BUFFALO CITY COUNCIL

1
BUFFALO CITY COUNCIL

• PROCUREMENT POLICY

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PRESENTATION TO THE TENDER COMMITTEE

• Presenter
• Geoff Walton
• Head Internal Audit

3
INTRODUCTION

• Legal provisions
• Policies set by Council
• Procedures defined by Council
• Administrative procedures
• Reports to Tender Committee
• Documentation required
• Local suppliers/manufacturers
• Specifications/Tender Documents

4
LEGAL PROVISIONS

• Constitution
• Local Government Transition Act
• Municipal Structures Act
• Municipal Systems Act
• Preferential Procurement Policy Framework Act
• Municipal Ordinance
• Administrative Justice Act

5
Constitution

• The Constitution provides that contracts shall be
  awarded in accordance with a system which is
  fair, equitable, transparent and cost effective
  and that there may be a system of preferences as
  per guidelines set by National legislation (the
  Preferential Procurement Policy Framework Act).

6
Other Legislation

• The Local Government Transition Act, Municipal
  Structures Act, and Municipal Systems Act, all
  repeat the provisions of the Constitution.
• The old Municipal Ordinance sets out various
  procedural matters such as the advertising etc.
• Some of the provisions of the Ordinance are
  superseded by current legislation

7
Preferential Procurement Policy Framework Act

• This Act sets out the Guidelines as required by
  the Constitution
• The Act refers to a preference points system with
  either 80 or 90 points being awarded for price
  and the remaining 20 or 10 points being awarded
  for HDI equity or the achievement of specified
  goals

8
Contd

• The Minister of Finance has yet to announce the
  level above which the 90/10 formula will apply
• The draft notice set the limit at R2 million but
  it may be set lower as the intention is to target
  and develop small emerging HDI contractors.
• The Council has set the limit at R1million to
  limit any potential additional costs

9
Contd

• The intention is to create an enabling
  environment for emerging contractors
• The principle is not to guarantee work for any
  group, rather to provide a framework within which
  they enjoy a preference or protection
• Awards are therefore based not on price but on
  points scored

10
Contd

• The Councils emphasis should therefore be to
  develop HDI contractors and not to encourage
  fronting by simply promoting equity in a business
• The Targeted Procurement documents produced by
  the Dept of Public Works could be used for this
  purpose

11
What is a tender

• A tender is a legal and binding offer
• Once accepted it becomes a contract
• A contract implies reciprocal rights and
  obligations
• The contractor must supply or perform as
  envisaged by the contract
• The employer (Council) must honour its
  obligations eg pay on time

12
How is an offer submitted

• The Council advertises its requirements either in
  the press if over R120 000 (formal) or on notice
  boards (informal)
• Offers must be submitted by the stipulated time
  and date
• Offers must be placed in the tender box provided

13
The Tender Box

• This is a locked box (two keys kept by different
  officials)
• It is opened by two officials and all documents
  are removed
• Thereafter, until opened in public, they are
  under constant supervision by the two officials

14
Opening of Tenders

• Tenders are opened in public at the set time
• They are date stamped and initialed
• Important pages are also stamped and initialed to
  prevent fraud
• If there are defects with the offer eg form of
  acceptance not signed then this is recorded on
  the tender cover page

15
Contd

• All formal tenders are listed, and prices are
  announced if possible (per tender)
• With informal tenders names are also recorded but
  prices are not read out
• As informal tenders often cover a lot of
  different items they are simply stamped,
  initialed and recorded by supplier only

16
Compilation of an offer

• This is a technical issue but in brief entails a
  tenderer establishing by calculation what the
  value of the service is
• There may be a Bill or schedule of prices to be
  filled in
• Once a tender is opened in public the price
  structure cannot be amended
• Addition errors etc can be corrected by the
  Council

17
Price of offer

• Some offers are fixed price tenders ie the value
  cannot be changed once accepted
• Some offers are subject to escalation based on an
  agreed formula eg SEIFSA
• Other offers are based on a foreign currency eg
  where items are imported from overseas

18
Contd

• The price is therefore often to be determined in
  terms of the actual work to be done
• For this reason the resolution reads along the
  lines Rx, or such other sum as may be determined
  in terms of the contract

19
Tender / Contract

• Once awarded the tender becomes a contract with
  all the legal ramifications thereof
• Acceptance can be verbal
• All of the Councils contracts must be in writing
  (either an order, letter, or contract document)

20
Contd

• Once the contract is concluded the contractor
  must perform as envisaged by the contract
• Variations orders may be issued on engineering/
  construction contracts and these must be recorded
  as they will affect the final payment value
• The Engineer may issue such variations as the
  contract conditions permit

21
Contd

• Major variations or alterations to the nature of
  the work would require both the Contractor and
  the Councils agreement
• This should be done with great care

22
Policies and procedures set by Council

• Definitions
• CONTROL 
• The possession and exercise of legal authority
  and power to manage the assets, goodwill and
  daily operations of a business and the active and
  continuous exercise of appropriate managerial
  authority and power in determining the policies
  of the business and directing the operations of
  the business.

23
Contd

• COMMERCIALLY USEFUL FUNCTION
•  
• The performance of real and actual work, or the
  provision of actual services, in the discharge of
  any contractual obligation which shall include
  but not be limited to the performance of a
  distinct element of work which the business has
  the skill and expertise to undertake and the
  responsibility for management and supervision.

24
Contd

• EQUITY OWNERSHIP
• Equity ownership shall be equated to the
  percentage of an enterprise which is owned by
  individuals, or in the case of a company, the
  percentage shares that are owned by individuals
  who are actively involved in the management and
  daily business operations of the enterprise and
  exercise control over the enterprise,
  commensurate with their degree of ownership

25
Contd

• OWNED
• Having all the customary incidents of ownership,
  including the right of disposition and the
  sharing of all the risks and profits commensurate
  with the degree of ownership interests as
  demonstrated by an examination of the substance
  rather than the form of ownership arrangements.

26
Contd

• LOCAL SUPPLIER A Local Enterprise that 
• a. owns, operates or maintains a store, warehouse
  or other establishment within the boundaries of
  Buffalo City, in which materials or supplies
  required for the performance of the contract are
  brought, kept in stock and regularly sold to the
  public in the usual course of business and

27
Contd

• b. engages as its principle business, and in its
  own name, in the purchase and sale of the
  products in question, or the provision of a
  professional service.

28
Contd

• AGENTS
• Agent means an independent institution or
  individual which has the proxy from another
  institution or individual from the industry to
  independently do business on behalf of or
  represent such an institution or individual.

29
Contd

• AWARD TO AN AGENT
•  
• An agent will, if awarded a tender, be regarded
  as a contractor and will be liable for all
  benefits/losses.
• H.D.I equity points as defined will only be
  awarded to an agent if documents substantiating
  such an appointment accompany the tender
  submission

30
Contd

• Access to Tendering information
• advertise widely
• advertise in Xhosa and English (Think about the
  cost and the benefit)
• documents in English only
• give feedback to unsuccessful tenderers
• consider advertising on radio

31
Contd

• Tender Advice Centres
• workshops etc
• take care not to favour one over another
• not assist in actual preparation of offer
• not see offer before submission

32
Contd

• Value levels
• to R5000 by telephone (minimum 2 quotes) on a
  roster basis from data base to be maintained by
  Finance Directorate
• R5000 R120 000 advertise on an informal tender
  Board twice a week
• greater than R120 000 advertise in the press

33
Contd

• The Regulations regarding the calling of tenders
  in terms of the Local Government Transition Act
  allow the Municipality to not call for tenders up
  to R120 000.
• NOTE Council waives the invitation of tenders and
  officials should not use this excuse for not
  laying a report before the Committee before
  advertising

34
Contd

• Note that the circumstances when a Council may
  waive the invitation of tenders are set out in
  regulations in terms of the Local Government
  Transition Act
• These include
• Consultants, but only to the extent that the fees
  charged are in accordance with a schedule of fees
  set by the relevant Institute

35
Contd

• Repairs or spare parts for which there is only
  one authorised supplier available in the
  Municipal area or in the Republic
• Where the execution of the work is so urgent that
  it would not be in the interests of the
  Municipality to invite tenders

36
Contd

• Waiver of Securities
• to protect Council in the event of default by the
  contractor
• up to R100 000 little risk and therefore need for
  surety bond may be waived
• dont award more than two contracts to a tenderer
  if sureties waived

37
Contd

• Packaging
• all contracts to be broken down into the smallest
  practical components to enable emerging
  contractors to participate
• is not an excuse to avoid the tender process
• where not practical then there is a need to
  specify sub-contracting to emerging contractors
• NOTE not an excuse to avoid formal tender
  procedures

38
Contd

• Payment cycle
• only pay for actual work performed
• pay emerging contractors regularly to assist
  their cash flow
• adopt procedures if contractors require direct
  payment or if a cession is to be entered into
• Directorate of Engineering Services need to
  formulate a policy in this regard

39
Contd

• Tender submissions
• colour coded pages to assist tenders
• standardise the conditions of tender (still to
  receive attention)
• revise the layout to make user-friendly eg
  combine price schedule with form of acceptance
  (reduce number of signatures required) This
  matter still needs attention

40
Contd

• Surety Bonds
• there is a need for adequate surety bonds to
  protect Councils interests
• Council needs to provide evidence of due
  diligence and of good stewardship
• appropriate surety bonds are required
• The actual requirements must be set in the
  document

41
Adjudication

• Use of a point scoring system
• 80/20 (or 90/10 above R1million)
• based on HDI equity and / or
• on Development objectives such as use of local
  labour, resources, sub-contracting, joint
  ventures with emerging contractors, use of
  Resource Specifications etc
• must be specified in the document

42
Contd

• With Procurement tenders (ie purchase of goods
  or services) HDI equity is the only factor
  subject to compliance with the definitions
• With Engineering/Construction tenders HDI equity
  or development objectives may be specified

43
Contd

• Points for price
• Maximum of 90 points for the lowest responsive
  tender
• As the formula is 1 minus - all remaining
  tenders get fewer points for price

44
Contd

• Process points are allocated based on equity
  ownership
• Relevant registration papers duly certified are
  required to provide evidence.
• There is a need to evaluate the documents
  submitted
• Officials must evaluate the documents submitted
  and investigate where needed

45
The Formula

• Price points 90 X 1-(T T1) /T1
• T Tender under consideration
• T1 Lowest responsive tender

46
Contd

• Process points
• Based on the percentage of ownership which HDIs
  enjoy in the business
• Price and process points are added together to
  produce the total adjudication points

47
Restrictions / Controls

• Restrictions
• designed to make fronting more difficult and to
  ensure that there is meaningful participation in
  the contract by a H D I
• control
• commercially useful function
• ownership
• local supplier
• agent

48
Contd

• Agents
• must be properly appointed
• tender awarded to agent in agents name
• agent responsible for delivery and penalties if
  applicable

49
Clearance certificates

• Receiver of Revenue
• Municipal Services
• also from other Local Authorities including
  District Council

50
Contd

• Municipal Clearance Certificate
• Issued by the Municipality ie not completed by
  the tenderer

51
Contd

• TAX CLEARANCE CERTIFICATE
• No contracts will be awarded to tenderers who
  have failed to submit an original Tax Clearance
  Certificate from the South African Revenue
  Service certifying that their taxes are in order
  or that suitable arrangements have been made with
  the South African Revenue Service to satisfy
  them.

52
Contd

• CLEARANCE CERTIFICATE FOR MUNICIPAL LEVIES,
  SERVICES ETC 
• No contracts will be awarded to tenderers who
  have failed to submit an original Municipal
  Service/Levies clearance certificate issued by
  the Chief Financial Officers for Buffalo City and
  the Amatole District Municipality or such other
  Municipality where the Head Office is

53
Contd

• situated certifying that their service
  charges/levies etc. are in order, or that
  suitable arrangements have been made for their
  payment.

54
Sample certification

• I hereby certify that on the basis of the
  information available to me the tenderer set out
  hereunder has complied with all obligations and
  commitments relating to the payment of service
  and other fees due to the Buffalo City
  Municipality or has made satisfactory
  arrangements for the settlement thereof

55
Contd

• Officials must check out all the above and
  include such evaluation in the report to the
  Tender Committee

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Penalties

• Penalties need to be applied in the event of
  false information or if goals as specified are
  not achieved
• NOTE Goals must be measurable and require to be
  monitored for compliance
• These are in addition to the penalties specified
  in the Conditions of Contract

57
Contd

• The Tender Committee requires to be kept informed
  of progress with the various contracts
• This would include problems/ disputes as they
  develop unless they can be resolved easily
• If penalties must be applied the Tender Committee
  should be informed of the imposition

58
Administrative Procedures

• Project approval - Estimates
• Submission to Tender Committee
• motivation for contract
• packaging
• adjudication criteria including cut off points at
  say plus and minus 20 or 10
• estimated costs and funding
• approval to advertise

59
Contd

• Advertising (3 weeks at least for formal tenders)
• Submission of tenders (tender box)
• Opening in Public
• Recording of tenders received
• Assessment and report by Directorate
• Consideration by Tender Committee

60
Contd

• Recommendation by Tender Committee
• Consideration by Executive Mayor
• Resolution by Executive Mayor
• Resolution by Council (if above the limit
  delegated to Executive Mayor)

61
Adjudication/ Assessment

• The adjudication of a tender is a technical
  exercise
• Officials must feel free to give an honest
  assessment of an offer
• This serves to provide the Committee with all
  relevant information with which to make a decision

62
Contd

• A decision is invariably a choice between
  alternatives and this provides evidence of
  compliance with the provisions of the Promotion
  of Administrative Justice Act
• Officials must exercise their minds when
  performing an adjudication and must consider all
  aspects known to them

63
Contd

• For example a failure to sign key documents or to
  provide certain stipulated information (eg
  Certificate of Incorporation) may invalidate a
  tender
• Submissions by Joint Ventures must be verified to
  ascertain if they are reasonable or achievable
• These matters must be dealt with by the official
  doing the adjudication

64
Contd

• Tender responsiveness
• After the opening of tenders, the
  responsiveness of each tender should be
  established by determining whether it-
•  Complies with the conditions of tender
• Has been properly completed and signed
• Provides such clarification and / or
  substantiation as is called for

65
Contd

• Meets the minimum resource goals, if any laid
  down.
• Contains no material deviation from, or
  unacceptable qualification to, the terms,
  conditions and requirements of the contract,
  which could

66
Contd

• detrimentally affect the scope, quality, or
  performance of the works, or
• change the Employers, or the contractors risks
  and responsibilities under the contract,
• and would detrimentally affect the competitive
  position of other, responsive tenders, if it were
  to be rectified.

67
Contd

• There are several other reasons for the
  disqualification of tenders apart from the above.
  These should be clearly set out in the
  conditions of tender and may include failure to
• Submit rates for items in the schedule of
  quantities/bill of quantities, on contracts which
  target more advanced contractors.

68
Contd

• Adhere to any qualifications which may be laid
  down
• Complete the tender documentation in ink.

69
Contd

• Every tenderer who has tendered an
  unrealistically low price should be interviewed
  to ascertain whether there is a valid reason for
  his tender price being unrealistically low. If
  there is no valid reason, the tender should be
  eliminated from further consideration.
•  
•  

70
Contd

• If there is an upper limit on the price at which
  a contract may be awarded, tenders with adjusted
  prices higher that the limit should be eliminated
  from further consideration.

71
Reports to Committee

• Contract no and description
• Introduction ( authority to advertise, agreed
  criteria, background, benefit, etc)
• Tenders received (give full legal name)
• Evaluation (consider all, exclude for particular
  reasons and risk analysis, evaluate HDI
  participation, etc )

72
Contd

• The Council is required to consider all tenders
  received. Officials preparing tender reports
  must therefore consider and report on all tenders
  received. This does not mean that all tenders
  will be deemed to be responsive. The report must
  indicate which tenderers are being excluded from
  further consideration and document the reasons.

73
Contd

• All remaining responsive tenders must then be
  examined and reported on. The evaluation
  includes the technical evaluation of the offer as
  well as financial and process evaluation. It is
  important that all documentation substantiating
  the nature of the entity tendering (as well as
  the partners, members or shareholders) be
  included in the report, as Annexures.

74
Contd

• All documentation called for in the tender
  document e.g. VAT registration, income tax
  clearance, etc must also be checked to ensure
  that they are valid, and that the details
  coincide with the detail of the tenderer.
• This is the responsibility of officials.

75
Contd

• It is important to note that certain information
  set out above could be sensitive e.g. income tax
  clearance and bank rating. If for example a
  tender does not have an income tax clearance or
  has a poor bank rating then the report must be
  considered in committee (i.e. on pink paper).

76
Contd

• It may not be prudent to include the Bank rating
  in the report to the Committee. The details
  should however be available for the Committee.

77
Contd

• A detailed cost comparison of alternatives/option
  should be included in the report (unless this has
  been done previously e.g. when the capital Budget
  or Operating Budget was prepared) to enable the
  Council to ensure that it is achieving the best
  value for money. Where the cost benefit analysis
  was done previously this should be referred to in
  the report.

78
Contd

• Care should however be taken to ensure that the
  cost benefit analysis is still relevant given the
  pricing and structure of the tender under
  consideration. Other factors which require to be
  taken into consideration include all other costs
  associated with the project e.g. staffing,
  maintenance costs, further capital acquisitions
  e.g. equipment for a clinic or a library, etc.

79
Contd

• The cost benefit analysis must effectively cover
  the expected life of the asset. For example, it
  may be that the cheaper capital option has much
  higher maintenance costs which will soon overtake
  the next highest capital costs.

80
Contd

• Calculate price points
• Evaluate HDI equity and report
• Calculate process points
• Note income tax and other clearances required
• Cost benefit analysis (analyse longer term
  implications such as maintenance, staffing,
  equipment, etc)

81
Contd

• Risk analysis requires to be performed
• Unduly high or low rates
• Previous experience
• Total resources
• Plant and equipment
• Imbalances in pricing
• Availability of key staff

82
Contd

• The risk analysis is intended to establish beyond
  reasonable doubt that the contractor has the
  capacity to perform the work
• A statement in this regard must form part of the
  evaluation of each tenderer and be clearly set
  out in the report to the Committee

83
Contd

• Recommendations
• Record reasons for passing over non responsive
  tenders
• Record award to tenderer (give full legal name)
  at a fixed or determinable price, time for
  completion (if important), being highest
  responsive point scorer

84
Contd

• If award is not made to the highest responsive
  point scorer then record why (full motivation is
  required to demonstrate compliance with the
  Promotion of Administrative Justice Act) as an
  aggrieved tenderer has a right to request the
  reasons
• Detail where funded from and that funds are
  available

85
Contd

• If only one responsive tender received then the
  relevant Director must record that the prices are
  considered to be fair and reasonable
• If to be funded over more than one year then
  record that funds must be provided in the next
  financial year

86
Contd

• They need to commence with the reasons for
  deeming certain tenders to be non-responsive. If
  only three or four tenders have been
  examined/evaluated in detail then the reasons for
  not evaluating the remaining tenders must also be
  recoded. The recommendation must however make it
  clear that they were considered but passed over
  for a particular reason e.g. price too high, etc.

87
Contd

• The recommendation relating to the actual award
  must clearly indicate the full name of the tender
  (not abbreviated form), the value of tender
  (including if it is fixed or subject to final
  determination in terms of the contract) as well
  as the fact that the tenderer scored the highest
  points based on the points scoring system set out
  in the Councils Procurement Policy and the
  Tender Specification.

88
Contd

• Note that the full name must be given
• A name like Khans Construction is not
  acceptable as it should be either c.c. , (Pty)
  Ltd or Ltd after the name.
• Alternatively it would be A Harris t/a Khans
  Construction or
• Ventura cc t/a Khans Construction

89
Contd

• The Council cannot sue a non existant entity and
  Khans Construction does not exist as a legal
  entity

90
Contd

• If the award is not made to the tenderer scoring
  the highest points then the reasons why the
  Council elected to award the tender to another
  tenderer must be fully set out.
•  
• The final recommendation relates to the funding
  for the project i.e. the vote number and the
  amount available.
•  

91
Contd

• Where the project is to be performed over two (or
  more) financial years then this fact needs to be
  incorporated into both the report (introduction)
  and the recommendation with specific
  recommendations relative to future funding.

92
Contd

• It must be noted that the Committee takes all the
  decisions and recommendations must therefore be
  complete
• Although in the body of the report there may be
  reference to passing a tender over as non
  responsive, or a sole supplier, these matters
  must also be embodied in the recommendations

93
Contd

• As only minutes (not reports) are retained as a
  permanent record of the deliberations of the
  Council it is important that the tender awards be
  specified ie the minute must not state for
  items 1a, 2c, and 2e but must describe the items
  and the values.
• These could be in a table as well

94
Promotion of Administrative Justice Act

• The award of a tender is an administrative action
  as defined in the Act
• A court may review an administrative action if
  there is evidence that irrelevant considerations
  were taken into account or relevant
  considerations were not taken into account

95
Contd

• An administrative action may also be reviewed if
  there is evidence of bad faith,or if the decision
  was taken capriciously, arbitrarily or for
  ulterior motives
• The decision of the Committee must demonstrate
  compliance with the Act

96
Contd

• The Promotion of Administrative Justice Act No 3
  of 2000 provides that everyone has the right to
  administrative action that is lawful, reasonable
  and procedurally fair and that everyone whose
  rights have been adversely affected by
  administrative actions has the right to be given
  written reasons. The Act further provides that
  administrative action which materially affects
  the rights or legitimate expectations of any
  person must be procedurally fair

97
Contd

• While the Council has the right to not award a
  tender this cannot be done arbitrarily
• Should the Council decide not to award any tender
  then they must record the reasons
• The mere fact that the award may go to a tenderer
  they do not like would not be sufficient grounds

98
Documentation to be submitted

• Importance of documentation establishing the
  legal entity cannot be underestimated
• Documentation required as evidence
• Certified copies are required
• To be checked to ascertain if they are correct eg
  that Company registration, Vat and other details
  correspond with the tenderers details

99
Contd

• Attach documents to report for consideration by
  the Tender Committee
• Take care with confidential information such as
  bank ratings (these should not be in the report
  other than to state satisfactory and details
  may be given verbally at the Tender Committee
  meeting

100
Contd

•      for Close Corporations
• 1 a certified copy of the Founding Statement and
  division of shares.
• 2  a certified copy of the resolution of the
  members to tender.
• 3 a certified copy of the authority to sign on
  behalf of the CC.

101
Contd

• for (Pty) Ltd
•  1 a certified copy of the Certificate of
  Incorporation and the division of shares.
• 2     a certified copy of the resolution of the
  Board of Directors to tender.
• 3    a certified copy of the authority to sign on
  behalf of the company.

102
Contd

• for Ltd
•  
• 1 a certified copy of the Certificate of
  Incorporation.
• 2  a certified copy of the resolution of the
  Board of Directors to tender.
•  
• 3 a certified copy of the authority to sign on
  behalf of the company.

103
Contd

• for sole proprietors
• a statement signed by the tenderer to the effect
  that he/she is a sole proprietor. If a business
  name is used then the statement shall state this
  fact e.g. Mr J. Blogg trading as The Building
  Manager.

104
Contd

• for partnerships
•  1 a certified copy of the partnership agreement.
• 2 resolutions of the partners to tender and
  authority to sign on behalf of the partners to
  the partnership.
• 3 a statement that the liability is joint and
  several

105
Contd

• Joint Ventures
• 1   for joint ventures certified copies of
  documentation referred to above.
• 2    Documentation relative to the trading nature
  of each of the partners to the Joint Venture

106
Contd

• In all cases copies of Income Tax and Vat
  Registration Certificates shall be submitted with
  the tender as well as a tax clearance certificate
  from the South African Revenue Service.
• Tax and Municipal Clearance Certificates

107
Legal Entity

• It is a relatively simple matter to establish a
  Close Corporation
• They can literally be bought off the shelf
• This simply means that a legal entity exists
  although it is in fact a shell with no assets,
  staff or ability to perform

108
Contd

• For this reason it is vital that officials
  establish if the tendering entity has the
  resources to perform the work
• In this regard the tenderer must indicate how or
  from where the assets will be obtained (eg
  vehicles)
• The tenderer must indicate the time required to
  acquire the assets

109
Contd

• This may mean a delay before the tenderer can
  commence delivering the service
• Staff appointments must be dealt with in the same
  way
• These details must be included in the report to
  the Committee

110
Can the Council contract with a company still to
be formed

• In short, the answer is yes.
• There are however complications and these must be
  set out in the report ie that the award is being
  made to a company to be formed.
• In effect the tender is then awarded to the
  individual partners in their personal capacities

111
Contd

• There also needs to be a resolution indicating
  that the partners agree to tender, that X is
  authorised to sign and that the partners
  stipulate that at the first meeting after
  incorporation to ratify the decisions made by the
  partners.

112
Contd

• If they fail to do so then they remain liable to
  perform the contract in their personal
  capacities.
• These details must be written into the letter of
  award / contract

113
Joint Ventures

• Joint Venture agreements are fairly complicated
  but it is important that the Agreement (or the
  in-principle agreement) be carefully considered
  to establish the true identity of the tenderer
• The document must form part of the report to the
  Committee

114
Contd

• A copy of the HDI declaration form indicating the
  involvement of HDIs in the company must be
  attached
• Where a Joint venture or partnership is involved
  then sufficient documentation from the
  Declaration forms must be attached to enable the
  Tender Committee to evaluate the involvement of
  HDIs in the venture

115
Transparency

• All procedures must display evidence of complete
  transparency
• equal opportunity for all to participate
• security over offers submitted
• expectation that all offers received will be
  fairly considered
• clear adjudication criteria
• expectation of just administrative action

116
Other preferences

• SABS mark
• Local supplier
• these preferences should be taken into account
  before applying the 90/10 or 80/20 formula
• Think about a local Manufacturer

117
Risk analysis

• The acceptance of a tender should be done in such
  a way that the Council is exposed to a minimum
  risk.
• The Council must be in a position to show that it
  acted in a responsible manner when awarding the
  tender and that the award was not done
  capriciously, negligently or with prejudice or
  bias

118
Contd

• Council has the right to call for such financial
  or other information as it deems fit to ensure
  that the tenderer can carry out the work

119
Delegated authority

• Up to R35 000 Chief Financial Officer may award
  formal and informal tenders provided the award
  goes to the tenderer scoring the highest points

120
Contd

• Above R35 000 award of formal and informal
  tenders is made through the Tender Committee
• Above R120 000 tenders to be considered by the
  Tender Committee

121
Procedural matters

• A combined formal Tender Register needs to be
  established to record all tenders advertised and
  awarded (or not awarded)
• Regular reports on contract progress, performance
  and / or problems
• Other Progress reports eg time frames and
  progress with Annual Tenders

122
Specifications

• Must be specific about what is required eg if a
  four door car is required then state this
  specific requirement
• May not be built around a specific item or brand
  ie open to all eg dont specify in such a way
  that only one tenderer can comply

123
Contd

• Where it is necessary that an item be acquired
  from a specific supplier then the Council needs
  to be aware of this so that the Council can waive
  the invitation of tenders
• The Tender Committee requires to be advised as
  Council and not officials waive the requirement
  to invite tenders
• Arbitration without legal representation

124
Specifications

• Conditions of Contract
• There are a number each designed for a specific
  type of contract
• Special Conditions of Contract (override the
  General Conditions)
• These contain various legal and contractual
  issues

125
Contd

• Tender Cover page is very important and sets out
  what is required, where documents are available,
  where they must be submitted, when, and when they
  will be opened in public
• They also include terms to protect Councils
  interests

126
Contd

• Sealed tenders endorsed on the envelope with the
  tenderers name and the contract number shall
  either be deposited in the formal Tender Boxes
  situated in the Main Payments Hall, Munifin
  Centre, Caxton Street, East London, and in the
  Civic Centre, King Williams Town, or posted so
  as to reach the Municipal Manager, P.O. Box 134,
  East London in sufficient time for it to be
  placed in the Tender Box before the closing time
  and date

127
Contd

• It must be expressly understood that the Council
  disclaims any responsibility for seeing that
  tenders sent by post or delivered in any other
  way to the council, are lodged in the Tender Box.
  It is accordingly preferable for the Tenderer to
  personally ensure that the tender is placed in
  the Tender Box by the Tenderers own staff, or
  where appropriate, a courier appointed by the
  Tenderer

128
Contd

• Late, incomplete, unsigned, faxed or electronic
  mailed tenders will not be considered.
• The Council reserves the right to extend the
  tender period by notice published in the press
  and notification to all parties who have drawn
  documents.
• The Council reserves the right not to accept the
  only or lowest tender or any tender at all, or to
  accept the whole or part of any tender.
•  

129
Contd

• The Council further reserves the right to set-off
  amounts legally due to a contractor in terms of
  the contract, against any unpaid liquid debts
  owing by the contractor to the Council.

130
Contd

• The specifications are technical in nature and
  set out exactly what is required.
• Officials may not build a specification around
  one particular product. To do so would prevent
  others from submitting offers

131
Contd

• The requirements must be comprehensive ie if the
  engine size or boot size are important then they
  must be clearly stated
• Once issued they can be amended provided adequate
  notice is given to all who have taken documents
  (Addenda to specification)

132
Contd

• There may be Bills of Quantities for construction
  type contracts
• A site meeting may be specified if necessary
• Tenderers often propose alternatives for
  consideration and provided within reason may be
  accepted by the Council

133
Contd

• Deviations from tender
• These must be assessed by the official doing the
  adjudication and reported on
• They must not materially compromise the tender
  procedure or alter the risks of either party

134
Contd

• The financial offer is is set out in the price
  schedule
• Take care with regard to VAT
• Take care with Quantities eg each, etc
• The Form of Agreement provides that the offer
  holds goods and may not be amended or withdrawn
  for say 90 days

135
Contd

• This form encapsulates the entire tender as well
  as the offer (price) and MUST be signed by an
  authorised person
• If not signed the tender is invalid
• It cannot be signed after the tender opening

136
Letters of award

• These must be addressed to the legal entity
  tendering
• Take care with Joint ventures and partnerships
• Clearly set out the price and escalation if
  applicable (refer previous slides for price
  structure)

137
Contd

• With partnerships the letter of award must state
  that liability is joint and severable
• With Joint Ventures it must be addressed to all
  of the parties trading jointly as and
  stipulate that their liability is as set out in
  the Agreement submitted with their offer

138
Contd

• It is not adequate to simply state that the
  tender is awarded in accordance with the offer
  and specification
• If quantities are to be altered or established
  then this must be clearly stated
• If a surety bond or insurance certificate is
  required then this must also be included in the
  award letter

139
Contd

• The letter of award in fact concludes the
  contract ie offer and acceptance
• It is therefore critical that it be properly
  prepared and be signed by an authorised Municipal
  official
• The fact that a further contract document is to
  be prepared does not override the content of the
  letter of award

140
Contd

• The letter of award will form part of such final
  contract document and must therefore not be at
  variance with anything in the original offer
  unless such clause in the original offer is to be
  amended or substituted

141
Contd

• The order and the letter of award must be
  addressed to the proper legal entity eg not
  Ronnies Motors but Ronnies Motors Trust.
• All Creditors names need to be properly reflected
  in the accounts data base.
• Dont overlook the correct names for Joint
  Ventures

142
Other matters

• Revised advertisement required to reduce
  advertising costs
• Balance of information is to be incorporated into
  the tender Document

143
Contd

• Tenders may be deposited in both East London and
  King Williamstown
• Tenders to close at 12h00 to facilitate transfer
  to opening venue
• One opening venue only
• New tender box required for King Williamstown

144
Contd

• Transport arrangements are required
• Informal tenders need to be advertised throughout
  the whole of Buffalo City
• Notice Boards may be required at certain venues
• Procedures to be put in place to ensure notices
  are placed throughout Buffalo City

145
Contd

• Officials responsible for the preparation of
  specifications, adjudication of tenders,
  preparation of reports for the Tender Committee
  need to regularly confirm that they have no
  direct or indirect involvement with any of the
  tenderers

146
Contd

• Policies need to make it quite clear that
  officials colluding with tenderers to obtain work
  from the Council, or to any way circumvent the
  rules, or advantage any contractor over another
  face disciplinary action and dismissal

147
Annual tenders

• Annual tenders for Buffalo City need to be looked
  at
• As East London has a greater number it may be
  practical to add the King Williamstown tenders to
  the existing East London ones

148
Conclusion

• This presentation was prepared to give you an
  overview not only of the Procurement Policy, but
  also the functions of this Tender Committee.
• The Committee is now in a better position to
  understand the enormity of the task facing them

149
Contd

• The presentation was also intended to set out the
  legal prescriptions within which the Committee
  must operate so as to avoid any legal challenge
  or be in a position to defend any decision if
  challenged
• The presentation also sets out the duties of
  officials when preparing reports for the Committee

150
Contd

• Officials have a duty to submit honest and
  objective reports to assist the Committee when
  making a decision
• The Committee in turn needs to consider the
  input (and often the reservations) of officials

151
Contd

• In the final analysis the Committee and the
  Council take the decision and assume
  accountability
• To do this they must have been afforded an
  opportunity to consider all relevant data
• Officials then have a duty to carry out that
  decision with all due diligence

152
THANKS

• Thank you for listening to me
• The Policy is yours, I am simply an implementing
  agent
• Please give me your input

153

• THE END