Tender ban: Govt bodies can apply for exemptions

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  • Following an effective ban on new government tenders since end-February, Treasury has relaxed its approach.
  • Government departments and state-owned enterprises can manage their own tenders - if they get an exemption from the Minister.
  • Tenders have been suspended pending clarity from the Constitutional Court about BEE requirements.

Following an effective ban on new government tenders since end-February, Treasury has relaxed its approach.

On 25 February, Treasury issued a circular stating that the issuing of tenders would be "held in abeyance" after the Constitutional Court dismissed an appeal by the Finance Minister Enoch Godongwana to overturn an earlier court judgment which had set regulations signed in 2017 aside. 

The case was brought by Afribusiness, and argued that the 2017 regulations were unfair because they allowed for "pre-qualifications" to be set for tenders. For example, state institutions could declare that only black-owned businesses qualified to tender.

Treasury sought urgent clarification from the Constitutional Court on its ruling and in interim effectively asked government bodies to suspend new tenders. 

This had a big impact on state-owned entities and government departments. For example, the Department of Water and Sanitation confirmed to Fin24 that the suspension affected R2 billion in its infrastructure tenders.

Treasury says organs of state can apply for exemptions from certain provisions of the Preferential Procurement Policy Framework Act, which would allow them to proceed with new tenders.

"Once the minister has made his decision on the exemption requests, the acting chief procurement officer communicates the decision to the organ of state concerned. This process generally takes 72 hours from application to response."

Treasury said this process will continue until new regulations are in place or the Constitutional Court has provided clarity on the Afribusiness case.

Treasury released new government tender regulations for comment in March.

READ | Treasury releases new public procurement rules after tender suspension imbroglio

The new regulations restore the system that existed before the 2017 iteration of the rules and do away with the pre-qualification rules that Afribusiness NPC contested in court.

Under this system, the formula for scoring points in tender awards proposes a 80/20 BEE preference point system for the acquisition of goods with a value of up to R50 million and a 90/10 BEE preference points system for goods valued higher than R50 million.

On Friday, Treasury said it is considering public comments, and "after due process" will publish the new regulations in the Gazette.

"Concerning the Minister of Finance’s application to the Constitutional Court seeking clarity on its judgment of 16 February 2022, the Registrar of the Court had advised that it is receiving the Court’s attention and that the parties will be advised when the judgment will be handed down," Treasury added.

On Friday, Eskom welcomed Treasury’s relaxation of some procurement constraints, a move it says will help it to move more quickly to resolve some of the utility’s pressing operational challenges.

Eskom said the amendment now allows it to approve contract variations without National Treasury approval and to engage directly with the original equipment manufacturers and maintenance suppliers of the most critical equipment and services required in the process of generating electricity. The amendments also provide Eskom with flexibility and agility over expansions, deviations and handling of urgent matters in its procurement processes.

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