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PPPFA forum


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Preferential Procurement Policy Framework Act new regulations

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PPPFA forum

  1. 1. Preferential Procurement Policy Framework Act Leila Moonda
  2. 2. Preferential Procurement Policy Framework Act Regulations and BBBEE
  3. 3. <ul><li>On 8 June 2011 Cabinet approved the alignment of the Regulations of PPPFA Act and B-BBEE Act. This has far reaching implications for Private Business, Local and Provincial Government. </li></ul><ul><li>The PPPFA comes into effect on the 8 December 2011 </li></ul>PPPFA and BBBEE
  4. 4. Designated Sector <ul><li>Sector, sub-sector or industry that has been designated by the DTI, in line with national development and industrial policies for local productions, where ONLY locally produced services, works or goods or locally manufactured goods meet the stipulated minimum threshold for local production and content </li></ul>
  5. 5. Designated Sector <ul><li>designated by the DTI </li></ul><ul><li>where ONLY locally produced / manufactured services, works or goods </li></ul><ul><li>meet the stipulated minimum threshold </li></ul>
  6. 6. Local Content <ul><li>That portion of the price which is not included in the imported content, provided that local manufacture does take place. </li></ul>
  7. 7. Imported Content <ul><li>Portion of the tender price from the components, parts or materials which have been or still are to be imported. Includes: </li></ul><ul><li>Costs abroad </li></ul><ul><li>F reight </li></ul><ul><li>O ther direct importation costs (landing costs, dock duties, import duty, sales duty, other similar taxes) </li></ul>
  8. 8. Functionality <ul><li>Invitation must stipulate if the tender will be evaluated on functionality </li></ul><ul><li>Invitation to tender must specify: </li></ul><ul><ul><li>E valuation criteria </li></ul></ul><ul><ul><li>W eight for each criteria </li></ul></ul><ul><ul><li>A pplicable values </li></ul></ul><ul><ul><li>M inimum qualifying score </li></ul></ul><ul><li>Only once functionality has been met, will preference points be applied </li></ul>
  9. 9. PPPFA and BBBEE <ul><li>PPPFA points are being changed to take into account BEE compliance as per the dti Codes, i.e. 80/20 and 90/10 preference points system </li></ul>
  10. 10. PPPFA and BBBEE <ul><li>90/10 Preference system: </li></ul><ul><li>Compulsory for Procurement > R1Million (previously R500,000) </li></ul><ul><li>Maximum of 90 Points for Price and Technicality </li></ul><ul><li>Maximum of 10 Points for BEE Level </li></ul>
  11. 11. PPPFA and BBBEE <ul><li>80/20 Preference system </li></ul><ul><li>Compulsory for procurement = > R300 000 – R1000 000.00. May be used for <R300 000 Maximum of 80 Points for Price and Technicality </li></ul><ul><li>Maximum of 20 Points BEE Level </li></ul>
  12. 12. Formula <ul><li>P = 90/80 (1 – P t – P min / P min ) </li></ul><ul><li>P t = Comparative price </li></ul><ul><li>P min = Comparative price of lowest acceptable tender </li></ul>
  13. 13. Formula <ul><li>Effect: </li></ul><ul><li>Favours lowest price </li></ul><ul><ul><li>At double the lowest price, no points for price </li></ul></ul><ul><ul><li>Lowest price maximises the points </li></ul></ul>
  14. 14. <ul><li>Companies wanting to tender for jobs over and above the value of R1million must provide the procuring entity with a B-BBBEE compliance certificate issued by an accredited Verification Agency </li></ul>PPPFA and BBBEE
  15. 15. <ul><li>Original or certified copies of the Verification Certificate </li></ul>PPPFA and BBBEE
  16. 16. Awarding of points 80:20 points system BEE Level Number of points 1 20 2 18 3 16 4 12 5 8 6 6 7 4 8 2 Non-Compliant 0
  17. 17. Awarding of points 90:10 points system BEE Level Number of points 1 10 2 9 3 8 4 5 5 4 6 3 7 2 8 1 Non-Compliant 0
  18. 18. Not scoring the highest points <ul><li>A contract can be awarded to a tenderer who did not score the highest points, only if objective criteria (other than BEE) justify t he awarding of the contract. </li></ul>
  19. 19. Equal Points <ul><li>Where two or more tenderers score equal total points, the tender must be awarded to t he tenderer with the highest BEE Points. </li></ul><ul><li>Except </li></ul><ul><li>Where functionality is part of the evaluation process, then the tender must be awarded to the tenderer scoring the highest points for functionality. </li></ul>
  20. 20. <ul><li>Organisations may not be awarded points for BEE if they indicate that they intend sub contracting more than 25% of the contract to an organisation with a lower BEE score than itself.* </li></ul><ul><li>Fronting Prevention </li></ul><ul><li>* D oes not apply to EME’s </li></ul>PPPFA and BBBEE
  21. 21. <ul><li>Organisations awarded a contract may not sub contract more than 25% of the contract to an organisation with a lower BEE score than itself.* </li></ul><ul><li>Fronting Prevention </li></ul><ul><li>* D oes not apply to EME’s </li></ul>PPPFA and BBBEE
  22. 22. Joint Ventures <ul><li>An unincorporated joint venture must submit a combined valid BEE certificate </li></ul>
  23. 23. Local Content <ul><li>In designated sectors (where local production and content is key) tenders must stipulate a minimum threshold for local content and production. </li></ul>
  24. 24. Local Content <ul><li>Where the tender is not in a designated sector, a specific requirement for local content may be included. </li></ul>
  25. 25. Local Content <ul><li>National Treasury will issue instructions and guidelines with specific reporting mechanisms to ensure compliance. </li></ul>
  26. 26. Local Content <ul><li>Where a tender has been issued with a local content specification, it must be measurable and audited . </li></ul>
  27. 27. Local Content <ul><li>Organisations that are awarded a tender may not sub contract if the local content is reduced below the minimum theshold. </li></ul>
  28. 28. Local Content <ul><li>Two stage tendering process </li></ul><ul><li>Functionality including local content </li></ul><ul><li>Price and BEE </li></ul>
  29. 29. Tertiary Institutions and Public Entities <ul><li>Procurement must be done through a tendering process </li></ul><ul><li>Tertiary Institutions and Public Entities must submit BEE certificates based on the specialised entities scorecard. </li></ul>
  30. 30. Fronting <ul><li>Companies caught fronting: </li></ul><ul><ul><li>Disqualified from the tendering process </li></ul></ul><ul><ul><li>Costs, losses and damages can be recovered </li></ul></ul><ul><ul><li>Contracted will be cancelled and damages claimed </li></ul></ul><ul><ul><li>Prevented from any tenders for 10 years </li></ul></ul><ul><ul><li>May be prosecuted </li></ul></ul>
  31. 31. Procurement and preferential procurement
  32. 32. Procurement vs. Preferential Procurement <ul><li>Procurement is the acquisition of appropriate goods and/or services at the best possible total cost of ownership to meet the needs of the purchaser in terms of quality and quantity, time, and location. </li></ul><ul><li>Preferential Procurement is the acquisition of appropriate goods and/or services that fulfill a procurement function, as well a social responsibility function </li></ul>
  33. 33. Procurement vs. Preferential Procurement Procurement Preferential Procurement Cost Cost + Service Service - Quality Quality - vs
  34. 34. Total Cost of Ownership Acquisition cost Change Cost Operating Cost TCO
  35. 35. Total BEE Cost of Ownership Acquisition cost Change Cost BEE Cost Operating Cost TCO
  36. 36. <ul><li>Value / Change cost </li></ul><ul><ul><li>Cost of quality including maintenance, disposal, CSR, and environmental costs </li></ul></ul><ul><li>Price / Acquisition cost </li></ul><ul><ul><li>Basic cost of product or service or service </li></ul></ul><ul><li>Transaction / Operating cost </li></ul><ul><ul><li>Cost of acquisition, including buying resources, effort, time, and payment terms </li></ul></ul>Total Cost of Ownership
  37. 37. <ul><li>BEE </li></ul><ul><ul><li>Cost of Enterprise Development programmes </li></ul></ul><ul><ul><li>Cost of Socio-economic Development programmes </li></ul></ul><ul><ul><li>Cost of obtaining certificates and monitoring supplier BEE status </li></ul></ul><ul><ul><li>Possible cost of non-performance </li></ul></ul><ul><ul><li>Possible cost of non-conformance </li></ul></ul>Total Cost of Ownership
  38. 38. Developing a BEE Strategy
  39. 39. Dynamics of BEE Time BEE Score Your BEE score Pressure from competitors, customers, public perception…. Limit of your BEE capabilities Practical minimum score 30 (40)
  40. 40. Approaching BEE <ul><li>Preferential Procurement </li></ul><ul><ul><li>But there aren ’ t any BEE suppliers for… </li></ul></ul><ul><ul><li>Speak to your suppliers </li></ul></ul><ul><ul><li>Help develop suppliers </li></ul></ul><ul><ul><li>REMEMBER TARGETS INCREASE FROM 09/07/2013 (2012) </li></ul></ul>
  41. 41. Initial Target Score <ul><ul><li>Do you have proper vendor data? </li></ul></ul><ul><ul><li>What can your suppliers offer? </li></ul></ul><ul><ul><li>Do you understand your Vendor Data? </li></ul></ul><ul><ul><li>Are your systems ready? </li></ul></ul>
  42. 42. SUSTAINABLE BEE™ APPROACH <ul><li>1. Buy-in at Senior Level </li></ul><ul><li>2. Structure Value Chain Committee </li></ul><ul><li>3. Train Committee members </li></ul><ul><li>4. Train Line Management </li></ul><ul><li>5. Support Line Management </li></ul><ul><li>6. BEE Management Tools and Systems Alignment (if necessary) </li></ul>
  43. 43. Buy-in from Senior Management <ul><li>No company-wide change can succeed without the support and buy-in from the top most structures of the organisation, including the CEO. </li></ul><ul><li>BEE is no different. </li></ul>
  44. 44. Socio- Economic Development Enterprise Development Preferential Procurement Value Chain Committee
  45. 45. <ul><li>Core focus areas </li></ul><ul><li>Managing Suppliers in terms of BEE </li></ul><ul><li>Enterprise Development programme management </li></ul><ul><li>Socio – Economic Development programme management </li></ul>Value Chain Committee
  46. 46. <ul><li>How to achieve the above: </li></ul><ul><li>Have a policy, strategy and program </li></ul><ul><li>Manage supplier BEE information </li></ul><ul><li>Identify suppliers or customers for Enterprise Development support initiatives </li></ul><ul><li>Implement SED initiatives aimed at enhancing current suppliers or to create future suppliers </li></ul><ul><li>Manage all programmes to ensure a return on investment </li></ul><ul><li>Implement Enterprise Development initiatives aimed at either enhancing your supply chain or customer base </li></ul><ul><li>Put in place projects and manage them </li></ul>Value Chain Committee
  47. 47. A Structured Pref Proc Process
  48. 48. A Structured BEE Process <ul><li>Establish a Policy </li></ul><ul><li>Undertake an audit – determine current state </li></ul><ul><li>Formulate Goals and Strategies </li></ul><ul><li>Set Pref. Procurement goals and strategy </li></ul><ul><li>Align Pref. Procurement strategy to company strategy </li></ul><ul><li>Get input on “ Best Practice ” </li></ul><ul><li>Review of proposed strategy against “ Best Practice ” </li></ul><ul><li>Determine Time Frames and Monitoring Mechanisms </li></ul><ul><li>Allocate accountability and identify performance indicators </li></ul>
  49. 49. A Structured BEE Process <ul><li>Implement strategies </li></ul><ul><li>Monitor, Evaluate & Manage </li></ul><ul><li>Develop action plans </li></ul><ul><li>Implement action plans </li></ul><ul><li>Project Management </li></ul><ul><li>Undertake an Organisational Alignment review to identify gaps between BEE implementation requirements and existing company structures, procedures and systems </li></ul><ul><li>Communication, implementation and change management processes </li></ul><ul><ul><li>Responsibility of Top Management / Governance Committee </li></ul></ul><ul><ul><li>Cyclic meetings </li></ul></ul>
  50. 50. Establishing a Pref. Proc. strategy <ul><li>Understand the external influences on your business </li></ul><ul><ul><li>What are your suppliers able to deliver </li></ul></ul><ul><ul><li>Are there SMME ’ s, Black Owned and Black Women Owned suppliers available </li></ul></ul><ul><ul><li>Have your suppliers embraced BEE </li></ul></ul><ul><ul><li>PEST Analysis ( P olitical, E conomic, S ocial, T echnological) </li></ul></ul><ul><li>Understand the internal influences on your business </li></ul><ul><ul><li>Staff understanding of BEE </li></ul></ul><ul><ul><li>Capabilities of systems </li></ul></ul><ul><ul><li>Internal procedures and controls </li></ul></ul><ul><ul><li>SWOT Analysis ( S trengths, W eaknesses, O pportunities, T hreats) </li></ul></ul>
  51. 51. Establishing BBBEE targets and plan <ul><li>Establish practical and achievable targets that you know your company can achieve in required time frames </li></ul><ul><li>Consider 12 month, 2 and 3 year targets and then ensure that your company can sustain them </li></ul><ul><li>Develop a detailed implementation plan for achieving the targets </li></ul><ul><ul><li>Who, how, when , cost, impact </li></ul></ul><ul><li>Review and align targets based on implementation plan </li></ul>
  52. 52. Preferential Procurement Process Phase 1 Phase 2 Phase 3 Extract Vendor List Update vendor list with contact details Undertake Supplier analysis: 80:20 principle, SMME ’ s, BO ’ s BWO ’ s Kraljic analysis Survey suppliers Request BEE scorecards Receive scorecards and capture information Calculate BEE procurements figures and score
  53. 53. Segmenting the Spend Price of Commodity Risk to the Business <ul><li>High BEE Levels (1/2) </li></ul><ul><li>Black Owned Suppliers </li></ul><ul><li>Black Women Owned Suppliers </li></ul><ul><li>EME ’ s and QSE ’ s </li></ul><ul><li>Level 7 / 5 BEE Level </li></ul><ul><li>Level 4 or higher </li></ul><ul><li>Black Owned Suppliers </li></ul><ul><li>Black Women Owned Suppliers </li></ul><ul><li>EME ’ s and QSE ’ s </li></ul>First Segment the spend, the n ... Leverage Non-critical Stationery Cleaning Garden Service Fuel Office Automation Cellphones IT Hardware Travel Strategic Bottleneck Transportation Raw Materials Core Components Low Low High <ul><li>Critical Spares </li></ul><ul><li>Legal and Business Advice </li></ul>High
  54. 54. THANK YOU LEILA MOONDA 011 726 3052 [email_address]