Gaps in government’s new procurement regulations

The new Procurement Regulations have stripped away most of the requirements from the previous regulations, which is welcome, but there are also some glaring omissions.

The minister of finance issued detailed Preferential Procurement Regulations in terms of the Preferential Procurement Policy Framework Act in 2017, that laid down the criteria for the adjudication of tenders.

These criteria included price and the Broad-Based Black Economic Empowerment status of the entity completing the tender, as well as matters such as local production and sub-contracting. Other details included the criteria for breaking deadlocks in scoring, the awarding of tenders not scoring the highest points and cancellations.

In February this year, the Constitutional Court found that these regulations were inconsistent with the Preferential Policy Framework Act and ordered the ministry of finance to develop new practices within one year.

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New procurement regulations

On 4 November, the minister of finance, Enoch Godongwana, promulgated the Preferential Procurement Regulations by publishing it in the Government Gazette. The new regulations require tender documents to state the applicable preference point system to use, the inclusion of any specific goals relevant to the tender in the invitation to tender, which points to award for achieving these goals, the calculation of the points awarded and evidence that will be required in support of these points.

National Treasury and the Public Procurement Office that will be housed in Treasury will have teeth in terms of corruption and loss of public funds, while the Public Procurement office will also have wide-ranging powers, almost like a law enforcement agency.

The question is how it will be staffed and will it have a watchdog to prevent abuse, B-BBEE expert Richard Ryding and labour law expert Jonathan Goldberg from Global Business Solutions want to know.

They both welcome the fact that people found guilty of offences in terms of the regulations can be fined or be imprisoned for up to 10 years in terms of the regulations.

However, Ryding and Goldberg note that there are a large number of things that “must” be done.

“The implementation and policing of these matters are not necessarily dealt with in the regulations, such as steps that “must” be taken when bids are rejected, awards deviate from committee recommendations, contracts are concluded and officials disclose their interests.”

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Gaps in new Procurement Regulations

The minister must publish regulations and Section 64 gives details of the matters these regulations must deal with. However, these requirements are not included in the Procurement Regulations, such as security vetting for procurement officials in the supply chain and Public Procurement office and procedures and fees for lodging objections.

The preference point systems are:

• 80/20 for the acquisition of goods or services and tenders for income generating contracts up to R50 million.
• 90/10 for the acquisition of goods or services and tenders for income generating contracts with award value of more than R50 million.

According to the 2017 regulations, for example, 80 points were used when measuring items such as the efficacy of the product supplied, the price, any local content and other requirements specified in the tender documents. The remaining 20 points were allocated based on the tenderer’s BEE status.

Now, under the 2022 regulations, the 20 points are no longer based on the tenderers BEE status’ but are awarded based on goals specified for the tender. The regulations describe these specific goals as ‘special specific goals as contemplated in Section 2 (1) (d) of the Act which may include contact with persons, or categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender and disability, including the implementation of programmes of the Reconstruction and Development Programme as published in Gazette 16085 dated 23 November 1994.

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No longer BEE tables

The 2017 regulations also included tables showing how the points must be allocated based on the tenderer’s BEE status. Due to the Constitutional Court finding, these tables are no longer in the regulations.

“Instead, the Invitation to tender must state how the points will be allocated. Section 30 (1) (b) of the regulations requires the organ of state to indicate the specific goals that will be applied in the adjudication of the tender, the number of points that will be awarded to each goal and proof of the claim for such goal. Tender documents will have to be very detailed.”

Irrespective of which preference point system is applied, the contract must be awarded to the tender scoring the highest points. When there is a deadlock in scoring, this will be resolved initially by reference to scores achieved for the specific goals with the tenderer receiving the highest points winning the contract. If the tenderers score the same points for everything, it will be awarded by the drawing of lots.

Goldberg and Ryding say a large number of the requirements laid out in the Preferential Procurement Regulations of 2017 were removed in the new regulations, 2022.

“The Preferential Procurement Act is also being amended and from a review of the draft bill, it appears the Preferential Procurement Act will become the vehicle to drive and protect procurement.”