The National Treasury has provided insight into some of the legislative changes that have been proposed in the long-awaited Public Procurement Bill, which is expected to be officially tabled before Parliament in the coming weeks.
In a presentation to Parliament’s Standing Committee on Finance – cut short when it emerged that the Bill was still awaiting certification by the Office of the Chief State Law Adviser – acting director-general Ismail Momoniat said the changes were designed to address the fact that the current public procurement system was not only prone to corruption but was also failing to deliver services efficiently and effectively.
“The public procurement system is not working,” he said bluntly, while also stressing that the proposed legislation would only provide a framework for modernisation, with the actual changes to the system, including how preferential procurement would be implemented across all spheres of government, depending largely on subsequent regulations.
Currently, preferential procurement, which seeks to use procurement as an instrument of socioeconomic transformation by supporting individuals and groups that faced exclusion and discrimination under apartheid, is being governed by ‘stop gap’ regulations that came into effect on January 16.
The regulations were introduced following a February 2022 Constitutional Court judgment, ruling that the Finance Minister had exceeded his powers by prescribing procurement rules to organs of State. This meant that the 2017 regulations under the Preferential Procurement Policy Framework Act were found to have fallen foul of with Section 217 of the Constitution.
The Public Procurement Bill is expected to play a role in remedying this contravention, while also providing the basis for several other reforms aimed at improving transparency, decreasing the propensity for corruption, making greater use of automation and introducing differentiation in the ways various goods and services are procured.
Value for money receives priority in the Bill, which currently comprises seven chapters, with the proposed legislation defining value for money as the primary objective of public procurement, with socioeconomic objectives to be pursued as secondary objectives.
In line with the Constitutional Court ruling, public institutions will be expected to create their own procurement policies, using the parameters outlined in the legislation for the allocation of contracts and the protection or advancement of categories of people disadvantaged by unfair discrimination.
Importantly, the proposed legislation departs from the ‘one-size-fits-all’ approach by introducing differentiated procurement systems, whereby distinction is made between the routine procurement of goods and services by a public entity or department as opposed to the procurement of infrastructure and capital assets.
Chapter 5 stipulates that the Minister must prescribe a procurement system for infrastructure and capital goods, as well as the goods and services related to it.
The National Treasury indicates that these prescriptions will be outlined in regulations and will cover social infrastructure such as schools and clinics, as well as mega-projects and network infrastructure.
The Bill also seeks to institutionalise so-called ‘strategic procurement’, which is defined as a shift from “transactional buying to commercial decision making”, which could imply that competitive bidding will not always be the default method of procurement.
It also introduces greater flexibility with regards to the thresholds that can be used when evaluating tenders, which have hitherto been limited to either an 80/20 or 90/10 preference point system, where the weighting given to pricing in the adjudication is either 80% or 90%.
The National Treasury says the choice of the preference points system will depend on what the institution is seeking to promote, and institutions are also empowered to have more than once preference point system.
In other words, the Bill proposes that such systems be customised, while still advising that the price element remain above a 50% threshold.
The Bill will allow for so-called set-asides to give preference, for instance, to black people, women, youth, people with disabilities, cooperatives, township or rural firms, as well as to the procurement of local goods and services.
Momoniat told lawmakers that the draft Bill formed part of a broader procurement modernisation process that envisages a “more strategic, differential and flexible approach, built on technology and big data”.
“The Bill lays the framework for a better and more modern procurement system, but does not provide all the answers,” he said.
The Bill had been consulted in the National Economic Development and Labour Council and has been approved by Cabinet for tabling in Parliament.
Momoniat believes certification by the Office of the Chief State Law Adviser to be imminent and expects that the Bill will be formally tabled within weeks.
Nevertheless, several lawmakers expressed displeasure at having received a briefing only on a draft Bill rather than one that had been certified and tabled.