It is going to be interesting to see whether changes to the adjudication criteria for the purchase of 1 064 locomotives, provisionally valued at R35-billion, deliver the localisation and job creation benefits being advertised.

It has been agreed that the adjudication will be conducted using a 60:20:20 formula, with price accounting for 60%, black economic empowerment (BEE) 20% and local content 20%. The formula deviates from the prevailing Preferential Procurement Policy Framework Act (PPPFA) ratio which stipulates a 90% weighting for price and 10% for empowerment.

At stake is the procurement of 599 dual-voltage electric locomotives and 465 diesel locomotives for Transnet Freight Rail’s (TFR’s) general freight business. Preferred bidders should be named during the second half of this calendar year, with bids having been submitted on April 28.

TFR CEO Siyabonga Gama has confirmed that multiple bids have been received for both programmes, but says the identities of bidders will not be released until the tender is awarded.

Initially, the tenders were due to close on October 1, 2012, but this deadline was shifted in order to secure sanction from the National Treasury on the final adjudication criteria.

The National Treasury scrutinised the adjudication formula mainly over concerns that it could raise the costs of the programme. However, it also recognised the fact that rail rolling stock had been among the ‘first wave’ of products designated for local procurement following the December 7, 2011, revision of the PPPFA.

A similar dispensation was granted for the Renewable Energy Independent Power Producer Procurement Programme, where a price weighting of 70% was stipulated, with economic development, including local content, and BEE comprising the 30% balance.

Gama indicates that there may be a marginal price differential, but says that “1% to 2% translates into around 68 000 additional jobs”.

He also insists that the comprehensive nature of TFR’s tender means that the final evaluation criteria “did not make a major difference” to the bidders.

TFR is aiming to achieve minimum local content of 60% and he believes that the BEE component needs to be built into the overall offer.

The procurement is a major component in a larger R200-billion-plus capital expenditure programme being undertaken by TFR, under Transnet’s R300-billion Market Demand Strategy for rail, ports and pipelines.

Locomotives are expected to com- prise about R75-billion of the TFR programme’s costs, with infrastructure expected to account for R84.5-billion and wagons R48-billion.

Should this locomotive programme deliver on its industrialisation and employment promises, South Africa should expect more of the same. However, there will have to be close monitoring, as any overpricing will have consequences for South Africa’s already high logistics costs.