Alarm bells are ringing over lack of detail in draft Public Procurement Bill
BUSINESS LIVE / 24 FEBRUARY 2020 - 11:14 / MEGAN ADDERLEY
Companies that do business with the government should beware of new envisaged rules, Megan Adderley writes
The Treasury published the long-awaited draft Public Procurement Bill for public comment on February 19. The draft bill has a noble aim: to simplify the confusing and fragmented rules that regulate the public tender process into a single, unified process that is easy for bidders and supply chain officials to understand and apply.
There are some disquieting aspects of the draft bill for those who do business with the government, especially regarding the lack of detail on key aspects of the public procurement processes that are left to be fleshed out later in regulations.
The draft bill appears poised to create further opportunities for black-empowered businesses to grow but does not spell out exactly what form these measures will take. The feature causing the most disquiet in the draft bill is that it creates significant uncertainty about the criteria that will determine who wins a tender and, for this reason, is arguably unconstitutional.
Tenders are currently determined on the basis of a preference points system. Tenders valued at less than R50m are awarded in terms of the 80/20 preference points system, in terms of which 80 points are awarded for price and 20 points for preferences based on the bidder’s broad-based BEE (BBBEE) scorecard. Tenders valued at more than R50m are awarded based on the 90/10 preference points system, in terms of which 90 points are awarded for price and 10 points for preferences based on the bidder’s BBBEE scorecard.
The draft bill requires that the minister of finance determines a preference points system but, unlike the current laws, does not provide any constraint on the way the preference points system is structured. The minister could for example decide in regulations to provide for a preference points system in terms of which 50 points are awarded to price and 50 to preferences.
The minister thus has a wide discretion to determine how the preference points system would function, with no real guidance from parliament and could quickly and easily change that system (though the regulations must be submitted for parliamentary scrutiny). This is arguably unconstitutional as the constitution requires that the framework for preferential procurement must be set out in national legislation — the framework must be determined by parliament rather than by the minister in his sole discretion.
It would be in the interests of all bidders — those that are empowered and those that are not — for the framework to be set out in legislation so that they have certainty about how the award of tenders will be decided.
Other notable features of the draft bill are that:
It seems to suggest the minister is required to put in place measures for organs of state to set aside certain government tenders so that only a limited category of people may bid for that contract (and no-one outside that category may bid even if they are capable of fulfilling the requirements of the tender). For example, a tender could be set aside for only historically disadvantaged people or only SA citizens or only businesses operating in a particular province or municipality;
It introduces a new more streamlined process for entering into public private partnerships;
A tender process may now also (in addition to the existing grounds) be cancelled “where there is a significant change in the required technical specifications, bidding conditions, conditions of contract or other details”, “in the interest of national security” and where “insufficient bids are received to determine competitiveness” and the right to cancel is not expressly stated to apply only before the award of the tender;
Disposal of state assets may take place through open advertised bidding, public auction, electronic reverse auction, restricted bidding or through any other method prescribed by the minister or regarding movable assets by auction, written price quotations, transfers to other organs of state or controlled dumping. Under the current laws there has been significant debate about whether a procurement process should be followed for the sale and letting of state assets; and
It establishes processes for reconsideration of decisions taken in competitive tender processes by the institution itself or by a national regulator or provincial treasury. If the bidder is still unsatisfied the decision can be reviewed by a public procurement tribunal, established in the draft bill. These processes are aimed at addressing the landslide of protracted procurement litigation by providing cheaper and more cost-effective relief to bidders and at reducing the negative impact on service delivery. It is notable however, that a decision made by the public procurement tribunal may be judicially reviewed by a court, and therefore the process could end up being even more drawn out.
The public is required to submit comments on the draft bill by May 31 2020.
• Adderley is partner at Webber Wentzel.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER