Standard for a Construction Procurement System

1 Standard for a Construction Procurement System Western Cape Provincial Treasury 1 April 2012 First edition Preface A System may be regarded as a set of interrelated or interacting elements. It is an established way of doing things that provides order and a platform for the methodical planning of a way of proceeding. Systems are underpinned by processes (a set of interrelated or interacting activities which transforms inputs into outputs), procedures (specified way to carry out an activity or a process) and methods. Procurement may be regarded as the process that creates, manages and fulfils contracts. Procurement commences once a need for goods, services, or engineering and Construction works has been identified and ends when the goods are received, the services or Construction works are completed.

2 Procurement processes and procedures need to be managed and controlled. Accordingly, governance activities need to be linked to the milestones in the Procurement process. At the same time, policies are required to govern the usage and application of certain Procurement procedures, requirements for recording, reporting and risk management, and procedures for dealing with specific Procurement related issues, etc. A Procurement System comprises not only Procurement processes but also: a) rules and guidelines governing procedures and methods b) Procurement documents which include terms and conditions, procedures and requirements risk / quality oversight (governance and performance) controls c) organisational policies which deal with issues such as: i) the usage and application of particular Procurement procedures; ii) requirements for recording, reporting and risk management; iii) procedures for dealing with specific Procurement issues; iv) the usage of Procurement to promote social and developmental objectives; and v) the assignment of responsibilities for the performance of activities.

3 A public Procurement System in South Africa needs to be developed around the South African constitutional imperatives for a public Procurement System , namely that the System : a) must be fair, equitable, transparent, competitive and cost%effective; and b) may provide for categories of preference. The Construction Industry Development Board (CIDB) has developed standards which provide procedures and methods which are required by law to be applied to certain key Procurement processes, as well as a series of best practice guidelines, which have now been incorporated into the recently published ISO 10845 standards for Construction Procurement . These standards have been developed around the primary and secondary Procurement System objectives embedded in the Constitution of the Republic of South Africa (Act 108 of 1996) for a Procurement System which may be expressed in qualitative terms as follows: a) Fair: the process of offer and acceptance is conducted impartially without bias, and provides participating parties simultaneous and timely access to the same information.

4 B) Equitable: the only grounds for not awarding a contract to a tenderer who complies with all requirements are restrictions from doing business with the organization, lack of capability or capacity, legal impediments and conflicts of interest. c) Transparent: the Procurement process and criteria upon which decisions are to be made shall be publicized and made publicly available with reasons for those decisions, and with the possibility of verifying that criteria were applied. d) Competitive: the System provides for appropriate levels of competition to ensure cost%effective and best value outcomes. e) Cost-effective: the processes, procedures and methods are standardized with sufficient flexibility to attain best value outcomes in respect of quality, timing and price, and the least resources to effectively manage and control Procurement processes.

5 F) Promotion of other objectives: the System may incorporate measures to promote objectives associated with a secondary Procurement policy subject to qualified tenderers not being excluded and deliverables or evaluation criteria being measurable, quantifiable and monitored for compliance. The primary purpose of this Standard is to establish a Construction Procurement System for an institution to use in fulfilling its obligations in the Procurement of goods, services and engineering and Construction works within the Construction industry in: a) compliance with requirements established in terms of the: i) Constitution of the Republic of South Africa, 1996 (Act No 108 of 1996); ii) Public Finance Management Act or 1999 (Act 1 of 1999) iii) Construction Industry Development Board (Act 38 of 2000); and iv) other pertinent Acts; and b) a manner which: i) embraces national and international best practice; and ii) is auditable.

6 Institutions who are required to apply this Standard need to complete Annexure B allocated designated persons to perform duties, provide delegations and set parameters associated with Procurement procedures. The ultimate objective of the Western Cape Cabinet is to ensure clean, efficient and effective Construction Procurement processes with clear delineation of accountability and responsibilities of the various role players within the process and the assurance of transparency. There is also a need to reach consensus upfront to the standards against which institutions have to be audited. This allows for proper goal setting and the setting of management standards. This Standard responds to these imperatives.

7 Need for Procurement established Is there an emergency situation? Apply negotiated procedure Are there only a limited number of contractors available? Is the value below R10 000? Apply shopping procedure Is the value below R500 000? Apply quotation procedure Designated person awards contract Delegated authority awards contract Apply confined market procedure Contract R500 000 Contract > R500 000 Is it necessary to prequalify tenderers or reduce the number of tenderers making submissions? no Call for expressions of interest Invite tender offers and apply appropriate Procurement procedure Documentation Review Team accepts Procurement documents yes Evaluation Panel evaluates Tenders Expressions of interest yes no Construction Procurement committee Recommends award of contract Accepts outcome of expression of interest Procurement processes provided for in the Construction Procurement System yes yes yes no no no NOTE.

8 The processes associated with the issuing of task, batch and package orders in terms of framework agreements are not shown Standard for a Construction Procurement System CONTENTS Preface 1 Scope 1 2 Terms, definitions and abbreviations 1 Terms and definitions 1 Abbreviations 4 3 Normative references 4 4 Requirements 6 General requirements 6 Conduct of those engaged in Construction Procurement processes or procedures 6 General requirements 6 Conflicts of interest 7 Evaluation of submissions received from respondents and tenderers 8 Non%disclosure agreements 9 Gratifications, hospitality and gifts 9 Breaches 10 Placing of contractors under restrictions 10 Procurement activities, key actions, responsibilities and gates 11 Roles and responsibilities in relation to the Procurement processes.

9 Activities and controls 18 General 18 Documentation Review Team 18 Evaluation panels 19 Construction Procurement Committee 20 Disposal Committee 23 Delegated Authority 24 Compliance monitoring 25 Complaints and challenges 27 Secondary Procurement policy 27 General 27 Permitted targeted Procurement procedures 28 Broad Based Black Economic Empowerment 29 Engaging members of the community in Construction works 29 Usage of Standard Procurement procedures 29 General 29 Framework agreements 32 Lists of pre%approved contractors 34 Disposals 35 Unsolicited proposals 35 Procurement documents 35 General 35 Standard forms of contract 36 Auction data 38 Standardised documents 38 Tender assessment schedules 38 Guarantees 38 Retention 38 Delay damages 38 Price escalation 38 Insurances 39 Communications 39 Intellectual property rights 39 Disputes arising during the performance of a contract 39 Quality standards 40 Budgetary items 40 Calls for expressions of interest and invitations to submit tender offers 41 General 41 Advertising 41 Issuing of Procurement documents 41 Clarification meetings and issuing of addenda 41 Receipt and safeguarding of submissions 42 Opening of submissions 42 Evaluation of submissions 43 Notice to unsuccessful tenderers and respondents 43 Debriefing of respondents and tenderers 44 Written reasons for actions

10 Taken 45 request for access to information 45 Award of contracts 45 General 45 Registration on the Western Cape Supplier database 46 Administration of contracts 46 General 46 Records and reporting 46 Authorised increase in the final contract amount 47 Invoicing 48 Occupational health and safety 48 Departures from procedures 48 Annexure A: Overview of applicable legislation 49 A1 Constitutional imperatives for Procurement 49 A2 Applicable pieces of legislation 49 A3 Public Finance Management Act 50 A4 Construction Industry Development Board Act 51 Annexure B: Designated persons, delegated authorities, the composition of teams, panels and committees and thresholds associated with Procurement procedures 53 B1 Designated persons 53 B2 Delegated authority to award a contract 58 B3 Composition of control and governance committees 59 B4 Thresholds relating to various Procurement procedures 60 B5 Insurance values 60 Annexure C: Adjudication procedures to challenge decisions made during the tender process 62 C1 General principles 62 C2 Notice of tender dispute adjudication 62 C3 Administrative procedures 62 C4 Tender dispute adjudicator s decision 62 Annexure D.