10 MOST READ ARTICLES 2016

Transcription

1 KUNAKU PROCUREMENT SOLUTIONS T/A HOW2TENDER 10 MOST READ ARTICLES 2016 Articles by Werner van Rooyen. Copyright Kunaku Procurement Solutions

2 1.)Tenders and Pricing One of the most important parts of any tender is pricing. All tender documents will tell you that it is not necessarily the lowest bid that will win the tender but that there are also other factors that influence the final decision. This might be true but be assured that you will lose more tenders than you will win if you have the highest price. Make sure to price your tender correct. Dealing with the Standard Bidding Document 3 (SBD 3.1, 3.2 and 3.3), which is the pricing document, can be hair-raising. In these documents they talk about firm prices, non-firm prices, professional service providers, exchange rates and lots more confusing matters. There are three SBD 3 documents namely the: SBD 3.1 for firm prices SBD 3.2 for non-firm prices SBD 3.3 for professional service providers. Many people ask the question - how must we work out our tender price? There is no straight forward answer because every tender is different. The fact is that a tender for the supply of furniture will have a different pricing structure than a tender for the supply of food for a government function thus providing individual pricing techniques would be very difficult. In general there are a couple of points that must be considered with when you calculate your price. These include: Be precise; when your product that you supply is R10-26 then state it in the tender document as R10-26 and not as R10-00 or even R Small differences like these can amount to large amounts that can be lost, depending on the size of the tender. Ensure that you take all your costs into consideration; double check your pricing something small left out can come back and bite you later on. Always remember to add Value Added Tax (VAT) at 14% to your price. The tender committees want to see the final price. They do not want to sit with a calculator and calculate what your price is supposed to be. Most tenders state that the price must include VAT. Try and quote firm prices, even if the tender duration is more than 12 months. Tender committees are hesitant for non-firm prices. If you apply these points above, your pricing will be less of a challenge. Another piece of advice is to draw-up your own pricing schedule and to refer on the SBD 3 document back to your own pricing schedule. The reason being: every supply is unique and to try and fit your pricing into the SBD 3 forms is usually undoable. You will find that almost all bidders do this. Your tender would not be judged as non-responsive by using a separate pricing schedule.

3 2.) Tenders and Joint Ventures Do not under estimate the power of Joint Ventures because many tenders have been awarded to Joint Ventures and many more tenders will be awarded to Joint Ventures. The advantage of having a Joint Venture when you bid for a contract is that you combine the skills sets of the participants involved in the Joint Venture. Another advantage is that you minimize your risk and exposure towards the bid and the participants also share the profits as well as the costs in the Joint Venture. A Joint Venture can be described as a business enterprise where two or more participants come together to share their expertise in order to win a specific contract for a set period of time. A Joint Venture is a separate entity and is not part of the individual participant s own enterprise. Therefor a Joint Venture must have its own set of rules by which it is managed and this is called a Joint Venture Agreement. A Joint Venture agreement must include some minimum rights and duties. This includes: - The way the profit or loss will be shared by the participants; - The duties of each participant towards the Joint Venture; - The reason the Joint Venture has been established; - The start and end date of the Joint Venture; - The persons who will be the representatives of the Joint Venture; If you want a copy of a Standard Joint Venture Agreement visit our website, where you can buy a JV Agreement online. When it comes to tenders in South Africa, you must remember to include your duly signed Joint Venture Agreement in your proposal. If you do not comply with this rule, your tender can be disqualified. Another very important thing to remember, when bidding through a Joint Venture, is to include a consolidated B-BBEE certificate. This means that you will have to obtain a new B-BBEE certificate for the Joint Venture which consolidates each participant s B-BBEE status level. Remember then if you want to bid for a specific tender and you do not possess all the necessary skills, recourses, infrastructure or capital you can always look for partners who can join forces with you through Joint Ventures. Joint Ventures can bring you the success you always wanted without being trapped in a never ending partnership or shareholding scenario.

4 3.) Tenders Public or Private Sector One question that we get asked a lot, especially at workshops, is what differences are there between Public Sector and Private Sector tenders? One would think that the answer lies in the fact that one is Public and the other one Private and that this would be the only difference but unfortunately it is not that simple. Public Sector tenders obviously are from Government Departments and Government Institutions such as Municipalities whilst Private Sector tenders are usually from large business such as the major banks, large retailers and large telecommunication companies. The main difference between these types of tenders is the Public Sector tenders will all contain Standard Bidding Documents (SBD) that the bidder must respond to. These Standard Bidding Documents are compulsory and if not completed will disqualify your response. Ensure that you complete all the Standard Bidding Documents correctly and truthfully. The second difference is the fact that Public Sector responses to tenders is evaluated according the Preferential Procurement Policy Framework Act (Act no 5 of 2000). According to this Act, points are scored on the Technical Criteria of a tender. If your response passes the minimum threshold for Technical Criteria you will be evaluated on Price and your B-BBEE status. Again, points are earned and the bidder with the highest amount of points will usually be awarded the tender. In the Private sector there are no Standard Bidding Documents to complete. There usually is no point system in place on which you get evaluated. The potential bidders are evaluated mainly on their technical skills and price. This means the Private Entity will have a pre-set standard that potential suppliers will have to comply with. The Private Sector focuses more on the capability of the supplier and although price is important, they will not pick a supplier purely on price. Private Sector tenders will also have more specific requirements that bidders will have to comply with. It doesn t matter if you respond to a Public or Private Sector tender; always ensure that you complete the tender document correctly, accurately and truthfully. Rather give too much information as too little. Remember that the person or persons that evaluate your response most probably have never heard of your business so be sure that they have a good understanding of your business once they have worked through your response.

5 4.) Tender Site Visits If you are so fortunate to have reached the stage where an Organ of State or a Private Sector Company wants to come and does a site visit, you must know that you are now in the final straight to winning that tender that you have responded to. But what must you do to prepare for a site visit? The first thing is to ensure that your place of business is in excellent order. Be sure everything is clean and neat. A clean workshop or office is a pre-requisite and non-negotiable. Secondly ensure that your employees are prepared and that they are at work the day of the site visit. You do not want to be in a situation where the Evaluation Committee Member asks you to demonstrate a procedure and you can't because the specific employee that operates that specific peace of engineering or tool or computer is not at work the day of the site visit. You are going to end up with a red face and the Committee is not going to be impressed. One of the main reasons the Evaluation Committee does site visits is to ensure your business do exists. This may sounds weird but believe me there have been horrifying stories of people that have been awarded tenders and then the Organ of State finds out that the vendor operates out of his vehicle! It is imperative to have an operating business. It is also a way to combat fraud; by doing a site visit, the Organ of State verifies that the Vendor isn't just a person fronting. There have been many instances in the past where tenders have been awarded to businesses that do not actually exist. The Evaluation Committee will also verify many other things that are important in awarding the tender. These may include: - How many employees you have? - Do you have the correct machinery? - Do you enough other resources to do the job at hand? The best advice I can give you is to be prepared. Ensure that everything is in order the day of the site visit. Prepare your employees so that they know what to do and what to answer when asked that difficult questions. But most of all, be happy, because you have reached the final stages of the tender process. I do not want to end on a negative note but I must mention that at the end of the day a site visit can go wrong and you might not be awarded that tender. So, be prepared!

6 5.) Must my business be registered in order to tender? Must my business be registered in order to tender? Once, a very anxious business owner phoned me and asked if I can supply him with a CK number. I was amused by this and first asked why he asked me for such a number and secondly for what did he need a CK number for? He said that because of my Tender Manual that he bought, he thought that maybe I can help him with a CK number. Also, at the briefing session of the tender that he was responding to, the person in charge of the tender said that if the responders to this tender didn't have a CK number their tender responses would be disqualified! Obviously I was flattered by the compliment that this person thought I could help him with everything regarding his tender response but I was really confused why all responders to this specific tender needed a CK number. Now, for those of you that do not know what a CK number is, it is the general term that is given for a Close Corporation registration number; all Close Corporation numbers started with the prefix CK followed by some numbers. The ridiculousness of this statement that all responders must provide a CK number just proved how little this official new about general business in South Africa. This brings us to the question - must I have a Registered Business to respond to tenders in South Africa. The short answer is simply no; you don't need a Registered Business to respond to a tender. In South Africa you can do business in various forms of entities. The most popular of course is a Private Company or (Pty) Ltd as it is commonly known. In 1984 the South African Government of the time thought it good to give an alternative to the Private Company in the form of a Close Corporation. The idea behind the Close Corporation was to make it easier for entrepreneurs to have access to a legal business entity. The Close Corporation as a legal entity was very popular in the 1980's and 1990's. It became less popular as business owners realized that it didn't provide sufficient security against them personally and eventually Close Corporation registrations were s topped in Close Corporations that are still in existence can still operate but no new ones are allowed to register.

7 The fact of the matter is that if you respond to Public Sector tenders you are allowed to respond in your own name. The Standard Bidding Documents makes provision for this. Just remember that you will still need all the compulsory documents to respond to the tender albeit in your own name. Then there is the question of experience; the Evaluation Committee members may think that you lack experience if you do not respond in the name of a Legal Entity. And as we all know, experience counts when you respond to a tender.

8 6.) 10 things to remember when you tender There are many things that you as a small business owner must remember when you respond to a tender and sometimes responding to a tender can be overwhelming. Experience has taught me that there are some important things to remember when responding to a Tender and there are some less important things to remember when responding to a Tender. Here are ten of the important things to remember when responding to a Tender. Please remember that all ten of these items mention here are equal important and that is applicable to Public as well as Private Sector Tenders. Top ten tips: 1. Attend the briefing sessions. The briefing sessions are the place where you find out the what, why and how of responding to a Tender. You can also check out your competition at the briefing session. 2. Read the tender document carefully and thoroughly. Each tender document is different. Make sure you read every last word so that you respond correctly the specific tender. 3. Be on time! Ensure that you deliver your tender response on time. If you are late with your tender response you are going to be disqualified. 4. Use an index in your tender response. The Evaluation Committee members do not want to page around struggling to find specific information in your tender response. 5. All prices should normally include VAT at 14%. 6. Complete all the documents, especially those in the Public Sector Tenders. If you fail to complete all the Standard Bidding Documents your tender can be disqualified. 7. Initial each and every page of the tender document that you have received from the Organ of State or the Private Company. By initialling each page you indicate that you have read its contents and that you are familiar with the contents of each page. 8. Ensure that you attach all the necessary compulsory documents. Your tender response maybe disqualified if you forget to attach a tax clearance certificate or the ID s of the company directors and so on. In our Tender Manual there is a tick list that helps you remember all the compulsory documents. 9. Keep your compulsory documents such as your tax clearance, B-BBEE and municipal accounts up to date. Old documentation will not work and your tender response will be disqualified. 10. Keep your tender response need and tidy. Bind the whole document into one if it is at all possible this way you know that the Evaluation Committee will not misplace part of your tender response.

9 7.) The 8 steps in the Tender Adjudication process It is important to understand the Adjudication process when one responds to a Tender or Request for Proposal. If you have these 8 steps under control when responding to tenders, changes are good that you will proceed to the next round. Here are 8 steps in the adjudication process that Organs of State will most often follow in determining which bidder will win the tender: 1. Opening and recording of tenders When tenders are opened in public, the following features of each tender usually are announced and recorded: The name of the tenderer; The tender price as stated on the form of tender; The number of B-BBEE points claimed by the tenderer; Tenders usually are endorsed and dated with the approved tender stamp of the Organ of State or Private Entity. 2. Determine whether or not tenders offers are complete After the opening of tenders, the tender officials will determine the responsiveness of each tender by determining whether: The tender complies with all the conditions of the tender or request for proposal; The tender has been properly completed and signed; The tender meets the minimum resource objectives; Above are just some of the requirements that have to be met in order for your response to advance in the tender process. Any tender that does not meet the stipulated requirements will be regarded as being non-responsive. Non-responsive tenders will be eliminated from the adjudication process at this stage. All responsive tenders will proceed to the next stage. 3. Price Review The prices of all responsive tenders are checked for errors. Bidders who have tendered an unrealistically low price can be interviewed by the Organ of State to determine whether there is a valid reason for its tender price being unrealistically low. If the bidder cannot supply a valid reason, the tender would most probably be eliminated from the tender adjudication process. 4. Award of points for Functionality Tenders that remain in contention will be awarded points for functionality.

10 5. Awarding of points for Price At this stage the points for price will be awarded according to the Preferential Points System. Prices are usually adjusted to a common base so that it can be comparable with each bidder s price. 6. Process review At this stage the legitimacy of the B-BBEE Levels claimed by the bidders will be validated and recorded. If there are any reasons for eliminating tenders on the grounds of process review it will be recorded here. 7. Summation of points The points awarded for price and B-BBEE will be added for each tender and, subject to satisfactory risk analysis; the tender which has been awarded the highest total number of points will be recommended for acceptance. 8. Risk Analysis An Organ of State will do a risk analyses before acceptance of any tender to ensure that it would, if accepted, not place the Organ of State or the tenderer, at undue risk. As one can see there are various elements that all contribute to the final awarding of a tender.

11 8.) 6 Reasons why tenders fail There are many reasons why your tender response might fail. Here are 10 reasons why tender responses usually fail: 1. Pricing A tender response has to be competitive. It has to be competitive in pricing as wells as good value for money. It is not to say that if your price is the lowest, you will be awarded the tender. If your supply is under par it can cost you a tender. 2. Administrative reasons Administrative errors can cause your tender to be disqualified. You might forget to sign the tender or to initial every page. Perhaps your tender is late or you submit it into the wrong tender box. These errors are all causes for your tender being disqualified. 3. Missing information Ensure that you supply all the additional information that the tender asks for. It is always good to read the tender document thoroughly whilst making a list of all the additional documents that will be required. As soon as you are finished with your tender response tick every item on the list that you have made. 4. Unclear proposal Communication is everything. In order to stand a chance of winning a tender you have to communicate your supply in such a way that it is clearly understood what you are offering. Ensure that your writing skills are up-to-date. Write in understandable English. 5. Requirements not met This point can be confused with point 3, but it is not the same. Together with additional information come specific and general requirements. These requirements will be picked up by the responder when examining the tender document. Ensure that you meet all the requirements and if there are any requirements that you are not sure how to respond to, ask. Once you have clarity regarding difficult requirements you can respond properly. Not responding to all requirements of a tender may lead to disqualification of your tender response. 6. Be precise When responding to a tender be precise, especially when it comes to describing your tender supply. If the supply is of foreign origin ensure to mention that in your proposal.

12 9.) Completing the invitation to bid document SBD 1 Empowering black businesses, particularly your The first document that you will need to complete while doing your tender is the Invitation to Bid. Although this is a standard document, organs of state change the appearance to accommodate their details. You will find basic information of the tender in this document such as: Tender number (in the document it is called the bid number) Closing date and time Delivery Address Name of organ of state who s tender it is How the tender must be completed Contact details of the person responsible for answering any queries You must complete the document by filling in your details (either your own, if you are tendering in your own name, or, your company s detail, if you are tendering in your company s name). Be as thorough as possible. You will find by keeping your company s letterhead and tax clearance close by; you can easily complete this document. VERY IMPORTANT: 1. Make sure you attach your tax clearance certificate. 2. The section on B-BBEE - Make sure you tick the correct box. Remember to attach your B-BBEE Scorecard Certificate. If you are the accredited representative in South Africa for the goods/services/works offered then you must supply proof of that. You or your company will have some kind of certificate certifying that you are an accredited representative. An accredited representative is someone such as an insurance financial advisor or a registered auditor or a registered debt collector and so forth. Sign the document or, if you are not authorized to sign, obtain the signature from the correct person that is authorized to sign such as a director/member/shareholder. The Capacity under which this bid is signed means - what is your title? Therefore, if you are the tender manager, you will indicate your capacity as such. If the director should sign, you fill in director. The Total bid price is the total amount of your tender. Remember to state whether the amount includes VAT or not. The Total number of items offered is just what is says. Count the items that you offer and fill it in here. If you provide a service, the recommendation would be that you fill in ONE here.

13 10.) 10 features of a good Joint Venture Agreement A Joint Ventures is a good business idea to compete for tenders if one does not have all the necessary expertise that are required from a specific tender. The thing to remember though is that you must have a solid Joint Venture Agreement in place for your Joint Venture. A good, rock solid Joint Venture Agreement will protect the participants to the Joint Venture. Here are 10 features that any good Joint Venture Agreement must have: 1. The purpose of the joint venture must be clearly defined; 2. The percentage participation of all the members must be clearly stated. Remember that the members share in the profits and losses of the Joint Venture and this must be indicated as such. 3. There must be a paragraph that provides for the formation of a management body for the joint venture; 4. There must be consensus between the members to ensure that the activities of the Joint Venture will not be unjustifiably slowed down by failure to achieve it; 5. The dispute resolution must be effective, easy and cheap to execute; 6. There must be clear and comprehensive guidelines that sets out the contributions to be made by each member towards the activities of the joint venture in securing and executing the contract and should allocate monetary values to such contributions. 7. All members must provide meaningful input to the management activities of the joint venture as well as policy making; 8. There must be a safe guard to limit, as far as possible, any losses to the joint venture by the default of any Joint Venture member; 9. The Joint Venture Agreement must be flexible enough to allow for joint ventures which differ in objectives, inputs by members and management systems; 10. Last but not least the Joint Venture Agreement must be tender specific. Make sure that your Joint Venture Agreement contains all these features. This will ensure that you are covered against most unforeseen contingencies. You can find a Joint Venture Agreement on our website at. You will also find our newly revised Tender Handbook 2016 there. The Tender Manual will teach you all you need to know to respond to tenders correctly and hopefully successfully.

14 About our Company: Empowering black businesses, particularly your Since our inception in 2014, How2Tender.com has presented numerous workshops throughout South Africa. These Tender and B-BBEE workshops have been attended by hundreds of people (and counting) representing more than 650 South African companies. How2Tender Handbook has also been successfully marketed as an E-book and Printed Handbook. Our Clients:

15 Client References: Company Contact Name Position Shell S.A Think Money Wisani Khoza James Webster Indirect Channel Excellence manager Financial Manager Potatoes S.A Andre Jooste CEO Amgen S.A Tradeworld Ariba Michelle Griessel Paul Hills Head Value Access and Policy Senior Manager Service Presented Enterprise Development Initiative BEE Consultation & ED In-House Procurement Processes Tender Consultation Tender/BEE Training Tel Number For more information please contact: Wynand Cronje Werner van Rooyen