• Uniting the South African Construction Industry

This submission represents a consolidated view from Construction Alliance South Africa (CASA), an association of over thirty – five (35) industry and voluntary associations across the value chain in the Construction Sector. Whereas we have included specific commentary, it would be remiss of us not to raise the uncertainty and confusion that the communication process adopted by National Treasury has caused among both public sector entities as well as amongst member companies in our Sector following the ruling by the Constitutional Court. This has not only added complexity and higher costs for doing business with the State, but also arguably puts other legislation such as Sector Specific BBBEE at risk as well as the gains achieved thus far totally at risk in the following manner, namely:

  • The complete removal of section 10 [Subcontracting after awarding of tender], in particular the restriction on sub-contracting of not more “than 25% of the value of the contract to any other enterprise that does not have an equal or higher B-BBEE status level of a contributor than the person concerned…” is an open opportunity for fronting, which detracts from the objectives of transformation.
  • Micro-sized businesses previously having only completed contracts of < R1m can potentially be awarded tenders of R100 million and then subcontracting up to 99% to a foreign entity with no empowerment credentials.

Furthermore, all of this is happening at a time when we should be maximising the opportunity for rebuilding the Sector so that we can build the local capacity to meet the demands of our Big Build Infrastructure Investment plans currently being driven through the Office of the President. Furthermore, we would like to advocate for the fast-tracking of the long awaited Public Procurement Bill, which is meant to provide better legislative certainty, accountability, oversight and guidance for infrastructure procurement coupled with transformation elements in a manner that seeks to find the best compromise solution for meeting the prescripts of Section 217 of the Constitution of the Republic of South Africa, Act 108 of 1996, with subsections 1 and 2 both in balance, whilst providing little opportunity for detractors of especially sub-section 2, to be able to rally against the foresight so provided for in the Constitution.

Specific Comments and Remedial Proposals

For ease of reference, specific comments and proposal for remedy have been consolidated in the table below.

 

NO REGULATION COMMENTS PROPOSALS
1 Definitions No Comment No Comment
2 Application No Comment No Comment
3 Identification of preference point system 1.             The BBBEE scorecard has been removed from the proposed regulations.

 

1.1.    Instead, new sub-section 4(2) reads as follows:

 

“A maximum of 20 points may be awarded to a tenderer for the specified goals envisaged in section 2(1)(d) and

(e)  of the Act”.

 

1.2.    New sub-sections 5(2); (6(2) and 7(2) reads as follows:

 

“A maximum of 10 points may be awarded to a tenderer for the specified goals envisaged in section 2(1)(d) and

(e)  of the Act”.

 

2.              The provisions of Sub-sections 2(1)(d) and (e) of the Preferential Procurement Policy Framework Act (“the Act”) are as follows:

 

“(d)          the specific goals may include

 

(i)  contracting with persons, or categories of persons, historically disadvantaged by unfair discrimination based on race, gender, or disability;

(ii) implementing the programmes of the Reconstruction and Development Programme as published in Government Gazette No 16085 dated 23 November 1994;

 

(e)           any specific goal for which a point may be awarded must be clearly specified in the invitation to submit a tender.”

 

3.       The above amendment empowers each organ of State to devise their own criteria

Revert to the 2011 regulations which includes the BBEEE scorecard [sub- sections (5(2) and 6(2)] until such time that the Public Procurement Bill has been gazetted

 

for the awarding of either 10 or 20 points based on specific goals to be determined by such organ of State.

 

4.              It is furthermore to be noted that these sub-sections are not prescriptive as they read “A maximum of 20/10 points may be awarded to a tenderer…” which then leads to the reasonable conclusion that such criteria could very well be excluded in any tender document formulated by an organ of State.

 

5.              The very reason for the inclusion of the BBBEE scorecard in the 2017 regulations was due to the Minister finding that organs of State were not giving regard to the intent of the Act by ignoring the preference, protection, and advancement of those unfairly discriminated against in the tender process. This system ensured that targets and measurements were standardized.

 

6.              The revised regulations mean that for each tender an organ of State can instead prescribe its policy for scoring the 10 and 20 points. i.e. they may choose direct black ownership or 100% black ownership or black woman ownership or employment equity. This system does not allow for a fair, equitable, transparent, competitive, or cost-effective process as the bar will be constantly changing and therefore will be open to abuse and manipulation.

 

7.              Such a scenario will make it virtually impossible for any business to align their operations and investments in South Africa. The absence of a scorecard allows for foreign tenderers without commitment to the development of local capacity and local industries, to cannibalise business opportunities that should be available to locally based companies..

4 80/20 preference point system for acquisition of goods or services with

Rand value equal to

8.       The revised regulations mean that for each tender an organ of State can instead prescribe its policy for scoring the 10 and 20 points. i.e. they may choose

direct black ownership or 100% black

Revert to the 2011 regulations which includes the BBEEE scorecard [sub- sections (5(2) and 6(2)] until such time that the Public Procurement Bill

has been gazetted

 

or above R30 000 and up to R50 million ownership or black woman ownership or employment equity. This system does not allow for a fair, equitable, transparent, competitive, or cost-effective process as the bar will be constantly changing and therefore will be open to abuse and manipulation.

 

9.       Such a scenario will make it virtually impossible for any business to align their operations and investments in South Africa. The absence of a scorecard opens the door to foreign tenderers further diluting the business opportunities available to local participants.

 

10.

5 90/10 preference point system for acquisition of goods or services with Rand value above R50 million Same comments as per above Revert to the 2011 regulations which includes the BBEEE scorecard [sub- sections (5(2) and 6(2)] until such time that the Public Procurement Bill has been gazetted
6 80/20 preference points system for tenders to generate income or to dispose of or lease assets with Rand value equal to or above R30 000 and up to Rand

value of R50 million

Same comments as per above Revert to the 2011 regulations which includes the BBEEE scorecard [sub- sections (5(2) and 6(2)] until such time that the Public Procurement Bill has been gazetted
7 90/10 preference point system for tenders to generate income or to dispose of

or lease assets with Rand value equalto or above R50

million

Same comments as per above Revert to the 2011 regulations which includes the BBEEE scorecard [sub- sections (5(2) and 6(2)] until such time that the Public Procurement Bill has been gazetted
8 Criteria for breaking

deadlock inscoring

No Comment No Comment
9 Award of contracts to tenderers not scoring highest points The proposed regulation states:

A contract may be awarded to a tenderer that did not score the highest points only in accordance with section 2(1)(f) of the Act.

In order to mitigate against risk and ensure that in the process of infrastructure development, the total cost of ownership is factored into every step of the process,

objective criteria should include consideration of the full life

cycle cost of the asset.

 

10 Remedies No comment No Comment
11 Repeal of

regulations

No comment No Comment
12 Short title and

commencement

No Comment No Comment

We trust that the aforementioned comments are well received and look forward to working with you on future procurement legislation that affects the growth and development of our Sector.

 

Yours Sincerely

John Matthews Chairperson

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