New Tendering Rules will change the way you do business.
Tenderers are required to make changes in the way they submit government tenders, especially in relation to sub-contracting.
Bids and tenders submitted without taking the below points into consideration stand to have their tenders deemed ‘unacceptable’ or could face hefty fines!
Gerrit Davids, owner and facilitator of a tender advisory consultancy, walks us through the new Preferential Procurement Policy Framework Act (PPPFA) Regulations.
- The new Regulations from the outset grants an organ of state the authority to stipulate a ‘Preferred Minimum BBBEE Level’ in a tender, which will exclude certain companies with a lower BBBEE Level from submitting bids.
- The Regulations will allow the state to include wide-ranging Sub-Contracting stipulations, which could force principle bidders to make use of up to 8 x different types of sub-contractors under the ‘Pre-Qualification Criteria’. Failure to do so will have the bid being declared ‘unacceptable’.
- The value of the 80:20 and the 90:10 Preference Point Systems has been increased to below and above R50m respectively. However, it retains the current scoring of points for Price alongside that of BBBEE in tenders.
- The new Regulations also place a 25% maximum on Sub-Contracting, which is done in the ordinary course of business with companies that have a lower BBBEE level than that of the principle bidder. Failure to comply with this stipulation will also cause tenders to be disqualified from consideration.
- Regulations are introducing a new approach to pricing where a bidder scores the ‘highest points’ in a tender but its price is not market related and (the bidder) refuses to adjust it to be in-line with market related prices. The organ of state will have the right not to award the tender to such a bidder and it may even decide to cancel it.
- An additional stipulation to the Regulations makes it obligatory for an organ of state issuing tenders to ‘make available a list’ of potential sub-contractors that qualify under the definition of ‘designated groups’ and such a list must be subject to approval by National Treasury.
- The much-debated stipulation of compulsory Sub-Contracting of 30% for all tenders above R30m in value will also be allowed ‘where feasible’ to advance any one or more of the ‘designated groups’ as defined by these new Regulations.
- Another key regulation stipulates that sub-contracting, which was not mentioned in the bidder’s tender could only be done with the permission of the organ of state ‘after a tender has been awarded’. A 10% penalty of the total value of the contract may be imposed where the correct sub-contracting procedures were not followed or where information was withheld, a ban on doing business with the state for 10 years could also be imposed by National Treasury under these new Regulations.
Davids says, “The meaning and understanding of the concept of ‘being proactive’ becomes a very relevant application with this new dispensation. Tenderers will be left behind if they do not make the required changes in the way they submit government tenders, especially in relation to sub-contracting”.
The Regulations will come into effect on 1 April 2017 giving tenderers less than 3 months to prepare for its impact.
Should you wish to contact the author:
Gerrit Davids – Lead Advisor at TaranisCo Advisory CC
Tel. 011-026 4891
Cell. +27 (0)82 496 1657
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