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Tuesday, September 6, 2022

Confusion reigns over South African public procurement after judgment

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The February 2022 Constitutional Court docket (CC) determination dominated the Preferential Procurement Rules 2017 to be inconsistent with the Preferential Procurement Coverage Framework Act (PPPFA), upholding by a majority a November 2020 determination of the Supreme Court docket of Attraction (SCA).

The CC failed to supply readability on when the laws turned invalid from – whether or not this was from one 12 months after the SCA judgment, or from one 12 months after the CC’s judgment. Within the former case, the laws would have been invalid from November 2021; within the latter, they’d nonetheless be in impact till 15 February 2023.

On 25 February 2022 the Nationwide Treasury, having recognized that with out legitimate laws being in place there was no foundation for organs of state to have the ability to apply a desire factors system on the appropriate contract values, issued a discover to public our bodies specifying that each one tenders marketed after the date of the CC’s judgment ought to be suspended and that no additional tenders ought to be marketed.

This has resulted in widespread consternation given the impracticality of the Treasury’s moratorium within the context of crucial items and companies. The Treasury clarified in March that its discover was solely steering directed at organs of state, and advisable that an exemption from the PPPFA ought to be sought if procurement couldn’t wait.

The Nationwide Treasury has since issued draft Preferential Procurement Rules in step with the CC’s judgment, pared down considerably from the 2017 laws. These give attention to using a desire factors system and the utilization of goal standards to award contracts to a bidder who didn’t rating the very best in desire factors.

Nonetheless, there isn’t a clear timing on when the 2022 PPPFA Rules will come into impact. With this uncertainty, there have been a lot of purposes not too long ago by main public entities resembling Transnet and SANRAL to use for a full exemption from the appliance of the PPPFA, on the grounds that it’s within the public curiosity to take action.

Main state-owned enterprises (SOEs) are key to South African infrastructure tasks and the nation’s financial restoration plans, and finance minister Enoch Godongwana has already granted an exemption to move firm Transnet from making use of PPPFA provisions till there’s readability.

The exemption means Transnet, and different state-owned enterprises receiving comparable exemptions, will be capable to develop their very own bid analysis standards and scoring methods with out the constraints of the system contemplated within the new laws.

This complete framework could once more change as soon as the long-awaited Public Procurement Invoice is promulgated. This laws has been within the making for nearly a decade, and though a model of the invoice was ultimately printed for public remark in February 2020, no additional drafts have been forthcoming.

Godongwana Finance appeared earlier than a joint assembly of the Standing Committee on Appropriation, the Standing Committee on Finance, the Choose Committee on Appropriations and the Choose Committee on Finance on 25 February 2022 the place he acknowledged that, because of each the findings of the Zondo Fee on state seize and the CC’s ruling in Afribusiness, the invoice was being redrafted and should thus be additional delayed.

Sensible penalties of the CC judgment

The CC’s judgment has far-reaching sensible penalties. It appears to disregard the implications of the flexibility of enormous components of the general public sector to “decide its personal preferential procurement coverage”. It’s actually not a degree enjoying subject in relation to procurement within the public sector, with SOEs resembling Transnet and SANRAL solely too eager to be given the pliability to develop their very own preferential procurement insurance policies.

Nonetheless, that’s the exception. For many authorities departments and public entities, the rug could have been pulled from beneath their ft and the Nationwide Treasury’s palms are tied. The vast majority of authorities establishments will merely proceed to use their provide chain administration insurance policies as they stand, aligned to PPPFA and 2017 PPPFA Rules, claiming them as their very own preferential procurement insurance policies.

Different establishments could amend their provide chain administration coverage and develop a brand new, totally different coverage to go well with their necessities. The outcome shall be assorted preferential procurement approaches throughout and between authorities.

Procurement usually works higher when it’s codified right into a constant algorithm that are detailed sufficient to cater for a lot of procurement frameworks. That is finest illustrated within the plethora of EU directives issued for EU members regarding procurement, all to be utilized persistently throughout a broad vary of nations with totally different authorized methods. What has not labored properly is a ‘laissez faire’ strategy to procurement regulation.

Though properly intentioned, the CC’s judgment has set the cat among the many pigeons at a time when greater than ever the nation wants readability across the processes for state contracting. Within the interval earlier than the promulgation of the Public Procurement Invoice, it’s doubtless that public procurement shall be assorted and inconsistent.

This can be mitigated if the Treasury can gazette the brand new PPPFA Rules shortly, creating some sense of certainty for the general public sector in addition to these taking part in public tenders.

Co-written by regulatory regulation specialists Reuben Cronjé and Aliyah Ince of Pinsent Masons

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