The revised Preferential Procurement Regulations 2017 ("PPPFA Regulations 2017") issued in terms of the Preferential Procurement Policy Framework Act, 2000, came into effect on 1 April 2017.
The revised regulations marked the beginning of a process of using government procurement to promote local industrial development, socio-economic transformation and the empowerment of small business enterprises, cooperatives, and rural and township enterprises. This process was taken a further in February 2018, when the then Minister of Finance announced that an Act of Parliament aimed at ensuring that small and medium-sized businesses, in particular those owned by women and previously disadvantaged South Africans would enjoy a larger stake in State Procurement.
Also, in response to the corruption and inefficiency that had been highlighted as a result of various investigations, the National Treasury recognised a need to simplify and streamline the procurement process. Some two years later Treasury published the Draft Bill for public comment; the comments were due on 31 May 2020. Because of the nationwide lockdown currently in place, Treasury has extended the deadline for public comment on the Draft Bill by a month to 30 June 2020.
The Draft Bill proposes a single regulatory framework for procurement applicable to national, provincial, and local Government, as well as State-owned entities. The Draft Bill will repeal the Preferential Procurement Policy Framework Act of 2000 and amend other procurement-related laws in respect of public administration.
The Draft Bill aims to simplify the confusing and fragmented rules that currently regulate public procurement processes across the Public Administration, which is presently decentralised, into a single unified process that will be simple for bidders and supply chain officials to understand.
Currently, procurement is legislated through the Public Finance Management Act No.1 of 1999 ("PFMA"), applicable to National and Provincial spheres of Government. The Municipal Finance Management Act No. 56 of 2003 ("MFMA") further legislates procurement for local spheres of Government. Further to the PFMA and MFMA, to give effect to the constitutional requirement of providing for preferential procurement to address socio-economic imbalances of the past. The Preferential Procurement Policy Framework Act, No. 5 of 2000 ("PPPFA") was enacted and applies to all organs of state.
In addition to the above-mentioned legislation, there are various other pieces of legislation, dealing indirectly with, or regulating certain specificities in public procurement. These numerous pieces of procurement regulatory tools have created fragmentation, resulting in the following:
- There are overlap and duplication between different regulatory instruments.
- There is uncertainty as to which precedes the other, or which to follow.
- There are inconsistencies in the approach to similar issues at the different levels or spheres of Government.
- There is variation in the scope of application concerning supply chain management, thereby posing challenges in providing uniform guidance.
- They undermine integrated and comprehensive national oversight functions.
- There is a hampering effect on capacity development due to the significant differences between the manners in which public procurement is approached in diverse contexts and institutions.
- There are impacts on service delivery; and
- There are challenges in addressing broader socio-economic objectives set out by Government
The Draft Bill introduces several reforms and proposed changes that address the outlined issues caused by the current framework some of the more notable and salient modifications introduced by the Draft Bill are summarised below.
The Draft Bill creates a more flexible preferential procurement regime and enables the Minister of Finance, in consultation with the responsible Ministers, to prescribe a framework for a preferential procurement system. It requires that the Minister of Finance determines a preferential procurement framework which will advance opportunities for persons previously disadvantaged by unfair discrimination in the procurement process. The framework mentioned above must consider the provisions of the Broad-based Black Empowerment Act.
The Draft Bill establishes a Public Procurement Regulator within the National Treasury ("the Regulator") to perform the following functions:
- Ensure institutions comply with the Bill and engagement in prudent spending of public funds.
- Reconsider the decisions of institutions.
- Revise and guide procurement processes and the procurement system.
- Establish and ensure the integrity of the procurement system; and
- Establish and maintain a register for debarred bidders and suppliers.
These processes are aimed at addressing the often lengthy and costly process in procurement litigation by providing cheaper and more cost-effective relief to bidders. The expeditious resolution of disputes within the national procurement framework is aimed at reducing the negative impact of litigation on service delivery.
The Draft Bill also introduces internal dispute resolution mechanisms for the reconsideration of decisions taken in the competitive tender process. These decisions can be reconsidered by the institution itself, by provincial treasury in the case of an institution within its provincial administration, or by the Regulator. If the bidder is still unsatisfied, the decision can be reviewed by a Public Procurement Tribunal, established in the draft Bill.
The Draft Bill proposes that a tender process may be, together with the existing grounds, be cancelled in the instances where:
- There is a significant change in the required technical specifications, bidding conditions, conditions of contract or other details;
- Where insufficient bids are received to determine competitiveness;
- The goods, services or infrastructure are no longer required;
- Insufficient funding is available for the procurement;
- It is not economically viable to proceed with the bid;
- An irregularity in the procurement process occurred;
- There is evidence of corruption, fraud, coercion or collusion among suppliers; and
- Cancellation is considered to be in the interest of national security.
The Draft Bill aims to introduce an innovative, more simplified process for entering into public-private partnerships. Once enacted, there will be a uniform procurement framework for all spheres of Government and state-owned entities; this will reduce bureaucracy and stamp out the inefficiencies that exist in the current procurement framework. This single framework will also improve the ease of doing business within the public-private partnership space.
Originally published 23 June 2020.
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