Public procurement processes in South Africa have long been in need of an update. After 24 years under the current legal framework, the courts have developed a rich body of case law as government departments and state-owned enterprises have contracted for goods and services with mixed success and serious failures. Fundamental lessons have been learned.
The latest iteration of the Public Procurement Bill B18B-2023 (the “Bill”) was passed by the National Assembly on 6 December 2023. The Bill is aimed at regulating public procurement by introducing a single regulatory framework for procurement for national and provincial government departments, municipalities, as well as constitutional institutions and state-owned enterprises (“SOEs”).
The Bill aims to consolidate legislation regulating procurement, including the Preferential Procurement Policy Framework Act, 2000 as well as the procurement-related provisions in the Public Finance Management Act, 1999, the Local Government: Municipal Finance Management Act, 2003, the Broad-based Black Economic Empowerment Act, 2003, and the Prevention and Combating of Corrupt Activities Act, 2004.
Once the Bill comes into effect, all procuring institutions must conduct their procurement processes in accordance with its requirements. In this article, we highlight the salient reforms introduced by the Bill.
Among the most significant changes brought about by the Bill is the establishment of the Public Procurement Office (the “PPO”), to be established within the National Treasury. The PPO’s powers are extensive and include the power to issue binding instructions and non-binding guidelines on any procurement matter, measures to promote integrity in procurement, measures to promote transparency and to promote standardisation in procurement. Although the introduction of a body dedicated to overseeing the procurement activities of organs of the state is a welcome development, it is questionable whether the PPO’s power to issue guidelines and instructions solves the issues created by the multiplicity of legal instruments currently regulating procurement. Critics of the Bill have also questioned whether the PPO should be housed within the National Treasury, as this may create doubts about its independence, particularly because the National Treasury is also a procuring institution.
Also notable is Chapter 4 of the Bill, the bulk of which was introduced late in the parliamentary process and has not been subjected to a public comment period. Chapter 4 creates a prescriptive framework within which organs of state must provide for preferential procurement.
The following additions and changes have been introduced:
It appears from Chapter 4 that the intention is for procuring institutions to apply the mechanisms described above; set-asides, prequalifying criteria, subcontracting and local content, and only if those are not applicable, to apply a system of preferences.
Chapter 4 of the Bill also provides that procuring institutions must advance sustainable development in procurement, and introduce measures to advance the creation of jobs, intensification of labour absorption, beneficiation and the development of small enterprises.
In accordance with Chapter 5, the Minister of Finance is empowered to prescribe a framework within which procuring institutions must implement their procuring systems, including the type of procurement methods that must be used and the requirements and procedures to be followed for each prescribed method. Procuring institutions are also obligated to take steps to prevent corruption in procurement, and, to the extent possible, use technology in the implementation of the Bill. This degree of central control and discretion by the Minister of Finance over the full range of State institutions, without adequate guidance on the parameters within which it should be applied, is problematic. For example, there is no indication as to how the core pillars of price (or value for money), functionality (technical credentials) and preference will be measured in a bid evaluation and ultimately a determination as to the successful bidder, or if they will all count towards that decision. In addition, the Bill gives insufficient guidance as to the factors for differentiating between categories of procurement or institutions, which could create operational and organisational challenges for departments and SOEs through adopting a one-size-fits-all approach. It will therefore be necessary for regulations to address the nuances in the operations and functions of organs of state.
Another contentious provision is a limitation to the effect that all bids must be in South African currency. It is not stated whether contracts concluded pursuant to these bids must also be Rand-based.
The Bill is still to be debated and passed at the National Council of Provinces (“NCOP”) in early 2024 and will need to be debated in each of the nine provincial legislatures. Any further amendments made by the NCOP could require further deliberation by the NA. For now, organs of state are bound by the existing procurement legislation and must ensure that all procurement activity is undertaken in a manner that complies with the constitutional procurement principles.
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Read the original publication at ENSafrica.