Government’s new Tendering Rules to become effective soon.

23-01-2017
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Gerrit Davids
Source

National Treasury has promulgated the new Preferential Procurement Policy Framework Act (PPPFA) Regulations last Friday and it will now make all tenders ‘unacceptable’ if they do not comply with these changed stipulations.

According to Gerrit Davids, Lead Advisor at tender advisory consultancy, TaranisCo Advisory CC, "the new Regulations from the outset grants an organ of state the authority to stipulate a ‘Preferred Minimum BBBEE Level’ in a tender, which will exclude certain companies with a lower BBBEE Level from submitting bids".

The Regulations also allow the state to include another wide-ranging Sub-Contracting stipulation, which could force principle bidders to make use of up to 8 x different types of sub-contractors under the ‘Pre-Qualification Criteria’. A failure to do so will also have the bid being declared ‘unacceptable’. The value of the 80:20 and the 90:10 Preference Point Systems has also been increased to below and above R50m respectively. However, it retains the current scoring of points for Price alongside that of BBBEE in tenders.

Additionally, the new Regulations also place a 25% maximum on Sub-Contracting, which is done in the ordinary course of business with companies having a lower BBBEE level than that of the principle bidder. A failure to comply with this stipulation will also cause tenders to be disqualified from consideration.

Davids says, that the Regulations are also introducing a new approach to pricing where a bidder scores the highest points in a tender but its price is not market related and refuses to adjust it to be in-line with market related prices, the organ of state will have the right not to award the tender to such a bidder and it may even decide to cancel it.

Davids also points out that the much debated stipulation of compulsory Sub-Contracting of 30% for all tenders above R30m in value will also be allowed 'where feasible' to advance any one or more of the ‘designated groups’ as defined by these new Regulations.

Another new inclusion to the Regulations is that of making it obligatory for organ of states issuing tenders to make available a list of potential sub-contractors that qualify under the definition of ‘designated groups’ and such a list must be subject to approval by National Treasury. According to Davids, “the biggest challenge will be to find the right ‘designated' sub-contractors and to make sure that they are registered on the Central Supplier Database (CSD), since it’s the only list approved by National Treasury".

"Your existing sub-contractors, even if they do qualify under the scope of these ‘designated groups’, they will also have to register on the CSD, even if they themselves do not tender for state contracts, otherwise you won’t be able to make use of them in your tender.Davids says, that its also important to note that even if you do manage to get them to register on the CSD and if at the time of your tender, any of their details are not verified, it will also makes your tender ‘unacceptable’ until they have updated their ‘un-verified details’.

However, if any of your existing sub-contractors do not qualify under this ’designated groups’ status, it would mean that you won’t be able to make use of them in a tender. It will then force bidders to facilitate joint ventures between 'designated groups’ sub-contractors and that of their own. Another key regulation stipulates that sub-contracting can only be done with the permission of the organ of state after a tender has been awarded. A 10% penalty of the total value of the contract may be imposed where the correct sub-contracting procedures were not followed and a ban on doing business with the state for 10 years could also be imposed by National Treasury under these new Regulations.

The Regulations will come into effect on 1 April 2017 giving tenderers less than 3 months to prepare for its impact.

Davids says, “The meaning and understanding of the concept of ‘being proactive’ becomes a very relevant application with this new dispensation. Tenderers will be left behind if they do not make the required changes in the way they submit government tenders, especially in relation to sub- contracting".