It’s all systems go for Public Procurement Bill, but is SA ready?

It is all systems go for the Public Procurement Bill, but the question is: is South Africa ready? The Bill establishes a comprehensive procurement system using technology to enhance access and transparency for officials, bidders, suppliers and the public.

In a political rift between mainstream political parties recently, the National Council of Provinces (NCOP) made amendments to the Public Procurement Bill in line with the Broad-Based Black Economic Empowerment Act.

Although the Bill aims to elevate public procurement through technology and economic empowerment, it faces immense risks including implementation challenges, corruption persistence, market distortions and legal compliance burdens, Katekani Mashamba, senior associate of dispute resolution at law firm, Cliffe Dekker Hofmeyr (CDH), says.

“The Public Procurement Bill’s ambition to enhance procurement transparency and promote economic transformation is commendable, but it must navigate potential pitfalls, including technological and training gaps, resistance to change and the challenge of effective enforcement,” Marelise van der Westhuizen, director at CDH, says.

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Primary objectives of the Public Procurement Bill

The primary objectives of the Public Procurement Bill are to enhance transparency in the tender process, as well as efficiency and integrity, minimise corruption and promote economic development and job creation.

The Public Procurement Bill emphasises the use of technology to provide access for officials and aims to recognise the need for promoting economic transformation within the ownership and management control of black people.

It also aims to advance preferential procurement from enterprises that are owned and managed by black people in terms of the code of good practice on black empowerment issued in terms of the Broad-Based Black Economic Empowerment Act, such as the inclusion of designation of sectors for local production and content in South Africa.

Mashamba says this Bill differs from existing legislation as it includes amendments that are lacking in the Public Finance Management Act and subordinate legislation and it repeals the whole of the Preferential Procurement Policy Framework Act.

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Is the Public Procurement Bill being rushed through before elections?

As with the NHI Bill being rushed through parliament before the election, there are also questions about the Public Procurement Bill approved so close to the elections? There are also questions about the impact this will have on governments ability to deliver on it.

“There is currently a lot of debate around the timing of the NHI Bill, but the Public Procurement Bill has been long in the making and is a necessary enhancement of the public procurement process, particularly because its objectives seek to contribute immensely to economic growth and for this reason I do not see anything sinister in the timing,” Mashamba says.

Regarding government’s ability to deliver on the Bill, Van der Westhuizen says the Bill makes provision for the minister of finance to issue regulations that will partially determine the extent of the objectives achieved, as the teeth of the Bill will be in the final Bill and Regulations, which will be published for comment and consultation.

“Government will need to amend procurement policies, administer training on the changes and ensure that their procurement regime achieves the objectives of the Bill through the implementation of the measures that will be contained in the regulations.”

She points out that the Public Procurement Bill focuses on a preferential procurement framework for procurement policies, which includes pre-qualification criteria for preferential procurement, set asides for preferential procurement, sub-contracting as condition of a bid and the designation of sectors for local production and content.

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How does Public Procurement Bill tackle corruption?

Then there is always the question about how this Bill aims to tackle and mitigate corruption in the procurement process. Mashamba says there is an emphasis on the importance of transparency and public access to procurement processes and information in the Bill, while it also outlines measures for preferential procurement to promote economic development and job creation.

In addition, the Bill includes provisions on financial misconduct. “It specifies that individuals who knowingly give false or misleading information, interfere with or exert undue influence on procurement processes or cause loss of public assets or funds due to wilful acts or gross negligence, may be liable for fines, imprisonment or both upon conviction.”

The Bill makes provision for a dispute resolution mechanism with the establishment of the Public Procurement Tribunal that will review decisions by procuring institutions, including decisions to debar a bidder or supplier. It also mandates the investigation of allegations against officials or role players of corruption, improper conduct or failure to comply with procurement systems.

Regarding transparency, the Bill specifies that the minister is required to prescribe measures for the public, civil society and the media to access, scrutinise and monitor procurement processes. Although he does not want to belabour the point, this will also largely depend on the Regulations, Mashaba says.

“Even at present, a decision by a state-owned enterprise to award or not to award a bid is administrative action subject to review in the High Court.”

He says it will also be important to establish whether an internal remedy lies against the award of a tender before the courts can be approached to review the decision. The current Bill assigns the ultimate internal remedies to the Tribunal.

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Possible legal challenges

Van der Westhuizen says there could be legal challenges around the implementation of the Public Procurement Bill “The most obvious legal challenge would be if necessary action to pursue the objectives of the Bill are not taken.

These challenges could happen if financial misconduct is not pursued or prosecuted or bid committees are permitted to ignore the objectives or do not follow Regulations, potentially leading to corruption.

It could also happen if bidders are not excluded from participating in procurement transactions for a specific period, instead allowing those same bidders to participate in another tender process, as the debarment provisions will then mean nothing, she says.

“Currently, a bidder who is not satisfied with a procuring institution’s decision to award a bid can apply for reconsideration from the same institution.  The Public Procurement Tribunal or a court may not review a decision to award a bid unless the bidder has exhausted this internal remedy.

“Consequently, it will be very important to first exhaust the internal remedy before the Tribunal or burdening our already overburdened courts.”

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Concerns around Public Procurement Bill

There have also been proposals that the Public Procurement Bill should return to its previous form which gave the minister broad powers to prescribe preferential mechanisms and Regulations. “On the other hand, giving the minister or procuring institutions the opportunity themselves to determine pre-qualification criteria, might have the result of not achieving the Bill’s objectives,” Mashaba points out.

He says there may also be concerns about the compliance burden on businesses and government entities due to the detailed requirements of the Public Procurement Bill.

The Bill will introduce a comprehensive set of Regulations and procedures that must be followed in the procurement process, including requirements for transparency, reporting, use of technology and adherence to preferential procurement policies.

Mashaba says these measures are designed to ensure fair, transparent and efficient procurement practices, but they also impose additional administrative and procedural obligations on both procuring institutions and bidders.

“For businesses, the Public Procurement Bill’s requirements may necessitate changes to their bidding and contracting processes, including the need to provide detailed information about the bidders ownership structure, compliance with local content requirements and adherence to set-aside and subcontracting conditions.”