contents · 23456bowb2wm6ans6nob wnoaffio4ncbfn5be3rl4fibeawfi3a6s6nob4nbtw3oibhpa4fif 5...
TRANSCRIPT
Contents
04 Introduction
05 OurFirm
06 OurFootprintinAfrica
07 OurGovernmentContractingandPublicProcurementServiceLine
08 GovernmentContractingandPublicProcurementinSouthAfrica:
•Overview •Scopeofapplication •Applicableprocedures •Evaluationandaward •Changestoanexistingcontract •Enforcement •Reform
16 KeyContacts
Guide to Government Contracting and Public Procurement in South Africa
3
This is the first edition of our Guide to Government Contracting and Public Procurement in South Africa.
Itisintendedtoanswersomeofthemostfrequentlyaskedquestionsrelatingtopublic
procurement,andtoprovideaconciseoverviewofissuespertainingtogovernmentcontractingandpublicprocurementinSouthAfrica.
Inparticular,thisguideprovidesabroadoverviewofthelegislativeregimeapplicabletopublicprocurementinSouthAfrica,andconsidersthescopeofapplicationofthislegislativeregimetoentities,contracts,privatisationsandpublic-privatepartnerships(PPPs).
Theguidealsoprovidesanoverviewoftheapplicableproceduresforpublicprocurement,theevaluationandawardoftenders,changestoexistingcontracts,andenforcement,aswellasthereformsthatareexpected.
Claire Tucker
HeadofPublicLawandRegulatory
The contents of this guide are for reference
purposes only and should not be considered to
be a substitute for detailed legal advice. If you
require further information or specific advice,
please contact one of the key contacts listed
at the end of this guide.
Introduction
BOWMANS
4CONTENTS PAGE
Guide to Government Contracting and Public Procurement in South Africa
5CONTENTS PAGE
Our Firm
Bowmans is a leading Pan-African law firm. Our track record of providing specialist legal services, both domestic and cross-border, in the fields of corporate law, banking and finance law and dispute resolution, spans over a century.
WithsixofficesinfourAfricancountriesandover400specialisedlawyers,
wearedifferentiatedbyourgeographicalreach,independenceandthequalityoflegalservicesweprovide.
WedrawonouruniqueknowledgeoftheAfricanbusinessenvironmentandin-depthunderstandingofthesocio-politicalclimatetoadviseclientsonawiderangeoflegalissues.Ouraimistoassistourclientsinachievingtheirobjectivesassmoothlyandefficientlyaspossiblewhileminimisingthelegalandregulatoryrisks.
Ourclientsincludecorporates,multinationalsandstate-ownedenterprisesacrossarangeofindustrysectorsaswellasfinancialinstitutionsandgovernments.
Ourexpertiseisfrequentlyrecognisedbyindependentresearchorganisations.
WehavebeennamedAfricanLegalAdviserbyDealMakersforthelastthreeconsecutiveyearsandSouthAfricanLawFirmoftheYearfor2016bytheWho’s Who Legal.Mostrecently,wewontheTechnology,MediaandTelecommunicationsTeamoftheYearAwardattheprestigiousAfricanLegalAwardshostedbyLegal WeekandtheCorporateCounselAssociationofSouthAfricain2017.Thefirmwasalso‘highlycommended’intheAfricanLawFirmoftheYear–LargePracticeandLitigationandDisputeResolutionTeamoftheYearcategories.
BOWMANS
6CONTENTS PAGE
Bowmans offices
Relationship firm
Significant transaction
or advisory experience
Bowmans offices
Relationship firm
Significant transaction or advisory experience
SOUTH AFRICA MOZAMBIQUE
NIGERIA
KENYA
TANZANIA
UGANDA
Bowmans offices
Relationship firm
Significant transaction or advisory experience
SOUTH AFRICA MOZAMBIQUE
NIGERIA
KENYA
TANZANIA
UGANDA
WeprovideintegratedlegalservicesthroughoutAfricafromsixoffices(Cape
Town,DaresSalaam,Durban,Johannesburg,KampalaandNairobi)infourcountries(Kenya,SouthAfrica,TanzaniaandUganda).
WeworkcloselywithleadingNigerianfirmUdoUdoma&Belo-Osagie,andMozambique-basedboutiquefirm,TacianaPeãoLopes&AdvogadosAssociados.WealsohavestrongrelationshipswithotherleadinglawfirmsacrosstherestofAfrica.
WearerepresentativesofLexMundi,aglobalassociation,withmorethan160independentlawfirmsinallthemajorcentresacrosstheglobe.Thisassociationgivesusaccesstothebestfirmsineachjurisdictionrepresented.
Our Footprint in Africa
Bowmans offices
Relationship firm
Significant transaction or advisory experience
SOUTH AFRICA MOZAMBIQUE
NIGERIA
KENYA
TANZANIA
UGANDA
Bowmans offices
Relationship firm
Significant transaction or advisory experience
SOUTH AFRICA MOZAMBIQUE
NIGERIA
KENYA
TANZANIA
UGANDA
Bowmans offices
Relationship firm
Significant transaction or advisory experience
SOUTH AFRICA MOZAMBIQUE
NIGERIA
KENYA
TANZANIA
UGANDA
Guide to Government Contracting and Public Procurement in South Africa
7CONTENTS PAGE
Our Government Contracting and Public Procurement Service Line
F airness,equitability,transparency,competitivenessandcost-effectivenessarethe
guidingprinciples,requiredbytheConstitutioninrelationtoallpublicprocurementinSouthAfrica.
Wehavehadmanysuccessesinguidingbothpublicandprivatesectorclientsthroughthecomplexregulatoryregimeofpublicprocurementprocesses.
Onthepublicsectorside,weassistwiththedesignandimplementationoffairtenderprocessesthatmeetthestipulatedconstitutionalprinciples.
Ontheprivatesectorsideweadviseclientsontheprocurementofgoodsandservicesbyorgansofstateandassistwithchallengingtenderprocesseswhichdonotmeetconstitutionalstandards.
Weadvisecorporateclientsandgovernmentbodiesontheapplicationandinterpretationoflawsandonadministrativeaction.Wealsoregularlyrepresentclientsinproceedingsbeforestatutorybodiesthatregulatediverseareasofeconomicandsocialactivity.Ourcollectiveexpertiseinconstitutionalandadministrativelawmakesusleadingpractitionersinjudicialreviewproceedings.
OVERVIEW
1. What legislative framework is applicable
to government contracting and
public procurement?
TheprinciplepieceoflegislationthatregulatespublicprocurementistheConstitutionoftheRepublicofSouthAfrica,1996(Constitution).Section217oftheConstitutionrequiresthatwhenanorganofstatecontractsforgoodsandservices,itmustdosoinaccordancewithprinciplesoffairness,equitability,transparency,competitivenessandcost-effectiveness.
Thisconstitutionalrequirementisechoedinsection51(1)(a)ofthePublicFinanceManagementAct1of1999(PFMA),whichstatesthatanaccountingauthorityfor,amongothers,anationalorprovincialdepartmentorpublicentitymustensurethattheparticulardepartmentorentityhasandmaintainsanappropriateprocurementandprovisioningsystemwhichisfair,equitable,transparent,competitiveandcost-effective.ThePFMAisimplementedthroughtheregulationspublishedunderit,namelytheNationalTreasuryRegulations(TreasuryRegulations).
TheConstitutionpermitsorgansofstate(suchasdepartmentsofgovernmentandpublicentities)toimplementapreferentialprocurementpolicythatadvancespersonspreviouslydisadvantagedbyunfairdiscrimination.Section217(3)oftheConstitutionprovidesforlegislationthatwillprescribeaframeworkwithinwhichthepolicymustbeimplementedtobeenacted.Inlinewithsection217(3)oftheConstitution,thePreferentialProcurementPolicyFrameworkAct5of2000(PPPFA)andtheregulationspublishedunderitin2011(PPPFARegulations)prescriberequirementsregardingblackeconomicempowerment(BEE)considerationsforstatetenders.
TheLocalGovernment:MunicipalSystemsAct32of2000andtheMunicipalFinanceManagementAct56of2003(MFMA)regulate,amongothers,themannerinwhichmunicipalpowersandfunctionsareexercisedandperformedandthemanagementofthefinancialaffairsofmunicipalitiesandotherinstitutionsinthelocalsphereofgovernment.Theserequirethattheentitiestowhichtheyapply,adheretothePPPFA.
SouthAfricaisafoundingmemberoftheWorldTradeOrganisation(WTO)andisclassifiedas
adevelopedcountry.Despitethis,SouthAfricahasbeenabletonegotiatefavourableconditionsandextendedimplementationperiodsforsomeofitssensitiveeconomicsectorsintheGeneralAgreementonTariffsandTrade(GATT).
SouthAfricaisalsoasignatorytotheWTOAgreementonGovernmentProcurement(GPA)withcertainreservations.
2. Is there a regulatory authority that is
responsible for public procurement enforcement?
No.Thereisnospecificregulatoryauthorityinrespectofpublicprocurement.Mostgovernmentdepartmentsorpublicentitiesdetermineandregulatetheirprocurementsystemsinternallyinaccordancewiththeregulatoryrequirementsforsuchasystem.However,atprovincialleveltherearebuyingofficesinoperationincertainareas.
PublicprocurementisgovernedbytheprinciplesofadministrativejusticeandanunfairdecisioncanbetakenonreviewtotheHighCourt(see17).
3. What are the overriding principles applicable
to public procurement?
Theoverridingprinciplesapplicabletopublicprocurementaretheconstitutionalrequirementsof:fairness,equitability,transparency,competitiveness,andcost-effectiveness.Thesefiveprinciplesarethestandardsagainstwhichallprocurementbyanorganofstateismeasured.
Fairnessandequitabilityrequirethataprocurementprocessbeprocedurallyfairandareconcernedwiththemannerinwhichtheprocessisconducted.Forexample,allparticipantsmustbegiventhesameinformationandopportunities.
Transparencyrequiresopennessandaccountability.Thismeansthattheprocessmustbeconductedpubliclyandnotbehindcloseddoors.Itmeansthatprocurementinformationmustbegenerallyavailable,procurementrulesandpracticesshouldbestandardisedandmadeknown,andinformationregardinggovernmentcontractsandtheirawardshouldbeaccessible.
Competitivenessandcost-effectiveness,whichrevolvearoundcost,requirethatanorganofstatemust,whiletakingintoaccounttheotherprinciples,trytoprocuregoodsorservicesatthelowestpossiblecostandderivevalueformoney.
Guide to Government Contracting and Public Procurement in South Africa
9CONTENTS PAGE
Whilenotinherentlycontradictory,thereisatensionamongthefiveprinciplesandtheremaybecircumstanceswheretheachievementofoneprincipleisnotpossibleunlessanotherissacrificed.Therefore,whenevaluatingwhethertherehasbeencompliancewithsection217oftheConstitution,thefiveprinciplesmustbelookedatasawholeratherthanseparately.
4. Are any industries subject to
specific regulation?
Thereisnoindustryspecificregulationunderthelegislativeregimeoutlinedabove.However,therearesomegovernmentpoliciesrelatingtoprocurementwithincertainindustries.Forexample,theDefenceIndustrialParticipation(DIP)policyismandatoryfortheDepartmentofDefenceandparastatalorganisationsinthedefenceindustry.
Thispolicyusespurchasesandleasesbyorgansofstateinthedefenceindustryasleveragetoobligeaforeignsellerofdefencecommoditiesorservicestododefence-relatedbusinessinSouthAfrica.Thisisdoneonareciprocalbasisinordertoadvancemilitarystrategicanddefence-relatedindustrialimperatives.ThepolicyappliestoallforeigndefencepurchaseandleasecontractsaboveUSD2million.
TheDIP,whichonlyfocusesonthedefenceindustry,isavariationoftheNationalIndustrialParticipationProgramme(NIPP)whichappliestoallpurchaseorleasecontractsbystateorgansandparastatalorganisationsthathaveanimportedcontentofUSD10millionorabove.
5. What role does local content play in the
procurement process, if any?
Arecenttrendinpublicprocurementincludesanincreasedfocusonlocalcontent.ThishasseenthesigningoftheLocalProcurementAccordon31October2011undertheNewGrowthPathadoptedbythegovernment.TheAccordistargeting75%ofpublicandprivateprocurementtoacceleratejobcreationandtheattainingofthegoalsoftheIndustrialPolicyActionPlan.
ThePPPFAprovidesthattherecouldbespecificlocalcontentrequirementsinatenderwhichmustbemetforthetendertoqualifyforcompetitiveadjudication.Thesewillbesetoutintherequestforproposal(RFP)document.
6. Is there a procurement portal and is
it accessible?
InApril2015asingleeTenderportalandcentralsupplierdatabasewaslaunched.OperatedbyNationalTreasury(seewww.etenders.gov.za),itaimstosimplify,standardiseandautomatetheprocurementprocess.Theportalcarriestendernotices,accompaniedbyofficialtenderdocumentsandrelevanttermsofreferenceofotherdescriptionsoffunctionalityasapplicable,andawardnotices.Theportalisaccessibletothepublic.
Allcompaniesthatwishtodobusinesswithgovernmentmustberegisteredonthecentralsupplierdatabasefortransactionswithnationalandprovincialgovernmentandtheirentities,aswellasmunicipalities.
Itisalsonowcompulsorytoprocureroutinegoodsandservicesthroughthecentrallynegotiatedcontractsinplace.TheprocessismanagedthroughthegCommerceportalwhichautomatesorderingandallowsforbulkdiscounts.Theautomationprocessisexpectedtoreducecorruptionbyreducingtheriskofhumaninterventiontooverrideestablishedprotocols.
SCOPE OF APPLICATION
1. Which entities must comply with the
procurement rules? Are there any exemptions?
ENTITIES COVERED
Intermsofsection217oftheConstitution,allorgansofstateinthenational,provincialandlocalsphereofgovernmentoranyinstitutionidentifiedinnationallegislationmustcomplywiththeprocurementrules.
OnthenationallevelthePFMAappliestospecificinstitutionsincluding:
• NationalandprovincialstatedepartmentsasdefinedinthePublicServiceAct103of1994.
• Listedmajorpublicentities,nationalgovernmentbusinessenterprisesandotherpublicentities.
• Listedconstitutionalinstitutions.• Provinciallegislatures.
BOWMANS
10CONTENTS PAGE
OnthelocalleveltheMFMAappliestothefollowing:
• Allmunicipalities.• Allmunicipalentities.• Nationalandprovincialorgansofstateto
theextentoftheirfinancialdealingswithmunicipalities.
ThePPPFARegulationsareapplicabletoorgansofstatedefinedasincluding:
• Nationalandprovincialdepartments.• Municipalities.• Constitutionalinstitutions.• Parliament.• Provinciallegislatures.• Otherorgansofstatethatareincludedin
section239oftheConstitutionandarerecognisedbytheMinisterofFinanceasinstitutionstowhichthePPPFAapplies(nosuchotherorgansofstatehavebeenrecognisedbytheMinisterofFinance).
ThePPPFAalsoappliestothespecificpublicentitieslistedinthePFMA.
EXEMPTIONS
Therearenoparticularexemptionsfromprocurementrulesbutthereisameasureofflexibility.Forexample,anorganofstatemayrequestexemptionfromanyoftheprovisionsofthePPPFAforreasonsincludingthattenderersarelikelytobeinternationalsuppliers,amongothers.
Thisexemptionprovisionisdesignedtoworkonacase-by-casebasisandexemptstheorganofstatefromprovisionsofthePPPFAinrespectofaspecifictender.ManyofthepublicentitieslistedinthePFMAwerespecificallyexemptedfromtheprovisionsofthePPPFAuntil7December2012,afterwhichtheexemptionlapsed.
Section92ofthePFMAallowstheMinisterofFinancetoexemptentitiesfromspecificprovisionsofthePFMAortheTreasuryRegulations,whilesection177oftheMFMAallowstheMinisterofFinancetoexemptanymunicipalityormunicipalentityfromspecificprovisionsoftheMFMA.
2. What contracts do procurement rules cover?
Are there any specific thresholds?
CONTRACTS COVERED
Publicprocurementrulesapplytocommercialcontractsbyorgansofstateforthe:
• Acquisitionofgoodsandservices.• Disposalandlettingofstateassets,including
thedisposalofgoodsnolongerrequired.• ConclusionofPPPs.
AccesstostateregulatedassetsisregulatedthroughPPPagreementsorthroughtheregulationswhichareapplicableinthespecificsector.Forexample,inthemineralsandpetroleumsectorapplicationstoexploitsuchassetsaregovernedbysectorspecificlegislation.
However,theprocurementrulesdonotprescribetheformatforprocurement.Forexample,opentenderingisnotrequirediftherearecompellingreasonsnottoconducttheprocessinthismanner.
SPECIFIC THRESHOLDS
Therearenospecificthresholdstodeterminewhetheracontractissubjecttothepublicprocurementregimeornot,buteachentityisrequiredtohaveitsowninternalpolicythatdeterminesthresholdsfortheapprovalsrequiredforvarioustypesoftransactions.
3. Are privatisations and PPPs subject to the
procurement regime?
PRIVATISATIONS
Therearevariousprovisionsacrosspublicprocurementlegislationdetailinghoworgansofstatemustdisposeofpublicassetstoprivateentities.TheNationalTreasuryhasmaderegulationsrelatingtohowdepartments,constitutionalinstitutions,andcertainpublicentitiesshouldalienate,letorotherwisedisposeofstateassets.
Regulation16A.7oftheTreasuryRegulationsstatesthatdisposalofassetsmustbeatamarket-relatedvalueandcanbedonebyquotations,competitivebidsorauction;whicheveristhemostadvantageousforthestate.Thedisposalofassetsmustbeapprovedbytherelevanttreasuryinaccordancewithregulation19.6oftheTreasuryRegulations.
Guide to Government Contracting and Public Procurement in South Africa
11CONTENTS PAGE
TheMunicipalAssetTransferRegulations,publishedundertheMFMA,regulatehowmunicipalitiesandmunicipalentitiesmustdisposeofstateassets.Apublicparticipationprocessisrequiredwheretheassetsarehighvalue,toallowthemunicipalcounciltomakedeterminations.Themunicipalcouncilmustapprovethedisposaloftheasset.Inreachingthedecisiontoapprovethedisposalofanasset,themunicipalcouncilmusttakeintoaccountaconsiderablenumberoffactorslistedinregulation7,including:
• Therisksandrewardsassociatedwithoperationorcontroloftheasset.
• TheviewsandrecommendationsofNationalandProvincialTreasury.
• Theinterestsofanyaffectedorgansandthelocalcommunity.
• Compliancewiththelegislativeregimethatappliestothedisposal.
PPPs
Inthecontextofnationalorprovincialgovernmentdepartments,PPPsareregulatedbyregulation16oftheTreasuryRegulationswhichstatesthatPPPagreementsmustbeprocuredinaccordancewithapplicableprocurementlegislation.TheTreasuryRegulationsdealwithhowPPPsmustbeimplementedandsetoutthestepstobefollowed.
Theprinciplessetoutundersection217oftheConstitutionapplytoPPPswhentheyperformapublicfunctiononbehalfofanorganofstateintermsofaPPPagreement.
Regulation16oftheTreasuryRegulationsprovidesforstrictnationalorprovincialtreasurysupervisionofPPPtransactions.Thesetaketheformofapprovals,basedonlistedcriteriathatmustbeobtainedfromtheNationalandProvincialTreasury.
PPPsenteredintobymunicipalitiesareregulatedbysection120oftheMFMAanditsPublic-PrivatePartnershipRegulations.TheseRegulationsprovideforhowmunicipalitiesmustgoaboutconcludingPPPs.Thisinvolves:
• Conductingfeasibilitystudies.• Solicitingtheviewsandrecommendations
oftheNationalandProvincialTreasuryregardingthePPP.
• Complyingwithsection33(ieregardingcontractshavingfuturebudgetaryimplications)and120(6)(ieregardingtheactionstobeundertakenafterafeasibilitystudyhasbeencompleted)oftheMFMA.
APPLICABLE PROCEDURES
1. What procedures do regulated entities use
when carrying out procurements? When is it
appropriate to use each procedure?
AVAILABLE PROCEDURES
TheinternalSupplyChainManagementPolicyofeachdepartmentorentitymustbefollowed.TreasuryGuidelinesandCircularsconstrainthecontentsoftheseandtheTreasuryRegulationsalsoimposespecificrequirementsoncertainentities.
Forcertainvaluethresholdsthereareprescribedprocedures.Thisincludesquotationsorbiddingprocedures.
Thelegislativeregimeallowsforadegreeofflexibilityandforexemptionstobegrantedifthesecanbejustified.Anyexemptiongrantedmustadheretotheconstitutionalprinciplesoffairness,equitability,transparency,competitivenessandcost-effectiveness.
COMPETITIVE TENDERING
AcompetitivetenderprocessisgenerallyconsideredmostlikelytomeettherequirementsoftheConstitutionbut,dependingonthecircumstances,itisnotrequiredbylaw.
TheSupremeCourtofAppealhasstatedthatfairnessisinherentinanopencompetitivetenderprocedure,theverypurposeofwhichistoensurecost-effectivenessandcompetitivenessinatransparentmanner.Itisforthisreasonthatatenderprocessisgenerallyconsideredtobethemostsuitablemethod,astheconstitutionalrequirementspermeatetheentireprocedureforawardingorrefusingtenders.
Nevertheless,solesourceprocurementmaybejustifiedwithreferencetothebusinessneedsoftheentityordepartmentandthepracticalproblemsthatsuchaprocesswouldpresentinthecircumstances.
BOWMANS
12CONTENTS PAGE
2. Can an entity cancel a tender before
awarding it to a tenderer?
Regulation8(4)ofthePPPFARegulationsprovidesthatanorganofstatemay,priortotheawardofatender,cancelthetenderif:
• duetochangedcircumstancesthereisnolongeraneedfortheservices,worksorgoodsrequested;
• fundsarenolongeravailabletocoverthetotalenvisagedexpenditure;or
• noacceptabletendersarereceived.
Thisishowevernotconsideredtobeaclosedlist.
InarecentjudgmenttheSupremeCourtofAppealheldthatthedecisiontocancelatenderpriortoitsawardisnotadministrativeactionandthereforecannotbechallengedonreviewbyatenderingparty.
Incancellingatender,anentityisgenerallyconsideredtoberequiredtoactinamannerthatisprocedurallyfair.Thisincludesgivingadequatenoticeoftheintentiontocancelthetenderwhichindicatesthemainconsiderationsforthecontemplatedactiongivingtheaffectedpartiestherighttomakerepresentations.
EVALUATION AND AWARD
1. Are there any requirements concerning
technical specifications of tenders?
Theevaluationcriteriaformeasuringtechnicalspecificationsoftenders,referredtoas"functionality"inthePPPFARegulations,mustbeobjectiveandmustbespecifiedclearlyinanyinvitationtosubmittenders.
Aminimumqualifyingscoreforfunctionalitymustbeindicatedandatenderisregardedasunacceptableifthisscoreisnotachieved.TendersthathaveachievedthisminimumscorearethenevaluatedcomparativelyonBEEandprice.
2. What are the requirements relating to contract
award criteria?
WherethePPPFAapplies,contractsareawardedbasedonapreferentialpointssystem.Underthepreferentialpointssystem,pointsareallocatedasfollows:
• Contracts below ZAR 1 million:80pointsareallocatedforpriceandfunctionalityandtheremaining20pointsforotherspecifiedgoals.
• Contracts above ZAR 1 million:90pointsareallocatedforpriceandfunctionalityand10pointsforotherspecificgoals.
ThePPPFAhasbeenalignedwiththeBroad-BasedBlackEconomicEmpowermentAct53of2003(BBBEEAct),sothatatendererthathasachievedlevel1statusintermsoftheBBBEEActcanearnthemaximumpointsforspecifiedgoalsunderthepreferencepointsystem.(ItshouldbenotedthatfromMarch2015,anewmethodofcalculatingtheBEEstatuslevelofanenterpriseundertheBBBEEActapplied,whichhasmadeithardertoattaina‘good’BEEstatuslevel.)
Atenderisawardedtotheoverallhighestpointscorerunlessthereareobjectivecriteriathatjustifytheawardtoanothertenderer.Wheretwotendershaveequalscores,theonewiththehighestBEEratingmustbeawardedthecontractandwheretheBEEratingsarealsoequal,theonewiththehighestfunctionalitypointsmustbeawardedthecontract(unlessthereareobjectivecriteriathatjustifytheawardtoanothertenderer).
TheMinisterofFinancecanexemptcertainorgansofstatefromtheprovisionsofthePPPFAonrequest.Certainprocurementprocessesobtainstandaloneexemption(suchastheIndependentPowerProducerProgrammesoftheDepartmentofEnergy).
Guide to Government Contracting and Public Procurement in South Africa
13CONTENTS PAGE
CHANGES TO AN EXISTING CONTRACT
1. Does an extension or amendment of an
existing contract require a new
procurement procedure?
Therearevaluethresholdssetfortheextensionoramendmentofcontracts.Anextensionoranamendmentofanexistingcontractmayrequireanewprocurementproceduredependingon,amongothers:
• Thetermsoftheoriginalagreement.• Theextentoftheextensionoramendment.• Theconsequencesforthecontractorand
othertenderers.
Recentlythecourtshaveheldthatwhereapublicprocurementagreementhasaprovisionforrenewal,thecontractcanbeextendedonthesametermswithouttheneedforanewprocurementprocedure.
However,whereanamendmentorextensionofaprocurementcontractdepartsfromwhatwasoriginallyputouttotendertotheextentthatthecontractorbenefitssignificantlyorothertenderersmayhavetendereddifferently,anewprocurementproceduremayberequired.
ENFORCEMENT
1. Who can bring a claim for non-compliance
with procurement legislation?
Thedecisiontoawardacontracttoaparticularpartywill,inmostcircumstances,constituteadministrativeactiononthepartoftheorganofstate.ThePromotionofAdministrativeJusticeAct3of2000(PAJA)hasbroad‘standing’rulesandeffectivelyallowsanypersontoinstituteproceedingsbeforetheHighCourtforthereviewofadministrativeaction.
Thecourtcannotreviewanadministrativedecisionuntilallinternalremediesprovidedforundertheapplicablelegislationhavebeenexhausted.AninternalappealisprovidedforinthemunicipalsectorintheregulationsundertheMFMA.Theregulatedauthorityconcernedwillhavetobeapartytothelitigation.
2. What are the available review procedures?
Intheprovincialandnationalspheretherearenospecialauthoritiesthatreviewclaimsofnon-compliancewithprocurementlegislationalthoughNationalTreasury,theAuditor-GeneralandthePublicProtectorcanallinvestigatesuchclaimsandmayassist.Theregulatedauthorityinquestionmayhaveaninternalappealprocedurebut,oncethisisexhaustedthecourtsarethemainavenuetohavetheclaimheard.
Apartycanapplyfor,andbegranted,aninjunction(interdict)fromthecourttostoptheorganofstatefromcontractingwithanotherpartyortopreventtheimplementationofthecontract,pendingthereviewofthedecisiontograntthecontract.Tosucceed,suchactionmustbelaunchedwithoutanydelay.Oneofthefactorsthecourtwillconsideriswhetherthereisaprimafaciebasisforthereviewingpartytosucceedonreview.
Inmanycircumstances,ifitisfoundthattherehasbeennon-compliancewithprocurementlegislation,thecourtislikelytosetthecontractasideandmayrefertheprocurementdecisionbacktotheregulatedauthoritytore-opentheprocurementprocedure.However,thiswoulddependontheconsequencesofthisforthedeliveryoftherelevantservicebythestate.
3. Are there any associated time periods?
AnyapplicationforjudicialreviewbroughtintermsofPAJAmustbemadeassoonaspossibleandatmostwithin180daysfromthedatethe
BOWMANS
14CONTENTS PAGE
personwasinformedofthedecision,orthedateonwhichanyinternalproceduresareconcluded(the180-daylimitmaybeextended).Thereviewofatendercantakeonaveragefromsixmonthstotwoyears.
REFORM
1. Are there any proposals for reform of the
procurement legislation? If so, when are they
likely to be implemented?
APublicProcurementBill,whichwillconsolidatethefragmentedlegalandregulatorylandscape,alignpreferentialprocurementwithsection217oftheConstitutionandmoderniseprocurementrules,isbeingfinalisedandisexpectedtobereleasedforcommentduring2016.
Amongotherthings,itwillgivetheofficeofthechiefprocurementofficervariouspowersandfunctions,suchas:
• administeringnationallegislation;• ensuringthatpoliciesandlegislationare
implementedinanappropriate,consistentandsystematicmanner;and
• sanctioningnon-compliancewithnationalsupplychainmanagementandprocurementpolicies,regulations,instructionsandguidelines.
DraftamendmentstothePPPFARegulationswerepublishedinJune2016forpubliccomment.ItisnotyetclearwhenthefinalPPPFARegulationswillbepublished.
TheMinisterofFinancehasannouncedthattheinitiativesofthechiefprocurementofficerwillbeextendedtoincludemonitoringofstate-ownedcompanies’procurementplansandsupplychainprocessesaswellasreviewsofcontractsaboveZAR10milliontoensurevalueformoney.
Guide to Government Contracting and Public Procurement in South Africa
15CONTENTS PAGE
BOWMAN GILF ILL AN AFRICA GROUPBOWMANS
16CONTENTS PAGE
16
Key Contacts
CLAIRE TUCKER
HeadofPublicLawandRegulatoryJohannesburg,SouthAfrica
T: +27116699402E: [email protected]
SHAMILAH GRIMWOOD
HeadofBankingandFinanceCapeTown,SouthAfrica
T: +27214807855E: [email protected]
WANDISILE MANDLANA
PartnerJohannesburg,SouthAfricaT: +27116699562E: [email protected]
To view profiles of our lawyers,
please visit www.bowmanslaw.com
CONTENTS PAGE
Cape Town
T: +27214807800E:[email protected]
Dar es Salaam
T: +255768988640E: [email protected]
Durban
T: +27312650651E:[email protected]
Johannesburg
T: +27116699000E:[email protected]
Kampala
T: +256414254540E:[email protected]
Nairobi
T: +254202899000E:[email protected]
Follow us on Twitter:
@Bowmans_Law
www.bowmanslaw.com