Tender fraud must be probed

Are you faced with an ethical dilemma? Are you witnessing corruption but don’t know what to do about it? Ask the team of Corruption Watch experts what to do by writing to: letters@businesstimes.co.za and mark your letter ‘Dear Corruption Watch’.

Dear Corruption Watch,

I’m newly appointed to a government position involving me in procurement. I’m interested in knowing whether I can write a clause into the tender notice prohibiting firms that have ever been found guilty of corruption, fraud or collusion from bidding, and are there any statutory provisions I could invoke that could blacklist those firms and how can I go about invoking them?

Yours faithfully,
Thinking Ahead

Dear Thinking Ahead,

You’re quite right not to want to do business with firms that have previously been found guilty of corruption or fraud.

Regulations issued under the Procurement Policy Framework Act, 2000 require an organ of state to act against any tenderer that has failed to fulfil the conditions of a contract or has fraudulently misrepresented its broad-based black economic empowerment (B-BBEE) status to obtain a tender.

An organ of state is entitled to disqualify such a person from a tender process, recover any losses it has suffered as a result of that person’s conduct, cancel the contract and claim damages, or forward the matter for criminal prosecution.

It may also restrict the tenderer, its shareholders and directors, or only the shareholders and directors who acted on a fraudulent basis, from doing business with any organ of state for a period not more than 10 years.

There are a number of names already on the database. The names of the persons and companies who have been placed on this database can be viewed on the National Treasury’s website at the following address: http://www.treasury.gov.za/publications/other/Database%20of%20Restricted%20Suppliers.pdf

If a potential tenderer’s name appears on this database, they are not permitted to do business with the state and you may disqualify them from the tender process.

If a tenderer’s name is not on the database, but you discover fraud or misrepresentation, the organ of state that you work for is required to act against the person who has committed it. This may entail placing their name on the database of restricted suppliers.

However, you should remember that the decision to place a tenderer’s name on the database is administrative action, which means that you must give the person the appropriate protections of procedural fairness before doing so. This entails, at a minimum, notifying them that you are considering placing them on the database, giving them an opportunity to make submissions, and giving them reasons for the decision that is reached.

The accounting officer of an organ of state is also required by the Treasury Regulations to investigate any allegations of corruption in a tender process, and to take appropriate steps against those involved. The accounting officer may disregard any bid or cancel any contract if the bidder or any of its directors have abused the supply chain management system, committed any corrupt or fraudulent act during the bidding process, or failed to perform a previous contract.

Your organ of state is required to have a system for supply chain management in place. This is constituted by its preferential procurement policy, together with any supply chain manuals or circulars that have been issued.   This policy may already entitle you , when doing business with firms that have been found guilty of the kind of conduct you are concerned about, to build restrictions into the terms of your notice of tender.

If it doesn’t already include such a provision and you think it should, you can take the matter up with your accounting officer. As long as such a clause is carefully framed so that it doesn’t operate unfairly or inhibit effectiveness, we can see no reason not to include it in your supply chain management system.

Take a stand and report an incident of corruption. This article originally appeared in the Sunday Times Business Times on 24 June 2012.