The new Preferential Procurement Regulations will soon come into effect, replacing the current regulations which were last published in 2011.

The regulations, which come into effect on April 1, are based on the Preferential Procurement Policy Framework Act, 2000.

The new act, which was published by National Treasury in January this year, will help facilitate better regulation of tender processes and accelerate the current rate of transformation.

The Act requires that government entities follow a preference point system for contracts below or above R1 million and creates a framework for achieving specific goals.

Bontle Pilane, senior associate and Fasken Martineau, commented on the new regulations and said many provisions have been retained from 2011. While the regulations still stipulate price as the dominant basis on which procurement decisions must be made, there are some changes:

• The 80:20 principle will apply to tenders valued between R1 million and R50 million. The 90:10 principle will apply to tenders above R50 million.
• Those bidding for products and services to the value of R 30 million or more must sub-contract at least 30% of the value of the contract to Exempted Micro Enterprises (EMEs) or Qualifying Small Business Enterprises (QSEs), or a small business as defined in the National Small Business Act, 1996.
• Government entities which impose the 30% sub-contracting requirement must make a database of all suppliers from the targeted groups available for bidders to choose from.
• Government entities are required to stipulate the objective criteria used when awarding a contract to a party who did not obtain the highest points.
• The remedies provision was extended to afford bidders suspected of having submitted false information regarding their B-BBEE status an opportunity to make representations.

However, Pilane said it was important to note that although the new regulations contain aggressive measures to ensure greater economic participation by small and black owned businesses, National Treasury had compromised on some provisions which were initially contained in the draft regulations.

She noted these as:

• Only requiring the sub-contracting of 30% of the contract value of a tender where the government entity finds it feasible instead of requiring it in all cases and placing the onus of creating supplier lists on such organs of state
• Deleting the provision creating a different formula to calculate the points for price in respect of the disposal, sale and letting of property.
• Lowering the increase in the maximum threshold for the 80:20 principle and the minimum threshold for the 90:10 preference point system from R100 million to R 50 million.