Request for comment on B-BBEE Preferential Procurement Policy Framework Act

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Broad-Based Black Economic Empowerment (B-BBEE) Preferential Procurement Policy Framework Act gazetted

20 August 2009

Members of the public and interested parties have until 14 September 2009 to submit their comments and inputs on the Draft Preferential Procurement Policy Framework Act (PPPFA) that has been gazetted by the National Treasury.

Preferential Procurement Policy Framework Act (PPPFA) was promulgated as a result of Section 217 of the Constitution which states that all spheres of government must have a mechanism in place that would bring about categories of preference in allocation of contract when procuring goods and services to advance previously disadvantage individuals.

PPPFA outlines that when government is assessing contracts, it must take into account preference point system which prescribes functionality, price and reconstruction and development programme goals (RDP).

The preference point system determines that:

* For contracts below R500 000, 80 points will be allocated for price and functionality and the remaining 20 points for RDP goals
* For contract above R500 000, 90 points will be allocated for price and functionality and 20 points for RDP.

In December 2006, when the B-BBEE Codes of Good Practice were approved for gazetting, Cabinet gave the Department of Trade and Industry and National Treasury a mandate to amend the PPPFA to advance the objectives of the B-BBEE Act and the related strategy, as these two pieces of legislation were in conflict of each other. The abovementioned process led to the amendment of the preferential procurement regulations as interim measures to align the B-BBEE and the Codes of Good Practice

Although the Black Economic Empowerment (BEE) Act does not place a legal onus to private sector companies to comply with its provisions, it does place a legal onus on organs of state to contribute to BEE and including amongst others when developing and implementing a preferential procurement policy.

Furthermore in achieving the 20 points allocated to preferential procurement element of the Codes of Good Practice, government entities must procure from companies with a good BEE status. This has the trickledown effect which will put pressure to all suppliers and service providers. The implication of the trickledown is the increase in market access for black companies.

The (interim measures) draft regulations proposed the 80/20 preference point system for procurement of goods and service for a rand value of R1million and 90/10 preference point system above R1million, to strengthen the contribution towards the development of small, medium and micro enterprise.

Furthermore the draft proposed the allocation of point systems on the following basis:

* 80/20 principle, 20 points scored by a bidder will be in respect of B-BBEE status level as contemplated in the draft
* 90/10 principle, 10 points will be in respect of B-BBEE status level.

Comments and inputs can be forwarded to the following address:

The Director General
National Treasury
Private Bag X115
Pretoria
0001

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