The Public Procurement Bill becomes law: What are the new changes?
Before delving into these reforms, it is important to note that the provisions of the PPA are not yet in force. Indeed, the National Treasury – the national department responsible for the administration of the Act - in a media statement confirmed that the President must still, through a proclamation, bring the provisions of the PPA into operation. This will take some time, considering that many of the provisions of the PPA require regulations for the Act to be brought into operation. The approach taken by the President and National Treasury in delaying the commencement of the PPA is in line with the Constitutional Court’s decision in Pharmaceutical Manufactures, where it was established that bringing an Act of Parliament into operation by way of proclamation without the necessary regulatory infrastructure being in place, is irrational and unlawful.
Effectively, this means that until the relevant provisions of the Public Procurement Act and its accompanying regulations come into effect, national and provincial departments, organs of state, and municipalities must still comply with the existing laws governing public procurement (i.e. Municipal Finance Management Act of 2003, the Public Finance Management Act of 1999, Preferential Procurement Policy Framework Act of 2000, Broad-based Black Economic Empowerment Act of 2003 and Prevention and Combating of Corrupt Activities Act of 2004) when procuring goods and services. The Act makes this clear in section 66, providing that bids awarded or advertised before the commencement of the Act must be dealt with in terms of the law applicable at the time when the award or advertisement was made.
As previously reported in the Bulletin, not much has changed since our last review of the Act. The Act still, for example, aims to introduce a single regulatory framework governing public procurement across national, provincial, and local government. To this end, it repeals several laws, including Chapter 11 of the Municipal Finance Management Act, which deals with municipal supply chain management (section 67 PPA).
Public Procurement Office
The Act retained the Public Procurement Office (PPO), which is established within the National Treasury, and its key functions include monitoring compliance with the Act and providing advice and assistance to procuring institutions, among others (section 5 PPA). In an article published in the Bulletin, I argued against the PPO's power to issue binding instructions in respect of municipalities. To recall, both the 2020 and 2023 versions of the Procurement Bill empowered the PPO to issue binding instructions (see s 5(1)(f) of the Procurement Bill, 2020) and (s 5(2)(a)-(b) of the Procurement Bill, 2023) without any qualification. The Act now qualifies and limits the power of the PPO to issue binding instructions. It states that the PPO may, in accordance with the Act, in relation to procuring institutions, ‘except municipalities and municipal entities, issue binding instructions’ (section 2(a) PPA). The default position is that instructions issued by PPO in the case of municipalities are no longer binding unless a municipality’s council adopts them through a resolution (section 4(a) PPA). The same applies to circulars and instructions issued by provincial treasuries; these circulars, unlike before, are also now non-binding on municipalities unless they are adopted by a municipality’s council. Significantly, the Act further recognises that there may be overlaps and contradictions between circulars issued by the PPO and provincial treasuries. Thus, it qualifies the power of provincial treasuries to issue circulars, by requiring that their respective circulars and instructions may not be in conflict with the Act, including the instructions issued by the PPO (section 2(a)(ii) PPA). Again, this change is aimed at avoiding duplication and contradictions, concerns I raised before. I also submitted that without controls, the authority to issue circulars and instructions by both the national and provincial treasuries may lead to overregulation and fragmentation.
The Act also empowers the PPO to investigate any alleged non-compliance with the Act. The PPO may use its investigating powers if requested by the provincial treasury or procuring institution, a member of the public, or on its own initiative (section 54(1) PPA). Should an investigation by the PPO reveal non-compliance with the Act, the PPO must instruct the procuring institution to take steps to stop or prevent the non-compliance and direct that appropriate action be taken against the official responsible for the non-compliance. The Act, in turn, imposes a reporting back duty on the procuring institution to provide the PPO with feedback on the progress made. If an investigation by the PPO uncovers a suspected offence listed in section 60 of the Act, such as extortion or corruption, these offences must be reported to the relevant law enforcement agencies for further investigation (section 54(2)(b) PPA). The referral provision was included in the Act to deal with concerns of regulatory overlap and to prevent situations where the PPO usurp the investigative authority of the Hawks and other law enforcement agencies specifically mandated to investigate the crime of corruption. As a result, the PPA restricts the investigative authority of the PPO by excluding these serious offences.
The Act further empowers the PPO, when undertaking investigations, to enter and search any premises, including that of the procuring institution (i.e. municipality), the premises of an official of a procuring institution and the premises of a bidder and supplier. The Act distinguishes between these three premises. For example, a person authorised by the PPO may enter and search without prior consent or warrant (section 55(1)(a) PPA) the premises of the procuring institution. In contrast, the Act requires that prior consent must be obtained in the case of entering and searching at the private residence of an official, bidder or supplier. No prior consent and notice are required where the entry and search are authorised by a warrant (section 55(2)(b) PPA). This is necessary to protect a person's right to privacy.
Procuring institutions
The Act further regulates the conduct of persons involved in procurement and imposes specific duties on procuring institutions. The Act, for example, requires procuring institutions (i.e. municipalities) to put in place measures to ensure that all bidders submit their declaration of interest. Failure on the part of bidders to submit a declaration or submitting false information automatically renders the bid invalid (s 11(2)(a)(b) PPA).
The Act also imposes a duty on procuring institutions to identify persons automatically excluded from bidding. These include public office bearers, an official or employee of a municipality or municipal entity and a bidder or supplier debarred in terms of section 15 of the PPA. In respect of debarments, the Act empowers the procuring institution to issue disbarment orders, subject to notice (the notice must indicate reasons for intended disbarment and invite the affected party an opportunity to provide reasons, why a debarment order should not be issued). A procuring institution must issue a disbarment order against a supplier or bidder if such a bidder or supplier provides false information, connived to interfere with the participation of other bidders or has been convicted of an offence involving fraud, corruption relating to procurement by a procuring institution (section 15(3) PPA). There is a duty on the accounting officer of the procuring institution, and in the case of a municipality, the municipal manager, to verify that a bidder is not debarred, and that the bidder’s name does not appear on the debarred register (s 26(1)(d) PPA).
Duty to be transparent
The Act strongly emphasises the need for procurement transparency. It foremost instructs the PPO to develop an information and communication technology-based procurement system to enhance transparency (s 28 PPA). To this end, the Act requires that the PPO establish a hosting option (central portal) for procurement data to enable easy reporting, analysis, research, and oversight of procurement transactions (s 28(2)(f) PPA). Compared with the MFMA, the Act is much more detailed when it comes to making procurement information available to the public. For example, the Act expressly recognises the importance of making public procurement information available to the public – something which the Dullah Omar Institute and the International Budget Partnership-South Africa have been pushing for a while. The Act does so by instructing the Minister of Finance to prescribe measures for the public, civil society and the media to access, scrutinise and monitor procurement processes (s 30(1) PPA). The Act lists procurement information that must be disclosed, and which must be regulated by the Minister through regulations. The Minister must specify which category of information must be disclosed; disclosure of reasons for a decision; and the date, reasons for and value of an award to a bidder (s 31(2)(a) PPA). The Act requires that this information must be published as soon as possible, and it must be easily accessible on a central online portal available free of charge. The information must not be scattered but must be published in a format that enables the easy tracking of information relevant to the entire process of a specific procurement (s 31(2)(b) PPA). This means that all the documents relevant to a tender, such as the bid invitation and specifications, must be linked and easily accessible.
The above legislative developments should be welcomed. Indeed, they address some of the shortcomings in the municipal procurement system identified by the Dullah Omar Institute and the International Budget Partnership-South Africa. In particular, the studies conducted by these two institutions found that the majority of municipalities do not publish procurement-related information on their websites, and when they do, this information is either outdated or incomplete. While the PPA is a step in the right direction, a 2021 follow-up study by the Dullah Omar Institute and International Budget Partnership South Africa revealed that more than just prescribing laws is needed to achieve transparency. This study shows that municipalities often do not publish procurement information due to the non-functionality of municipal websites and under-capacitated supply chain units, among other reasons. The study also established that municipalities tend not to publish information on the National Treasury’s e-tender portal since this was not a legal requirement and only provided for under National Treasury’s circulars. As stated previously, circulars are not binding until adopted by the council. When the PPA comes into force, the publication of tender-related information on a central portal will be a must for all procuring institutions, and this legislative change should be embraced.
Procuring tribunal
Chapter 6 of the PPA establishes a dispute resolution framework, empowering a bidder to submit an application for reconsideration to the procuring institution if the bidder is not satisfied with a decision to award a bid. The application for reconsideration must be submitted within 10 days of the date the bidder is informed of the decision to award. Before approaching the Public Procurement Tribunal or court for relief, the Act requires that an aggrieved bidder exhaust all internal remedies (s 35(2)(a) PPA). If an aggrieved bidder is unsuccessful in the reconsideration application, they may file an application for review with the Public Procurement Tribunal (s 35(8) PPA). The Public Procurement Tribunal is an independent body specifically established to review reconsideration decisions to award a bid or debar a bidder taken by procuring institutions (s 36(1)(a)(b) PAA). The Tribunal was specifically created to alleviate the already overwhelmed courts from having to handle procurement matters by offering aggrieved parties a more accessible and cost-effective platform for resolving procurement disputes.
The Act guarantees the Tribunal’s independence in several instances. For example, the Act empowers the Tribunal to make its own rules and empowers the Chairperson – a retired judge - to hire and appoint persons as employees (s 43 and 46 PPA).
The Chairperson is responsible for constituting Tribunal Panels - the decision-making body that will hear and consider review applications. The Act requires the establishment of various Tribunal Panels to deal with national departments, provincial departments, and municipalities (s 45(1)(a) PPA). The panel, once constituted and upon considering an application, can issue various orders, including confirming the decisions of the procuring institution or setting it aside and referring the matter back to the relevant procuring institution for reconsideration. The panel may also direct that the procuring institution not make the award or cancel an award under review or direct that the procurement proceedings be terminated (s 51(1)(2) PPA).
In both instances where a procurement process is subject to reconsideration by a procurement institution, or subject to a review process undertaken by the Tribunal Panel, a procuring institution is prohibited from concluding a contract with a successful bidder. The procurement institution may only conclude a contract with a successful bidder upon the conclusion of the reconsideration and review process (s 53(1)(a)(b) PPA). Any aggrieved party dissatisfied with an order of the Tribunal may institute judicial review proceedings in terms of the Promotion of Administrative Justice Act or any applicable law.
The anticipated impact of the legal and institutional reforms introduced by the PPA, exemplified by the PPO and Public Procurement Tribunal, necessitates meticulous monitoring when the Act comes into operation. Evidently, the PAA will introduce additional intricacies to an already convoluted procurement system. The next article will focus on the safeguards and controls introduced in the Act to manage and control the Minister of Finance's regulatory powers.
By Curtly Stevens, Doctoral Researcher