The PPPFA regulations

Everyone probably knows about the new regulations. But not many people know what I (uppercase i) think of the regulations. In short – they're good. It evens things out for most companies and will spur on higher scores across the board. Also mere black ownership is no longer good enough – so cancel your BEE deal.

A few features

1. The regulations come into operation on the 7^th of December, 2011 – in other words in six months' time. Considering that they apply to almost every government entity and municipalities you would need about this much time to get the message across.
2. The 80/20 preference point system is applicable to bids from between R30,000 and R1million. This figure is INCLUSIVE of taxes like VAT etc. This is not new (the inclusive of tax bit is new) – although a practice does seem to exist within government supply chain systems where bids up to R200k can be issued using three written quotes. Whether this practice continues or not is to be seen.
3. They have built in an anti-blackwashing mechanism under the local content feature.. Blackwashing is a term that I first heard Kevin Lester use and it refers to black people importing goods and selling them. As far as the purchaser is concerned they have bought goods from black people and attract point under the last bit of preferential procurement - ESKOM is reported to have been duped often by this (such were the shortfallings of the ESKADAAT).  This is new and very welcomed.
4. There is a subcontracting clause that requires the bidder that subcontracts more than 25% of the contract to another entity (it appears to be a SINGLE entity) to ensure that the sub-contractor has a greater or equal BEE score to the primary bidder.
5. In certain places they actually clarify parts of the codes that are vague. For instance did you know that an accounting officer as contemplated in paragraph 4.5 of statement 000 is one that is contemplated under section 60 (1) of the CC Act.
6. The regulations all codes gazetted under section 9 (1) of the BEE Act.
7. It is very clear that only scorecards issued by SANAS or other recognised body accredited agencies.

The points system works like this

BEE level	80/20	90/10
1	20	10
2	18	9
3	16	8
4	12	5
5	8	4
6	6	3
7	4	2
8	2	1
Non-compliant	0	0

 

What is important to remember is that these regulations refer to PREFERENCE POINTS. In other words it is for the 20 or 10 points depending on the value of the tender. A bid cannot be rejected if a company does not submit a BEE certificate – all that happens is that the bid committee does not award preference points.

Similarly a great scorecard is not going to guarantee you the tender - it may help you win it but you still have to win as many points as possible under the 80 or 90 points. 

Local content and subcontracting etc is also not considered under preference points – it falls under the "functionality" section – which is part of the price section which is the 80 or 90 points.

There are all sorts of subtleties contained in this document – which is what you can expect from Treasury. We'll be starting our training courses soon so send me an email to book.