Recently released draft regulations to the Preferential Procurement Policy Framework Act state that for tenders under R 10 million, 50% of the weighting of the bid must be allocated to the price and 50% must be allocated to “specific goals”, primarily ownership of the bidding entity by individuals who had no franchise in either of the “national elections before the 1983 and 1993 constitutions”. The 1983 election was open to whites, Indians and Coloureds as part of the Tri-cameral parliament system, but not to black South Africans. Another of these "specific goals" is ownership of the bidding entity by women (irrespective of their race) and ownership by persons with a disability.
As a result, small and medium sized entities competing for tenders under R 10 million which are owned by Indian or Coloured men who are not disabled will be severely prejudiced in this tender system. Conversely, those entities that meet some or all of these criteria (i.e. are owned by black South Africans, women or disabled people) will be able to significantly increase their bidding price and still be able to win the tender based on the 50% of the weighting being allocated to these specific goals rather than to the bidder's price. This tender evaluation system also applies in any sale or lease of state property, whether moveable or immoveable.
Tenders valued between R 10 million and R 50 million remain on the 80/20 system and tenders valued over R 50 million remain on the 90/10 system. In other words, a bid for a tender valued over R 50 million is assessed by allocating 80% of the weighting to the price and 20% to the bidder's BEE status level, based on its scorecard.
It is very alarming that this new concept of empowerment is being sought to be introduced through these regulations. Businesses are only starting to get to grips with the changes introduced by the new BEE Codes, which are significant enough, and now a new playing field emerges for small and medium sized entities trying to do business with government. Not only does this add to the uncertainty surrounding BEE but it poses a real threat to state resources if companies only by a limited sector of the public are given this enormous advantage over others in winning tenders.