Procurement activities need to be organised to assure quality products and services at the same time benefiting from economies of scale by ensuring projects are attractive to the prospective suppliers and contractors.
Purchasing and Supple with Nyasha Chizu
There is a fine line between slicing and packaging of tenders and tender splitting.
Slicing and packaging is breaking project procurement into smaller components for various technical and economic reasons; whereas tender splitting is breaking a project into smaller components for reasons of avoiding procurement practices associated with thresholds or tender value limits.
As an example, the 600km Harare—Beitbridge Highway dualisation project can be sliced and packaged into six 100km stretches that can be awarded to different providers on whatever model of private-public partnership or outsourcing that the government may adopt.
The major reasons being the desire to manage project risks of quality and schedules by involving more players and/or motivation of construction industry growth.
Awarding the 600km stretch to one contractor could be construed as creation of monopolies in the construction industry given the current state of the construction industry.
When the same project is split into smaller components of informal tender lots of $1m to avoid public tendering would be a clear tender splitting case.
Such a move would inevitably increase costs due to the duplication of avoidable multi-preliminary and general costs associated with construction projects.
On the other hand, the size of the project determines the quality of contractors and service providers that an organisation is capable of attracting.
As the projects increase in size, the value increases likewise and the more the interest of the bigger players.
Bigger players are generally experienced and produce quality products and services. There is reasonable competition in bigger projects as opposed to smaller ones giving some economic and technical benefit to the buying organisation.
On the other hand, some organisations prefer turnkey contracts as a means of avoiding tender splitting.
It must be known that there is value in dealing directly with specialists when a project has been sliced and packaged appropriately.
Construction projects can be split into civil works for roads and sewer, electricity reticulation and a separate project for the construction of the houses.
It is possible to appoint one contractor on a turnkey basis to deliver the construction project but it is at a cost.
The main contractor indirectly includes a mark-up or management fees for the subcontractor portion of the costs.
The public and private sector face the same challenges when dealing with procurement.
The motivation in the public sector is complying with procurement rules at the same time embracing the principle of value for money and equal opportunities.
Some countries have incorporated provisions in their law to manage tender splitting and guidelines for slicing and packaging projects.
The motivation of the same in private sector is for embracing competitiveness and profitability of the businesses.
There is, therefore, need to ensure that there is a reasonable connection between the measure adopted and the objective when projects are being sliced and packaged given the implications discussed above.
It is also unfortunate that our current procurement law lacks guidelines for managing tender splitting and slicing and packaging of tenders at the expense of benefits discussed above.