As of 16 January 2023, the New Preferential Procurement Regulations (2022 Regulations) have taken effect in South Africa. This is after the Constitutional Court have declared the 2017 regulations to be unlawful.
The New Regulations (2022 Regulations) repeat the wording found in the empowering legislation, the PPPFA and do away with most of the additional concepts that were found in the 2017 Regulations.
The key difference between the 2017 Regulations & the new 2022 Regulations concerns the application of pre-qualification criteria.
Whereas the 2017 Regulation provides that an organ of state may apply pre-qualification criteria “to advance certain designated groups”, which includes Black people, women, persons with disabilities, and small enterprises, the 2022 Regulations no longer provide for the use of pre-qualification criteria.
The 2022 Regulations also allow for some discretion for procuring institutions when allocating preference points. Although the scoring system of 80/20 (for contracts up to R50-million) and 90/10 (for contracts above R50-million) is still in place, the 2022 Regulations permit the procuring institution to decide on “the specific goal specified for the tender” (instead of only B-BBEE contributor status level, as was provided in the 2017 Regulations).
Only “specific goals” may include contracting with persons historically disadvantaged by unfair discrimination, or the implementation of programmes of the Reconstruction and Development Programme.
Significantly, the 2022 Regulations cover tenders for income-generating contracts (including concessions and the letting of government assets or property) and tenders for the acquisition of goods or services. This confirms the position that contracts entered into by organs of state for commercial gain, rather than for the acquisition of goods and services, are also subject to public procurement rules (this was confirmed in a judgment by the Supreme Court of Appeal in Airports Company South Africa SOC Ltd v Imperial Group Ltd and Others).
An important exclusion from the 2022 Regulations is local content requirements. However, it is likely that local content will be included in the anticipated Public Procurement Bill, which is in development by National Treasury and should be introduced in Parliament in 2023.
The 2022 Regulations also refrain from regulating the award of contracts to tenderers not scoring the highest points, and the permissible grounds for cancellation of tenders. These are matters that organs of state can cover in their own procurement policies.
Importantly, the absence of specific references to preference based on B-BBEE contributor status level and to local content in the 2022 Regulations does not preclude organs of state from allocating preference points to B-BBEE or localisation in a tender process, as “specific goals”. In other words, procurement, to be seen whether organs of state continue to apply B-BBEE contributor status level as the key consideration in preference point scoring, or whether they apply other specific goals such as job creation, employment equity, local or regional presence, participation by women or disabled persons, green procurement or other goals.