WiEBE

TENDERING ON PROFESSIONAL FEES

INTRODUCTION

A profession may be regarded as ‘an occupation in which an individual uses an intellectual skill based on an established body of knowledge and practice to provide a specialised service in a defined area, exercising independent judgement in accordance with a code of ethics and in the public interest.’ UK Inter Professional Group

INTRO. CONT. THE PURPOSE OF PROCURING

PROFESSIONAL SERVICES

Provide services including those relating to the design and supervision of construction work, for limited periods without any obligation of permanent employment

Benefit from superior knowledge, transfer of skills and upgrading of a knowledge base while executing an assignment

Provide independent advice on the most suitable approaches, methodologies and solutions of projects

PROFESSIONAL REGISTRATION A number of statutory councils have been

established in South Africa to regulate various professions in terms of the following Acts:

Architectural Profession Act, 2000

Engineering Profession Act, 2000

Landscape Architectural Profession Act, 2000

National Scientific Professions Act, 2000

Planning Professions Act, 2003

PROF. REGISTRATION CONT.Professional and Technical Surveyors’ Act,

1984

Project and Construction Management Professions Act, 2000

Quantity Surveying Profession Act, 2000

HISTORICAL PRACTICES FOR PROCURING PROF. SERVICES

a database of pre-qualified consultants

organization’s panel

Non-tariff based appointments

WHY THE NEW APPROACH?One of the objectives of the Policy strategy to

guide uniformity in procurement is to ‘replace the outdated procurement and provisioning practices in government with a supply chain management function and a systematic competitive procedure for the appointment of consultant.’

In the past, professionals could not advertise their services and work was by appointment from those who knew of their capabilities

New companies found it difficult to compete with established companies even though they could provide at least an equal service and usually cost effectively

WHY CONT.The larger and regular employers used a pool

or panel of established companies occasionally added to by offshoots from within the pool or as a result of hard marketing

It is also argued that employers did not necessarily receive value for money as the number of capable but under utilised practitioners grew

It could even be said that the independence of advice meted out was becoming questionable

WHY CONT.In summary, the wait for an appointment, or panel system had in-built inefficiencies.

Cost value was suspect.

Independence of the service provider was becoming suspect

The appropriate or most fit for purpose design was not always assured i.e. did not encourage innovation

LEGISLATIVE REQUIREMENTSConstitution Act (108 of 1996), section 217 of

which states that when organs of state “contract for goods and services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost effective.

“In accordance with the Framework for Supply Chain Management [Section 76(4)(c) of the PFMA] that was promulgated in Government Gazette Number 25767 on 5 December 2003 as Treasury Regulations, National Treasury is required to issue instructions to accounting officers/authorities in respect of the appointment of consultants.

Consultants should be appointed by means of competitive bidding processes, whenever possible.

LEGISLATIVE REQ. CONT.Treasury Regulation 16A6.3(g) for

departments, trading entities, constitutional institutions and public entities issued in terms of the Public Finance Management Act (Act 1 of 1999) states that:

The accounting officer or accounting authority must ensure that instructions issued by the National Treasury in respect of the appointment of consultants complied with

DIFFERENTIATORS AS A MEANS OF SELECTIONThe identification of differentiators is the

corner stone of any competitive selection process.

Differentiators form the basis for competition

According to Treasury consultants should be selected on:

Their qualifications for the assignment

The basis of references

DIFFERENTIATORS CONT.Through comparison of qualifications among

those expressing interest in the assignment or approached directly by the accounting officer

Should be fully capable of carrying out the assignment – capability being judged on the basis of academic background, experience and as appropriate, knowledge of the local conditions

SELECTION METHODSQuality and cost based selection – whereby

the tenderer who scores the highest number of points for quality and price is awarded the contract

Quality based selection– whereby a contract is negotiated with the tenderer scoring the highest number of points for quality

Selection under a fixed budget – whereby tenderers are provided with the available budget and are requested to provide their best technical and financial proposals in separate envelopes and a contract is negotiated with the tenderer submitting the highest ranked technical offer

SELECTION METHODS CONT.Least cost selection– whereby tenderers

submit technical proposals and financial proposals in two envelopes, the financial proposals of only those tenderers who obtain a quality score above a threshold are opened and the contract is awarded to the tenderer with the highest score based on price

Selection based on Consultants’ qualifications– whereby the firm with the most appropriate qualifications and references is selected

Single source selection – whereby a contract is negotiated with a single suitable tenderer

STUDY ON SANRALThis process is relatively new, however

SANRAL has been practising it longer than the other govt entities, such that there has even been a paper that was presented at the 10th CONFERENCE ON ASPHALT PAVEMENTS FOR SOUTHERN AFRICA where an attempt was made to quantify the possible impact and effect the introduction of the tendering process had on the consulting engineering sector

STUDY CONT.From the SANRAL study it was established

that:-

On average, professional fees have been reduced in some cases by up to 48%

Disbursements were in certain cases reduced by about 60% of the original value

About 60% of the respondents were of the opinion that the quality of design reports deteriorated since the implementation of the tendering system

The quality of tender documentation and drawings showed a similar trend

STUDY CONT.According to the survey, the introduction of

the tender process did have a significant impact on the number of hours spent by professionals on site during construction.

The average hours spent on site by the engineer has reduced by 50% between fee based projects and tendered projects.

The involvement of other ad hoc technical personnel which are not full time site staff has also reduced by 46% between fee projects and tendered projects

CONCLUSION Quality will suffer as a result of reduced

rates due to tendering

The time and cost to submit tenders – questionable whether the industry especially smaller players can sustain the cost of tendering over the long term

System is biased towards larger firms

In service training for young professionals has been reduced

The nature of professional expertise and evaluation thereof is highly complex – that coupled with skills shortages and one wonders how and where govt both national and provincial, let alone municipalities are going to get the expertise needed to evaluate the tenders

CONCLUSION CONT.The process of procuring services in the

construction industry need to maintain a balance between reasonable compensation that will ensure the continued attractiveness and development of these professions on the one hand, and ensuring competitiveness on the other hand.

REFERENCES National Treasury, 2003, Supply Chain

Management Office: Practice Note Number SCM3 of 2003: Appointment of Consultants, National Treasury: Republic of South Africa, Pretoria

Construction Industry Development Board (CIDB), 2007, Best Practice Guideline #A7: The procurement of professional services 2nd edition – December 2007, Construction Industry Development Board, Pretoria, South Africa

Paper based on findings on South African National Roads Agency Ltd delivered at the 10th Conference on asphalt pavements for Southern Africa : Tendering for professional services: both sides of the coin, J.J.E. Liebenberg and S. J. Wilson

REFERENCES CONT. Construction Industry Development Board

(CIDB), 2007, Practice Note # 6: Competitive Selection Of Professional Service Providers, Version 1 – May 2007, Construction Industry Development Board, Pretoria, South Africa

THANK YOU