Content Last updated: 15/11/2019
Stage 2 of 5

Initiation of a procurement process

The process leading to an agreement to buy a good or service, e.g. tender, quotes, sole supplier, and so on.

2.1 - Overview

In order to implement Government’s procurement plans, and purchase a good or service, a procurement process of some sort must be undertaken. 

There are different procurement processes that can be used. The type of procurement process required will depend on the value of the transaction or the type of good or service being acquired. 

Every expenditure of public funds must occur in accordance with legislated procedures. However, the legislation will require greater complexity in the procurement process for bigger transactions - because more public money is at risk. 

Higher value transactions will require a full bidding process, while lower value transactions will only require the receipt of a few quotations for the purposes of comparing price.

2.2 - The laws governing the tender process

The Constitution - Section 217

In order to implement Government’s procurement plans, and purchase a good or service, a procurement process of some sort must be undertaken.

The Public Finance Management Act 1 of 1999

This act regulates financial management, including procurement, at provincial and national levels of government.

The Local Government: Municipal Finance Management Act 56 of 2003 (and Regulations)

This act regulates financial management, including procurement, the municipal level of government.

The Preferential Procurement Policy Framework Act 5 of 2000 (and its Regulations)

This act regulates the use of procurement to achieve certain government policy objectives, for example increased use of local suppliers, or increased use of suppliers with excellent BBBEE credentials.

The procuring entity’s supply chain management policy

  • For extra guidance you could also look at National Treasury Instruction Notes, Circulars and Practice notes
  • Useful also is the document Supply Chain Management: A guide for Accounting Officers.

2.3 - Initiation of a tender process

Requests for Proposals (RFPs)

First, the procuring entity will send out an RFP - A Request for Proposals (or an invitation to bid)

  • When an organ of state has an understanding of the need it must satisfy, it will have an idea of what to procure. 
  • It will send out a Request for Proposals, asking qualified bidders to submit a proposal.
  • The RFP is a document which sets out the rules for submitting a bid.
  • The RFP will ask for information from bidders on their technical knowledge, the quality of their product or service and their experience in the field. 
  • Sometimes bidders will already be on a panel of bidders, which was set up by the procuring entity, and which the procuring entity frequently uses for its procurements. In this case, bidders will compete based on fewer criteria. The procuring entity is already familiar with the bidders level of expertise when they are on a panel. 
  • The tender will be advertised on the Government Tender Bulletin, the eTenders Portal and newspapers if applicable, for a minimum period of 21 days (including weekends/holidays).  

Submission of bids

All interested bidders will submit bids.

  • These must be submitted within the timeframes stipulated in the RFP

The window for submission of bids will close.

  • At a designated date and time, a representative of the procuring entity will open the submitted bids
  • While bids are being opened, the procuring entity must create a register of all of the bids it has received. This register must be made available on the procuring entity’s website within 10 days of the closure of the bid.
  • Suppliers are allowed to attend the opening session where the names of the bidders will be read and recorded.  
  • The prices of bids should be read out in public. 
  • Sometimes (particularly in respect of infrastructure contracts) BBBEE points claimed are also read out in public.

2.4 - Preferring certain suppliers

Procurement Policy Framework Act

  • The Preferential Procurement Policy Framework Act requires that government departments develop and implement a preferential procurement policy. The PPPFA provides a framework for achieving specific goals such as contracting with historically disadvantaged persons. 
  • A preferential procurement policy must be implemented within the following framework:
  •     For contracts above a value of R50 million, a maximum of 10 scoring points may be allocated for “specific goals” such as historical disadvantage. The remaining 90 points must be allocated to price and functionality concerns. 
  •     For contracts equal to or below R50 million (but above R30 million) a maximum 20 scoring points may be allocated for these “specific goals” and the remaining 80 points must be allocated to price and functionality concerns. 
  • It also allows for the use of procurement to favour locally produced goods over imported goods. This is known as the “local content” requirement.
  • These concerns are evaluated at BEC and BAC stage.

System Weaknesses

There is much confusion, especially in the construction industry, about what the “local content” requirement entails. This is particularly so in respect of the requirement for the use of local labour, when it is unclear whether the relevant necessary skills are available in the particular area surrounding a construction site. Thus, there is confusion on whether 'local' means South Africa, a local municipal area, or a more limited spatial zone immediately surrounding, for example, a housing project to upgrade an informal settlement.

It is further unclear whether the local content requirement necessitates the provision of training for ‘local” labourers who do not have requisite skills to participate in procurement implementation.

2.5 - Deviations from the process

What are deviations?

The framework allows organs of state to deviate from the usual procurement process in special circumstances.

  1. Where there is an emergency
  2. Where there is a sole supplier that is able to provide a particular service

When may deviations occur?

  • The requirements set out in SCM Instruction Note 3 - 16/17 MUST be followed. 
  • An emergency procurement is a serious and unexpected situation that poses an immediate risk to health, life, property or environment, and there is insufficient time to invite competitive bids. 
  • A sole source procurement may only occur where there is evidence that only one supplier possesses the unique and singularly available capacity to meet the requirements of the procuring institution.
  • A deviation for any other reason must first be approved by the relevant treasury (either National or Provincial).
  • Deviations are permitted when unpredictable, real life events affect implementation of a procurement plan. Examples include anything from a flood that delays a road or bridge being built, to a fire in a publishing house that prints school textbooks.

System Weaknesses

Emergency procurement may only be used in cases of genuine emergency. There is a real risk the emergency procurement procedure is exploited as a “loophole” for corruption since normal procurement requirements do not apply. 

A deviation may not be used to rapidly spend unspent funds which are at risk of being returned to National or Provincial Treasury. Circumstances for emergency procurement are not created through poor procurement planning. 

Those monitoring procurement processes should be alert to the fact that unjustified deviations may be an avenue for abuse/corruption 

Although some information on deviations can be found here, this is an incomplete list of deviations occurring across South Africa. The inability to publicly access a full set of deviations makes monitoring of procurement difficult.

2.6 - Glossary

Central Supplier Database (CSD)

  • This is an online compliance database, managed by the Office of the Chief Procurement Officer. 
  • Suppliers who would like to supply government must register on the CSD and their business information will be accessible to all organs of state.
  • The CSD does not issue tenders, its objective is to reduce the paperwork for suppliers, thus the centralising of compliance requirements at one point.

eTender Portal

An online portal where tender opportunities are advertised and awarded bids recorded.