Tender ‘loophole opens doors for crooked auctioneers’

Government’s price-weighted tender requirements for the disposal of assets is having the unintended effect of attracting unscrupulous auctioneers who tender low and add additional costs to the seller’s and buyer’s bills after the event.

This practice is a major concern for the industry’s regulator, the South African Institute of Auctioneers (SAIA).

It has offered to work with government to develop more conducive tender adjudication processes to participate in these auctions.

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While some departments have begun insisting on membership of the institute as a starting point, the SAIA feels more should be done to curb the practice, SAIA chair John Cowing says that hosting a successful auction requires a lot of preparation and hard work.

It also requires meticulous fiduciary management and administration to ensure monies are accounted for and that the buyer’s and seller’s interests are accurately represented.

While the auction process may seem straightforward, there are also strict regulations that govern the practice and must be adhered to at all times.

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“In some instances, we have seen these crooked auctioneers win tenders with 1% or 2% commission bids. In terms of the Public Finance Management Act’s recommended price-weighted tender requirement, these auctioneers win the tender, then add all manner of charges that are charged to the buyers over and above the agreed purchase price.

“Considering these requirements, and the advertising and marketing of upcoming auctions, it is plain to see that such low fees cannot cover the auctioneer’s costs and should be viewed with scepticism.

“Another problem is that different asset classes may have different charges and requirements which means that you cannot always apply a one-size-fits-all policy to decide tenders,” says Cowing.

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“To describe every charge possible is simply impractical and for this reason, SAIA recommends a watertight document be designed and approved by government on what charges are allowed and laid out upfront and allow the tender adjudicator to tally up costs of all tenderers before making final decisions.

“We also recommend that the credentials should include proof of experience in the required auctioneering field, professional auctioneer training and accreditation with SAIA, as well as other representative bodies involved in the disposal of distinct types of assets such as properties, vehicles, moveable and immovable assets,” says Cowing.

He proposes a closer working relationship between SAIA, National Treasury and the South African Local Government Association to close any loopholes that are potentially damaging to the seller and buyer.

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In the meantime, the institute says it is eager to work with individual government departments, state-owned enterprises and municipalities to provide advice on the tightening of tender requirements.

South African Institute of Auctioneers, Sonja Styger, SAIA secretary, Tel: 021-813-6342, Fax: 086-660-5276, Email: sonja.styger@auctioneering.co.za