TOOLKIT 2006

 

INFRASTRUCTURE DELIVERY MANAGEMENT GUIDELINES

 

MODULE 5 – CONSTRUCTION PROCUREMENT

 

Status: Final for Toolkit version 4.0

 

                                                            

 

 

Developed by the Construction Industry Development Board in cooperation with National Treasury

 

Version 4-0

March 2006


Module 5  

 

Table of Contents

Module 5.

TABLE OF FIGURES.

Supporting Information, Templates and Examples.

Schedule of Supporting Information.

Schedule of Examples.

1        Overview..

1.1     Purpose of the module.

2        An introduction to public procurement

2.1     What is procurement?.

2.2     What are the commonly encountered categories of public construction procurement?.

2.3     Public Procurement

2.3.1 Introduction.

2.3.2Regulatory Framework for procurement

2.3.3Supply Chain Management

2.4     The procurement mandate of the Construction Industry Development Board.

2.4.1 The prescripts of the Construction Industry Development Board.

2.4.2Construction Procurement Best Practice Library.

2.4.3 Register of contractors.

2.4.4 Register of Projects.

3        Implementing Construction Procurement in a Institution.

3.1     The fundamentals of a construction procurement system.. 

3.2     Construction Procurement processes.

3.3     The Procurement System within an institution.

3.4     Managing construction procurement

3.5     Managing construction procurement risks.

3.6     Recommended approach to the various construction procurement activities.

3.6.1 Activity 1:  Establish what is to be procured.

3.6.2 Activity 2:  Decide on the procurement strategies.

3.6.3 Activity 3:  Solicit tender offers.

3.6.4 Activity 4: Evaluate tender offers.

3.6.5 Activity 5: Award contract

3.6.6 Activity 6: Administer contracts and confirm compliance with requirements.

3.7     Applying the CIDB Registers to the procurement system..

Annex A: Construction Procurement Best Practice Library.

 

TABLE OF FIGURES

Figure 1.0: Modular Footprint of Toolkit   

Figure 2.1: The Regulatory Framework for Construction Procurement in South Africa 

Figure 2.2: Standard methods for soliciting tender offers from the construction industry 

Figure 2.3: Relationship between CIDB prescripts and the procurement regulatory framework 

Figure 3.1: The components of a construction procurement system  

Figure 3.2: Establishing a construction procurement system within an institution

Figure 3.3: Sample procurement control card 

 

Supporting Information, Templates and Examples

 

All the supporting information in the form of Best Practice published by the Construction Industry Development Board may be downloaded from the CIDB website www.cidb.org.za  (See Construction Procurement Best Practice Library).

Several of the annexures to these documents contain templates and examples.

Schedule of Supporting Information

 

Number

Name

Synopsis/purpose

Current revision

5S01

CIDB Standard for Uniformity in Construction Procurement

Prescript of the CIDB under National Treasury SCM Framework Regulation and extension of the Construction Industry Development Regulations. To promote uniformity and standardisation in procurement documentation and solicitation of tender offers.

Government Gazette No. 29138, Board Notice 94 of 2006

5S02

CIDB Best Practice Guideline A1: The Procurement Cycle

(1001)

This practice guide identifies six main procurement activities that apply to all construction procurements irrespective of their categorisation as supplies, services and engineering and construction works. It also identifies the generic steps (sub-activities) associated with such activities and the logical points in the process where controls should be introduced. The actions associated with these activities and sub-activities are documented as well as the inputs and outputs to each of the actions in a logical framework.

The practice guide also presents the recommended approach to performing the various activities and sub-activities

Edition 2.0

5S03

CIDB Best Practice Guideline A2: Applying the procurement prescripts of the CIDB in the Public Sector (1002)

This practice guide provides guidelines on the application of the CIDB’s Standard for Uniformity in Construction. It also establishes the relationship between this standard and National Treasury’s Regulatory Framework for Supply Chain Management. Guidance is also provided on the establishment of a procurement policy within an institution and the manner in which procurement may be managed and controlled.

Edition 4.0

5S04

CIDB Best Practice Guideline A3: Evaluating tender offers (1003)

This practice guide provides guidance on the evaluation of tenders in accordance with the provisions of the CIDB Standard for Uniformity in Construction Procurement respect of the seven steps identified in Practice Guide A1 associated with this activity. It also contains proforma forms to evaluate tender offers and an example of a tender evaluation report.

Edition 3.0

5S05

CIDB Best Practice Guideline A4: Evaluating Quality in Tender Submissions (1004)

This practice guide defines quality within the procurement context and reviews the requirements for evaluating quality in the accordance with regulatory requirements and the provisions of the CIDB Standard for Uniformity in Construction Procurement for the evaluation of quality. It furthermore provides practical guidelines on the awarding of preferences for quality, pre-qualification on the basis of quality and the scoring of tender submissions in terms of quality and price or quality, price and preference.

Edition 2.0

5S06

CIDB Best Practice Guideline A5: Managing Construction Procurement Risks  (1005)

This practice guide outlines the main elements of the risk management process. It identifies the generic sources of construction related risks, presents a range of options for risk allocation between the employer and the contractor and discusses the question of insurances. It also provides guidelines for the management of risk.

Edition 1.0

5S07

CIDB Best Practice Guideline A6: Applying the Registers to Construction Procurement (1006)

This practice guide outlines the processes associated with the implementation of the register of contractors and the register of projects in accordance with the provisions of the Construction Industry Development Regulations. It provides guidelines to employers and their agents to comply with the requirements of these regulations in their procurements and describes the manner in which requirements relating to contractor grading designations may be incorporated in procurement documents.

Edition 3.0

5S08

CIDB Best Practice Guideline B1: Formulating and Implementing Preferential Procurement Policies (1007)

This practice guide presents a range of policy options and implementation methodologies that may be pursued in the formulation of preferential procurement policies that are consistent with the provisions of the South African regulatory regime. The guide introduces the thinking behind preferential procurement policies, the manner in which such policies are implemented internationally and the constraints to implementation within South Africa. It interprets the Preferential Procurement Policy Framework Act and related regulations, identifies the methods by which preferences may be applied, provides guidelines as to how preferential procurement policies may be formulated to satisfy legislative requirements and contains examples of preferential procurement policies that are drafted in accordance with this practice guide.  

Edition 1.0

5S09

CIDB Best Practice Guideline B2: Methods and Procedures for Implementing Preferential Procurement Policies (1008)

This practice guide provides a range of uniform methods and procedures for implementing a wide range of policy themes in a consistent manner. The guide presupposes that a preferential procurement policy is in place and focuses on the capturing of preferencing requirements in procurement documents.  It contains sample preferencing schedules, clauses required to activate preferencing in the Tender Data where use is made of the CIDB Standard for Uniformity in Construction Procurement, and data capture forms.

Edition 1.0

5S10

CIDB Best Practice Guideline C1: Preparing Procurement Documents (1009)

This practice guide identifies the various types of procurement documents and provides a uniform format for the drafting and compilation of these documents. It also establishes a practical approach to uniformity and standardisation of procurement documents within an organisation and makes recommendations regarding the forms of contracts which should be used. It also contains a number of proforma component documents to facilitate a uniform approach.

Edition 2.0

5S11

CIDB Best Practice Guideline C2:

Choosing an appropriate Form of Contract for Engineering and Construction Works (1010)

This practice guide presents the fundamental considerations in the selection of a form of contract for engineering and construction works. It presents an overview of three different series of forms of contracts and provides practical guidance of the selection of appropriate forms of contract for an organisation or for use in selected pricing and contracting strategies.

Edition 2.0

5S12

CIDB Best Practice Guideline C3: Adjudication (1011)

This practice guide provides an overview of what adjudication is, presents the principles underpinning adjudication, reviews the provisions for adjudication in standard forms of contract (NEC, FIDIC and CIDB), outlines an approach for the selection and use of adjudicators, and provides sample clauses and proforma agreements to be included in procurement documents.

Edition 2.0

5S13

CIDB Best Practice Guideline D1: Subcontracting Arrangements (1012)

This practice guide establishes acceptable practices in respect conditions of subcontract.  Features of forms of subcontract which are unacceptable to the Employer and the Contractor are identified and described.  It also recommends forms of subcontract which have desirable features for use with the main contracts identified in Practice Guide C2 and reviews the legal considerations in the engagement of labour only subcontractors.

Edition 1.0

5S14

CIDB Best Practice Guideline D2: Joint Venture Arrangements (1013)

This practice guide identifies the reasons for forming joint ventures, reviews requirements for the formation of joint ventures in response to preferential procurement policies and presents an overview of the typical content of a joint venture agreement. It also identifies the standard joint venture agreements forms that are suitable for use or to serve as a basis for the development of an agreement.

Edition 1.0

5S15

CIDB Code of Conduct

This provides a guide and regulates the behaviour of parties engaged in construction-related procurement to establish the standards of behaviour that participants may expect from each other and against which their behaviour can be measured.

 

5S16

CIDB Best Practice Guideline A7: The procurement of professional services (1035)

This practice guide outlines the principles for sustainable growth and a number of strategies to promote the participation of smaller registered contractors in public contracts so that they can grow and develop. The strengths and weaknesses of each of these strategies are discussed.

Edition 1.0

5S17

CIDB Best Practice Guideline A8: Procurement measures to develop registered contractors. (1036)

This practice guide presents a range of policy options and implementation methodologies that may be pursued in the formulation of preferential procurement policies that are consistent with the provisions of the South African regulatory regime. The guide introduces the thinking behind preferential procurement policies, the manner in which such policies are implemented internationally and the constraints to implementation within South Africa. It interprets the Preferential Procurement Policy Framework Act and related regulations, identifies the methods by which preferences may be applied, provides guidelines as to how preferential procurement policies may be formulated to satisfy legislative requirements and contains examples of preferential procurement policies that are drafted in accordance with this practice guide.  

Edition 1.0

5S18

CIDB Practice Note 1

Scaling up delivery and accelerating empowerment

Version 1

5S19

CIDB Practice Note 2

Correcting arithmetical errors in tenders

Versions 1

 

Schedule of Templates

Number

Name

Synopsis/purpose

Current revision

5T01

Site Inspection and Clarification Meeting Minutes

Provides a proforma for a typical site inspection meeting held to clarify elements of the tender in relation to the site conditions

4-0

 

Schedule of Examples

 

Number

Name

Synopsis/purpose

Current revision

5E01

Standardised Construction Procurement Documents for Engineering and Construction Works

 

August 2006

5E02

Standardised Construction Procurement Documents for Professional Services

 

August 2006

5E03

Free State Provincial Government: Compiler’s notes on the use of the Standardised Construction Procurement Documents for Engineering and Construction Works

Provides an example of the guidance required  in the preparation of a tender document

August 2006

5E04

Free State Provincial Government: Standardised Construction Procurement Documents for Engineering and Construction Works

Provides an example of a standardised procurement document tailored for the public service

August 2006

 

1         Overview

1.1         Purpose of the module

 

Construction procurement is the process that creates, manages and fulfils contracts within the construction industry. The purpose of this module is to:

 

Ÿ         Briefly describe the regulatory framework for procurement in South Africa, and in particular that pertaining to construction procurement

Ÿ         Identify the core processes and major activities associated with construction procurements involving the provision of supplies, services and engineering and construction works

Ÿ         Describe the actions associated with the identified major construction procurement activities

Ÿ         Identify published guidelines to enable the identified activities to be executed efficiently and effectively and components of a construction procurement system

 

Figure 1.0: Modular Footprint of Toolkit

2              An introduction to public procurement

2.1         What is procurement?

Procurement may be described as the process that creates, manages and fulfils contracts. Procurement is as such concerned with establishing and documenting what is required; soliciting from the private sector tender offers to provide supplies or services / to construct or maintain infrastructure / to undertake disposals; awarding contracts to successful tenderers; monitoring that which was contracted to be provided is indeed provided; and paying contractors for executing their contracts.

Public sector procurement falls within the supply chain management functions under acquisition management and may involve activities such as:

Ÿ         The provision of supplies, services or engineering and construction works or any combination thereof

Ÿ         The disposal of moveable property

Ÿ         The hiring or letting of anything

Ÿ         The acquisition or granting of any rights 

2.2         What are the commonly encountered categories of public construction procurement?

Most public sector construction procurement activities focus on the provision of supplies, services engineering and construction works and disposals. (See Table 2.1)

Table 2.1: Categories of Construction Procurement

CATEGORY OF CONSTRUCTION PROCUREMENT

DESCRIPTION

Disposals

The divestiture of public assets, by any means, including sale, rental, lease, licenses, tenancies, franchises, auction or any combination thereof.

Engineering and construction works

The provision of a combination of supplies and services, arranged for the development, extension, installation, repair, maintenance, renewal, removal, renovation, alteration, dismantling or demolition of structures, including building and engineering infrastructure

Services

The provision of labour or work, including knowledge-based expertise, carried out by hand, or with the assistance of equipment and plant.

Supplies

The provision of materials or commodities made available for purchase.

 

2.3         Public Procurement

 

2.3.1        Introduction

 

Public procurement is directly related to service delivery. Institutions require services, supplies and / or engineering and construction works in order to deliver the services that they are mandated by the state to provide. Disposals are required to dispose of surplus and redundant supplies and assets.

2.3.2        Regulatory Framework for procurement

 

The primary pieces of national legislation that govern procurement in South Africa are as listed in Table 2.2 (see supporting document 5S03 CIDB Best Practice Guideline A#2, Applying the prescripts of the CIDB Act in the Public Sector, for more detailed particulars). Figure 2.1 thereafter presents an overview of the regulatory framework for procurement.

Table 2.2: Primary pieces of legislation that regulate procurement

 

ACT

APPLICABILITY

WHAT IT DOES IN RESPECT OF PROCUREMENT / SUPPLY CHAIN MANAGEMENT

Constitution of the Republic of South Africa, 1996 (Act No 108 of 1996)

All organs of state

Provides procurement objectives and establishes government’s policy for preferencing

Public Finance Management Act, 1999 (Act 1 of 1999)

All organs of state, except in the local sphere of government

Establishes broad framework within which accounting officers / authorities must establish their procurement and provisioning system (supply chain management)

Preferential Procurement Policy Framework Act, 2000 (Act No 5 of 2000)

All organs of state (state owned enterprises) at discretion of Minister)

Establishes the manner in which preferential procurement policies are to be implemented

Local Government: Municipal Finance Management Act, 2003 (Act No 56 of 2003)

Municipalities and municipal entities

Establishes a detailed regulatory framework for supply chain management.

Local Government Municipal Systems Act, 2000 (Act No 32 of 2000); and

Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003)

Local sphere of government

Establishes a framework for the  establishment of service delivery agreements involving competitive bidding processes

Construction Industry Development Board Act, 2000 (Act 38 of 2000)

All organs of state involved in procurement relating to the construction industry.

Establishes a means by which the Board

Can promote and implement policies, programmes and projects aimed at procurement reform, standardisation and uniformity in procurement documentation, practices and procedures within the framework of the procurement policy of government.

Establishes a national register of contractors (and if required, consultants and suppliers) to manage public sector procurement risk

Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003).

Procurement provisions apply to all organs of state.

Establishes a code of good practice to inform the:

Ÿ         Development of qualification criteria for the issuing of licenses or concessions, the sale of state owned enterprises and for entering into partnerships with the private sector

Ÿ         Development and implementation of a preferential procurement policy.

The Promotion of Equality and the Prevention of Unfair Discrimination Act, 2000 (Act 4 of 2000)

The state and all persons (natural or juristic person)

Prohibits the state or any person from discriminating unfairly against any person on the grounds of race or gender through the denial of access to contractual opportunities for rendering services or by failing to take steps to reasonably accommodate the needs of such persons

Prevention and Combating of Corrupt Activities Act, 2004.  (Act No. 12 of 2004).

 

Public and private sector

Makes corruption and related activities an offence.

Establishment  a Register in order to place certain restrictions on persons and enterprises convicted of corrupt activities relating to tenders and contracts; and

Places a duty on certain persons holding a position of authority to report certain corrupt transactions.

 

 

Figure 2.1: The Regulatory Framework for Construction Procurement in South Africa

 

2.3.3        Supply Chain Management

Regulations relating to supply chain management issued in terms of the Public Finance Management Act and the Local Government: Municipal Finance Management Act require accounting officers and accounting authorities to which these Acts apply (see Figure 2.1) to implement within their institutions a supply chain management system that provides for at least the following:

Ÿ         Demand management (i.e. identify demand, establish requirements and determine needs)

Ÿ         Acquisition management (i.e. acquire supplies, services, and engineering and construction works; and take delivery of supplies, project deliverables and engineering and construction works.)

Ÿ         Logistics management (codify items, set inventory levels, place orders, receive and distribute, manage stores / warehouses, expedite orders, manage transport and monitor supplier performance)

Ÿ         Disposal management (i.e. undertake obsolescence planning, identify where all redundant material is kept or located and the identify appropriate disposal strategies; dispose of surplus and redundant assets, materials and equipment)

Ÿ         Risk management (i.e. establish culture, processes and structures that are directed towards the effective management of potential opportunities and adverse effects)

Ÿ         Regular assessment of supply chain performance (i.e. monitoring processes and perform a retrospective analysis to determine whether or not the proper process was followed and the desired objectives achieved)

The major activities associated with construction acquisition are:

Ÿ         Acquire supplies,  services, and  engineering and construction works

Ÿ         Take delivery of supplies, project deliverables and engineering and construction works

Supplies and services which are not available within an institution can be sourced from other institutions or procured. Acquisition management as such deals with the decisions that have to be made in order to manage the acquisition of the required supplies or services from within the institution, or through procurement thereof from the open market. Accordingly, the options for acquisition are:

Ÿ         Acquisition of redundant / obsolete material,  goods and assets from other institutions

Ÿ         Sourcing of expertise from other institutions;

Ÿ         Utilisation of transversal contracts administered by others

Ÿ         Public private partnerships

Ÿ         Procurement from the private sector

2.4         The procurement mandate of the Construction Industry Development Board

 

2.4.1        The prescripts of the Construction Industry Development Board

Construction procurement (i.e. procurement in the construction industry[1], including the invitation, award and management of contracts, which may involve services, supplies, works and disposals), apart from being regulated in terms of general legislation governing public procurement, is also regulated through the following prescripts of the Construction Industry Development Board Act (act 38 of 2000):

Ÿ         CIDB Code of Conduct for the Parties engaged in Construction Procurement

Ÿ         CIDB Standard for Uniformity in Construction Procurement

These prescripts are applicable to all organs of state i.e. all national and provincial departments, constitutional institutions, public entities, municipalities and municipal entities. 

The CIDB Code of Conduct for the Parties engaged in Construction Procurement requires that the parties in any public or private construction-related procurement in their dealings with each other:

1.       Behave equitably, honestly and transparently

2.       Discharge duties and obligations timeously and with integrity

3.       Comply with all applicable legislation and associated regulations

4.       Satisfy all relevant requirements established in procurement documents

5.       Avoid conflicts of interest

6.       Not maliciously or recklessly injure or attempt to injure the reputation of another party

The Code of Conduct establishes standards of behaviour between the parties in procurement that are consistent with a procurement system that is fair, equitable, transparent, competitive and cost effective.

The Standard for Uniformity establishes minimum requirements that:

Ÿ         Promote cost efficiencies through the adoption of a uniform structure for procurement documents and standard component documents  and generic and uniform solicitation procedures

Ÿ         Provide transparent, fair and equitable procurement methods and procedures in critical areas in the solicitation process

Ÿ         Ensure that the forms of contract that are used are fair and equitable to the parties to a contract

Ÿ         Enable risk, responsibilities and obligations to be clearly identified

As such, the Standard establishes minimum requirements for:

Ÿ         The solicitation of tender offers

Ÿ         The manner in which quality is to be incorporated in procurement documents

Ÿ         The formatting and compilation of procurement documents

Ÿ         The application of the register of contracts to public sector contracts

The Standard Conditions of Tender  contained in the Standard impose obligations on the tenderer and require employers to conduct the process of offer and acceptance in terms of a set of standard procedures. At the same time, these conditions of tender integrate aspects of the Code of Conduct with the procurement process.  

The Standard Conditions for Calling for Expressions of Interest contained in the Standard imposes similar obligations on respondents and employers.

The Standard in addition establishes a number of generic procurement procedures and requires that all supplies, services (including professional services) and works relating to the construction industry be solicited in accordance with standard methods and within certain parameters. (See Figure 2.2).

 

 

Figure 2.2: Standard methods for soliciting tender offers from the construction industry    

 The CIDB has in addition published construction procurement best practice guidelines (see www.cidb.org.za and Annex A) which enable the Standard for Uniformity to be complied with.

Figure 2.3 illustrates the relationship between the CIDB prescripts and the South African regulatory framework for procurement.

Accounting officers and accounting authorities need to take account of the CIDB prescripts in the development of their procurement systems. (See Figures 2 and 4)

  

Figure 2.3: Relationship between CIDB prescripts and the procurement regulatory framework 

  

2.4.2        Construction Procurement Best Practice Library

The CIDB has reviewed various documents relating to procurement and has declared in terms of the Act, certain documents as best practice with regard to procurement guidelines, methods and contracts. The CIDB Procurement Best Practice Library is listed in Annex A. It is not obligatory to adopt best practices.

2.4.3        Register of contractors

 

The Construction Industry Development Board Act (Act 38 of 2000) requires the Board to establish a national register of contractors, which:

Ÿ         Categorises contractors in a manner that facilitates public sector procurement

Ÿ         Indicates the size and distribution of contractors operating within the construction industry

Ÿ         Indicates the volume, nature and performance of contractors and target groups

Ÿ         Promotes contractor development

Ÿ         Is accessible to the private sector to facilitate private sector procurement 

The legislation prohibits contractors who are not registered with the Board and in possession of a valid registration certificate issued by the Board, from undertaking any public sector engineering and construction works contracts or portion thereof awarded in terms of a competitive tendering or quotation procedure.

The register of contractors is intended to:

Ÿ         Support risk management in the public tendering process

Ÿ         Reduce the administrative burden associated with the award of contracts

Ÿ         reduce tendering costs to both employers and contractors

Ÿ         Enable effective access by the emerging sector to work and development opportunities

Ÿ         Assess the performance of contractors in the execution of contracts and thus provide a performance record for contractors

Ÿ         Regulate contractor behaviour and promote minimum standards and best practice

Ÿ         Store and provide data on the size and distribution of contractors operating within the industry and the volume, nature, performance and development of contractors and target groups

Ÿ         Enable access by the private sector and thus also facilitate private sector procurement

The legislation also requires that the Board, within a reasonable period after the establishment of the register of contractors, establish a best practice contractor recognition scheme which:

Ÿ         Enables organs of state to manage risk on complex contracting strategies

Ÿ         Promotes contractor development in relation to best practice standards and guidelines published by the Board

The manner in which the register of contractors is to be applied in public contracts is fully described in 5S07 CIDB Best Practice Guideline #A6, Applying the Registers to Construction Procurement.

2.4.4        Register of Projects

The Construction Industry Development Board Act requires the Board to establish a register of projects to gather information on the nature, value and distribution of projects. The regulations require that all public and private sector engineering and construction works projects above a contract value determined by the Minister by Notice in the Gazette must be registered with the Board[2]. The register of projects (or more correctly a register of contracts) is intended to gather information on the nature, value and distribution of projects and to provide the basis for a best practice project assessment scheme to promote the performance of public and private sector clients in the development of the construction industry.

The legislation furthermore requires that the Board, within a reasonable period after the establishment of the register of projects, establish a best practice project assessment scheme to enable compliance with best practices and standards published by the Board to be confirmed on projects above a prescribed tender value.

The manner in which employers register projects is fully described in 5S07 CIDB Best Practice Guideline #A6, Applying the Registers to Construction Procurement.

3              Implementing Construction Procurement in a Institution

3.1         The fundamentals of a construction procurement system

Procurement is by definition a process i.e. a succession of logically related actions occurring or performed in a definite manner which culminates in the completion of a contract for the provision of engineering and construction works, supplies or services or disposals. There are a finite range of methods and procedures associated with the various procurement activities.

A construction procurement system[3] comprises processes which are underpinned by methods[4] and procedures[5] which are informed and shaped by the policy[6] of the institution (see Figure 3.1) which must take into account elements of supply chain management.

 

 

Figure 3.1: The components of a construction procurement system

 

 

The Toolkit approach to construction procurement is to develop a holistic construction procurement system and to then identify which methods and procedures are best suited to particular categories of construction procurement. This approach considerably simplifies matters and facilitates the training of officials and the understanding of an institution’s senior management of construction procurement across the full spectrum of procurement.

3.2         Construction Procurement processes

The starting point in developing a construction procurement system is to identify procurement activities that commence once the need for procurement is identified and end when the transaction is completed. The start of the procurement process is to identify the need for procurement. This is normally identified under demand management within supply chain management system. This should not be undertaken in isolation from the project characteristics, client teams or infrastructure planning (see modules 2, 3 and 4).

The next step in procurement is to establish the steps that need to be taken to proceed from one activity to another. Thereafter a series of internal controls (procedural milestones) need to be identified and located within the steps that are necessary to proceed from one activity to another.

Table 3.1 sets out the procurement steps and recommended internal controls associated with the major procurement activities.

3.3         The Procurement System within an institution

Institutions must develop and document their procurement systems within the confines of the legislative framework and government’s procurement policy outlined in 2.3. In doing so, they need to make various strategic choices based on project requirements around a process which commences once the need for procurement is identified and ends when the transaction is completed. This necessitates that implementation and preferential policies be formulated, procurement directives and standard operating procedures and implementation guides be developed and adopted. (See Figures 2.3 and 3.2)

The procurement system must in addition take account of and be consistent with the requirements established in the CIDB’s Standard for Uniformity in Construction Procurement. Construction procurement processes, procedures and methods are well documented in 5S02 CIDB Best Practice Guideline #A1, The Procurement Cycle, 5S04 Best Practice Guide #A3, Evaluating tender offers, 5S07 CIDB Best Practice Guideline #A6, Applying the Registers to Construction Procurement and 5S08 Practice Guide #B1, Formulating and Implementing Preferential Procurement Policies and the various construction procurement standards published by Standards South Africa.

5S03 Best Practice Practice Guide #A2, Applying the procurement prescripts of the CIDB Act in the Public Sector, provides guidelines on the application of the CIDB’s Standard for Uniformity in Construction. It also establishes the relationship between this standard and regulations issued in terms of the Public Finance Management At of 1999 and the Local Government: Municipal Finance Management Act. Guidance is also provided on the establishment of an implementation procurement policy within an institution and the manner in which procurement may be managed and controlled.

The decisions required in construction procurement can be complex with many possible variations and choices, dependant on the type of project. As far as possible uniform procurement processes should be adopted, in order to streamline processes and avoid confusion between different procurement methods. However, it is essential that the procurement should be appropriate to the type of project in order to reduce risks.

Table 3.1:   Main construction procurement activities and associated steps and internal controls

 

ACTIVITY

STEPS

 

#

DESCRIPTION

INPUTS

PROCEDURAL MILESTONE (CONTROL POINT)

1

Establish what is to be procured

1.        Prepare broad scope of work for procurement

2.  Estimate financial value of proposed procurement

 

3 Obtain permission to start with the procurement process

2

Decide on procurement strategies

1.         Establish applicable preferential procurement policy

2.         Establish contract and pricing strategy

3.         Establish targeting strategy

4.         Establish procurement procedure

 

 

5.     Obtain approval for procurement strategies that are to be adopted

3

Solicit tender offers*

1.          Prepare procurement  documents

 

 

2.     Obtain approval for procurement documents

3.     Confirm that budgets are in place

4.         Invite contractors to submit tender offers or expressions of interest# Hold site inspection and clarification meeting (see template 5T01)

5.         Receive tender offers or expressions of interest#

6.         Evaluate expressions of interests #

7.         Prepare evaluation report on short listing process#

 

8.     Confirm shortlist #

9.         Invite tender offers from shortlist#

 

 

4

Evaluate tender offers*

1.        Open and record tender offers received

 

2.        Determine whether or not tenders offers are complete

3.        Determine whether or not tender offers are responsive

4.        Evaluate tender submissions

5.        Perform a risk analysis.

6.        Prepare a tender evaluation report

 

 

7.    Confirm recommendation contained in the tender evaluation report.

5

Award contract*

1.       Notify successful tenderer and unsuccessful tenderers of outcome

2.       Compile contract document

 

 

3.    Formally accept tender offer

4       Capture contract award data

 

6

Administer contracts and confirm compliance with requirements

1.       Administer contract in accordance with the terms and provisions of the contract

 

2.       Ensure compliance with requirements

 

 

3. Capture contract completion / termination data

 

# Expressions of interest are only called for where the Nominated, Qualified Procedure and Proposal (Two stage tendering) is used to populate electronic data bases, to pre-qualify tenderers or to submit technical proposals, respectively.  Accordingly, Steps 6 to 9 in Activity 3 (Solicit tender offers) will be omitted where the Negotiated, Open, Quotation and Proposal (two stage tendering) procedures are used.

* Several of the steps within these activities will not be required where the Negotiated Procedure is used. It should be noted that the negotiated procedure can be used to conclude contracts between institutions.

 

 

Figure 3.2: Establishing a construction procurement system within an institution

 

3.4         Managing construction procurement

There are a number of procedural milestones that need to be attained for a procurement to proceed. These should be signed off by those mandated in the institution's procurement policy to manage procurement. Ideally, a control card along the lines of that illustrated in Figure 3.3 should be used for this purpose.

 

 

Procurement reference number: . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 

Title: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  

 

Responsible official / agent: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

 

Procedural milestone

Responsible official

Signature

Name

Date

1.3

Obtain permission to start with the procurement process

 

 

 

2.5

Obtain approval for the procurement strategies that are adopted

 

 

 

3.2

Obtain approval for procurement documents

 

 

 

3.3

Confirm that budgets are in place

 

 

 

3.8

Confirm shortlist

 

 

 

4.7

Confirm recommendation in tender evaluation report.

 

 

 

5.3

Formally accept tender offer

 

 

 

6.3

Capture contract completion / termination data

 

 

 

Figure 3.3:         Sample procurement control card

 The principal actions associated with each activity are well defined. Internal and external resources to undertake steps associated with each activity should be assigned to each activity.

3.5         Managing construction procurement risks

Risk cannot be eradicated, but it can be managed identifying key risks, determining suitable actions to mitigate the risk and to then monitor risk mitigation. In this respect, it is better to be proactive rather than reactive. Risks, however, need to be identified, quantified and understood if they are to be managed.

Risk management is an iterative process comprising well‑defined steps which, taken in sequence, support better decision‑making by contributing a greater insight into risks and their impacts. The risk management process can be applied to any situation where an undesired or unexpected outcome could have significant impact or where opportunities are identified. Decision makers need to know about possible outcomes and take steps to control their impact.

Risk management is recognised as an integral part of good management practice. To be most effective, risk management should become part of an institution’s culture. It should be integrated into the institution’s philosophy, practices and business plans rather than be viewed or practiced as a separate program. When this integrated approach is achieved, risk management becomes the business of everyone in the institution.

Risk management enables continual improvement in decision-making. It is as much about identifying opportunities as avoiding or mitigating losses.

Supporting document 5S06 CIDB Best Practice Guideline CIDB #A5, Managing Construction Procurement Risks, outlines a framework for establishing the context, identification, analysis, evaluation, treatment, monitoring and communication of risk. This guideline examines construction related risk and provides guidelines for risk management.

3.6         Recommended approach to the various construction procurement activities

 

3.6.1        Activity 1: Establish what is to be procured

The actions associated with this activity are preparatory to any procurement and are intended to clarify what is to be procured and establish the basic procurement parameters.

Table 3.2 sets out the sub-activities associated with activity 1, describes the main actions associated with this activity and each sub-activity, the necessary input to and output from such actions and the dependencies between sub-activities

Table 3.2: Sub-activities, related actions, inputs and outputs pertaining to activity 1: establishing what needs to be procured

 

#

ACTIVITY

PRINCIPAL ACTION

INPUT TO THE ACTION

OUTPUT FROM THE ACTION

1

Establish what is to be procured

Clarify what is to be procured

Approved project scope

Confirmation of what is to be procured

1.1

Prepare broad scope of work for procurement

Develop a title for procurement for the purposes of project identification and a broad scope of work

Approved project scope

Broad scope of work for procurement

1.2

Estimate financial value of proposed procurement

Estimate the financial value of the proposed contract for budgetary purposes, based on the broad scope of work.

Broad scope of work for procurement

Estimated value of procurement

1.3

Obtain permission to start with the procurement process

Nominated official(s) makes a decision to proceed / not to proceed with the procurement based on the broad scope of work, financial estimates and availability of funds.

Document containing title, broad scope of work and approximate value of procurement

Approval to proceed with the procurement

 

Step 1.1: Prepare broad scope of work for procurement

Develop a title for the procurement for the purposes of project identification and a broad scope of work utilising the headings provided in Table 3.3.

Step 1.2: Estimate financial value of proposed procurement

Estimate the financial value of the proposed contract for budgetary purposes based on the broad scope of work. The estimate should include VAT, make allowances for currency fluctuations and provide for price escalation, where appropriate. Provisions for uncertainties (risk provision) in assumptions and the like should also be made.

In order to justify the procurement it may also be necessary to undertake feasibility studies in order to establish the financial viability of the procurement,  perform benefit-cost analysis, establish whole life costs[7] (capital, maintenance, management, operating and disposal) etc. It may also be necessary to establish the timing of the procurement in order to establish cash flow demands and to establish any related or hidden costs e.g. professional or other services ancillary to the procurement, land costs, royalties, security etc.

It is important to establish a realistic ceiling price for the contract as tender offers received in excess of this amount may cause the viability / value for money of the project to be reconsidered and may lead to the cancellation of tenders.

Table 3.3: Outline of broad scope of work

CATEGORY OF CONSTRUCTION PROCUREMENT

HEADING

GUIDANCE

 

Construction Supplies

Employer’s / purchaser’s objectives

Describe the employer’s / purchaser’s objectives for the supplies as delivered.

Overview of the required supplies

Provide a short description of the supplies.

Extent of the supplies

 

Provide a brief outline of the quantity, duration and nature of the supplies.

Construction Services

Client’s / employer’s objectives

Describe the client’s / employer’s objectives for the outcome of the services

Description of the services

Provide a short description of the services and outline what the contractor is to provide.

Extent of the services

 

Provide a brief outline of the extent of services and key deliverables, as appropriate.

Engineering and construction works

Employer’s objectives

Describe the employer’s objectives for the delivered end product or the project.

Overview of the works

Provide a short description of the works, its purpose, etc.

Extent of the works

Provide a brief outline of the scope of works.

Ensure that all operations, particularly those requiring special attention, are listed.

Location of the works

State the place where the works are to be provided.

 

Step 1.3: Obtain permission to start with the procurement process

The person mandated in the institution’s procurement policy who has the necessary authority should be presented with the broad scope of work and financial estimates in order to decide if the procurement should proceed. It may also at this stage be prudent to reconfirm the need and justification for the procurement.

A procurement reference number for use in procurement documents should be allocated for reference purposes should permission be granted to proceed with the procurement.

It is a requirement of the Public Finance Management Act that all major capital projects must be evaluated prior to a final decision being taken on the project.

3.6.2        Activity 2: Decide on the procurement strategies

The actions associated with this activity are preparatory to any procurement and are strategic in nature. They are intended to clarify how the procurement is to take place. They in effect plan the procurement process to achieve the required outcome and may be regarded as a form of “business plan”.

Supporting document 5S18 CIDB Note 1, Scaling up delivery and accelerating empowerment, identifies systemic problems in scaling up delivery and accelerating empowerment and outlines fresh approaches to procurement and delivery, which focuses on changes in contracting strategies and the size and duration of contracts in a manner which promotes accelerated empowerment.

In repetitive procurements or in specific programmes, it is possible to predetermine the options that will be used, in which case, Activity 2 will fall away.   (The procurement policy of an institution can set out the standard choices for routine procurements)

Table 3.4 sets out the sub-activities associated with activity 2, describes the principal actions associated with this activity and each sub-activity, the necessary input to and output from such actions and the dependencies between sub-activities

Table 3.4: Sub-activities, related actions, inputs and outputs pertaining to activity 2: deciding on the procurement strategy

#

Activity

Principal action

Input to the action

Output from the action

2

Decide on procurement strategies

Determine how the procurement is to take place

Approved scope of work

Approved procurement strategy

2.1

Establish applicable preferential procurement policy

Identify the specific goals which are to be pursued and establish likely outcomes and broad implementation procedures which are consistent with the framework provided in the Act.

Preferential Procurement Policy for institution / programme

Proposed specific goals and preferencing arrangements

2.2

Establish contract and pricing strategy

Decide on an appropriate allocation of responsibilities and risks and the methodology by which contractors are to be paid.

Procurement policy and institutional capacity

Proposed pricing and contracting strategy.

2.3

Establish targeting strategy

Decide on the methodology that is to be used to implement preferencing.

Proposed specific goals and preferencing arrangements

Proposed targeting strategy

2.4

Establish procurement procedure

Identify the process that will be followed to solicit tender offers and conclude a contract.

Procurement policy

Proposed procurement procedure

2.5

Obtain approval for procurement strategies that are to be adopted

Nominated official(s) confirm selection of strategies so that tender offers can be solicited.

Document establishing preferential procurement policy

Approved procurement strategies

 

Best value demands that procurement strategies be reviewed. Any change resulting from a review, in order to be justified, must deliver better value. It must be recognised from the outset that there is no one ideal way to procure. Each situation is different. There are, however, clear methods for choosing the appropriate or best way for a given circumstance and a logical process which should be followed to confirm that decisions will indeed deliver best practice. These decisions are to be recorded and assessed after the completion of each project.

Step 2.1: Establish applicable preferential procurement policy

Changes to the regulatory framework concerning preferential procurement and broad based black economic empowerment are currently underway. These changes will need to be addressed once publications of the new requirements have been made.

The starting point when implementing a preferential procurement policy within a specific procurement is in the first instance to establish the preferential procurement policy that is applicable to the procurement. In most instances, it will be that of the institution. Where the procurement forms part of a national or provincial programme, the preferential procurement policy pertaining to the programme should be adopted, e.g. the preferential procurement policy established in the National Housing Code must be pursued in project linked Greenfield housing subsidy developments in engineering and construction works contracts.

In the event that an institution does not have a preferential procurement policy or there are no such policies governing the programme within which the procurement falls, the institution needs to establish one in accordance with the provisions of 5S08 Best Practice Guideline # B1, Formulating and implementing Preferential Procurement Policies.

Where preferential procurement policies are in place, identify an appropriate theme and a specific goal within such a scheme which is to be pursued (e.g. target groups, comprising enterprises or labour, goals relating to the internal workings of enterprises, specific deliverables etc). This should be undertaken by considering the procurement in the light of the objectives, targets and target groups contained in the preferential procurement policy and the desirable policy outcomes and factors such as past experience, knowledge of the potential tenderers and an understanding of the nature of the procurement.

Once the goals have been identified and documented, quantitative targets (likely outcomes of the preferencing arrangements) and implementation procedures which are consistent with the framework provided in the Act need to be identified. This should be done in relation to the procurement in question in order to arrive at the optimum preferencing arrangements.

Step 2.2: Establish contract and pricing strategy

Decide on an appropriate allocation of responsibilities and risks and the methodology by which contractors are to be paid. (See 5S06 Best Practice Guideline #A5, Managing construction procurement risk, 5S10 Best Practice Guideline #C1, Preparing procurement documents, 5S11 Best Practice Guideline #C2, Choosing an appropriate form of contract, and Module 4[8].) This decision can only be made after the risks associated with the procurement have been identified and the availability of skills has been established, including those required to manage the procurement.

Step 2.3: Establish targeting strategy

Establish the appropriate targeting strategy i.e. decide on the implementation methodology that is to be pursued in respect of a preferential procurement policy (see 5S08 Best Practice Guideline #B1, Formulating and implementing preferential procurement policies and 5S09 Best Practice Guideline #B2, Methods and procedures for implementing preferential procurement policies) and, in the case of construction works contracts, the manner in which the participation and development of registered contractors is to be promoted (see 5S17 Best Practice Guideline #A8, Procurement measures to develop registered contractors . Cognisance of the selected contracting and pricing strategy should be taken in the selection of the targeting strategy as well the manner in which the target group might be engaged as joint venture partners or subcontractors. (See 5S013 Best Practice Guideline D1, Subcontracting Arrangements , and 5S014 Best Practice Guideline D2, Joint Venture Arrangements

The documented targeting strategy should in respect of the preferencing arrangements include exact definitions for the specific goals, the method of preferencing, the number of preference points that will be provided in respect of each specific goal and the manner in which the goals are to be measured, quantified and monitored for contract compliance. If SANS 1914 resource standards are to be utilised, establish any weighting / target areas that are to be nominated.

The implementation procedures must be consistent with the framework provided in the Preferential Procurement Policy Framework Act (See 5S08 Best Practice Guideline #B1, Formulating and implementing preferential procurement policies).

The documented strategy that in support of industry development promotes the participation and development of registered contractors should indicate which of the following is to be employed:

Ÿ         Unbundling projects into smaller contracts

Ÿ         Offering preferences to contractors who undertake to enter into joint ventures with or subcontract portions of the works to such contractors

Ÿ         Implementing targeted development programmes to support potentially emerging contractors in accordance with the provisions of the Construction Industry Development Regulations

Ÿ         Requiring a prime contractor to subcontract defined portions of the works to such contractors in accordance with the provisions of Annex I of the Standard for Uniformity for Construction Procurement

Ÿ         Offering preferences in terms of a preferential procurement policy to a contractor registered in particular contractor grading designations 

Step 2.4: Establish construction procurement procedure

Establish and document the appropriate construction procurement procedure (see 5S01 CIDB Standard for Uniformity in Construction Procurement), taking cognisance of the institution’s procurement policy (see 5S03 Best Practice Guideline #A2, Applying the procurement prescripts of the CIDB in the Public Sector and 5S16 Best Practice Guideline #A7, The procurement of professional services).

Step 2.5: Obtain approval for procurement strategies that are to be adopted

Motivate selected procurement strategies for the proposed procurement and obtain approval for the options selected from those persons mandated in the institution's procurement policy.

Confirm that the institution has internal or external capacity and expertise to undertake the procurement for the chosen procurement strategies. If not, recommend changes in selections.

Revise selections as necessary and obtain approval for procurement strategies.

3.6.3        Activity 3: Solicit tender offers

The actions associated with this activity must be conducted in accordance with the provisions of the CIDB Code of Conduct for the Parties Engaged in Procurement.

Written reasons may have to be furnished to tenderers for administrative actions around issues pertaining to the solicitation of tender offers. Administration of these actions should be done in accordance with the Promotion of Administrative Justice Act[9].

Table 3.5 sets out the sub-activities associated with activity 3, describes the principal actions associated with this activity and each sub-activity, the necessary input to and output from such actions and the dependencies between sub-activities

Table 3.5: Sub-activities, related actions, inputs and outputs pertaining to activity 3: solicitation of tender offers

#

Activity

Principal action

Input to the action

Output from the action

3

Solicit tender offers

Solicit tender offers in terms of a set of procedures.

Approved scope of work and procurement strategy

Tender offers

3.1

Prepare procurement documents

Prepare pre-qualification and / or tender documents, as appropriate, that are compatible with the approved procurement strategies.

Approved scope of work and procurement strategy

Procurement documents

3.2

Obtain approval for procurement documents

Nominated official(s) review the procurement document, identify sections, if any, that require amendments or improvements, and grant the necessary approval.

Procurement document

Approved procurement document

3.3

Confirm that budgets are in place

Nominated official(s) make sure that finance is available for the procurement to take place.

Document containing approximate value of procurement

Permission to solicit tender offers

3.4

Invite contractors to submit tender offers or expressions of interest

Advertise for tenders / identify contractor(s) that are to be invited to submit tender offers in accordance with the approved procurement procedure, issue procurement documents, respond to requests for clarification, conduct clarification / site meetings, issue attendees with minutes of such meetings, and issue addenda, as relevant.

Procurement document

Procurement documents issued for solicitation purposes

Site Clarifcation minutes issued (see template 5T01)

3.5

Receive tender offers or expressions of interest

Ensure that arrangements are in place to receive tender offers / expressions of interest and return unopened those that are received late, are delivered not in accordance with instructions given to tenderers or where only one tender is received and it is decided to call for fresh tenders.

Procurement document issued for solicitation purposes

Tender submissions

3.6

Evaluate expressions of interests

Open expressions of interest, record data relating to the submission and evaluate in accordance with undertakings made to tenderers.

Tender submissions

Evaluated expression of interests

3.7

Prepare evaluation report on shortlisting process

Prepare evaluation report and make recommendations in respect of actions to be taken, depending upon the procurement procedure that is adopted.

Evaluated expressions of interest

Evaluation Report

3.8

Confirm shortlist

Nominated official(s) review evaluation report and ratify recommendations.

Evaluation report

Approved shortlist of tenderers

3.9

Invite tender offers from shortlist

Invite tender offers from short list, respond to requests for clarifications by tenderers, conduct clarification / site meetings, issue all attendees with the minutes of such meetings, and issue addenda to amend or amplify the procurement documents, as relevant. The Qualified or Proposal (two stage tendering) procedure to be used stipulating required timeframes.

Approved shortlist of tenderers

Procurement documents issued to short listed tenderers

 

Extract from Standard Conditions of Tender (See Annex F of CIDB Standard for Uniformity in Construction Procurement)

Clause

Heading

Action

 

F.1.5.1

The Employer's rights to accept or reject any tender offer

The employer may accept or reject any variation, deviation, tender offer, or alternative tender offer, and may cancel the tender process and reject all tender offers at any time before the formation of a contract. The employer shall not accept or incur any liability to a tenderer for such cancellation and rejection, but will give reasons for such action upon written request to do so.

F.1.5.2

 

The employer may not subsequent to the cancellation or abandonment of a tender process or the rejection of all responsive tender offers re-issue  a tender covering substantially the same scope of work within a period of six months unless only one tender was received and such tender was returned unopened to the tenderer.

 

Step 3.1: Prepare procurement documents

Procurement documents comprise those documents required to:

Ÿ         Pre-qualify respondents so that they may be invited to tender

Ÿ         Solicit tender offers

Ÿ         Establish the terms and conditions of the contract

Compile procurement documents for the calling for expressions of interest. Ensure that the Submission Data contains a list of returnable documents.

Requirements for the preparation of procurement documents can be found in the CIDB’s Standard for Uniformity in Construction Procurement. Guidance on the formatting and compilation of procurement documents may be found in 5S03 Best Practice Guideline # A2, Applying the procurement prescripts of the CIDB Act in the Public Sector,  5S10  Best Practice Guideline #C1, Preparing procurement documents and SAICE Practice Manual #1, The use of South African National Standards in Construction Procurement. (See also the CIDB’s Standardised Construction Procurement Documentation for Engineering and Construction Works and Professional Services (5E01 and 5E02) which provides an example of a generic document compiled in accordance with the provisions of the CIDB Standard for Uniformity in Construction Procurement[10])

 

 

Extract from Standard Conditions for the Calling for Expressions of Interest (see Annex H of CIDB Standard for Uniformity in Construction Procurement)

Clause

Heading

Action

 

H.1.2

Supporting documents

The documents issued by the employer for the purpose of obtaining expressions of interest are listed in the submission data.

 

Expressions of interest are only called for where the Nominated, Qualified Procedure and Proposal (Two stage tendering) is used to populate electronic data bases, to pre-qualify tenderers or to submit technical proposals, respectively. (See SANS 294).  Where an electronic data base has already been populated, it is not necessary to call for expressions of interest.

Select an appropriate form of contract for the procurement using the guidance contained in 5S10 Best Practice Guideline #C1, Preparing procurement documentation, and 5S11 Best Practice Guideline #C2, Choosing an appropriate form of contract for engineering and construction works, and prepare procurement documents in accordance with the provisions of 5S10 Best Practice Guideline #C1, Preparing procurement documentation, and SAICE Practice Manual #1, The use of South African National Standards in Construction Procurement, that are compatible with the adopted procurement strategies. Ensure that the Tender Data contains a list of tender documents.

Extract from Standard Conditions of Tender (see Annex F of CIDB Standard for Uniformity in Construction Procurement)

Clause

Heading

Action

 

F.1.2

Tender documents

The documents issued by the employer for the purpose of a tender offer are listed in the tender data.

 

It must be stressed that procurement documents cannot be finalised until such time that:

Ÿ         All the necessary studies and / or preliminary investigations, commensurate with the selected contract strategy have been completed

Ÿ         The bodies which need to be consulted in connection with the procurement, have been consulted

Ÿ         The compatibility with other works has been established

Quality (functionality) criteria used in the evaluation of tender offers shall be developed in accordance with the requirements of the CIDB Standard for Uniformity in Construction Procurement. 5S05 Best Practice Guideline #A4, Evaluating quality in tender submissions, provides guidance in this regard.

Those tendering for a contract need to know the degree of risk that they are expected to take. The higher the risk, the greater must be the financial provision in case the worst scenario occurs. Consequently, the higher the risk a contractor assumes, the greater will be the tender value and hence the cost borne by the institution. Whereas careful checking of the facts about existing circumstances will help to reduce the total risk, there will always be elements of uncertainty outside the control of all parties to the contract.

Procurement documents must assign risks to each party so that they can make provision for managing them, either by adding to the cost of the tender or by spreading the risk by means of acquiring insurance. (See 5S06 Best Practice Guideline #A5, Managing construction risk, and 5S11 Best Practice Guideline #C2, Choosing an appropriate form of contract for engineering and construction contracts)

Even if all possible measures are taken to clarify what outcome is expected, there will always be risk attached to the procurement processes. All likely or possible risks should be identified and explicitly assigned to a particular party in procurement documents, failing which;

Ÿ         High premiums will be placed on the finance required for procurement

Ÿ         Tender prices will be unexpectedly high

The length of the contract needs to be carefully considered. Clearly, the length of contract needs to be matched to the time-scale necessary to achieve the required outcome together with the level of investment and training necessary. Contract periods vary with the type of work required. For term contracts where the contractor has to provide significant “up-front” investment, periods of up to 15 years are not unusual. Indeed, where very significant investment is required, periods of up to 25 years are adopted. A maintenance contract where investment is limited to enabling the contractor to fulfil a contract is likely to be no more than three to four years in length.

For engineering and works contracts, the duration of the contract should match the reasonable rates of progress to completion. A shorter contract length will result in higher costs which can only be justified if the institution has an urgent need for an early completion and a distinct benefit can be shown for early delivery.

The failure to identify things that exist at the outset of the procurement frequently give rise to costly disputes between the parties.

When applicable, the procurement documents should satisfy the requirements of donor funding agencies or banking institutions. It should be noted in this regard that section 3(a) of the Reconstruction and Development Programme Fund Act (Act 7 of 1994) requires that “the money of the fund shall be utilised in accordance with the relevant technical assistance agreement.” Donor funding should further consider the conditions stipulated by the donor. 

Step 3.2: Obtain approval for procurement documents

The persons mandated in the institution’s procurement policy should review the procurement documents, identify sections, if any, that requires amendments or improvements and grant the necessary approval.

Step 3.3: Confirm that budgets are in place

Those persons mandated as being responsible in the institution’s procurement policy should confirm that budgets and availability of funds are in place so that the procurement may proceed.

Step 3.4: Invite contractors to submit tender offers or expressions of interest

With reference to the CIDB Standard for Uniformity in Construction Procurement, the institution should:

Ÿ         Undertake the following depending upon the procurement procedure that is adopted:

Construction Procurement Procedure

Actions to be followed

Negotiated procedure

Identify preferred bidder/sole source provider and request that a tender offer be submitted.

Nominated procedure

Prepare calls for expression of interest to populate the data base if not already populated.

Use software for electronic data base to identify contractors who are to be invited to tender.

Open procedure

Prepare tender advertisements

Advertise tenders / expressions of interest in appropriate media.

Proposal procedure using the two-envelope system / two-stage system

Prepare advertisements for the submission of tenders (two envelope) and expressions of interest (two stage).

Advertise for proposals in appropriate media.

Qualified Procedure

Prepare calls for expression of interest.

Advertise tenders / expressions of interest in appropriate media.

Quotation procedure*

Invite tender offers, giving tenderers a minimum of three days to respond to invitation, using one or more of the following methods:

i)     posting a notice on a website;

ii)    posting a notice on a demarcated notice board in a public area;

iii)   placing an advertising in a local or national newspaper;

iv)     inviting registered contractors from a data base registered in an appropriate work category to submit quotations in a manner that over time all registered contractors who have the requisite expertise have an opportunity to submit tenders.

Shopping procedure*

Obtain three written or verbal offers and confirm lowest offer in writing, if relevant.

*subject to threshold values

 

Ÿ         Obtain contact particulars of entities that draw procurement documents and collect non-refundable deposits, as appropriate

Ÿ         Respond to requests for clarifications by tenderers.

Ÿ         Conduct clarification / site meetings, as necessary, and issue all attendees with the minutes of such meetings

Ÿ         If necessary, issue addenda to amend or amplify the procurement documents to each entity that drew documents / attended any compulsory clarification / site meeting

Step 3.5:  Receive tender offers or expressions of interest

Expressions of interest are only called for where:

Ÿ         Electronic data bases need to be populated to enable the Nominated Procedure to be used

Ÿ         Tenderers need to be pre-qualified and short listed to submit tender offers in terms of the Qualified Procedure

Ÿ         Technical proposals are solicited in the first stage of the two stage Proposal Procedure

Ensure that arrangements are in place to receive tender offers / expressions of interest. Return tender offers, and where appropriate expressions of interest, unopened if:

Ÿ         Received after the closing time

Ÿ         The tender submission is received by a method other than the method prescribed in the procurement documents

Ÿ         Only one tender offer  is received and it is decided to call for fresh tenders

Tenderers are required to in terms of the Standard Conditions of Tender/ Standard Conditions for the Calling for Expressions of Interest to:

Ÿ         Seal the original and each copy of the tender offer as separate packages marking the packages as "ORIGINAL" and "COPY".  Each package shall state on the outside the Employer's address and identification details stated in the Tender Data, as well as the tenderer's name and contact address

Ÿ         Seal the original tender offer and copy packages together in an outer package that states on the outside only the Employer's address and identification details as stated in the Tender Data

Ÿ         Accept that the Employer will not assume any responsibility for the misplacement or premature opening of the tender offer if the outer package is not sealed and marked as stated

Step 3.6:           Evaluate expressions of interests

This step must be omitted where the Open, Negotiated, Quotation and Proposal (two-envelope) procedures are used. It must also be omitted in the Nominated Procedure where the electronic data base is populated.

Ÿ         Open expressions of interest in public and in the presence of not less than two officials on the date prescribed in the advertisement / bid documents, record the names of the entities making the submissions and acknowledge receipt of the submissions

Ÿ         Evaluate expressions of interest in accordance with the provisions of the Submission Data and, where relevant the policy and operational procedures for electronic data bases or the guidance provided in 5S05 Best Practice Guideline #A4, Evaluating quality in tender submissions

Step 3.7: Prepare evaluation report on short listing process

This step is only required in the Qualified and Proposal (two stage tendering) procedures.

Prepare evaluation report and make recommendations in respect of actions to be taken, depending upon the procurement procedure that is adopted:

Procurement Procedure

Actions

Nominated procedure

Admit to electronic data base and confer preferred status in a specific category if the tenderer is eligible for such status.

Qualified Procedure

Make recommendations as to whether or not the tender is to be short listed.

Proposal procedure

(Option 2: Two stage tendering)

Evaluate technical proposals and make recommendations as to which tenderers should be invited to submit financial proposals based on the revised procurement documents

 Step 3.8: Confirm short list

This step is only required in the Qualified and Proposal (two stage tendering) procedures.

Those persons mandated in the institution's procurement policy should review the evaluation report and ratify recommendations.

Step 3.9: Invite tender offers from short list

This step is only required in the Qualified and Proposal (two stage tendering) procedures.

Ÿ         Invite tender offers from short list

Ÿ         Respond to requests for clarifications by tenderers

Ÿ         Conduct clarification / site meetings, as necessary, and issue all attendees with the minutes of such meetings

Ÿ         If necessary, issue addenda to amend or amplify the procurement documents

Ÿ         Timeframes should be stipulated

3.6.4        Activity 4: Evaluate tender offers

Tender offers must be evaluated in accordance with the parameters stated in the tender data

The actions associated with this activity must be conducted in accordance with the provisions of the Code of Conduct for the parties engaged in construction procurement.

Written reasons may have to be furnished to tenderers for administrative actions around issues pertaining to the evaluation of tender offers. Administration of these actions should be done in accordance with the Promotion of Administrative Justice Act[11].

Table 3.6 sets out the sub-activities associated with activity 4, describes the principal actions associated with this activity and each sub-activity, the necessary input to and output from such actions and the dependencies between sub-activities.

Steps 4.1 to 4.6 pertaining to the evaluation of tender offers

Evaluate tender offers and prepare tender evaluation report in accordance with the provisions of 5S04 Best Practice Guideline # A3, Evaluating tender offers. 5S19 CIDB Practice Note 2, Correcting arithmetical errors in tenders, sets out the manner in which arithmetical corrections are to be made in the evaluation of tenders in accordance with the CIDB Standard Conditions of Tender.

Step 4.7: Confirm recommendation contained in tender evaluation report

Those persons mandated in the institution's procurement policy should review the tender evaluation report and ratify the recommendation for the award of the contract.

3.6.5        Activity 5: Award contract

The actions associated with this activity focus on the entering into a contract with the successful tenderer.

Table 3.8 sets out the sub-activities associated with activity 5, describes the principal actions associated with this activity and each sub-activity, the necessary input to and output from such actions and the dependencies between sub-activities

Step 5.1: Notify successful tenderer and unsuccessful tenderers of outcome

Notify in writing the successful and unsuccessful tenderer

Step 5.2: Compile contract document

Assemble contract document from the relevant tender returnables and draft contract issued to tenderers, capturing all the changes that were agreed to between the offer and acceptance in the Schedule attached to the Form of Offer and Acceptance. (See 5S10 Best Practice Guideline #C1, Preparing procurement documentation, and SANS 10403).

The completion of the schedule attached to the Form of Offer and Acceptance not only contains a record of all agreed deviations from the tender documents but also forms an audit trail of all agreed changes between offer and acceptance.

Table 3.6: Sub-activities, related actions, inputs and outputs pertaining to activity 4: evaluation of tender offers

#

Activity

Principal action

Input to the action

Output from the action

4

Evaluate tender offers

Evaluate tender offers in terms of undertakings and parameters established in procurement documents.

Tender submissions

Evaluated tender offers

4.1

Open and record tender offers received

Open tender offers, in public in the presence of not less than two officials, and record pertinent details, authenticate all pages of returnable documents, and notify interested parties of pertinent details if requested to do so.

Sealed tender submissions

Opened tender submissions

4.2

Determine whether or not tenders offers are complete

Compare tender submission against List of Returnable Documents contained in the tender document and identify schedules and component documents that have not been returned or are incomplete e.g. signed documentation. Request tenderers to complete incomplete tender documents, within a reasonable period of time, that are required only for  tender evaluation purposes so that they are capable of being evaluated, this must be in compliance with the Conditions of Tender. Record what is incomplete in each tender submission.

Opened tender submissions

Complete tender submissions

4.3

Determine whether or not tender offers are responsive

Confirm compliance with all the requirements of the procurement documents, including eligibility criteria. If not, declare tender offers non-responsive and record reasons for declaring a tender to be non-responsive  and disregard such tender offers from further consideration.

Complete tender submission

Responsive tender submissions

4.4

Evaluate tender submissions

Review financial offer and correct discrepancies between totals and calculations / summations, identify parameters included in the tender submission that have a bearing on the financial offer and reduce all tender offers to a common base.

Judge the reasonableness of financial offers and reject all tender offers with unrealistic financial offers.

Evaluate tender submissions in accordance with the tender evaluation method adopted for the procurement.

Responsive tender submissions

Tender offers ranked in terms of the evaluation

4.5

Perform a risk analysis

Perform a risk analysis on the tenderer ranked highest in terms of the tender evaluation and, if found to be unsatisfactory, undertake an analysis on the next highest ranked tenderer and so on until such time as a tenderer satisfies the risk assessment, and recommend this tenderer for the award of the contract.

Responsive tender submissions of highest ranked tenderers

Commercial risk exposure

4.6

Prepare a tender evaluation report

Prepare a tender evaluation report which as a minimum contains the tender evaluation points awarded to each tenderer, the reasons for eliminating tender offers and a recommendation for the award of the contract.

Tender evaluation schedule and commercial risk exposure

Tender Evaluation Report

4.7

Confirm recommendation contained in the tender evaluation report.

Nominated official(s) to review report and ratify recommendations.

Tender evaluation report

Approved tender evaluation report

 

 

Table 3.7: Sub-activities, related actions, inputs and outputs pertaining to activity 5: award contract

#

Activity

Principal action

Input to the action

Output from the action

5

Award contract

Enter into contract with the successful tenderer.

Approved tender evaluation report

Signed contract

5.1

Notify successful tenderer and unsuccessful tenderers of outcome

Notify in writing the successful tenderer and unsuccessful tenderers

Approved tender evaluation report

Communication to successful and unsuccessful tenderers

5.2

Compile contract document

Assemble contract document from the relevant tender returnables and draft contract issued to tenderers, capturing all the changes that were agreed to between the offer and acceptance.

Procurement document and tender submission

Contract Document

5.3

Formally accept tender offer

Confirm that the tenderer has provided a valid, original tax clearance certificate issued by the South African Revenue Services, formally accept the tender offer in writing and issue contractor with a signed copy of the contract.

Contract document

Signed contract

5.4

Capture contract award data

Capture, in a data base, essential contract data for record purposes.

Contract document

Recorded contract  data

 Step 5.3: Formally accept tender offer

Confirm that the tenderer has provided a valid, original tax clearance certificate issued by the South African Revenue Services.

Extract from Standard Conditions of Tender (see Annex F of CIDB Standard for Uniformity in Construction Procurement)

Clause

Heading

Action

 

F.3.16

Issue final contract

Prepare and issue the final draft of contract documents to the successful tenderer for acceptance as soon as possible after the date of the employer's signing of the form of offer and acceptance (including the schedule of deviations, if any). Only those documents that the conditions of tender require the tenderer to submit, after acceptance by the employer, shall be included.

F.3.17

Complete Adjudicator's Contract

Unless alternative arrangements have been agreed or otherwise provided for in the contract, arrange for both parties to complete formalities for appointing the selected adjudicator at the same time as the main contract is signed.

F3.18

Provide copies of the contracts

Provide to the successful tenderer the number of copies stated in the Tender Data of the signed copy of the contract as soon as possible after completion and signing of the form of offer and acceptance.

 

Formally accept the tender offer in writing and issue contractor with a signed copy of the contract.

It is sufficient to merely sign the acceptance portion of the Form of Offer and Acceptance to accept the tender offer. (See Annex C of CIDB Standard for Uniformity in Construction Procurement).

The initialling of each page is not required by law to give effect to the contract. This practice, may, however, assist in identifying the contract between the parties during the discovery phase of litigation proceedings. 

Step 5.4: Capture contract award data

Capture the following in a data base for record purposes:

Ÿ         The contract reference number

Ÿ         A description of the work

Ÿ         The contract price

Ÿ         Preferences claimed

Ÿ         Tender evaluation points awarded

Ÿ         The price of the tender used for comparative purposes

Ÿ         The name and address of the successful tenderer

Ÿ         The reasons for awarding the contract to that tenderer

Ÿ         The reasons why any tenderers were rejected

Ÿ         The procurement procedure used

3.6.6        Activity 6: Administer contracts and confirm compliance with requirements

The focus on the actions in this activity are on acting in terms of the contract and confirming that the procurement is in accordance with all requirements.

Table 3.8 sets out the sub-activities associated with activity 6, describes the principal actions associated with this activity and each sub-activity, the necessary input to and output from such actions and the dependencies between sub-activities

Table 3.8:   Sub-activities, related actions, inputs, outputs and dependencies pertaining to activity 6: administer contract and confirm compliance with requirements

#

Activity

Principal action

Input to the action

Output from the action

6

Administer contracts and confirm compliance with requirements

Act in terms of the contract and confirm that procurement is in accordance with all requirements.

Contract document

Contract completed in accordance with requirements

6.1

Administer contract in accordance with the terms and provisions of the contract

Administer the contract in accordance with its terms and conditions and pay contractors within the time periods provided for in the contract so as to avoid interest on late payments.

Contract document

Compliance with administrative provisions of the contract

6.2

Ensure compliance with requirements

Monitor the contractor’s performance to ensure that the requisite quality standards are attained and all requirements are satisfied and certify compliance upon completion.

Contract document

Certified compliance with contract requirements

6.3

Capture contract completion / termination data

Record, in a data base, key performance indicators relating to time, cost and the attainment of specific goals associated with a preferential procurement policy, or if the contract is terminated or cancelled, the reasons therefore.

Termination / completion report

Recorded data

 

Step 6.1: Administer contract in accordance with the terms and provisions of the contract

Ÿ         Administer the contract in accordance with its terms and conditions within the agreed time frames. (See Contract administration chapter of SAICE Practice Manual #2, Delivering construction projects using the design by employer contracting strategy.)

Ÿ         Pay contractors within the time periods provided for in the contract so as to avoid interest on late payments

Ÿ         Resolve disputes in accordance with the provisions of the contract

Step 6.2:           Ensure compliance with requirements

Monitor the contractor’s performance to ensure that the requisite quality standards are attained and the requirements are satisfied and certify compliance upon completion. 

Step 6.3:           Capture contract completion / termination data

Record key performance indicators relating to time, cost and the attainment of specific goals associated with a preferential procurement policy, or if the contract is terminated or cancelled, record the reasons therefore.

This is an opportune time to review the procurement process. Such reviews should focus on:

Ÿ         Whether the procurement satisfied the stated objectives

Ÿ         Whether needs and expectations have changed such that the procurement documents should be modified

Ÿ         Whether the procurement process itself could be improved

Ÿ         How external factors such as legislation, regulations or standard component procurement documents have changed

3.7         Applying the CIDB Registers to the procurement system

Table 3.9 identifies the actions required in applying the CIDB Construction Registers Service, if any, associated with each of the procurement activities identified in Figure 3.1 .Greater detail is provided in the 5S07 CIDB Best Practice Guideline A6, Applying the registers to construction procurement.

Employers are required to register with the CIDB using from CRS P1 (Application for an employer number and authorisation of internet users.)  All projects must be registered free of any charge on the CIDB’s website www.cidb.org.za within one month from the date on which the contractors offer to perform a construction works contract are accepted in writing.

Employers are required to advertise all their tenders on the CIDB’s I-Tender service i.e. a fully electronic national information system located on the CIDB’s website. The information captured is then relayed to registered contractors either by SMS (short text message) or e-mail. The adverts are placed in a searchable data base on the CIDB website which is accessible to the public.

Employers are also required to notify the CIDB through its website of the cancellation / termination of any contracts within these time frames.

 Table 3.9: Applying the Registers in the procurement process 

Activity

Steps

Actions associated with the register of contractors

1

Establish what is to be procured

1.1

Prepare broad scope of work for procurement

Categorise procurement as engineering and construction works / services / supplies or disposals.

1.2

Estimate financial value of proposed procurement

Establish approximate contractor grading requirement based on estimate of contract value.

1.3

Obtain permission to start with the procurement process

Nil

2

Decide on procurement strategies

2.1

Establish applicable preferential procurement policy

Make use of data in the register to develop, if necessary, procurement strategies around the supply of contractors registered as having the required contractor grading designation. (See 5S17 Best Practice Guideline A8: Procurement Measures to Develop Registered Contractors)

2.2

Establish contract and pricing strategy

2.3

Establish targeting strategy

2.4

Establish procurement procedure

2.5

Obtain approval for procurement strategies that are to be adopted

Nil

3

Solicit tender offers

3.1

Prepare procurement  documents

Include clauses outlined in section 4 in procurement documents

3.2

Obtain approval for procurement documents

 

Nil

3.3

Confirm that budgets are in place

3.4

Invite contractors to submit tender offers or expressions of interest#

Include clauses as outlined in section 4 in procurement documents.

Advertise tenders / calls for expressions of interest on the CIDB website.

3.5

Receive tender offers or expressions of interest

 

3.6

Evaluate expressions of interests

Declare all respondents as non-responsive who have a contractor grading designation less than that required or, in the case of expressions of interest, fail to obtain the requisite registration 21 working days after the closing date for submissions.

3.7

Prepare evaluation report on shortlisting process

 

3.8

Confirm shortlist

Confirm that all respondents are registered and have a contractor grading designation not less than that specified in the call for expressions of interest.

3.9

Invite tender offers from shortlist

 

 

Nil

4

Evaluate tender offers

4.1

Open and record tender offers received

4.2

Determine whether or not tenders offers are complete

4.3

Determine whether or not tender offers are responsive

Declare all tenderers who have a contractor grading designation less than that required or fail to obtain the requisite registration prior to the evaluation of tender submissions as non-responsive.

4.4

Evaluate tender submissions

4.5

Perform a risk analysis.

Confirm that the tenderer has demonstrated that-

(i)  he or she has the resource capacity specific to the contract concerned;

(ii) his or her capacity to perform the construction works concerned will not be unduly compromised on the award of the contract concerned.

4.6

Prepare a tender evaluation report

Nil

4.7

Confirm recommendation contained in the tender evaluation report.

Confirm registration of contractor (i.e. check for debarment) and that his or her contract grading designation is as required.)

5

Award contract

5.1

Notify successful tenderer and unsuccessful tenderers of outcome

Nil

5.2

Compile contract document

5.3

Formally accept tender offer

5.4

Capture contract award data

Register contract on Register of Projects within one calendar month of the date on which a contractor’s offer to perform a contract is accepted in writing.

6

Administer contracts and confirm compliance with requirements

6.1

Administer contract in accordance with the terms and provisions of the contract

 

6.2

Ensure compliance with requirements

 

6.3

Capture contract completion / termination data

Notify the CIDB within one calendar month of  cancelling / terminating the contract.

 

Annex A: Construction Procurement Best Practice Library

 

The standards, processes, procedures, methods and systems embodied in the following CIDB publications are deemed desirable and appropriate by the Board:

Title

Synopsis

Procurement procedures and practices

CIDB Best Practice Guideline A1: The Procurement Cycle
(1001)

This practice guide identifies six main procurement activities that apply to all construction procurements irrespective of their categorisation as supplies, services and engineering and construction works. It also identifies the generic steps (sub-activities) associated with such activities and the logical points in the process where controls should be introduced. The actions associated with these activities and sub-activities are documented as well as the inputs and outputs to each of the actions in a logical framework.

The practice guide also presents the recommended approach to performing the various activities and sub-activities

CIDB Best Practice Guideline A2: Applying the procurement prescripts of the CIDB in the Public Sector (1002)

This practice guide provides guidelines on the application of the CIDB’s Standard for Uniformity in Construction. It also establishes the relationship between this standard and National Treasury’s Regulatory Framework for Supply Chain Management . Guidance is also provided on the establishment of a procurement policy within an institution and the manner in which procurement may be managed and controlled.

CIDB Best Practice Guideline A3: Evaluating tender offers (1003)

This practice guide provides guidance on the evaluation of tenders in accordance with the provisions of the CIDB Standard for Uniformity in Construction Procurement respect of the seven steps identified in Practice Guide A1 associated with this activity. It also contains proforma forms to evaluate tender offers and an example of a tender evaluation report.

CIDB Best Practice Guideline A4: Evaluating Quality in Tender Submissions (1004)

This practice guide defines quality within the procurement context and reviews the requirements for evaluating quality in the accordance with regulatory requirements and the provisions of the CIDB Standard for Uniformity in Construction Procurement for the evaluation of quality. It furthermore provides practical guidelines on the awarding of preferences for quality, pre-qualification on the basis of quality and the scoring of tender submissions in terms of quality and price or quality, price and preference.

CIDB Best Practice Guideline A5: Managing Construction Procurement Risks  (1005)

This practice guide outlines the main elements of the risk management process. It identifies the generic sources of construction related risks, presents a range of options for risk allocation between the employer and the contractor and discusses the question of insurances. It also provides guidelines for the management of risk.

CIDB Best Practice Guideline A6: Applying the Registers to Construction Procurement (1006)

This practice guide outlines the processes associated with the implementation of the register of contractors and the register of projects in accordance with the provisions of the Construction Industry Development Regulations. It provides guidelines to employers and their agents to comply with the requirements of these regulations in their procurements and describes the manner in which requirements relating to contractor grading designations may be incorporated in procurement documents.

CIDB Best Practice Guideline A7: The procurement of professional services (1035)

This practice guide provides an overview of government’s policy regarding the appointment of consultants and the provisions made in the CIDB Standard for Uniformity for the procuring of professional services. It outlines procedures in respect of each of the methods contained in this standard and guidance on the compilation of procurement documentation associated with professional service contracts. It also establishes the relationship between the methodology advocated by the standard and that promoted by National Treasury in their Supply Chain Management Practice Notes.

CIDB Best Practice Guideline A8: Procurement measures to develop registered contractors. (1036)

This practice guide outlines the principles for sustainable growth and a number of strategies to promote the participation of smaller registered contractors in public contracts so that they can grow and develop. The strengths and weaknesses of each of these strategies are discussed.

Preferencing arrangements

CIDB Best Practice Guideline B1: Formulating and Implementing Preferential Procurement Policies (1007)

This practice guide presents a range of policy options and implementation methodologies that may be pursued in the formulation of preferential procurement policies that are consistent with the provisions of the South African regulatory regime. The guide introduces the thinking behind preferential procurement policies, the manner in which such policies are implemented internationally and the constraints to implementation within South Africa. It interprets the Preferential Procurement Policy Framework Act and related regulations, identifies the methods by which preferences may be applied, provides guidelines as to how preferential procurement policies may be formulated to satisfy legislative requirements and contains examples of preferential procurement policies that are drafted in accordance with this practice guide.  

CIDB Best Practice Guideline B2: Methods and Procedures for Implementing Preferential Procurement Policies (1008)

This practice guide provides a range of uniform methods and procedures for implementing a wide range of policy themes in a consistent manner. The guide presupposes that a preferential procurement policy is in place and focuses on the capturing of preferencing requirements in procurement documents.  It contains sample preferencing schedules, clauses required to activate preferencing in the Tender Data where use is made of the CIDB Standard for Uniformity in Construction Procurement, and data capture forms.

Procurement documentation

CIDB Best Practice Guideline C1: Preparing Procurement Documents (1009)

This practice guide identifies the various types of procurement documents and provides a uniform format for the drafting and compilation of these documents. It also establishes a practical approach to uniformity and standardisation of procurement documents within an organisation and makes recommendations regarding the forms of contracts which should be used. It also contains a number of proforma component documents to facilitate a uniform approach.

CIDB Best Practice Guideline C2:
Choosing an appropriate Form of Contract for Engineering and Construction Works (1010)

This practice guide presents the fundamental considerations in the selection of a form of contract for engineering and construction works. It presents an overview of three different series of forms of contracts and provides practical guidance of the selection of appropriate forms of contract for an organisation or for use in selected pricing and contracting strategies.

CIDB Best Practice Guideline C3: Adjudication (1011)

This practice guide provides an overview of what adjudication is, presents the principles underpinning adjudication, reviews the provisions for adjudication in standard forms of contract (NEC, FIDIC and CIDB), outlines an approach for the selection and use of adjudicators, and provides sample clauses and proforma agreements to be included in procurement documents.

Joint venture and subcontracting arrangements

CIDB Best Practice Guideline D1: Subcontracting Arrangements (1012)

This practice guide establishes acceptable practices in respect conditions of subcontract.  Features of forms of subcontract which are unacceptable to the Employer and the Contractor are identified and described.  It also recommends forms of subcontract which have desirable features for use with the main contracts identified in Practice Guide C2 and reviews the legal considerations in the engagement of labour only subcontractors.

CIDB Best Practice Guideline D2: Joint Venture Arrangements (1013)

This practice guide identifies the reasons for forming joint ventures, reviews requirements for the formation of joint ventures in response to preferential procurement policies and presents an overview of the typical content of a joint venture agreement. It also identifies the standard joint venture agreements forms that are suitable for use or to serve as a basis for the development of an agreement.

 

The following publications are referenced in the abovementioned CIDB publications and as such form an integral part of the provisions of these publications. They too contain desirable and appropriate standards, processes, procedures, methods and systems endorsed by the focus group - and as such also constitute best practice.

Documents

Title

Synopsis

CIDB Adjudication Procedure (1014)

This document contains an adjudication procedure and an agreement for the appointment by the parties of an adjudicator. It may be used in any form of contract or subcontract.

CIDB Standard Professional Services Contract (1015)

This standard form of contract establishes the risks, liabilities and obligations of the parties to a professional service contract.

CIDB Subcontract For Labour Only Engineering and Construction Works (1016)

This standard form of contract establishes the risks, liabilities and obligations of the parties to a labour only subcontract involving engineering and construction works.

CIDB Joint Venture Agreement (1017)

This joint venture agreement establishes the basic agreement between the joint venture partners and outlines the content of the schedules that are necessary to make the agreement project specific.

CIDB General conditions of purchase (1018)

This standard form of contract establishes the risks, liabilities and obligations of the parties to very basic supply contracts.

CIDB Contract for the Supply and Delivery of Goods (1019)

This standard form of contract establishes the risks, liabilities and obligations of the parties to a simple supply contract.

CIDB Supply of Goods (Short Contract) (1020)

This standard form of contract, based on the NEC system, establishes the risks, liabilities and obligations of the parties to a simple supply contract.

CIDB The Supply Contract (1021)

This standard form of contract, based on the NEC system, establishes the risks, liabilities and obligations of the parties to a complex supply contract.

Practice Manuals published by the South African Institution of Civil Engineering

SAICE Practice Manual #1. The use of South African National Standards in Construction Procurement

This practice manual provides comprehensive guidance on the use of SANS 294, SANS 10403, SANS 10396, and the SANS 1914, SANS 1921 and SANS 2001 families of standards in construction procurement. It also provides guidance on the use of SABS 1200 where procurement documents are compiled using in accordance with the provisions of SANS 10403.

SAICE Practice Manual #2: Delivering construction projects using the design by employer contracting strategy.

This practice manual presents an overview of a number of contracting strategies that are commonly encountered in engineering and construction works contracts and fully describes the processes and sub-processes associated with design by employer contracting strategy. It also outlines the administrative processes associated with FIDIC, GCC, NEC and JBCC forms of contract with this contracting strategy.

Standards published by Standards South Africa

SANS 294, Construction Procurement processes, procedures and methods

 This standard provides processes, methods and procedures for the establishment within an organisation of a procurement system that is fair, equitable, transparent, competitive and cost effective. It:

a)  describes generic procurement processes around which an organisation may develop its procurement system;

b)  establishes minimum requirements for the conduct of an organisation’s  employees, agents, board members and office bearers when engaging in procurement;

c)  establishes the framework for the development of an organisation’s  procurement policy including any preferential procurement policy;

d)  establishes generic methods and procedures for procurements including those pertaining to disposals; and

e)            provides standard conditions of tender and conditions for the calling for expressions of interest.

SANS 1914-1, Resource Standard for the Participation  of targeted enterprises

These six standard targeted construction procurement standards:

a)                  describe the general requirements for engaging targeted enterprises and / or targeted labour  on a contract for the provision of supplies, services or works, as relevant;

b)                  specify the contract participation goal (the value of a percentage of the value of the contract which represents the inputs of targeted enterprises and/or targeted labour in the performance of the contract;

c)                   set out the methods by which the contract participation goal will be measured, quantified and verified in the performance of the contract;

d)                  describe the means by which:

i)           progress towards the attainment of the contract participation goal is to be monitored;

ii)          compliance with requirements will be verified and monitored; and

iii)        the contract participation goal will be adjusted to accommodate variations to the scope of the contract.

SANS 1914-2, Resource Standard for Participation of targeted  partners in joint ventures

SANS 1914-3, Resource Standard for Participation of targeted enterprises and targeted partners in joint ventures

SANS 1914-4, Resource Standard for Participation of targeted enterprises and targeted labour (local resources)

SANS 1914-5, Resource Standard for Participation of targeted labour

SANS 1914-6, Resource Standard for Participation of targeted enterprises in concession contracts

SANS 1921-1, Construction and Management Requirements for Works Contracts: Part 1: General

This standard establishes general construction and management requirements, which are applicable in a wide range of engineering and construction works contracts

SANS 1921-3, Construction and management requirements for works contracts, Part 3: Structural steelwork

This specification contains requirements for managing the fabrication and erection of structural steelwork.

SANS 10403, Formatting and Compilation of Construction Procurement Documents

This standard establishes at both prime and subcontract level:

a)         a uniform format for the compilation of procurement documents for supplies, services and engineering and construction works contracts; and

b)         the general principles for compiling procurement documents in respect of supplies, services and engineering and construction works.

SANS 10396, Implementing Preferential Procurement Policies Using  Targeted Procurement Procedures

 

This standard:

a)       sets out the issues and principles which should be considered when formulating preferential procurement policies and developing associated implementation mechanisms;

b)       sets out the principles associated with the engagement of targeted enterprises and targeted labour;

c)       establishes a range of techniques and mechanisms which may be used to provide a framework within which access to markets for targeted enterprises and / or targeted labour can be provided and goals relating to the engagement of such enterprises and / or labour can be set, monitored and evaluated at both project and programme level;

d)       establishes targeting frameworks and strategies which can be used with a number of different procurement regimes;

e)       describes techniques for the monitoring and evaluation of the outcomes of a preferential procurement policy;

f)        provides guidance as to how targeted procurement procedures can be activated in procurement documents; and

g)       provides guidance on the design and implementation of programmes associated with the implementation of a preferential procurement policy.

Forms of Contract and Agreements

SAFCEC Joint venture agreement

This joint venture agreement comprises the agreement itself and the heads of agreement between the partners in a joint venture.

FIDIC Joint Venture Consortium Agreement

This joint venture agreement is intended only for joint ventures between professional service providers and is not suitable for use by contractors

BIFSA Non-Nominated Subcontract for use with the JBCC Series 2000 Principal Building Agreement

These forms of subcontract establish the risks, liabilities and obligations of the parties to a subcontract

BIFSA Standard Subcontract Agreement 1995 edition (Amended 2000), for use with Principal Building Agreements other than the JBCC Principal Building Agreement.

BIFSA Labour-only sub-contract

JBCC series 2000 Nominated / selected Subcontract Agreement

JBCC series 2000 Engineering General Conditions 

 NEC3 Engineering and Construction Subcontract                   

NEC3 Engineering and Construction Short Subcontract

SAFCEC General conditions of subcontract (2003 edition)

FIDIC Conditions of Contract for Construction (“Red Book”)

These forms of contract  establish the risks, liabilities and obligations of the parties to a contract

FIDIC Conditions of Contract for Plant and Design-Build (“Yellow Book”) 

FIDIC Conditions of Contract for FIDIC EPC/Turnkey Projects (“Silver Book”)

FIDIC Short Form of Contract (“Green Book”)

JBCC series 2000 Principal Building Agreement

JBCC series 2000 Minor Works Agreement

NEC3 Engineering and Construction Short Contract (ECSC)

NEC3 Engineering and Construction Contract  (ECC)

NEC3 - The Professional Services Contract     

This form of contract  establish the risks, liabilities and obligations of the parties to a professional services contract

NEC3 Term services contract

This form of contract  establish the risks, liabilities and obligations of the parties to a professional services contract

SAICE General Conditions of Contract for Construction Works (2004)

This form of contract establishes the risks, liabilities and obligations of the parties to a contract.

 



[1] The Act defines “construction industry” as “the broad conglomeration of industries and sectors which add value in the creation and maintenance of fixed assets within the built environment.”

 

[2] The Act defines a project as a construction works contract or a series of related construction work contracts. Thus every prime or main contract within a project needs to be registered.

[3] A system is an organised scheme or plan of action or an orderly or regular procedure or method.

[4]  A method is a documented systematically-ordered collection of rules or approaches.

[5] A procedure contains the formal steps to be taken in the performance of a specific task, which may be evoked in the course of a process.

[6] Policy (within the legislative framework) established by a department establishes the manner in which choices within a system must be exercised by that department.

[7] Life cycle costing is the concept of including acquisition, operating and disposal costs when evaluating various alternatives (see module 3)

[8] SAICE Practice Manual #2, Delivering construction projects using the design by employer contracting strategy also provides guidance.

[9] A tenderer has the right to ask for justifiable reasons for the rejection or acceptance of any offer.

[10] It is recommended that each institution develop standardised procurement documents around the CIDB generic documents. (See examples 5E03 and 5E04 prepared for the Department of Public Works, Roads and Transport,  Free State Provincial Government,)

[11] A tenderer has the right to ask for justifiable reasons for the rejection or acceptance of any offer.