001 | lcc-a5 guide to tendering - the official website of ... · customer and supplier relations...

001 | LCC-A5 Guide To Tendering 15/9/06 6:23 pm

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TENDERING GUIDELINESYOU CAN CONTACT US AT:

Supply Chain Management UnitCustomer and Supplier Relations Branch1st Floor Materials Management Building166 Old Fort Road Durban 4000

Phone: +27 31 311 7153

Fax: +27 31 311 7330


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TENDERING GUIDELINES

1. How do I tender?2. Where do I find the tendering information?3. Where do I find raw materials and equipment?

“Tenders are a lucrative source of income for small business, but can be a

minefield to negotiate, particularly since legislation has changed, and

requirements differ between organisations and government sectors.

Getting the process right not only saves time and effort but has the potential

to set up lucrative income streams.”

Friday, March 10, 2006www.business.co.uk

This document has been prepared to assist entry-level service providers on the tenderingprocesses in general.

Compiled by: Procurement Monitoring Branch 2006Page 3


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How do I tender?Am I ready to tender?

First of all, you need to establish whether your business is capable of meeting therequirements of the tender. Usually, an invitation to tender is very specific about thepractical tasks to be accomplished. Be realistic about your ability to accomplish thosetasks. Remember, failure to deliver what is required at the stated costs and within the timeagreed will probably make you liable for penalties in terms of the contract.

As a guideline, an enterprise that is ready to tender:

• Is a registered business

• Has a good banking record, credit history and relationship with its suppliersand clients

• Is able to deliver - on time, on budget and according to specifications

• Is up to date with its taxes

• Pays its bills on time

• Has the required cash-flow and other resources to completethe contract

• Is pro-active, actively looking for business opportunities

• Is able to deliver goods or services of consistent quality

• Has qualified employees

• Has, or can acquire, the right equipment, clothing and accessories to completethe tender

• Has registered its employees with the Department of Labour, Unemployment `Insurance Fund (UIF), Skills Development Levy, and Workmen’s Compensation etc.)

• Has products that complies with South African National Standards (SANS)

• Registered in the eThekwini Municipality’s Suppliers’ Database. Registration forms can be collected from Procurement Monitoring Unit 1st Floor Shell House,Durban; and

• Registered with the relevant Professional or statutory Body , such as the Construction Industry & Development Board (CIDB), National Home Builders Registration Council (NHBRC), Small Enterprise Development Agency(Seda), etc.

Does my business have to be registered as a CC or company?

No. A sole trader or partnership may tender. However, the business has to be:

• Registered or licensed with the relevant local authority

• It must have a bank account; and

• It must be registered with the South African Revenue Services (SARS) and must have

an up-to-date tax clearance certificate or an arrangement with SARS.

• Registered in the eThekwini Municipality’s Suppliers’ Database. Registration forms

can be collected from Procurement Monitoring Unit 1st Floor Shell House,

Durban; and

• Registered with the relevant Professional Body, such as the CIDB, NHBRC, Seta, etc.

What about tendering together with another business?

This is called a joint venture (JV). When two businesses form a joint venture (a partnership

between two business) they each contribute to the project and share the profit. In this

way two (or more) small businesses may be able to win a large tender that neither would

have been able to take on alone.

Use the following guidelines when selecting a JV:

• Choose you partner very carefully. Like any partnership, a JV thrives on mutual trust

and collapses when partners become suspicious of the others motives, agendas

and ethics

• Enter into negotiations early

• Rather involve two or more smaller JV partners than one other firm that is much

bigger than you are; and

• Draw up a formal JV agreement and state all expectations clearly, including usually

vague notions such as the one partner empowering the other with skills.

Sub-Contracting

• Delegation by one firm of a portion of its production process,

under contract, to another firm, including in another country.

The Company may assign the contract with the buyer or sub-

contract the whole or any part thereof to any person, firm or

company. Companies need to note that organs of state may

restrict the percentage amount of work to be subcontracted.Page 4 Page 5


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How do I complete the tender documentation?

• With great care and precision! Follow the instructions carefully. Even the smallest error may result in the cancellation of your tender application.

• Your nearest Tender Advice Centre (TAC)/and or Seda will help you get hold of andcomplete the tender documents.

• Be quite sure that you have enough time to prepare and submit an offer before thedue date.

• It is up to you to deliver or post your tender documents to the correct address by the due date, and indeed at the correct time. If the closing time is 12 noon, your tender will be disqualified if it is handed in at one minute past 12.

• The tender will include all the requirements and specifications for the goods and services to be supplied. Be quite sure that you will be able to comply.

• Include in your tender details all the relevant experience you have in relation to theproposed contract.

• When completing the tender document do not forget to:

o Include your Value Added Tax (VAT) registration number, if you have one.

o Guarantee the quality of your products or services. Also provide details of any SABS or ISO marks or sign of quality assurance that you are entitled to use.

o Offer substitute products or services where necessary

o Offer to make refunds if you fail to deliver as agreed.

o Declare the percentage or quantity of imported products

o State patents and details of any royalties

o Describe the packaging

o Give the time and place of delivery

o Provide samples of products or goods if required

o Use delivery documentation including delivery notes

o Complete the tender documents in ink and sign alterations in full.

o Obtain import permits for goods that were not made in SA; and

o Supply the prices that you paid for the goods.

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You will need to complete the following information that are oftenstandard forms for National, Provincial and Local government tenders:

Conditions for tendering withthe state

Note: These forms are part of the tender invitation and are alsoavailable at any procurement office.

Official cover page of thetender document

Tax Clearance Certificate

Essential conditions relating tothe tender

Closing dates, tender number,durability, price, delivery periodetc.

Asks questions that will help in theadjudication of the tender

Promotes development oflocal businesses

Prevents tendering on the basisof association Promotesdevelopment of local businesses

Also includes details of the addresses fordelivery of your tender application.

To be signed in ink. Includes details of thebuying department, validity period andclosing date

Obtained from SARS, should be valid attime of submitting the tender and shouldhave a validity period longer than thevalidity period of the tender document.

Important to study carefully, as deviationfrom these conditions may invalidate yourtender.

Also deals with the description ofthe product of service concerned.

State any deviation in specification fromthose in the original tender; whether ornot your quoted price is firm; whether youare an agent for the product or service; theamount of stock you carry; the type andlocation of the service facilities you offer;your VAT number (if any).

Preference Point Certificate to besigned. Applies only for servicesless than R2 million.

Declaration of interest. Promotesdevelopment of local businesses ensuringfair and equal treatment, you must declareany relations with members of the tenderboard or government department.

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How do I price my tender?Keep in mind that you need to make a profit but that competing tenderers may offer a

lower price.

In order to be competitive, experienced tender advisors normally suggest a cost plus 7.5%

tender price. This may vary according the level of expertise and general availability (market)

of the service or goods required.

Costing and estimation:

This often requires an educated guess based on the following researched tender

specifications:

• Quantities of material needed

• Length of time to completion

• Minimum lead-time required (that is, the time before actually starting on the contract,

often the time in which preparations are made)

• Insurances needed

• Depreciation of vehicles and equipment over the course of the contract

• Indirect costs

• Capacity to complete the contract

Some costs are variable - they may fluctuate as production fluctuates

• Labour

• Materials

• Equipment

Other costs are termed fixed costs or overheads:

These costs do not fluctuate with increases or decreases in production. Examples of costs

that are usually fixed are:

• Electricity

• Owners salary

• Subscriptions

• Vehicle leases

• Stationery

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The following are also important considerations:

• Will the purchaser be making interim payments (so that your business maintains cash-flow and can pay the weekly salaries, materials and so on)? This is especially important for lengthy contracts.

• Will you require bridging finance? If so, do you have security for a loan?

• If you will need to borrow money to perform the contract, you should do the groundwork to allow for interest and other charges while you are preparingthe tender. Then if you win the contract, you will be able to get a loan so muchmore quickly.

Do I qualify for Preference Points?

The law requires the application of a preference point system for tenderers who arePreviously Disadvantaged Individuals (PDIs) or women.

• Generally, for government tenders under R500 000, 80% of the tender will be adjudicated on price and 20% on the PDI or gender status of the business owner(s).A maximum of 20 points will be scored by tenderers, depending on the achievementof specific goals clearly specified in the tendering conditions. These specific goals may include Reconstruction and Development Programme Principles as well as contracting with persons, or categories of persons, disadvantaged by unfair discrimination. The way in which the points in this category will be calculated and awarded to tenderers must be clearly specked in the tendering conditions.

• For tenders over R500 000, the 90/10 price system applies. A maximum of 10 pointswill be scored by tenderers, depending on the achievement of specific goals clearlyspecified in the tendering conditions. These specific goals may include Reconstructionand Development Programme Principles as well as contracting with persons, or categories of persons, disadvantaged by unfair discrimination. The way in which thepoints in this category will be calculated and awarded to tenderers, must be clearlyspecked in the tendering conditions.

Letters of Notification• If you submit your tender to the right address by the due date and time, you will be

notified in writing whether you have been successful or not.

• If your tender was accepted, you have to start planning to deliver the goods or services you offered.

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Don't give up!If at first you don't succeed, try and try again.

• Every time you complete a tender document you will learn more about the processand requirements of tendering.

• Once you have a won a tender, and built up a track record, things get a bit easier.

• Always research your market and your competition

I need more help:• Phone BRAIN at 0860 103 703.

• Contact you nearest Tender Advice Centre. Get the contact details from Brain.

Are you asking the right question?So many opportunities are opening up with government tenders that many people believethat their core business is "tendering" - not construction, or plumbing, or stationery, but"tendering". They go for every possible tender, whether it's making school uniforms orcatering, whether they actually have a business to back it up or not. Some people arecurrently making a bit of money this way. But it won't last, because:

• More and more people are competing for tenders. Many of them are no longer emerging business owners, but experienced specialists with finely tuned businessesto back up their tenders.

• If you win tenders that you can't carry out yourself, but simply act as a middleman by passing on the tenders to people who can do it, you are not building a businessand that is against the principles of empowerment. All you are doing is skimming a bit of profit off the top. The people who do the job are the ones being empoweredby practicing and improving their project management skills.

• It is very easy to get a bad name when you're a "tender-hopper". You could tender too low a price because you don't know a certain industry. Or the people to whomyou outsource the tender may let you down.

Therefore, before you start looking for tenders:

• Make sure you have a business with a proper focus.

• Tender only for those contracts that fit your business's focus.


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• Plan to use each tender you win to build up capital in your industry: your reputation,credit with suppliers, extended overdraft limits at the bank, equipment, skilled staff,project management skills.

• Make sure you continue to take advantage of any Municipalities workshops, information obtainable from the website, media, newspapers etc

• Don't ever bank on winning a tender. The competition is very stiff. Very successful business owners say they submit at least twelve tenders before winning one.

• Know that you cannot build a business just by tendering. While it can sometimes give you a good break, or move you to a new level of operation, the results are toounpredictable to build you whole business around. You should try to build up a steady non-government clientele.

What is a tender?When you need a new pair of shoes, you go to a shop near you to choose, fit and buy theshoes you want. Government cannot work like this - mainly because public money isbeing spent and the government must try and get the best price and quality for the goodsand services it needs. The government must also try to give all businesses equal opportunityto the public money it spends.

• A tender is therefore the government's way of inviting businesses to provide goodsand services on a contractual basis. Once the business completes and submits the tender document it becomes an offer. Once the government accepts the offer, it becomes a contract.

• This contract is between your business and the relevant government department.

Tendering is a structured, competitive and transparent process:

• It helps find supplies or services needed from outside government.

• Better prices and higher quality are also obtained because tenderers compete witheach other in an open market.

• Because of this, and to avoid confusion and unhappiness, there are strict rules thatregulate the tendering process.

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How does this help the smallbusiness owner?You are unlikely to become rich only through tendering for government contracts. Thisis because of the competitive nature of tenders and the relatively small average markupon successful government tenders (usually around cost plus 7.5%).

However, small and medium businesses are given the opportunity to access empowermentbenefits, and to consolidate, expand and grow their businesses.

In the longer run, this helps you build a strong and profitable business.

Who issues tenders?• National government departments

• Provincial government departments

• The roughly 450 municipalities (Including eThekwini Municipality)

• Parastatals such as Eskom and Spoornet

• Big companies in the private sector


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Where to find tender advertisementsMajor national and provincial tenders are advertised in the Government Tender Bulletin.Published weekly, the Bulletin is obtainable from the Government Printer, Private Bag X85, Pretoria, 0001. It can also be downloaded from the Internet atwww.info.gov.za/documents/tenders/index.htm\t_NEW• Provincial governments advertise their tenders in the various Provincial Gazettes.

Contact your provincial government to find out where you can order a copy or whether they have tender opportunities on the Internet.Around 450 Local Government (municipality) Tender Authorities also put out tenders.Generally, you must make contact with your local municipality and keep on remindingthem of your existence. Also ask them in which local newspapers they tendto advertise.

• The central or local offices of some parastatals too, may be approached directly. Findout in which newspapers (or elsewhere) they advertise and whether they keep a database of preferred suppliers. If so, find out how you can get onto that database.

• For government tenders generally, always keep an open eye on the major nationalnewspapers, your own local newspapers, and notice boards at government departments, post offices, police stations and elsewhere. If your business operatescountrywide, you must of course also focus on the national sources of tender information. If your business is local, you concentrate on the local sources.

• Private Sector Databases: There are commercial services available which scan the business world for as many tenders as possible. They gather the information and sort them into categories. When you subscribe to their services, they send you the information on tenders available for your industry. It is very handy if you don't havetime to phone around and scan all the newspapers and bulletins. There are a few such services available, such as Tenderscan and Sabinet. Tradeworld is probably themost comprehensive service. Subscription to their basic service costs over R500 permonth at present.

• eThekwini Municipality Public Tenders- contract that are valued above

R200 000.00, are advertised almost every Wednesday on the Notice Board of the Tenders Administration Section at 41 Victoria Embarkment, 2nd Floor Rennies House,Durban. Tenders are also advertised in the eThekwini Municipality’s own free newspaper, Metro Ezasegagasini, which is issued every Friday. Copies of this Newspaper are obtainable at City Hall basement Churchwalk Entrance.

• eThekwini Municipality’s Public Quotations (PQ’s) – contract that are valued

below R200 000.00, are advertised almost every Wednesday on the Notice Board of the of the Materials Management Branch at 166 Old Fort Place, Ground Floor, Materials Management Building, Durban

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Tender Advice CentersThe Tender Advice Centres (TACs) are non-governmental organizations that help smallerbusinesses access tender information. They will also help you complete the tenderdocumentation.

• The TACs use the same sources of information that have already beenmentioned here.They collect information on current tender opportunities from national, provincial and local government.

• They also often subscribe to the Tradeworld database, but may not send that information to you directly (otherwise Tradeworld will go out of business). You willhave to physically go the TAC and get the information from them.

• To find out where your nearest Tender Advice Centre is located, ask Brain on telephone0860 103 703 or at www.brain.org.za.

• Whatever you do, be proactive. Just because tendering information is supposed tobe made available as widely as possible, it doesn't mean that it will come to you automatically. Apart from keeping a keen eye on newspapers and the Tender Bulletin,you need to apply the age-old business principle of networking. Stay in contact withthe government buying offices that put out the most appropriate Tenders for yourbusiness. In that way you can proactively stay informed about coming tenders.

• eThekwini Municipality’s Seda is located at the Thekwini Business Development Centre (TBDC) EWASHINI at 127 Alice Street, Durban. Tel: 031 309 54329(W) and TBDC Pinetown at 40 Old Main Road, Tel: 031 702 3769(W).

• Check with Floyd for the address in Tongaat

Classification of TendersGoods and Services

• For tenders under R30 000, the relevant government department will usually just approach three registered providers for a quotation. This is why it is so important to get your business registered on their database!

• Tenders of more than R30 000 must generally be advertised to all providers, even those not listed on the register.

• Large tenders (usually over R200 000) must be advertised and formally adjudicated by one of the Tender Boards.

Building and Engineering Tenders

• It is compulsory to register for Construction Industry Development Board (CIDB) membership, in order to be considered for work.

• Tenders of over R2 million are classified as major and will be widely advertised as well as formally adjudicated.

• Tenders below R2 million usually classed as minor.

• Tenders of under R100 000 are considered micro.

You have the information, what now?Finding the tender information that is right for your business is only the first step. Younow have to:

• Complete the tender documentation

• Make sure that your business is properly registered and licensed and that your taxeshave been paid; and

• Be quite sure that you, your staff and the business itself are able and capable of completing the tender on time and according to specifications.

The following are common mistakes made when tendering:

1. Always provide all of the information requested by in the tender application. Do notforget things like your tax clearance certificate and shareholding certificates. Note:out-dated tax clearance certificates are also not allowed.

2. It is important that the calculations of tender prices is correct.Check and DOUBLE- CHECK this!

3. Often, tenderers misinterpret the scope of the work. If you are unsure of anything in the tender ASK and attend site inspections even if they are not compulsory!

4. Always SIGN your bid document. Unsigned documents are unresponsive and will therefore be disqualified.

5. If you are an HDI, remember to claim your points. Points unclaimed are points lost!

6. Make sure that you drop the tender into the right box, beforethe closing time. By law, no late bids will be accepted, not even 1 second past the closing time.

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7. If samples are requested, sufficient amounts must be supplied to enable the item to be evaluated under the appropriate technical or clinical conditions. Ensure that any requirements related to compliance with SABS specifications are met.

Tips from the procurement officials:

1. Always read through the bid documents carefully.

2. Complete the document in full.

3. Do a proper cost analysis when calculating your bid prices. Bids calculated too highor too low are considered unresponsive.

4. Enquire about the bid and obtain all the relevant information before completing the tender document.

5. Feel free to ask why you were unsuccessful so that you may learn frommistakes made.

6. Make sure that you are able to meet all the requirements within the specified timeand are able to honour your offer in the event that your bid is successful.

7. Do not make any misrepresentations or false statements in your bid documentation.It is a legal document and therefore enforceable by law.

8. Quality services and products will improve your track record and good standing with the department. Poor delivery creates a negative impression not only for yourbusiness but for all small businesses in general.

Where do I find… (raw materialsand equipment)?• This section deals with the problem of where you find the supplies -machinery,

equipment, vehicles, workstations, and shelving, for example- to set up or runyour business.

• Finding the right equipment can be a problem if you are new to the industry. If youalready have a business it also makes sense to do research into the most suitable product and new technology, before investing your capital.

Shop aroundShopping around does not only mean looking for the best price. It also allows you toincrease your technical awareness of different products and their specifications. Say forexample you phone a supplier of industrial toasters and they quote you on two products,one at R3000 and one at R5000. Ask them about the difference between the two - whatfeatures does the more expensive one have? Ask yourself if you need these features. Now,when you phone another supplier for a quote, you could ask them if this product has thefeatures you were interested in. Suppliers will also have an opinion about which featuresare best. If you listen through the sales talk, you will get an idea of the range of productsavailable and learn more about different features and functions. Then you can decidewhich product would be the most suitable and represents the best value for money.

Where do I start looking?Other business owners

The best person to point you in the right direction is another business owner in a similarbusiness. They will have a good feel for the product specifications needed for a particularpurpose, of suppliers you can trust and what you can expect to pay. At the very least theywill be able to direct you to someone else who can help you. But how do you approachanother business owner, who is probably extremely busy and has a hundred other thingson his or her mind and get them to stop and talk to you, who mightbe a potential competitor? Here are a few tips to help you approachother business owners in the right way:

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• You will be surprised how many business owners out there are happy to help.They have all been through the same process and understand the value of informalnetworks amongst business owners. You might come across a few who are truly cagey and unwilling to share information, more so in some industries, but just keeptrying until you find those willing to talk to you. They will be worth their weightin gold.

• It might help if you approach people who are not or will not be your direct competitors,for example a similar business to yours, but in a different area.

• Throw your net wide. You will have to take the initiative here. Don't wait for a particularbusiness owner to become available or return your message. Move on to the next person on your list. You can always come back to the first one later.

• When you phone a business owner you have a 50/50 chance of getting a good response. It depends on a combination of things: the mood of the business owner,whether you have caught him or her at a bad time, the way you come across over the phone. Never take it too personally. As you phone around, you will find an approach that works well for you.

• In most cases a short and to-the-point approach works best. If you want to know something fairly straightforward, introduce yourself very briefly and just ask, "I runa Bed and Breakfast/am starting a Bed and Breakfast in Cape Town; do you know where I can find an industrial size toaster?" You don't have to start with "Can I ask you a few questions?", or "Could I have a few moments of your time?" If they think about it, they will realise that they do not have time.

• If you need to have a longer discussion, you can try to make an appointment.Some people will manage this better than others. If you do manage this, then stickfirmly to the time you said you would need. If you can not succeed in making an appointment, try the ambush approach - ask your question right there and then. "What do you think the best toaster is to get for my size business?" Normally, you will get a valuable response. Often, once a business owner starts talking it is quite difficult to make them stop.

• Start networking. If you join the industry's business association, you will meet otherbusiness owners face to face in a relaxed environment.Here it will be much easier to pick their seeds . Many of the business associations have their own websites on which suppliers advertise

Yellow pages• The Yellow Pages is a directory of contact numbers for businesses and professions

in a particular area.

• The businesses are arranged according to categories, for example, "Amplifiers", "Crates", "Refrigeration". It is sometimes tricky to find the exact category for the typeof product or service that you need. It is useful to take a look at the index first to seewhat categories there are.

• The advantage of the Yellow Pages is that all businesses in a specific area get one free listing in the Yellow Pages, so it is quite comprehensive. Beware however, that they have to choose in which language they want their free listing to be, so you might find some businesses in the Afrikaans section that do not appear in the Englishsection and vice versa.

• You are entitled to a free copy of your area's Yellow Pages if you are a Telkom subscriber. It normally comes as part of your Phone book, but in larger areas like theCape Peninsula, Johannesburg, Pretoria and Durban, the Yellow Pages come as a separate volume. A new updated version comes out once a year.

• If you want the Yellow Pages of a different area than the one you live in, phone 0860111 837

• The Yellow Pages also has an electronic version at: www.yellowpages.co.za/iyellow/index.jsp

• The electronic version is simply the same as the publication - it works according tocategories, not keywords. If you type in "toaster" in the search box, you will

• not get a listing, but perhaps you would get a listing if you type in the category "Electrical Appliances."

Internet searches

The internet has become a valuable tool for finding suppliers of even the most obscurearticles. You have to learn how to streamline your searches so that you do waste too muchtime and money on the internet.

• Use a search engine. This is a tool on the internet that allowsyou to type in keywords. It will then give you a list of websitesthat contain these keywords. You can click on the links to thesesites for more details.

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• Use South African search engines - you can then choose to view only South Africanwebsites. It is no good finding a product only to find it is sold in England or the USA.Here are some good South African search engines to try:

o (www.aha.co.za) We found this the best search engine to source business supplies.This is mainly because they have a category in their directory called "businessto business". If you click on that, you can do searches with keywords that will onlybring up websites of other businesses, so you do not get links to news articles, or other non-relevant websites.

o (www.aardvark.co.za/search) A very good feature here is that you can narrow down your search results quite effectively, by doing a further keyword search within your results. They also have a directory (i.e. a list of categories), but your search is more limited here, because they do not have a business-to-business category and it is difficult to assess which other category in the directory matchesyour query. The best way to use this site is to do a keyword search that searchesall South African sites.

o (www.ananzi.co.za) This site provides you with good tips on how to search usinga search engine. It is very similar to aardvark in all other respects.

Your business association

Most industries have business associations that have regular meetings, newsletters andwebsites containing information important to that industry. You can contact other businessowners through these associations. Many suppliers also advertise in these newslettersand websites.

seda

If you are reading this fact sheet, you probably know that the Business Referral andInformation Network (seda) has a database of suppliers to various industries. They alsohave contact numbers of the business associations for your industry.

Some of the information contained document is taken from the sourceslisted below:

Seda Website: www.brain.org.za/factsheets/opportunities/tender/find_tender.html

Capegateway:http://www.capegateway.gov.za/eng/tenders/how_to_tender/Business Day Newspaper

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