Public Procurement Bill: National Treasury response to public submissions

Meeting report

The Chairperson apologised for starting the meeting late, as he was involved in a workshop related to the two-pot retirement system.

He asked if any apologies were recorded.

Mr Nkululeko Mangweni (Committee Secretary) mentioned that the Committee received apologies from Mr Aucamp and Mr Du Toit.

The Chairperson indicated that the Committee would continue deliberating on the department’s responses to stakeholder submissions on the Bill.

Briefing on National Treasury’s responses to stakeholder submissions

The Chairperson said the Committee would pick up on the issue of incentivised whistleblowing. He summarised the stakeholder's input and asked the National Treasury to comment.

Adv Empie Van Schoor (Chief Director: Legislation, NT) clarified that the stakeholder proposal insisted that a percentage be paid to a whistleblower if there is a successful prosecution following whistleblowing. In the discussion paper from the Department of Justice, several amendments were proposed, one of which was a provision for a fund to provide protection for whistleblowers.

During the public hearings, the concern was not about paying whistleblowers but protecting them. The department believed that the proposal to pay a whistleblower should be debated and not written into the law if there is a successful prosecution.

The Chairperson asked Members if these provisions should be included in the PP Bill or the Justice Bill. The Committee was taking policy decisions and asked Treasury to draft the bill for Members to consider.

Ms D Mahlangu (ANC, Mpumalanga) felt that the Committee should refer the matter to the Portfolio Committee on Justice (PCoJ) so it did not overstep its mandate. She noted that whistleblowing should not be incentivised through money but rather through a moral obligation to uproot corruption and other wrongdoing, as people would view it as a money-making scheme. She appreciated all the whistleblowers who had come out to report instances of corruption. Whistleblowers must be encouraged and protected. Justice must prevail. Sometimes, you do something with good intentions, and there might be unintended consequences.

Mr D Ryder (DA, Gauteng) believed that while legislation on whistleblowing should largely be left to the PCoJ, it was still important that certain procurement-related provisions be included in the Bill. Even though he noted that the Committee could not demand a review of the legislation, he proposed that the Chairperson write to the Chairperson of the PCoJ in the 7th Parliament, highlighting the discussions and the inputs should be considered further. He was unsure if the letter was sufficient or should go to the Ministry.

The Chairperson acceded to the proposal and committed to sending the letter to both the PCoJ and the Minister towards the end of the legislative process. He further proposed that the Committee include in its final report a proposed paragraph that states whistleblowers should be provided protection and that it be included in its final report on the Bill. He asked if the department could draft a clause in the bill that refers to the PCoJ’s work on the Justice bill.

Adv Van Schoor said that the department could do so.

The Chairperson asked for more details on the department’s response to the Procurement Reform Working Group’s (PRWG) submission that Chapter 4 of the Bill restricts participation in procurement from the outset.

Adv Van Schoor said the department proposed that Clause 25 (1) be amended to contain a general requirement on bid evaluation as prescribed by the regulations as part of the framework for an institution’s procurement system. This clause, she continued, referred to price, functionality and other requirements.

The Chairperson said that in its previous meeting, the Committee mentioned that price should be part of several criteria to be used, and not be excluded. He proposed that this proposal be drafted in a manner that is acceptable to the Standing Committee on Finance as he presumed it may disagree.

PRWG further submitted that the Bill establishes two frameworks, one in Chapter 4 and another in Chapter 5. These frameworks dealt with overlapping subject matters. However, Chapter 4 entrenches a series of procedural steps inappropriate to the statute, which at various points interferes with Chapter 5’s objective of creating a flexible, strategic, and innovative procurement regime. He asked the department to explain its response to this comment.

Adv Van Schoor mentioned that Chapter 4 prescribes a framework as required by Section 217 (3) for preferential procurement. The rest of the Bill deals with general procurement requirements. PRWG took issue with the provision in Clause 25 that requires the Minister to establish a framework for the procurement system. However, the department notes that the preferential procurement framework exists within that procurement system, so it cannot be argued that they are separate.

Several stakeholders proposed that procedural provisions in clause 17 (5)(a) to (c) be removed from the Bill, for different reasons to the PRWG. As such, the department proposed it be omitted and that the clause simply read that set-asides be evaluated according to the prescribed criteria.

The Chairperson wondered if the department’s proposal fully addressed the concerns raised by the PRWG. Having looked at Chapters 4 and 5 of the Bill, he believed there was a conflict between the two.  Considering this, he proposed that the Committee include in its report that the 7th administration look at the relationship between the two chapters and how to resolve the tension between them.

He praised the Constitution for the standard of its provisions.

Adv Van Schoor added that the department’s proposed Clause 25 (d) would assist in bringing harmony between Chapters 4 and 5 of the Bill.

The Chairperson asked for the department to explain how this clause would do so.

Adv Van Schoor indicated that the clause made clear that bids submitted subject to Chapter 4 will be regulated as part of the procurement system contained in Clause 25.

Previously, the Bill conferred powers for the Public Procurement Office (PPO) and provincial treasuries to review the procurement policies of procuring institutions. Stakeholders viewed that as an important function for a coherent procurement regime and asked that this proposal be re-introduced. The bill states that the PPO may issue a model policy, which could be for different categories of procurement or procuring institutions. Each institution may customise this to its own requirements. Thus, they expected to adapt the policy according to its own unique circumstances.

The department thought this was better aligned to the point that it is for the accounting officer or authority to make decisions and determine its own policy on procurement and that the review function should not be introduced for the PPO. If such a power is introduced for the PPO, additional capacity will be required.

The Chairperson asked if these policies would be binding.

Adv Van Schoor said they were not.

The Chairperson asked what problem the stakeholders had if they were not binding.

Adv Van Schoor clarified that the organisations took issue with the proposed provision in the Bill granting powers to the PPO to review the policies of procuring institutions.

The Chairperson asked if the department had removed this provision.

Adv Van Schoor confirmed that it had.

Mr Ryder asked if the powers extended to state-owned enterprises only or only down to the provinces and local municipalities and their entities, whether there would be flexibility for procuring institutions, and if these powers would be managed through the regulations.

The Chairperson said he could not recall a more technically challenging bill. He called for the department to explain the Bill in a simpler manner so that all Members could understand it.

Ms Mahlangu indicated that the Committee was pleased with the proposed introduction of the PPO during the 5th Administration of Parliament, as it believed that it would resolve many of the challenges faced in procurement, such as value for money and pricing. However, she asked for clarity on whether the proposal to confer powers to procuring institutions for procurement would minimise those of the PPO. If so, she asked what informed the decision to make this proposal.

The Chairperson asked if the PPO referred to was the one initially chaired by Mr Kenneth Brown.

Adv Van Schoor confirmed that it was.

The Chairperson asked if it had always been in the department.

Adv Van Schoor confirmed it had been, but the Bill proposed changing its name to the PPO from the Office of the Chief Procurement Officer (OCPO).

Regarding the questions on why the proposal was made, she explained that the PPO would be the successor to the OCPO. The main difference would be that the PPO, unlike the OCPO, would not operate under the delegations of the Minister, as the Bill would provide the procurement officer certain powers.

Mr Willie Mathebula (Chief Procurement Officer at the NT) highlighted that nearly 1000 government institutions had to develop their own procurement policies. Under the proposal, the PPO may develop a model policy so that the institutions can adopt and customise them to their relevant circumstances. The original provision in the Bill stated that the PPO would develop those procurement policies. After due consideration, the department amended this as the PPO would be overseeing and directly involved in the process.

This was also in line with the department’s proposal in Clause 16, which states that procuring institutions will develop and implement their policies. He pointed out that the proposed amendment would not remove the PPO’s oversight and support roles.

Adv Van Schoor indicated that the Minister must prescribe a framework, and each institution must develop its own system, including the procurement policy in line with that framework. Each institution must determine on its own how to develop and implement the policy. Furthermore, the current provisions state that the PPO may issue a model policy, and if issued, it can be used to adapt to its own circumstances.

The Chairperson asked if this would require the department to empower the PPO by providing more staff and resources.

Adv Van Schoor said that the organisation recommended that it would require additional capacity to carry out its functions.

The Chairperson indicated that the Committee should note in its report that the department should consider providing the PPO with additional resources and staff to carry out its expanded functions.

When the OCPO was introduced during the 5th Administration, he indicated that the first chairperson of the Office was often in the media, but that was no longer the case. He asked who the Office's current Chief Executive Officer (CEO) was.

Adv Van Schoor indicated that Ms Mendoe Ntshwahlana was the current CEO.

The Chairperson wondered if making the institution more public would somewhat deter individuals from engaging in corruption.

Adv Van Schoor moved on to the next comment made by the PRWG, which raised a concern about Clause 30, which deals with ICT-based procurement, Clause 25, which deals with the procurement system, and Clause 33, which deals with transparency. PRWG stated that Clause 30 creates a parallel process for expanding procurement methods and transparency and should be aligned with Clauses 25 and 33.

She explained that Clause 30 required the PPO to build an ICT-based procurement system over time, a tool to implement the procurement system. It was not a parallel one, as suggested by PRWG. The department noted that this system would have cost implications and take time to establish. The Corporation for Public Deposits (CPD) has provided a foundation for it.

PRWG made several proposals to amend Clause 30, some of which the department agreed to.

The Chairperson agreed to the organisation's proposals. However, he asked why the organisations still misunderstood some of the provisions, given that the Bill has been processed for the last ten years. As such, he was cautious about what the department had suggested.

Adv Van Schoor outlined another issue raised by the PRWG and other stakeholders: the Bill's reference to the Companies Act was incorrect and should have been to Section 56 (14) of the Companies Act regarding beneficial ownership, which the department agreed to.

The Chairperson noted this.

Adv Van Schoor mentioned that the definition of confidential information is obtained from the Protection of Personal Information Act (POPIA) and other grounds or matters that are considered confidential. Initially, it was proposed that the department refer to the Promotion of Access and Information Act (PAIA) as it is more closely aligned with what type of information should be protected, whereas POPIA dealt with the process of personal information. The department supported this. However, civil society organisations subsequently proposed that the Bill use PAIA for the entire definition and not use any other grounds, which the department agreed to. As such, the department proposed that the definition be aligned to any grounds for refusal under personal information.

Mr Ryder felt that POPIA was being abused by all sorts of entities and allowed the government to avoid transparency in its affairs. He wondered when POPIA ended and transparency started. Every right has its limits, so he wondered how much protection an individual or entity could expect from POPIA whenever they choose to engage in certain activities with the government.

Ms Mahlangu agreed with Mr Ryder’s sentiments and added that POPIA can be used by formal institutions, the government, individuals, and certain groups to hide wrongdoings or for the correct reasons. Considering this, she recommended that the Act be managed with caution.

The Chairperson agreed with these remarks. He asked if the reference was made to PAIA and whether the definitions would be covered in the Bill. In addition, he asked Mr Ryder if he had a proposal to make.

Mr Ryder reminded Members that the Companies Act was amended a few years ago to state that directors' details had to be clearly displayed on the bottom of letterheads, and he wondered what impact POPIA had on that. Nevertheless, he had no proposal to make.

The Chairperson indicated that the Committee agreed with the department’s proposed amendment. He added that the Committee would write a letter to the civil society organisations stating they had been provided sufficient time to comment and providing them with sections of the Bill that it had approved for further comment.

PRWG also submitted proposed amendments to Chapter 4, similar to those of the Congress of South African Trade Unions (COSATU) and South African Democratic Teachers Union (SADTU). She suggested that the department list all of the proposed amendments and points made by stakeholders and present them on Friday to the Committee.

The Chairperson acceded to this request. He asked if the department would still take the Committee through the Broad-Based Black Economic Empowerment (B-BBEE) statistics the following day.

Mr Mathebula confirmed that it still planned to do so.

The Chairperson asked the department to clarify whether the Committee should change how the meeting had been approached.

Adv Van Schoor confirmed that this is what had been requested. She also mentioned that the recommendation referred to the proposals made in Chapter 4 of the Bill.

The Chairperson said that the Committee should review as many of the department’s responses as possible during the meeting so that it can complete its deliberations by tomorrow.

Ms Mahlangu supported the Chairperson’s proposed way forward.

Adv Van Schoor indicated that the department removed several clauses that referred to complementary goals, which have not been defined.

The Chairperson asked what the term ‘complementary goals’ meant.

Adv Van Schoor explained that this was an additional way to introduce further preferences.

The Chairperson asked again what the term meant.

Mr Mathebula outlined that this meant the preferences covered in Chapter 4 should be applied. However, if there is any other preference an institution may deem necessary to implement, they can also consider that.

The Chairperson asked why the word ‘goal’ was used as it referred to aims.

Mr Mathebula said it had done so to indicate what should be achieved.

Adv Van Schoor mentioned that PRWG proposed in its submission that the department’s provision for the prescribed thresholds on conditions also includes a minimum of potentially qualifying suppliers to ensure competition.

PRWG also proposed omitting Clause 21, which the department initially recommended being removed as it was too open-ended.

The Chairperson asked for the department to explain what pre-qualifications were.

Adv Van Schoor explained that the Bill had set-asides for certain categories of people. Clause 18, which dealt with pre-qualifications, would only apply if set-asides are not applied. There was a proposal to deal with the BEE requirement differently than it has been in the Bill. The second category proposed by the department is where procuring institutions subcontract certain categories of bidders, such as black Africans, small enterprises owned by youth, etc. This set a higher threshold than in Clause 17.

The Chairperson asked for a more concise explanation from the department.

Mr Mathebula said that he would explain through an example. A tender is advertised by a procuring institution, and it is specified for black youth-owned small enterprises. Any other company that submits a bid and does not meet that threshold would be disqualified from the process.

The Chairperson acknowledged the explanation and asked under what conditions pre-qualification would apply.

Mr Mathebula indicated that Clause 17 prescribes a threshold for set-asides. Beyond that, there is another higher threshold for pre-qualification.

The Chairperson asked if this meant that the criteria would be more limited in the case of a pre-qualification.

Mr Mathebula confirmed that is what it meant.

Adv Van Schoor stated that the Public Service Accountability Monitor (PSAM)’s concerns were around transparency. One of its comments was that the disclosure requirements should be included in the Bill and that the Minister should not be the one to make regulations on these requirements. The department did not believe Clause 33 did not allow the Minister to make regulations. Rather, it states that the Minister must make regulations regarding the disclosure of procurement information and what the regulations must contain as a minimum.

The Chairperson was surprised by how much power the Minister had been given to make prescriptions and called for Members to consider this more. In addition, he recommended that the Committee persuade the department to put certain things in the Bill rather than leave them to the regulations. He asked the department to provide the Committee with three examples stakeholders want included in the Bill rather than leaving them to the regulations.

Adv Van Schoor referred the Committee to Clause 33, which contained a list of what the Minister should prescribe for disclosure.

The Chairperson asked which of the items stakeholders wanted included in the Bill.

Adv Van Schoor explained that the Public Finance Management Act (PFMA) requires a procurement system to be put in place. All of the procurement requirements are based on Treasury regulations and instructions. The Municipal Finance Management Act (MFMA) contains a chapter on procurement and a set of regulations on supply chain management (SCM) that inform a municipality on what should be in its policy. As the current requirements are not in the prime legislation, the Bill had to be flexible.

The Chairperson pointed out that, at times, Parliament has compromised by including certain matters in a Bill and making provision for the Minister to regulate other issues. He asked if Clause 64 (2) to (4) requires consultation before the Minister decides.

Adv Van Schoor confirmed that was the case.

The Chairperson asked if the regulations were also required to be tabled in Parliament.

Adv Van Schoor confirmed that was the case.

The Chairperson was pleased by this. He further stated that not all executive actions needed to be brought before Parliament.

Adv Van Schoor said PSAM also contended that compliance was poor while existing measures were in place. The department’s response is that under the current system, transparency is implemented through instructions, which are only under the scope of the MFMA. Furthermore, the department believed that if enacted, the Bill and the regulations would provide sufficient compulsory measures for transparency.

The Chairperson asked if this would be within the prime and subordinate legislation.

Adv Van Schoor confirmed that was the case.

The Chairperson accepted the department’s response.

Adv Van Schoor said PSAM proposed removing the words ‘to the extent possible’ from Clause 31 (1)(a), as the provision requires procuring institutions to use ICT in implementing the Act. In response, the department said it could not be expected for all procuring institutions to utilise an ICT system as some may be under-resourced.

PSAM proposed that the requirement for instructions in Clause 31 (2)(a) be removed, and the PPO must determine by instruction the requirements for digitisation, reporting, and innovations that ICT may enable for procurement processes by procuring institutions. It further proposed that whatever is issued should be aligned with the national ICT and e-government strategy.

Regarding the first proposal, the department has proposed that instead of having instructions for the PPO, they must, by notice in the gazette, determine these requirements so that it is more flexible. However, the department did not think it would be possible to leave it without further rules regulating this.

On the proposal related to the e-government strategy and electronic government in the public service, she said the department proposed adding provisions to the two relevant Acts that deal with these.

The Chairperson indicated that the Committee agreed to the response.

Adv Van Schoor mentioned that PSAM also proposed the matters listed in Clause 33. The department supported the proposal by referring to information on bid reconciliations, as this has been a problem in practice – many bids are issued and then cancelled. PSAM further proposed that the listed information be made available within 14 days after the award of the contract. However, the department did not think this would be practical.

Mr Ryder asked if the department could explain the difference between regulations and instructions.

Adv Van Schoor outlined that under the Bill, the Minister would be making regulations, and a particular process has been prescribed for him or her to consult other relevant ministers and organised local government. All regulations must be submitted to Parliament for scrutiny, and the department must publish a subsequent consultation report. She added that instructions are to be issued by the PPO.

The Chairperson remarked that instructions must be within the regulations and the Act.

Mr Ryder pointed out that the MFMA requires a monthly disclosure when procurement occurs outside of normal processes or during emergency procurement. He felt that PSAM’s recommendation that the Bill impose a direct obligation for disclosing procurement information was quite broad. He asked if this comment referred to something similar to a monthly disclosure of procurement outside of the normal process or if it was a broader call for transparency where the details of each procurement item are disclosed. He did not understand the intention behind it.

The Chairperson said that the Committee would ask PSAM in writing if required.

Adv Van Schoor stated that PSAM focused on whether disclosure should be a direct obligation in the Bill and not through the regulations.

The Chairperson was satisfied with the department’s response.

Adv Van Schoor asked if the department should take the Committee through its responses to the National Research Foundation (NRF)’s comments on the bill's costing, as it had already done on Tuesday.

The Chairperson said that it was unnecessary. He agreed with the NRF’s belief that the socio-economic assessment done on the Bill was inadequate; however, he did not appreciate that it was characterised as naive. This was unnecessary and did not inculcate a sense of dialogue amongst equal parties.

Nonetheless, he advised that the Committee report supports the view that different sections of the Bill should be implemented at different times, considering funding, capacity, skills, and other requirements.

Adv Van Schoor said the NRF requested capacity building to implement complex procurement and procurement of innovation. The Bill does contain a clause that mandates the PPO to guide and support officials and procuring institutions to ensure compliance with the Act through professional development and the training of officials involved in procurement. The department believed that institutions operating in a particular sector should ensure specific capacity building. In addition, the Bill provides provincial treasuries to build capacity within provinces.

The Chairperson acknowledged the department’s response and proposed that the Committee highlight its concern about the department’s ability to implement the Bill at all levels of government at the end of its report. Furthermore, the report should state that the Committee would want quarterly implementation reports on the Bill.

Adv Van Schoor indicated that the NRF proposed a help desk and that the Bill proposes both contract and asset management be part of the procurement system. In response, the department pointed out that the Bill requires procuring institutions to receive advice and assistance on implementing it. In addition, it believed that a help desk is an operational matter that should not be legislated. However, it could be considered for subordinate legislation.

Clause 28 of the Bill allows procuring institutions to establish a procurement function and what it should do. The department proposed amending this provision to require the PPO to perform certain functions, but these must be performed in different units so that a single unit is not prescribed to do everything that is to be contained in the procurement system, she said.

She continued that the department also supported the view that asset management be removed from the list of Clause 25 (3) as it is not a function that is directly linked to procurement. However, it felt that procurement management should be retained. She added that the department proposed that procurement management be emphasised in prime legislation as part of the procurement system, as it remained a major concern in many institutions. Where it is performed by the SCM or another unit, it is up to the institution to decide.

Mr Ryder agreed that procurement management should be the principle underpinning procurement.

The Chairperson suggested that the Committee express its objection to the submission of the Bill requiring the establishment of a help desk in its report.

Adv Van Schoor said the NRF suggested that the Bill should address impediments to innovation, as has been done in the United States, which had an exemption for the procurement of innovation. In response, the department pointed out that the objects clause did recognise innovation. Clause 23 contained a provision enabling institutions to provide measures that advance innovation when procuring. She further pointed out that innovation would be enabled through unsolicited bids, as it is a procurement method.

The Chairperson asked if such an exemption would open up the opportunity for corruption.

Adv Van Schoor confirmed that it would.

The Chairperson felt that one of the country's problems is that research and development are not encouraged enough.

Adv Van Schoor said the NRF believed that one of the provisions in Clause 25 that stated that procurement from another organ of state should be regulated would be unconstitutional. In response, the department indicated that several state institutions – National School of Government, Government Printing Works, Government Technical Advisory Centre and the Council for Scientific and Industrial Research – were created to serve a particular purpose. As a result, it is proposing, through the Bill, that when procurement is needed for a particular service or good, and there are existing organs of state to provide that, that should be regulated in the regulations. This would ensure that fair prices are paid by the procuring institutions.

She continued to say that the MFMA provides that municipalities may contract with another organ of state without complying with SCM prescripts. The department thought Clause 26 should be retained so that specific regulations dealing with instances where services are obtained from another organ of state.

She added that the department sought counsel's advice on this matter and was advised that Section 217 did apply to procurement from another organ of state.

The Chairperson was pleased with the department’s response.

Adv Van Schoor mentioned that the NRF’s last comment related to the standstill period, which is provided for where there is reconsideration or review of a procurement ascension, and it argued that the period of one week would be too lengthy. It advised that a 10% deposit must be paid if there is an adverse finding from reconsideration or review. In its response, the department suggested that adequate time for reconsideration and review of a decision must be given to ensure that the matter is heard and addressed fairly, which may take longer than a week.

The department also thought that requiring an unsuccessful bidder to pay a deposit may render the process unfair because some of them may not have the funds to do so.

Mr Ryder asked where the standstill period was covered in the bill.

Adv Van Schoor indicated it could be found in Clause 55 of the Bill.

The Chairperson asked what a standstill period referred to.

Adv Van Schoor explained that it was a defined period between the notice of the contract award decision and the contract award.

The Chairperson was pleased with the department’s response to the submission.

Many unsuccessful bidders contest the decision not to award them with the contract at the courts, he pointed out.

Adv Van Schoor said the NRF raised concerns around the definition of bid in the Bill, which the department agreed to as it would prevent unsolicited bids. As such, the department would propose an amendment to the definition of bid and, if necessary, the definition of bid committee.

Mr Ryder understood why the NRF had proposed imposing a 10% deposit on unsuccessful bidders with an adverse finding from reconsideration or review, as it may unnecessarily burden service delivery. Moreover, it may be open to abuse. While he accepted the department’s objection to the proposal and the reasons, he asked what would happen if an objection from an unsuccessful bidder is lodged, thus stalling the appointment process by a week, and if there would be scope for another bidder to lodge a further complaint and frustrate the process even more; or if there was only one window for bidders to make their submissions and adjudication is done in one set time period so that there is no indefinite delay to procurement.

Ms Mahlangu asked how the bid committees would be configured, as several complaints have been made about irregularities in them.

Adv Van Schoor, on whether there was only one window and time period for all unsuccessful bidders to lodge a complaint, explained that Clause 37 contained a provision that stipulates a time period within which an application must be submitted for reconsideration and the review process.

Mr Mathebula told Members that the specification and bid evaluation committees were ad hoc. The bid adjudication committee was a standing committee and can be changed after a review.

Adv Van Schoor remarked that the department proposed amending the definition of ‘bid’ to allow unsolicited bids.

Thereafter, she indicated that the NRF took issue with Clause 17, which prescribes targets not contained in prior prescripts. The department said that according to Clause 64, the draft regulations require a statement of need and the expected impact. This will be subject to consultation. The costs of instructions and regulations will be relevant considerations during the development.

The NRF also expressed concern about the emergency procurement regulatory framework and recommended that it be excluded entirely from the Bill, similar to China. However, the department believed that doing so would not be in accordance with Section 217 of the Constitution.

The Chairperson agreed with the department’s view.

Adv Van Schoor then took Members through the public submissions of Willpower. Its first proposal was to apply the bill to Parliament and the legislation.

The Chairperson said the Committee disagreed with the proposal as it was not feasible.

Adv Van Schoor highlighted that Willpower raised a concern regarding the provision, which states the Bill will also apply to donor funding unless there is a provision for exemption in Clause 62. It was worried that funding from certain donors would be lost. In its response, the department said that procurement done through donor funding should be subject to the bill, and the requirement should be left to the regulations.

The Chairperson agreed to the proposal.

Adv Van Schoor remarked that Willpower expressed concern that Clause 18 (3) limits the selection of designated groups to one. She explained that Clause 18 (1) provided for one of the basis of pre-qualification while 18 (3), referred to the category for subcontracting. As such, it was deliberate that only one could be selected; otherwise, it would be administratively difficult. Another stakeholder submitted that a provision should be made in Clause 18 for using contractors from the same geographical area, but the department felt that there were sufficient other provisions in the Bill, in set-asides, pre-qualification and subcontracting, for local economic development.

Mr Ryder did not agree with the department’s response.

The Chairperson asked him to elaborate.

Mr Ryder did not understand why Clause 18 could not include the provision for geographical location.

Mr Mathebula highlighted that Clause 23 of the Bill made provisions to consider the geographical area.

The Chairperson indicated that Mr Ryder had meant that there may not be that category of person in that area but that there may be someone in another municipality who does. He asked Mr Ryder to confirm if his understanding was correct.

Mr Ryder said that his understanding was incorrect. To him, it seemed that there was a conflict between Clause 18 and 23, because 18 (1)(c)(v) refers to a small enterprise owned by black people, whereas 23 states that when procuring a procuring institution may in accordance with the prescribed conditions, provide for measures to advance the creation of jobs within a particular geographical area. Whilst Clause 23 allows local municipalities to prioritise a specific geographical area, Clause 18 (3) limits this and negates the intention of the former clause.

Adv Van Schoor outlined that Clause 23 dealt with the designation of sectors for local production and content, and this would apply across the board. Where the Minister of Trade and Industry makes a designation under Clause 23, it would apply regardless of anything else. She said that the department would further clarify this matter on Friday.

The Chairperson noted this.

Adv Van Schoor mentioned that Willpower recommended a parameter for a framework be set for premiums in the Bill, which may include minimum and maximum determinations. The department believed that this would be dealt with in the regulations.

Mr Ryder felt that quantifying what type of premium is allowable would raise the base level, thus increasing procurement costs. He asked if Willpower had recommended an alternative solution, as it seemed difficult to resolve.

Adv Van Schoor said that the department would take note of his comment.

She stated that Willpower was concerned that provinces and local governments lack insight into matters that are to be prescribed. Once more, the department stressed that there would be a consultation process.

The Chairperson supported the department’s earlier proposal to provide a copy of the regulations to Parliament alongside the Bill.

Adv Van Schoor remarked that the department agreed with Willpower’s proposals to exclude contract and asset management from the Bill.

The Chairperson requested that the department move on SAMED’s comments.

Adv Van Schoor pointed out that SAMED was concerned that the Bill would implement a one-size-fits-all procurement system, which includes medical devices. The department acknowledged from the outset that there would have to be different regulations for different categories of procurement.

The Chairperson asked why SAMED continued to raise this concern even after receiving this response from the department at the beginning of the process.

Mr Mathebula mentioned that the department did not understand why SAMED continued to do so.

The Chairperson stated that the Committee would write this question to SAMED.

Mr Ryder asked the department if anything in the Bill encouraged a bid committee to receive advice from technical experts. He underlined this was important, as a bid committee in a small municipality would not necessarily have a broad understanding of the various technicalities of the departments it serves. In addition, he asked if the Bill made provision for bidders to request a technical evaluation of their bid by an independent source or someone within the end user department.

Ms Mahlangu agreed with Mr Ryder’s point and added that technical experts usually advise procuring institutions.

The Chairperson agreed that they do so, but questioned the cost at which they have done so.

Ms Mahlangu felt that the problem was the unwillingness of procuring institutions to provide the required oversight over procurement projects to ensure that they were implemented properly.

Mr Mathebula told Members that nothing prohibited a procuring institution from using experts and even including them as bid committees to provide technical advice. However, this did not extend to bidders.

The Chairperson supported that bidders should procure technical expertise at their own costs.

Mr Mathebula agreed that outsourcing technical expertise to the government has proved costly, but he believed that this could only be resolved through the education of government officials by private experts.

Adv Van Schoor said SAMED did not believe that subcontracting as a preference in Clause 19 could not apply to medical devices. In its response the department pointed out that the Bill had made an exception of this hence the same clause said ‘where feasible’.

The Chairperson did not understand why this was not clear enough to SAMED and said the Committee would have to ask it in writing.

He noted SAMED’s complaint that the concepts of value-based procurement and bid specification committees had been removed from the original Bill. He asked if this was correct and, if so, why the department had done so.

Adv Van Schoor mentioned that Clause 2 under the objects clause value for money was replaced by a reference to Section 195 of the Constitution around the effective use of public resources.

Regarding the bid specification committees, she was unsure which version of the Bill the organisation was referring to because the original one provided for a bid committee system in Clause 29.

Mr Mathebula explained that SAMED requested that the provision of strategic sourcing found in the Bill consulted on in 2020 be returned to the current version. He pointed out that Clause 25 (1)(a) of the Bill touched on a strategic approach to procurement, while Clause 64 (7) mentioned different regulations for different categories of procurement.

The Chairperson asked if the definition of strategic approach in Clause 25 (1)(a) was clear enough and asked the department to explain what it meant.

Mr Mathebula outlined that all the costs involved in procuring something must be taken into account before a decision is made.

The Chairperson asked for the department to include this definition in the definitions section of the Bill.

Mr Mathebula said that this could be done.

Adv Van Schoor indicated that SAMED questioned how the Bill would prevent unqualified or unsuitably regulated companies from setting up as subcontractors. In its response, the department said that it was not the Bill's role to regulate the establishment of new enterprises. It was for the main contractor to ensure that the subcontractor was suitably qualified to perform the work.

Mr Ryder felt that this question opened up a broader discussion on the issue around the construction mafia and business forums and how they have disrupted construction projects. This has become a problem that has impacted every single government department. He asked whether the Bill sought to formalise subcontracting.

The Chairperson asked if the Bill could not include provisions that sought to resolve this matter. If it could not, he recommended that the Committee’s report stress the need for policy and action on this issue.

Mr Mathebula admitted that the department had not considered this option. Nevertheless, it would investigate how to do so without completely exonerating the main contractor from his or her contractual responsibilities.

Adv Van Schoor highlighted SAMED’s concern that subcontractors will increase the price of tenders. The department disagreed, saying that the price would be determined at the awarding of the tender. She added that it was between a main contractor and subcontractor on what the latter is paid.

The Chairperson asked if the department could provide a brief summary of its responses to the Committee by Monday. Thereafter, it would ask the civil society organisations to explain what they did not understand from the department’s original responses.

Adv Van Schoor remarked that SAMED questioned how the procurement process proposed in the National Health Insurance (NHI) Bill would run parallel to that of the PP Bill. She explained that Clause 38 of the NHI provides that procurement under the NHI fund is subject to public procurement laws and policies of the country that give effect to Section 217 of the Constitution, including the B-BBEE and PPPFA. Furthermore, as the NHI Fund will become a 3A public entity, it will apply to the PP Bill through the application clause.

The NHI Bill also has an override clause, which states that if there is conflict between it and the provisions of another Act, the Bill will prevail. In its view, the department did not believe there would be any conflict. In any event, the statutory rule that a later Act trumps an earlier one.

The Chairperson agreed with the department’s response.

Adv Van Schoor then took Members through the Black Business Council (BBC)’s comments on the Bill. She indicated that the BBC proposed the removal of categories of black people or not owned by black people in Clauses 17 (3), 18 (1) and 19 (1) be removed. The department did not support this proposal and said the removal of women, people with disabilities, youth, small enterprises and cooperatives to black people and black-owned was too limiting. It further argued that the categories selected in those sections accord with Sections 217 (2) (a) and (b).

Ms Mahlangu was pleased with the department’s response, as she recognised specifying the preferred preferential candidate based on historical disadvantage.

The Chairperson agreed that the proposal was too limited as it would exclude other disadvantaged people, such as a disabled white individual. He stressed what needed to be changed was the practicalities, not the legislation.

Through B-BBEE, there has been a failure to ensure the fair distribution of resources across all and reasonably representative of the population groups.

Adv Van Schoor pointed out that Clause 17 contained a provision that required the Minister to set targets for historically disadvantaged groups to benefit from procurement after consulting the relevant Ministers.

The Chairperson indicated that primarily black people would be the main beneficiaries of preferential procurement.

Adv Van Schoor said the BBC suggested that the Bill should include single-source procurement to promote innovation. The department responded that single-source procurement would be one of the procurement methods.

Thereafter, she took Members through Business Unity of South Africa (BUSA)’s comments, which ranged from a concern about the department’s responses to the submissions and the Bill deconstructing the B-BBEE Act and its sector codes.

The Chairperson felt that the second issue was a significant matter that must be extensively discussed in tomorrow’s meeting.

Mr Ryder recommended that the Committee conclude the meeting two minutes before time.

The Chairperson accepted the proposal and thanked the department for the engagement.

The meeting was adjourned.