Issue Date: 
Tuesday, May 3, 2016

Tender Experience - Do I need it?

A regular question asked is “I am interested in registering a CC, specifically to apply for government tenders. I don't have any experience in business let alone in tendering, so I want to find out if one can be awarded a tender if he/she does not have specific experience?”

Firstly, unfortunately you cannot register a CC (Closed Corporation) in South Africa anymore - you will have to register some other juristic person such as a private company.

The tender processes in South Africa are governed by:

  • The Preferential Procurement Policy Framework Act;
  • Preferential Procurement Regulations, 2011;
  • National Treasury’s Supply Chain Regulations;
  • General Procurement Guidelines.

According to these Acts and Regulations, Competitive Bids - as tenders are legally called in South Africa - must be evaluated on either the 90/10 or 80/20 Preference Points Scoring System. All Government tender responses must be evaluated on one of these two systems if it has passed the Functionality test.

The Functionality test determines if a bidder has the capabilities to execute the contract or not. During the Functionality test the bidders are tested on various aspects of the contract to establish the extent of their capabilities. Bidders are mostly tested on the following criteria during the Functionality test:

  1. Experience: the Procuring Entity - either Public or Private Sector - wants to know how many years’ experience the bidders has in order to execute the contract;
  2. Human Resources: the bidder must indicate if it has the human manpower, with the necessary experience and expertise to successfully comply with the requirements of the contract;
  3. Financial capabilities: Procuring Entities are hesitant to award a contract to anyone who doesn’t have the required capital available in order to successfully execute the contract.
  4. Other functionality criteria: usually the Procuring Entity will require other Functionality criteria that are specific to the goods or services that they want to procure. For example: if the Procuring Entity needs a construction company, the bidder will have to be registered with the Construction Industry Development Board.. If the bidder is not registered with the CIBD then the bid response will be marked as non-responsive.

During the Functionality test bidders will score points on the different Functionality criteria. Each Functionality criteria will have a weight in points. The weight of each functionality criteria will be dependent on the importance of the criteria in the contract. Thus, you will find that Experience can have a higher score than Human Resources and so on.. All competitive bids will have a minimum number of points that needs to be scored by the bidder in order to progress to the next phase of evaluation namely the Preference Points Scoring system. Only those bidders that reach the minimum threshold, which can be anything between 60 and 90 points out of a 100 points, will advance to the next phase.

So, to answer the question, will you will be awarded a tender if you have no experience is a simple: NO, you won’t. The Procuring Entity must apply the abovementioned Acts and Regulations in evaluating bid responses and automatically disqualify bid responses that do not have the necessary experience.

There are some Government Entities that have committed themselves to procure a certain percentage of goods and services from start-up enter but these bids are hard to find and there are many businesses that respond to them. This means that your chances of being the successful bidder are slim.

Find something that you are good at and start a small business and once you have gained some experience you can start responding to quotations and bids.

Get proper training in the art of responding to quotations and competitive bids by attending the How-to-Tender workshops (www.how2tender.com).

Earn to learn!

When Must I Sub-Contract?

There seems to be a lot of confusion amongst entrepreneurs when it comes to tenders and sub-contracting. The Draft Preferential Procurement Regulations, have been gazetted and are currently up for review. However, these Regulations are the major cause for the confusion. Many entrepreneurs ask whether they should sub-contract or not whilst responding to a tender.

The Draft Preferential Procurement Regulations stipulates the following: 

  1. For contracts above R30 million, the tenderer MUST sub-contract a minimum of 30% of the value of the... Read More
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