Preferential Procurement Policy Bill: discussion

Meeting report

FINANCE PORTFOLIO COMMITTEE; FINANCE SELECT COMMITTEE - JOINT MEETING
13 January 2000
PREFERENTIAL PROCUREMENT POLICY FRAMEWORK BILL [B66-99]: DELIBERATIONS

Documents distributed:
Amendments proposed by the DP (Annexure 1 - attached to end of minutes)
Amendments proposed by the NNP (Annexure 2 - attached to end of minutes)
Proposed amendments by Department as distributed on 12/1/2000 (Annexure 3 - attached to end of minutes)
Negotiating mandates from all the legislatures

SUMMARY
Amendments were proposed by the ANC, the DP, and the NNP.

Clause 2(1) was the subject of much debate. It was agreed that Section 217 of the Constitution did not provide for the mandatory implementation of a preferential procurement policy. The ANC indicated that although they were not compelled to implement a preferential procurement policy framework that was mandatory for all organs of state this was still the route that they wished and wanted to take.

The NNP and the DP contended that not only did the Constitution not compel the mandatory implementation of such a policy, but it in fact went a step further by precluding such a mandatory implementation (thus making such mandatory implementation unconstitutional.)

The State Law Advisor indicated that S217 did not compel but nor did it prohibit a mandatory preferential procurement policy. This, however, only meant that a mandatory preferential procurement policy was not unconstitutional in terms of S217 of the Constitution. The State Law Advisor said that he would need more time to consider what other aspects of the Constitution (specifically section 44 which deals with the legislative powers of Parliament) had to say on the matter.
The Chairperson asked the State Law Advisor to furnish legal opinion regarding the constitutionality of implementing a mandatory preferential procurement policy for discussion on 18 January 2000.

The Minister of Finance requested the inclusion of clause dealing with applications for partial/complete exemption as decided by the Minister. The inclusion of such a clause was objected to by the DP. The Chairperson requested the State Law Advisor to furnish a legal opinion on the constitutionality of including an exemption clause.

MINUTES
The Minister of Finance, the Director General of the Department of Finance, the deputy Director General of State Expenditure and two state law advisors were welcomed to the meeting.

The Co-Chairperson, Ms B Hogan, commenced saying they hoped to reach informal consensus on the majority of the clauses in the Bill. Formal consideration of the Bill would take place on Tuesday 18 January 2000 and, if there were differing views then these issues would be addressed when they voted on Tuesday.

Minister of Finance's comments
The Minister of Finance, Trevor Manuel, was called upon to take the committee through some issues. He made the following comments:
The issue of the Bill's compliance with S217 of the Constitution encompassed a balance between two values. On the one hand society had to take into account redress, and on the other hand, value for money was also an important consideration. He added that they were aiming for legislation which was compliant with the Constitution and, because of the complexity of S76 legislation, they were also looking for legislation which was minimalist.

The Minister also highlighted the need for uniformity with regard to a framework for all national and provincial procurements. The consultation with the provinces, he said, was important so that 'everyone could march in step'. He said that in accordance with the interim Constitution there had been nine distinct procurement policies in the provinces. Now however, because of S217, a platform for uniformity could be established. (He noted that S217 was not clear on what precisely would constitute an organ of state.)

Minister Manuel went on to comment that there was a need to find a balance between empowerment and efficiency. He noted that it had been shown that new entrants to state procurement have been able to provide their services at a lower cost than traditional business.

The Minister also addressed the Reconstruction and Development Programme (RDP) principles which dealt with issues such as economic transformation. The most important thing about the RDP principles, according to the Minister, is the need for transparency up front with regard to the evaluation process as there has to be the certainty that the evaluation process is fair. Such transparency was considered important in terms of the World Trade Organisation.

Finally, the Minister made a plea for the insertion of a new clause between clause 3 and 4. This clause would deal with partial and/or complete exemptions from the Bill. He suggested that the clause read something along the lines of : ''The Minister may on request exempt an organ of state from this Act.''

Consideration of the Bill
The Long title/Preamble
The proposed amendment of the day before was considered acceptable. Accordingly, there was no discussion.

Definitions
''Acceptable tender'' (clause 1(i))
Mr Schutte of the NNP suggested that the words "and which has been received from a tenderer who is in good standing with the Receiver of Revenue" be added at the end of the existing definition.

The Minister replied that the point which Mr Schutte was making was not in dispute but to make this addition would be ''trite''. He explained that other legislation, such as the Employment Equity Act and the Labour Relations Act had already made such points. He also said that being in good standing with the Receiver of Revenue was applicable to all existing legislation as an obligation which should be met as part of the functions and duties of citizenship. Thus, while he endorsed the sentiment of Mr Schutte, he indicated that he would like to take advice on the addition of these words.

Mr Schutte asked if the position which the Minister had described was also applicable in respect of tenders to local government. The Minister replied that it was not but noted that the tenders are made to tender boards and that the tender boards are not governments.

Mr Andrew (DP) criticised the NNP's proposal by saying that ''good standing'' was not easily defined. He suggested that they rather insert something which requires the tender to provide proof of registration (for the purpose of at least knowing that they were on the books of SARS). Mr Andrews submitted that this would cover the local government problem while also endorsing the concept of tax morality.

Mr Manuel said that as the minister responsible for revenue he certainly endorsed the concept of tax morality. He explained however that he would like to get a look at the forms used by the office of the tender board. He told the committee that the nature of this form was such that it was in fact a declaration. He added that, in any event, in terms of the Bill, the submission of false information was grounds for cancellation. [Thus, the Minister was trying to explain that the suggested amendments were redundant as the form used for tender applications encompassed all these aspects].

The Chairperson ruled that this discussion would be postponed until the committee had seen the relevant tender forms.

Organ of state
Mr Schutte argued that, in accordance with the amended definition of ''organ of state'' in S1(iv)(f) of the Bill, the Minister was given the power to decide that something was an organ of state even if it was not declared to be an organ of state in terms of S239 of the Constitution (because of the use of the word ''and''). He asserted that the power being conferred on the Minister by this definition was unconstitutional.

The Chairperson replied that she had consulted with a constitutional lawyer who had assured her that the definition of ''organ of state'' as included in the Bill was not unconstitutional because the Minister was not given the power to redefine the concept ''organ of state''. The most important point is that all the elements of the definition as it is contained in the Constitution is also contained in the definition in the Bill. They did not redefine what an organ of state was, therefore the definition in the Bill was not unconstitutional.

The State Law Advisor added that the definition in the Bill was a definition for the purpose of the Bill. This was not a problem, he said, as the definition in the Bill and the definition in the Constitution were allowed to differ. The Minister added that this definition tried to capture the essence of S239.

Mr Schutte responded that he supported the purpose for which the definition differed but insisted that it was a legal problem. To add to his point he posed the rhetorical question; ''Should the Minister decide if a person falls under S239(b)(ii) or is it for the Constitution to decide that''? He pointed out that he was not convinced by their argument but that he would leave it at that.

The Chairperson reiterated that the point was that all the elements of the constitutional definition were present in the definition in the Bill. She noted however that the matter would remain on the agenda for further deliberation.

Section 2(1)
The amended section 2(1) (of the Bill) reads ''An organ of state must implement its preferential procurement policy within the following framework''
This clause was the subject of much debate. (Two issues arose, one was a drafting issue and the other a legal issue.)

Discussion of the drafting issue
Mr Andrew (DP) said that the clause was ambiguous as it could be interpreted in either one of the following ways:
1. An organ of state must implement a preferential procurement policy; and it must do so within the prescribed framework. (Thus, there are two compulsory aspects - the implementation of the preferential procurement policy AND its implementation within a certain framework) OR
2. An organ of state must implement its preferential procurement policy within a prescribed framework ONLY if it has chosen to implement a preferential procurement policy. (Thus, an organ of state has the option of implementing a preferential procurement policy - it is not mandatory. The only compulsory aspect is that it has to be implemented within a prescribed framework.)

Mr Andrew informed the committee that S217of the Constitution does not oblige the state to have a mandatory preferential procurement policy. He asked the Minister to state clearly whether it was their intention to make a preferential procurement policy mandatory on all organs of state and if so, to state clearly that intent in S2(1).

In reply the Minister remarked that it would be ''untenable to have a government with a myriad of policies" with some organs of state implementing and others not implementing a preferential procurement policy. It would be especially undesirable to have the decision left to someone's subjective discretion. Ideally, there should be one uniform policy which was subject to objective criteria.

The Chairperson said that this made it clear that the intent was that a preferential procurement policy should be binding on all organs of state.

Mr Feinstein (ANC) commented that the phrase was drafted openly but that it would not be difficult for them to alter it so that the ambiguity would be cleared up. He suggested the following formulation:
''Organs of state must implement a preferential procurement policy. Such policy must be implemented within the following framework''.

The State Law Advisor , explaining what S2(1) meant, said that the clause envisaged that a preferential procurement policy had already been implemented. The effect is that if such a policy has not been implemented then the clause does not apply at all. Thus the drafting had to be fixed to make the compulsory intent clear.

The question arose whether the committee, in the light of S217 (and its non-mandatory nature), had the authority to make the preferential procurement policy compulsory on all organs of state. In other words, does S217 preclude and make unconstitutional the mandatory implementation of a preferential procurement policy?

Discussion of the legal issue
The State Law Advisor, Mr Kellner, said that S217 does not prevent Parliament from implementing a mandatory preferential procurement policy. However he did not know if there was another part of the Constitution which prevented this.

Mr Feinstein asked him if, in terms of S44 of the Constitution, it could be assumed that the national legislature was not excluded from passing such legislation. Mr Kellner replied that he needed time to consider this matter.

The reason for examining Section 44 is as follows:
The legislation in question is a Section 76 Bill. S44 of the Constitution sets out the powers of the National Assembly and National Council of Provinces. The National Assembly is permitted to pass legislation on Schedule 4 matters but is prevented from passing legislation on Schedule 5 matters (subject to certain exceptions). Procurement is incidental to both Schedule 4 and Schedule 5 functions. As Parliament cannot pass Schedule 5 legislation, and procurement is incidental to Schedule 5, the question arises whether Parliament has the authority to make preferential procurement policy compulsory. Parliament can legislate on a Schedule 5 matter if the matter falls within a S44(2) exemption.

The Minister criticised the debate saying that this matter was beyond the scope of the committee. He said that their purpose was simply to deal with this as Section 76 legislation. The Chairperson responded that, at the end of the day, the Bill would have to be passed by the National Assembly, thus, if they were acting beyond the scope of their authority then that matter should be addressed now.

Ms Mahlangu (Co-chair) commented that this matter was ''too legal''. She suggested that they stick to the clauses at hand and that the committee might want to seek legal advice on the issue.

The Minister said that he did not think that legal consultation was necessary as the Bill had already been tagged as S76 legislation. The Chairperson noted that the debate arose out of the ambiguity in the Constitution.

Ms Fubbs (ANC, Gauteng) repeated the earlier suggestion that the constitutional matter be left for the time being.

A vote was taken from the provincial legislatures regarding whether they were in favour of S2(1) providing for the compulsory implementation of preferential procurement policy.
All the provinces voted in favour of the compulsory implementation of preferential procurement policy on all organs of state.

An opportunity was then given to the political parties to note their perspectives:
The DP commented that S217 does not require obligatory preferential procurement policy. The constitutional imperative is only for framework legislation. They were of the opinion that the implementation of the preferential procurement policy must be optional as making it obligatory would amount to taking the principle of equality too far. This was considered undesirable.

The DP further said that, in terms of S44 (specifically in relation to Schedule 5 functions) making the implementation of preferential procurement policy obligatory would be unconstitutional.

The NNP commented that the committee was there to fulfill the requirements of S217. This meant that they had to establish a framework. They felt that the implementation of the preferential procurement policy must be optional. They added that whether such policy was to be implemented or not was an administrative decision and each individual administration had the authority to make that decision. Thus, making it mandatory was unconstitutional.

The IFP supported the notion of mandatory implementation of the preferential procurement policy and supported Mr Feinstein's proposed amendment to clause 2(1).

Mr Feinstein suggested that S155(7) of the Constitution (dealing with local government) as well as Section 44 should be read closely. He submitted that the legislature had taken the mandate from S217 and then taken it further to make policy implementation obligatory. If these sections are read together then parliament's legislation in this regard cannot be considered unconstitutional. In any event, S217 does not prevent Parliament from making the implementation of the policy obligatory.

Mr Andrew said that Parliament should get a formal legal opinion as it would be embarrassing if they passed an unconstitutional law or if all the different political parties came with different legal opinions. Ms Hogan agreed, saying that they must ensure that they pass good legislation and requested the State Law Advisor draft his legal opinion on the matter for discussion on 18/1/2000. The Ministry was also asked to bring a legal opinion to the next meeting.

Section 2(1)(a)
Mr Schutte said that he stood by his argument of the previous day that benefits should be phased out for people who had already established themselves.

Regarding this section, the DP made various comments. Firstly, Mr Andrew felt that no ratio should be mentioned in (a) as this would allow for greater flexibility.

He also said that the section should mention a prescribed amount with a proviso attached to it in terms of which the Minister can alter the amount.

The Minister responded by saying that monetary values should be properly considered as different amounts will apply to different types of services.

Mr Andrew asked the Minister if he was saying that there would be more than one prescribed amount to which the 90/10 ratio or the 80/20 ratio would apply?
The Minister replied that you cannot have one limit for all these things (example, construction services vs gardening services).

Mr Feinstein agreed with Mr Andrew and said that the route of an actual prescribed figure would be the way to go. Regarding the issue of phasing out affirmative action, he said that it was a difficult matter as there was no scientific way to evaluate this. He referred to the American system saying that they had stopped applying affirmative action after it had existed for 30 years, only to realise two years later, that it had been stopped too early. Thus, when it comes to phasing out, he did not think it was something to speculate about now.

In summary the Chairperson asked members to consider in preparation for the next meeting whether a prescribed amount should be specified or not and whether the ratio should be included.

Section 2(1)(b)
As a matter of grammar the DP noted that the word maximum served no purpose (this was so because the lowest acceptable tender could not score a point less than 90 and using the word maximum suggested that lower points could be scored). In terms of suggesting a substantive amendment they recommended that the word maximum be replaced with the word ''minimum''.

Section 2(1)(c)
Mr Schutte felt that the formula should be retained in the clause. The Minister said that he did not mind whether they left the formula in the clause (or in the regulations). He reminded them however that they were dealing with two formulas; the ratio of 80 and the ratio of 90.

The only other opinion on this clause came from Mr Andrew. He suggested that in place of the 90 they should rather put a word such as p.set. This word could then be defined as maximum points set. He felt also that price should score fewer points (this is in keeping with his earlier proposal to convert the word 'maximum' in (b) to 'minimum'.

The Minister did not agree with this suggestion as it would not have the effect of giving preference to people who had been previously excluded.

Section 2(1)(d) - no discussion
Section 2(1)(e)
Ms T Essop (ANC, Western Cape) asked if the correct phrasing was ''may include" or "must include". The committee decided that using the word ''must'' would have the effect of excluding certain categories of preference. They decided to stick with the original draft and use the word ''may''.

Mr Hamilton (Kwa-Zulu Natal) asked if the provinces would be able to give a preference for goods which were locally manufactured (that is, in that particular province). The Minister replied that the international obligations of the country would not allow the kind of preference that he envisioned. Even if no international companies were involved and all the tenders were South African then specifications still would not allow this (it is the task of the tender boards to evaluate the tender against certain specifications).

The ANC proposed the inclusion of the word ''historically'' disadvantaged in 2(e)(i).

Mr Schutte said that they proposed the inclusion of various goals (as set out in the NNP proposed amendments).

Mr Andrew said that the reference to RDP principles was vague as there were only six basic principles in the RDP. In terms of transparency and legislative certainty there had to be some kind of cross-reference to a document external to the Bill which could be referred to in order to know to what RDP goals it was referring). He said that the DP amendment proposed that the tender would have to state what goals it set out to achieve. He further suggested that not more than two points should be awarded per goal in order to prevent an imbalance from taking place.

In response to Messrs Schutte and Andrew, the Minister replied that he did not understand what the problem was. He noted that specific points of disadvantage were described in the clause and further urged them to read clause (f) which requires that the goals against which the tender is to be measured must be specified. He explained that one cannot prescribe all the terms as there are simply too many.

Mr Feinstein said that he agreed with Mr Andrew that the reference to RDP principles in this section was too vague. He noted that Parliament had, in the past, tabled a document on the RDP and wondered whether a simple reference could not be made to this document as a cross-reference.

The Chairperson instructed the committee clerk to check with the Clerk of Papers. The feeling was that if such a document existed then it should be referred to in this clause.

The Minister however felt that the clause as it stood was adequate and suggested that the committee might consider replacing the word 'principles' with 'objectives' for the purpose of making that clause appear less vague.

Section 2(f) - No comments were made.

Section 2(g)
Mr Andrew said that he would stick to his argument of the previous day and suggested that the term ''sound reasons'' be replaced with ''objective criteria''. The Minister said that this amendment would be acceptable as it was resonant with the spirit of the Constitution.

Section 2(h)
The Chairperson noted that a proposed amendment to this section was that they replace the term ''must be cancelled'' with ''must be penalised''.

The Minister commented that this could lead to difficulties in respect of certain contracts, specifically in respect of which kind of penalty one would impose. He suggested that they rather look at changing the term to ''may be cancelled''. The State Law Advisor seconded this opinion. Mr Andrew also preferred this amendment and further suggested that they add ''at the sole discretion of the organ of state'' after the word ''cancelled''.

Section 3 - No comments were made.

Proposed insertion of an exemption clause
This clause was proposed by the Minister of Finance. The Minister suggested the following formulation:
''The Minister may on request exempt any organ of state from any or all of the provisions of this Act''.

Mr Andrew objected to the inclusion of this clause as he thought that giving the Minister the power to grant exemptions defeated the whole purpose of the Act. He also stated that it would create the potential for abuse and indicated that he did not think that the Act needed an exemption clause.

The Minister remarked to Mr Andrew that having an exemption clause was not for his own benefit or for the benefit of any future Minister of Finance as they did not have the time to ''look at exemptions all day''. He continued that an ''escape hatch'' was always necessary and that the true purpose thereof was to ''maximise compliance with the Act''

In light of Mr Andrew's criticism the Chairperson suggested that they look at a way of ''tying down'' the exemption clause. The purpose of this was not only to limit the Ministers power to grant exemptions but also for the Minister's own protection as he could easily be ''besieged'' by exemption applications.

Two suggestions were made from the ANC side. One suggestion was that the qualifying clause ''in the interests of national security'' be added to the exemption clause so that the Minister could only add exemptions for this purpose. Mr Feinstein pointed out that this would not work as an exemption may be necessary for a commercial reason.

The Minister explained that the issues which related to commercial contracts and contracts which affected national security were the same issues which applied to other contracts. The point being made was that one could not foresee when an exemption would be necessary and when not.

Mr Andrew reiterated his earlier point that there was no reason for an exemption clause. The Minister accused Mr Andrew of taking an ''anti-executive position which was impractical and had the effect of making government unworkable''. Mr Andrew took offence to this statement, remarking that the Minister did not have to ''get personal''.

Mr Schutte noted that the proper interpretation of S217 was that a department could itself decide to exempt certain areas. He pointed out that if the preferential procurement policy was not considered mandatory (as the NNP preferred) then an exemption clause would be redundant.

Additional amendments proposed by the ANC
In clause 2(h) the addition of the words ''at the sole discretion of the organ of state'' after the words ''may be cancelled''.

It was also proposed that the following clause be added under ''Regulations'' after clause 4:
''Draft regulations in terms of the Act must be published for public comment by publication in the government gazette before their enactment''.

Additional amendments proposed by the DP
1) They proposed that: ''Preferential procurement policies may not be implemented for tenders with a value in excess of five million rands'' be inserted as a new clause 2(5).

Mr Andrew explained his rationale by saying that ''in terms of the objects of the Bill an upper limit should exist.'' He noted that the Bill was aiming at small business therefore people who could tender large tenders should be excluded by putting in place an ''upper limit''.

2) A new clause 2(6) could read ''A tenderer must have one fifth of the additional points awarded to it in terms of paragraph 2(1)(d) deducted for each previous tender awarded to that tenderer, or a person or business concern financially associated with that tenderer, by any organ of state''.

Mr Andrew explained that they were trying to address the issue of whether a particular business should repeatedly be awarded a preferential tender or not. They were suggesting that after each additional succussful tender, points should be subtracted.
He added that they should also try to overcome the problem of a business having already won tenders, then changing its name so that points may not be subtracted for those tenders won.

3) The DP also suggested that provision be made for regular review to see whether the objects of the Act are being met. Mr Schutte agreed with this notion of review.

Amendments proposed by the NNP (definitions)
Mr Schutte suggested that the reconstruction and development principles be defined. He also suggested that they provide a definition for small business (that it be described as a business with a turnover of less than R300 000 per year) and he suggested a definition of persons who were disadvantaged by unfair discrimination (as persons who were not previously allowed to vote).

The Minister replied that the Small Business Act of 1997 already provides adequate definitions of small, medium, and micro business. He described these definitions as being useful and said that it would be tautologous to import them into this Bill as well.
With regard to the definition of persons who were previously disadvantaged the Minister said that such a definition would not be easy to draft as some people, for example, were allowed to vote for the old House of Representatives. The Minister did not feel that such a definition would be either useful or necessary.

Amendment proposed by SALGA (definition)
SALGA commented that they wanted to amend the definition of municipality. They suggested that the definition of municipality refer to S155(6) or S157 of the Constitution, or to a definition proposed by SALGA which defined municipality as local government and its administration (including not only local government but also service providers).

The Ministry did not approve of this definition. They indicated that service providers could not be included as they had their own regulations. The State Law Advisor concurred with this opinion, noting that they ''were wary of including service providers that were not government bodies''. It was noted that S151 of the Constitution provided a useful definition of municipalities.

SALGA agreed that their definition required further investigation.

Conclusion
The Chairperson noted that on Tuesday the committee would consider the constitutionality of a mandatory preferential procurement policy (on which a legal opinion had been requested from both the Ministry and the State Law Advisor (Mr Kellner). She asked that this opinion be distributed before Tuesday so that the committee members could examine it before the committee met.

She added that the committee should also consider whether the insertion of an exemption clause would be unconstitutional and asked Mr Kellner to submit a legal opinion on this matter as well (for discussion on Tuesday).

Annexure 1:
DEMOCRATIC PARTY
Proposed amendments to Preferential Procurement Policy Framework Bill (B66-99)

1. Clause 2, on page 2

(a) In lines 16 and 17,
delete all the words from "an organ" to "framework" and
insert "An organ of state implementing a preferential procurement policy must do so within the following framework"

(b) In line 18,
delete "90/10"

(c) In line 19,
delete "maximum" and
insert "minimum"

(d) In line 20,
delete "less" and
insert "fewer"

(e) In line 23,
delete "90" and
insert "Pset"

(f) After line 28,
insert "Pset = number of points awarded in terms of paragraph 2(1)(b)"

(g) In line 30,
delete "10"
and insert "100 minus Pset"
and delete "which" and insert "who"

(h) In line 34,
after "point"
insert "or points"

2. Clause 2, on page 4

(a) In line 2,
delete "sound reasons" and
insert "objective criteria other than those contemplated in paragraph (e) or subsection 2(2)"

(b) In line 9,
after "compliance"
insert "by the organ of state concerned."

3. New clause 2(4)
"An organ of state may vary the number of points awarded in terms of paragraph 2(1)(b) and the specific goals set in terms of paragraph 2(1)(d) as between individual tenders or categories of tender."

4. New clause 2(5)
"Preferential procurement policies may not be implemented for tenders with a value in excess of five million rands."

5. New clause 2(6)
"A tenderer must have one fifth of the additional points awarded to it in terms of paragraph 2(1 )(d) deducted for each previous tender awarded to that tenderer, or a person or business concern financially associated with that tenderer, by any organ of state."

6. New clause 2(7)
"A tenderer must provide proof of registration with the South African Revenue Services to be eligible for additional points to be awarded in terms of paragraph 2(1)(d)."

7. New clause
To be inserted after clause 4.

"As from 1 April 2005, the "90 points" referred to in paragraph 2(1)(b) is hereby amended to "98 points."

PROPOSED AMENDMENTS TO PREFERENTIAL PROCUREMENT POLICY FRAMEWORK BILL

2. After: 2(2)(b):
(c) the number of points to be awarded for any specific goal must be clearly specified in the invitation to submit a tender provided that not more than 2 points may be awarded for any one specific goal.

1. After: 2(1)(g):

(h) the preferential procurement policy must clearly define the goods and services in respect of which the policy will apply, and must be published in either the Government Gazette or, in the case of a provincial or local government organ of state, in a provincial gazette.

Annexure 2:
NEW NATIONAL PARTY
PREFERENTIAL PROCUREMENT POLICY FRAMEWORK BILL
AMENDMENTS FOR CONSIDERATION

AD CLAUSE 1: DEFINITIONS

That the following definitions be added or amended:
"acceptable tender" means any tender which, in all respects, complies with the specifications and conditions of tender as set out in the tender document and which has been received from a tenderer who is in a good standing with the Receiver of Revenue.

"Reconstruction and Development Principles" means the promotion of national, provincial, regional and local development by South Africans for South Africans and the promotion of equitable development opportunities for women and the physically handicapped.

"Small business" means a business with a turnover of less than 300 000 per annum".

"Persons or categories of persons, disadvantaged by unfair discrimination" means South African citizens who have previously been denied the right to vote by legislation."

AD CLAUSE 2
Clause 2(1)(e) to read as follows:
The specific goals implement a procurement policy which provides for -
(aa) categories of preference in the allocating of contracts; and
(bb) the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination; and must include one or more of the following goals:
(i) the promotion of Reconstruction and Development Programme principles;
(ii) the promotion of persons who have previously been denied the right to vote by legislation;
(iii) the promotion of women;
(iv) the promotion of physically handicapped persons; (v) the promotion of South African enterprises;
(vi) the promotion small business;
(vii) the creation of new jobs
(viii) the promotion of enterprises located in a specific
province for work to be done or services to he rendered in that specific province;
(ix) the promotion of enterprises located in a specific region for work to he done or services to be rendered in that specific region;
(x) the promotion of business located in a specific local authority area for work to be done or services to be rendered in that specific local authority area;
(xi) the promotion of enterprises located in rural areas;

A new paragraph (h) to be added:
The sound reasons contemplated in (g) refers to one or more of the following reasons: the inability of the tenderer to deliver the goods or services or to complete the tender; fraud committed or false information furnished by the tenderer to secure the tender or to secure preference in terms of this Act; the tenderer not being in good standing with the Receiver of Revenue or the failure of the tender to meet any tender condition or formal requirement, or any other objective criteria, apart from the preferences already applied, which would justify the award to another tenderer.

AD: REVIEW OF BILL
A clause to be added which reads as follows:
"This Act will be valid and binding for a period of 10 years from the date of its promulgation after which it will terminate and the subject matter of this Act will be reviewed".

POSSIBLE AMENDMENT TO CLAUSE 2(1)(d)
(d) in addition to the points contemplated in paragraphs (b) and (c), a maximum of 10 points may be awarded to tenderers which comply fully with all specific goals ; provided that, should a tenderer have been awarded three tenders in one financial year by the same organ of state, that tenderer will not be entitled to points in addition to the points contemplated in paragraphs (b) and (c) in submitting tenders to the said organ of state.

Appendix 3: Proposed amended Bill by Department as of 12/1/2000

REPUBLIC OF SOUTH AFRICA

PREFERENTIAL PROCUREMENT POLICY FRAMEWORK BILL

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(As introduced in the National Assembly as a section 76(1) Bill)

---------------------------------

(MINISTER OF FINANCE)

[B - 99]

_____________________________________________________________________

REPUBLIEK VAN SUID-AFRIKA

WETSONTWERP OP DIE RAAMWERK VIR VOORKEURVERKRYGINGSBELEID

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(Soos ingedien in die Nasionale Vergadering as 'n artikel 76(1) - wetsontwerp)

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(MINISTER VAN FINANSIES)

B I L L

To identify the institutions contemplated in section 217(1) of the Constitution; To give effect to section 217(3) of the Constitution by providing a framework for the implementation of the procurement policy contemplated in section 217(2) of the Constitution by any organ of state and any such identified institution; and to provide for matters connected therewith.

BE IT ENACTED by the Parliament of the Republic of South Africa, as follows:

Definitions

1. In this Act, unless the context indicates otherwise

(i) "acceptable tender" means any tender which, in all respects, complies with the specifications and conditions of tender as set out in the tender document; (i)

(ii) "identified institution" means any institution contemplated in paragraph (b) of the definition of organ of state in section 239 of the Constitution; (ii)

(iii) "Minister" means the Minister of Finance; (iv)

(iv) "organ of state" means an organ of state in the national, provincial or local sphere of government as contemplated in section 217(1) of the Constitution; (v)

(a) a national or provincial department as defined in the Public Finance Management Act, 1999 (Act No. 1 of 1999;

(v) "preferential procurement policy" means a procurement policy contemplated in section 217(2) of the Constitution; (vi)

(vi) (vii) "this Act" includes any regulations made under section 4. (iii)

Framework for implementation of preferential procurement policy

2. (1) An organ of state or an identified institution must implement its preferential procurement policy within the following framework:

(a) A 90\10 preference point system must be followed for contracts with a rand value above a prescribed amount and a 80/20 preferences point system for contracts equal to or below that prescribed amount;

(b) the lowest acceptable tender must score a maximum of 90 points for contracts with a rand value of above the prescribed amount and a maximum of 80 points for contracts equal to or below that prescribed amount;

(c) any other acceptable tenders which are higher in price must score less points, on a pro rata basis, calculated on their tender prices in relation to the lowest acceptable tender in accordance with the following formula: a prescribed formula as prescribed by the Minister.

Pmin 90

--------X-----

Ps = P 1

Where Ps = points scored for price by tender under consideration;

Pmin = tender price of lowest acceptable tender; and

P = tender price of tender under consideration;

(d) in addition to the points contemplated in paragraphs (b) and (c), a maximum of 10 points for contracts with a rand value of above that prescribed amount and 20 points for contracts equal to or below that prescribed amount may be awarded to tenderers which comply fully with all specific goals;

(e) the specific goals may include - Reconstruction and Development Programme principles;

(i) Contracting with persons, or categories of persons, disadvantaged by unfair discrimination on the basis of race, gender or disability;

(iii) the principles of the Recontruction and Development Programme.

(f) any specific goal for which a point may be awarded must be clearly specified in the invitation to submit a tender; and

(g) the contract must be awarded to the tenderer who scores the highest points, unless sound reasons objective criteria as contemplated in paragraph (e) or (f) above justify the award to another tenderer ;and

(h) Any tender awarded on account of false information furnished by the tenderer in order to secure preferences in terms of this Act must be cancelled without prejudice to any other remedies the state may have.

(2) Any invitation to submit a tender contemplated in subsection (1) must clearly define

(a) the categories of preference;

(b) the persons, or categories of persons, disadvantaged by unfair discrimination to be protected or advanced.

(3) (2) Any goals contemplated in subsection 1(f) must be measurable, quantifiable and monitored for compliance.

Transitional provision

3. Any procurement process implemented under a preferential procurement policy where the invitation to tender was advertised before the commencement of this Act, must be finalised as if this Act had not come into operation.

Regulation

4. The Minister may make regulations any matter that may be necessary or expedient to prescribe in order to achieve the objects of this Act.

Short title

5. This Act is called the Preferential Procurement Policy Framework Act, 2000.