A guide to being a tenderpreneur

1st February 2013 By: Terry Mackenzie-hoy

The tender system has been around for years. In the 1840s, the French decided to develop a railway network. The Paris & Rouen Railway Company was established and an engineer, Locke, was appointed its engineer.

Locke thought the tenders submitted by French contractors were too expensive and obtained prices from two British contractors, Brassey and William Mackenzie. Their tender was accepted in 1841. Between 1841 and 1844, Brassey and Mackenzie built four French railways with a total mileage of 437 miles (703 km).

In January 1846, Brassey built the 58-mile- (93-km-) long Rouen–Le Havre line, the Barentin Viaduct. It collapsed. The viaduct was built of brick and was 30 m high. The reason for the collapse was probably the lime used to make the mortar. The contract stipulated that this had to be obtained locally, and the collapse occurred after a few days of heavy rain. Brassey rebuilt the viaduct at his own expense, this time using lime of his own choice. The rebuilt viaduct still stands and is in use today.

There are some lessons we should take home: it is a good idea to obtain competing prices; it is a good idea to get an engineer to evaluate bids, since the engineer can certainly balance value and cost and not just go for the lowest price, which often results is an inferior product; and do not tell a contractor how to build what you need – all that is promised is a finished product, so do not insist on a specific material (such as local lime) when this is not really your call.

Today, engineers do not evaluate tenders, except to verify that the offer is technically compliant. The financial evaluation is done by a person who is not an engineer, and the award by the same person.

Out of this arises the South African pheno- menon, the ‘tenderpreneur’. Let us call the person who sets up the tender the ‘tender organiser’, or TO. The TO wants his brother or friend or whoever to get the tender award. So the engineer writes the specification and the TO goes to work.

I will now set out all the dodges which could follow but note that not all of them are used. Firstly, the TO sets out a prequalification meeting. All prospective tenderers must attend and must have a valid tax clearance certificate, a letter of good standing from the Workmen’s Compensation Commissioner and a black eco- nomic-empowerment (BEE) certificate. A meeting is held in a distant boardroom and the TO can sign attendance for brother or friend. Next, the TO holds a compulsory site meeting. Same rules. Next, he or she states in the tender documents a whole lot of very onerous conditions of submission; for example, tenders must be submitted by hand, in person, in a sealed envelope, with the CVs of all interest parties, the tenderer must employ certain people with disability, females, and so on.

The TO then holds a meeting at a distant location. Next, he or she receives and opens tenders in public at place of tender. The TO makes sure brother or friend has not filled out the price in the tender document and puts his document in the back office. When tenders are all open, the TO goes to the back office and comes back with a document which he or she says was “submitted earlier”. The TO fills in the lowest price and then “reads” out the lowest price and awards the tender to brother or friend.

At the first site meeting, the TO asks for a price for “increased site safety super- vision”. This can be up to a million bucks, which is spread around the tender team.

Alternative scam: the TO asks the engineer to ask tenderers to include an amount for “increased site safety supervision”. The TO tells brother or friend to put in a very nominal amount (say, R500). Brother or friend’s tender comes in low and he gets the job. If this does not happen, the TO announces (after tender close) that the tender will be awarded to whoever gets the most points, where up to 50 points are for price, 20 for BEE, 10 for method statement and 20 for quality assurance. The TO manipulates these until brother or friend gets the job. It is happening all the time. The tender system in this country stinks.