PREFERENTIAL PROCUREMENT REGULATIONS 2022

Following the Constitutional Court declaring the 2017 Preferential Procurement Regulations to be unlawful in Minister of Finance v Afribusiness NPC [2022] ZACC 4 earlier this year, the Minister of Finance was given 12 months to draft new regulations in terms of the Preferential Procurement Policy Framework Act (PPPFA). The issue in the abovementioned case was the introduction of an obligation that 30% of government tenders be subcontracted to disadvantaged groups. The new Preferential Procurement Regulations, 2022 (2022 Regulations) were promulgated on 4 November 2022 and will take effect on 16 January 2023. The 2022 Regulations, are a placeholder while the Public Procurement Bill is being finalised.

The purpose of the 2022 Regulations is to comply with Section 217 of the Constitution on procurement of goods and services by organs of state, comply with the PPPFA of 2000 and comply with the Constitutional Court judgement of February 2022. The new regulations will not result in a change in procurement as it relates to State Owned Entities, or a general scrapping of Black Economic Empowerment and local content development.

The 2022 Regulations will alter many of the existing aspects of public procurement unrelated to B-BBEE that had crept into the regulations published under the PPPFA. Issues such as evaluation of functionality, pre-qualification criteria, local production and content, subcontracting, cancellation of tenders and blacklisting which were regulated in the 2017 Regulations have been omitted from the 2022 Regulations.

The 2022 Regulations still require organs of state to apply the ‘80/20’ or ‘90/10’ Price/Preference Points scoring method to each government tender. These tenders should be judged by allowing 90% of the available points to the adjudication of price, such that the cheapest tenderer scores 90/90. The balance of the points to the score that tenderers obtain is on ‘Preference Points’. The highest overall points scorer should be awarded the tender (unless other objective criteria justify a different outcome).

While under the 2017 Regulations the 10 or 20 Preference Points could only be allocated based on the B-BBEE Contribution Level or score of the tenderer under the B-BBEE Codes, the 2022 Regulations require each organ of state to set ‘specific goals’ for which points will be awarded in a preferential procurement policy and apply this to each tender. The specific goals are as intended in section 2(1)(d) of the PPPFA, which may include contracting with persons, or categories of persons, historically disadvantaged by unfair discrimination based on race, gender and disability including the implementation of programmes of the Reconstruction and Development Programme as published in Government Gazette No. 16085 dated 23 November 1994.

Thus, it is possible for an organ of state to simply determine that the ‘specific goals’ it will use is the B-BBEE Contribution Level or score of the tenderer under the B-BBEE Codes. Arguably, the 2022 Regulations do not allow for the criteria related to ‘specific goals’ to be used for more than the 10/20 points in the final evaluation. In other words, the “specific goals” should not be exclusion criteria or prequalification criteria.