Procurement policy will hamstring delivery of R500bn Covid-19 stimulus
Draft bill fails to deal with many core issues that bedevil process
Unless more accountability, transparency and fairness is brought into SA’s procurement policy, or it is scrapped in its current form, the delivery of the R500bn Covid-19 economic stimulus will be severely undermined.
About R230bn of the stimulus package will involve direct financial transactions by government departments and entities. Though the Treasury gazetted the draft Public Procurement Bill in February to establish a single regulatory framework for procurement applicable to national, provincial and local government as well as state-owned entities, the bill does not deal with many of the core issues that bedevil public procurement.
Section 217 of the constitution says public procurement must be fair, equitable, transparent, competitive and cost-effective. However, many procurement statutes and regulations are contradictory, confusing and open to widely different interpretations. The laws, rules and guidelines are often not understood, are manipulated or simply not implemented.
The Preferential Procurement Policy Framework Act has the widest coverage regarding public procurement, allowing for preferential procurement for “persons, categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender or disability” and “implementing the programmes of the Reconstruction & Development Programme”.
The Treasury has put together preferential procurement regulations, which include minimum competencies for supply chain management staff, requirements to report on their procurement functions and ethical conduct. However, the regulations apply only to entities governed by the Public Finance Management Act, which means many national and provincial entities are not covered.
There is little transparency in bidding processes, and tender awards are often not published so they can be challenged
There are also many cases in which different national departments have joint oversight over aspects of procurement, diluting the effectiveness of oversight. At municipal level, the Treasury exercises its power with the department of co-operative governance and traditional affairs.
The Municipal Finance Management Act regulates procurement at municipal level and gives municipalities wide scope to come up with their own procurement rules. The Treasury has also issued regulations for municipal procurement, called the municipal supply chain management regulations, but in terms of the act these are only guidelines and come into force only if the council of a municipality adopts them.
Across public sector supply chains, especially at municipal level, a committee system is used to oversee public procurement when there is competitive bidding. The governance of these tender committees is a particular problem. In many cases members lack competence and the committees are often manipulated to give tenders to preferred bidders.
There is little transparency in bidding processes, and tender awards are often not published so they can be challenged. Nor are the reasons given for decisions, and the provision that public entities can deviate from competitive bidding during emergencies has frequently been used for corrupt purposes.
Parallel apartheid-era institutions and laws also still cause confusion. The State Tender Board Act, the law that governed the centralised State Tender Board that oversaw procurement during the apartheid era, is still law. It is not in use, but it remains as a parallel law. The National Supplies Procurement Act, which authorises the department of trade & industry to procure outside existing legislation if it is “necessary or expedient for the security of the republic” is another apartheid-era procurement law that is still in force.
The Corruption and Combating of Corrupt Activities Act prescribes that the Treasury set up a register of tender defaulters, and that when people are found guilty of procurement irregularities they be barred from bidding for government contracts until government has been repaid. This rarely happens.
Mired in red tape
In 2012 the government established the office of the Chief Procurement Officer as part of significant reforms intended to monitor procurement compliance, but the office has little independent institutional power. As there is no regulatory authority for public procurement, weak democratic oversight and little accountability, incompetence, waste and corruption remain rife and there are few avenues to take to task entities that do not follow procurement rules.
Some national and provincial entities have internal appeal processes, but these are often mired in red tape. Citizens, whistle-blowers and losing bidders can report irregularities to the Treasury and auditor-general, and the public protector can be asked to investigate. But bidders who believe they have lost out unfairly have increasingly sought relief in the courts. As public procurement is deemed administrative action, the Promotion of Administrative Justice Act applies that allows any individual to approach the high court to review a procurement decision.
At municipal level, the Municipal Finance Management Act provides for internal appeals. However, these are inadequate at best. Bidders cannot appeal unless they go through a laborious internal administrative process.
In strict terms, appeals can only review the processes followed by officials, not the merit of the decision. As corrupt officials often follow the “correct” bid processes but manipulate them, there is little recourse for a losing bidder.
Value for money
BEE provisions in procurement regulations are also widely abused to give contracts to family, friends and political allies — and to channel funds to the ANC at local, provincial and national level. Former Passenger Rail Agency of SA (Prasa) chair Popo Molefe has alleged in court papers that the supplier of Prasa’s Afro 4,000 locomotives insisted that 10% of the tender’s value be paid to the ANC. The governing party even has an investment arm that tenders for government contracts.
The Public Finance Management Act requirement that a point-scoring system be used for tenders exceeding R500,000, with 90% of the points awarded based on price, is meaningless. Suppliers often give low prices with no capacity to deliver, or deliver poor quality products or services. Government officials often assume the lowest-priced tender must be the most cost-effective, rather than emphasising value for money, efficiency and timely delivery.
Local-content requirements are also manipulated by unscrupulous tenderpreneurs fronting for foreign companies and claiming imports as locally manufactured. The Treasury, with the DTI, set criteria for local content, but this dual responsibility often weakens oversight.
The procurement rules allowing for closed bidding, a deviation from competitive bidding, in emergencies or where there is only one supplier available, has been abused for corrupt purposes and should be tightened. Political parties should be banned from having companies that bid for government contracts.
Civil society, the media and the public should be involved to oversee tender awards. Tender bid committee processes should be public.
Individuals and companies found guilty of procurement irregularities should be banned from tendering for government contracts. They should be publicly named, especially those that have secured Covid-19 tenders corruptly.
The chief procurement officer should be turned into a regulator, reporting directly to parliament and with both the ability to investigate procurement irregularities and enforcement powers.
• Gumede is associate professor at the Wits University School of Governance and author of Restless Nation: Making Sense of Troubled Times.
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