Procurement – from an engineer’s perspective

A significant problem with the delivery of projects is the low capacity of municipalities to establish requirements for what is being built, and to award and administer contracts. Gift Mphefu, chairperson: Gauteng Province Branch at Consulting Engineers South Africa (CESA), talks to Kirsten Kelly about public procurement issues.

There are a number of challenges that construction firms or consulting engineering companies face when it comes to procurement in the public sector environment, and this threatens the sustainable development of infrastructure in South Africa, as well as the country’s economic growth,” explains Mphefu.

Some of these problems are:

• non-payment or late payment by public sector clients

• requests for proposal issued without adequate scope of works or services (that are impossible to price)

• three-year contract duration/restriction imposed by Section 33 of the Municipal Finance Management Act (No. 56 of 2003) that regularly clashes with/disrupts long-term construction contracts

• abuse of SA Municipal Supply Chain

Management Regulation 32. Procurement has been used by governments all over the world to stimulate economic activity. The South African Constitution has made provision to use procurement as a policy tool to address economic, social and political issues.

It is there to protect national industry against foreign competition, improve the competitiveness of industrial sectors and remedy regional disparities.

Procurement is also used to achieve social policy objectives to: create jobs, promote fair labour conditions, protect the environment, promote equal opportunities between males and females, and prevent discrimination against disabled people.

“However, too often, public entities do not follow the necessary procurement processes and this often results in unhappy parties, litigation and poor-quality construction, creating a risky environment for engineering consulting firms. It has become clear the current procurement processes do not always support the objectives of the Constitution,” says Mphefu.

Managing risk

Mphefu believes that consulting engineers need to be firm with their ‘public clients’. “As engineers, the sustainability of the businesses that we own or work for is paramount. We need to address these problems because if we don’t, many emerging small mediums and micro enterprises will fail.”

He suggests that the solution lies in best-practice procurement. Best practice is defined as the technique or methodology that consistently yields successful or optimum outcomes for an organisation.

These are best practices for the procurement of engineering consulting services based on an international study:

• strategic planning – identify objectives and determine key drivers needed to achieve objectives and facilitate alignment of the tactical and individual actions of the organisation with its long-term objectives

• quality management

• professional services (procurement manager)

• standardisation of operational processes, documentation and reporting

• operations manual for consultant procurement and contract management

• training and certification for contract managers, procurement personnel, and professional services consultants to communicate process and policy, gain feedback and buy-in, and stabilise operations

• automation systems for data, document and project management to improve communication, allow automatic data capture, prevent redundant data entry, improve document accuracy and reliability, and reduce personnel needs

• contract-specific procurement plans that establish procurement deadlines, objectives and a plan for resource allocation once the need for professional services has been identified

• indefinite delivery contracts for common and or routine work types to take advantage of shorter and more efficient procurement, and to provide flexibility to respond to funding issues

• lump-sum contracting for projects with appropriate characteristics to mitigate project risk, encourage professional service provider efficiency, and reduce administrative burden

• performance metrics that will allow the department to evaluate the efficiency and effectiveness of the procurement and contract management of professional services consultants

• performance evaluation to implement an assessment policy that obtains feedback from all entities involved in procurement and administration, including professional service providers, contractors and other interested stakeholders.

Local solution

“I did a survey with local companies (consulting engineers, contractors and subcontractors) involved in the procurement space to find out what they would consider best practice based on the problems they encounter,” adds Mphefu. This is the feedback that he received:

• Use of quality criteria in the Preferential Procurement Policy Framework Act (No. 5 of 2000), a point scoring system. This will encourage firms to improve the quality of service to the benefit of the sector. Current threshold requirements reduce quality to the minimum acceptable level.

• The use of construction contracts (New Engineering Contract, FIDIC) in construction procurement. These forms of contract cover traditional and turnkey procurement.

• Distinguish between professional and non-professional consultants. Tailored procurement strategies should be used for professional services contracts, in line with cidb and National Treasury.

• Engineering consultants can be procured and used to manage infrastructure procurement if required. Clients lacking capacity can easily outsource technical aspects of infrastructure procurement to consulting engineering firms.

• Practical procurement of recurring services.

• List of approved engineering consultants. The use of panels allows clients to fasttrack the procurement process. The panel is a list of approved consultants already assessed on quality and BBBEE.

• Infrastructure tenders awarded according to the scope of work of the project. It is cost-effective and reasonable to employ consulting engineers to complete the scope of infrastructure projects within suitable timeframes of not more than three years.

. • Award projects by quotes. Having a minimum of 10 bidders involved satisfies competitive tendering requirement and eliminates overpricing.

“Infrastructure delivery cannot take place without collaboration between engineers, government and other relevant stakeholders. The method in which these professional service contracts are procured and managed can have a substantial impact on organisational resources, employment creation, infrastructure cost and quality. By facilitating and making sure that procurement processes are easier, and the companies and services appointed can deliver, many social and economic problems can be addressed. We must always remember the two constitutional principles that directly impact the use of procurement as a policy tool in South Africa – the right to equality and the attainment of value for money,” concludes Mphefu.