Issue Date: 
Tuesday, July 5, 2016

Draft Procurement Regulations Media Release

 The Draft Procurement Regulations 2016 were released on 14 June 2016. If these regulations are going to be implemented it will change the Tender environment in South Africa. Below is the media release from the Office of the Chief Procurement Officer, explaining the major changes in the Regulations:

“The Office of the Chief Procurement Officer (OCPO) has published the proposed new Preferential Procurement Regulations*, to afford the public an opportunity to comment.

The revision of the Preferential Procurement Regulations was influenced, to a large extent, by the need to provide a mechanism that will assist targeting certain categories of persons, including investigating ways for government to procure at least 30 per cent from SMMEs, co-operatives, township and rural enterprises, and other targeted groups.

The main changes contained in the proposed new Preferential Procurement Regulations are the following:

  • 80/20 preference points system

In the current 80/20 preference point system, 80 points are allocated for the lowest price and a maximum of 20 points count allocated towards the BB-BEE level of the supplier. This applies to tenders equal to or above R30 000 up to a maximum of R1 million.

The points for price (80) and the B-BBEE level (20) are combined and only a tender with the highest number of points scored out of 100 may be selected.

The draft regulations propose that this threshold for the application of the 80/20 system be increased to R100 million to further stimulate the development of small enterprises.

  • 90/10 preference points system

Similarly, in the current 90/10 preference point system, 90 points are allocated for price and a maximum of 10 points for B-BBEE status level. The 90/10 applies to tenders that are above R 1 million, with all applicable taxes included.

The proposal in the draft regulations is for the 90/10 rule to apply to tenders above R100 million.

  • 30 per cent sub-contracting

The current regulations do not make sub-contracting compulsory, however with the new draft regulations it will be compulsory to sub-contract a minimum of 30 per cent of the value of the contract (above R30 million) to further develop emerging suppliers.

These emerging suppliers have to be-

(a) one or more black female-owned Exempted Micro Enterprises (EMEs); or

(b) one or more black youth-owned EMEs; or

(c) one or more black-owned EMEs; or

(d) one or more Qualifying Small Business Enterprises (QSE); or

(e) one or more small business, as defined in the National Small Business Act, 1996 (Act No. 102 of 1996).”

We will keep you up-to-date with the Draft Regulations and how it plays out.

*in terms of section 5(2) of the Preferential Procurement Policy Framework Act, 2000 (Act No. 5 of 2000) (PPPFA)

Earn to learn

Visit www.how2tender.com for Tender workshops around the country.

When Must I Sub-Contract?

There seems to be a lot of confusion amongst entrepreneurs when it comes to tenders and sub-contracting. The Draft Preferential Procurement Regulations, have been gazetted and are currently up for review. However, these Regulations are the major cause for the confusion. Many entrepreneurs ask whether they should sub-contract or not whilst responding to a tender.

The Draft Preferential Procurement Regulations stipulates the following: 

  1. For contracts above R30 million, the tenderer MUST sub-contract a minimum of 30% of the value of the... Read More
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