City of Cape Town and the National Department of Public Works (NDPW) tendering practice –The death of architecture
An Open Letter to the Minister of Public Works, the Premier and the Mayor of Cape Town
At a time when the City is revelling in the accolades of being selected as the Design Capital 2014, it is widely known within the architectural services industry that in order to win a tender advertised by the City of Cape Town or the National Department of Public Works [NDPW], an offer of between 65 and 75% discount needs to be made to be in the running for consideration. Simple business sense tells us that these levels of discount cannot be upheld without considerable compromise, either on the quality of service or the collapse of the company through the inability for it to cover its costs. The pattern of current tendering practice reflects a crisis in our industry for which employers such as the City of Cape Town and NDPW are equally responsible and its ongoing support could spell industry-wide disaster well beyond architectural services.
When tendering for City and NDPW work, decimated prices offered for City and NDPW contracts have been the everyday experience for the full range of professional services ranging from engineering to quantity surveying, and one cannot help but ask whether the City or NDPW understands the implications of this disturbing trend.
Our most recent tender offering experience has yielded some shocking statistics. The lowest offer for alterations to Wynberg Military Hospital, considered to be a highly complex project by all standards, was awarded at a whopping 73% discount off what is considered the recommended fee scale as recorded in a Government Gazette. The magnitude of the practice of offering huge discounts is widespread and can be seen at all levels of public tender. Additional recently awarded tenders include Iziko Way-finding Signage Tender delivered a discounted 66% and the upgrading of factories in Ndabeni for the Department of Labour at a staggering 70.02% discount.
Since 2009, we have witnessed what can only be considered desperate attempts by architectural practices to procure work in a context of a stagnant construction sector, dramatic retrenchments and closures of once-viable businesses. While economic pressures add considerable downward pressure on pricing, the extent to which prices have been driven downwards is unprecedented and we argue that this trend could spell the demise of architecture or at best, continue to produce poor levels of service, costly delays which in turn is likely to transpire into endless and expensive litigation. What is certain is that the continued practice of offering and acceptance of tenders at such high discounts are unsustainable.
An architect’s work is governed by an Act of Parliament [the Architectural Profession Act, Act 44 of 2000] which sets out the powers of the South African Council for the Architectural Profession [SACAP] to recommend a Tariff of Fees which is updated annually and sets out a code of ethics that governs the responsibility that an architect has in delivering a product with professional skill, care and diligence. Although the fee structure is considered a guideline, it gives a considered opinion on what a client could expect fees to be for an acceptable level of service as laid out in the Act, thereby also ensuring that design and proper consideration of the task is accounted for.
Despite often negative portrayals through the media, putting work out to tender has become the accepted norm for procuring professional services for the public sector and is widely practiced by the City and the NDPW. On the surface, putting work out to tender is seen as the only means for transparent procurement, ensuring fair competition and simultaneously delivering the best price or value for the task at hand. The current trends in discounting prices however, points to serious flaws within the system.
The tendering system, a tool devised to meet the transparency and open competition requirements of the Competition’s Act, is often criticized as a means to giving work to a select group of people In Cape Town. Relatively unblemished by accusations such as nepotism it has generally been a transparent process of procuring work however, the short-sighted acceptance of unsustainable offers for the work amounts to a narrow reading of the Act; the lowest price is seldom the best offer.
The price is often unrelated to the cost of a project and more accurately reflects the value associated with executing the work while the cost may include all the implications to the economy where the economy includes a financial, environmental and social cost, let alone the long-term cost of poorly executed work. It is clear to us that the current practice of appointing consultants at unsustainable rates flies directly in the face of the public’s best interests. Accordingly, we believe it is the responsibility of the authorities to understand its role in accepting unsustainable offers and effectively promoting the demise of good practice.
A telling example for the consequences of the current trend can be seen through the implications of buying Chinese manufactured clothing; which at much lower costs, is widely understood to be the reason for the moribund state of the local clothing manufacturing industry. The analogy can be directly translated to the architectural industry in Cape Town, where the cheapest price is considered the most desirable. The adage, paying peanuts…seems appropriate!
The inbuilt flaw in the current system is the over reliance on the market to regulate itself. Lessons of the “sub-prime” collapse point to the fact that the market is driven by self-interest and self-preservation. Despite King II’s attempt to bring ethical practice to bear on business, current practice is built on survivalist tactics and is wildly skewing the playing fields.
Our preferred procurement scenario would be along fair trade principles where people are adequately compensated for the value of the work done. We call on the City and the National Department of Public Works to re-evaluate its procurement processes and policies to change its behaviour in a manner that fully meets responsible spending of taxpayer’s money.
The risks for a continuation of the status quo go beyond the survival of architectural practices, [and there are many who rely on public sector projects] it directly undermines both the integrity of the profession, the quality of the product or building produced and by extension, the public who pays for and uses it.
We call on you to understand the context within which companies are making these hugely discounted offers and the likely harmful effects on the industry and the quality of service. We therefore respectfully call on you to reject any tenders that offer more than 33% of professional tariff.
We request that you set in place procurement guidelines that ensure professional integrity, support tendering processes that are based on realistic pricing and that tax-payers money is spent responsibly. The best price is seldom the lowest.
A simple measure to test whether it is suitable to accept the levels of discount offered is to ask whether the City or NDPW is prepared to accept paying 75% more than the value of the work. If not, then surely paying 75% less for a product can mean nothing less than double standards.
Khalied Jacobs and Gabs Pather
Jakupa Architects and Urban Designers