Treasury overhauls preferential procurement provisions in bill

The National Treasury has fundamentally revised the chapter on preferential procurement in the Public Procurement Bill to make more specific how procuring institutions must apply the policy. 

The bill as tabled in parliament just outlined a broad preferential procurement framework that provided for preference points, who should benefit from the preferences, set-asides and subcontracting.

The revised bill presented to parliament’s finance committee on Friday by National Treasury chief director Willie Mathebula specifies who can benefit from set-asides and how it must be assessed, as well as stipulating prequalification criteria to promote preferences. 

The revised bill also details the preference point system with 10, 20, 30 or 40 points being allocated for preferences depending on the rand value of the contracts with the rest being allocated for price. The original bill did not go into this detail.

The revised bill specifies which small enterprises qualify for subcontracting and has a large section on the designation of sectors for local production and local content that was absent in the original bill. 

Professor Geo Quinot of Stellenbosch University’s African Procurement Law Unit said in his commentary on the revised bill during the committee proceedings that the revised chapter goes beyond simply laying down a framework as required by the constitution and instead lays down a set of rules. These rules, said Quinot, are inadequate. 

“We note with great alarm that these provisions (relating to empowerment) are effectively a cut-and-paste of the PPPFA [Public Procurement Policy Framework Act] and the 2017 preferential procurement regulations. It is exactly those provisions that led us to this law reform that we are engaging in.” 

Point system

He said this would result in a repeat of the struggles and challenges of the past 23 years and the many court cases which undermined the use of procurement for empowerment purposes.

Quinot said in an interview after the meeting that the details of the preferential procurement policy such as the point system should be left to regulations made by the minister of finance.

Mathebula said it is up to parliament to decide how loose or tight the framework should be — how much discretion should be given to organs of state to develop their own policies or depart from the national policy. 

Quinot also noted contradictions and a lack of clarity in the proposed rules. 

Stakeholders who commented on the revised bill expressed concern at what they said is the watering down of provisions related to integrity and transparency. 

Cosatu spokesperson Simon Eppel noted that changes introduced by the Treasury watered down the restrictions on political interference. The revised bill removes political leaders and family members as excluded people from state contracts as they were in the original bill. 

Eppel was concerned that the powers of debarment of suppliers from state contracting have been decentralised to procuring institutions and urged that the local content designation should be made a prequalification criterion for all state contracts. 

Mathebula justified the removal of the automatic exclusion of leaders of political parties and family members from submitting bids saying that the normal process of due diligence and declaration of interest should occur. 

He said the value-for-money requirement of state procurement in the bill has been replaced by “efficient, effective and economic use of resources” to align it with the wording of the constitution.

The Treasury did not accede to stakeholders’ concerns about the location of the Public Procurement Office in National Treasury on the grounds that this would undermine its independence. It also did not agree with the view that bidders should have direct access to the courts saying that they should first exhaust internal dispute resolution mechanisms. 

ensorl@businesslive.co.za