Major Tender Overhaul Could Kill Tenderpreneurship

The new face of South Africa’s government tender process goes live on April 1 and is an overhaul of the much-abused and derided system.

Fin24 - Dewald van Rensburg

09 February 2015

Johannesburg - The new face of South Africa’s government tender process goes live on April 1 and is an overhaul of the much-abused and derided system, a report in the City Press explains.

Some tenders likely to be centralised with chief procurement officer Kenneth Brown’s team include those for textbooks, building leases, air travel and hotel bookings, consultants, private security, banking and cellular telephony.

Brown and his team at the Office of the Chief Procurement Officer are using three weapons in their arsenal to reshape the tender process.

- An e-tender portal that goes live on April 1;

- A national database of all approved and compliant suppliers; and

- A sort of “online shop” where government departments will place all orders of less than R500 000.

“The biggest source of corruption and waste is not these tenders you see in the papers, with R50m here and there,” said Brown in an interview on Friday.

“It is in the million small routine transactions that happen every year.”

Small purchases of below R500 000 are constantly taking place. In national and provincial departments alone, these come to R6bn a year.

More importantly, they make up 97% of all transactions – a million small opportunities for waste and corruption.

“What hurts most is inefficiency. That creates the corruption and is the reason the state can’t exercise its market power,” he said.

The cure is a system based on Amazon.com where all purchases will be made through a website that goes live in July this year.

The suppliers and prices are pre-negotiated and the system will allow the state to aggregate orders into weekly purchases and deliveries.

The hold-up is not the technology, but the sourcing strategy that will go with it, said Brown. It can only be phased in as existing contracts lapse.

On Wednesday, Treasury published the culmination of the work by the office since it was established in 2013, the first overall review of the tender system in 10 years.

The supply chain management review paints a picture of a vast, fragmented system where tenders are constantly awarded without proper skills or information.

This road map to hyper-transparency is going to be the major intervention for most state spending.

“Transversal” contracts

At the same time, Brown’s office is expanding its list of “transversal” contracts to be negotiated in Pretoria for the entire public sector.

The nebulous state procurement system was created in 2004 with the decentralisation of tendering – from the monolithic former national tender board to the 660 government entities that put out the tenders. This includes national and provincial departments, municipalities, state-owned companies and entities.

Brown said what’s happening now is “the work we should have done in 2004” to modernise this fragmented system.

Corruption happens on the admin side

The portal that will launch on April 1 should deal a “blow” to the tender system’s flaws.

He said the biggest areas of corruption were not what people would expect because “a lot of corruption happens on the admin side”.

He hoped the central database would change that.

Every bidder will have to be registered on it and their tax or BEE status will be automatically checked against records at the SA Revenue Service or with the department of trade and industry.

This should stop companies “messing with” competitors. “We’ll know who gets work where and how they performed,” he said. It can go further.

The database could be linked to the Companies and Intellectual Property Commission to catch people who start multiple companies to hide their bad performance in one contract from another tender process.

This can be hooked up to the government’s payroll system to immediately identify state employees trying to do business with the state.

System could kill tenderpreneurship

“I hope this system will kill tenderpreneurship, but that is not the main objective. The objective is to make it easy for the private sector to transact with the state. In the process, it reduces tenderpreneurship,” said Brown.

It will start out modestly and develop these features over two years. In principle, the public should eventually be able to see all tenders, bidders and their prices, as well as minutes of bid committee meetings, online.

In the future, Brown imagines an automated system doing all these things immediately and envisages an app for suppliers to notify them of new tenders.

The third weapon in Brown’s arsenal, a central supplier database, will get cleaned up by April 1 next year after all the separate lists kept by government departments have been combined.

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