Open Tender Process
Gauteng Provincial Treasury

A. Problem Analysis

 1. What was the problem before the implementation of the initiative?
Anti-corruption reports and statistics obtained from various platforms (anti-corruption hotline, public protector, specialized investigating units, etc.) illustrated the degree of corrupt practices in government procurement. This also demonstrated the dissatisfaction from communities, business and civil society members of the Gauteng Province. In this regard Public Sector institutions had become infamous for tender maladministration, collusion with suppliers and corrupt practices. This corruption extended as far as developing specifications tailored for targeted suppliers and service providers so that competition among bidders was limited to allow a favorable outcome for the targeted bidder. Bid evaluation processes were also manipulated by nominated and appointed committee members to marginalize bidders not on the favored list. This manipulation included the ingenious exchange and removal of information from suppliers’ bidding documents, incorrect scoring of bidder proposals, and omission of key activities in the evaluation process. The key cause and outcome of this maladministration was the bribes offered by suppliers to secure government tenders and business paid to officials in the state to facilitate the security of especially large value tenders. The continuous award of large value tenders to the well-established and financially profitable companies had become the point of contention in awarding tenders. A number of laws and regulations are implemented to govern the tendering process that includes internal controls, checks and balances to effect these laws. Non-compliance to procedures and processes results in irregular expenditure declared by the Auditor General of South Africa. Irregular expenditure is a negative report disclosed to the public through audit reports and the annual financial statements of the institutions. Yet even this measure did not deter maladministration through bribery and corruption. The impact of all these measures has resulted in citizens’ lack of trust and confidence in Government leadership as well as Government processes in providing business opportunities to various markets and sectors, particularly the rural and township based suppliers. Township and rural suppliers do not have established business structures and finances to produce high volumes however they do possess the required skill and ability to deliver in sectors they specialize in. Without being given any fair business opportunities to build their operations, growth and development and job creation will not be realized for marginalized communities. The lack of transparency and integrity to the public in Government tender processes has been a fundamental criteria resulting in the slow economic growth of poor communities, lack of jobs, inadequate service delivery on basic services. Supply chain management (SCM) remains a huge challenge and is surrounded by imperfections. The minimum core standards of behaviour and ethics among those that are entrusted with procurement process have deteriorated over time and this is evidenced by the Auditor-General findings on SCM. According to Auditor General Report (2015: 197) irregular expenditure increased to R6,5 billion in 2015 (2014-15: R5,6 billion) and can primarily be attributed to continued non-compliance with SCM legislation (concentrated around uncompetitive or unfair procurement processes). Most of the irregular expenditure incurred related to payments made against non-compliant contracts awarded in previous financial years (legacy contracts).

B. Strategic Approach

 2. What was the solution?
Public participation in Government tender adjudications (Open Tender System) was implemented to provide a platform for the public to observe the outcome of the tender evaluation process on how each bidder faired in the tender, at which stage and why the bidder was eliminated or passed through to following stages, ensuring transparency is maintained. Probity auditing throughout the tender process is conducted by external auditors to maintain segregation from internal influence, thus maintaining integrity in the process and ensuring fairness to bidders as well as compliance to all applicable laws and regulations. Public Accountability and Ethical leadership is enforced through the monitoring of the open tender process and progress by the Provincial Treasury in its oversight mandate.

 3. How did the initiative solve the problem and improve people’s lives?
Public participation in Government tender adjudications began the process of building confidence in Government procurement systems. The impact of fraud and corruption in Government procurement processes has resulted in citizens’ lack of trust and confidence in Government. The Open Tender Process was put in place to ensure transparency and integrity to the public in Government tender processes and resulting in the economic growth of poor communities, job creation opportunities and ensuring service delivery to citizens. The poor who are dependent on the government for housing, healthcare, education, security and welfare are most vulnerable to corruption which delays the delivery of such basic services. Public funds, which are earmarked for service delivery, were being diverted away from the public good towards private interests, resulting in the depletion of government’s financial resources to fund service delivery. Government’s procurement decisions directly impact on the daily lives of its citizens and determine to a great extent the quality of their lives. The Open Tender Process necessitates for public participation in tender adjudication sittings where the citizens are afforded a platform to observe the outcome of the tender evaluation process. While the strategy aims to eliminate corruption and ensure ethical practices in government tendering procedures as well as ensure integrity in the open tender process, improved livelihood of Gauteng citizens has been an indirect benefit and /or result of this strategy. In supporting this notion the Gauteng Provincial Treasury has implemented the Township Economy Revitalization Strategy which intends to establish dynamic and sustainable township enterprises with the objective of building an inclusive labour absorbing economy and have them integrated into the mainstream economy. The provincial procurement spend that has been directed towards historically disadvantaged individuals and business’ (black owned) including township based suppliers over three years is as follows: R46, 3 billion in General Procurement spend with 12,679 benefited suppliers, R42, 08 billion spend on B-BBEE suppliers (HDI) with 10,237 benefited suppliers, R38, 09 billion spend on SMME’s with 9,773 suppliers benefited, R22, 7 billion spend on GPG Black SMME’s with 8,710 suppliers benefited and R5, 08 billion spend on Township* suppliers with 2,826 benefited suppliers. Township refers to the previously disadvantaged areas under apartheid.

C. Execution and Implementation

 4. In which ways is the initiative creative and innovative?
The open tender system is one of the most important innovations and it is leading the country in ensuring that procurement decisions are taken justly and fairly. Unique features: Probity auditing The GPT has committed independent auditors to a project ready for execution. It is based on a rotation mechanism that ensures the audit independence and objectivity in each project without the opportunity for familiarity to manipulate the tender outcomes. The auditors commence at the specification stage, observe behaviour to identify any collusion or coercion and test the bid committee member scores against each bid to ensure fairness to each bidder. The audits provide assurance to the stakeholders that fair and transparent processes were followed, no maladministration and collusion and that processes comply with legislation and regulations. Public observation in tender adjudications was implemented to provide a platform for the public to observe the outcome of the tender evaluation process on how each bidder faired in the tender, at which stage and why the bidder was eliminated or passed through to following stages, ensuring transparency. The creativity in the process are the instances where public adjudication is done at a community based location. Gauteng Provincial Government is currently preparing for a state of the art Procurement Hub to house open tender operations in a secure, and technologically advanced facility.

 5. Who implemented the initiative and what is the size of the population affected by this initiative?
In 2014, the Premier of Gauteng Province, David Makhura, in his State of the Province Address, gave a mandate to the Gauteng Provincial Treasury to address fraud and corruption in government’s procurement process within the Province. This resulted in the Open Tender Process initiative, which seeks to improve government’s transparency and accountability to citizens and transform public sector procurement to free it of fraud and corruption. This initiative was welcomed by all Members of the Executive Council of the province to ensure compliance to the open tender implementation within their respective departments. The Public Finance Management Act of 1999 charges the Gauteng Treasury with the responsibility of ensuring that provincial priorities are funded and resourced through the implementation of key initiatives and priorities. The Gauteng Treasury under the leadership of Member of the Executive Council (MEC) Barbara Creecy, has five key drivers of which two are relevant for Open Tender Process; to ensure approved financial resources are spent efficiently, effectively and economically across the province and to reduce fraud and corruption and promote accountable and transparent financial governance in the province. The Provincial Supply Chain Management division in the Gauteng Treasury department is tasked with the implementation of the Open Tender Process. Two Provincial Supply Chain Management’s strategic objectives are important for the Open Tender Process. Firstly, Provincial Supply Chain Management must ensure compliance to Section 217 of the South African Constitution which stipulates the principles of fairness, equity, transparency, competition and value for money must be entrenched in the procurement of goods and services, and other relevant legislation. Secondly, it must reduce fraud and corruption and promote clean governance across the province. The population affected by the implementation of open tender are the 14 provincial departments; 8 local municipalities and 15 public entities through the governance and compliance measures inherent in the open tender process. The result hereof is the improved supply chain management and financial management outcomes. The citizens residing in various communities are also positively affected by the open tender process through the improved service delivery from the appointment of competent and credible service providers to deliver on key basic services such as schools, clinics, hospitals, care facilities for aged and orphaned as well as sport and recreational services. The citizen population in the five Gauteng corridors (regions) in which public services are delivered totals to 12,272,264 with the population breakdown as follows: 71,5% : working age (15 – 64), 26,3& unemployed, 34,4% unemployed youth, 33,2% female headed households and 16,0& higher education aged 20 and above. The transparent and open nature of the Open Tender Process has resulted in an increase in the number of registered township suppliers as they now trust that they stand a chance.
 6. How was the strategy implemented and what resources were mobilized?
Elements of the approach: Element 1: Probity audit Probity audits refer to independent reviews of government tenders, contracting out projects (government procurements), to ascertain whether procedures followed are consistent with appropriate regulations, guidelines and best practice principles of openness and transparency. Its objectives are also to bring a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. The rules governing the tender process are usually documented in the request for tender and covered by probity during the audit such as scope and contend of the tenders, skills required, evaluation criteria and tender submission details The purpose of appointing external audit companies as opposed to utilizing the internal audit resources was to mitigate the perception that internal auditors overlook the probability of internal collusion and orchestration of rigging tender outcomes. Element 2: Public Adjudication Reports were received from the public through the platforms such as the Corruption hotline and the Auditor General of irregularities in procurement awards, it necessitated that public have access to information on how the tender was processed and how each bidder faired in the process. Action plan to implement the strategy: The pilot was rolled out in 2014 with a phased approach undertaken from 2015 to roll out the open tender process in the province. I. Phase 1: Processing of projects above R50m to be executed through open tender in 2015. II. Phase 2: Allocation of 60% of procurement spend from each provincial department to be executed through open tender in 2016. III. Phase 3: Allocation of 80% of procurement spend per provincial department to be executed through open tender in 2017 and 100% of procurement spend in 2018. The open tender process involves 7 key activities which occur concurrently with the audit probity process to give assurance that fair and transparent processes were followed and that all processes comply with legislation and regulations before a tender is adjudicated. The steps are: tender design – tender specification, SCM process, bid evaluation, bid adjudication, tender awarding and monitoring and feedback. Element 3 Oversight, Monitoring & Evaluation The Gauteng Provincial Treasury monitors each tender process and provide guidance and oversight responsibilities at each stage of the tender process. The typical timelines and steps to be undertaken in Open Tender Process spans over a period of 15 weeks with probity audit activities being undertaken in the review of specifications, Appointment of Bid Evaluation Committee, Administrative Evaluation, Technical Evaluation, Site Visit, Commercial Evaluation and the final draft probity report. Resources to implement The Provincial Supply Chain Management division in the Gauteng Treasury department was tasked with the implementation of the Open Tender Process with a budget and personnel. Firstly, Provincial Supply Chain Management must ensure compliance to Section 217 of the South African Constitution which stipulates the principles of fairness, equity, transparency, competition and value for money must be entrenched in the procurement of goods and services, and other relevant legislation. Secondly, it must reduce fraud and corruption and promote clean governance across the province. Funding The Gauteng Treasury is tasked with the responsibility of ensuring that provincial priorities are funded and resourced through the implementation of key initiatives and priorities. Probity audits are the only funding requirements of the open tender process funded by Gauteng Provincial Treasury on behalf of departments and institutions. The other requirements are funded by respective Supply Change Management Units of departments that have tenders to be issued.

 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
In 2014, Provincial Government Executive Leadership under the Premier of Gauteng, David Makhura, as the owner of the initiative together with the MEC of Finance, Barbara Creecy, as the champion of the initiative and the Gauteng Provincial Treasury as the implementor of the initiative. The civil servants employed in the Provincial Supply Chain Management division of the Gauteng Provincial Treasury, designed the concept and all related documents such as frameworks, guidelines and processes. The PSCM division liaised, strained and supported provincial departments’ supply chain management units and ensured that they followed and implemented these directives. An Open Tender seminar hosted in October 2016 to publicly launch the initiative to all citizens, business sector, NGO’s and private sector included prominent members of society to participate in the seminar under the discussion topics that relate to transparency, accountability and ethical leadership. These presentations can be found on the open tender seminar website: www.opentenderseminar.org.za

 8. What were the most successful outputs and why was the initiative effective?
Improved compliance to Supply Chain laws and regulations To illustrate this improvement in compliance, a department issued a tender for services required at multiple sites. During the evaluation, the tender was cancelled as a result of several irregularities identified in the specification and terms of reference that could have resulted in irregularities. These errors identified by the probity auditors were corrected by the bid specification committee and the tender republished. Reduce fraud and corruption attempts: As an example, a department issued a tender for multiple sites. At the evaluation stage, the probity auditors detected irregularities with regard to altered bid packs as well as a revised bid receipt register. Upon the probity investigation, the security of the storage facility for bidding documents was found compromised. This tender is currently under forensic investigation. The control gaps identified in this scenario were provided to all departments to implement additional security controls for bidding documents. In cases where material gaps, errors, non-compliance was detected in the process, the tender is recommended for cancellation and re-issued. The degree of compliance achieved in the execution of the projects through the open tender process has seen a remarkable improvement in the audit outcomes in each institution’s risk and compliance audit conducted by the Auditor General. As a result, the 2015/2016 financial year audit has reported improved outcomes with more institutions obtaining clean audits. Enhanced Internal Control Environment: Controls, checks and balances are specific action steps incorporated in the tender processes to ensure the compliance to Supply Chain laws and regulations as well as ensure a good governance. Some of these controls are publication of bidder attendance registers and bid receipt registers, levels of approval of delegation, and date and number stamping of bids. Reduced Timeframes of the Tender Process: Delays such as non-attendance of scheduled bid committee sessions and operational challenges within department can extend a tender to almost a year before the tender can be awarded. This impacted on bidders planning and operations as well as service delivery to communities. With the oversight mechanism in this initiative through follow ups and escalating all challenges to the Accounting Officer of the department, has improved tender completion times to four months. Increased Public Participation This initiative enforces the publication of tender activities at certain stages of the process for the public to attend and observe the adjudication and provide bidders with information of the tender process.

 9. What were the main obstacles encountered and how were they overcome?
The lack of buy-in from end users within departments to commit to the process and implement the criteria (probity auditing and public adjudication) was the first obstacle encountered. This resistance was evident in the excessive delays by bid committee members trying to avoid the participation of auditors in the auditing of tender activities. This was overcome by the Provincial Leadership’s (Gauteng Premier and Members of the Executive Council) enforcement of a percentage of each department’s procurement spend to be processed through open tender processes as described in the strategy. Department’s had no option but to eventually achieve the targets set out. The lack of various skill sets such as developing specifications for publication in the tender was also a challenge which often resulted in the cancellation of a tender due to unmatched bids received. To overcome this Gauteng Provincial Treasury widened the scope of probity auditing and included probity advising which required the tender specification review by probity advisors before publication. The specification review was also overseen by Gauteng Provincial Treasury in its oversight and monitoring role. The probable fraud and corruption risks in the tendering system without tangible evidence to assertively address and resolve was one of the key problems the open tender intends to overcome. Through the auditing and publication of tender information minimal opportunity exists for collusion or manipulation of bidder documents and information therefore the open tender has and will continue to identify any incident or perpetrator intending to enrich themselves through ill-gotten gains at the expense of deserving citizens.

D. Impact and Sustainability

 10. What were the key benefits resulting from this initiative?
As a result of the implementation of the Open Tender Process had a positive impact as it improved compliance to Supply Chain laws and regulations, reduced corruption attempts and it enhanced internal control environment. The process also saw a reduction in time frames for completion of tenders which ensured that services were rendered to citizens as promised. The fundamental goal of the initiative was realised and that it is it had increased public participation. The needs of the poor were being addressed indirectly through projects (tenders) awarded, thus delivery was expedited and the needs of poorest and most vulnerable people were being addressed. Suppliers from poor areas and townships were borough into the economic opportunities of government processes, by the openness and transparent manner of the process allows these suppliers to compete. These suppliers are being trained and developed to be able to complete in the market. The initiative also ensures that all government policies are implemented to the latter, hence disable, youth and women are provided the opportunities to tender for projects and are part of the process. They able to learn lesson and knowledge which can be used in any future venture. The citizen population in the five Gauteng corridors (regions) in which public services are delivered totals to 12,272,264 with the population breakdown as follows: 71,5% : working age (15 – 64), 26,3& unemployed, 34,4% unemployed youth, 33,2% female headed households and 16,0& higher education aged 20 and above. The transparent and open nature of the Open Tender Process has resulted in an increase in the number of registered township suppliers and from marginalized groups as they now trust that they stand a chance to bid for tenders in government procurement processes.

 11. Did the initiative improve integrity and/or accountability in public service? (If applicable)
The audit is performed by independent qualified auditors prior to the adjudication of the tender to give assurance that fair and transparent processes were followed and that all processes comply with legislation and regulations before a tender is adjudicated. The findings of the auditors are dealt with immediately to correct any weaknesses before adjudication. The positive aspect is that litigations against government may be avoided. Probity audit also helped an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Further, public participation in the tender adjudications was implemented to provide a platform for the public to observe the outcome of the tender evaluation process on how each bidder faired in the tender, at which stage and why the bidder was eliminated or passed through to following stages, ensuring transparency is maintained. Officials were held accountable directly under public scrutiny which only improved integrity and accountability, hence decreased corruption and biasness in procurement processes. The public and bidders are made aware of all the stages of the tender process and are invited to sit in and view the deliberations of the bid adjudication process where reasons are provided of successful and unsuccessful bidders in each step of the process. Although, it is too soon to evaluate the impact of the initiative, a decline in irregular expenditure and litigation procedures against government procurement processes in those that have went through the Open Tender Process. Suppliers, in particular bidders have indicated their satisfaction of the process when asked anecdotally after their participation in any stage of the process. However, at the Open Tender Seminar, suppliers articulated their appreciation to the process and provided their positive experience in the open tender process. This was captured in the many commissions held at the Open Tender Seminar.

 12. Were special measures put in place to ensure that the initiative benefits women and girls and improves the situation of the poorest and most vulnerable? (If applicable)
The transparent and open nature of the Open Tender Process has resulted in an increase in the number of registered township suppliers and from marginalised groups as they now trust that they stand a chance to bid for tenders in government procurement processes. Furthermore, targets were set for government spend on goods and services for marginalised groups, especially women and youth.

Contact Information

Institution Name:   Gauteng Provincial Treasury
Institution Type:   Government Department  
Contact Person:   Mohammad Sujee
Title:   Chief Director : Strategy Management  
Telephone/ Fax:  
Institution's / Project's Website:  
E-mail:   mohammad.sujee@gauteng.gov.za  
Address:   75 Fox Street Imbumba House
Postal Code:   2107
City:   Johannesburg
State/Province:   Gauteng
Country:  

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