Preferential Procurement and Tenders

Government departments have been forced to comply with the Codes of Good Practice from 7 December 2011, when evaluating tenders for government business.  The new regulations require that all tenders be accompanied by a valid B-BBEE certificate, issued by an accredited verification agency.

Applicability

The regulations require organs of state, public entities and government business enterprises to consider the submitted B-BBEE status of tenderers in awarding contracts for government business.   The new process of evaluation retains the principle of evaluating tenders on the basis of functionality and local content, and now includes an 80/20 or 90/10 approach to awarding points for price and the tenderer’s B-BBEE compliance level.

Evaluation

Tenders are evaluated in 2 stages, first on Functionality and Local Content, then on Price and B-BBEE Status.  If a tender meets the requirements for functionality and local content, then points are allocated for achievement in price and B-BBEE with price counting 80% and B-BBEE compliance 20%.  For tenders above R1 000 000, price counts 90% and B-BBEE 10%.

Price points are allocated by considering the differential between the tender price and the lowest tender price submitted.  The lower the price the more points are allocated to the tender.

B-BBEE points are then awarded on the basis of the B-BBEE Status Level of the tenderer.

B-BBEE Status Level
of the Contributor
Number of Points
(Tenders below R1m)
Number of Points
(Tenders above R1m)
1 20 10
2 18 9
3 16 8
4 12 5
5 8 4
6 6 3
7 4 2
8 2 1
Non-Compliant
Contributor
0 0

In the event that two or more tenders have scored equal points, the successful tender must be the one scoring the highest number of preference points for B-BBEE.

Proof

A tenderer must submit their original (or certified copy) valid B-BBEE status level verification certificate substantiating their B-BBEE rating.  Exempt Micro Enterprises (EME’s) must submit a certificate issued be a registered auditor, accounting officer, or an accredited verification agency.

Fraud / Fronting

Where the B-BBEE status level claimed has been found to be claimed or obtained on a fraudulent basis, the organ of state may disqualify the tender, claim costs and damages, cancel the contract, restrict future business, and institute criminal proceedings against the tenderer.

Subcontracting

Limitations are placed on subcontracting of services, where the value of subcontracted services exceeds 25%.  In such instances, the organ of state may not award points for B-BBEE status if the subcontractor does not qualify for at least the same points as the principal tenderer.  The organ of state may also not award the contract if the subcontractor does not have an equal or higher B-BBEE status level than the principal tenderer.

These limitations do not apply where the subcontractor is an EME that has the capability and ability to execute the subcontract.  It follows that the subcontractor would also have to produce a B-BBEE certificate.

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