Preferential Procurement and the policy framework

Thousands of businesses wish to do business with the government of South Africa however it is not as easy as one would think. A host of criteria and regulations exist and are all currently guided by the Preferential Procurement Policy Framework Act, 2000 which is now under draft review. Members of the public have till 31 May 2020 to provide comments to government.

Gazette 43030 is available HERE (Draft Public Procurement Bill, 2020: Publication of draft Public Procurement Bill for public comment).

The Draft Bill is available HERE (Draft Public Procurement Bill)

The essence of such a bill is similar to the basics of preferential procurement as defined in the B-BBEE Act.

The South African Cabinet recently approved publication of the Public Procurement Bill for public comment setting in motion legislation for procurement strategies that support the government’s socio-economic objectives. The Bill proposes a single regulatory framework of public procurement. It establishes a procurement authority to regulate and promote Section 217 of the Constitution of the Republic of South Africa of 1996 across all departments of government.

Once passed into law, the Bill will repeal the Preferential Procurement Policy Framework Act, 2000 and amend other procurement-related laws.

The bill provides for more flexible legislation for preferential procurement strategies in support of the government’s socio-economic objectives.

The draft bill attempts to address weaknesses in procurement legislation that make it easy for corrupt government officials, politicians, and service providers to loot the state when tenders are issued, while at the same time opening up procurement opportunities to black-owned and women-controlled suppliers.

The bill prohibits government employees from trading with the state. Drafters of the bill aim to close loopholes that are created by the fragmentation in laws governing public sector procurement.

The bill aims to develop a single legislation that eliminates fragmentation. Currently, procurement is legislated through the Public Finance Management Act (PFMA), which is applicable to national and provincial governments, while municipalities are regulated through the Municipal Finance Management Act (MFMA).

On top of the PFMA and MFMA, there are 29 other pieces of legislation dealing indirectly with or regulating certain aspects of public procurement. Additionally, there is the Preferential Procurement Policy Framework Act (PPPFA) too.

The new bill will consolidate procurement laws into one regulatory framework and sets out several key policy proposals.

1. It aims to remodel Treasury’s central procurement office into a Public Procurement Regulator (PPR) that will regulate public procurement. The finance minister will be responsible for appointing a chief executive officer (head) of the PPR on recommendation from an appointment panel. The PPR will have wide-ranging powers that entail initiating criminal proceedings, overturning decisions of procuring entities, and suspending or terminating procurement processes. Ministers will be prohibited from interfering with procurement processes and will be confined to a policy-setting and oversight role.
2. It introduces the debarment of suppliers that submit false information in their bid documents to secure contracts. The bill allows the regulator to debar suppliers if they are found to have been involved in corrupt activities and price-fixing.
3. It aims to reform the preferential procurement policy to advance South Africa’s industrial development and broad-based black economic empowerment (B-BBEE). This will be done through implementing tender set-asides, whereby a portion of public procurement spend will be allocated to previously disadvantaged persons.
4. It intends to establish a Public Procurement Supplier Ombudsman to manage a system of complaint and dispute resolution. The ombudsman will resolve complaints and disputes between
5. suppliers and procuring entities.

Currently, tenders are awarded based on a preference points system. Tenders valued at less than R50m are awarded on the 80/20 preference points system, whereby 80 points are allocated for price competitiveness and 20 points for a bidder’s strength according to the B-BBEE scorecard.

Tenders valued at more than R50m are awarded on the 90/10 system, whereby 90 points are allocated for price and 10 points for the B-BBEE scorecard.

The preference points system will probably be amended to increase the B-BBEE points allocation to give black suppliers an improved possibility of being awarded tenders.

Make sure you have all your systems in place to address and maximise your BEE scorecard in the hope of a successful bid for business with local and national government. Be honest and transparent and make sure you avoid any possbility of corruption at all times.