DEEN LETCHMIAH
LETCHMIAH DAYA MANDINDI
QUANTITY SURVEYORS AND PROCUREMENT CONSULTANTS
CONTACT DETAILS:
Tel. 031-2071340
Fax: 031-2099441
Email: dletchmiah@dbn.ldm.co.za
COURSE CONTENT:
Lecture 1. OVERVIEW AND CURRENT STATUS OF AFFIRMATIVE
PROCUREMENT
Lecture 2. ACHIEVING SOCIO-ECONOMIC OBJECTIVES THROUGH
PROCUREMENT
Lecture 3. ROLE OF CONSTRUCTION INDUSTRY DEVELOPMENT BOARD
(CIDB)
Lecture 4. BLACK ECONOMIC EMPOWERMENT: ACTS, CODES,
CHARTERS, SCORECARDS, ETC.
LECTURE 1: AN OVERVIEW OF PROCUREMENT POLICY AND LATEST
DEVELOPMENTS
FORMAT OF PRESENTATION
• BACKGOUND
• PROCUREMENT REFORM
• LEGISLATIVE FRAMEWORK
• PROCUREMENT OPTIONS
• CHALLENGES
• CONCLUSION
PUBLIC SECTOR PROCUREMENT IN SOUTH AFRICA EXPRESSED AS A
PERCENTAGE OF GDP
11% 5%
2%
6%
National
Provincial
Local authorities
State owned enterprises
THE PILLARS OF PROCUREMENT REFORM
Good governance Attaining socio- economic
objectives
THE SOUTH AFRICAN PROCUREMENT REGIME
Good governance Public / Municipal
in procurement Finance
Management Act
SA Constitution
Preferential
Attaining socio- Procurement Policy
Framework Act
economic objectives
through
procurement
CONSTITUTIONAL REQUIREMENTS
Organs of State (national, provincial and local) or any other institution identified in
national legislation must contract for goods and services using a system which
is :
• fair
• equitable
• transparent
• competitive
• cost effective
CONSTITUITIONAL PROVISIONS
Furthermore, organs of state or institutions can implement a procurement policy
which incorporates:-
(a) Categories of preference in the allocation of contracts;
and
(b) The protection or advancement of persons, or categories of persons,
disadvantaged by unfair discrimination
PRIORITY
Priority must be given to the redressing of skewed business ownership patterns
arising from the system of discrimination.
GUIDING DOCUMENTS ON PROCUREMENT REFORM IN
SOUTH AFRICA
• Constitution of the Republic of South Africa
• The Ten Point Plan.
• Green Paper on Public Sector Procurement Reform
• Public Finance Management Act.
• Preferential Procurement Policy Framework Act.
CONSTRAINTS TO DEVELOPMENT
• access to markets
• skills
• finance
• Supportive institutional arrangements.
ACCESS TO MARKETS
Procurement can be used to create a demand for the goods and services of
Targeted Enterprises
Targeted procurement allows such a demand to be created without
compromising the principles of good governance.
See www.pwdprocure.co.za
www.targetedprocurement.com
www.cidb.org.za
FACTORS TO CONSIDER
Policy objectives
business empowerment
employee empowerment
job creation
development of SMEs
poverty alleviation
community based developments
local economic development
Target group -
Targeted Enterprises
race / ethnicity / gender / size / locality / community parameters
Targeted Labour
disability / age / residency / race/ethnicity / gender / wage levels / period of
unemployment
The The Client
Client
THIRD PARTY The
MANAGEMENT
SUPPORT
Contracting The Contracting Entity
Performs those Entity (Prime Contractor)
functional Performs
activities, which some
the Contractor
is unable to functional
DEVELOPMENT
perform. activities The Sub-
CONTRACTS Contractor
PRIME CONTRACTS
The Client
The Contracting Entity
Contractor A Contractor B
The Sub-Contractor
STRUCTURED JOINT VENTURES
LEGISLATIVE FRAMEWORK
The PPPFA is an outcome of the procurement reform process.
It redefines value for money.
No longer is least cost the primary determinant for the awarding of
tenders.
Contract awards are now based upon a balance between price and social
objectives.
The PPPFA allows procurement to be used as an instrument of social
policy without compromising good governance.
PROJECT IMPERATIVES
TRADITIONAL:
• Time
• Quality
• COST
ADDITIONAL IMPERATIVE:
• Socio-economic objectives
PREFERENCE POINTS FOR DEVELOPMENT OBJECTIVES (PPPFA)
• Bids not exceeding R500 000 :- 80/price and 20/development objectives
• Bids exceeding R500 000 :- 90/price and 10/development objectives
• Preference points awarded to historically disadvantaged individuals (HDIs)
based on race, gender and disability
• Also applicable to reconstruction and development objectives
CONVENTIONAL PROCUREMENT SYSTEM
INPUT
INPUT
Materials
Plant/equipment
Labour PROCESS
Management skills PROCESS
Technical specifications
Technical design
OUTPUT Contracting strategies
OUTPUT Technical quality assurance
Goods
Services
Products
Assets
Economic benefits
TARGETED PROCUREMENT SYSTEM
INPUT PROCESS
INPUT PROCESS
Materials Technical specifications
Plant/equipment Technical design
Labour Contracting strategies
Management skills Technical quality assurance
Resource specifications
Targeting strategy
Technology choice
Compliance monitoring
OUTPUT
OUTPUT
Goods - Focussed business
Services participation
Products - Focussed employment
Assets opportunities
Economic and social benefits
DEVELOPMENT OBJECTIVE / PRICE MECHANISM
Points for tendered resource goal or enterprise status + Points for price
THE TARGETED PROCUREMENT SYSTEM
This system permits socio-economic deliverables (goals and targets) to be:
• Clearly defined so that they are legally enforceable.
• Measurable and quantifiable for the purpose of monitoring and
evaluation.
• Verifiable and auditable to satisfy public sector accountability.
EXAMPLE OF DEFINED TARGET GROUPS
Affirmable business enterprise (abe)
Black business enterprise (bbe)
Previously disadvantaged enterprise (pde)
Woman business enterprise (wbe)
Disabled person business enterprise (dpbe)
Priority enterprise (pe)
CONCESSION CONTRACTS
• Public Private Partnerships (PPPs)
• Privately Funded Initiatives (PFIs)
• Build Operate and Transfer (BOT)
• Asset Procurement and Operating Partnerships (APOPs)
EMPOWERMENT REQUIREMENTS IN CONCESSION CONTRACTS
• Equity by Disadvantaged Persons in the Bidding Entity
• Business Participation by Target Groups
• Employee Empowerment
MONITORING REQUIREMENTS
1(e) any specific goal for which a point may be awarded must be clearly specified
in the invitation to submit a tender;
(2) Any goals contemplated in subsection 1(e) must be measurable, quantifiable
and monitored for compliance.
FACTORS TO CONSIDER
• simplification in bid submission requirements
• broadening of participation base of small suppliers
• waiving of bid requirements
• contractor registration / prequalification systems
• procurement documentation
• dispute mechanisms
Key question: do the above facilitate or impede participation by the target
group?
10 YEAR TARGETS – BEECom REPORT
BLACK WOMEN DISABLED SMME
Market share 50% 17.5% 2.5% 30%
(Public)
Long Term 30% 10.5% 1.5% N/a
Contracts
Market Share 30% 10.5% 1.5% N/a
(Private)
CHALLENGES AND BARRIERS
• Resistance to Change
• Prejudice / Attitudes
• Fronting and Abuse
• Lack of Monitoring and Reporting
• Effective Supply Side Measures
• Quality Management and Assurance
