“Our company is heavily reliant on government tenders for work. There have been rumours about government intending to introduce new legislation that will change the tendering environment. Can you shed any light on these rumours?”

You are right in that Government is indeed considering an overhaul of the current public procurement regime. To this end National Treasury published a Draft Public Procurement Bill (“the Bill”) on 19 February 2020 for public comment until 31 May 2020. 

On a reading of the Bill, it appears that one of the objectives of the Bill is to ensure that Government utilises procurement, to advance economic opportunities for previously disadvantaged people, women, youth, people with disabilities as well as small businesses, whilst also promoting local production. Other objectives include providing for procurement that is developmental, ensuring effective use of public funds, expanding the economy and encouraging investment and competition and the use of technology in the procurement process. Furthermore, the Bill aims to incorporate categories of preference in the allocation of tenders as well as to protect categories of persons who have been disadvantaged by unfair discrimination.

The Bill aims to do this by simplifying procurement processes and creating a single unified regulatory framework for public procurement to so eliminate the fragmented procurement environment that is currently the default position with public tendering. 

To do so the Bill aims to repeal the Preferential Procurement Policy Framework Act which currently regulates government tenders, and with such repeal also the preference points system currently being applied. The preference point system applying an 80/20-point system for tenders up to a value of R50 million and a 90/10-point system for tenders exceeding R50 million, is proposed to be replaced by the Minister who must prescribe a framework which includes a preference point system and applicable thresholds. 

The Bill will further enable the Minister of Finance to prescribe a framework for public procurement, which framework will incorporate the provisions of the Broad-Based-Black Economic Empowerment Act. In its present form the Bill does not however provide an indication on how such a preference point system will be constructed or what constraints will be applied, leaving uncertainty on how this framework will be applied. 

The Bill also requires the Minister to put measures in place to reserve certain contracts for limited categories of persons or businesses that will be allowed to bid for a specific tender. Among other things the Minister must also include measures for the advancement of small, medium and micro enterprises. 

The Bill proposes to establish a Public Procurement Regulator within the National Treasury. The functions of this Public Procurement Regulator will include among other things, to ensure that institutions comply with the act, revise and provide guidance on the procurement system, and promote and ensure the integrity of the public procurement system.

Although a great deal of water still needs to run into the sea before the draft Bill is passed, it should be noted that Government is intent on changing the current public procurement regime, and businesses reliant on government tender work would be well advised to closely monitor developments in relation to the draft Bill.