Introduction to the PPPFA’s

Preferential Procurement Regulations

American Chamber of Commerce in South Africa

Shaun Scott

CEO, Worldwide Integrated Logistics

+27 83 442 6532; shaun.scott@wil.co.za

26 August 2015

“(1) When an organ of state in the national,

provincial or local sphere of government, or any

institution identified in national legislation,

contracts for goods or services, it must do so

in accordance with a system which is

fair, equitable, transparent, competitive and

cost-effective.”

The Constitution of the

Republic of South Africa,

Act 108 of 1996,

Section 217

“(2) Subsection (1) does not prevent the organs of state

or institutions referred to in that subsection from

implementing a procurement policy providing for (a) categories of preference in the allocation of contracts; &

(b) the protection or advancement of persons, or categories

of persons, disadvantaged by unfair discrimination.

(3) National legislation must prescribe a framework

within which the policy referred to in subsection

(2) must be implemented.”

The Constitution of the

Republic of South Africa,

Act 108 of 1996,

Section 217

Preferential Procurement Policy Framework

Act - PPPFA

Source: Preferential Procurement Policy Framework Act 2000

Revised Preferential Procurement Regulations

First promulgated in 2001

Revised draft issued in Aug ‘09

Enacted 6 Jun ‘11:

• B-BBEE integrated into the new

Regulations.

• National, Provincial, Municipal,

Constitutional entities and all public

entities 2, 3A, 3B, 3C, & 3D

Effective 7 Dec ‘11

Schedule 2, 3B and 3D public

entities effective 7 Dec ‘12

• Instructions since 16 Jul ‘12

No blanket exemptions Dec ’12

Early draft Aug’15 Source: Preferential Procurement Regulations, 2011

Key Changes Since December 2011:

Tax Clearance Certificate

Regulations 2001:

• Section 16 – Tax

Clearance Certificate:

• “No contract may be

awarded to a person who

has failed to submit an

original Tax Clearance

Certificate from the South

African Revenue Service

(“SARS”) certifying that the

taxes of that person to be

in order or that suitable

arrangements have been

made with SARS.”

Regulations 2011:

• Section 14 – Tax

Clearance

• “No tender may be

awarded to any person

whose tax matters have

not been declared by

the South African

Revenue Service to be

in order”.

Source: Preferential Procurement Regulations, 2001 Preferential Procurement Regulations, 2011

Key Changes Since December 2011:

Designated Sectors and Thresholds Sector/Sub-Sector/Industries Local Content

Threshold (min)

Effective Date

Textile, clothing, leather and footwear 100% 16 Jul ’12

Steel Power Pylons & Substation Structures 100% 16 Jul ’12

Rail Rolling Stock (Updated) 60% to 80% 16 Jul ’12, 07 Jul ’14

Canned or Processed Vegetables 80% 16 Jul ’12

Bus / Bus Bodies 70% to 80% 16 Jul ’12

Pharmaceutical Products: OSD Tender 70% (volumes) per tender

Set Top Boxes 30% 26 Sep ’12

Furniture (Office and School) 65% to 100% 15 Nov ’12

Electrical Cables and Telecom Cables 90% 13 May ’13

Solar Water Heater Components (Updated) 70% 5 Aug ’13, 07 Jul ’14

Valves and Actuators 70% 03 Mar ’14

Working Vessels (Boats) 60% 21 Aug ’14

Residential Electricity Meters 50% to 70% 21 Aug ‘14 Source: SCM Circular dated 20 January 2012 and updated based on Instructions issued 16 July 2012. and 26

September 2012; 15 November 2012; 13 May 2013, 19 July 2013, 6 February 2014; and 01 August 2014.

Department of Trade and Industry www.dti.gov.za/industrial_development/ip.jsp

Designated Sectors and Thresholds

Technical Standard - SATS 1286:2011

AO/AA’s must stipulate in

bid invitations that…..

(ii) only the South African

Bureau of Standards

(SABS) technical

specification number

SATS 1286:2011 must

be used to calculate local

content.

Includes:

• Annexures A, B, C, D & E

Source: Invitation and Evaluation of Bids Based on Stipulated Minimum Threshold for Local Production and Local

Content Instruction Notes issued 16 July 2012 and 26 September 2012, section 4.2.

Designated Sectors and Thresholds

Post Award and Reporting Requirements

9 Source: Invitation and Evaluation of Bids Based on Stipulated Minimum Threshold for Local Production and Local

Content Instruction Notes issued 16 July 2012 and 26 September 2012, section 7.

Key Changes Since Dec 2011:

Functional Threshold / Qualifying Score

An organ of state must indicate in the invitation to submit a

tender, if that tender will be evaluated on functionality.

The evaluation criteria must be objective.

Clearly specified:

• Evaluation criteria for measuring functionality

• Weight of each criterion

• Applicable values

• Minimum qualifying score for functionality

Tender not acceptable if it fails to meet minimum

qualifying score

Tenders that qualify - then evaluated on basis of price

and preference

Source: Preferential Procurement Regulations, 2011

Functional Threshold / Qualifying Score

Functional Threshold / Qualifying Score

Example:

Functional / Technical threshold: 30 out of 40

Functional/

Technical Score

Supplier A: 29 out of 40

Supplier B: 40 out of 40

Supplier C: 20 out of 40

Supplier D: 30 out of 40

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Key Changes Since December 2011:

80/20 and 90/10 Thresholds

80/20

Equal to or above

R30,000 up to

R1,000,000 (all

applicable taxes

included)

90/10

Above Rand value of

R1,000,000 (all

applicable taxes

included)

Source: Preferential Procurement Regulations, 2011

All bids, tenders and price quotations

above R30,000

Key Changes Since December 2011:

Preference

B-BBEE status level of contributor - Score based on a table

Source: Section 5(2) and Section 6(2), Preferential Procurement Regulations 2011

90/10 and 80/20 Scoring

90 / 10 80 / 20

Maximum points scored

for price

Maximum points

scored for preference

Score = Score for Price + Score for Preference

Source: Interpreted from Preferential Procurement Regulation 2011, section 6 (4).

Price Scoring

Ps = Points scored for price of bid under consideration

Pt = Rand value of bid under consideration

Pmin = Rand value of lowest acceptable bid submitted

90/10 and 80/20

)min

min1(90

P

PPtPs

)min

min1(80

P

PPtPs

Source: Preferential Procurement Regulations, 2011, Section

Section 5 and Section 6, Preferential Procurement Regulations 2011

Awarding

(5) Subject to regulation 7, the contract

must be awarded to the tenderer who

scores the highest total number of points.

Award of contracts to tenderers not scoring the

highest number of points

7. (1) A contract may be awarded to a tenderer that

did not score the highest total number of points, only

in accordance with section 2 (1) (f) of the Act.

Source: Section 6(5) and Section 7(1), Preferential Procurement Regulations 2011