Some certainty in public procurement

State procurement has been in a state of flux over the last three years following a number of developments in the enforceability of the legal framework.  State procurement is regulated in terms of the Preferential Procurement Policy Framework Act, 2000 (PPPFA).  Since coming into effect on 20 January 2017, the Preferential Procurement Regulations, 2017 have set out the methodology for scoring bids and tenders. The preference point system allocated 80 or 90 points to price, with the remaining points allocated to bidders based on their broad-based black economic empowerment (BEE) status (or BEE level).

On 16 February 2022, the Constitutional Court in Minister of Finance v Afribusiness NPC [2022] ZACC 4 upheld a 2020 judgment by the Supreme Court of Appeal (SCA) which declared the 2017 Regulations invalid. The SCA had suspended its order for a period of one year to give the Minister of Finance (who is tasked with creating and administering regulations under the PPPFA) time to pass new regulations. In the absence of any Constitutional Court appeal, the SCA’s order would have taken effect in November 2021, at which point the 2017 Regulations would be set aside.

In the view of the Minister, after the Constitutional Court’s judgment, it was unclear whether the invalidity of the 2017 Regulations was suspended or took effect immediately. To deal with this, the Minister:

1. through National Treasury, advised that organs of state should hold off on issuing new requests for proposal (RFPs) and tenders;
2. through National Treasury, exempted more than 100 state entities from complying with the 2017 Regulations when issuing RFPs and tenders during this period of uncertainty;
3. published draft replacement Preferential Procurement Regulations for public comment; and
4. applied to the Constitutional Court for clarity on whether the order setting the 2017 Regulations aside was suspended and, if so, until when.

The Constitutional Court’s judgment in Minister of Finance v Sakeliga NPC (formerly Afribusiness NPC) [2022] ZACC 17 confirmed that:

1. the countdown on the suspension of the SCA’s order began running on 2 November 2021;
2. the countdown was stopped from 23 November 2020 when the Minister lodged an appeal to the Constitutional Court (less than a month after the SCA judgment was handed down); and
3. the countdown resumed when the Constitutional Court dismissed the Minister’s appeal on 16 February 2022.

In other words, the 2017 Regulations remain in force until 26 January 2023. National Treasury accordingly issued a media statement which confirms that:

1. all exemptions granted to deal with the period of uncertainty following the Constitutional Court’s judgment lapse according to the conditions of the letters of exemption;
2. all new tenders and requests for quotation (RFPs) must be advertised and dealt with in accordance with the 2017 Regulations;
3. an RFP issued or tender advertised before 30 May 2022 must be dealt with in terms of the relevant exemption and the organ of state’s internal procurement policy “in place for the duration of the exemption”. An organ of state may, however, decide to withdraw its RFP or tender advert and issue a new RFP which will be subject to 2017 Regulations; and
4. the 2017 Regulations will remain in place until 26 January 2023, unless new regulations are promulgated before then.

It is clear that RFPs issued from 30 May 2022 will be dealt with in terms of the 2017 Regulations. It also appears that an RFP issued on the basis of an exemption, even if the exemption lapsed on 30 May 2022 according to its conditions, remains governed by the exemption if the bidding process has not yet concluded. Potential bidders under existing RFPs, such as Round 6 of the Renewable Energy Independent Power Producer Procurement Programme, should be reassured that RFPs will continue to be governed by the procurement policy in force immediately prior to the exemption being granted.

Potential bidders should, however, be aware that organs of state may withdraw and re-issue existing RFPs. Further, RFPs which do not comply with the 2017 Regulations may be challenged on the basis that National Treasury granted exemptions because of its misunderstanding of the timing of the SCA and Constitutional Court decisions. Bidders should also be prepared to respond to any changes in the overall procurement framework, including the promulgation of new regulations.