Procurement policies

2008-03-21 00:00

In discussions within the Pietermaritzburg Chamber of Business circles about procurement policies, a number of interesting questions have been raised, which, on the face of it, might be overlooked. One issue which often raises hackles is the failure to appoint local companies to do local work. Some time ago there was an initiative in Pietermaritzburg to promote local products and services. We set out to develop a mindset which favoured a local business ahead of one, say, in Durban or elsewhere. The chamber had to withdraw its support for this when the organisers began to “name and shame” large Pietermaritzburg companies for not procuring exclusively in the city. By then it had emerged anyway that there was discomfiture in encouraging businesses to expand into markets outside the city while supporting the closure of our own market to outsiders.

It had also become clear that customers sometimes chose to give their business to companies elsewhere because local quotes were higher and, more significantly, service levels were often much lower. It was a time, too, when the municipality — a prime target for those who felt cheated — had to wrestle with the pressures imposed simultaneously by the BEE and “buy local” lobbies respectively. These were not always aligned as the number of black-owned businesses in Pietermaritzburg at the time was limited.

Large-scale developments under-taken by investors with a national, or even international, footprint have brought their share of controversy around this topic. As far as the chamber was aware (we made it our business to find out), the developing companies had sound policies in place to make use of local suppliers and labour. But a large cleaning contract was awarded to a Gauteng company instead of local ones that had quoted. In order to service the contract, the company undertook to open an office in Pietermaritzburg and employ local people. This put a somewhat different light on the objection. When a painting contract was dealt with, the specification included a particular brand of paint. A local paint manufacturer questioned why his brand was not considered. This was a fair question and our intervention elicited a promise that it would be considered after all. But it made no difference. The people responsible (not so much the developer as the architect and project managers, perhaps) had most faith in the quality of the well-known brand and wanted this used. It is a reasonable argument that the product or service with proven reliability should be used repeatedly. It is equally reasonable that a national entity operating in different provincial and local localities should go to its proven supplier base and the contracts and long-standing arrangements associated with it.

Unfortunately, while local companies are often aggrieved by these events, the biggest losers are those engaged in small-business operations. When questioned why his department did not break contracts into smaller pieces that could be awarded to small companies, the head told me that it was easier to procure from large companies with proven capacity. This attitude may have to change over the years, such is the increased pressure to comply with both small business stimulation and black economic empowerment.

A single contract, with a single account to pay and standard prices across the board plus reliability and quality are very attractive features in the procurement environment. One wonders how many millions of extra rands have been paid out by the government, in particular, when contracts have not been fulfilled and when someone else has to be brought in to complete the job.

In my view, the fundamental principle of procurement is such that these dilemmas will persist long into the future. The business community expects impartiality and fairness in a process in which tenders are submitted in such a way that there is no scrutiny of them until the process of objective adjudication. We know this to be a sham in many cases and the corruption and abuse which sometimes make a mockery of objectivity strengthens the demand for the traditional process. Yet how much more effective it would be if those companies that were serious bidders, were assisted in their pricing and their tendering so that they could be given the work. I hear the cries of “foul”, but I don’t believe it is beyond our capability to develop a procurement process that is substantially fair and objective and which provides broader opportunity and enough work to keep the larger operators happy.

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