Summary of draft PPPFA Regulations

Significant changes are proposed to the Government procurement process under the Gazette no 40067 published for comment on 14 June by the National Treasury.

Briefly the changes, that affect all levels of Government and state owned entities, are as follows:

For goods and services up to R100m, after functionality of the proposed solution has been confirmed, an 80/20 formula applies to select the winning bid.  80% of the score relates to price and 20% relates to the BEE level of the tenderer.   BEE Levels are to be applied as follows:

Table1

 

 

 

 

 

 

Under the current PPPFA regulations, this 80/20 formula applies to contracts from R30k – R1m.

For goods and services over R100m, after functionality of the proposed solution has been confirmed, a 90/10 formula applies to select the winning bid.  90% of the score relates to price and 10% relates to the BEE level of the tenderer.   BEE Levels are to be applied as follows:

table2

 

 

 

 

 

 

A formula is given to convert the price of the tender to a number of points out of 80 or 90 as above and the BEE points are added and rounded off to 2 decimal places. The contract must be awarded to the tenderer with the highest number of points.

The tenderer must provide proof of their BEE level.  A trust, unincorporated JV or consortium can qualify as if it were a legal entity but must provide proof of its BEE level.

Objective criteria can be set in the tender documents that can be pre-qualifying criteria or can result in awards to tenderers not scoring the highest points.  Examples given are:

  1. A minimum BEE level
  1. 30% of the contract being given to:
  • EMEs or QSEs owned by Black people, Black females, Black disabled people or Black youth (people of 14 – 35).
  • Local Co-operatives
  • Enterprises conducting their business in local townships or rural areas
  1. Economic projections regarding the capacity of the tenderer
  1. Professional timescale projections
  1. Lead times

Where a contract is awarded to a tenderer that did not score the highest number of points the organ of state has to report the fact to the National Treasury providing reasons.

Controversially we would think, where a contract is being awarded for more than R30m the tenderer must sub-contract a minimum of 30% of the contract to one or more:

  1. EMEs or QSEs owned by Black people, Black females, Black disabled people or Black youth.
  1. EMEs or QSEs.
  1. Small businesses.

Where designated sectors are involved, the tender document must stipulate that only locally produced or manufactured goods meeting the stipulated minimum threshold will be considered.

Remedies for tenderers supplying false information include termination of the contract, claims for damages and prohibition from doing business with the Government for 10 years.

Comment:

  1. This supersedes the controversial draft gazette issued by Nhlanhla Nene in July 2015 that suggested that for Government tenders of R10m and below a 50/50 formula would apply based on price and specific BEE factors.
  1. The value of a BEE level has increased for contracts from R1m to R100m.
  1. The provisions regarding sub-contracting seem mandatory.
  1. This Gazette reflects the Government’s stated intention of purchasing more from small black owned businesses.
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