Rules for piggyback contracts strict and specific

Underpinning the fraught provincial department of education (DoE) procurement of e-learning tablets for matriculants is tender contract participation — colloquially known as “piggybacking” — in which a government department or an organ of state participates in a tender process initiated by another state entity.

While this process may evoke unsavoury connotations, especially in the Eastern Cape given our experience of the Siyenza Group toilets scandal which was premised on piggybacking on a Northern Cape toilet-building tender awarded to Siyenza, justifiable project principles exist for this approach.

The issue is critical to the intergovernmental dispute playing out in the Bhisho high court involving the national State Information and Technology Agency, the DoE and the department of economic development, environmental affairs & tourism (Dedeat).

After Dedeat’s successful open tender process to procure R6m in goods and services from Sizwe Africa IT Group, DoE sought permission from the contracting parties and provincial treasury to participate in the contract.

While government institutions must comply with the legislation that govern supply chain management, National Treasury regulation 16A6.6 allows for a department to participate in any contract arranged by means of a competitive bidding process by any other organ of state.

According to a 2014 circular issued by the EC provincial treasury, the intention of the regulation is to provide a platform for collaborative procurement where the goods or services being procured have identical specifications and the participants agree to the same contractual conditions.

Principles to be applied:

•  The contract must not have a fixed value with a defined or limited scope of work;
• The contract must not be expired;
• It must have been arranged in terms of a competitive bidding procurement process;
• The initial organ of state and the bidding entity who concluded the original contract must agree in writing to the addition of the subsequent organ of state which requests permission to participate;
• The subsequent organ of state may not create a new contract but use the existing contract. If the second organ of state creates a new contract, it must embark on its own procurement process;
•  The organ of state requesting participation must agree in writing to the existing terms and conditions of the contract;
• Only the initial contracting parties may amend the contract;
• The specifications of the required goods or services must remain the same;
• The unit price or contract rates of the goods or services must remain the same;
• Where the number of items of goods or services is defined, this cannot be changed;
• The organ of state requesting participation is bound by the duration of the contract.

The National Treasury instruction note 32 dated May 30 2011 allows for contract variations within specific thresholds. As a result, the initial contracting organ of state may amend the contract within the threshold to cater for small specification, price or quantity changes. The initial contracting entity must evaluate whether the request to participate will result in the contract exceeding the maximum threshold variation application.

If these rules are not followed, the expenditure that results could be classified as irregular.

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