Treasury plans to redo procurement laws
BUSINESS LIVE / 24 APRIL 2018 - 05:38/ LINDA ENSOR
The new bill will consolidate various procurement laws into a single overarching national legislative framework
Treasury is moving ahead with the enactment of a new procurement framework, arguing that the current regime is fragmented.
The Treasury building in Pretoria.Picture: Russell Roberts
According to Treasury, the Preferential Procurement Policy Framework Act (PPPFA) and its subsidiary regulations are an ineffective framework for transforming the economy which is why a new Public Procurement Bill is being developed.
The bill which is currently with the chief state law advisor for certification aims to overcome the fragmentation in current procurement legislation. Once certified by the state law advisor the bill will be submitted to cabinet and once approved will be published for public comment. When enacted the Public Procurement Bill will repeal the PPPFA in its entirety.
With an annual procurement budget of over R900bn, government can be a powerful instrument for achieving economic transformation.
In a presentation to be made to Parliament’s appropriations committee Tuesday, Treasury says that the bill will consolidate various laws dealing with procurement into a single overarching national procurement legislative framework "to enable government to effectively use public procurement as a strategic lever to achieve the transformation, empowerment and development for inclusive growth.
"The bill will give provinces the flexibility to determine their own transformation and empowerment strategies and programmes based on their local economic development needs within the broader national framework."
Black Business Council secretary-general George Sebulela said the council was "very excited" about the new bill explaining that the existing procurement regime had not succeeded in bringing about broad based black economic empowerment (BBBEE) as it was still strongly biased in favour of price.
Also under development by Treasury are guidelines for the management of deviations and contract extensions which will introduce stringent criteria, thresholds and proper delegations of authority.
Every application for a contract deviation or extension will be mapped against submitted procurement plans. Where no procurement plan exists, no deviation will be allowed unless there is an emergency or there is only one source for the procurement.
The Office of the Chief Procurement Officer noted in a presentation to the committee that major deviations from contracts in 2017/18 amounted to R8bn and contract expansions or extensions to R35bn. Deviations were meant to deal with exceptional cases but had become the norm.
"They have many unintended consequences such as opening a door for corruption, promotion of anti-competitive practices, monopolies, (and) create barriers to entry."
Treasury says one of the fundamental reasons for overhauling the current preferential procurement legislation is that the PPPFA limits the extent to which the 30% set aside provided for in the preferential procurement regulations can be used. It is difficult to amend the 80/20 and 90/10 preference systems laid down in the principal act.
"There is also a misalignment between the PPPFA and the BBBEE Act and industrial policy action plan. The preferential procurement system was originally not designed to accommodate and effect the BBBEE with its various sector and industry charters and the industrial policy action plan. Some of the sector charters conflict with preferential procurement regulations making it difficult to achieve the objectives of preferential procurement as a lever to transform the economy," Treasury says.
"Coupled to this is the inability of organs of state to implement these regulations due to among others capacity constraints, interpretation and understanding of the regulations by procurement practitioners."
There were also other laws such as the Construction Industry Development Board Act, the Armscor Act and the SITA Act which sometimes conflicted with the PPPFA and rendered it ineffective, Treasury said.
The bill will lay down a new preference system with a maximum payable premium to give provinces the flexibility to regulate their own preference system on condition that this is cost effective and within the prescribed national payable premium.
The bill will introduce a differentiated approach to different types of procurement. For instance, infrastructure procurement will be procured differently from goods and services.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER