete tender documents and the tenderer with the highest price winning the job.
Ignorance of the law and government regulations can make companies vulnerable to repeated tender rejection, or worse: being listed as a restricted supplier by national treasury.
Read our no-nonsense, step-by-step guide to tendering here.
Targeting procurement
Treasury is increasing government training of procurement officials to ensure greater support for companies, and to prevent fraud.
The training is also aimed at addressing supply chain problems highlighted by the auditor-general’s General Report of National Audit Outcomes for 2010-2011, which found that 31% of departments and 22% of public entities failed to obtain three quotes when required, and 74% of departments were found to have engaged in non-competitive or unfair procurement processes.
In terms of treasury regulation 164.9.1 (c), an accounting officer or organ of state is required by treasury to investigate any allegation of corruption in a tender process and to take appropriate steps against those involved.
This can include cancelling or disregarding any bid if the bidder or any of its directors are seen to have abused the supply-chain management system, committed any corrupt or fraudulent act during the bidding process or failed to perform on a previous contract.
It can also result in the bidders in question being placed on the treasury’s list of restricted suppliers. View the treasury list of restricted suppliers here.
Government is entitled to recover any costs relating to a tender found not to comply with its requirements, claim damages or take the matter forward for criminal prosecution.
‘Not as simple as it should be’
Mark Townsend, founder of Tenderscan, which publishes lists of available government tenders, has been involved in tendering for many years, particularly those for construction and town planning.
He warns that because many tenders are complicated it’s often best to get good legal advice, particularly if unsuccessful companies want to appeal the process, or access the tender board’s adjudication report.
“A lot of tenders, particularly those for large amounts of money, are very complex and they need qualified people to apply. The law is not as simple as it should be, and often government employees are not suitably qualified,” he says.
Townsend believes that while it’s not fair to tar everyone with the same brush, there is still a fair amount of abuse of the tendering process.
“Treasury is trying desperately to set up a standard best practice to ensure that abuse is reduced.”
He believes the present national treasury restricted supplier list is far from illustrative of the extent of the problem. “It appears that the blacklist has already been in operation for many years even though it was not made public. This means that, while the database was only made public last year, it had already been in operation long before its publication in June 2011.
“In fact, four of the restricted suppliers listed on the Treasury list were blacklisted as long ago as 4 July 2002, which means that they are due to be removed from the list on 3 July 2012. They are Asidle (Pty) Ltd, and three individuals: S Chiboo, JCA Colin and PM Sapire.
“This means that means that the newly published list – published last year – is already out of date in some regards.”
Townsend says an analysis of the database of 125 companies and individuals who have been placed on treasury’s restricted suppliers list and, in term of the new treasury regulations, are not allowed to do business with government for a maximum of 10 years, shows that there are five reasons for being blacklisted:
• misrepresenting the facts or fronting
• breach of contract
• poor performance
• paying bribes to officials
• not obtaining permission to conduct business with the state
“It appears that the blacklisting is initiated by a government department or municipality,” says Townsend. “Although one should be wary of using the list to extrapolate too far with regard to corruption by province, it is interesting that the overwhelming majority (81) of those companies and individuals on the database have been blacklisted by provincial government departments in Limpopo province – only 18 have been blacklisted by national treasury, one by a KwaZulu-Natal departments and three by Mpumalanga departments, 11 by Gauteng departments and municipalities, and 11 by Western Cape departments and municipalities.”
Townsend says the fact that no companies or individuals have been blacklisted by government departments and municipalities in the Northern Cape, Eastern Cape, North West or Free State is a concern, since it’s unlikely that there is no abuse, fraud or corruption taking place in those provinces.
Legal minefield
Glenn Hollands, partner at Mbumba Development Services, explains why tendering can be a legal minefield. He says to understand the full complexity of awarding tenders in South Africa, it is useful for companies to look at the Preferential Procurement Policy Framework Act, accompanied with the Preferential Procurement Regulations, which set up the system of evaluating tenders in terms of a set of adjudication criteria with a maximum of 100 points.
That system works in conjunction with the Public Finance Management Act, Municipal Finance Management Act and treasury regulations, as well as the supply-chain management processes of the respective departments or municipalities.
