So, you’re a small business and you’re plodding along relatively successfully but work is not always a sure thing. What you really need to launch you into the big time is a large contract with a client that will guarantee both work and payment. If you could only get your hands on one, you could breathe easy for a while, and maybe even put some capital aside to execute the growth plans you’ve previously put on the backburner.
Tenders, especially those for government contracts, sound like the answer in this situation, and in many ways they can be. But before you start counting your chickens, familiarise yourself with the ins and outs of the tender process – because it’s never as easy as it sounds.
Simply put, a tender is an offer to do a particular job or supply particular goods at a particular price. Also referred to as a bid, it is a process whereby businesses have the opportunity to put forward their goods or services at their price to the organisation that has put out the tender. Because government is spending public money on contracts, and is committed to transparency in how this is carried out, it adopts a tender process as a way of limiting the chances that contracts are awarded on the basis of favouritism, racism, nepotism or any other unfair process.
A similar principle applies to companies in the private sector which need to remain transparent about their procurement process. Once you submit a tender, it will be reviewed according to a number of criteria along with all the other tenders for the same contract, after which government or the organisation will accept the tender and award the contract to its chosen service provider. This contract is legally binding – it requires the service provider to deliver the goods or services at the tendered price and within a particular time framework, and it requires the other party to pay for the goods or services at the price tendered and on time. Great – so where do the snags come in?
Firstly, the tender process is an understandably competitive one. Everyone wants the same piece of the same pie so you can be sure that your tender is up against the toughest of your eligible competitors. And although cost is an important factor in deciding which tender is awarded the contract, it’s not always the only criterion. Obviously, it goes without saying that you have to be deemed capable of delivering the goods or services required.
All government tenders are awarded points and the bidder that obtains the highest number is awarded the contract. But in line with its procurement policy, government gives preferential points to contactors that are owned and operated by previously disadvantaged individuals (PDIs). For example, the Small Enterprise Development Agency (Seda) points out that government adjudicates 80% of tender on price and 20% on the PDI status or gender of the business owner, for tenders under R500 000. Companies in the private sector often have a similar policy of favouring suppliers with PDI status.
Find The Information
But first you have to find out what contracts have been put to tender. National and provincial government departments; municipalities; parastatals and big companies in the private sector all issue tenders. The system is designed to make information on tenders freely available but that doesn’t mean you won’t have to go looking for it. Proactivity is the name of the game.
Establish Your Eligibility
Your next step is to determine whether you are eligible to tender for the contract. Seda advises that businesses that meet the following requirements are ready to tender. The business should:
- Be a registered business or be licensed with the relevant local authority;
- Have a good banking record, credit history and relationship with its suppliers and clients;
- Be able to deliver on time, on budget and according to specifications and to deliver consistent quality;
- Be registered with the South African Revenue Services;
- Have an up to date tax clearance certificate;
- Pay its bills on time;
- Have the cash flow and other resources necessary to complete the contract;
- Have qualified employees who are registered with the Department of Labour (UIF, Skills Development Levy, Workmen’s Compensation);
- Have, or can acquire, the right equipment and accessories to complete the tender; and
- Have products that comply with SABS or other relevant standard authorities;
- Be proactive