The Treasury has further revised preferential procurement provisions in the draft Public Procurement Bill, which revert to the original, more onerous requirements for bidders for government contracts.
The bill, which is being processed by parliament’s standing committee on finance, is to consolidate the many laws and Treasury instructions dealing with procurement by organs of state into one law. What finally emerges from the legislative process will be critical for companies and individuals contracting with state institutions, which together spend about R1-trillion a year on procuring goods and services.
Whereas the draft bill presented by Treasury chief director of supply chain management and legal issues, Willie Mathebula, to the committee last week said a procuring institution may set aside a bid for small enterprises owned by blacks, women, people with disabilities and youth, the draft presented to MPs on Friday made set-asides mandatory. This brings the draft bill back in line with the bill originally tabled in parliament which made set-asides obligatory.
Beneficiaries of the mandatory set-asides were changed in the latest draft of the bill from small enterprises to blacks, women, people with disabilities, small enterprises and co-operatives. Procuring institutions will have to explain to the Public Procurement Office why they did not use a set-aside in a contract. This means bidders will have to set aside part of their contracts in accordance with prescribed thresholds and conditions. Mathebula told MPs that making set-asides mandatory and changing the categories of beneficiaries “provides for the protection and advancement of persons historically disadvantaged by unfair discrimination”.
The Treasury has made this and other changes to the draft bill in continuing engagements with MPs and stakeholders. So while the bill as tabled in parliament provided only a broad framework for preferential procurement, the revised bill includes a section on the application of a preference point system based on the broad-based BEE level of the bidder, with the points allocated to price depending on the rand value of the contract. Thresholds would be set out in regulations determined by the finance minister in consultation with parliament.
The revised draft bill includes a new section on localisation in terms of which the trade, industry & competition minister may designate a sector, subsector, industry or product where only locally produced goods can be procured. A procuring institution must only consider bids that meet the threshold for local production and content which must be stipulated by the minister.
“A bid that fails to meet the minimum stipulated threshold for local production and content is unacceptable and must be disqualified,” the revised bill states. The bill’s chapter on preferential procurement also contains a section on prequalification criteria for bidders such as broad-based BEE status level and the degree of subcontracting to small enterprises and the historically disadvantaged.
Provision is also made for subcontracting to small enterprises and the historically disadvantaged as a condition for bids.
Mathebula took issue with the view of some stakeholders that price should not be used by state institutions in the evaluation of bids, saying it was a critical element.
“Procurement in general includes price evaluation and section 217 of the constitution requires that procurement be cost-effective and competitive,” he said. In the draft bill, price is used together with transformation objectives in bid criteria.
There were calls by various stakeholders for the bill to include provisions to protect and incentivise whistle-blowing as a measure against corruption, but Mathebula said this was best left to the Protected Disclosures Act.
DA finance spokesperson Dion George said at the weekend that the DA rejected the proposed bill as it was “another disastrous piece of race-based legislation. The bill fails to address the core issue of systemic corruption plaguing SA’s procurement system, entrenches racial divisions and exacerbates inefficient public expenditure. Instead of creating an enabling environment for economic growth, it is poised to deepen economic stagnation and the cost of living crisis by imposing new, restrictive requirements.
“Throughout its tenure in government the ANC has implemented a progressively racially divisive public procurement framework that has resulted in harmful negative effects across the entire state. Failed BEE policies facilitated the emergence of tenderpreneurs, entrenched systemic corruption and crowded out economic growth needed to generate jobs and alleviate poverty.”
A recent report by Harvard University’s Growth Lab led by professor Ricardo Hausmann criticised the government’s preferential procurement policies, which “encouraged tenderpreneurs in ways that ended up being entrenched in the political system and ended up corrupting the state and the party system”.
The finance committee will this week begin clause-by-clause deliberations on the bill. The National Assembly will vote on it on December 5.
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