Public Procurement Draft Bill: PBO briefing

Standing Committee on Appropriations

07 October 2020
Chairperson: Mr S Buthelezi (ANC)
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Meeting Summary

Video: Standing Committee on Appropriations (NA) 7 Oct 2020

Preferential Procurement Regulations, 2017

In this virtual meeting, the Parliamentary Budget Office presented the Committee with an overview of the Draft Procurement Bill. The draft Bill was government’s response to procurement irregularities and the associated high economic and social costs that have resulted from it.

The Bill repeals the Preferential Procurement Policy Framework Act (2000)/Preferential Procurement Regulations of 2017, related procurement law as well as the preferential point system. The purpose of the draft bill is to introduce a single regulatory framework for local, provincial and national governments and state-owned enterprises. The draft bill proposes the creation of institutions necessary to ensure the integrity of the procurement system and to address potential violations.

The establishment of a Public Procurement Regulator to address any material breach by an institution, reconsider decisions by institutions

The establishment of Public Procurement Tribunal to review the decisions made by the Regulator and provincial treasuries

Members identified and raised several key issues with the Bill. They expressed concern that the bill seeks to establish additional structures, made transparency discretionary and did not speak to the advancement of local production (localisation) and the creation of opportunities for women, youth and persons with disabilities. Because of the gaps in the Bill some members expressed that the current draft was a wasted exercise.

Members asked about the implementation of existing legislation, people being barred and blacklisted from doing business with government, fronting and predetermined prices.

The Committee agreed that National Treasury should be called to the Committee to give a presentation. The Committee would then be able to highlight all of their concerns and have Treasury respond.

Meeting report

The Chairperson welcomed the PBO to the meeting to give a briefing on the draft Public Procurement Bill. The Bill was one important instrument in the process of appropriating funds.

The Chairperson added that he wanted the Committee to provide critical input with this Bill. He handed over the PBO to deliver its presentation.

Briefing by the PBO on the Draft Public Procurement Bill

The presentation was delivered by a delegation from the PBO. The purpose of the presentation was to provide the Committee Members with information regarding the Draft Public Procurement Bill, that has been developed to consolidate the numerous laws and supply chain instructions that inform public procurement and to better regulate the public procurement process.

The draft Bill was government’s response to procurement irregularities and the associated high economic and social costs that have resulted from it, to address public procurement regulatory framework failures, to poor compliance that impact service delivery in all three spheres of government and to create strong oversight mechanisms.

The presentation detailed the procurement developments and trends in South Africa and other countries. 

The draft Bill proposed the creation of institutions necessary to ensure the integrity of the procurement system and to address potential violations. The Bill would establish a Public Procurement Regulator, to address any material breach by an institution, and a Public Procurement Tribunal to review the decisions made by the Regulator and provincial treasuries. The Bill would also make changes in the institutional framework. The Office of the Chief Procurement Officer would be changed from a departmental functionary to an independent regulator. The limitations and concerns over the new Bill were also discussed. The overall objective of the draft Public Procurement Bill is to simplify processes, maximise value-for-money, and reduce corruption from public procurement.

The bill exhibits several limitations, preventing the necessary realisation of the principles of fairness, equitability, transparency, competitiveness and cost-effectiveness as envisaged in section 217(3) of the Constitution.

Lack of transparency will retard aims of the bill

The bill:

-Requires confidentiality of bidder’s information

-Makes transparency discretionary to the regulator’s judgement

  • Whilst certain bid information is sensitive (e.g. blue prints, supplier specific technology), such a general inclusion favours secrecy and corruption.
  • Non-sensitive bid information (i.e. company name, directors, shareholders, bid price) should be publically available at all stages of the bid process.

The bill importantly automatically excludes certain individuals and entities from the procurement process (CH3 (4)). To be effective, its requires honest declaration on the part of potential bidders, and knowledge on the part of bid evaluation and bid adjudication committees. For meaningful effect with the intents of this provision of the bill a transparent, complete and publically available record of bidding companies, their directors and shareholders, parent/holding companies and their respective directors and shareholders is required. This could be strengthened by a publically available, comprehensive and consistently updated list of persons and entities debarred from doing business with the state

Concerns from civil society groups are mainly with regards to:

  • The establishment of the Public Procurement Regulator and its functions [section 4(2) and section 5]
    • In terms of its independence
    • Appointment process and qualifications of the Regulator
  • Conflict between different spheres of government and the establishment of a register for debarred suppliers [sections 5(1)(d), 9(1)(c) and 95(2)(d)] [section 22]
  • Accountability, specifically:
    • The review process as described in Chapter 9, specifically part 2 that allows for the reconsideration of a decision.
    • Monetary compensation as a remedy for the unlawful award of tenders or loss of profits.
    • Provisions requiring further clarity [section 13, 16, 18, 19 and 115].


The Chairperson stressed that this was an important piece of legislation. This would be the first interaction the Committee had with this legation. The Committee would need further interaction with it.

Mr A Shaik Emam (NFP) expressed his disappointment with National Treasury. Treasury were no experts when it came to procurement. Treasury has been found wanting on a number of occasions, like with the integrated financial management systems and others. Treasury should be talking to structures like the Standing Committee on Appropriations and others before it puts out a draft Bill. Treasury needs to get an understanding of exactly what is happening in terms of procurement because the various Committees deal with these issues every day. He raised some concerns with the draft Bill. The process of looting and corruption, particularly in the procurement system, does not start in the awarding of the tender. It starts long before that. It starts when those responsible regularise irregular behaviour. He raised concern with Section 36 (B). Most of the tenders that are given out are given out before they are awarded because of the collusion that takes place. One of the challenges with procurement was the 15% that was spoken about. If the tender was 15% lower than the rest and was the lowest tender that company was not considered. That happens even thought that company might be qualified and has the grading, the references and performed exceptionally well. He provided an example of a company in KwaZulu-Natal that used to get most of the work. Their costs were the lowest and they were a credible organisation. Now they do not get the tender directly. They get it through middlemen. Two things were important. The first was the awarding and who gets awarded. Does the company deserve to be awarded the contract? Second, and most importantly, was the value for money.

He did not see in the presentation how government would make sure that they paid R10 for an item that cost R10 and not R100. This is a major problem with procurement at the moment. There were other weaknesses in the entire procurement system. There was a particular problem with both internal and external consultants. There was also the issue with payments and site establishment. The moment someone was awarded the contract government was paying for site establishment when there was no site establishment taking place. His understanding was that when a contract was awarded to an organisation it must have the financial muscle and resources to be able to start the job and then get paid based off of their performance. Companies must only get paid for the percentage of work that has been done. This is where the issue of collusion comes in to play. He provided an example of a contract where the entire amount of the contract was paid before any work had begun. He provided an example of his understanding of transparency. When a contract was awarded for the purchasing of examination pads the government needed to make it known that it was acquiring examination pads from ‘Mr A’ and how much each examination pad cost. The public and other competitors needed to see that government was paying market-related prices and not increased prices for goods. That would save hundreds of billions of Rands in South Africa.

He then raised the issue of some people being barred and blacklisted from doing business with government. There was no mention in this Bill on how to deal with people who have been blacklisted. The way companies get around being blacklisted is that if the bid fails those blacklisted people start another company and put their relative in charge of it. In the end those blacklisted individuals still get the contract. Another problem that this Committee identified previously was that there was grading which allowed a company to bid for a certain percentage. There was an example where a company which was only qualified for grading of up to R50 or R70 million but had two schools to bid at the same time. There was a weakness with the grading process within the procurement system. There was also no process to establish whether these companies have the financial muscle to carry out the contracts. There were projects in the Eastern Cape that were just standing because the contractors did not have the financial muscle to buy the material to continue with the job. That was a serious concern.

The draft bill proposes another tribunal and another structure. With all the internal mechanisms already in place that deals with oversight from local, provincial and national levels, now there needs to be an additional structure to make sure that companies were complying. The PMFA provides guidelines and people are not following those guidelines. People are not following those guidelines because the internal process that are in place are inadequate. People who are responsible for ensuring that there was oversight are not performing optimally and are allowed to continue working. In the procurement system any payment that must be made must be approved by internal people and not external. Currently there were outside consultants that were colluding. There was a housing contract in KwaZulu-Natal and the contract was awarded immediately even though there was a geotechnical report which stated that there was rock on the site. The variation order system needed to be covered in the procurement and it was not covered. That was another way people were colluding and enriching themselves. These were some of the issues that were not covered in the draft Bill. If National Treasury had consulted with the Committee and all other structures before they published the draft Bill then these issues could have been addressed. With expert guidance Treasury could have included these different aspects and then called for public comment. The current draft bill was certainly a wasted exercise.

Mr O Mathafa (ANC) agreed with Mr Shaik Emam about the need for accountability at the grassroots level. All the procurement bills and legislation that was there was solid. All that was needed was for someone to implement them properly. If that was done half of the problems would be resolved. The Bill appeared to be systems and process orientated. It left the human element out. Was there anything in the Bill that dealt with the upskilling of supply chain management?

There was a serious challenge of infrastructure development as an economic stimulator. He envisaged that there would be a lot of public and private partnership deals that would be happening. Does the public sector have the necessary skills to be able to make contracts that have conditions that are favourable to the State and the tax payer? Does government have enough capacity to evaluate service delivery quality in terms of value for money? Does the Bill deal with one of the biggest mandates of government which was redressing the imbalances of the past? Africans, women, youth and people with disabilities have been excluded from the mainstream economy. Will the Bill be able to assist that government programme? There might be a situation where all the legislated indicators of economic empowerment are on paper, and in policy pronouncement, but they are not happening at the grassroots level. The public fiscus was also a contested economic space.

He agreed with Mr Shaik Emam that there was some uncompetitive behaviour happening. He highlighted the issues around variation orders that Mr Shaik Emam raised. Would the Bill be able to prevent the accepting of inflated prices that might result from collusion between big suppliers? Then there was the issue of ‘respecing’ the product. He created the term ‘respecing’. It refers to when an appointed company has the ability to manufacture its own equipment. The company comes on site and services the particular area or product that has been awarded to them to maintain. In the process of the maintenance the company uses equipment that only they manufacture. When the contract expires and government needs to conduct a process of competitive bidding it was impossible to award the contract to a different company. The only company who would comply to the ‘bid spec’ was the company that had been awarded the contract previously. Was the Bill responding to that particular issue?

He then raised the issue of turnaround times. He saw a lot of emphasis on e-procurement. One of the problems with e-procurement was the system’s inability to respond to non-responsive tenders. Was there a mechanism in the Bill that does not involve human intervention when e-procurement fails to find a suitable supplier? He raised the issue of standardised procurement protocols and this was related to the issue of collusion. Did the Bill contain a move towards standardising procurement processes and protocols for specialised and consulting services? The Committee has been lamenting the expenditure the State was carrying out around consulting services without deriving any particular benefit. Was there a move towards that particular area? Across the board the usage of consulting services was standardised to a point that it can only be considered as the last resort. Lastly, he mentioned the cost for bidders. Was there a way for the Bill to allow for the submission of compliance documents and any other supporting documents once and for all?

Mr D Joseph (DA) asked what were the gaps in the current procurement system. What is happening in the current procurement process that necessitates a review of the current procurement system? Why was the current procurement system not working to the benefit of the people? He was not sure if the PBO had access to the information but he wanted further information on those employed to do business with the State. What was the record of non-compliance? What was the record of current investigations? What was the record of legal cases in court? What was the number of the procurement processes that were flawed in the various Departments? There must be some other form of information that informs why the issue of procurement is so serious. He then highlighted the current appeals process. Sometimes the appeal process halts service delivery.

Transparency was good and he was glad to hear that it will be focused on in the Bill. He shared Mr Shaik Emam’s concern about the creation of another entity and regulator that is referred to in the Bill. The cost thereof was a concern. The current procurement process was overregulated and now the Bill was talking about the integration of supply chain management systems, which was important, but then some regulations needed to be removed. If integration takes place and more regulations are added then the whole process becomes more complicated and complex. Who will the regulators report to? The independence of the regulator was important. How independent will the regulator be? He was not sure what was meant on slide 12 on the requirements of confidentiality as it applied to transparency. The Bill makes transparency discretionary which was questionable. The Department of Planning, Monitoring and Evaluation (DPME) had previously informed the Committee that there was a number of people doing business with the State and were even using State offices and resources in their business with the State. This Committee needed to follow up on that issue. National Treasury must tell the Committee what it was going to do with that information that has been highlighted. He had done business with the State before becoming a public representative. He knew the procurement system intimately. Lately, all the tender companies do not share all the relevant information that they were supposed to share. He had experiences in the Western Cape where he visited many schools. Public Works had to remove companies from sites and this resulted in court cases. A lot of money was involved in removing an incompetent company. He agreed that the electronic systems were very important. The monitoring of these projects by technical experts, from Public Works, is important because there was not enough monitoring of sites. Penalties must be given to companies that construct inferior houses and schools because this impacts on service delivery. 

What were the public comments on the organisations? Have the departments and municipalities who deal with procurement given any input as to how the system can improve? He agreed that Government needed to help previously disadvantaged companies and must become more inclusive. The principle there was correct but Government was going overboard to pay companies money in advance. These companies get the tender but then complain that they do not have the resources and materials that are needed for the job. Government needs to help companies get off the ground and establish the company so that the State can engage with them productively. There was no reason why the State could not have a tender with predetermined prices. He understood that the State worked in a market economy that people must tender but there were thousands and thousands of materials being delivered to the State, like stationery and toilet paper, that were overpriced. Government knew the market price so why did it allow companies to come in and inflate the prices? Government needs to provide a bracket of prices that it wants to be in the tender and provide those conditions to the companies. He provided an example of the price of speed humps in municipalities increasing tenfold and the quality has become poorer. Road marks were supposed to last for five or six years but now every six months it needed to be repainted and the tender was ten times more expensive. The State should not be scared to advertise tenders on a predetermined price because it knew what the market price of the products were. That would give small business more opportunities because currently small businesses could not compete against the bigger companies. There needed to be value for money in the tenders.

Ms M Dikgale (ANC) agreed with Mr Shaik Emam on family members and the issuing of tenders. She wanted the PBO to address how the Bill would reduce and eliminate from the public procurement system? If the taxpayers were not happy with how Government was running the tender process then that was a problem. She then raised a concern over people who have done work for Government and still have not been paid. She read a letter from a telecommunications company that had not been paid for their work by a municipality. This company has done the work and had not been paid. The draft Bill did not address the non-payment of contracts and the non-payment of work after it has been completed. She wanted the PBO to address the concerns Mr Shaik Emam raised because she shared those concerns.

The Chairperson said that the presentation raised a number of issues. He highlighted that the Bill was not the PBO’s Bill. The PBO was only critically looking at the Bill. Some of the questions asked should be answered by National Treasury. National Treasury was the custodian of this Bill. The Chief Procurement Officer was implementing the Act and therefore National Treasury should address the Committee. It was an important piece of legislation. The PBO must be honest and say which questions they cannot answer. The support staff needed to note the questions that could not be answered so that those questions could be raised with National Treasury. Does the Bill have a transformative budget that enhances economic inclusion? Did the Bill take into account the previously disadvantaged? How was the Bill advancing local production? How was the Bill advancing employment creation? Is the Bill an improvement of the PPPFA? He wanted supporting evidence for whatever the answer was. How did the Bill promote economic growth? How does the Bill promote innovation? Was there an accommodation of unsolicited bids? The IT industry was always coming up with innovations and sometimes Government does not know about these solutions. There have been a lot of comments about the tendering system. People want to do away with tenders. How else can Government buy goods and services without going through a tender process? He then brought up variation orders. The PPPFA has an 80/20 rule and a 90/10 rule. The 80/20 rule means that when a bid is being evaluated 80% of the weight is given to the price and 20% to the rest. The 90/10 rule states that when evaluating 90% of the weighting is given to the price and 10% to everything else. Price is an important determinate in who gets the work. Price variation changes the initial price completely and sometimes makes it very expensive. Was that addressed in the Bill? The Chief Procurement Officer was allowed to approve deviations but that process needed to be re-evaluated. Did the Bill bar companies who have been found guilty of fraud and maleficence from doing business with Government in the future?

Dr Nelia Orlandi, Deputy Director: Public Policy, PBO, responded that at this stage the Bill was placing a large responsibility on the Public Procurement Regulator which would be within National Treasury. The Bill was clear on the responsibilities of the Regulator as well as the Public Procurement Tribunal. The Public Procurement Regulator must ensure that institutions comply with the Bill and engage in the prudent spending of public funds. It must reconsider decisions by institutions. The Regulator must continuously revise and guide the procurement and the procurement system. It must promote and ensure the integrity of the procurement system. The Regulator must also establish and maintain a register of the bidders. The Public Procurement Tribunal has to review decisions made by the regulator or provincial treasuries. It has to review the processes that have already been approved by provincial treasuries. Parties not satisfied with the outcome can review the decision through the Promotion of Administrative Justice Act (PAJA).

Some of the issues raised by members on the BEE codes have not been defined in the Bill yet. The Minister of Finance must prescribe a framework that must consider a BEE preference points system and measures to advance categories of persons previously disadvantaged through unfair discrimination. The Minister must still provide measures to advance categories of businesses or a sector. Those are the things that have not been attached to the Bill and are still outstanding. The Finance Minister must also consult with the Ministers of Women, Youth and Persons with Disabilities, Small businesses, Trade Industry and Competition, and Infrastructure before making a regulation. There are a lot of other role players that need to be consulted before the Minister of Finance provides the regulations for this Bill. The Minister could set aside certain Government tenders so that historically disadvantaged persons can submit bids. This relates to what Mr Shaik Emam indicated. He was concerned about a tender being awarded and then it is subcontracted a few times which escalates the price. In this Bill the Minister could set aside certain Government tenders for historically disadvantaged people. It also states that the Minister can put out certain tenders that can be subcontracted. Not all tenders will be allowed to subcontract. She reiterated that some of the regulations in the Bill have not been defined so it was not entirely clear as certain attachments have not been completed. The Bill also indicates that there were a lot of roles for organs of State. When a company prepares a bid Government must consider the qualifications criteria. It must look at professional or technical qualifications. The tender must provide information for financial resources, equipment, personnel and managerial capabilities, records of the past performance of similar contracts, registration of licensing with a professional body and any other criteria deemed necessary. The Bill provides the additional information that is required when a company prepares an invitation to bid. There were things that the Bill was addressing but there is also outstanding information that is required from the Minister.

Mr Rashaad Amra, Economic Analyst, PBO, acknowledged Mr Shaik Emam’s concerns. Non-sensitive bid information such as company name, directors, shareholders, bid prices and the evaluation committee’s reports should be publicly available to ensure greater transparency. For example, if a construction project costs R1 million but it ends up being R2 or 3 million then that information needs to be made publicly available. This would encourage more scrutiny on the bid and awarding process.

He then discussed the necessity of disclosing beneficial ownership. The difference between beneficial ownership and normal ownership is that beneficial ownership when a person who was barred from doing business with the State ends up doing business with the State through a company owned by their spouse or relative. Beneficial ownership can be defined as people who effectively have control and benefit from a legal entity. This person may not be registered as the actual owner but they indirectly benefit from the company. That type of beneficial ownership disclosure would be quite useful to promote transparency. He then responded to the Bill’s role in addressing historical legacies. He noted that in the previous legislation it emphasised preferential procurement specifically around historically disadvantaged individuals, women and people with disabilities. Clause two of the Bill notes the importance of incorporating in the procurement system categories of preference in the allocation of contracts. This includes the protection and advancement of categories of persons disadvantaged by historical legacies and unfair discrimination. There is this general provision in the Bill, however, the Minister needs to prescribe a framework for preferential treatment. For this to happen the Minister of Finance needs to consider the Broad-based Black Economic Empowerment Act.

He then responded to the question of the Chairperson on the role of procurement in facilitating economic growth. A significant portion of National GDP emanates from public procurement. A simple improvement in efficiency of spending results in the economy performing better and much needed economic and social infrastructure is also provided. Efficient public spending without leakages, wastages and corruption directly contributes to economic growth. The relationship between public procurement and growth was a bit more complicated than just efficiency and the total amount spent. There was also the need for complimentary spending between the infrastructure and the maintenance costs. Generally speaking, however, that relationship was intuitive. Similarly, employment and innovation were all objects of the Bill. There were specific objects related to the promotion of employment and towards innovation. There was no mention in the Bill of unsolicited contracting and that idea was noted. It was important to note that there were various objectives related to public procurement. These at times may require trade-offs and may pull in different directions. For example, if Government wanted to promote small business it needed to accept that a small business might not have the necessary efficiencies and economies of the scale a larger business has. If Government wanted to save a few billions then it might need to forgo a particular policy objective for the realisation of another policy object. This meant that there would inevitably be different levels of trade-off. The trade-off depends on the specific objectives of the contracting department and the particular economic climate that may exist. There may be a time where Government may be able to pay more of a premium for other policy objectives and there may be a time when costs trumps everything else. This was all subject to the framework that still needed to be provided by the Minister of Finance. He then responded to the Chairperson’s question on deviations. The Regulator may authorise a deviation from the application from a procurement method or instruction envisaged in the Act. There was a provision for it but it was to be used with discretion.

Dr Dumisani Jantjies, Deputy Director: Finance, PBO, commented on the policy objectives of the Bill. He highlighted the international experiences of regulatory reforms have shown that the political, economic and social environments need to be incorporated in developing procurement reform. He provided an example of how major regulatory reforms were implemented in countries that suffered financial crises. A number of countries went through a period of reforming and transforming the financial sector due to failures. South African gained lessons and experiences from the United Kingdom as they were of the countries that reformed their financial sector quickly. One of the lessons that came out of these engagements was the importance of identifying unintended financial consequences or considering the financial impact of various regulatory reforms. Broader reforms were needed to impact the entire economy and this would have a broader socio-economic impact. One of the unintended consequences that was identified was that even if the financial sector regulations were intended to discipline bad behaviour, the focus on that particular area hampered wider economic growth. A few years down the line the government had to pass some amendments to those regulations to soften them. The reason he raised this was because it was always good to have a broad outlook of financial reform that takes into account the political, economic and social situation of the country. The current climate of the country required balancing the need for reforming the procurement system but also taking into account the broader developmental objectives in policies. The procurement reform was important in encouraging economic growth. His expectation was that the Bill would change going forward taking into account the comments received from Parliament and various stakeholders. The Bill was seen as an important development by Government in addressing some of the longstanding challenges in public procurement. He then commented on the Bill and some of the unintended financial consequences that might occur. Parliament may ask Government to provide a socio-economic impact analysis before the Bill is processed to consider the broad developmental strategies set out in the Constitution and other policies.

He then highlighted some other considerations that Parliament may take into account once the Bill was tabled. The framework around procurement needed to be contained in the Bill itself. Currently the framework for the regulations lie outside of the Bill. There also needed to be transparency and a clear framework for the awarding of tenders in the Bill itself. He stressed the need for oversight structures being put in place to avoid some of the challenges that have been experience in public procurement. There needed to be accountability and engagement between the Public Procurement Regulator and various stakeholders to ensure that there were clear mechanisms to regulate stakeholders. The Bill needed to empower Public Procurement Managers to continue to do their work without making mistakes. The Bill has a framework makes a distinction between normal procurement of goods and services and procurement that relates to specialisation.

Mr X Qayiso (ANC) noted the comments Dr Orlandi made about the inputs that were still outstanding that would provide context to the Bill. The Committee need to have another round of engagements with the Bill once those areas that Dr Orlandi mentioned has been worked on. The Bill in its current form was in an infancy stage as there were other areas that still needed to be included. The Bill needs to be very clear on what it seeks to address. It must be clear on its policy intent and objectives. Government wants to see the ownership of the economy by the people. It would be a gradual process of the economy returning to the people. The amendment should seek to address that objective but he did not find it in the Bill. The nature of the Bill seeks to entrench old traditions which does not actually address the objectives. What the Bill seeks to address and the policy intent was very important. Localisation was a priority and it needed to be strengthened.

Mr Shaik Emam said that the Bill did not address ‘fronting’. Many companies were just using black entrepreneurs to get business. As a result, small businesses owned by black entrepreneurs never progress because they are totally dependent on these fronting companies. There needs to be a way to ensure that smaller businesses are going to be empowered by bigger companies particularly in the case of subcontracting. He had a concern about the public not having the opportunity to report during the procurement process. National Treasury should be called to the Committee to give a presentation. The Committee would then be able to highlight all of their concerns and have Treasury respond.

He was not sure how it was possible to separate politics from administration because political parties, wherever they govern, depend on funding from these businesspeople who in turn depend on these political parties to give them tenders. Political parties, mayors and deputy mayors appoint these directors and its ‘payback time’. The procurement process needed to be looked at holistically. Some mechanism has to be put in place to make sure that if a company qualifies for a certain amount based on their grading that that company must be blocked from getting a second tender. If Government wants to help small businesses and capitate them then the State should provide resources in covering the cost of materials. Many small businesses do not have the resources because they have been disadvantaged for a long time. He had a serious problem with people saying that children of members of Parliament or Government should not do business with the State. No person should be isolated from doing business with the State because they were related to some politician. Mechanisms needed to be put in place to ensure that there was no corruption so those individuals could participate freely and get the tender in a transparent manner. It was not fair to keep people who were in some way related to members of Parliament or Government from doing business with the State. What did the PBO believe could be done to strengthen the procurement system particularly in getting value for money so that hundreds of billions of Rands could be saved in South Africa.

Ms Dikgale agreed with the public sentiment that Government should do away with tenders because maybe then all these problems would come to an end.

Mr Joseph wanted to revisit the matter of doing business with the State. If there was a general practitioner who had a contract with the State in a far off area and there was a crisis in that town; if that person with the contract is the only person who can provide that service, then it should be allowed to. In the system of procurement there should be an application that officials can fill out and get permission to provide that service if there was a crisis. There were sometimes exceptional circumstances for people doing business with the State. Was disaster management included in the Bill? Infrastructure damaged due to natural disasters also needs attention. There needed to be faster service delivery. State-owned entities also needed to be included in these engagements on the new Bill.

The Chairperson repeated the question on the call to do away with the tender system. How else does Government buy goods and services if it was not through the tender system?

Dr Orlandi responded that the main objective of this draft Bill was to try and bring all the separate systems, mechanisms and processes together. The Bill really does make an effort to bring all of these things together. The Bill is in a draft format and the Minister must still provide frameworks for many areas. The object of the Bill was to make it much less complex so that officials and departments can comply. Most of the concerns the members raised was already captured in other legislation and policies. People did not adhere to those policies and regulations but they were there. She responded to Mr Shaik Emam’s question about Government setting out a list of prices and said that Government did have a list of prices. During the Covid-19 pandemic there was a list of prices that departments were supposed to pay for the PPEs. The list and guidelines given from Treasury was not adhered to. In the supply chain management of the public sector of the Western Cape it was indicated there are different ways of purchasing. The Western Cape purchased through petty cash, verbal or fax quotations. They had open bidding and limited bidding. There was also urgent and emergency procurement. That was how the Western Cape procured goods and services. The PBO did not have all the answers to all the questions. The draft Bill was still in early stages. The comments from the public have not yet been included in the draft Bill. When Treasury presents the Bill to the Committee it might look quite different from the current draft.

Mr Amra responded to Mr Qayiso’s question on localisation and transformation. That was an object of the Bill as well as other economic objectives. It is given expression in the regulations that need to be presented by the Minister of Finance. He then responded to Mr Joseph’s question on disaster management procurements. That was governed by regulations and there were provisions for it. Things that need to be procured urgently was allowed for under regulations. The Bill does address meaningful ownership, and this was hoped to combat ‘fronting’. Company A may have a high BEE score but those who meaningfully benefit from the awarding of a contract may be another party. The full disclosure of meaningful ownership would address that issue. What are the other alternatives to procurement? The State would struggle to do everything in-house. There were times when it would make more sense to do everything in-house but there are other times when outsourcing makes more sense. Outsourcing makes sense when the product is not frequently required. If a niche project needs to be delivered and the State does not have those resources, then going out on tender would be better. The debate on insourcing and outsourcing was ongoing within Government.

The Chairperson said that the object of localisation was very important in the Bill. It was going to be contained in the regulations but that was a mistake. That object was so important that it should be contained in the principal legislation. The Secretariat needed to capture these issues even if they were not answered in this meeting. These concerns would guide the Committee as they interacted with National Treasury. If Government wanted to do away with tenders how else could it buy goods and services? How else do Governments perform the function of buying goods and services?

Dr Orlandi said that the tender process was fixed in Government. International experience has indicated that they also use the tender process and that over time they deal with a lot of corruption. The tender does, however, improve over time. She was not sure what other systems or mechanisms there were especially for the bigger tenders. There was no other way to procure in a regulated manner because it needed to be regulated and there needs to be norms and standards. In her view this was how Government should do procurement to try and get value for money. 

The Chairperson said he asked the question because Government had to buy goods and services. The challenge of procurement and tendering was to make sure that the process was free, fair and transparent. He also did not know any other way Government could buy goods and services. He asked the PBO to send the Bill to the Committee. He asked the research staff to also look at the Bill and the presentation. This was one of the most important legislations facing Parliament. A workshop interaction would be beneficial for members. National Treasury needed to interact with this Committee and other finance committees. After listening to the presentation there were too many gaps that must still be attended to. The Bill should encourage value for money and doing away with the possibilities of maleficence. This process needs to be transparent. He highlighted with concern the location of the Procurement Tribunal. This was only the beginning of the draft process.

The meeting was adjourned.

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