How Does the Preference Point System Work in South African Tenders?

One of the questions businesses ask most often when bidding for government contracts is:

“How does the Preference Point System work?”

Many people assume that the lowest-priced bidder automatically wins a tender. In reality, government tenders are evaluated using a preference points system that considers both price and Broad-Based Black Economic Empowerment (B-BBEE), provided the bidder first meets all the mandatory compliance and technical requirements.

Understanding how this system works can help you price your tender more competitively and improve your chances of being awarded a contract.

What Is the Preference Point System?

The Preference Point System is used by organs of state when evaluating most tenders. It provides a fair and transparent method of comparing bidders by allocating points for:

• Price
• B-BBEE status level

The bidder with the highest total score is generally recommended for the award.

It is important to remember that points are only calculated after a bidder has met the minimum administrative, compliance and technical requirements of the tender.

The 80/20 Preference Point System

The 80/20 system is generally used for lower-value tenders.

Under this system:

• 80 points are allocated for price.
• 20 points are allocated for B-BBEE status level.

This means that while offering a competitive price is important, a strong B-BBEE status can make a significant difference when bidders have similar pricing.

The 90/10 Preference Point System

Higher-value tenders are generally evaluated using the 90/10 system.

Under this system:

• 90 points are allocated for price.
• 10 points are allocated for B-BBEE status level.

Because price carries more weight, submitting a realistic and competitive quotation becomes even more important.

Does the Lowest Price Always Win?

No.

A common misconception is that simply submitting the cheapest price guarantees success.

Before price or preference points are even considered, the contracting authority will usually evaluate whether:

• All compulsory documents were submitted.
• Mandatory requirements have been met.
• Technical specifications have been complied with.
• Functionality or quality requirements have been achieved (where applicable).

A bidder who fails any mandatory requirement may be disqualified before preference points are calculated.

How Is the Winning Bidder Selected?

Once all compliant bids have been evaluated, each qualifying bidder receives points for price and B-BBEE status.

The bidder with the highest combined score is normally recommended for appointment, provided there are no other valid reasons preventing the award.

This approach aims to ensure that government procurement remains competitive while also supporting South Africa’s transformation objectives.

Why Pricing Matters

One of the biggest mistakes businesses make is pricing their tenders too high in an attempt to maximise profit.

While you should always submit a sustainable and realistic price, being significantly more expensive than your competitors can reduce your price score and make it difficult to compete, even if you have a favourable B-BBEE level.

At the same time, pricing too low simply to win a contract can create financial difficulties during project delivery.

Successful tender pricing requires careful planning and a clear understanding of the evaluation process.

Understanding the Evaluation Criteria

The Preference Point System is only one part of the overall evaluation process.

Many tenders also include:

• Functionality or quality assessments.
• Mandatory experience requirements.
• Financial capability.
• Professional registrations.
• Technical capacity.
• Local content requirements (where applicable).
• Mandatory site or briefing meetings.

Understanding how all these elements fit together is essential if you want to submit a competitive tender.

Learn How Tender Evaluations Really Work

Many businesses lose tenders not because they offer poor products or services, but because they misunderstand how tenders are evaluated.

At HowToTender, our practical workshops and webinars explain the complete tender evaluation process in plain language. We show delegates how preference points are calculated, how evaluators assess submissions, how to avoid common compliance mistakes, and how to prepare competitive, professional tender responses.

Training is presented by Werner van Rooyen, founder of HowToTender and one of South Africa’s leading tender specialists. With years of practical experience in tender consulting, procurement compliance and B-BBEE, Werner has helped thousands of businesses understand the tender process and improve their chances of success.

Whether you’re new to tendering or looking to increase your success rate, understanding the Preference Point System is one of the most valuable investments you can make before submitting your next bid.