GAMA HOME GAMA 2000 HOME
GAMA 2000
22 - 24 March 2000
GABORONE-BOTSWANA
Organized by the Botswana Association of Consulting Engineers on behalf of FIDIC's Group of African Member Associations (GAMA)
  
The Selection and Appointment of Consulting Engineers

Summary of presentation by Hannes Schutte, Director VIKE Engineers, Mafilkeng


In the North West Province of South Africa, the SAACE members also debated this topic for some time and then decided to organise a symposium.

The A Re Ageng Forum of the North West Province also investigated the same issue and requested myself to prepare an advisory document, and being a member of the Forum and the immediate past chairman of SAACE North West, I used the opportunity to help arrange the symposium.

Mr Koos Louw of Africon and Eddie van der Heiden of Stewart Scott told us about a seminar that was held by ACEB in Gaborone in October 1994. We looked at the proceedings of that seminar and decided to follow the same procedures in our symposium.

I am going to give you a summary of proceedings and will do my best to convey the message the various presenters tried to bring to our symposium.

1. The Chairperson of A Re Ageng, Prof. Madoda Zibi opened the symposium and said:

This seminar, is where we will talk about ways of appointing consultants and it is yet one of those efforts of A Re Ageng to deliver on crucial issues pertaining to service delivery mechanisms with a view to advising government on best practices.

The name A Re Ageng, itself is highly pregnant with meaning particularly at this juncture in our country. It was part of the task team that was given a mandate by the cabinet committee of the Economic Affairs to investigate and advise government on the feasibility of a forum like this one.

Perhaps in your deliberations you may ponder over the following issues, when you begin to talk about criteria on appointment of consultants.

What specifically the consultant has to deliver, this means that the person that wants to engage a consultant has to be specific and state clearly what has to be done by the consultant. It does not have to doubt whatsoever. Give clarity of and, specify your need so that the consultant should know what he has to do. This entails that you have to know your needs quite clearly.

Secondly is the contractor or consultant able to guarantee the results? This means that he should not waiver or he should not thumb-suck and once again this boils down to what 1 have said, results orientation.

Thirdly, the person that wants to engage a consultant, should ask this question, is he able to measure the results against his needs at the end of it? Will he be able to say he has delivered on what 1 said he should and against my needs, and if not, one has to go back to the drawing board.

The above elements I have considered to be crucial in the appointment of consultants.

2. To obtain the provincial Government's perspective, we invited Prof. J. Mokgoro, the Director General of the North West Province, to present their view to the symposium and he said:

Up to the present, both private and public sector clients and consultant are familiar with, and have even grown comfortable with two traditional approaches to consultation. Either

a) The client presents the consultant with a problem for solution and the consultant provides a recommended solution or a set of alternatives. Or

b) The client asks the consultant both to define the problem and to offer recommended solutions. The latter is the physician's approach. The client describes a set of symptoms and the consultant first makes a diagnosis and then prescribes a remedy.

In both traditional approaches to consultation the client somewhat passive and placed in a position of dependency until the point at which the consultant's recommendations require implementation.

The great problem is that for most situations, consultant's recommendations are not always fully implemented. This represents a serious gap in the present situation where consultants may go to extraordinary lengths to devise processes and technologies for implementation and they are diluted to the point where they rendered meaningless.

The critical question is therefore, how to ensure maximum value from appointing consultants and ensure there is meaningful implementation where recommendations of solutions require changes in valued or customary practices?

An integrative/systemic approach addresses two central issues found in any consultation (Argyris, 1970):

a) How to generate valid information. b) How to ensure effective implementation.

If the success of the consultation is to be evaluated in terms of increased organisational effectiveness, the only results that count are those that are based on valid information describing that which has actually been implemented.

Consultant Responsibility

In South Africa, and in the Public Service particularly, there is the assumption that a consultant will have all the answers. Some consultants assurne that they do have all the answers. In an article advising potential clients how to use consultants, two practicing nianagement consultants and a company president accepted this traditional view that it is "the consultant's plan of action which must fit your company ... remember, it's the consultant's solution. He's supposed to know what it takes to get the job done-especially in terms of judging your staffs ability to implement his program.

3. Mr. D. W Schoeman from the Office of the Premier said:

The use of consultants should be viewed as the first and the best-known example of private/public partnerships. Let us try to develop some solutions for the future, so that we could actually enter into a partnership arrangement and an understanding of what the appointment of consultants is all about so that we could develop the best possible public/private partnership regarding consulting services in Africa

4. Mr G. S. Pirie - Executive director of the South African Association of Consulting Engineers (SAACE), then presented the SAACE PERSPECTIVE and stated:

The SAACE will continue to develop its constructive partnership with government at all levels. Sharing in the vision of an African Renaissance, SAACE members can offer the technological and management know-how and commitment to find African solutions to African problems, thus ensuring that prosperity and technological advancement are provided to all South Africans, as well as to our SADC neighbours and the wider sub-Saharan Africa.

And then addressed the SELECTION AND APPOINTMENT OF CONSULTANTS as follows:

There are many ways one can appoint consultants:

By means of referral: which is mainly used by the private sector,

When your are talking about an appointment from the public sector you are probably talking about a roster system. You normally do that in the context of standard fee scales and one would use it for routine appointments. It is important to bear in mind that there are two sets of selection procedures, namely:

  • appointment to a roster, and
  • appointment from a roster

With the last mentioned we are probably talking about quality based selection. As the day progresses we will tell you from our side why a quality-based selection is far more practical method and the world's best practice, as far as we are concerned.

5. THE CLIENT'S PERSPECTIVE was presented by H van Wamelen - Chief Director of Department of Transport, Roads & Public Works. He stated:

The idea of consultants being appointed by means of open, or selected, tendering comes up quite often. I am not in favour of this idea and for the following reasons:

Registered professionals must provide the services of Engineering, Architecture and Quantity Surveying. These professions are regulated by the various acts and this should remain to be the case. If professionals are required to tender for work they will become contractors and this will change the whole approach. The levels of honesty and ethics required from a professional have no place in the competitive world of contracting.

The client / agent relationship that exists in the current model of appointment will disappear in a contracting environment. The client and consultant are no longer on the same side of the fence, with the contractor.

0n the other side. The consultant now joins the contractor on the other side, and the client is now alone. The client will have to control the consultant more closely because the trust relationship has disappeared. The professional service provider will become another sub-contractor on the project and will have to look out after his/her own interests instead of after the interest of the client.

When work is scarce, like now, the tenderers will have to cut their fees and this will inevitably affect the quality of service. Likewise, when work is plentiful the fees will be high to make up for the lean years.

6. We also requested the SABTACO's perspective from Mr A Sebego (Chairman SABTACO North West). He said:

We at SABTACO regard this seminar as a milestone in terms of bringing together all that is role-players in the built environment, in order to chart a way forward in the transformation of the procurement system. We believe this coming together of all role-players is long over due and we will be very happy to participate in the process as it unfolds.

Our concerns in SABTACO is that most of our members that are emerging, most clients especially at provincial district level, do not seem to realize what risk is there for emerging firms who have so much external forces acting against them. We believe if we are serious about black economic empowerment, the emerging sector, making sure that the APSP share in the cake of the budget on a yearly basis, then we really need to focus on policies, which are promulgated from national and make sure that they reach the furthest level and that is the third tie of government.

Allow me to talk about the Joint Venture System as per the APP document. We believe it's a beautiful piece of paper, which, if followed to the letter, will give good results, but at the moment, we have a problem in the implementation of that document. The problem is, a document is there, you'll be ?ppointed in a joint venture, the client will make sure that he appoints in a joint venture for a particular big firm, what happens is, the big firm will be notified about the joint venture, maybe as an emerging guy you'll be notified, and if you are, during the currency of the project, you don't have equal access to the client like the big firm.

And yet as an APSP, we believe you are a corporate entity just like the big firm. However, we recognise the fact that it has to be tested on how it performs. We still think that other stakeholders, like all government departments and Local Councils, should adopt it. We believe it is a good tool, which should be perfected as it performs.


SECOND SESSION: Current Trends

During the second session we focussed on: CURRENT TRENDS IN THE APPOINTMENT OF CONSULTANTS IN SOUTH AFRICA

7. Mr T Marshall (VKE Engineers and vice president of SAAC) informed the symposium on THE WORK OF THE CONSTRUCTION INDUSTRY DEVELOPMENT BOARD (CIDB) in South Africa.

The CIDB's role is to enhance:

Delivery and performance to meet the needs of the SA population. Now that again, if you think about it is very wide. It talks about increasing efficiency, it talks about best practice, in all aspects of construction, not just construction, building or big earth moving plants, but procurement of materials, procurement of professional services, the whole construction industry.

Role of industry in economic& social development of the country. Increasing capacity in the industry, developing new skills and benchmarking performance.

Human resource development and transformation of the industry. How can controlled transformation take place, without the financial controls that we require and without the value for money aspect? So those are the roles of the C0B.

And the (SIMPLIFIED) OBJECTIVES OF CIDB is to successful marry two positions:

  • Good governance/Best Practice. Which is the high efficiency side
  • Transformation/Socio-economic objectives including black economic empowerment. Which is a longer term aspect, which includes black economic empowerment.

So you have to balance the longer/shorter term interests of the country. So in all the activities of the CID13, be it professional services occupation or whatever occupation. One must always bear those two positions in mind in an attempt to balance the two in the interest of all of us in this country.

CIDB Task Team established Focus Groups. These Focus Groups were given specific tasks with specific outputs involving public sector representatives and industry specialists in various fields, to find best practice solutions. The one group is Focus group 6 on procurement, which deals with the whole procurement scene, including procurement of professional services.

8. Mr G.S. Pirie then presented APPOINTMENT PROPOSALS OF FOCUS GROUP 6

The three outputs he talked about was:

  • Uniformity in procurement documents
  • The appointment of consultants in the public sector
  • Code of conduct for the procurement of goods and services

And further dealt with: THE APPOINTMENT OF CONSULTANTS IN THE PUBLIC SECTOR (BEST PRACTICE GUIDE NO. 4)

We should be looking at classifying the appointments in terms of:

  • Routine appointments: where standard technologies would be used
  • Specialist appointments: would be more technically complex work
  • Complex appointments: would be i.e. policy development

If you flag those three routine, specialist and complex and then you superimpose on these methods of appointment and then these methods of appointment would be:

  • Selection from a roster for tariff appointment assuming that you have a roster and you have gone trough a process and it is following the principles of affirmative procurement and empowerment. Then what we need to do is make a distinction of appointment from a roster to our answer to tender, which is quality-based selection.
  • Competitive selection on a balance between competence and price for tariff and non-tariff appointments.

If you are looking at a competitive selection there are a number of steps that you should follow; e.g.

  • Step 1: Appoint a selection committee
  • Step 2: Prepare a brief
  • Step 3: Determine weighting for competence and price (because essentially what we are talking about is a two-envelope system, where price can vary from 10%, 15%, 20%, but not be the central focus. Because we do not believe that it is in the client's interest and certainly not in the consultant's interest. We are buying innovation, the more you compete on price the less innovation you will get.)
  • Step 4: Prepare the procurement document.
  • Step 5: Advertise for submissions and issue documents.
  • Step 6: Adjudicate in a transparent manner (and give feedback to those who were unsuccessful. It is making you as a client vulnerable, but it is essential because it is adding capacity building capacity in the market)
  • Step 7: Award the assignment

Now if you take the routine, specialist and complex assignments and you superimpose the roster-based selection versus the quality-based selection we then define two categories and you have to answer these questions when you go out into the market.

  • Tariff-based appointments

If for example (and you can set your own threshold) the fee income is less than R2m (SA Rand) you would go for tariff-based appointments. For routine and specialist assignments you basically use the roster system. For the complex assignments we are saying competitive selection on competence alone. In other words price is equal to zero. So, tariff-based appointments less than R2m fees you are essentially going for a roster-based system for all three categories of appointment.

  • Non-tariff-based appointments

Above R2m fees for technically more complex and bigger projects you would then be talking about competitive selection or a two envelope system, thus a balance between price and competence, but the focus on competence, yet not ignoring price. The R2m fee is only en example and the specific level can be debated in terms of your own policy.

9. Mr T Marshall then addressed the symposium on THE DEPARTMENT OF PUBLIC WORKS ROSTER. And stated:

I would like to talk about the Department of Public Works Roster, because it is a good example of a roster that complies with the requirements as set out in the best practice note, produced by the CID13.

OPENING STATEMENTS:

  • South Africa's constitution requires that all organs of state in a fair, equitable, transparent, competitive and cost effective manner procure goods and services.
  • Public sector procurement is a powerful instrument for achieving government's black economic empowerment and transformation objectives.
  • These statements apply to professional service contracts.

GENERAL PRINCIPLES:

  • Types of assignment :

    - Routine: The bulk of appointments by organs of state, government departments and various levels of government normally fall in the routine category. The roster must always be aimed at handling that with high efficiency.

    - Specialist Ill-defined inputs & outputs.

    - Complex e.g. policy development, Research & Development.

  • The roster can only deal with statutory tariff appointments.
  • The roster deals only with appointments smaller that R2m excluding VAT fee value. The same Department of Public Works roster system is now being implemented in a number of Local Authorities on an experimental basis. The R2m is however too high for many Local Authorities and they had to determine their own levels and the system makes provision for that. A department, an authority or province can determine it's own level and announce that appointments below that level will be via the roster route. In Cape Town for instance they determined that level be R2m.
  • The roster system also recommends the competitive selection for projects with an estimated fee value for fees more than R2m.

ASSIGNMENT PRINCIPLES

  • There is a single randomly sorted list which includes:
- Architects
- Quantity
- Surveyors
- All engineering disciplines

In the past most government departments had a civil roster. a structural engineer roster, an architectural roster, a quantity surveyor roster, etc. The new roster is a single roster that includes all of these disciplines.

  • It works on a basis of a Black box computerised selection and the reason why that was done was to cut out any room for manipulation.
  • A firm can register a head office and any number of branch offices on the roster and they are each individually registered on the roster.
  • It also registers the disciplines in each office and the computer takes that into account in the selection process.

SELECTION PRINCIPLES

Let's say you are now one of the firms on the roster, how do you get selected for a project?

  • The number of principals at a specific office determines maximum fee value that can be awarded to that office. For a principal you can get appointments with a fee value of up to R250 000. For 2 principals the level increases to R500 000, fee value. So the amount increases with R250 000 with each additional principal up to 4 principals.
  • Once a project has been selected you have to have the appropriate discipline of that office.
  • The computer program looks at locality. The program starts on a 50km radius from the project site. It searches the database on a 50km radius and unless it finds at least 10 qualifying firms on the roster. insuring competition, it goes to the next radius, which is a 10Okm radius and unless it finds 10 qualifying consultants on the roster it goes to the 150km radius. Only when it gets to the 250km, radius it drops the requirement for the minimum of 10 consultants and then the roster appoints on a 20Okm radius. So it takes into account the geographic locality.
  • The firm on the roster that meets all of those above criteria, i.e. the number of principals, the correct discipline, the locality and the firm closest to top gets selected by the computer.
  • If the estimated fee value is more than R750 000, and the selected firm is a non-APSP (remember everybody is on the same roster) then the selected firm is required to form a structured joint venture with a nominated affirmative professional service provider (APSP) also form the roster.
  • The participation criterion for the nominated APSP is a minimum 0,35. That implicates that the APSP should have a minimum of 35% of the total fee value.

ADVANTAGES OF THE ROSTER SYSTEM

  • A full industry participation in development, monitoring and evaluation. So ADP and SABTACO assisted the Department of Public Works with the roster over a long period. In this development process the three parties found a lot of common ground but also a lot of differences. The result of this development process was something that has been a consensus result. In various points in time we had to take decisions which did not please one or two of the parties, but in the end we achieved this process and we are still friends.
  • This participation in monitoring and evaluation is a fantastic example of transparency and good governance. It is a total transparent system, which is totally open and the private sector is also involved in monitoring and can come up with recommendations for improvements if there are shortcomings in the system.
  • It makes provision for development in a controlled environment. We saw with the Pilot roster that to think that everything (Development) is going to happen in a free for all system is very often wishful thinking. This makes provision for rules that everybody understands, rules which to operate and development can take place in a controlled and monitored way. You can see that you actually achieved development objectives and you do not just throw out money there and think that maybe development will take place.
  • It is also a first for the Department of Public Works to accept PI (Professional Indemnity Insurance) instead of their own personal surety. The private sector involvement by means of the ADP and SABTACO, jointly, convinced the Department of Public Works that it is in their interest to forget about personal surety, because it means nothing in the end. They can really protect their interests by going the PI route. That is way the PI route is now part of the roster.
  • There is a new standard professional agreement that has been developed and that has gone through a CIDB procurement forum as well and has been approved there as best practice.
  • It goes hand in hand with a Code of Conduct. To be allowed on the roster you should decide to submit to this code of conduct. The code of conduct is not just a nice set of rules it also goes along with disciplinary measures. It is enforceable.

PROBLEM AREAS

  • The roster as it is now discourages new non-APSP entrants. So the young person that comes out of university and is not black has no change of setting up a practice and hoping to get government work. The system is discriminating against him.
  • It requires a minimum R2m PI, which is fine but taking into account the current economic situation and the fact that the bulk of practices are small practices it is pretty tough. It is a big additional cost that a firm has to bear. If he is a non-APSP he has to have that PI and maybe he will get that project out of the roster in three to four year's time.
  • A single roster for all disciplines. It discriminates against multidisciplinary practices, because if you are a practice with electrical engineers, structural engineers and civil engineers and you get one electrical appointment and it may be a relatively small project, you go to the bottom of the roster. The civil engineers in your company loose out for a couple of years before they may be able to get an appointment.
  • The fact that firms is disqualified for joint directorships. We had to bring that in and we agreed in the end on this, because it is one of the measures to counter fronting. Nevertheless it does prove problematical in some company structures, where you have a holding company and separate companies in different provinces with shared directorship from the holding company. Then automatically the system disqualifies that company. That is a problem we still have to deal with.
  • The system also works against in-house employment equity plans. What we are telling our established firms is, we say whatever you do, it is going to be for a very short term. Thus you can send students to university, but if they come back and they start the long road to become an engineer or other professional within the firm, the system tells them that after a year they can set up their own practice instead and be a little one-man-show, because they are guarantied a faster rotation of work and better access to government appointments, which is not good for professional development. It is also not good in terms of the country's professional structure, thus breaking up in all these little one-man firms. In this way you lose all capacity in the country to handle large projects and you have to invite foreigners to come and do all your large projects.
  • There are no incentives for human recourse development or doing a good job. Where the pilot roster gave some recognition to firms spending a lot of money on educating previously disadvantaged people by sending them to university for instance. The new roster makes no provision for that and gives no recognition for that. In fact it tells you, you spend money and your student is going to start his own little business anyway.

Our symposium then focused on:

10. WORLD BEST PRACTICE IN APPOINTMENT PROCEDURES FOR CONSULTANTS presented by Mr LOUIS STEYN (AFRICON International Division)

He told the symposium how the International Bidding process works, and used the World Bank as an example

The process is called the International Competitive Bidding.

The client body or Client Country would approach the Bank to finance the specific project. The World Bank will put a general procurement notice in their United Nations Development Business, it is a magazine that conies out twice a month, which advertise all projects and all stages.

Consultant will then look at this document and express an interest into a specific project at that stage. The Client Country will then prepare a shortlist. The Client will then sent a letter of invitation to the specific consultants

The Consultant will prepare a technical proposal, and a financial proposal and the two proposals will be bound separately and packaged and sent to the Client, where the technical proposal will then be assessed for its credibility and quality on a points rating system as outlined in the terms of reference, if the score is above a specific threshold that has been set, then the financial proposal will be opened and assessed. The best combined tender will then be accepted and the tenderer will enter into negotiation with the Client. That is the whole process and it could take anything from 18 months to 2 years before this whole cycle of events is concluded.

11. ARTHUR TAUTE CEO VIKE ENGINEERS then presented UNSOLICITED BIDS

What is an unsolicited bid? An unsolicited bid is a bid put in by the private sector for the use of a Government resource. It has to be the use of a Government resource, there has to be some money coming back to this person who put in the bid. It is not something that must to be driven with State funding, it has to generate its own funding.

The initial policy of South Africa's Department of Transport was a double envelope system, same as the World Bank system. There was a Technical proposal and a Financial proposal. It was quiet difficult to put the thing together because you had to put a Financial proposal on the table. You had to say what your price was for that project. This created a lot of frustration in the Construction Industry.

Their new policy now looks totally different. What happens is, you put your proposal in and they look at it and they say, we like this idea, but will you amended this a little bit like this or that. Then you amended it a little bit and then they say, OK now you have to go and consult and obtain the support of all the role players.

Once you have got that through and you have the support of the people in the communities, where you are going to do this project and general support, then they will grant you Project Developer Status.

Then starts a Phase 1 development of the project. Where you do your environmental scooping report and you do your Preliminary design so that you can price this thing. Then they, the Department of Transport, or SANRA in this case now, on their current policy, will pay you 50% of the recoverable costs.

Phase 2 is the Development and Tender Documentation phase. Once you have done your Preliminary documentation, they will look at it again and then they will ask you to prepare tender documentation. All the costs associated with your unsolicited bid, both yours and SANRA's go into the tender document as a provisional sum and they sit there. The winning bidder will have to pay all those costs back. It doesn't cost the Government anything at the end of the day, provided that the project goes ahead and gets implemented.

In Phase 3, you call for tenders. Now this guy who put in an unsolicited bid, if he is part of a Contractor Consortium, he can bid on his own tender documents. So that gives him a little bid of a margin on the other guys, because he came up with the idea in the first place and has taken some of the costs and the risks. So he can bid, then they will have to get somebody else to evaluate, it has to be a third party who they would have to appoint.

They will ask two guys for final and best offers. If you, the unsolicited bidder, are not one of those two, then there will be three frontrunners. They will then negotiated with the three frontrunners, they will then select the preferred bidder, financial closure, award the tender and from the first draw down, from the banks, or who ever are going to finance this project, the PC sum of all the costs that were incurred in the preparation of the documentation and so on, is paid out to the Department, the unsolicited bidder and so on. So that is a fairly fair process that involves the tender procedure, it does reward creativity to a degree and it encourages the private sector to come forward and put something on the table.

I think it is certainly not the solution for everything but for certain things, I think it can certainly get a bit of momentum going in this country, which is what we need.

12. The symposium then discussed the relevant topics in five groups and they came back with the following recommendations:

  • A standard procurement policy for all ministries in order to eliminate confusion, corrupt practices etc.
  • The roster concept should be filtered throughout all government ministries to eliminate emotions
  • The current roster system should be given a chance to mature prior to being set as a procurement standard for the other ministries
  • Implementation and funding ministries should liaise closely with each other so as to talk in "one voice" which would eliminate confusing communications to consultants and beneficiaries of the projects in question.

the process should be:

  • Simple;
  • Applied uniformly;
  • Seen as rewarding acceptable performance;
  • Applying penalties where deserved, and
  • Foolproof

Issues:

  • Value of consultancy
  • Level of complexity, how well the outcome is defined
  • Capacity of client Department to draft and evaluate proposal
  • Empowerment objectives not an issue, can be enforced to a degree for both methods
  • Risk of failure
  • Level of technical excellence imposed
  • Level of innovation required - can have a % cost weighting

To remove existing bottlenecks, problems and delays in the current procurement process the following should be addressed:

  • Prioritisation of projects in place
  • Budget approval earlier in financial year
  • Project "green light" earlier enough for the process
  • Reasons for appointment: - Role players identified - Authority defined - Process defined and programmed
  • Data basis on consultants kept up to date

Chairperson, I am of the opinion that the Selection and Appointment of Consulting Engineers should be discussed between the Profession and the Client bodies. The various associations should be proactive in this regard.

Engineers should not tender to perform design work, or any other work normally expected to be performed by engineers, but the client should appoint them.


| GAMA HOME | GAMA 2000 HOME|