WHAT IS PREQUALIFICATION?

Jun 11, 2012 Features / Columnists, Peeping Tom

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In order for our readers to understand the issue of procurement, today we publish an explanation about pre-qualification of bidders.
The public must not be confused between prequalification and a tender for a contract.
The two are not the same and the difference between the two is explained here.
Prequalification is not a form of tendering. Prequalification when used, precedes the tendering for the actual contract. Prequalification is used to identify contractors who would be allowed to tender for certain contracts.
Therefore an advertisement for prequalification does not amount to an advertisement of a tender for a contract because all the former does is allow those interested to express their desire to be eligible to tender.
Once a company is pre-qualified for a particular contract it is then eligible to tender for that contract.
A firm applying for prequalification has no expectation to be awarded any contract on the basis of the application for prequalification. Its only expectation is that once it has been approved for prequalification, then it is free to bid for the contract.
Prequalification therefore precedes the tender and an advertisement for prequalification should not be confused with an advertisement inviting tenders for the award of the substantive contract.
Prequalification is not used for all contracts. In fact, it is only used in certain cases where it is felt necessary to do so.
The vast majority of contracts are publicly advertised without the need for prequalification which is often reserved for large contracts and those requiring highly technical expertise.
One of the advantages of prequalification is to reduce the need to evaluate unqualified contractors. It is way of narrowing the field to only those who have the requisite ability to comply with the terms of the contract and the financial capability to undertake the work.
Thus for certain contracts, particularly large contracts or those involving highly technical work, a procurement entity will before advertising for bidders for the contract, first ask for invitations for pre-qualified bidders.
Prequalification allows for unqualified bidders to be weeded out and thus helps to speed up evaluation of bids since only a limited number of pre-qualified bids have to be examined.
This means that only those firms pre-qualified would be eligible to bid on the contract.
The prequalification is merely for companies to demonstrate that they have the ability to undertake the work or supply of whatever it has to be sourced.
Section 6 of our National Procurement Act is in fact very precise on this point. It provides at Section 6 for the procuring entity to engage in prequalification proceedings in order to identify, prior to the submission of tenders, suppliers and contractors that are qualified to participate in such proceedings.
The Act goes on to indicate that a procuring entity shall solicit invitations to pre-qualify by causing an invitation to pre-qualify to be advertised.
Section 6 (6) goes on to state, “The procuring entity shall promptly notify each supplier or contractor submitting an application to pre-qualify whether or not it has been pre-qualified and shall make available to any member of the general public, upon request, the names of all suppliers or contractors that have been pre-qualified.
“Only suppliers or contractors that have been pre-qualified are entitled to participate further in the procurement proceedings.”
The Procurement Act goes on to state that except for single sourcing, procurement through community participation, restricted tendering single or a request for quotations, for which there are prescribed rules- all procurement should be by open tendering.
In the case of request for quotations, there are usually limits to the amounts under which this method can be used.
The procurement process is important for public transparency and should allow for a system that is fair and allows for the procurement agency to reap the benefits that go with such openness.
It is quite possible for companies who feel that prequalification has been used to disqualify them from tendering to legally question the fairness of the prequalification process. Certainly, for example, it would be in violation of international trading rules for a company which is being asked to supply goods to enjoy an advantage over either a local or international firm simply because it has local manufacturing capabilities. This would amount to a breach of national treatment and because it offers an unfair advantage can be annulled either through resort to the national competitiveness process or through direct court action.

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