What is Infrastructure Procurement?
Infrastructure procurement is the process of acquiring goods, services, and works needed to build, maintain, or upgrade infrastructure projects. This can include things like roads, bridges, water supply systems, and buildings.
The six stages of procurement are:
- Planning and Specification: Determining the requirements for the infrastructure project and defining the scope, budget, and timeline.
- Tendering: Issuing a call for bids from contractors or suppliers. This usually involves preparing and distributing a detailed request for bid or invitation to tender.
- Evaluation: Reviewing and comparing the submitted bids or proposals based on criteria such as cost, quality, functionality and capability.
- Contract Award: Selecting the successful bidder and formalizing the agreement through a contract.
- Execution and Management: Overseeing the performance of the contract, ensuring that the work is completed as specified, on time, and within budget.
- Completion and Handover: Finalising the project, ensuring all deliverables are met, and transferring ownership or responsibility for the infrastructure.
Effective infrastructure procurement is crucial for ensuring that projects are completed cost effectively and meet the necessary standards and requirements.
Legislative framework
Infrastructure procurement is regulated in terms of the Preferential Procurement Policy Framework Act, 2000 (“PPPFA”) and the 2022 Preferential Procurement Regulations (“2022 Regulations”).
The 2017 Preferential Procurement Regulations was declared invalid based on the Minister of Finance’s authority to prescribe procurement policies for the entire government (Minister of Finance v Afribusiness NPS and Others CCT279/20 [2020] ZACC 4).
This legislation refers to procurement by an organ of state.
Specifically, in relation to the construction industry, the Construction Industry Development Board constitutes an organ of state for purposes of application of the PPPFA.
In terms of the PPPFA and the 2022 Regulations, an organ of state must determine the preference point system which will apply to the specific tender.
- The 90/10 preference point system is used for the acquisition of goods or services with Rand value above R50 million.
- 90 points will be allocated to price; and
- 10 points will be allocated to specific goals.
- The 80/20 preference point system for the acquisition of goods or services with Rand value equal to or below R50 million.
- 80 points will be allocated to price; and
- 20 points will be allocated to specific goals.
The default position is that the contract will be awarded to the tenderer who scores the highest points in terms of the preference point system. An exception to this rule is found at section 2(1)(f) of the PPPFA, which states that the contract may be awarded to another tenderer if the award is justified by objective criteria.
A difficulty that the construction industry faces is that the rules for procurement in this industry is scattered all over the place and it is often difficult to locate the various sources and determining which rules apply.
Thankfully, all is not lost. We finally have a new Public Procurement Act, 28 of 2024 (“PPA”). Even though the PPA will only become effective once the regulations to the PPA have been drafted, vetted and promulgated, we now have the opportunity to prepare regulations specific to our industry and to put our house, aka the construction industry, in order.
Interestingly, the PPA provides for a dispute resolution mechanism via the establishment of the Public Procurement Tribunal. The duties of the Tribunal include reviewing decisions taken by the procuring institutions, including decisions to debar a bidder or supplier. We are excited to see what the impact of the Tribunal will be on the procurement process and review proceedings.