The draft Public Procurement Bill approved in large part by the cabinet will make the current preferential points system redundant. But this does not mean companies will be let off the hook in terms of complying with government’s preferential procurement policies if they want to get government contracts.
Preferential procurement points and thresholds will be governed by regulations and state organs will have to develop their own procurement policies in terms of the draft Public Procurement Bill.
In his briefing to members of parliament’s two finance committees on Tuesday on the draft bill, Treasury acting director-general Ismail Momoniat said the current procurement system is not working, which means the government is not able to deliver services efficiently and effectively. As the Zondo commission of inquiry into state capture had identified, the system is opaque and “prone to massive corruption”.
“Many goods and services are overpriced, often many times over the price available to a private retail customer. There are inflexible, incoherent and rigid prescripts that hamper development and service delivery.”
The draft bill — which still has to be certified by the state law advisers and slightly amended according to cabinet instructions — overhauls the current fragmented system of public procurement, though a lot of the detail will be contained in future regulations. It proposes to introduce a modernised, strategic, differentiated and flexible approach to procurement.
The bill will establish a preferential procurement framework for all procuring institutions within which to implement their own procurement policies. Regulations will be made on one or more preference point systems and thresholds, which will be mandatory for the procurement policies.
The Treasury’s chief director of supply chain management policy, norms and standards, William Mathebula, said the current 80/20 and 90/10 preferential procurement system would be redundant under the proposed legislation.
He said the weighting given to price in future should not be lower than 50 points, whereas in the Preferential Procurement Policy Framework Act price is accorded either 90 or 80 points, depending on the size of the contract. The remainder is allocated according to the broad-based BEE (BBBEE) score of the bidder.
The procurement policies of procuring institutions must include categories of preference in the allocation of contracts and the protection or advancement of persons, or categories of persons disadvantaged by unfair discrimination as defined in the BBBEE Act. Preferences cited in the bill include small enterprises, enterprises in townships, rural or underdeveloped areas, black people, women, persons with disabilities and youth.
The preferential procurement policies must include preferences relating to categories of goods and services produced and provided in SA.
“The preference point system can now be customised based on what is critical for the institution for a specific commodity, whether it be specific socioeconomic goals, quality price, etc. It is, however, advised that the price element should not be lower than 50,” Mathebula said.
He said the choice of the preference system will depend on what the institution wants to promote. It will not be a one-size-fits-all approach. An institution may have more than one preference points system.
He gave the example of a 70/30 policy, where 70 points are awarded for price and 30 for a number of objectives — for example, 15 for local specific goals and 10 for quality. Another example was a 50/50 policy, where 50 is for price and the other 50 is shared between local content, women and quality.
The draft bill also provides that the preferential procurement policy of an entity must include measures to set aside the awarding of bids to give preference to categories of persons/enterprises/sectors including black people; women youth and people with disabilities; co-operatives; and goods and services produced or provided in SA.
The set-aside policy must include measures to enhance economic development such as subcontracting as a bid condition to promote the preference; and allowing awarded bidders to subcontract to advance transformation, beneficiation, innovation, creation of jobs, intensification of labour absorption and economic development.
The set-aside policy must include measures to give preference to citizens or permanent residents or enterprises owned by citizens or permanent residents; enterprises based in townships, rural or underdeveloped areas or in a particular province or municipality; and advancing a sustainable environment.
Mathebula noted that government is at present limited to an open competitive tender process as a default. The draft bill will allow it to expand on allowable procurement methods. He said the bill will enable a more differentiated approach to procurement as not all commodities or services can be procured in the same way.
The draft bill proposes to establish a single regulatory system and oversight authority, the public procurement office within the National Treasury with jurisdiction over the whole public procurement system, including all organs of state. The bill will institutionalise lifestyle audits for all senior managers and officials involved in supply chain management and provides for a process of debarment of bidders and suppliers.
Regulations will also cover the procurement and strategic sourcing of goods or services and of infrastructure and capital assets and the types of procurement methods including, but not limited to, public-private partnerships and transversal term contracting.
The bill provides for the establishment of a public procurement tribunal for the settlement of disputes.
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