Understanding bidder behaviour: The case of the Mamelodi contract

Abstract

The South African government has had a nearly 17 year moratorium on new commuter bus contracts. In late 2017, the government lifted this moratorium which enabled the Gauteng Provincial Government to design a service for a number of operating areas, one of which was for the Mamelodi township to the east of Pretoria. From the outset, some operators expressed their reservations about the quality of the supporting information. The result of the tender process was that the respective tender prices and related subsidy requirements were significantly higher than that of the incumbent operator and was therefore not awarded. The purpose of the research is to investigate how bidding companies viewed the Mamelodi contract when tendering for the service. The results of the research indicated that there were major variances in annual passenger trip estimates, passenger revenue estimates, subsidy requirements and overall tender amounts, amongst the bidders. Conclusions are that the lack of accurate and complete passenger information, detailed route information, the lack of an adequate escalation formula and a requirement that bidders had to sub-contract 30% of their services to smaller operators, collectively contributed to higher tender costs and therefore subsidy requirements for the authority.