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On 4 November 2022, finance minister Enoch Godongwana announced the new Preferential Procurement Rules, 2022, which will come into effect on 16 January 2023.
This has been misrepresented by some media reports that allow Government Enterprises to ‘do away with BEE’. This is not correct.
Minister Godongwana responded strongly to these reports justifying the continued application of B-BBEE criteria in government contracts.
The Minister of Finance was given 12 months to draft new laws related to the Preference Funds Framework Act (PPPFA) after the Court of Appeal declared the 2017 Act unconstitutional.
The 2022 Regulations mostly duplicate the wording found in the enabling legislation, the PPPFA, and eliminate most of the additional concepts found in the 2017 Regulations.
However, the 2022 Regulations will continue to require government agencies to use an ’80/20′ or ’90/10′ award method for Price/Preference Awards in each government bid.
The South African market is familiar with the 80/20 or 90/10 grading system, where the 90/10 allocation must be used for bids over R50 million. These requests must be based on 90% of the available points to determine the price, because the lowest price is about 90/90.
The remaining marks in the score will be earned by candidates based on ‘Preference Points’. The highest scorer should be awarded flexibility, unless other objective criteria warrant a different award.
A change introduced with the 2022 Rules, even under the 2017 Rules, the 10 or 20 Preference Points can only be distributed based on the B-BBEE Contribution Level or the applicant’s account at Under the B-BBEE Code, the 2022 regulations require each government body to set ‘specific objectives’ that will be awarded in the best procurement policy and apply this to each application. .
These ‘special objectives’ are called ‘contracting with people from categories of people who have suffered in the past due to direct discrimination on the basis of race, gender and disability as well as the implementation of the programs of the Reform and Development Programme’. This text is copied from the PPPFA.
A government body can freely decide that the ‘specific targets’ it will use are the B-BBEE Contribution Level or the applicant’s score under the B-BBEE Codes. Generally, a government agency can set specific goals for a subcontract with certain individuals or entities that have a history of problems.
What the 2022 Regulations do not allow is the use of criteria based on ‘special objectives’ for more than 10/20 points in the final review.
In other words, “specific objectives” should not be exclusion criteria or qualification criteria. The introduction of the obligation that 30% of the government’s requests be made to vulnerable groups the first complaint in Afribusiness case because the 2017 Acts were set aside by the Constitutional Court.
Generally, the B-BBEE Act and the B-BBEE Contribution Level or an applicant’s account under the relevant B-BBEE Codes will remain the main criteria for the implementation of the ‘specific objectives’ by government agencies.
The B-BBEE Act 2003 was enacted to provide a framework for B-BBEE. Section 10 of the B-BBEE Act provides that all government organs and public enterprises must be requested best practices related to the provisions of this Act for developing and implementing its best procurement policy.
Therefore, policies were developed under the 2022 Regulations that deviate from the provisions for measurement of B-BBEE as established in the B-BBEE Act and Codes, will fall in breach of this provision.
The 2022 Regulations, however, will change many of the current aspects of public procurement that are not related to B-BBEE that were included in the regulations published under the PPPFA.
Matters such as performance evaluation, pre-qualification criteria, local production and content, sub-contracting, rejection of bids and blacklisting are dealt with in the Regulations. 2017 has been omitted from the 2022 Rules.
These issues are not directly related to the procurement of required items and are generally considered to be outside of the PPPFA warranty framework; but, to this day, it has been organized under these conditions.
These issues should be covered in the Public Procurement Bill, which is meant to regulate procurement by government bodies. The Minister of Finance indicated in his Budget Speech for 2022 SONA the Public Procurement Bill, which will be tabled in Parliament this Parliamentary year.
This time frame has been pushed out.
President Ramaphosa, during his response to the Government Capture Commission’s recommendations, called for the Public Procurement Bill to be completed and presented to Parliament by March 2023. This time it was approved by Minister Godongwana on 8 November 2022, who also said he hoped. the bill will be passed in 2023.
We can assume that, at this time, these general procurement issues previously identified in the 2017 Procurement Regulations will be resolved by the National Treasury under the Public Finance Management Act through circulars and guidelines .
President Ramaphosa reiterated this in his response to the Government Capture Commission recommendations, particularly the blacklisting of suppliers.
However, there will be room for many of these issues pending the completion of the Public Procurement Bill, and significant changes are expected in the portion of government contracts next year. recently..
By Clinton Mphahlele and Claire Tucker at law firm, Bowmans. Read the original article here.
Read: Government explains major changes to BEE laws in South Africa
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