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Procurements and tenders should be conducted in a manner that is open, transparent and fair

March 2012

Winning a tender has sometimes been likened to a poisoned chalice: rake in lots of money or get entangled into legal challenges from those who may regard the winning bidder as having done so corruptly.

Some tender processes have often been fraught with doubts of credibility. But why?
Because in some cases corruption in tenders occur from project inception to execution. In the design stage, those responsible for preparing a statement of requirements may overstate or exaggerate project components. They may also manipulate the project design to benefit particular suppliers, consultants, contractors, and other private parties.

In theory, tenders encourage competitive bidding. But in some cases some tenders attract only one bid, or no bids at all. This is a systemic problem. It cuts across all levels.

The selection of potential vendors represents a crucial and sensitive part of the procurement process. Companies and organisations should be aware of the risks arising from the exclusion of specific vendors, through carelessness or intent, which can materially impact the outcome of procurement activities. Most organisations maintain a database--also called a "roster" or "portfolio"--of existing and potential vendors.

Before including vendors in the database, the procurement department should screen vendors for their technical capabilities and financial stability, and any amendments to the database should be subjected to strict control and authorization procedures.

In some cases, during the tender process, corruption occurs through insufficient or inadequate advertising or extensively short bidding time to favour certain bidders; misuse of legal and administrative requirements; and use of inappropriate bidding procedures.

During implementation, corruption can occur while making contract amendments or payments in favour of the executing firm.

It is a pity that buying the right goods or services for the best price at the most appropriate time is going to be perceived by some who lose as unfair and it will always be so. After all, it is competition and there will be losers in every competition. Threshold limits, level playing fields and easy complaint mechanisms aren't going to change that.

To reduce the risks of anti-competitive fraud in procurement, an organisation should treat all potential vendors on an arms-length and equal basis, and receive and handle all vendor communications in a rigorous, confidential, and transparent manner.

Company officials, including external consultants should look for any warning signs of fraud in correspondence between the organization and potential vendors. Auditors could also assess the appropriateness of accounts payable and disbursement procedures, the responsibilities for which should be segregated adequately from the procurement function.

So what makes a tender fair?

  • When there is fairness of process, not fairness to a particular bidder. In other words when there is equal information, consistent treatment, no hidden preferences;
  • When the scope of work and tender requirements are performance-based and allow for equivalents in every case;
  • When alleged unfair treatment has occurred, the wronged bidder must be given an opportunity to prove that unfairness caused them to lose the competition;
  • When there is no discrimination based upon location, nationality or lack of past performance with the organisation;
  • When all potential suppliers have equal access to information prior to bidding and short-listing and bidding;
  • When there is no cancellation of the Request For Tender unless it is not in the public interest to make an award; and
  • After an award, provide any aggrieved supplier with the characteristics and relevant advantages of the tender selected, not what was wrong with their bid but what was right with the successful bid.

In the final analysis, it should be statutorily mandated that all tenders, whether involving public or private resource allotments, made only after a competitive bidding process that allows everyone to realise the full value of those resources.

The modalities and process of resource allotments should be clearly laid out. They should also develop model contract documents that can be used to manage the bid process in a transparent manner.

In a democracy, all qualified suppliers are entitled to a fair shot at a tender and contract. Transparency and accountability are critical to a genuine and democratic bidding and tender process.

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