13 Feb Unpacked (Preferential Procurement Policy Framework Act)
The South African tender process can be rather confusing to business owners looking to procure state tenders. The amended Preferential Procurement Policy Framework Act of 2000 (PPPFA) has been aligned with the socio-economic goals laid out by the Constitution regarding Broad-Based Black Economic Empowerment. In order to maximise the chances of a tender being awarded to a company, it is vital that business owners pay close attention to their BBBEE scorecards – as well as the scorecards of their suppliers! Let’s unpack the PPPFA…
What is Preferential Procurement?
Derived from the Preferential Procurement Policy Framework Act and its regulations, preferential procurement is a system where government tenders are awarded on a prescribed point system where preference is given to historically disadvantaged individuals. Before, tenders were awarded to the organisation that quoted the best price and who were in line with government specification for the job. Preferential procurement encourages transformation throughout the entire economy, while encouraging procurement of locally produced goods and services.
Why the Act was Amended
Owing to the fact that the Preferential Procurement Policy Framework Act of 2000, with its regulations promulgated a year later, were constitutionalised before the Broad-Based Black Economic Empowerment Act of 2003 came into effect – the South African Department of Finance in 2011 finalised and promulgated new regulations to the PPPFA, as well as amending it so as to have greater consistency between the Act and its regulations. The Act allows government to evaluate tender submissions according to certain criteria based on a 100 point system – where 90 points are allocated to the price of the submission, and 10 points allocated to the categories of preference based on the Constitution. Any contracts valued at below R1 million take on a different point system, where 80 points are allocated to the price and 20 points to the transformation criteria.
B-BBEE and the Preferential Procurement Act
In a nutshell, the Preferential Procurement Act of 2000 stipulates that state tenders be granted to companies that are as BEE compliant as possible. This takes into account the BEE status of suppliers, as well as whether or not materials are sourced locally. When tender bids are submitted, companies tendering need to submit a certificate calculated in accordance with a scorecard set under the Codes of Good Practice. The certificate presents the bidding organisation’s BEE score, as well as their score out of 10 or 20 (depending on the contract value) based on the transformation criteria. This amendment to the Act and its accompanying regulations has taken much subjectivity out of the selection process, and presents a clear yardstick for all to be measured by. This means that no matter who gets awarded a tender, the greater objectives of B-BBEE are being supported.
Procure Tenders with Experienced BEE Professionals
While the Preferential Procurement Policy Framework Act might be a lot to wrap your head around, the dedicated BEE professionals at SAB&T have made it their business to know the Act. We are ready to assist any organisations looking to land state tenders with sound BEE advice and the correct steps to take in order to maximise their procurement chances!