Minister of Local Government, Environmental Affairs and Development Planning

The City is not aware of any complaints made against any departments within the City relating to price manipulation of tenders. The City is however aware of an investigation by the Commercial Crimes Unit against a City supplier, (The Construction Company), relating to alleged fraud. The investigation is ongoing and no further details have been disclosed by the Commercial Crimes Unit.

The City’s Supply Chain Management bid committee system is geared to provide for a sufficient degree of segregation of duties in order to protect the integrity of the system and ensure a fair, transparent, cost effective, competitive and equitable SCM process.

The Bid Evaluation Committees (BEC) is responsible to ensure that any award recommended for approval is compliant to all applicable legislative requirements, and that such award is value for money.

The BEC assesses an offer to determine value for money/ fair pricing by testing the offer against a range of criteria. The City’s prescribed value for money principles to be assessed includes, but is not limited to:

• Historical pricing is understood against current market trends
• Taking into account economic factors such as inflation, ROE, the pricing of a good or service is reasonable and within the market range
• Consideration of the Preferential elements on pricing (local content, B-BBEE premium)
• The balance between quality and pricing is achieved
• Consider market pricing and benchmark prices; and
• Consider the impact of economies of scale / bulk buying and its impact on pricing.
• Conducting market research on the supplier industry prior to tendering

Prior to making an award, the Bid Adjudication Committee (BAC) interrogates recommendations and  requires assurance that value for money was considered and whether certain prices are considered to be market related. If pricing is deemed high, the City enters into price negotiations  to align the offered price with what is considered market related.

The negotiation procedure include:

• Negotiate a market-related price with the bidder scoring the highest points.
• If an agreement on appropriate price cannot be reached, negotiate with the 2nd or 3rd highest scoring bidders, or cancel the tender.
• Apply the foregoing principles to all written and formal written price quotations.

The above procedure is contingent on ensuring such a negotiation:

• does not allow any preferred bidder a second or unfair opportunity;
• is not to the detriment of any other bidder; and
• does not lead to a higher price than the bid as originally submitted. 

The City has recently undertaken a value for money assessment and analysed top 300 key goods and services procured and if prices  paid are market-related.

The outcome of the analysis is that, in the 2021/22 financial year, the City paid market-related prices, or prices below market-related rates, for 85% of the items and services it procured. The remaining 15% of the commodities analysed were procured at prices slightly above market prices. Instances where the City pays above market prices is attributable to various reasons, inter alia, premiums due to legislative requirements, specialist activities, specialist commodities, impact of COVID-19 and loadshedding on manufacturing costs, weaker rand, global supply chain constraints, rising interest rates and unique specifications required by the City of Cape Town.

Sound ethical conduct by City departments, officials and suppliers remain paramount to ensuring value for money is achieved and service delivery obligations are fulfilled. To this end, the City has contract and project management processes in place to monitor all services and products provided by suppliers.