Brand new Preferential Procurement Regulations 2017 for Tenders

The brand new Preferential Procurement Regulations 2017, has been finalized and was gazetted on 20 January 2017. There are some interesting changes and challenges that we will discuss during the coming months. This is the official media release from National Treasury:

The regulations were initially promulgated in 2001 and revised in 2011 thus making this the second revision since the initial promulgation.

The revision of the Preferential Procurement Regulations of 2011 was largely influenced by the need to provide for a mechanism to empower certain categories (Small Medium and Micro Enterprises (SMME) also classified as EMEs or QSEs, Co-operatives, Township and Rural enterprises) through procurement. This was an outcome of social dialogue on the New Growth Path (NGP) wherein government and social partners signed a Local Procurement Accord on 31 October 2011.To this end, commitment made by government was to leverage public procurement.

The revised regulations are also aligned to President Jacob Zuma’s pronouncement in his 2015 State of the Nation Address, wherein he said that government will set-aside 30% of appropriate categories of State procurement for purchasing from SMMEs, co-operatives as well as township and rural enterprises. Also, giving impetus to the NGP the highlights of the revision are: –

  • Introducing the prequalification criteria which allow the advancement of these selected categories of people by limiting competition only amongst themselves. This restricts the inclusion of well established companies unless they meet further requirements of subcontracting to these groups should they (established company) be successful. (Refer to regulation 4).
  • Acknowledging that in the main, the high value tender in the region of R30 million and above tend to be awarded to established companies due to economies of scale and affordability, leaving out categories of aspiring businesses, the revised regulations requires all those with ability to deliver the required service to demonstrate the element of subcontracting to the categorised groups at a tendering stage. (Refer to regulation 9).
  • Addressing the outcry of the categorised groups who felt that the threshold of R1 million is too insignificant for them to grow to a level of established companies. Current regulations have increased to R50 million. This now give the smaller companies greater chances to compete in the economy in a meaningful way. (Refer to 6 & 7)

Commenting on the release of the regulations, Minister Pravin Gordhan says the regulations aim to use public procurement as a lever to promote socio-economic transformation, empowerment of small enterprises, rural and township enterprises, designated groups and promotion of local industrial development. He said this is in line with the current dialogue on inclusive economic growth in South Africa.

To learn more about this and all the other new developments regarding tenders, please attend one of our How-to-Tender workshops.

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www.how2tender.com

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