The GoLive! events company lost a lucrative government contract because it lacked black ownership. Here is some expert advice on how to handle situations like these.
PROBLEM: GoLive! events company was invited by a long-standing client (a government agency) to tender for a high-profile annual event.
GoLive! had managed this event in the previous year, and it was hailed by the agency's president as the "most successful" he had ever hosted.
GoLive! submitted the tender with confidence, and was taken aback to be told a week later that the contract had been awarded to someone else.
In an informal phone conversation, the agency's newly-appointed communication manager told GoLive's managing director that GoLive's creative concept was by far the best of all those submitted, and that the price was excellent, but that they had lost the tender due to a lack of black ownership.
By way of explanation, he added that the agency has committed itself to giving 50% of its annual procurement to black-owned companies.
While GoLive! scores very well in terms of preferential procurement and skills development (its QSE scorecard rating is Level 4), the client refused to accept this and insisted on applying its own evaluation method.
GoLive's question is this:
"We have a strong QSE score, a ten-year track record with this client and nothing but positive feedback in all that time. Using the lack of black ownership as the reason for not giving us the work seems illogical and unfair. If a government agency doesn"t recognise the QSE scorecard, what is the point of having it at all?
And what can we do to ensure we don't lose any more work from this client? This agency is the source of almost 70% of our turnover and we can't afford to lose it.
However, as a small, single-owner business, selling ownership to an empowerment partner isn't really an option. What else can we possibly do?"
BBBEE consultant, Paul Janisch, responds:
"This is a difficult situation and not an easy one to resolve. I have long subscribed to the notion that relationships (bolstered by a BBBEE profile) will always win the day.
The agency issuing the tender has taken a bad approach to this whole situation. It is clear that they have compromised standards, quality and price - and ultimately competitiveness - in order to satisfy their biggest client's needs (government).
"The tender loser is in a terrible predicament. Broad Based BEE criteria open up the concept of BEE to all companies and GoLive! should be recognised for the areas in which it scores BBBEE points.
"However, certain corporates, parastatals and many government departments insist on the equity component before they will do business with someone. Some clearly state in their procurement policies that those aspects of spend are reserved for black-owned companies."
OPTION 1: "If GoLive! wants to retain this client, it might need to consider the equity option. If it genuinely is not feasible, then the business will have to look for other markets that will accept its QSE rating."
OPTION 2: "To the best of my knowledge, you have the right to request the scores of all the tender submissions (this might not be the case with private companies though), which would give you a better idea of where you lost points. Itís possible that your creative concept wasnít up to scratch, but the communication manager was reluctant to say so."
OPTION 3: "Another suggestion is to meet with the tender committee - specifically the procurement manager or policy and decision-makers. Even if their procurement policy includes other BBBEE criteria besides the QSE scorecard, it will at least give you a more accurate idea of what the agency is looking for.
Donít rely on a phone conversation for something this important. Always remember that although you might have an excellent relationship with the people you work with at the agency on a daily basis, the person who makes the final purchasing decisions might not be familiar with your track record."
Paul Janisch is the CEO of BBBEE consultants Caird Consulting.
Joint ventures - a "tender" issue?
Joint ventures are a way for smaller businesses to pool resources (and BBBEE ratings) with other suppliers when bidding for large tenders.
The tendering company could allocate different aspects of the tender to different companies with a clear directive that they are to collaborate in some shape or form.
By doing this they create an opportunity for the less-experienced company to pick up vital skills, while the other is exposed to work it would not otherwise have secured.
Ideally, the two companies should sign a joint venture contract which clearly sets out roles and responsibilities. The tendering company should then act as a mediator in case of a dispute.
This approach benefits the company doing the work and the tendering company, which can now score enterprise development and preferential procurement points on its scorecard.
If the joint venture works, both businesses will gain a great deal of experience and will be in a position to extend their skills, services and BBBEE contribution.
Make relationships work for you
A good working relationship always affects a company's choice of supplier, and this would naturally give you an advantage over any newcomer. But make sure this relationship extends to all levels of the company.
Get to know the key financial and procurement people and find out what they look for in a supplier. There may be financial or administrative issues you aren't aware of that could lead to your proposals or tenders being rejected.