20 May 2020 by Dispute Resolution Alert

Public Procurement Bill, 2020: Proper change or a damp firework?

Contracting with an organ of state is not easy. Firstly, because the Constitution requires an organ of state to contract for goods or services in a way that is fair, equitable, transparent, competitive and cost-effective. To achieve those exacting requirements the state must maintain a procurement system of interrelated statutes, regulations and directives. But secondly, the system has developed over time with some of the rules governing state procurement pre-dating the constitutional dispensation. The State Tender Board Act, 1968 and National Supplies Procurement Act, 1970 are notable examples. That development over time has introduced a level of unnecessary complexity.

This complex procurement system has been fertile ground for litigation over many years and the law reports are replete with cases dealing with public procurement. Litigation in this context almost invariably brings significant delays in public procurement. Those delays cost money and cause much frustration and inefficiency within the organs of state and are a significant contributor to the regular calls from our citizenry for better service delivery.

The unnecessary complexity in procurement regulation often results in confusion and that confusion has led to disputes and lots of litigation. In that context, the draft Public Procurement Bill, 2020 – published for public comment on 19 February 2020 – has been awaited with much anticipation. A single regulatory framework for public procurement is crucial and the Bill is intended to provide that and specifically to address fragmentation in the regulation of public procurement. Areas addressed by the Bill include the description of a framework for the disposal of assets and the establishment of a Public Procurement Regulator within National Treasury. The Regulator will be required to ensure that state institutions comply with the rules by guiding and supporting state officials towards proper compliance with the regulatory framework and by ensuring generally that state funds are spent prudently. These are welcome developments particularly if the Regulator ultimately appointed is allowed to be effective.

Unhappily though there are some unclear issues. The most contentious provision in the Bill is likely to be the repeal of the Preferential Procurement Policy Framework Act, 2000 which defines the parameters for the current preference points system, generally known as the 90/10 and the 80/20 preference points systems. There, the Bill is short on detail providing instead that the Minister of Finance must prescribe a framework for preferential treatment for categories of preferences, and the protection or advancement of persons, or categories of persons, previously disadvantaged by unfair discrimination. The Minister’s discretion seems to be unfettered and it is theoretically possible for the Minister to go for an extreme such as a 95/5 or 50/50 preference points system. Whatever decision the Minister makes, it would be an excellent bet that the decision will be challenged under the provisions of the Promotion of Administrative Justice Act, 2000 or under the rubric of legality. There is no indication when the Minister will publish the framework. On this point particularly and although the Bill was much anticipated, it has turned out to be a bit of a damp firework.

Still, any effort by government to organise the presently fractured public procurement regime in South Africa should be welcomed. Whether entities that provide goods and services to organs of state should be bracing themselves for new procurement rules and regulations is an open question as the timing of any change has not been stipulated. Also, we are still dealing with a Bill and the deadline for comments has been extended to 30 June 2020. It is hoped that this extended period will see significant comments and ultimately legislation and a preference points framework that is fair, equitable, transparent, competitive and cost-effective and promotes efficient administration. That efficiency will benefit us all.

The Bill is available on the National Treasury’s website and public comments can be emailed to commentdraftlegislation@treasury.gov.za by 30 June 2020.

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