Procurement integrity and general procurement requirements

Public procurement is one of the government activities highly vulnerable to corruption. The financial interests at stake, the volume of transactions and the close interaction between public and private sectors in the awarding of public contracts all pose risks to the integrity of the procurement process. The findings of the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State all bear testimony to this fact.

18 Mar 2024 5 min read Dispute Resolution Alert Article

It is therefore unsurprising that “integrity” is one of the 12 principles included in the Organisation for European Economic Co-operation’s (OECD) 2015 Recommendation of the Council on Public Procurement, which builds on the 2008 OECD Recommendation in Enhancing Integrity in Public Procurement. Although it is not a member of the OECD, the OECD has designated South Africa as a Key Partner that participates in policy discussions in OECD bodies and takes part in regular OECD surveys.

Procurement integrity

Chapter 3 of the Procurement Bill encompasses the notion of procurement integrity and outlines the prohibition of certain practices. Section 10, for example, provides that a person participating in a procurement process in the role of an accounting officer or as a member of an accounting authority must exercise their powers and perform their duties impartially and with the degree of care and diligence that a reasonable person would exercise in similar circumstances. In so doing, an accounting officer must not use their position, or information obtained because of their position, improperly to gain an advantage for themselves or someone else, cause prejudice to any other person, or interfere with or exert undue influence on any person involved in procurement. If a conflict of interest exists in a procurement matter, the accounting officer must disclose such conflict and recuse themselves from participating in the process of that procurement matter. These requirements underpin the constitutional prerogative for accounting officers to act in a manner that is fair, equitable, transparent and competitive. At present, National Treasury Regulation 16A8.3 provides that supply chain management officials or other role players may not use their position for private gain or to improperly benefit another person and must treat all suppliers and potential suppliers equitably.

Excluded persons

In the same vein, the Procurement Bill provides for a declaration of interest by persons involved in the procurement process. To this end, in terms of section 11, read with section 13 of the bill, a procuring institution has an obligation to identify automatically excluded persons to ensure that such persons do not submit a bid in a public procurement process. Automatically excluded persons include, inter alia:

  • public office bearers;
  • officials or employees of Parliament or a provincial legislature;
  • persons appointed in terms of sections 9 or 12A of the Public Service Act (Proclamation No. 103 of 1994);
  • officials or employees of a constitutional institution;
  • officials or employees of a public entity;
  • officials or employees of a municipality or municipal entity;
  • entities in which such listed persons are directors or have a controlling or other substantial interest; and
  • executive members of controlling bodies of procuring institutions and their immediate family members.

Non-executive members of controlling bodies of procuring institutions may not submit bids in that institution.

Conversely, automatically excluded persons, their immediate family members and related entities also bear the onus to declare any direct or indirect personal interest in a procurement matter. All procuring institutions in each procurement process ought to prescribe a declaration of interest to be made by all bidders, in respect of bids and all applicants, in the case of applications for registration on a database created by the Public Procurement Office. National Treasury Regulation 16A8.3 currently provides for the declaration of interest by supply chain management officials or other role players in procurement matters. To this end, supply chain management officials or other role players must recognise and disclose any conflict of interest that may arise. Further, and in terms of National Treasury Regulation 16A8.4, if a supply chain management official or another role player, or any close family member, partner or associate of such official or role player, has any private or business interest in any contract to be awarded, that official or role player must disclose that interest; and withdraw from participating in any manner whatsoever in the process relating to that contract.

Procurement systems

The general procurement requirements proposed by the Procurement Bill are outlined in Chapter 5. The accounting officer or the accounting authority of a procuring institution must implement a procuring system, take the necessary steps to ensure that no person interferes with its procurement system or is able to amend or tamper with any bid or contract and prevent abuse of its procurement system. More importantly, the accounting authority must investigate any allegation against an official or other role player of corruption, improper conduct or failure to comply with its procurement system, and, where necessary, take steps against that official or role player, and inform the Public Procurement Office. Moreover, the accounting authority must reject a recommendation for the award of a bid if the recommended bidder has made a misrepresentation or submitted false documents in competing for a particular contract or been convicted of any offence involving corruption, fraud, collusion or coercion in competing for any contract. The accounting authority has an obligation to cancel a contract awarded to a supplier it becomes aware that the supplier has made a misrepresentation, submitted false documents or information, or has been convicted of any offence involving corruption, fraud, collusion or coercion in competing for a particular bid or during the execution of the contract; or if any official or other role player was convicted of any offence involving corruption, fraud, collusion or coercion during the bidding process or during the execution of the contract.

Every procuring institution must establish a procurement function as part of its procurement system that is responsible for the implementation and maintenance of the procurement system to ensure effectiveness and efficiency. The bid committee system currently implemented by public entities is also provided for in the Procurement Bill. Therefore, the Procurement Bill aims to expand on existing National Treasury Regulations and create uniform treasury norms and standards for all procuring institutions as outlined above.

Public procurement is a crucial pillar of service delivery for governments. Because of the sheer volume of spending it represents, well-governed public procurement processes can and must play a major role in fostering public sector efficiency and establishing citizens’ trust. Well-designed public procurement systems also contribute to achieving pressing policy goals such as environmental protection, innovation, job creation and the development of small and medium enterprises

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