PUBLIC PROCUREMENT BILL [B 18B-2023] PRESENTED BY:

KEY ISSUES IN SUBMISSIONS – 1. CONSTITUTIONAL CONCERNS Preferential procurement (Ch 4 of Bill)

Alignment comments:
Ch 4 to be understood in context of procurement system envisaged in s217(1) of Constitution, and is also linked to Ch 5 which provides for framework for this system to be prescribed by regulations
Procuring institutions must implement their procurement systems and policies taking into account nuances of their sector and industries
Constitutional Court judgement of Afribusiness v the Minister of Finance, Justice Mhlantla stated that: “The stand-alone reading of section 217(1), which ignores section 217(2), is not only a disservice to statutory interpretation, but also ignores the founding values of the Constitution.”
This confirms that national legislation providing a framework to give effect to s217(2) of the Constitution must take into account the founding values of the Constitution and the need to deliberately redress past discriminatory practices & provide for measures to make a meaningful difference to the lives of South Africans who suffered under pre-April 1994 dispensation
Refer also to par 60 of the judgment<br>

KEY ISSUES IN SUBMISSIONS – 1. CONSTITUTIONAL CONCERNS Preferential procurement (Ch 4 of Bill) – cont
Framework comments:
Section 217(2) & (3) of the Constitution means that Parliament is entitled & required to enact legislation laying down a “framework” for the implementation of preferential procurement policy envisaged in section 217(2)
The question of how tight or loose that framework is – that is, how much discretion it affords to organs of state to develop their own policies or depart from the national policy – is for Parliament to determine (par 18.5 of Adv S Budlender SC’s opinion)

s217(2) of the Constitution provides that “Subsection (1) does not prevent organs of state ... from implementing a procurement policy …”
s217(2) itself does not create an obligates on organs of state to use preferential procurement policies envisaged in s217(2) – it enables it, but does not require it
However, Parliament may, via legislation, require organs of state to use such policies (par’s 42 & 43 of Adv S Budlender SC’s opinion)<br>

KEY ISSUES IN SUBMISSIONS – 1. CONSTITUTIONAL CONCERNS Preferential procurement (Ch 4 of Bill) – cont

Prequalification & subcontracting comments (clauses 18 & 19):

Prequalification for preferential procurement and subcontracting as a condition of contract are included in a manner that aligned with aims of s217(2) and (3) of the Constitution, especially considering majority judgment in Afribusiness v the Minister of Finance in paragraph 116 of the Constitutional Court judgement:
"Happily, both the first judgment and this judgment and, indeed, the Minister understand the impugned regulations to do what is envisaged in section 217(2) of the Constitution.”<br>

KEY ISSUES IN SUBMISSIONS – 1. CONSTITUTIONAL CONCERNS Preferential procurement (Ch 4 of Bill) – cont
Set-aside comments (clause 17):
It is submitted that it is not correct that set-asides are unconstitutional
s217(2) provides for preference in allocation of contracts (s217(2)(a)) and for protection & advancement of persons or categories of persons previously disadvantaged by unfair discrimination (s217(2)(b))
Reason that set-asides were regarded in Afribusiness-case, as not being valid was that the founding legislation, the PPPFA, did not provide for set-asides per se, but for preferential procurement to only occur within the context of a preference point system in context of s217(2)(a)
Refer to par 69 of Afribusiness-case
Ch 4 of the Bill provides for menu of preference measures to provide for meaningful redress of the imbalances of the past
Cl 17(6) recognises that it may not always be possible to implement set-aside provisions, and states what should happen in such instances<br>

KEY ISSUES IN SUBMISSIONS – 1. CONSTITUTIONAL CONCERNS Preferential procurement (Ch 4 of Bill) – cont
PPPFA v Ch 4 of Bill & applying entire s217:
Ch 4 of the Bill goes further than the PPPFA in that it does not merely provide for preference points systems, but other measures that will ensure meaningful empowerment of the previously disadvantaged
Ch 4 seeks to address these fundamental constitutional provisions in s217(2) and (3), and also provides for regulations to be drafted with necessary conditions, thresholds & parameters to ensure that these preference measures are implemented in a responsible manner
This would include provisions to address negotiations with bidders, which is envisaged to include the negotiation of a fair market price to prevent government paying exorbitant prices for contracts awarded
All the subsections of s217 of the Constitution are designed to coexist within the procurement system envisaged in s217(1). The Constitutional Court also confirmed that the five principles in s217(1) do not become a nullity when s217(2) is in play. Tenders must still be evaluated in a manner that gives effect to s217(1).<br>

KEY ISSUES IN SUBMISSIONS – 1. CONSTITUTIONAL CONCERNS Preferential procurement (Ch 4 of Bill) – cont
Local production & content comments (cl 20):
Constitution in section 217(2)(a) provides for preferences in allocation of contracts, which preferences may relate to several vulnerable categories, such as local manufacturing base of the country
Before sectors or products are designated provided for in cl 20(1), the proposed designation is to be gazetted for public comments
Cl 20(3) provides that in determining threshold in cl 20(1)(b), the responsible Minister must, in addition to considering public comments and Minister of Finance’s responses consider—
whether there are sufficient local manufacturers in the country capable to compete for provision of goods designated for local production & content by determining (i) number of existing manufacturers available in the country; (ii) security of supply or capability to supply for period that the designation is to be in effect; (iii) contribution of other role-players in supply chain of the goods and (iv) the effect of local production & content on employment; and
economic impact on imported goods
It is believed that necessary checks & balances have been contained in cl 20, the provision for designation of sectors for local production & content<br>

KEY ISSUES IN SUBMISSIONS – 1. CONSTITUTIONAL CONCERNS Preferential procurement (Ch 4 of Bill) – cont

Concerning clause 21, which stipulates that if sections 17, 18, 19 and 20, are not applicable, preferences must be allocated as prescribed
It is proposed that the regulation-making power be circumscribed in more detail to ensure that it is not too wide
Amendments to this clause will be proposed for consideration by SeCOF<br>

KEY ISSUES IN SUBMISSIONS – 1. CONSTITUTIONAL CONCERNS Five principles in section 217(1) of Constitution

View that 5 principles in s217(1) are being overridden in Ch 4:
Various provisions in Bill deal with the 5 principles in s217(1) & will be augmented by regulations
Encapsulating all these principles in Bill through balancing them or choosing one over the other – not feasible & appropriate
These principles to be adhered to together with s217(2) & (3) as well as s195(1)(b) & s216
Bill (when enacted), together with regulations, will direct procuring institutions in implementing these in their procurement systems, which includes their policies
View that preferential procurement overrides principles in s217(1), argues from premise that there is conflict between s217(1) and s217(2) & (3)
All provisions of s217 are anticipated to coexist with procurement systems envisaged in s217(1)<br>

KEY ISSUES IN SUBMISSIONS – 1. CONSTITUTIONAL CONCERNS c) Scope of Bill

View that Bill extends beyond s217(3) of Constitution requirement for a framework for preferential procurement policy in s217(2)

National legislation like PFMA & MFMA – within Parliament’s legislative authority
s216(1) requires national legislation to prescribe measures to ensure transparency & expenditure control in each sphere of government by introducing, among others, uniform norms & standards
Submitted that uniform norms & standards includes regulation of procurement<br>

KEY ISSUES IN SUBMISSIONS – 1. CONSTITUTIONAL CONCERNS d) Co-operative governance
View about Bill infringing constitutional status & powers of provincial & local government
s216(1) & (2) of Constitution requires national legislation prescribing the earlier mentioned uniform norms & standards in each sphere of government and that national treasury must enforce compliance with these
Ch 4 of Bill is based on s217(3) of Constitution which provides that national legislation must prescribe a framework for s217(2) policy
s217 applies to organs of state in national, provincial & local government
Regulation of provincial & local government in Bill is comparable to PFMA, MFMA & PPPFA provisions
MFMA contains a Chapter on supply chain management (SCM) and a separate set of SCM regulations made by Minister of Finance
Minister of Finance may also make regulations under PFMA and these, also applicable to national institutions, are contained in 2005 Treasury Regulations
PPPFA applies to provincial and municipal institutions<br>

KEY ISSUES IN SUBMISSIONS – 1. CONSTITUTIONAL CONCERNS d) Co-operative governance – cont

Bill proposes that procurement including preferential procurement be regulated in a single statute
This is not precluded by Constitution
As to legislative & executive authority of municipality in s151 & 156 of Constitution
Cl 8 of Bill provides for a procuring institution, e.g. a municipality to implement a procurement system, which includes its procurement policy, which is to be implemented in terms of procurement system to be prescribed under cl 25
Therefore, a municipality’s authority in this regard is not impacted
As to consulting the Minister of COGTA on draft regulations affecting municipal institutions, cl 64(2) provides for such consultation<br>

KEY ISSUES IN SUBMISSIONS – 1. CONSTITUTIONAL CONCERNS d) Co-operative governance – cont

To address concerns about application of certain measures to local government, following amendments are proposed
Authority for Public Procurement Office (PPO) and provincial treasuries to issue instructions applicable to municipal institutions be replaced with circular that a municipality may adopt or not
Enforcement function for provincial treasuries regarding municipal institutions be omitted
Include a provision that organised local government (SALGA) must be consulted on draft regulations affecting local government<br>

KEY ISSUES IN SUBMISSIONS – 2. INDEPENDENCE OF PUBLIC PROCUREMENT OFFICE (PPO) View that PPO must be independent and not be part of NT
s216(2) of the Constitution stipulates that National Treasury (NT) must enforce compliance with uniform norms & standards, which in NT’s view includes procurement
Therefore, having PPO in NT accords with s216(2)
Bill proposes to confer original powers on PPO which provides for separation from other functions of NT
PPO’s functions pertain to when government procures and not when the private sector procures. Therefore, no need for the PPO to be independent since it performs a function for government and similarly, also provincial treasuries<br>

KEY ISSUES IN SUBMISSIONS – 3. FUNCTIONS OF PUBLIC PROCUREMENT OFFICE (PPO) & PROVINCIAL TREASURIES (PTs) View about clarity concerning respective roles of PPO, PTs & procuring institutions
Functions of PPO, PTs & procuring institutions are clearly set out in the Bill (cl 5 to 8)
PTs have functions that are same as PPO but only within province
Some functions are only those of PPO as part of its role to set uniform norms & standards
PPO’s functions are comparable to current NT’s functions under PFMA & MFMA
Issuance of binding instructions
PPO: only where so specified or for effective implementation of the Act
PTs: for effective implementation of the Act in province<br>

KEY ISSUES IN SUBMISSIONS – 4. DECISION-MAKING ON PROCUREMENT View regarding centralising procurement
Bill does not change current position on decision-making on procurement
Bill does not propose that PPO will be “chief buyer” for government
Cl 7 stipulates that decision-making on procurement vests in accounting officer (departments, constitutional institutions & municipalities, municipal entities) and accounting authorities (PFMA public entities)
Accounting officers/authorities must implement a procurement system, including a procurement policy, in accordance with the Bill (once enacted) and framework determined by regulation (cl 8 & 25)
Alignment between PFMA & MFMA, and the Bill are provided for via recognising accounting officers/authorities’ role in making procurement decisions & proposed amendments to PFMA & MFMA in Schedule to Bill<br>

KEY ISSUES IN SUBMISSIONS – 5. INTEGRITY, TRANSPARENCY, ACCOUNTABILITY & ANTI-CORRUPTION MEASURES View that Bill is not doing anything or enough for integrity, transparency, accountability & anti-corruption measures

Bill is premised on s195, 216 & 217 of Constitution
Fight against corruption & anti-corruption measures need collaboration with other government institutions & law enforcement agencies
Bill should not be the only instrument to combat corruption
As to an anti-corruption agency, proposed by Zondo Commission – best placed with departments in Justice cluster<br>

KEY ISSUES IN SUBMISSIONS – 5. INTEGRITY, TRANSPARENCY, ACCOUNTABILITY & ANTI-CORRUPTION MEASURES - cont View that Bill is not doing anything or enough for integrity, transparency, accountability & anti-corruption
Bill provides for
codes of conduct for everyone involved in procurement
prohibition of undue influence in procurement process
declaration of interests by role-players
automatic exclusion of specified persons from submitting bids
debarment of bidders & suppliers that have transgressed
protection of officials receiving directions inconsistent with Act
criminal offences – giving false information, connives or colludes to commit corrupt or fraudulent acts<br>

KEY ISSUES IN SUBMISSIONS – 5. INTEGRITY, TRANSPARENCY, ACCOUNTABILITY & ANTI-CORRUPTION MEASURES Cont View that Bill is not doing anything or enough for integrity, transparency, accountability & anti-corruption

Bill contains various transparency provisions - clauses 2(2)(b) (objects), 15(6) (debarment register), 30(2)(a) & (b) (access to procurement services and open data), 32 (access to procurement processes), 33 (disclosure of information) and 64 & 65 (process to make regulations and instructions)<br>

KEY ISSUES IN SUBMISSIONS – 6. INCENTIVISED WHISTLEBLOWING & PROTECTION OF WHSITLE-BLOWERS View that Bill should incentivise whistle-blowers & provide for protection
Strengthening protection of whistle-blowers is supported through amendments to the Protected Disclosures Act (PDA) administered by the Department of Justice and not through this Bill. Minister of Justice published a detailed discussion paper in 2023 for public comment

During public hearings in provinces, stakeholders raised amongst others, the following concerns on introducing incentivised whistle-blowing:
as this would create unwelcome market for criminal conduct - unscrupulous people would plant information implicating persons involved in procurement; fabricate proof, and then later attempt to claim payment, and so the cycle continues
instead of paying whistle-blowers, they called for enhanced protection of whistle-blowers
mentioned recent incident and asked: “how much money can save a life?”<br>

KEY ISSUES IN SUBMISSIONS – 7. RELATIONSHIP BETWEEN BILL AND OTHER ACTS & BILLS How will Bill, once enacted, relate to other Acts?

Bill refers to several Acts that are relevant or appropriate for the implementation thereof, such as POPIA, PAJA, CIDB Act, Companies Act, B-BBEE Act, etc.

Provisions of some of the Acts in the Schedule to the Bill are proposed to be amended to align with the Bill
These will be scrutinised further, also in view of stakeholders’ inputs, to limit reliance on trumping provision in cl 3(4) of Bill<br>

KEY ISSUES IN SUBMISSIONS – 8. TRIBUNAL & DISPUTE RESOLUTION MECHANISM Questions about remedies of reconsideration & review by Tribunal
Dispute resolution procedures are aimed at saving costs & improving turnaround times in service delivery
Remedies of reconsideration by procuring institutions & review by Tribunal are clearly set out
Tribunals are provided for in existing legislation, e.g. Financial Services Tribunal established by Financial Sector Regulation Act, 2017 and Tribunal established by Social Assistance Act, 2004
It is a remedy to be used before seeking judicial review which is provided for in cl 54(1)
Tribunal Chairperson is to constitute a panel for each application (cl 47(1))
Proposed that cl 48 be amended to specifically deal with the regulation of panels and requirements for operation at a provincial level
Tribunal’s costs are to be carried through appropriations from National Revenue Fund by Parliament & will only be proposed through normal budget process once the estimated costs have been determined & the Tribunal is ready to commence its work<br>

KEY ISSUES IN SUBMISSIONS – 9. BALANCE BETWEEN ACT AND REGULATIONS View that too many areas are to be prescribed by regulations
Important to keep in mind that national legislation envisaged in s216(1) and s217(3) of Constitution, includes subordinate legislation according to definition in s239 of Constitution
Bill is to set framework for procurement with specificity to be provided in Ministerial regulations, PPO’s instructions (limited in nature), and procurement systems & policies of institutions determined within the framework of the Bill and requirements of regulations
primary reason is to allow for different regulations to be made for different categories of procurement (e.g. infrastructure, capital assets, PPPs, normal goods and services, consultants, etc.) and different categories of institutions and to cater for new developments in procurement
regulations may be changed without amending primary legislation
notwithstanding above, process to develop regulations is rigorous: draft regulations with statement of need, intended operation & expect impact, must be published for comments, relevant Ministers must be consulted, and regulations subjected to Parliamentary scrutiny. Also propose amendment that organised local government must be consulted.<br>

KEY ISSUES IN SUBMISSIONS – 10. FINANCIAL IMPLICATIONS Concerns about financial implications
Elements of a procurement system mentioned in cl 25, are existing elements in institutions which may only have to be made part of the procurement system of institutions
As to expanding scope of procurement function in an institution, and most of these are not new functions for institutions but are elevated to primary legislation
Shifting functions within an institution should result in minimal costs
 
Enforcement function for provincial treasuries is not new – already have enforcement role in respect of provincial departments in s18(2)(b) of the PFMA. The enforcement role for provincial treasuries in respect of municipalities is proposed to be removed

Investigations about allegations in cl 27 and steps, are functions that are required in terms of the PFMA and MFMA and their respective prescripts<br>

KEY ISSUES IN SUBMISSIONS – 11. INVESTIGATIVE POWERS OF PUBLIC PROCUREMENT OFFICE Clause 56(1) makes it clear that the purpose of these powers is for compliance and not to investigate alleged criminal conduct

Several regulatory/supervisory bodies have such powers, see for example
Financial Sector Regulation Act, Financial Intelligence Centre Act and Property Practitioners Act
Only a person authorised by PPO may seek a warrant in terms of cl 58, and not other procuring institutions<br>

KEY ISSUES IN SUBMISSIONS – 12. PROPOSED AMENDMENTS In addition to proposed amendments in NT’s report on responses to public submissions (and included in this presentation), the comment matrix contains other proposed amendments<br>