legislative policies - mangaung - procurement policy

8/12/2019 Legislative Policies - Mangaung - Procurement Policy

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A. BACKGROUND INFORMATION

1. INTRODUCTION

1.1 During 2002, MLM developed the IDP which spells out the vision of the Municipality, the challenges and priority

areas which MLM has to address to meet the needs of community. The vision of MLM has been translated into 4

strategic thrusts, namely (1) Economic growth, (2) Service Excellence, (3) Community resilience and (4) Civic

Leadership. To make this strategic intent a reality, a number of key priority areas were identified to ensure focus

on the right areas to contribute significantly towards the achievement of MLM goals. It was against this

background that MLM recognized the need to actively allow participation of the historically disadvantaged

community within the economic mainstream. This is meant to address the imbalances created by the past.

1.2 Participation of the historically disadvantaged individuals in the economic activities of the country has been very

limited. The municipality has always procured goods and services from service providers, with limited

participation of the historically disadvantaged groups (HDIs). As a result this procurement approach mainly

benefited a small portion of the Mangaung community and was not representative of the population within

Mangaung. Furthermore the government is also concerned about the impact of the exclusions of the previouslydisadvantaged from meaning full participation in the mainstream economic activities in the country to boost

economic growth and reduce unemployment.

1.3 During the development of the IDP, it was also discovered that, in general, the overall economy is declining or

stagnant. Whilst it is the primary objective of MLM to affirm the historically disadvantaged community, it is also

critical to utilise procurement as a tool to s timulate and promote local business development.

1.4 It is therefore imperative for MLM to align its current procurement policy to the objectives of the IDP. The

purpose of the revised policy is therefore to promote entrepreneurship to allow the historically disadvantaged

individuals, particularly blacks, access to the mainstream of business opportunities. This will be achieved by

increasing business opportunities for HDIs and maximising purchases of goods and services from these

companies. Emphasis will need to be placed on supporting local businesses to boost the economy of Mangaung

and the Free State area.

1.5 Notwithstanding the above, the primary task of MLM procurement function shall always be to find reliable, cost

effective suppliers for the organisation. On the one hand, HDI companies will not be treated any differently from

the norm with regard to quality, expected service delivery and technical performance. On the other hand, it is

required that all personnel associated with MLMs procurement must be made aware of this initiative and are

expected to commit themselves to its implementation through good faith, efforts and appropriate purchasingprocedures.

2. EFFECT ON MLM STRATEGIC THRUST

2.1 Economic growth

The increasing involvement of the historically disadvantaged individuals in the procurement of goods and services

within MLM will ensure more participation of such individuals in the economy. This means people who never had

the opportunity to work before, will now be in a position to get employment and become economically active. This

may results in the increase of skills level and encouragement of entrepreneurial practices that could yield positive

economic growth and also expand the rates and taxes base of the Municipality.

2.2 Service excellence

The challenges that the municipality is facing is meeting the ever increasing community demands with limited

resources, mostly financial, available. To be the benchmark municipality will require the commitment and

contribution of every person that impacts on service delivery. Service providers form an integral part of the

MANGAUNG LOCAL MUNICIPALITYAFFIRMATIVE PROCUREMENT POLICY

Approved by Council on 10 July 2003 under item 8A3


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strategy of service excellence. The policy has to address elements relating to the quality of service delivered to the

community and ensure cost effective and efficient practices are applied to do more with available resources. The

latter will lower input costs for business as a result of cost effectiveness, which in turn will lead to investor

attraction.

2.3 Community resilience

In order to build community resilience, it is necessary to facilitate the involvement of local community members in

the procurement of services from service providers. Opportunity areas for community capacity building will haveto be identified when procuring goods and services to encourage effective use of community resources, build

social cohesion and an inclusive society. Higher quality of life and skilled workforce will ensure a reliable supply

of labour.

2.4 Civic leadership

Issues regarding cooperate governance are important in the supply value chain to ensure high level of

accountability and responsibility. Promotion of best practices in corporate governance, business ethics will ensurethat investors view the city as a place of choice for investment

B. MLM PROCUREMENT POLIC Y

1. PURPOSE

This document outlines the procurement policy of Mangaung Local Municipality (MLM) that is intended to

achieve a transparent and consistent procurement supply chain in line with the vision of MLM.

2. SCOPE

The policy is applicable to all directorates within MLM.

3. OBJECTIVE

3.1 To ensure that the procurement of goods and services including the appointment of professional service

providers is done in the most effective, efficient and consistent manner.3.2 To demonstrate MLMs commitment towards the achievement of National Governments black economic

empowerment goals.

3.3 To facilitate the engagement of HDIs in the procurement process.

3.4 To promote equity, fairness and increased participation of local business in the MLM procurement process.

3.5 To outline the process followed by MLM in tendering and awarding of contracts.

4. REFERENCES4.1 The Constitution Act 200 of 1996.

4.2 The Preferential Procurement Framework Policy Act, 2001 (Act No. 5 of 2001).

4.3 The Preferential Procurement Regulations, 2001

5. RESPONSIBILITIES

5.1 City Manager Ensures strict adherence to the guidelines provided in this policy

Implementation of policy

Annual review of affirmative procurement target and policy

Approves the inclusion of a service provider in MLM procurement process after rehabilitation of the

service provider according to statutory requirements

Approves the composition of the tender evaluation committees


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5.2 Executive Directors Commitment towards the achievement of target set

In consultation with Corporate Services, identify opportunity areas for participation of HDIs and develop

plan to assist and engage such HDIs.

Develop user requirement specification to acquire goods or services

Ensure all procurement is done in a manner that complies with all company and labour legislation.

5.3 Executive Director Corporate Services

Custodian of the procurement policy and report on progress regarding its implementation.

Conducts procurement audit of the entire procurement process to identify successes and failures for

incorporation into a lessons learnt database.

Overall management of the tendering process from solicitation to processing of invoice payment once work

has been completed

Promotes corporate approach by encouraging standardization of items purchased within MLM to realize

economies of scale

Provides supplier interface on supplier performance issues

Ensures that procurement is made through practices that demonstrate compliance to all relevant legislation

Responsible for sourcing suppliers and procurement of goods and services to ensure that the procurement

process of MLM is adhered to

Ensures that the process followed to procure goods and services for MLM adheres to preference targetswithout compromising price, quality, service delivery and developmental objectives

Responsible for ensuring that all employees involved in the development of enquiry document, tendering

and tender adjudication receive necessary training to support implementation of this policy

Responsible for establishing the amount to be paid by prospective tenderers as a non-refundable deposit for

enquiry documents issued by MLM

Responsible for the verification of all registered service providers for inclusion on the roster

Submit regular reports to Finance Portfolio Committee regarding progress and any matters of importancerelating to the procurement policy

Responsible for placing an advertisement in the press during February every year to invite professional

service providers to register on MLM professional service provider roster

Responsible for the verification and probity of all registered service providers for inclusion on the service

database and professional service provider roster

6. DEFINITIONS

6.1 BEE (Black Economic Enterprises)

A service provider, partnership or legal entity with PDI ownership, risk and control of more than 66%. The PDI

must not only own and control the business, but must also assume operational responsibility for the dailymanagement and operations of the business. The other remaining equity shares shall not be owned by another

business or principal which engages in similar business activities;

6.2 Fronting

Occurs when a supplier does not provide the true nature of ownership of control as claimed in the tender or

supplier application forms.

Equity holder not involved in the day-to-day running of the business

Shares with no dividend

Equity holder not adding value to business;

Equity or shares without the stated economic and voting rights and benefits

Equity holder shall be interpreted in relation to the legal persona to the extent that it adds value


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6.3 Historically Disadvantaged Individuals (HDI)

This means a South African citizen

who, due to the apartheid policy that had been in place, had no franchise in national elections prior to the

introduction of the Constitution of the Republic of South Africa, 1983 (Act No 110 of 1983) or the

Constitution of the Republic of South Africa, 1993 (Act No 200 of 1993) (the Interim Constitution);

and/or

who is female; and/or

who has a disability

Provided that a person who obtained South African citizenship on or after the coming to effect of the Interim

Constitution, is deemed not to be an HDI;

6.4 Joint Ventures

A partnership in which

The senior joint venture partner is a prime contractor and the junior venture partner, who may lack skills in

certain functional areas, is able, through the joint venture formation to participate at prime contract level

and develop in these areas, or

All joint venture partners may be prime contractors in their own right however lack the resources and

capacities to perform the work on their own, and elect to work in joint venture in order to assemblesufficient resources and/or capacity to the perform the Contract

A target group venture partner holds no less than 40% of the economic and voting rights of the joint

venture;

6.5 Local business

Means service providers with active offices in the Mangaung area. Active offices shall be interpreted on the basis

of whether they are utilized for the goods or services to be procured, and whether the majority shareholders are

local or Free State people;

6.6 Previously Disadvantaged Individuals (PDI)

A person who satisfies subsection (1) of the definition for Historically Disadvantaged Individual provided for inthe regulations to the Preferential Procurement Policy Framework Act (Act No. 5 of 2000). This subsection of the

Act defines HDI on the basis of race;

6.7 Price Matching

This is a tool used to assist HDIs to gain business in competition with established suppliers. It means allowing a

technically acceptable HDI company to match the lowest price of a non-HDI tenderer, or a realistic market priceand may be awarded 100% of the contract value. Before price matching is done, it must be made sure that the

lowest price of the financially, commercially and technically acceptable tender is a fair market price. Benchmarks

obtained from repeat purchases and market research information may provide guidelines for establishing fair

market prices.

6.8 Procurement

It is a process of creating, performing and completing a contract which may involve:

The supply of goods, services or works or any combination thereof,

The disposal of moveable property,

The hiring or letting of anything,

The acquisition or granting of any rights;


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6.9 Professional Service Provider (PSP)

A partnership, sole trader or legal entity which provides on a fiduciary basis, labour and knowledge-based

expertise which is applied with reasonable skill, care and diligence, and adheres to statutory labour practices;

6.10 Service Provider

This is a current or potential supplier, manufacturer, contractor, vendor, agent, or professional service provider

(PSP);

6.11 Traditional Service Providers

A service provider that has less than 25% ownership by the HDIs;

6.12 TransformingHDI

A partnership or legal entity with at least 25% ownership, risk and control by females or disabled persons or youth.Such persons must not only own and control the business, but must also assume operational responsibility for the

daily management and operations of the business. The other remaining equity shares shall not be owned by

another business or principal which engages in similar business activities;

6.13 Transforming PDI

A service provider, partnership or legal entity with PDI ownership, risk and control of between 25 66%. The PDI

must not only own and control the business, but must also assume operational responsibility for the daily

management and operations of the business. The other remaining equity shares shall not be owned by another

business or principal which engages in similar business activities;

6.14 Trial purchases

These are strategic purchases aimed at offering HDIs an opportunity to prove themselves, whilst increasing the

buyers confidence. The effectiveness of each trial purchase will be monitored and subsequent orders may be

increased depending on performance. This process will be used to develop HDI service providers and waive the

need for surety bonds on perfo rmance and improve the HDIs credit rating;

6.15 Youth

Means any persons(s) between the ages of 14 and 35 years

7. POLICY

7.1 Preference ProcurementIt is the policy of MLM to adopt a targeted procurement system, in line with the Act, to provide employment and

business opportunities for marginalized individuals and communities, enables procurement to be used as an

instrument for socio-economic transformation, through a policy that is fair, equitable, competitive, transparent and

cost effective and permits social objective to be quantified, measured, verified and audited.

7.2 Qualification for inclusion in MLM service provider databaseIt is the policy of MLM to qualify all potential service providers for the supply of part icular goods and services. To

be eligible for participation in MLMs procurement process, prospective service providers shall;

Apply for registration to be included in the service provider database and provide statement of their

ownership/control and internal HDI programmes, which will be used in the service provider assessment and

in assessing tenders along with technical and commercial submissions

Provide documentation and substantiate the validity of their credentials. Service providers who are not

willing to comply with this requirement will be eliminated from MLM service provider and/or tender list


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Be technically and commercially acceptable for the goods and services to be procured

The qualification of professional service providers will be managed according to section 16 of t his policy.

7.3 Hierarchy of Preference ProcurementPreferences and inclusion on the service provider database and the roster will be applied according to the

following hierarchy, with particular focus on local service providers, in sourcing products and services.

BEE

Transforming PDI service providers

Transforming HDI service providers (gender, disability and youth related)

Traditional suppliers

In applying the hierarchy, MLM will ensure that the procuring of goods is done fairly and equitably. In other

words, this preference should not benefit only a few HDI service providers, particularly if goods and services

could be sourced from numerous HDI service providers. A bias will be given for HDI service providers with a

minimum local equity shareholding of 45%.

7.4 Treatment of AgenciesNotwithstanding the provision of section 7.3 above, no preference will be given to any agencies, whether it is anHDI or not, if it is just an additional link but does not add any value in the supply chain.

In other words, agencies will only be considered if they provide expert back-up services, spares, stock holding or

similar benefit to MLM.

7.5 Mechanisms of ProcurementThe following mechanisms will be applied to procure goods and services.

Multiple source procurement

This method shall be used for procurement of goods and services equal to and below R120 000 by inviting

at least 3 prospective service providers to submit quotation or proposals.

Targeted procurement

This method will be used for all contracts, excluding professional service contracts, above R120 000 by

allowing any prospective service provider to make an offer and compete on an equal basis

Roster system procurement

This method will be used for all professional service contracts

Sole source procurement

This method may be used in the case where a service provider is required under emergency situation and the

financial, safety or health risk to the municipality could be substantial if the normal tendering process is

followed.

The method is also used in the case of sole suppliers whereby there are no other service providers that may

compete for similar goods and services required.

7.6 Categories of ProcurementIn line with the financial regulations governing the procurement process of MLM, the categories used to procure

goods and services shall be divided as follows for ease of management. The process described in each financial

category exclude the provision of professional services, as its process is dealt with under section 12.

Between R0 and R120 000 (see 7.6.1 below)

Between R120 000 and R500 000 (see 7.6.2. below)


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More than R500 000 (see 7.6.3. below)

All professional service providers (refer to section 16)

7.6.1 Between R0 AND R120 000 Multiple sourcing procurement method shall be used for procuring of goods in this area

Corporate Services shall develop and maintain a database of all service providers with the capability to

provide product or services in this category

Service providers in the database shall apply for registration and provide a statement of their

ownership/control and internal HDI Empowerment Programmes, which will be used in supplier assessment

and in assessing tenders along with technical and commercial offerings.

MLM gives explicit preference for HDIs on all contracts in this category.

The service provider shall be technically and commercially acceptable for the goods and services to be

procured.

The user directorates shall assist corporate services directorate in identifying potential service providers, with

particular emphasis on HDIs.

The user directorates shall draft the specifications and determine the quality standard of goods and services to

be procured. The details depend on the size and complexity of the goods and service required.

Trial purchases and price matching strategies shall be considered in this category

The controller of stores, after receiving the specification, shall obtain 3 written quotations that are responsive

(i.e. technically acceptable) and responsible (i.e. price acceptable). The hierarchy as indicated in section 7.3 shall be followed.

In the case where an HDI service provider is not available, the controller of stores and the relevant user

directorates shall put future plans in place to search for a potential HDI.

HDIs will not be treated differently than the norm with regard to quality, expected service delivery and any

technical requirements.

A minimum of 60% of contracts, in rand value terms, shall be awarded to PDI as an annual procurement

target for MLM in this category. Of this target, 15% must be HDI gender or disability related.

Approval of the requisition or order will be as per MLMs latest revision of Delegation of Powers Policy.

7.6.2 Between R120 000 and R500 000

The contracts falling in this area shall be procured using a targeted tendering process

A targeted preferential points system, 80/20, shall be applied whereby

- 80 points are based on the attractiveness of the price, and

- 20 points are allocated in relation to the targeted goals as outlined in Table 7.1

The allocation of Price Points1scored by a Tenderer shall be calculated on a pro rata basis in relation to the

attractiveness of the price submitted by the tenderer. For the acquisition of goods and services the tender with

the lowest price will be most attractive, while for the selling of goods and services the highest price will be the

most attractive. TheAllocated Price Pointsfor a tender can therefore be calculated as:

Allocated Price Points = P x (2 - T/TL)for the acquisition of goods, or;

= P x T/TH for the selling of goods

where:

P = Price Points

T = Price of the specific tender under investigation

TH= the highest tender received

TL = the lowest tender received

Targeted Goals:Targeted Goalsas set in the tender document shall be divided into:

1In line with clause 8, only responsible and responsive tenders will be considered for evaluation. Furthermore the

lowest price shall be defined on the basis of a realistic price


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(i) Equity Promoting Goals: The percentage equity held by PDIs, women or disabled people or youthin

the contracting business, joint venture (JV) or in combination with (if any) subcontractors (SC) or

emerging subcontractors (ESC).

(ii) RDPPromoting Goals: Including Local Businesses and Social Responsibility Goals as set out in the

Tender.

Allocated Preference Points:The Allocated Preference Pointsscored for the attainment of Targeted Goals

shall be allocated in accordance with the Tendered Goals and can be calculated as:

Allocated Preference Points = Preference Points x Tendered Goals

Targeted Goals

The tenderer with the highest number of tender points scored may be selected, subject to the achievement of

the HDI targets.

A minimum of 60% of contracts, in rand value terms, shall be awarded to PDI as an annual procurement

target for MLM in this category. Of this target, 10% shall be towards transforming HDI.

To achieve the above targets MLM may, price match the HDI tender that achieved the highest tender points

with lowest price tender1and award 100% of the contract value to such an HDI tendered.

Trial purchases and price matching strategies may be considered in this category

7.6.3 Above R500 000 The contracts falling in this area shall be procured using a targeted tendering process

A targeted preferential points system, 90/10, shall be applied whereby

- 90 points are based on the attractiveness of the price, and

- 10 points are allocated in relation to the targeted goals as outlined in Table 7 .1

The allocation of Price Pointsscored by a Tenderer shall be calculated on a pro rata basis in relation to the

attractiveness of the price submitted by the tenderer. For the acquisition of goods and services the tender

with the lowest price will be most attractive, while for the selling of goods and services the highest price

will be the most attractive. TheAllocated Price Pointsfor a tender can therefore be calculated as:

Allocated Price Points = P x (2 - T/TL)for the acquisition of goods, or;

= P x T/TH for the selling of goods

where:P = Price Points

T = Price of the specific tender under investigation

TH= the highest tender received

TL = the lowest tender received

Targeted Goals:Targeted Goalsas set in the tender document shall be divided into:

(i) Equity Promoting Goals: The percentage equity held by PDIs, women and disabled peoplein

the contracting business, joint venture (JV) or in combination with (if any) subcontractors (SC)

or emerging subcontractors (ESC) .

(ii) RDPPromoting Goals:Including Local Businesses and Social Responsibility Goals as set out inthe Tender.

Allocated Preference Points:The Allocated Preference Points scored for the attainment of Targeted

Goals shall be allocated in accordance with the Tendered Goals and can be calculated as:

Allocated Preference Points = Preference Points x Tendered Goals

Targeted Goals


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The tenderer with the highest number of tender points scored may be selected, subject to the achievement

of the HDI targets.

A minimum of 30% of contracts, in rand value terms, shall be awarded to PDIs as an annual

procurement target for MLM in this category. Of this target, 5% shall be towards HDI gender or

disability related.

To achieve the above targets MLM may, price match the HDI tender that achieved the highest tender

points with lowest price1tender and award 100% of the contract value to such an HDI tendered.

Price matching strategy may be considered


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TABLE 7.1

Preference Points

Preferences Goals

Tenders below a

Prescribed

Amount

(80/20)

Tenders Above a

Prescribed

Amount

(90/10)

Professional

Appointments

Equity

Promoting:

Women or

disabled or youth

PDI General

Local100% equity

100%

3

8

4

2

4

2

3

8

4

RDP

Promoting:

Local Firms Yes 2 1 2

Social Responsibility (in tender) 3 1 3

Price Best price 80 90 0

Total: 100 100 20

8. Tenders that are non-responsive (i.e. technically unacceptable) and non-responsible

(i.e. price very high or very low) will be disqualified.

8.1 Non-responsive tenders

Tenders that do not respond to any of the technical requirements of the scope of work or do not meet any of thetechnical specifications outlined in the enquiry document without clarification and acceptance by the person that

issued the enquiry documents, will be disqualified.

8.2 Non-responsible tenders

These refer to tenders with a price that is very high or very low and is therefore not considered a fair and

acceptable market price. A fair and acceptable market price is defined on the basis of the following factors.

Is the tendered price substantially below or higher than that of other tenderers?

In repeat purchases, how does the tendered price compare with recent contracts awarded for similar items or

work, taking into account quantified, conditions, terms, and other important specifications?

Are there price indices available to determine the changes in labour and material costs

Market research information to establish fair market price goods and serviced procured regularly

The above is particularly important for the calculation of preference point system and the implementation

of the price matching strategy.

9. MLM reserves the right, at its sole discrection, to award only part of a contract or not

to award a contract at all, if

9.1 due to changed circumstances, there is no longer need for goods or services tendered for; or9.2 funds are no longer available to cover the total envisaged expenditure; or


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9.3 no responsive and responsible tenders are received based on the evaluation criteria stipulated in the enquiry and

tender document,

10. MLM may challenge the price quoted by a service provider if it believes that the

quoted price is unrealistic or not market related.

11. MLM reserves the right to extend or modify the original scope work without

re-tendering, after the conclusion of a contract, if

11.1 due to unforeseen circumstances, additional work becomes necessary in order to complete the project based on the

original objective set out in the original enquiry document. The revised amount shall not exceed 40% of the

original contract amount.

11.2 the work is spread over a period that is more than 1 financial year. After the initial tendering during the first year,

the renewal of the contract for subsequent years will ensure Council expedite the implementation of projects

without repeating the tendering process for a repetition of similar work forming part of a basic a project for which

an initial contract was awarded using the tendering process. MLM shall indicate in the initial enquiry document

that further contracts may be awarded through negotiation with a service provider appointed for the initial contract.

12. Due to the multi year nature of the budgeting process MLM may consider, as an incentive for change, offering

contracts spreading over 3 years, particularly with PDI service providers, providing that the contract prices remain

market related and the project is approved for inclusion in the budget.

13. The HDI appointed on the basis of preference point system as the service provider may not subcontract more than

40% of the contract value to a non-HDI service provider.

14. Tender evaluation

To facilitate unbiased decision making and conformance to corporate governance, it is necessary to provide for a

process for the approval of tenders through a tender committee system.

Tender evaluation not applicable to multiple source procurement whereby procurement of goods and services is

done for contracts below R120 000 through the invitation of quotations.

14.1 Tendering process

User directorate to prepare specifications and submit them to Stores for procurement of goods or services

Stores shall- obtain quotations or issue enquiry

- receive offers or tender documents

- arrange for tender evaluation, where necessary, in conjunction with the

user directorate

- submit evaluation report and recommendations in conjunction with

the relevant user directorate to the following party for approval.

General Managers for contracts below R200 000

Executive Directors for contracts below R500 000

City Manager for contracts below R1 000 000Executive Mayor for contracts above R1 000 000

14.2 Establishment of a tender evaluation committee

Each directorate shall have its own tender evaluation committee to evaluate the tenders received based strictly

on the criteria as outlined in the enquiry document

Each committee shall comprise of permanent members and stand in members appointed on a yearly basis

Each committee shall consists of an independent observer, drawn from a register administered by Corporate

Services and approved by the Executive Mayor.


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Ad hoc members from other directorates or external parties may, with the approval of the City Manager, be

included to ensure representation on specific issues (e.g. economic development, legal, skills development,

etc)

Every tender adjudication committee shall have a member representing the interests of HDIs. These members

would have undergone relevant training as identified and approved by Corporate Services

The tender evaluation committee shall submit recommendations to the relevant party for approval

The criteria for the selection and inclusion of tender evaluation committee members shall be guided by

competency and representativity

15. Strategies for HDI procurement targeting15.1 Price matching

In order to assist HDI companies to gain business in competition with established suppliers, it may be necessary to

adopt the price matching strategy. When the highest tender points obtained are allocated to a non HDI company,

MLM may allow the closest HDI to match the lowest price of non-HDI tenderer, or a realistic market price.

The preference for price matching will be in the sequence as indicated under section 7.3. Furthermore to stimulate

economic growth in the area, local service providers will receive first preference.

It must be ascertained that the contract price tendered in the lowest priced financially, technically acceptable

tender is a realistic market price before price matching can be done. A realistic market price means a price basedon reasonable costs under normal competitive conditions. Any supplier that deliberately quotes a price below his

marginal costs in order to ruin competitors is contravening the Competition Act. If there are good reasons to

believe that the lowest price is not realistic market price then the tender should be disregarded as a non-responsive tender. This is done to protect the HDI service provider. Notwithstanding this, assurance is required

that the HDI service provider is willing to price match and is in fact capable of profitably supplying at that price.

Price matching will be done to achieve the annual procurement targets as set by MLM.

15.2 Joint VenturesPreference will be given to Joint Ventures with HDIs provided the following conditions are met :

the minimum participation of HDI shall be as specified in the tender document, however shall not be lessthan 45%

the HDI company executes work with its own resources and management, proportion to their participation

in the joint venture.

the HDI company is actively involved in the management and administration and shares in the potential

benefits and risks inherent in the contract

the joint venture, where necessary, demonstrate quantifiable commitment towards capacity building and

how this would be achieved.

15.3 Trial purchasesMLM will from time to time identify strategic contracts, which are aimed at offering HDIs an opportunity to

prove themselves, whilst increasing the buyers confidence. The effectiveness of each trial purchase will be

monitored and subsequent orders may be increased depending on performance. This process may be used to avoidsurety bonds on performance and improve the suppliers credit rating.

15.4 Sub contractingFor contracts awarded to traditional comp anies where sub contractors will be used, MLM expects the company toutilise HDIs for this purpose with a minimum participation of 30% of the subcontracted portion (in value terms),

provided that they exist. Such HDIs shall have the necessary competencies to provide the service required.


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15.5 Early payment cyclesPayment periods for HDIs shall be 15 days after receipt of a valid invoice without deduction of settlement

discount for conventional/and operational purchases and minor classified contracts. The receiver of goods or

services delivered shall ensure prompt approval of the invoice so that payment may be effected within the 15 days

period. Any dispute on the invoice shall therefore be resolved without delay.

15.6 RetentionFor contracts less than R500 000, retention will be reduced to 2.5% of the contract value and the amount shall be

deducted from progress payments at a rate of 5% per certificate unti l the retention amount is recovered.

Standard retention rules apply for contract above R500 000

For purposes of facilitating access to finance, cession of contracts and payments to third parties will be availed to

HDI service providers where necessary.

Furthermore where possible, Corporate Services may render assistance by requesting financial institutions to find

ways in which they could relax the normal commercial evaluation requirements to offer HDIs financial support,

without substantially increasing the risk of such financial institution.

16. The appointment of professional service providers (PSPs)16.1 This section outlines the approach taken by MLM in the appointment of professional service provider, otherwise

commonly called consultants. Due to the cost and time associated with the tendering process, the principle of a

roster system has been applied by government departments. MLM shall also appoint professional service providers

using a roster system. The policy therefore sets out the principles used for the establishment and operation of a

roster system in support of a Preferential Procurement Policy for statutory tariff appointments of Consultants.

16.2 This service will generally cover, but not limited to, the following CATEGORIES.

A : Integrated Development Planning

B : Municipal Service Delivery Planning and Organisation , with reference to all areas of municipal service

delivery

C : Municipal Finance Strategy and Planning including the development of Medium term Income andExpenditure

D : Human Resource Development and the design of HR Policies and Systems

E : Information Systems and Technology

F : The development of Public Participation arrangements

G : Economic Development

H : Environmental ManagementI : Advertising

J : Agri-business Development

K : Project Management

L : Communication

M : Legal

N : Engineering and Technical

16.3 Purposes of the rosterThe purposes of the roster are to:

Enable MLM to appoint PSPs efficiently without tendering

Ensure that the work is carried out in a professional,

competent and cost effective manner

Allocate work in a fair and equitable manner

Promote access to assignments by HDIs

Provide accelerated work opportunities for companies under


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targeted groups

Promote and encourage mutually beneficial relationship between the established companies and the HDIs

for capacity building.

16.4 Principle of assignment from roster

Roster data

The Roster will be a single list of firms covering the relevant disciplines and will contain the following data in

respect of the all offices of every firm;

the number of registered professionals employed at the office that are active. they must be classified in

respect of colour, gender, disability and youth

the disciplines and sub disciplines in which the office is competent

the geographical location of the office with a domicilium in MLM

the preferred status of the firm.

the field of specialisation of the firm

the rand value of work done for MLM (including previous town councils)

since the national elections in 1994

16.5 Preferential treatment of preferred firms

Inclusion on the roster will primarily be for those companies with a minimum 30% PDI and 10% Transforming

HDI equity and will be graded as follows.

Firms which qualify for preferred status will be given accelerated access to work opportunities and willrotate faster on the roster than firms which do not enjoy such status

MLM may require non-HDI firms to enter into structured joint ventures with HDI firms in order to develop

skills, competency, expertise and capacity in the latter.

The mechanism for allowing accelerated access to work will be applied as follows.

Category A (66% PDIs) move up 3 positions during the updating of the list annually

Category B (30% PDIs


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A firm which enjoys HDI status may be registered on the roster without professional indemnity insurance,

but will be expected to obtain such insurance upon receipt of an appointment from MLM

In a joint venture between an HDI and non-HDI, the HDI partner shall contribute at least 30% in the joint

venture

16.8 Levels of authorisation

Approval of professional service providers shall be carried out according to the following levels of authorization.

General Managers for total fees below R100 000

Executive Directors for total fees below R200 000

City Manager for total fees below R500 000

Executive Mayor for total fees above R500 000

16.9 Professional indemnityInsurance cover required is 1.2 times the estimated value of the professional portion to be carried out for projects

exceeding R500 000 in the case of HDIs.

16.10 Exclusions for legal professional servicesThe provision of section 16.3 and 16.5 of this policy will not apply in the case of legal professional services.

The Preferential treatment of preferred firms and registration on the roster for legal service providers shall be done

according to the document titled Council Work Assigned To Firms Of Attorneys In The Mangaung Municipal

Area attached as Annexure A, which was approved by a Council resolution during the meeting of 29 May 2003

(item 5.6, page 14 Annexure, pages 1093 1096).

17. Enabling environment for HDI;s

17.1 Developmental objectives

Joint ventures

From time to time, MLM may encourage joint ventures between HDI andnon HDI service providers to facilitate skills transfer to the HDI service

provider. Such joint ventures will require identification of specific and

measurable objectives to quantify the skills and knowledge transfer that

has taken place

Use of strategic projects for trial purchases

It is recognised that some of the HDI service providers may be newly emerging companies with limited

experience. In order to allow such service providers to gain more experience, MLM will identify strategic

contracts aimed at offering HDIs an opportunity to prove themselves. The performance of the service

provider will influence placement of future orders.

17.2 Commitment by allPersonnel involved in the procurement of goods and services will be expected to undergo training and

development to ensure full understanding and commitment towards the achievement of the objectives of this

policy.

17.3 Tender adjudicationEvery tender adjudication committee will have a member representing the interests of HDIs. These members

would have undergone relevant training as identified and approved by Corporate Services.


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18. Performance report

Corporate Services shall submit regular report on progress made with regards to

the implementation of this policy and management of procurement within MLM in

general. The report shall include, but not limited to, the following information.

Actual (year to date) amount spent on procurement v/s the target

Actual amount spent on BEE

Actual amount spent on transforming PDIs

Actual amount spent of Transforming HDIs

Actual amount spent on Traditional suppliers

Actual amount spent on the basis of price matching and trial purchases

Actual amount spent on HDI second tier procurement (i.e. HDI sub contractors). This information should be

obtained from the main service provider that MLM contracted with.

The percentage of HDIs who obtain repeat contracts

Progress on skills transfer due to joint ventures

Any penalties applied during the period in question

The format of reporting should show the actual and target, in percentage and rand value terms.

19. Penalties

MLM shall restrict any firm, its shareholders and directors from procuring any work from MLM for a period of 5

years, if the firm has committed the following acts after the implementation of this policy.

19.1 Any service provider awarded a contract as a result of preference for contracting with, or providing ownership to,as HDI, subcontract more than 30% of the value of the contract to a person who is not an HDI or does not qualify

for such preference.

19.2 Any service provider that misrepresents the facts in order to gain some advantage using the targeted procurementof this policy.

19.3 Any evidence of fronting from a service provider who has procured work from MLM.20. Service providers excluded from MLM procurement process

MLM will exclude service providers from its procurement process if they :

20.1 are not registered in accordance with all company, labour and relevant statutory body regulations20.2 have been in liquidation, sequestration, judicial management or under curatorship20.3 have embarked upon liquidation20.4 have been blacklisted by major credit bureaus or any local authority20.5 have outstanding payment of municipal services received from MLM, including municipal services to the

shareholders properties

20.6 have failed to submit an original Tax Clearance Certificate from the South African Revenue Service (SARS)certifying that the taxes of that person or business, which ever is applicable, to be in order or that suitable

arrangements have been made with SARS.

20.7 Have failed to submit a valid exemption certificate from the Free State bargaining Council with regards to itsduties in terms of the labour law, where applicable.

20.8 under-performed in the execution of previously awarded orders, projects, tenders and contracts.20.9 have used unethical practices to obtain business from MLM


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20.10 have been included in the barred suppliers register maintained by the National Treasury, due to conviction becauseof corruptive practices or reneging on contracts.

Service providers who have been rehabilitated according to statutory requirements may be reconsidered for

inclusion in the procurement process.

21. All service providers shall pay a non-refundable pre determined deposit for all enquiry documents issued by

MLM. This amount shall be indicated in the advertisement for the goods or services required.


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ANNEXURE A

COUNCIL WORK ASSINGED TO FRIMS OF ATTORNEYS IN THE IN THE MANGAUNG MUNICIPAL

AREA

Memorandum

OFFICE OF THE CITY MANAGER

P.O Box 3704,

Bloemfontein,

9300

Tel.: (051) 405 8101

Fax: (051) 405 8108Our ref/MJ MATLOLE

e-mail: [email protected] Date: 24 FEBRUARY 2003

EXECUTIVE MAYOR

COUNCIL WORK ASSIGNED TO FIRMS OF ATTORNEYS IN THE MANGAUNG MUNICIPAL AREA.

BACKGROUND

For some time the allocation of work by the municipality to firms of attorneys has been seen by certain sectors of our

community as controversial and disputatious. It is a fact that some established firms of attorneys in the Bloemfontein

area survived, developed and flourished on the basis of assignments from the then Bloemfontein Council. Unfortunately, all

these companies - for historical reasons -happen to be predominantly white and male dominated. As the municipality

continues to transform, it is crucial that this part of council assignments also transforms.

Previously, an attempt was made to try and diversify Council assignments to a number of firms including black firms.However, the flow of complaints from black firms clearly demonstrates that the chosen path and system is not bearing any

desired results. Throughout this year, Black firms other designated groups continue to make a case for their involvement in

municipalitys assignments and work.

A municipality (like all state organs) is supposed to further the objects of the Bill of Rights. Deliberate and concerted efforttherefore has to be taken to promote designated groups and previously disadvantaged people. This is a constitutional

requirement in terms of section 217 of Act 108 of 1996. Section 217(1) reads:

When an organ of state in the national, provincial or local sphere of government, or any other institution

identified in the national legislation, contracts for goods and services, it must do so in accordance with a systemthat is fair, equitable, transparent, competitive and cost effective.

Subsection 2 (b) reads:

Subsection 1 does not prevent the organs of state or institutions referred to in that subsection from implementing

a procurement policy providing for the protection or advancement of persons, or categories of persons,

disadvantaged by un fai r discrimination.

The intention of the government further finds expression in the Preferential Procurement Policy Framework Act 5 of 2000.

It therefore becomes clear that affirming designated groups is by law permissible and politically desirable

Status quo

Currently the allocation of municipalitys legal work happens as follows:

1. Labour disputes and labour law issues - Messrs Honey and Partners

2. Claims for compensation for damages against the Municipality that are not dealt with by brokers of the

Municipality. -Messrs Peete Peete and Partners


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3. Debt collection in respect of sundry debtors -Messrs Naudes

4. Debt collection in respect of water and electricity -Messrs McIntyre and Van der Post

5. Debt collection in respect of rentals - Messrs Symington and de Kok

6. Debt collection in respect of rates and services - Messrs Webbers with assistance by other firms

as determined by ED: Finance

7. drafting and registration of deeds -Messrs EG Cooper and Sons in consortium with

Messrs Mthembu and Mahomed

8. Legal advice on municipal matters, drafting of contracts of purchase and sale, letting and hiring, Court cases where

the Municipality features as plaintiff, defendant or accused, Expropriations, and any other work that may influencethe activities of he Municipality.- Messrs EG Coopers and Sons

It is not clear how this kind of allocation assists in promoting the cause of previously disadvantaged categories. The bulk of

work continues to go to White - male dominated firms. If the municipality is to be constitutionally correct and further the

intentions of empowerment/ development, a deliberate strategy and policy has to be developed to completely overhaul the

current framework.

The argument that high-risk work be allocated to experienced firms on municipal matters should not hold because all theseexperienced firms started somewhere. If we do not take the risk and broaden our pool of experienced firms, knowledge will

be monopolized.

Time for Change

The current Municipalitys procurement policy is tailor made for consultancy and contractors work and is not suitable for

legal work. Further, this policy does nothing more than comply with legislative requirements. It is submitted that maybe

time has come for this very important policy to be reviewed to enable municipalitys empowerment drive to get off the

ground.

There is however, recognition that some white firms are beginning to have blacks and other designated categories as part

of shareholders, partners, associates or assistants. Whilst this is laudable, empowerment of designated groups can beaccelerated with deliberate interventions.

Radical policies are therefore needed to drive empowerment. It can never again be business as usual when you want to

change peoples life. Part of the Preamble to the Systems Act Constitution of the country reads:

Whereas there is a need to set out the core principles, mechanisms and processes that give meaning to thedevelopment of local government and to empower communities to move progressively towards the social and

economic upli ftment of communiti es specifi cally the poor and the disadvantaged.

Because of the complex nature of the legal profession, it is not easy to propose changes based on quotas, as this will present

logistical complexit ies. However, a new progressive roster system is proposed to sufficiently advance the Municipalities

socio-economic objectives and constitutional imperatives.

Roster system

This system is intended to support the objectives of the preferential procurement policy in relation to the legal profession.

The purposes of the roster system are:

To promote access to assignments by historical ly disadvantaged and/ or designated groups;

To provide accelerated work opportunities for entities under targeted groups;

To promote and encourage mutually beneficial relationship between the established and previously disadvantaged

entities;

To allocate work in a fair and equitable manner;

To ensure that assignments are carried out in a professional, competent and cost effective manner and

To enable the Municipality to appoint Legal firms and companies without tendering.


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Principles of assignment from the roster

The roster will be a single list of Legal firms and will contain the following data:

1. A number of admitted attorneys at the firm

2. A number of registered candidate attorneys at the firm

3. Classification in respect of gender, colour etc

4. Geographic location of the firm

5. Preferred status of the firm and

6. Disciplines in which the firm is competent.Preferential treatment of firms

Firms qualifying for preferred status will be given accelerated access to work opportunities and will rotate faster on the

roster than firms, which do not enjoy the status. In certain instances, the municipality may require targeted entities to enter

into joint ventures with established entities in order to develop skills, competency, expertise and capacity.

Mechanisms for accelerated access to work will be applied as follows:

65% PDI - move up 4 places during update

55- 64% PDI - move up 3 places during update

30 54% PDI - move up 2 places during update

25 % Women and disabled - move up 1 place during update.

In case of a tie based on status, other objective criterion shall be utilized to determine a line up within a part icular grouping.

Registration for the Roster

1. Registration shall be annually before the end of April.

2. No individual or group can be in control of more than one firm on the roster

3. Joint ventures between opposite ends shall always be on a 50/50 basis

4. Sub-contracting by a PDI shall not exceed 30%

Penalty

Should any Firm provide false information, a penalty of a fine up to R100 000 shall be charged and suspension of its

membership from placement on the roster for up to 4 years irrespective of the nature and form they take.

Recommendations

It is therefore proposed that council resolves to accept this policy as stands

And other matters related hereto be dealt with administratively.

It is hoped that should Council resolve as indicated above, firms relying on municipalitys assignment will be encouragedto restructure themselves thus shifting the economies of scale in favour of blacks, women and the disabled.

Yours sincerely,

_____________

MJ Matlole

City Manager


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1.9 Negotiations with offerors for clarification of proposals

1.10 Shortlisting of proposals

1.11 Select best and final offer

1.12 Place contract

2.2 Request for quotation

This type of tendering is used for mainly products and services that are tangible. For instances, purchasing of computers,

stationary, and maintenance contracts for equipment falls in this category. The process followed in this case is

(i) User directorate develops request for quotation. The proposal to cover

- Scope of work or supply. Unless if what is required

can be described accurately b y characteristics, the

work should be specified according to the functionality

required.

- evaluation criteria and scoring criteria

- Specifications to be complied with

- List of deliverables

- List of receivables

- Cost of proposal

(ii) RFQ issued

(iii)

Quotations received and evaluated(iv) Select best and final offer

(v) Place contract

2.3. Request for information

This method of tendering is used in the case where MLM would like to find out what services or products are available in

the market. It goes without saying that there is no intention to enter into a contract agreement in this regard.

legislative policies - mangaung - procurement policy

Documents