Is sub-contracting something of the past?

By Werner van Rooyen, Director of HowToTender (Pty) Ltd which specializes in tender consulting and tender training.

Background:

In 2020 AFRI business took the Minister of Finance to court to challenge the Preferential Procurement Regulations 2017 (PPR 2017), specifically Regulations 4 and 9. These two Regulations, when applied by Organs of State, forced bidders to subcontract at least 30% of the value of a tender to certain Designated Groups. AFRI Business reasoned that these two Regulations was unfair and in contravention of the Constitution of South Africa Paragraph 217.

The Minister of Finance had to amend the Procurement Regulations by 16 February 2023. The Preferential Procurement Regulations 2022 was published on 4 November 2022 and took effect on 16 January 2023.

The new Preferential Procurement Regulations 2022:

The Preferential Procurement Regulations 2022 has completely done away with sub-contracting requirements as per Regulation 4 and 9 of the Preferential Procurement Regulations 2017. The Preferential Procurement Regulations 2022 only addresses which Preferential Points System must be used in evaluating tenders either the

·         80/20 Preference Point System for tenders with a value of more than R30,000-00 but not exceeding R50 million (all taxes included) or the

·         90/10 Preference Point System for tenders with a value exceeding R50 million (all taxes included).

The Preferential Procurement Regulations 2022 uses the original phrase from the Preferential Procurement Policy Framework Act (PPPFA) (Act 5 of 2000) which is “specific goal” to describe the 20 or 10 points available on the abovementioned points systems. The 80 or 90 points available remains the same and these are the points bidders can score for their price. Instead of B-BBEE counting 20 or 10 points (or a portion there of), the “specific goal” set by the Organ of State issuing the tender will count towards the 20 or 10 points (or a portion there of).

The question is: What could these specific goals be that you, the bidder, will have to achieve?

This question arises every time the phrase “specific goals” is mentioned. All indications suggests that B-BBEE, sub-contracting, functionality and Local Content requirements will all be re-classified as specific goals. All these requirements were addressed separately in the 2017 Preferential Procurement Regulations, but none is addressed in the 2022 Regulations. It must be stated that the Minister of Finance said the Preferential Procurement Regulations 2022 is only a “place holder” for Preferential Procurement Regulations that will be implemented together with the new Procurement Act later in 2023.

The next step?

The Preferential Procurement Regulations 2022 have been implemented on 16 January 2023. Be prepared by attending our training sessions. We will address all the new Preferential Procurement Regulations 2022 and show the differences between the old and the new Regulations.

To learn more about this and other tender conditions attend our “Become a Tender Expert” 2-Day webinars online or live workshops presented in Johannesburg and various other cities throughout South Africa. Book and pay online at https://howtotender.co.za/workshops/#comprehensive

Contact us at questions@howtotender.co.za should you require more information.

You can purchase a Tender Manual (Handbook) and various other tender products on our website https://howtotender.co.za/ should you be unable to attend one of our training sessions.