Complying with BEE


Government’s Preferential Procurement Policy Framework Act (PPPFA) for awarding tenders is aligned with the B-BBEE Codes. The regulations stipulate that tenders should apply the 80:20 or 90:10 rules, depending on the value of the tender.

This means that 90% of the evaluation is to be made on the basis of the price offered by the vendor and 10% on the valid B-BBEE level achieved. Price is therefore a major part of the tender evaluation and not necessarily the supplier’s BEE score.

The rules also apply to local government for issuing and awarding tenders. Furthermore, the PPPFA requires a valid BEE certificate as part evaluation of any tender.

The problem with tenderpreneurs was that a shelf company would bid for a tender, and because it had sufficiently high BEE credentials, would win the tender. The tender would then be sub-contracted, at a price, to another business with the capability to deliver on the tender but did not have the necessary BEE credentials.

The regulations now state that the tenderer must prove their competence and declare to whom they may be sub-contracting. A good B-BBEE score will be an advantage, but most importantly, the sub-contractor must now show that they have the same or better B-BBEE status as the principal tenderer.

Municipalities will therefore still be able to use contractors they have used in the past, even if the supplier has weak BEE credentials. Municipalities must continue to follow the PPPFA, based on price being 80% or 90% of the tender awarding decision.

It is therefore important for local government to comply with the Act and the Codes, not only because it is legislatively required, but to promote transformation by understanding the codes, ensuring that they themselves are compliant.

It is also a legislative requirement that every organ of state checks every certificate received from businesses for fronting.

Considering that many of the smaller municipalities are limited when it comes to a choice of contractors, they have no discretion when evaluating a tender – they must follow the PPPFA 80:20 or 90:10 rule. In reality it may happen that all companies bidding for a particular tender are not compliant, but will still have an equal chance.

Keith Levenstein


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This edition

Issue 68