1. PG38AFRICAPRINTJOURNALJUNEJULY2014www.AfricaPrint.com
FEATURE
© Kodak, 2014. Kodak and NexPress are trademarks of Kodak.
Findoutmoreatwww.kodak.com/go/gold
Printeye-catching,margin-drivingmetallicgoldwiththe
KodakNexPressDigitalProductionColorPress
It‘saGoldRush!
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CarolineCoughlan
+27116886116
email:caroline@antalis.co.za
© Kodak, 2014. Kodak and NexPress are trademarks of Kodak.
Findoutmoreatwww.kodak.com/go/gold
Printeye-catching,margin-drivingmetallicgoldwiththe
KodakNexPressDigitalProductionColorPress
It‘saGoldRush!
Addvisualimpacttoyourcommunicationwith
KodakNexPressGoldSolution—aflexiblewaytoaddmetallic
sparkletoyourdigitalprintapplicationssuchassmall-formatpackaging,
signage,directmail,premiumphotomerchandiseandmarketingcollateral.
CarolineCoughlan
+27116886116
email:caroline@antalis.co.za
Procuringanassetis
almostlikegettingmarried;
oncetheknotistied
(assetisprocured)there
isahostoffactorsthat
couldcomplicateearly
termination.Forthisreason
werecommendthatequal
attentionisdirectedtothe
evaluationandplanningas
totheprocurementofthe
asset.
Inapreviousseries,‘PrecisionPrintingSeries’we
focusedonmethodstocalculatebestlevelsina
printroomtoobtainoptimalavailability,minimum
interactionandpremiumquality.
Inthisarticlewewillprovideanoverviewof
thebasiccontrolsandgovernancewithinthe
procurementprocess,whichiffollowed,willassist
youinalongfruitfulrelationshipwithyourassets
andtheirsuppliers…untilrustdoyoupart.
TENDERGOVERNANCE
TenderGovernanceisgenerallyenforcedbylawon
StateOwnedEnterprises.Formalcontrolswithin
procurementprocessesaresubscribedtobein
accordancewithasystemwhichisfair,equitable,
transparent,competitiveandcost-effective.
Aformalprocurementprocessoffersessential
valuetoanorganisationandshouldbeadoptedby
allorganisations,irrespectivewhetherornotitis
requiredbylaw.
Listedbelowarethemajorlegislativearticlesfor
additionalreading:
PFMA(MFMA)–Public(Municipal)Finance
ManagementAct–regulateallmatters
relatingtopublicfinancemanagement.
ByRianvandeRMeRwe
ASSETLIFECYCLE
MANAGEMENTSERIES
PROCURINGANASSET
AFORMALPROCUREMENT
PROCESSOFFERSESSENTIAL
VALUETOANORGANISATION
ANDSHOULDBEADOPTEDBYALL
ORGANISATIONS...
PROCESSSELECTION
Asmentionedabove,thereisnoofficial
legislationthatrequireprivateandpublic
companiestofollowlegislativeprocurement
guidelines,howeverasalsostated,webelieve
thatthereishugevalueintheseprocessesand
theyshouldbeinvestigatedseriously.
Wellruncompanieshavesupplychainpolicies
andfollowsimilarprocesseswithmaterial
acquisitions.Thesepolicieswouldtypicallystate
Section217morespecificallydealswith
ProcurementRegulations;
PPPFA–PreferentialProcurementPolicy
FrameworkAct–prescribethepoliciesand
proceduresthatallstateownedentitiesneed
toobligebywhenprocuringanythingabove
certainthresholds;
Thesearticlesarefreelyavailableontheinternet
andshouldbestudiedbyorganisationsthat
areseriousaboutdoingworkwithinthePublic
Sector.

2. PG40AFRICAPRINTJOURNALJUNEJULY2014www.AfricaPrint.com
FEATURE
HP
themonetaryvalueabovewhichallacquisitions
wouldbesubjectedtoatenderprocess,generally
referredtoasanRFP(RequestforProposal).
TherearetwotypesofRFP’s:openandclosed
RFP’s.Theruleofthumbisthatabidshouldbe
open,unlessforspecificreasonswhichmotivate
aclosedbidtospecificparticipantsonly.
Whenthemonetarysizeofatransaction
fallsbelowtheminimumrequirementfora
formaltender(generallydocumentedinthe
organisation’sprocurementpolicy),organisations
shouldatleastobtainaminimumofthree
quotations,basedonaspecificationsheet
providedtothesuppliers(RFQ,orRequestfor
Quotation).
DETERMINETHEASSETREFRESHRATE
Differentassetshavedifferentlifeexpectancies.
The‘costofasset’reflectedinanorganisation’s
monthlyincomestatementhasakeybearingon
itslifeexpectancyandisthereforeessentialto
understandwhenselectingaspecificfinancial
model.
Whentheselectedperiodislongerthatthe
assetslifeexpectancyitwouldputtheasset
atriskofconstantfailureorearlytermination.
Theinitiallowfixedcostofanassetwillnotbe
sustainableasearlyterminationoftencomesat
ahighcost.
Therearefurtheroftenagenerallyaccepted
refreshrateonassets.Toillustratethisconcept,
considermobilephones–twoyears,passenger
cars–hundredthousandkilometres,etc.
Refreshratetheoriesarealsodefensibleusing
justificationssuchas:'Technologychangesso
fast,youcannotaffordtobeleftbehind'.
Makesuretotakeacloselookatthechosen
refreshrateandnegotiatetheoptionstosweat
theassetforaslongasyoustillhaveproductive
thereof.
COMMERCIALMODELLING
Therearesomanydifferentcommercialmodels
availableinthemarket.Tolistbutafew:
Outrightpurchasewithamaintenance
contract
Equipmentrental/leasecontracts
Outsource,insource,co-source
Payforuse
Thereareanumberofconsiderationsinselecting
thecorrectcommercialmodelwhichwilldiffer
amongstcompaniesaseachorganisationhas
differentneeds.Selectingthewrongmodelcould
leadtoinflatedcostsandlackofefficiency.
Thefollowingkeycomponentsshouldbe
consideredwhenselectingacommercialmodel:
OWNERSHIP–doesyourcompanyhave
theappetite,capital,infrastructureand/or
cashflowtoowntheasset?Ordoesyour
companyhavethesuretiesandcreditability
torent?
EXPERTISE–doyouhavein-houseexpertise
toadministrateandmanagetheasset?
RISK–canyouaffordtotaketherisk
associatedwiththeassetwithinyour
businessmodelwithyourclients?
FLEXIBILITY–shouldyourbusinesssuddenly
changeinvolumeorrequirement,canyou
adjustandatwhatcost?
Selectingtherightcommercialmodeliskeyand
organisationsshouldgivethisalotofthought.
Mostorganisationsendupstickingtothemodel
thatisknowntothem.Thismaybetheright
decision,however,sometimeschallengingthese
coredisciplinesinone’sbusinesscouldleadto
growthandthereforewewouldrecommendthat
youconsideryourcommercialmodeleverytime
youinvestinamaterialacquisition.
Withacommercialmodelselected,thefocus
shouldshifttoensuringthatthetenderincludes
acostingsheetthatenablesyoutocorrectly
considerallcostsassociatedwiththeasset,
includingallhiddencosts,escalations,etc.
Withoutgoingintodetailsondifferent
commercialmodels,therearesomestandard
disciplinesthatwecanbrieflylistthatacosting
sheetshouldapplywith:
Breakallcostsdownintothelowestform.In
otherwordsnevernegotiateonall-inclusive
costswithoutunderstandingthecostbroken
downintoitsrudimentaryform;
RemembertoindicateVAT;
Takeannualescalationsintoaccount;
Makecertainthatyoukeepyouroptions
opentomakethebestdecisionafterhaving
analysedthebids.
PRE-QUALIFICATIONS
Thereisalotofworkrequiredfromboththe
organisationthatadvertisethetenderasforthose
responding.Forthisreason,itisrecommended
tobeextremelyclearonpre-qualificationsfor
atender.Prospecttenderersshouldbeableto
downloadthedocumentandclearlyseeonthe
firstpagewhattheminimumrequirementsareto
beacceptedinthebid.
Pre-qualificationsshouldthereforebeasetof
mandatoryconditionswithoutwhichatenderer’s
bidwouldnotbeevaluatedtechnicallyifnotmet.
Thiscouldinclude:
AValidTaxClearancecertificate
ProofofVATregistration
AValidBBBEECertification
Aletterofgoodstandingfromthecompany’s
bank
Certificateofincorporation
Copiesofsharecertificates
Certifiedcopiesofdirectors’ID’s
Proofofworkmancompensationregistration
ASGISAregistration
SABS/ICASAcertifications
AuditedFinancials
Mandatoryinformationrequirementwouldbring
forwardthoseorganisationsthatcanfocuson
theirservicedeliveryandhavetheirkeybusiness
administrationundercontrol.Thisprocessisalso
essentialwhenyoutenderforbusinessasyoutoo
needtoproofyourBBBEEprocurementspend.
Inordertosavetime,thefirststepinevaluatinga
tenderistoconfirmthetenderers’complianceto
mandatoryinformationandputbidsasidethatdo
notcomply.
SCORINGANDWEIGHTING
Scoringistheprocessofevaluatingdifferent
componentsonascorecardbetweendifferent
bids,whereweightingistoputaweightonthe
differentcriteria.
Anacceptedmethodofscoringatenderisto
breakthetenderupintocomponentsthatcould
includecost,technicalcapabilities,BBBEE,
organisationalcapacities,etc.Eachofthese
elementsshouldhaveascorecardthatispre-
definedinlinewithwhatyouwanttoachieveby
thetender.Thisscorecardshouldideallyhavea
pointssystemthatallocatepointstoofferings
thatcomplytosetrequirements.
Weightingistoputaweighttoeachofthese
categoriesinordertofindawayofselecting
themostidealbidtakingallelementsinto
consideration.InthePPPFA,stateowned
enterprisesarerequiredtoadvertisetheir
weightingtablewithinthetender.
Thefinaloutcomeofefficientscoringistobeable
tolistofferingsonatable,scoredwithapoints
systemoutofahundredandhavetheoverallbest
bidvisibletoyou.
CLOSE
Tendersinvolvehardworkandrequirededicated
focusandattention.Suppliers,ontheotherhand
tendtobemoreaggressivewhentenderingona
formalbidandwhenhiddencostsareexcessive
andonlyuncoveredaftertheassetwasprocured.
Thefinalconclusionisthatcompaniesthat
implementstrictdisciplineswillbenefitfrom
lowerinputcostsandbeoverallmoresustainable
inthemarket.
RianvanderMerwe
+27(0)832572601,(+2711)2348116
rian@fine-print.co.za