Procurement as the basis for theft and extortion

It is no secret that South Africa pays lip service to small businesses’ development and innovation, but its deeds speak the opposite. The government’s approach through the tender conditions it introduces regarding intellectual property is a prime example of how corruption gets institutionalised in the country.

One of the ways this happens is by forcing professional service providers to surrender all claims to intellectual property and/or copyright in terms of any systems, methodologies, processes developed or data collected/ improved under a contract. This practice is not only unethical, but it also goes against the principles of fair competition and innovation. Furthermore, it is a form of extortion, where the service provider is forced to give up their intellectual property in exchange for the contract.

Terms of reference

When a ‘terms of reference’ states that all data collected or derived from work during the contract period is retained and belongs to the client, the project becomes a way of accessing data without paying for it. Most often, the data used in a project belongs to third parties and access to it is governed through specific agreements. What belongs to the client are the deliverables and not the data, tools and means to produce what is required. It is a form of theft where the government tries to expropriate property without compensation. This practice is unacceptable and needs to be condemned in the strongest words.

Even suggesting that the data collected or derived must be provided to the client and its agents in a prescribed format free of cost and compensation is highly unethical, and, again, if a contract requires free handouts, it is simply extortion. Every planning study starts with a data collection phase. However, we are not aware of a single tender that is prepared to acknowledge the cost of data in the pricing of a tender, but every single tender demands, as a condition of tender, that data must be handed over free of charge, cost or compensation.

What is the difference between this and some official or politician demanding payment for awarding a tender? If the latter happens, everyone will cry corruption, but nobody blinks an eye when expropriating the service provider’s data, tools and means to produce what is required as a condition for awarding a tender.

Fair competition

Developing systems and processes takes years, and millions are invested. Moreover, these systems and processes provide businesses with a competitive edge in pricing and delivery of services. This procurement practice is the most significant disincentive to innovation and a way for the government to strip a business of its competitive advantage.

The usual clause that excludes intellectual property registered before the bid dates is not enough protection for the service provider. These clauses are vague and open to interpretation, which could lead to the government taking away the intellectual property rights of service providers even for work done before the bid dates. Furthermore, the fact that bids state that no proprietary systems or non-accessible software (read software to be paid for) will be accepted as part of a project reflects a lack of understanding or experience from the clients and procurement institutions. Recognising that

Burgert Gildenhuys, director, BC Gildenhuys & Associates

systems are essential for solving complex problems and driving progress is crucial.

Increased complexity requires sophisticated systems to manage and analyse data efficiently and accurately. Moreover, by preventing service providers from creating proprietary systems or non-accessible (read ‘not free’) software, one risks limiting a service provider’s ability to develop cutting-edge technologies that can help solve complex problems. One must recognise the value of intellectual property and the need to protect it.

Skills and capacity

Skills transfer and capacity building are entrenched requirements in government tenders, and accompany the required data and systems. It alludes to the fact that officials must be fully empowered to use and apply the tools and systems developed as part of a project. However, this should not come at the cost of the service provider’s intellectual property rights.

The extent to which skills and capacity were destroyed in government is well documented. In addition, skills and experience take time and come at a considerable cost. Twenty years of experience cannot be gained in a week or two. Transferring this responsibility to a service provider is unfair and, when it is further incumbent on service providers to skill people in using their own products that have been unjustly extorted or expropriated, it can hardly be ethical or fair.

Compensation

The government should compensate the service provider for their intellectual property and data collected during the project, and they should not force them to give it up. The practice of using procurement as the basis for horse trading and extortion is not only unethical, but it also stifles innovation and fair competition. Furthermore, it helps to entrench the corruption culture further and institutionalise it in the country. It is time for South Africa to change its approach towards these procurement elements and adopt a fairer and more ethical approach.

Recommendations

If we turn the focus and accept the bona fides of government in its approach and that extortion and expropriation of intellectual property are not the intention, then one needs to view it in the light of the government not having the resources to access what it needs and that it admits to skills shortages. Then the right move will be to approach service providers who developed the systems and have the data required data or access to the data and sit down and devise a way to work around these barriers. One is unaware of a single service provider that will turn away the government when being approached for support. However, such support comes at a cost, and somebody –whether it is government itself, the service provider as an act of self-sacrifice or a benevolent third party – will have to pay. In the final analysis, leveraging tenders and contracts to access intellectual property, systems and data remains as unethical as can be.