CONSTRUCTION PROCUREMENT

BEST PRACTICE GUIDELINE #A1

The procurement cycle
Construction Industry Development Board
Pretoria September 2005
Tel: 012 343 7136 or 012 481 9030 Second edition of CIDB document 1001
Fax: 012 481 9087
E-mail: cidb@cidb.org.za

1. Introduction

Delivery management (see SAICE Practice Manual # 2 Delivering construction projects using the design
by employer contracting strategy 1) comprises a number of distinctly different processes and sub-
processes, namely:

• planning which comprises the iterative processes of identifying objectives, programmes and
projects that are to be undertaken;
• project delivery which comprises the undertaking of the projects identified in the planning
processes; and
• programme completion where the programme objectives set are regularly evaluated and adjusted
accordingly.

Procurement is the process that creates, manages and fulfils contracts. Procurement as such forms an
integral part of construction projects and occurs at any point in a project cycle where external resources
are required to provide supplies and services in any combination or in the disposal of surplus plant,
equipment and materials and the demolition of redundant buildings and infrastructure.

Public procurement in South Africa is regulated in all spheres of government and state owned enterprises
through various pieces of legislation. (see Annexure 1 of Best Practice Guideline #A2, Applying the
procurement prescripts of the CIDB in the Public Sector 2).

The skills and competencies required to implement a procurement system in the public sector are set out
in Annexure 1.

2. Principal procurement activities and associated steps and internal controls

The starting point in developing any procurement system is to identify procurement activities that
commence once the need for procurement is identified and end when the transaction is completed. (See
Table 1). The next step is to establish the steps that need to be taken to proceed from one activity to

1This practice manual presents an overview of a number of contracting strategies that are commonly encountered in engineering
and construction works contracts and fully describes the processes and sub-processes associated with design by employer
contracting strategy. It also outlines the administrative processes associated with FIDIC, GCC, NEC and JBCC forms of contract with
this contracting strategy..
2 This annexure provides a comprehensive overview of the South African Legislation for procurement.

Best Practice Guideline A1: The procurement cycle Page 1

September, 2005: Edition 2 of CIDB document 1001
another. Tables 2 to 11 set out the steps associated with the principal procurement activities and outlines
the necessary actions associated with each step.

Table 1: Principal procurement activities and associated steps and internal controls

ACTIVITY STEPS
# DESCRIPTION Inputs Procedural milestone (control point)
1 Establish what is 1. Prepare broad scope of work for procurement
to be procured 2. Estimate financial value of proposed
procurement
3 Obtain permission to start with the procurement
process
2 Decide on 1. Establish applicable preferential procurement
procurement policy
strategies 2. Establish contract and pricing strategy
3. Establish targeting strategy
4. Establish procurement procedure
5. Obtain approval for procurement strategies
that are to be adopted
3 Solicit tender 1. Prepare procurement documents
offers* 2. Obtain approval for procurement documents
3. Confirm that budgets are in place
4. Invite contractors to submit tender offers or
expressions of interest#
5. Receive tender offers or expressions of
interest#
6. Evaluate expressions of interests #
7. Prepare evaluation report on shorltlisting
process#
8. Confirm shortlist #
9. Invite tender offers from shortlist#
4 Evaluate tender 1. Open and record tender offers received
offers* 2. Determine whether or not tenders offers are
complete
3. Determine whether or not tender offers are
responsive
4. Evaluate tender submissions
5. Perform a risk analysis.
6. Prepare a tender evaluation report
7. Confirm recommendation contained in the
tender evaluation report.
5 Award contract* 1. Notify successful tenderer and unsuccessful
tenderers of outcome
2. Compile contract document
3. Formally accept tender offer
4 Capture contract award data
6 Administer 1. Administer contract in accordance with the
contracts and terms and provisions of the contract
confirm 2. Ensure compliance with requirements
compliance with 3. Capture contract completion / termination data
requirements

# Expressions of interest are only called for where the Nominated, Qualified Procedure and Proposal (Two stage tendering) (See
SANS 294, Construction procurement processes, procedures and methods, is used to populate electronic data bases, to pre-qualify
tenderers or to submit technical proposals, respectively. Accordingly, Steps 6 to 9 in Activity 3 (Solicit tender offers) will be omitted
where the Negotiated, Open, Quotation and Proposal (two stage tendering) procedures are used.

* Several of the steps within these activities will not be required where the Negotiated Procedure is used.

Best Practice Guideline A1: The procurement cycle Page 2

September, 2005: Edition 2 of CIDB document 1001
3. Recommended approach to the various steps and activities

Activity 1: Establish what is to be procured

Note: 1 The actions associated with this activity are preparatory to any procurement and are intended to clarify what is to be
procured and establish the basic procurement parameters.

2 Table 2 sets out the sub-activities associated with activity 1, describes the principal actions associated with this activity
and each sub-activity, the necessary input to and output from such actions and the dependencies between sub-
activities

Table 2: Sub-activities, related actions, inputs, outputs and dependencies pertaining to activity 1

# Activity Principal action Dependency Input to the Output from the

action action
1 Establish what is to Clarify what is to be procured - Approved project Confirmation of
be procured scope what is to be
procured
1.1 Prepare broad scope Develop a title for procurement for Approved project Broad scope of
of work for the purposes of project scope work for
procurement identification and a broad scope of procurement
work
1.2 Estimate financial Estimate the financial value of the 1.1 Broad scope of Estimated value of
value of proposed proposed contract for budgetary work for procurement
procurement purposes, based on the broad procurement
scope of work.
1.3 Obtain permission to Nominated official(s) makes a 1.2 Document Approval to
start with the decision to proceed / not to containing title, proceed with the
procurement process proceed with the procurement broad scope of procurement
based on the broad scope of work work and
and the financial estimates. approximate vale
of procurement

Step 1.1: Prepare broad scope of work for procurement

Develop a title for the procurement for the purposes of project identification and a broad scope of work
utilizing the headings provided in Table 3.

Table 3: Outline of broad scope of work

Category of procurement Heading Guidance

Supplies Employer’s / purchaser’s Describe the employer’s / purchaser’s objectives

objectives for the supplies as delivered.
Overview of the required Provide a short description of the supplies.
supplies
Extent of the supplies Provide a brief outline of the quantity, duration
and nature of the supplies.
Services Client’s / employer’s objectives Describe the client’s / employer’s objectives for
the services
Description of the services Provide a short description of the services and
outline what the contractor is to provide.
Extent of the services Provide a brief outline of the extent of services
and key deliverables, as appropriate.
Engineering and construction works Employer’s objectives Describe the employer’s objectives for the
delivered end product or the project.
Overview of the works Provide a short description of the works, its
purpose, etc.
Extent of the works Provide a brief outline of the scope of works.
Ensure that all operations, particularly those
requiring special attention, are listed.
Location of the works State the place where the works are to be
provided.

Best Practice Guideline A1: The procurement cycle Page 3

September, 2005: Edition 2 of CIDB document 1001
Step 1.2: Estimate financial value of proposed procurement

Estimate the financial value of the proposed contract for budgetary purposes based on the broad scope of
work. The estimate should include VAT, make allowances for currency fluctuations and provide for price
escalation, where appropriate. Provisions for uncertainties (risk provision) in assumptions and the like
should also be made.

In order to justify the procurement it may also be necessary to undertake feasibility studies in order to
establish the financial viability of the procurement, perform benefit-cost analysis, establish whole life costs
(capital, maintenance, management, operating and disposal) etc. It may also be necessary to establish
the timing of the procurement in order to establish cash flow demands and to establish any related or
hidden costs eg professional or other services ancillary to the procurement.

Note: It is important to establish a realistic ceiling price for the contract as tender offers received in excess of this amount may
cause the viability / value for money of the project to be reconsidered and may lead to the cancellation of tenders.

Step 1.3: Obtain permission to start with the procurement process

The person identified in the organisation's procurement policy who has the necessary authority should be
presented with the broad scope of work and financial estimates in order to decide if the procurement
should proceed. It may also at this stage be prudent to reconfirm the need and justification for the
procurement.

A procurement reference number for use in procurement documents should be allocated for reference
purposes should permission be granted to proceed with the procurement.

Note: It is a requirement of the Public Finance Management Act that all major capital projects must be evaluated prior to a
final decision being taken on the project.

Activity 2: Decide on the procurement strategies

Note: 1 The actions associated with this activity are preparatory to any procurement and are strategic in nature. They are
intended to clarify how the procurement is to take place. They in effect plan the procurement process to achieve the
required outcome and may be regarded as a form of “business plan”.

2 In repetitive procurements or in specific programs, it is possible to predetermine the options that will be used, in which
case, Activity 2 will fall away. (The procurement policy of an organisation can set out the standard choices for routine
procurements)

3 Table 4 sets out the sub-activities associated with activity 2, describes the principal actions associated with this activity
and each sub-activity, the necessary input to and output from such actions and the dependencies between sub-activities

4 Best value demands that procurement strategies be reviewed. Any change resulting from a review, in order to be
justified, must deliver better value. It must be recognised from the outset that there is no one ideal way to procure. Each
situation is different. There are, however, clear methods for choosing the appropriate or best way for a given
circumstance and a logical process which should be followed to confirm that decisions will indeed deliver best practice.

5 Best practice guide #A8, Procurement measures to develop registered contractors, outlines the principles for sustainable
growth and a number of strategies to promote the participation of smaller registered contractors in public contracts so
that they can grow and develop. The strengths and weaknesses of each of these strategies are discussed.

Step 2.1: Establish applicable preferential procurement policy

The starting point when implementing a preferential procurement policy within a specific procurement is in
the first instance to establish the preferential procurement policy that is applicable to the procurement. In
most instances, it will be that of the organisation. Where the procurement forms part of a national or
provincial programme, the preferential procurement policy pertaining to the programme should be
adopted, e.g.. the preferential procurement policy established in the National Housing Code must be

Best Practice Guideline A1: The procurement cycle Page 4

September, 2005: Edition 2 of CIDB document 1001
pursued in project linked greenfield housing subsidy developments in engineering and construction works
contracts.

Table 4: Sub-activities, related actions, inputs, outputs and dependencies pertaining to activity 2

# Activity Principal action Dependency Input to the Output from the

action action
2 Decide on Determine how the procurement 1.3 Approved scope of Approved
procurement is to take place work procurement
strategies strategy
2.1 Establish applicable Identify the specific goals which - Preferential Proposed specific
preferential are to be pursued and establish Procurement goals and
procurement policy likely outcomes and broad Policy for preferencing
implementation procedures which organisation / arrangements
are consistent with the framework programme
provided in the Act.
2.2 Establish contract and Decide on an appropriate - Procurement Proposed pricing
pricing strategy allocation of responsibilities and policy and and
risks and the methodology by institutional
which contractors are to be paid. capacity
2.3 Establish targeting Decide on the methodology that is 2.1 Proposed specific Proposed targeting
strategy to be used to implement goals and strategy
preferencing. preferencing
arrangements
2.4 Establish procurement Identify the process that will be - Procurement Proposed
procedure followed to solicit tender offers and policy procurement
conclude a contract. procedure
2.5 Obtain approval for Nominated official(s) confirm 2.1 to 2.4 Document Approved
procurement selection of strategies so that establishing procurement
strategies that are to tender offers can be solicited. preferential strategies
be adopted procurement policy

In the event that an organisation does not have a preferential procurement policy or there are no such
policies governing the programme within which the procurement falls, the organisation needs to establish
one in accordance with the provisions of Best Practice Guideline # B1, Formulating and implementing
Preferential Procurement Policies.

Where preferential procurement policies are in place, identify an appropriate theme and a specific goal
within such a scheme which is to be pursued (eg target groups, comprising enterprises or labour, goals
relating to the internal workings of enterprises, specific deliverables etc). This should be undertaken by
considering the procurement in the light of the objectives, targets and target groups contained in the
preferential procurement policy and the desirable policy outcomes and factors such as past experience,
knowledge of the potential tenderers and an understanding of the nature of the procurement.

Once the goals have been identified and documented, quantitative targets (likely outcomes of the
preferencing arrangements) and implementation procedures which are consistent with the framework
provided in the Act need to be identified. This should be done in relation to the procurement in question in
order to arrive at the optimum preferencing arrangements.

Step 2.2: Establish contract and pricing strategy

Decide on an appropriate allocation of responsibilities and risks and the methodology by which contractors
are to be paid. (See Best Practice Guideline #A5, Managing construction procurement risk, Best Practice
Guideline #C1, Preparing procurement documents, Best Practice Guideline #C2, Choosing an appropriate
form of contract, and SAICE Practice Manual #2, Delivering construction projects using the design by employer
contracting strategy.) This decision can only be made after the risks associated with the procurement have
been identified and the availability of skills has been established, including those required to manage the
procurement.

Best Practice Guideline A1: The procurement cycle Page 5

September, 2005: Edition 2 of CIDB document 1001
Step 2.3: Establish targeting strategy

Establish the appropriate targeting strategy i.e. decide on the implementation methodology that is to be
pursued. (See Best Practice Guideline #B1, Formulating and implementing preferential procurement
policies Best Practice Guideline #B2, Methods and procedures for implementing preferential procurement
policies and Best Practice Guideline #A8, Procurement measures to develop registered contractors).
Cogniscance of the selected contracting and pricing strategy should be taken in the selection of the
targeting strategy.

The documented targeting strategy should include exact definitions for the specific goals, the method of
preferencing, the number of preference points that will be provided in respect of each specific goal and the
manner in which the goals are to be measured, quantified and monitored for contract compliance. If SANS
1914 resource standards are to be utilized, establish any weightings / target areas that are to be
nominated.

Note: 1 The implementation procedures must be consistent with the framework provided in the Preferential Procurement Policy
Framework Act (See Best Practice Guideline #B1, Formulating and implementing preferential procurement policies).

2 The Standard for Uniformity in Construction Procurement requires employers, wherever appropriate, in support of industry
development, to promote the participation and development of registered contractors in the application of the registers of
contractors in engineering and construction works by:

a) unbundling projects into smaller contracts;

b) implementing targeted development programmes to support potentially emerging contractors in accordance with
the provisions of the Construction Industry Development Regulations;
c) offering preferences to contractors who undertake to enter into joint ventures with or subcontract portions of the
works to such contractors; and
d) requiring a prime contractor to subcontract defined portions of the works to such contractors in terms of
procedures established in the scope of work.

Step 2.4: Establish procurement procedure

Establish and document the appropriate procurement procedure (see CIDB Standard for Uniformity in
Construction Procurement and SANS 294, Construction Procurement processes, procedures and
methods), taking cogniscance of the organisation’s procurement policy (see Best Practice Guideline #A2,
Applying the procurement prescripts of the CIDB in the Public Sector).

Step 2.5: Obtain approval for procurement strategies that are to be adopted

Motivate selected procurement strategies for the proposed procurement and obtain approval for the
options selected from those persons identified in the organisation's procurement policy.

Confirm that the organisation has internal or external capacity and expertise to undertake the procurement
for the chosen procurement strategies. If not, recommend changes in selections.

Revise selections as necessary and obtain approval for procurement strategies.

Note: Best practice guide A#7, The procurement of professional services, provides an overview of government’s policy regarding
the appointment of consultants and the provisions made in the CIDB Standard for Uniformity for the procuring of professional
services. It outlines procedures in respect of each of the methods contained in this standard and guidance on the
compilation of procurement documentation associated with professional service contracts. It also establishes the relationship
between the methodology advocated by the standard and that promoted by National Treasury in their Supply Chain
Management Practice Notes.

Activity 3: Solicit tender offers

Note: 1 The actions associated with this activity must be conducted in accordance with the provisions of the CIDB Code of
Conduct for the Parties Engaged in Procurement. Written reasons may have to be furnished to tenderers for
administrative actions taken in terms of the Promotion of Administrative Justice Act.

Best Practice Guideline A1: The procurement cycle Page 6

September, 2005: Edition 2 of CIDB document 1001
 2 Table 5 sets out the sub-activities associated with activity 3, describes the principal actions associated with this activity
and each sub-activity, the necessary input to and output from such actions and the dependencies between sub-
activities
3 In terms of Standard Conditions of Tender contained in of the Annex F of the CIDB Standard for Uniformity in
Construction Procurement / Annex F of SANS 294, the Employer may:

Extract from Standard Conditions of Tender (See Annex F of CIDB Standard for Uniformity in
Construction Procurement / SANS 294)
Clause Heading Action

F.1.5.1 The Employer's rights to The employer may accept or reject any variation, deviation, tender offer,
accept or reject any tender or alternative tender offer, and may cancel the tender process and reject
offer all tender offers at any time before the formation of a contract. The
employer shall not accept or incur any liability to a tenderer for such
cancellation and rejection, but will give written reasons for such action
upon written request to do so.
F.1.5.2 The employer may not subsequent to the cancellation or abandonment of
a tender process or the rejection of all responsive tender offers re-issue a
tender covering substantially the same scope of work within a period of
six months unless only one tender was received and such tender was
returned unopened to the tenderer.

Table 5: Sub-activities, related actions, inputs, outputs and dependencies pertaining to activity 4

# Activity Principal action Dependency Input to the Output from the

action action
3 Solicit tender offers Solicit tender offers in terms of a 1 and 2 Approved scope of Tender offers
set of procedures. work and
procurement
strategy
3.1 Prepare procurement Prepare pre-qualification and / or 1.3 and 2.5 Approved scope of Procurement
documents tender documents, as appropriate, work and documents
that are compatible with the procurement
approved procurement strategies. strategy
3.2 Obtain approval for Nominated official(s) review the 3.1 Procurement Approved
procurement procurement document, identify document procurement
documents sections, if any, that require document
amendments or improvements,
and grant the necessary approval.
3.3 Confirm that budgets Nominated official(s) make sure 3.2 Document Permission to
are in place that finance is available for the containing solicit tender offers
procurement to take place. approximate value
of procurement
3.4 Invite contractors to Advertise for tenders / identify 3.2 and 3.3 Procurement Procurement
submit tender offers or contractor(s) that are to be invited document documents issued
expressions of interest to submit tender offers in for solicitation
accordance with the approved purposes
procurement procedure, issue
procurement documents, respond
to requests for clarification,
conduct clarification / site
meetings, issue attendees with
minutes of such meetings, and
issue addenda, as relevant.
3.5 Receive tender offers Ensure that arrangements are in 3.4 Procurement Tender
or expressions of place to receive tender offers / document issued submissions
interest expressions of interest and return for solicitation
unopened those that are received purposes
late, are delivered not in
accordance with instructions given
to tenderers or where only one
tender is received and it is decided
to call for fresh tenders.

Best Practice Guideline A1: The procurement cycle Page 7

September, 2005: Edition 2 of CIDB document 1001
# Activity Principal action Dependency Input to the Output from the
action action
3.6 Evaluate expressions Open expressions of interest, 3.5 Tender Evaluated
of interests record data relating to the submissions expression of
submission and evaluate in interests
accordance with undertakings
made to tenderers.
3.7 Prepare evaluation Prepare evaluation report and 3.6 Evaluated Evaluation Report
report on shortlisting make recommendations in respect expressions of
process of actions to be taken, depending interest
upon the procurement procedure
that is adopted.
3.8 Confirm shortlist Nominated official(s) review 3.7 Evaluation report Approved shortlist
evaluation report and ratify of tenderers
recommendations.
3.9 Invite tender offers Invite tender offers from short list, 3.8 Approved shortlist Procurement
from shortlist respond to requests for of tenderers documents issued
clarifications by tenderers, conduct to shortlisted
clarification / site meetings, issue tenderers
all attendees with the minutes of
such meetings, and issue addenda
to amend or amplify the
procurement documents, as
relevant.

Step 3.1: Prepare procurement documents

Procurement documents comprise those documents required to:

a) prequalify respondents so that they may be invited to tender;

b) solicit tender offers; and
c) establish the terms and conditions of the contract.

Compile procurement documents for the calling for expressions of interest. Ensure that the Submission
Data contains a list of returnable documents.

Requirements for the preparation of procurement documents may be found in the CIDB’s Standard for
Uniformity in Construction Procurement. Guidance on the formatting and compilation of procurement
documents may be found in Best Practice Guideline # A2, Applying the procurement prescripts of the
CIDB Act in the Public Sector, Best Practice Guideline #C1, Preparing procurement documents and
SAICE Practice Manual #1, The use of South African National Standards in Construction Procurement.

Extract from Standard Conditions for the Calling for Expressions of Interest (see Annex H of CIDB
Standard for Uniformity in Construction Procurement / SANS 294)
Clause Heading Action

H.1.2 Supporting The documents issued by the employer for the purpose of obtaining expressions of
documents interest are listed in the submission data.

Note: Expressions of interest are only called for where the Nominated, Qualified Procedure and Proposal (Two stage tendering) is
used to populate electronic data bases, to pre-qualify tenderers or to submit technical proposals, respectively. (See SANS
294). Where an electronic data base has already been populated, it is not necessary to call for expressions of interest.

Select an appropriate form of contract for the procurement using the guidance contained in Best Practice
Guideline #C1, Preparing procurement documentation, and Best Practice Guideline #C2, Choosing an
appropriate form of contract for engineering and construction works, and prepare procurement documents in
accordance with the provisions of SANS 10403, SANS 294, Best Practice Guideline #C1, Preparing
procurement documentation, and SAICE Practice Manual #1, The use of South African National Standards in
Construction Procurement, that are compatible with the adopted procurement strategies. Ensure that the
Tender Data contains a list of tender documents.

Best Practice Guideline A1: The procurement cycle Page 8

September, 2005: Edition 2 of CIDB document 1001
Extract from Standard Conditions of Tender (see Annex F of CIDB Standard for Uniformity in
Construction Procurement / SANS 294)
Clause Heading Action

F.1.2 Tender documents The documents issued by the employer for the purpose of a tender offer
are listed in the tender data.

It must be stressed that procurement documents cannot be finalised until such time that:

• all the necessary studies and / or preliminary investigations, commensurate with the selected
contract strategy have been completed,
• the bodies which need to be consulted in connection with the procurement, have been consulted,
and
• the compatibility with other works has been established.

Quality criteria used in the evaluation of tender offers should be in accordance with the provisions of Best
Practice Guideline #A4, Evaluating quality in tender submissions.

Those tendering for a contract need to know the degree of risk that they are expected to take. The higher
the risk, the greater must be the financial provision in case the worst scenario occurs. Consequently, the
higher the risk a contractor assumes, the greater will be the tender value and hence the cost borne by the
organisation. Whereas careful checking of the facts about existing circumstances will help to reduce the
total risk, there will always be elements of uncertainty outside the control of all parties to the contract.

Procurement documents must assign risks to each party so that they can make provision for managing
them, either by adding to the cost of the tender or by spreading the risk by means such means as
acquiring insurance. (See Best Practice Guideline #A5, Managing construction risk, and Best Practice
Guideline #C2, Choosing an appropriate form of contract for engineering and construction contracts)

Even if all possible measures are taken to clarify what outcome is expected, there will always be risk
attached to the procurement processes. All likely or possible risks should be identified and explicitly
assigned to a particular party in procurement documents, failing which;

• high premiums will be placed on the finance required for procurement; and
• tender prices will be unexpectedly high.

The length of the contract needs to be carefully considered. Clearly, the length of contract needs to be
matched to the time-scale necessary to achieve the required outcome together with the level of
investment and training necessary. Contract periods vary with the type of work required. For term
contracts where the contractor has to provide significant “up-front” investment, periods of up to 15 years
are not unusual. Indeed, where very significant investment is required, periods of up to 25 years are
adopted. A maintenance contract where investment is limited to enabling the contractor to fulfill a contract,
is likely to be no more than three of four years in length.

For engineering and works contracts, the duration of the contract should match the reasonable rates of
progress to completion. A shorter contract length will result in higher costs which can only be justified if
the organisation has an urgent need for an early completion and a distinct benefit can be shown for early
delivery.
Note: 1 The failure to identify things that exist at the outset of the procurement frequently give rise to costly disputes between
the parties.

2 The procurement documents should satisfy the requirements of donor funding agencies or banking institutions. It
should be noted in this regard that section 3(a) of the Reconstruction and Development Programme Fund Act (Act 7 of
1994) requires that “the money of the fund shall be utilised in accordance with the relevant technical assistance
agreement.”

Best Practice Guideline A1: The procurement cycle Page 9

September, 2005: Edition 2 of CIDB document 1001
Step 3.2: Obtain approval for procurement documents

The persons identified in the organisation's procurement policy should review the procurement
documents, identify sections, if any, that requires amendments or improvements and grant the necessary
approval.

Step 3.3: Confirm that budgets are in place

Those persons identified as being responsible in the organisation's procurement policy should confirm that
budgets are in place so that the procurement may proceed.

Step 3.4: Invite contractors to submit tender offers or expressions of interest

With reference to the SANS 294, Construction procurement processes, procedures and methods:

a) Undertake the following depending upon the procurement procedure that is adopted:

Procurement Actions
Procedure
Negotiated Identify sole source provider and request that a tender offer be submitted.
procedure
Nominated Prepare calls for expression of interest to populate the data base if not already populated.
procedure Use software for electronic data base to identify contractors who are to be invited to
tender.
Open procedure Prepare tender advertisements
Advertise tenders / expressions of interest in appropriate media .
Proposal Prepare advertisements for the submission of tenders (two envelope) and expressions of
procedure using interest (two stage).
the two-envelope Advertise for proposals in appropriate media.
system / two-
stage system
Qualified Prepare calls for expression of interest.
Procedure Advertise tenders / expressions of interest in appropriate media.
Quotation Invite tender offers, giving tenderers a minimum of three days to respond to invitation,
procedure using one or more of the following methods:
i) posting a notice on a website;
ii) posting a notice on a demarcated notice board in a public area;
iii) placing an advertising in a local or national newspaper;
iv) placing an advertising in the State Tender Bulletin;
v) inviting registered contractors from a data base registered in an appropriate work
category to submit quotations in a manner that over time all registered contractors
who have the requisite expertise have an opportunity to submit tenders.
Shopping Obtain three written or verbal offers and confirm lowest offer in writing, if relevant.
procedure

b) Obtain contact particulars of entities that draw procurement documents and collect non-refundable
deposits, as appropriate.

c) Respond to requests for clarifications by tenderers.

d) Conduct clarification / site meetings, as necessary, and issue all attendees with the minutes of
such meetings.

e) If necessary, issue addenda to amend or amplify the procurement documents to each entity that
drew documents / attended any compulsory clarification / site meeting.

Best Practice Guideline A1: The procurement cycle Page 10

September, 2005: Edition 2 of CIDB document 1001
Note: Best practice guide A#7, The procurement of professional services, provides an overview of government’s policy regarding
the appointment of consultants and the provisions made in the CIDB Standard for Uniformity for the procuring of professional
services. It outlines procedures in respect of each of the methods contained in this standard and guidance on the
compilation of procurement documentation associated with professional service contracts. It also establishes the relationship
between the methodology advocated by the standard and that promoted by National Treasury in their Supply Chain
Management Practice Notes.

Step 3.5: Receive tender offers or expressions of interest

Note: Expressions of interest are only called for where:

a) electronic data bases need to be populated to enable the Nominated Procedure to be used;
b) tenderers need to be prequalified and shortlisted to submit tender offers in terms of the Qualified Procedure; and
c) technical proposals are solicited in the first stage of the two stage Proposal Procedure.

a) Ensure that arrangements are in place to receive tender offers / expressions of interest.

b) Return tender offers, and where appropriate expressions of interest, unopened if:

i) received after the closing time;

ii) the tender submission is received by a method other than the method prescribed in the
procurement documents;
iii) only one tender offer is received and it is decided to call for fresh tenders.

Note : Tenderers are required to in terms of the Standard Conditions of Tender/ Standard Conditions for the Calling for Expressions
of Interest to:

• Seal the original and each copy of the tender offer as separate packages marking the packages as "ORIGINAL" and
"COPY". Each package shall state on the outside the Employer's address and identification details stated in the Tender
Data, as well as the tenderer's name and contact address.
• Seal the original tender offer and copy packages together in an outer package that states on the outside only the
Employer's address and identification details as stated in the Tender Data.
• Accept that the Employer will not assume any responsibility for the misplacement or premature opening of the tender offer
if the outer package is not sealed and marked as stated.

Step 3.6: Evaluate expressions of interests

Note: This step must be omitted where the Open, Negotiated, Quotation and Proposal (two envelope) procedures are used. It must
also be omitted in the Nominated Procedure where the electronic data base is populated.

a) Open expressions of interest as soon as practicable in the presence of two officials and record the
name of the entity making the submission and acknowledge receipt of the submission.

b) Evaluate expressions of interest in accordance with the provisions of the Submission Data and,
where relevant the policy and operational procedures for electronic data bases or the guidance
provided in Best Practice Guideline #A4, Evaluating quality in tender submissions.

Step 3.7: Prepare evaluation report on short listing process

Note: This step is only required in the Qualified and Proposal (two stage tendering) procedures.

Prepare evaluation report and make recommendations in respect of actions to be taken, depending upon
the procurement procedure that is adopted:

Best Practice Guideline A1: The procurement cycle Page 11

September, 2005: Edition 2 of CIDB document 1001
 Procurement Actions
Procedure
Nominated procedure Admit to electronic data base and confer preferred status in a specific category if the
tenderer is eligible for such status.
Qualified Procedure Make recommendations as to whether or not the tender is to be short listed.
Proposal procedure Evaluate technical proposals and make recommendations as to which tenderers
(Option 2: Two stage should be invited to submit financial proposals based on the revised procurement
tendering) documents

Step 3.8: Confirm short list

Note: This step is only required in the Qualified and Proposal (two stage tendering) procedures.

Those persons identified in the organisation's procurement policy should review the evaluation report and
ratify recommendations.

Step 3.9: Invite tender offers from short list

Note: This step is only required in the Qualified and Proposal (two stage tendering) procedures.

a) Invite tender offers from short list.

b) Respond to requests for clarifications by tenderers.

c) Conduct clarification / site meetings, as necessary, and issue all attendees with the minutes of such
meetings.

d) If necessary, issue addenda to amend or amplify the procurement documents.

Activity 4: Evaluate tender offers

Note: 1 Tender offers must be evaluated in accordance with the parameters stated in the tender data

2 The actions associated with this activity must be conducted in accordance with the provisions of the Code of conduct for
the parties engaged in procurement. Written reasons may have to be furnished to tenderers for administrative actions
taken in terms of the Promotion of Administrative Justice Act.

3 Table 6 sets out the sub-activities associated with activity 4, describes the principal actions associated with this activity
and each sub-activity, the necessary input to and output from such actions and the dependencies between sub-activities

Table 6: Sub-activities, related actions, inputs, outputs and dependencies pertaining to activity 4

# Activity Principal action Dependency Input to the Output from the

action action
4 Evaluate tender Evaluate tender offers in terms 3 Tender Evaluated tender
offers of undertakings and parameters submissions offers
established in procurement
documents.
4.1 Open and record Open tender offers, either in public 3.4 or 3.9 Sealed tender Opened tender
tender offers received or in the presence of not less than submissions submissions
two officials, and record pertinent
details, authenticate all pages of
returnable documents, and notify
interested parties of pertinent
details if requested to do so.
4.2 Determine whether or Examine tenders and determine 4.1 Opened tender Complete tender
not tenders offers are whether or not they are complete, submissions submissions
complete request tenderers to complete
items that are required only for
tender evaluation purposes and
record what is incomplete in each
tender submission.

Best Practice Guideline A1: The procurement cycle Page 12

September, 2005: Edition 2 of CIDB document 1001
# Activity Principal action Dependency Input to the Output from the
action action
4.3 Determine whether or Confirm compliance with all the 4.2 Complete tender Responsive tender
not tender offers are requirements of the procurement submission submissions
responsive documents, including eligibility
criteria. If not, declare tender offers
non-responsive and record
reasons for declaring a tender to
be non-responsive and disregard
such tender offers from further
consideration.
4.4 Evaluate tender Review financial offer and correct 4.3 Responsive tender Tender offers
submissions discrepancies between totals and submissions ranked in terms of
calculations / summations, identify the evaluation
parameters included in the tender
submission that have a bearing on
the financial offer and reduce all
tender offers to a common base.
Judge the reasonableness of
financial offers and reject all tender
offers with unrealistic financial
offers.
Evaluate tender submissions in
accordance with the tender
evaluation method adopted for the
procurement.
4.5 Perform a risk Perform a risk analysis on the 4.4 Responsive tender Commercial risk
analysis tenderer ranked highest in terms of submissions of exposure
the tender evaluation and, if found highest ranked
to be unsatisfactory, undertake an tenderers
analysis on the next highest ranked
tenderer and so on until such time
as a tenderer satisfies the risk
assessment, and recommend this
tenderer for the award of the
contract.
4.6 Prepare a tender Prepare a tender evaluation report 4.5 Tender evaluation Tender Evaluation
evaluation report which as a minimum contains the schedule and Report
tender evaluation points awarded commercial risk
to each tenderer, the reasons for exposure
eliminating a tender offer and a
recommendation for the award of
the contract.
4.7 Confirm Nominated official(s) to review 4.6 Tender evaluation Approved tender
recommendation report and ratify recommendations. report evaluation report
contained in the
tender evaluation
report.

Steps 4.1 to 4.6 pertaining to the evaluation of tender offers

Evaluate tender offers and prepare tender evaluation report in accordance with the provisions of Best
Practice Guideline # A3, Evaluating tender offers.

Step 4.7: Confirm recommendation contained in tender evaluation report

Those persons identified in the organisation's procurement policy should review the tender evaluation
report and ratify the recommendation for the award of the contract.

Activity 5: Award contract

Note: 1 The actions associated with this activity focus on the entering into a contract with the successful tenderer.

2 Table 7 sets out the sub-activities associated with activity 5, describes the principal actions associated with this activity
and each sub-activity, the necessary input to and output from such actions and the dependencies between sub-activities

Best Practice Guideline A1: The procurement cycle Page 13

September, 2005: Edition 2 of CIDB document 1001
Table 7: Sub-activities, related actions, inputs, outputs and dependencies pertaining to activity 5

# Activity Principal action Dependency Input to the Output from the

action action
5 Award contract Enter into contract with the 4 Approved tender Signed contract
successful tenderer. evaluation report
5.1 Notify successful Notify in writing the successful 4.13 Approved tender Communication to
tenderer and tenderer and unsuccessful evaluation report successful and
unsuccessful tenderers unsuccessful
tenderers of outcome tenderers
5.2 Compile contract Assemble contract document from 4.13 Procurement Contract
document the relevant tender returnables document and Document
and draft contract issued to tender submission
tenderers, capturing all the
changes that were agreed to
between the offer and acceptance.
5.3 Formally accept Confirm that the tenderer has 5.2 Contract Signed contract
tender offer provided a valid, original tax document
clearance certificate issued by the
South African Revenue Services,
formally accept the tender offer in
writing and issue contractor with a
signed copy of the contract.
5.4 Capture contract Capture, in a data base, essential 5.3 Contract Recorded contract
award data contract data for record purposes. document data

Step 5.1: Notify successful tenderer and unsuccessful tenderers of outcome

Notify in writing the successful and unsuccessful tenderer

Step 5.2: Compile contract document

Assemble contract document from the relevant tender returnables and draft contract issued to tenderers,
capturing all the changes that were agreed to between the offer and acceptance in the Schedule attached
to the Form of Offer and Acceptance. (See Best Practice Guideline #C1, Preparing procurement
documentation, and SANS 10403).

Note: The completion of the schedule attached to the Form of Offer and Acceptance (see Annex G of SANS 294) not only
contains a record of all agreed deviations from the tender documents but also forms an audit trail of all agreed changes
between offer and acceptance.

Step 5.3: Formally accept tender offer

Extract from Standard Conditions of Tender (see Annex F of CIDB Standard for Uniformity in
Construction Procurement / SANS 294)
Clause Heading Action

F.3.16 Issue final contract Prepare and issue the final draft of contract documents to the successful
tenderer for acceptance as soon as possible after the date of the
employer's signing of the form of offer and acceptance (including the
schedule of deviations, if any). Only those documents that the conditions
of tender require the tenderer to submit, after acceptance by the
employer, shall be included.
F.3.17 Complete Adjudicator's Unless alternative arrangements have been agreed or otherwise provided
Contract for in the contract, arrange for both parties to complete formalities for
appointing the selected adjudicator at the same time as the main contract
is signed.
F3.18 Provide copies of the Provide to the successful tenderer the number of copies stated in the
contracts Tender Data of the signed copy of the contract as soon as possible after
completion and signing of the form of offer and acceptance.

Best Practice Guideline A1: The procurement cycle Page 14

September, 2005: Edition 2 of CIDB document 1001
Confirm that the tenderer has provided a valid, original tax clearance certificate issued by the South
African Revenue Services.

Formally accept the tender offer in writing and issue contractor with a signed copy of the contract.

Note: 1 It is sufficient to merely sign the acceptance portion of the Form of Offer and Acceptance to accept the tender offer. (See
Annex C of CIDB Standard for Uniformity in Construction Procurement / Annex G of SANS 294).

2 The initialing of each page is not required by law to give effect to the contract. This practice, may, however, assist in
identifying the contract between the parties during the discovery phase of litigation proceedings.

Step 5.4: Capture contract award data

Capture the following in a data base for record purposes:

(i) the contract reference number;

(ii) a description of the work;
(iii) the contract price;
(iv) preferences claimed;
(v) tender evaluation points awarded;
(vi) the price of the tender used for comparative purposes;
(vii) the name and address of the successful tenderer;
(viii) the reasons for awarding the contract to that tenderer;
(ix) the reasons why any tenderers were rejected; and
(x) the procurement procedure used.

Activity 6: Administer contracts and confirm compliance with requirements

Note: 1 The focus on the actions in this activity are on acting in terms of the contract and confirming that the procurement is in
accordance with all requirements.

2 Table 8 sets out the sub-activities associated with activity 6, describes the principal actions associated with this activity
and each sub-activity, the necessary input to and output from such actions and the dependencies between sub-activities

Table 8: Sub-activities, related actions, inputs, outputs and dependencies pertaining to activity 6

# Activity Principal action Dependency Input to the Output from the

action action
6 Administer contracts Act in terms of the contract and 5 Contract Contract
and confirm confirm that procurement is in document completed in
compliance with accordance with all accordance with
requirements requirements. requirements
6.1 Administer contract in Administer the contract in 5.3 Contract Compliance with
accordance with the accordance with its terms and document administrative
terms and provisions conditions and pay contractors provisions of the
of the contract within the time periods provided for contract
in the contract so as to avoid
interest on late payments.
6.2 Ensure compliance Monitor the contractor’s 5.3 Contract Certified
with requirements performance to ensure that the document compliance with
requisite quality standards are contract
attained and all requirements are requirements
satisfied and certify compliance
upon completion.
6.3 Capture contract Record, in a data base, key 6.1 and 6.2 Termination / Recorded data
completion / performance indicators relating to completion report
termination data time, cost and the attainment of
specific goals associated with a
preferential procurement policy, or
if the contract is terminated or
cancelled, the reasons therefore.

Best Practice Guideline A1: The procurement cycle Page 15

September, 2005: Edition 2 of CIDB document 1001
Step 6.1: Administer contract in accordance with the terms and provisions of the contract

a) Administer the contract in accordance with its terms and conditions within the agreed time frames.
(See Contract administration chapter of SAICE Practice Manual #2, Delivering construction projects
using the design by employer contracting strategy.)

b) Pay contractors within the time periods provided for in the contract so as to avoid interest on late
payments.

c) Resolve disputes in accordance with the provisions of the contract.

Step 6.2: Ensure compliance with requirements

Monitor the contractor’s performance to ensure that the requisite quality standards are attained and the
requirements are satisfied and certify compliance upon completion.

Step 6.3: Capture contract completion / termination data

Record key performance indicators relating to time, cost and the attainment of specific goals associated
with a preferential procurement policy, or if the contract is terminated or cancelled, record the reasons
therefore.
Note: This is an opportune time to review the procurement process. Such reviews should focus on:

• whether the procurement satisfied the stated objectives;

• whether needs and expectations have changed such that the procurement documents should be modified;
• whether the procurement process itself could be improved; or
• how external factors such as legislation, regulations or standard component procurement documents have
changed.

Best Practice Guideline A1: The procurement cycle Page 16

September, 2005: Edition 2 of CIDB document 1001
Annexure 1: Skills and competencies required to implement a procurement system in the public
sector

General

South African citizens are entitled to expect that the public sector will conduct its business activities with
efficiency, expertise, economy, fairness, and impartiality and with high standards of integrity and
accountability. These standards should be reflected in organizational values, ethics and skills
development initiatives.

Each institution as ‘the client (or employer)’ needs to define procurement in terms of scope, standards and
outcomes and to manage the contractual relationships to ensure successful outcomes. The skills and
expertise that are applied to procurement planning, design and documentation, tendering, and project and
contract management have a significant and lasting impact on final costs and project outcomes. Effective
risk management and the required skills for any project must take into account its complexity, size, risk
and value.

At project initiation all risk resides with an institution as the client. The ability of an institution as the client
to manage those risks is dependent on the procurement strategies that are adopted and the nature of the
relationships entered into as the institution progressively engages others to deliver the project. For
successful outcomes, this requires the institution to have the capability, skills and expertise to:

• identify needs;
• negotiate the procurement;
• manage the contractual relationships; and
• monitor the delivery; and
• measure contractor’s performance.

Achieving these outcomes requires organs of state as the client to:

• develop and outline the project definition and scope;

• establish realistic project budgets and programme timelines;
• assess and understand the risks and identify who is to manage which risks;
• understand integrity, ethical conduct, fairness and accountability, and adopt these standards
throughout the project from initiation to completion;
• understand the all the parties’ obligations associated with inviting tenders, quotations, and
expressions of interest;
• establish evaluation criteria for contractor selection;
• understand the principles of project management and how they are applied;
• have quality control and management systems and procedures in place; and
• have monitoring, performance measurement and reporting mechanisms in place.

Assessment of internal capacity

An internal assessment of an institution's capabilities, similar to the way the institution as a client assesses
private sector capability, is a necessary first step for procurement. This should include self-assessment of:

• organisation capacity;
• knowledge of financial and contractual issues;
• technical and professional expertise and qualifications;
• previous experience and performance;
• capacity to evaluate value for money;
• capacity for innovation;
• capacity to evaluate and manage risks;
• resource availability;

Best Practice Guideline A1: The procurement cycle Page 17

September, 2005: Edition 2 of CIDB document 1001
• management systems and accountability; and
• performance management and indicator measurement.

It is important that where the private sector is engaged as agents to undertake procurement functions with
appropriate professional skills and the institution “manages” as opposed to “performs” these functions,
that officials have sound knowledge of the procurement processes, the capacity to engage the private
sector and the necessary skills to manage risk and administer contracts so that the state’s interests are
protected. In addition, these units need to have in place mechanisms, systems, and the skills and
expertise to measure their effectiveness in delivering project outcomes.

Basic knowledge and competencies

The implementation of procurement activities depends on inputs at the following levels involving the
following persons:

• manangement level, i.e., the decision makers / senior managers in an institution who set policy
and assume overall accountability.
• administration level, i.e., the professionals (internal project managers (officials) and external
agents) or administrative staff within an institution responsible for the preparation of procurement
documents, the soliciting of tenders, the evaluation of tenders and / or the administration of a
contract.
• contracting level, i.e., those who are contract to fulfill contracts.

Each of the abovementioned persons requires knowledge and competence, appropriate to the level at
which they perform, to successfully undertake their roles in procurement.

Best Practice Guideline A1: The procurement cycle Page 18

September, 2005: Edition 2 of CIDB document 1001