SOUTH AFRICAN REVENUE SERVICE
PRESS STATEMENT

24 JULY 2006

SARS CCSI (CONTAINER CARGO SCANNING INITIATIVE) PROJECT

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 SARS' 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 SARS' 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% 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; and
   • 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 SARS' needs; and
5. The imposition by bidders and/or their lenders of a sizeable "termination compensation" 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 SARS' 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 SARS' goals of facilitating trade and securing South Africa?s 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.

ENDS

ISSUED BY THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE
PRETORIA