New Public Procurement Bill: Essential Summary
On Tuesday, 23 July 2024, President Cyril Ramaphosa signed into law the Public Procurement Act, a transformative piece of legislation designed to overhaul and unify the procurement processes across all organs of state in South Africa.
This Act establishes a single, cohesive framework that not only aims to ensure efficiency and cost-effectiveness but also strengthens integrity and transparency in public procurement. As the nation continues its fight against corruption and strives for economic inclusivity, the Public Procurement Act stands as a pivotal step toward achieving these critical goals.
In this blog post, we will begin with an executive summary of the Public Procurement Act of 2024, providing a high-level overview of its objectives and significance.
Following that, we’ll explore the Act in more detail, starting with a summary of Chapter 1, which covers the definitions, objectives, and application of the Act. We will then proceed to Chapter 2, which discusses the roles of the Public Procurement Office, Provincial Treasuries, and Procuring Institutions, and move on to Chapter 3, which focuses on procurement integrity and debarment.
Each section will be summarized to give you a comprehensive understanding of how this legislation is designed to transform public procurement in South Africa.
Executive Summary
Act No. 28 of 2024, the Public Procurement Act, is a comprehensive piece of legislation passed by the South African Parliament to standardize how government departments, constitutional institutions, municipalities, and public entities procure goods and services. The Act's primary goal is to establish a single, unified framework for public procurement that is fair, equitable, transparent, competitive, and cost-effective, in line with the South African Constitution.
Key provisions of the Act include:
Ethical Conduct and Anti-Corruption: The Act prioritizes ethical behavior in procurement, with strong measures to combat corruption and ensure accountability.
Economic Transformation: It promotes economic transformation by advancing Black ownership and management in the economy through mechanisms like set-asides and subcontracting requirements for historically disadvantaged groups.
Oversight and Enforcement: Oversight is managed by the newly established Public Procurement Office within the National Treasury, supported by provincial treasuries. These bodies are responsible for issuing binding instructions and guidelines to ensure compliance with the Act.
Dispute Resolution: The Act establishes a Public Procurement Tribunal to address disputes arising from procurement decisions, providing an independent review mechanism.
Legal Alignment: The Act repeals or amends previous legislation to eliminate inconsistencies and ensure all public procurement activities are aligned with this new, comprehensive framework.
Overall, the Public Procurement Act, 2024, represents a significant step forward in creating a more cohesive, transparent, and fair public procurement system in South Africa.
Chapter 1 of the Public Procurement Act, 2024
Key Terms, Objectives, and Application
Definitions (Section 1): This section outlines the meanings of crucial terms like "bid," "procurement," "public office bearer," and others. Understanding these definitions is essential for interpreting the act correctly.
Objectives of the Act (Section 2): The act aims to establish standardized rules for how public funds are spent when the government procures goods and services. It promotes efficient use of resources, ethical practices, economic development, and innovation. It also focuses on fairness, transformation, and sustainability in the procurement process.
Application and Administration of the Act (Section 3): This act applies to a wide range of entities, including government departments, municipalities, and public institutions. It covers all procurement activities, even those funded by donors or grants. The act takes precedence over other conflicting laws. The Minister of Finance is responsible for overseeing and administering the act.
Conclusion:
Chapter 1 provides the foundational elements of the Public Procurement Act, 2024. It clarifies the key terms, sets out the objectives, and defines the scope of the law. This chapter is critical for understanding how the rest of the act is to be implemented and followed.
Chapter 2 of the Public Procurement Act, 2024
Entities Responsible for Public Procurement Oversight
Chapter 2 of the Public Procurement Act, 2024 explains which organizations are in charge of managing and overseeing public procurement in South Africa. These include the Public Procurement Office, Provincial Treasuries, and Procuring Institutions.
Part 1: Public Procurement Office (Sections 4-5)
This part establishes the Public Procurement Office within the National Treasury. This office is responsible for managing public procurement across the country.
The key roles of the Public Procurement Office include:
Developing a national strategy for procurement;
Creating policies that favor certain types of procurement;
Ensuring transparency in the procurement process;
Promoting standard procedures across all procurement activities;
Encouraging the use of technology and innovation;
Monitoring how well the Act is being followed;
Taking action when there are serious violations of the Act;
Managing databases that help with the implementation of the Act.
The Public Procurement Office has the power to issue mandatory guidelines (except for municipalities and municipal entities, where it can only provide non-binding advice) and model procurement policies.
Part 2: Provincial Treasuries (Section 6)
This part explains the role of provincial treasuries in overseeing procurement within their respective provinces.
Their responsibilities include:
Monitoring and managing procurement activities by institutions within their province;
Promoting effective management and transparency in procurement;
Enforcing the Act within the province (except for municipalities and municipal entities);
Providing necessary information to the Public Procurement Office.
Provincial treasuries can issue non-binding advice to municipalities and municipal entities, but they can enforce binding instructions on other procurement bodies in their region. They are also responsible for offering guidelines and helping build capacity within these institutions.
Part 3: Procuring Institutions (Sections 7-8)
Although not fully detailed here, sections 7 and 8 deal with the decision-making processes and duties of the institutions that carry out procurement.
These institutions must include a statement in their documents, evaluations, and contracts that confirms they are following the Act. They are also required to provide procurement information when needed and take steps to prevent the misuse of the procurement system.
Procuring institutions have the power to correct any mistakes or fraudulent actions, as long as they follow the correct procedures.
Conclusion:
Chapter 2 of the Public Procurement Act, 2024 sets up a clear framework for how public procurement should be managed in South Africa. By defining the roles of the Public Procurement Office, Provincial Treasuries, and Procuring Institutions, the Act aims to ensure that public funds are used efficiently, transparently, and responsibly.
Chapter 3 of the Public Procurement Act, 2024
Procurement Integrity and Debarment
Chapter 3 of the Public Procurement Act, 2024, focuses on the ethical standards and legal rules that everyone involved in public procurement must follow. It also sets up the process for banning individuals or companies that act unethically.
Codes of Conduct (Sections 9-10):
The Act requires all people involved in public procurement—like government officials, bidders, and suppliers—to follow a specific code of conduct. This code highlights the importance of being fair, careful, and responsible when handling information. If government officials or bid committee members break this code, they can face disciplinary actions for misconduct.
Conflict of Interest (Section 11):
Procurement institutions must have systems in place to identify people who are automatically barred from bidding (such as public office bearers and their close family members) and to spot any potential conflicts of interest. Bidders must declare any personal interests, and failing to do so will make their bid invalid. Anyone involved in procurement who has a personal stake in the matter must disclose it and step away from participating.
Preventing Undue Influence (Sections 12, 14):
The Act strictly prohibits anyone from interfering with or influencing the procurement process inappropriately. Government officials are protected from being forced to act against the rules of the Act. If they are pressured, they must report it to authorities like the Public Procurement Office, the provincial treasury, or the Public Service Commission. Tampering with bids is also strictly forbidden.
Automatic Exclusion from Bidding (Section 13):
Certain people are automatically banned from submitting bids. These include public office bearers, employees of legislative bodies, officials in constitutional institutions, municipal officials, and any entities significantly owned by these individuals.
Debarment (Sections 15, 51, 53):
This section outlines the process for banning (debarment) bidders or suppliers who engage in unethical or illegal activities. Before a debarment order is issued, the procuring institution must inform the affected party, explain the reasons, and give them a chance to respond. Reasons for debarment include being convicted of fraud, corruption, or other procurement-related crimes. The Public Procurement Office keeps a public list of debarred individuals. If someone is debarred, they can request a review by the Public Procurement Tribunal. Additionally, no contracts can be finalized if a related debarment review is still ongoing.
Conclusion:
Chapter 3 of the Public Procurement Act, 2024 plays a key role in ensuring that South Africa's public procurement system operates with integrity. By setting clear rules for ethical behavior, requiring disclosures, and establishing a process to ban those who break the rules, this chapter helps to prevent corruption and conflicts of interest.
Chapter 4 of the Public Procurement Act, 2024
Preferential Procurement
Chapter 4 of the Public Procurement Act, 2024 focuses on using public procurement to address past inequalities and promote economic transformation in South Africa. It aims to create opportunities for groups of people who were historically disadvantaged due to unfair discrimination.
Procurement Policy (Section 16):
The Act requires all government bodies, like departments, municipalities, and public entities, to create and follow a procurement policy that prioritizes these disadvantaged groups. This policy must align with the Act's goals and the guidelines in Chapter 4.
Prioritizing Historically Disadvantaged Groups (Section 17):
Government institutions must give preference to bids from specific groups, such as Black people, women, people with disabilities, military veterans, and small businesses owned by these groups. The Act includes "set-asides," which are contracts reserved just for these groups based on certain conditions, like having enough qualified suppliers.
Target Setting: The Minister of Finance is responsible for setting targets for these set-asides, making sure they align with Black Economic Empowerment (BEE) practices. The Minister must consult with other relevant ministers and local government to ensure these targets support the broader goals of economic transformation.
Income-Generating Contracts: The Act also applies these principles to income-generating contracts like leases and asset disposals, further promoting economic change.
Prequalification Criteria (Section 18):
If set-asides aren’t possible because there aren’t enough qualified suppliers, procuring institutions can use prequalification criteria to give preference to bidders who support preferential procurement in their own business practices. For example, a bidder might be favored if they plan to subcontract part of the work to small, Black-owned businesses.
Subcontracting Requirements (Section 19):
The Act recognizes that smaller, disadvantaged businesses might struggle to win large contracts. To help them, Section 19 allows government institutions to require that parts of big contracts be subcontracted to businesses owned by designated groups. This helps these smaller businesses participate in larger projects and promotes economic inclusion.
Local Production and Content (Section 20):
Chapter 4 also supports local industry by encouraging the use of locally produced goods and services. The Minister of Trade, Industry, and Competition can designate certain sectors or products that must be locally sourced in public contracts. This helps create jobs and supports local businesses.
Sustainable Development (Section 21):
The Act also emphasizes the importance of sustainability in public procurement. Government institutions can implement policies that promote environmentally friendly goods and services, reflecting a commitment to sustainability in government operations.
Beneficiation and Innovation (Section 22):
Finally, Chapter 4 encourages the use of public procurement to drive broader economic goals, like technological innovation, job creation, skills development, and the growth of small businesses, particularly in specific geographic areas.
Conclusion:
Chapter 4 of the Public Procurement Act, 2024 is a significant step towards using public spending to correct historical inequalities and support South Africa's economic transformation. It sets clear expectations for government institutions to actively contribute to building a more inclusive and equitable economy, not just by following the law, but by embracing its spirit to promote meaningful change.
Chapter 5 of the Public Procurement Act, 2024
General Procurement Requirements
Chapter 5 of the Public Procurement Act, 2024 explains the basic rules and systems that must be in place for public procurement in South Africa. This chapter is divided into three parts:
Part 1: Procurement System, Methods, and Related Matters
The Minister is required to set up a framework to help government institutions create their procurement systems. This framework should support strategic buying, outline different ways to procure goods and services, and establish how bids will be evaluated based on things like cost, quality, and technical needs. It should also encourage new and smaller suppliers to participate.
The Minister will also decide the limits for different types of procurement, which may vary for different institutions.
The procurement system needs to cover several areas, including policy, management, planning, acquiring goods, contract management, risk management, logistics, disposal, performance monitoring, and reporting.
A database of potential suppliers must be created and maintained to help manage procurement.
The Act allows for purchasing goods and services from other government bodies under certain conditions.
To prevent misuse of the system, the Act includes steps to ensure compliance, avoid interference, investigate any misconduct, check if bidders are eligible, and cancel bids or contracts if necessary.
A bid committee system must be in place, with members who have the necessary skills and no conflicts of interest.
Part 2: Use of Technology in Procurement
The Public Procurement Office is responsible for creating an information and communication technology (ICT) system for procurement.
This system should be a single platform for all procurement-related services, using standardized open data. It should help with reporting, create an online marketplace for common goods and services, and decide the best way to store procurement data.
Government institutions are encouraged to use technology as much as possible to follow the Act and use the established procurement system.
The Public Procurement Office will also set the rules for digitizing, automating, and innovating procurement processes.
Part 3: Access to Procurement Processes and Information
The Minister must establish measures to ensure that the public and media can access procurement processes. This access should allow for monitoring and oversight but also protect officials from undue pressure or threats. Confidential information will not be included in this access.
The Act requires that procurement information be disclosed, such as reasons for not using open competitive bidding, details about bids and awards, contract information, and information on canceled bids.
This information must be published quickly in a format that is easy to access and track on a public online portal.
Copies of the Act, related regulations, and guidelines must be available at the Public Procurement Office and on the National Treasury website.
The Public Procurement Office and provincial treasuries can share procurement information with authorized authorities like the National Prosecuting Authority, Public Protector, Auditor-General, and others as allowed by law.
The Act prohibits sharing confidential information obtained during procurement processes.
The Public Procurement Office, provincial treasuries, and government institutions must protect personal information in line with the Protection of Personal Information Act.
Conclusion:
Chapter 5 of the Public Procurement Act, 2024 aims to build a procurement system that is transparent, accountable, efficient, and fair. It emphasizes the use of technology, promotes ethical conduct, and ensures that the public can monitor procurement activities while protecting sensitive information.
Chapter 6 of the Public Procurement Act, 2024
Dispute Resolution Process
Chapter 6 of the Public Procurement Act, 2024 explains how disputes related to public procurement are resolved in South Africa.
Dispute Resolution Process:
If a bidder is unhappy with the decision to award a contract, they can ask the procuring institution to reconsider the decision.
The bidder must submit this request within 10 days of being notified about the award decision.
The procuring institution has 30 days to investigate the request and inform the bidder of their decision, unless the request is late or the bidder withdraws it.
If the procuring institution decides to cancel the original award, the bidder who originally won the contract can ask the Public Procurement Tribunal to review the decision.
The Public Procurement Tribunal:
The Tribunal is an independent body that reviews decisions made by procuring institutions during the reconsideration process, as well as decisions about banning (debarment) bidders or suppliers.
The Tribunal must be impartial and fair in its decisions.
The Tribunal is made up of members appointed by the Minister, including a retired judge as Chairperson, legal experts, and procurement experts.
The Chairperson leads the Tribunal, while the Deputy Chairperson steps in when needed.
Tribunal members must disclose any conflicts of interest related to cases they review.
The Tribunal works through panels, which are groups of members assigned by the Chairperson to handle specific cases. These panels include members with relevant expertise.
The Tribunal can set its own rules for how it operates, including rules for reviewing applications and how its panels function.
Review Process:
If a bidder is still unhappy after the procuring institution's reconsideration process, they can apply for review to the Tribunal within 10 days of being informed of the decision.
A person who has been debarred by a procuring institution can also ask the Tribunal to review their case within 10 days of being notified about the debarment.
The Tribunal can accept applications filed after the 10 days if they are submitted within 15 days and if reviewing the case is in the public interest.
The Chairperson of the panel decides how the review will be conducted, aiming to keep the process simple and quick.
Hearings are usually open to the public, unless the Chairperson decides that certain individuals should be excluded.
The panel can require individuals to provide evidence or documents, and those who are asked to do so are entitled to reimbursement for any costs.
The panel must decide within 30 days of receiving the application for review, but this deadline can be extended by up to 30 more days if needed.
The Tribunal's decision on a review is final.
During the Reconsideration and Review Processes:
The procuring institution cannot finalize a contract with the winning bidder while the reconsideration or review process is ongoing.
In emergencies, the procuring institution is allowed to follow emergency procurement procedures.
Conclusion:
Chapter 6 of the Public Procurement Act, 2024 provides a clear and structured process for resolving disputes in public procurement. By allowing bidders to challenge decisions and have their cases reviewed by an independent Tribunal, the Act promotes fairness and transparency in the procurement process. This chapter ensures that all parties have a fair opportunity to be heard, and it helps maintain trust in the integrity of South Africa's public procurement system.
Chapter 7 of the Public Procurement Act, 2024
General Provisions
Chapter 7 of the Public Procurement Act, 2024 covers various general rules and procedures related to public procurement in South Africa, including how investigations are handled, how authority is delegated, what constitutes offenses, and how regulations are made.
Investigations and Enforcement:
The Public Procurement Office can investigate suspected non-compliance with the Act if it has a good reason to believe something is wrong. Investigations can start based on requests from the treasury, a procuring institution, a member of the public, or on the Public Procurement Office's own initiative. If non-compliance is found, the Office can instruct the procuring institution on how to fix the issue and may refer possible criminal offenses to the police or other law enforcement agencies.
The Public Procurement Office has the power to authorize individuals to enter and search the premises of procuring institutions, their officials, bidders, and suppliers. In some cases, entering and searching premises other than those of procuring institutions may require consent, a warrant, or both, depending on the situation. Authorized individuals can access important documents, question people, and seize evidence as part of their investigation.
Warrants and Delegation of Authority:
The Act outlines how warrants can be obtained for entering and searching premises. It also explains how different entities can delegate their powers and duties to others. Additionally, the Act protects individuals from liability if they act in good faith while performing their duties under the Act.
Offenses and Penalties:
The Act identifies what counts as financial misconduct in procurement, such as not following the rules in the Act or failing to use the proper procurement systems. It also lists specific offenses, like providing false information, interfering with procurement processes, and engaging in corrupt activities. Those found guilty of these offenses could face fines, imprisonment, or both.
Exemptions and Departures:
The Minister can grant exemptions from certain parts of the Act in special situations, such as national security risks or emergencies. The Public Procurement Office can also allow departures from its instructions if following them is impractical, impossible, or too costly.
Regulations and Guidelines:
The Act gives the Minister the power to create and issue regulations on various aspects of procurement, including the qualifications required for procurement officials, security checks, and emergency procurement procedures. Before issuing these regulations, the Minister must consult with relevant stakeholders, like government ministries and local governments. The Act also explains the process for making and publishing these procurement-related instructions.
Transitional Measures and Review:
Chapter 7 includes steps to ensure a smooth transition to the new legal framework, especially for bids that were awarded or advertised before the new rules came into effect. The Act also requires a review of its implementation within 24 months of its publication, with a report on the findings to be submitted to Parliament.
Conclusion:
Chapter 7 of the Public Procurement Act, 2024 provides the necessary tools and guidelines to ensure that public procurement in South Africa is conducted fairly, transparently, and by the law. By outlining how investigations are conducted, how authority is delegated, and what penalties exist for wrongdoing, this chapter helps maintain the integrity of the procurement process. It also ensures that the transition to the new legal framework is smooth and that the Act is regularly reviewed for effectiveness.