Joint Ventures - important tool in the Tender Process
By Werner van Rooyen
14 September 2015
On 1 May 2015 the Amended B-BBEE Codes of Good Practice came into effect. These Amended Codes have a major impact on the B-BBEE Scores of all businesses that participate in B-BBEE in South Africa. The bottom line is that the B-BBEE scoring levels have changed drastically. If a company does not have any sort of Black Ownership it is going to be very difficult to achieve a decent B-BBEE Score.
In the Amended B-BBEE Codes of Good Practice the Ownership Element Score has been adjusted from 20 points to 25 points. It is widely accepted that on the “Old Codes” a good B-BBEE score was between 65 to 75 points. Businesses that achieved such a score usually got a Level Four B-BBE Score which in turn meant that these businesses had a 100% Procurement Recognition Level. A Level Four Procurement Recognition Level was great and everybody was happy.
The problem is that due to new changes in the Amended B-BBEE Codes such as Priority Elements and higher scoring levels, it will become a challenge to reach the same recognitions levels as in the past. This is where Joint Ventures will play a major role in ensuring that good B-BBEE Scores can be achieved by businesses.
One of the most important instances where B-BBEE Scores are of utmost importance is in the tender process. It is common knowledge that the better your B-BBEE Score, the better your chances of winning a tender. Government Entities must use the Preferential Procurement Point System (either the 80/20 or 90/10 system) to calculate which tender response will be awarded the tender – if you do not have a good B-BBEE Score and if it is a close race, you are going to lose out with a low B-BBEE Score.
Keeping all the above in mind, Joint Ventures can be a great tool to use to increase B-BBEE Scores. Remember that when you tender through a Joint Venture you must submit a Consolidated Joint Venture B-BBEE Certificate. If you have the correct Joint Venture partner, with a good B-BBEE score, the overall score that you will achieve in the Preferential Procurement Point System can be much higher than going into the tender alone.