Flawed Public Procurement Bill sets SA up to fail, says IRR

The Institute of Race Relations has made a submission to the Standing Committee on Finance in the National Assembly, opposing the Public Procurement Bill.

Mlondi Mdluli, IRR Campaign Manager, says: ‘The Bill itself is unconstitutional and the public participation process was flawed. In addition, the Socio-Economic Impact Assessment System (SEIAS) report is inaccurate and misleading.’

The IRR has flagged a number of other serious problems with the Bill, saying that many of the provisions in it are vague, creating space for non-value-adding intermediaries and weakening value-for-money procurement.

The most transformative way for the state to spend its annual R1 trillion procurement budget is to do so on a straight value-for-money basis, without other distracting objectives.

In contrast, the Bill states, for example, that a preferential procurement policy ‘must include measures: (i) to set aside the awarding of bids (ii) to set subcontracting as a bid condition (iii) for subcontracting by suppliers awarded bids; (iv) to advance transformation, beneficiation, industrialisation, innovation, creation of jobs, intensification of labour absorption, and economic development; (iv) to balance the economic impacts of imported goods or services, unless the procuring institution is exempted by the Minister; and (v) to advance a sustainable environment’.

This flurry of requirements is joined by the word ‘and’, meaning that a preferential procurement policy must include measures of all the kinds listed. In practice, this will be impossible to do and is sure to generate great confusion and uncertainty. The clause also creates a number of competing priorities, all of which are sure to detract from value-for-money procurement – which is where the focus should lie.

Chapter Four of the Bill, which deals with preferential procurement, states that a procurement policy must include ‘one or more preference point systems or thresholds.’ This wording not only detracts from straight value-for-money procurement, but is also impermissibly vague because it does not give any indication of what ‘preference point system or systems’ might be applied, or what ‘thresholds’ might be relevant, says Mdluli.

Furthermore, the Bill lays the groundwork for ministerial overreach. It says, for example, that the minister ‘must’ make regulations on the ‘circumstances and procedures for pre-qualification of bidders’.

The ‘pre-qualification’ of bidders by ministerial regulation could easily lead to demands that bidders have 100% BEE ownership – and so exclude many of the most experienced, competitive, and cost-effective companies from bidding for state tenders at all.

This will further prejudice the great majority of disadvantaged black South Africans, who depend on the government for the efficient provision of core goods and services – and need these to be provided at the lowest prices and in the most efficient way.

Empowering the finance minister to introduce substantive new law by way of regulation is also in conflict with Section 217(3) of the Constitution. This requires a clear procurement framework to be laid down in national legislation, not chopped and changed at ministerial whim by ministerial regulation.

Mdluli adds: ‘The Bill is too flawed, on both procedural and substantive grounds, to proceed through the legislative process. It should be abandoned, and a fresh start made, focusing on straight value-for-money procurement. All South Africans are encouraged to read our full submission which has been uploaded on our website and support our fight against this flawed Bill.’

Media contacts: Mlondi Mdluli, IRR Campaign Manager Tel: 071 148 2971 Email: mlondi@irr.org.za

Media enquiries: Michael Morris Tel: 066 302 1968 Email: michael@irr.org.za

Sinalo Thuku, Tel: 073 932 8506 Email: sinalo@irr.org.za