initiative project
24 July 2006
PRETORIA - The South African Revenue Service (SARS) has taken a decision not
to award the tender (RFT 02/2005) for its proposed Container Cargo Scanning
Initiative (CCSI).
SARS has further decided to purchase the container scanners it requires
directly and not to outsource this requirement.
The acquisition of scanners and scanner-related services aims to improve the
capability of SARSâ customs control responsibility and to secure trade into and
out of South Africa and indeed Southern Africa.
The tender process resulted in five bidders submitting proposals and three
were short listed. After concluding a very rigorous bid evaluation process
including various interactions with bidders, and taking into account the
criteria prescribed by the Public Finance and Management Act, of affordability,
value for money and substantial risk transfer, SARS has decided not to award
the tender.
The primary reasons for SARSâ decision are as follows:
1. The procurement process has revealed that, from an asset acquisition
point of view, the pricing offered indicates that the technology and
maintenance cost of the scanners is a much smaller proportion of the total cost
than was originally anticipated.
2. Conversely, the cost of operating the scanners by bidders, excluding the
asset acquisition component of the tender referred to above, is therefore a
much higher proportion of the total cost than was initially anticipated. Based
on the submissions made by bidders at the best and final offer (BAFO) stage,
the proportion attributable to the operational component of the scanners is
well in excess of 50 percent of the total cost.
3. As a result, the value for money calculation performed by SARS at the
feasibility study stage has been revised, and the updated Risk Adjusted Public
Sector Comparator now indicates that SARS can no longer show that the
cost-efficiency and effectiveness of outsourcing the operation of the scanners,
would be better value for money than SARS acquiring the equipment through
traditional procurement methods and performing this function itself.
4. The increase in the usage of scanners globally during the tender
evaluation period has resulted in:
* a significant decrease in the cost of scanners
* a more rapid and frequent upgrades of the scanner equipment than was
originally envisaged.
The result is that the original parameters of the tender regarding
technology upgrades are no longer necessarily appropriate to meet SARSâ
needs.
5. The imposition by bidders and/or their lenders of a sizeable âtermination
compensationâ payment, which would be payable by SARS in the event of early
termination for default by the suppliers, even if the default stems from
technology failure and thus does not leave SARS with a fully usable asset.
Furthermore, the bidders were inflexible regarding such termination
compensation during the BAFO stage of the procurement process.
Notwithstanding SARSâ decision not to award this tender, the urgent
procurement of scanners remains a national economic and security imperative as
endorsed by Cabinet during 2005. Scanner deployment is pivotal to meeting SARSâ
goals of facilitating trade and securing South Africaâs trade supply chain in
support of national growth imperatives and pursuant to international and
regional legally binding commitments. International trade is a driver of
economic prosperity.
SARS will soon issue a new tender for the supply and maintenance of
scanners.
SARS remains committed to act in the best interest of government and the
economy and is therefore confident that it has made the best value-for-money
decision. SARS wishes to thank those bidders who submitted proposals and invite
them to participate in the new tender process.
Please note that a chronology of the tender process follows below as
background information.
Chronological order of events relating to the SARS CCSI public-private
partnership (PPP) project
Date: Events
2002-07-22: SARS Executive Committee (EXCO) considers the case for scanner
technology and requests a position paper be prepared
2003-05-05: SARS EXCO notes feasibility study would be undertaken for the SARS
CCSI PPP Project
2004-10-27: SARS EXCO approves appointment of advisor in terms of National
Treasury regulations
2004-08-16: Procurement approach approved by the National Treasury as per SARS
request for TA1
2004-12-02: Commissioner approves the issuing of a request for proposal
2005-03-06: Request advertised
2005-05-31: Closing date for tender bids
2005-07-22: Cabinet endorsed the adoption of the World Customs Organisation
(WCO) Framework of Standards and the use of non-intrusive scanning
equipment
2005-09-29: The Bid Selection Committee (BSC) meets to endorse recommendations
of the Tender Evaluation Committee â SARS EXCO approves short-list of 3
bidders
2005-12-23: Request for Best-and-Final-Offer (RfBAFO) documentation published
and collected by 3 bidders
2006-01-23: Responses to RfBAFO received from 3 bidders
2006-03-06: RfBAFO evaluation process completed
2006-03-20: Independent external Procurement Review (Auditor-General and
independent senior counsel) of procurement process completed â found process
was fair and equitable to all bidders
2006-05-09: Third biddersâ conference held to clarify positions on the residual
major risk and cost clarifications. Feedback received from bidders on 18 May
2006
2006-05-23: Feedback presented to BSC. BSC requests further refinement and
clarification on: costs, risk components and engaged in in-depth
value-for-money discussion based on bidder information
2006-07-05: The BSC final meeting makes recommendations to SARS Executive
Committee
2006-07-05 to 06: SARS EXCO meets to consider BSC recommendations
2007-07-13 to 21: SARS discusses tender concerns and queries with National
Treasury
2007-07-21: SARS EXCO ratifies decision to cancel tender and conveys decision
to National Treasury on the same day
Background
The CCSI tender was, in part, a response to the Framework of International
Standards which was adopted by the World Customs Organisation (WCO). The
Framework recommends non-intrusive inspections which can assist to secure
global trade networks whilst maintaining an efficient and effective secure
global trade supply chain.
South Africa, through SARS, is one of 169 member states of the WCO. The use
of scanners is considered an important and critical tool for non-intrusive
inspections that, in conjunction with effective risk profiling, will improve
the capabilities of SARS Customs to detect illicit trade.
South Africa also entered into the Container Security Initiative (CSI) with
the United States Customs and Border Protection.
The CCSI PPP procurement was a large complex project that touched many
dimensions of SARS business and required thorough and diligent consideration
and analysis from different perspectives, including technical, legal,
commercial, financial, BEE and operational. In addition, SARS had to ensure
that it does justice to the substantial effort made by the respective bidders
in answering this tender.
The BSC consisted of senior executives and operational managers that were
nominated by the affected business functions and approved by the Commissioner.
In addition a representative of the National Treasury also attended in an
advisory capacity. The PPP Unit within the National Treasury ultimately made
recommendations on the value-for-money specifications as required in terms of
Treasury regulation 16 of the PFMA.
For further media enquiries please contact:
Adrian Lackay, SARS Communications
Tel: (012) 422 4206
Cell: 083 388 2580
Issued by: South African Revenue Service
24 July 2006
