THE RULE OF LAW AND THE STATUS OF THE PUBLIC PROCUREMENT REGULATIONS (2017)
The principle of legality is an integral component of the rule of law. This principle was best explained by the Constitutional Court in the judgement of Affordable Medicines Trust and others v The Minister of Health and others. This court, in paragraph 49, explained this principle in the following terms: “the exercise of public power must therefore comply with the constitution, which is the supreme law, and the doctrine of legality, which is part of that law. The doctrine of legality, which is an incident of the rule of law, is one of the constitutional controls through which the exercise of public power is regulated by the constitution. It entails that both the legislature and the executive are constrained by the principle that they may exercise no power and perform no function beyond that conferred upon them by law. In this sense the constitution entrenches the principle of legality and provides the foundation for the control of public power.”
On the 2nd of November 2020, the Supreme Court of Appeal (SCA), in the judgement of Afribusiness v The Minister of Finance, declared the Preferential Procurement Regulations (2017) inconsistent with the Preferential Procurement Policy Framework Act, 2000 (Act No. 5 of 2000), and invalid. The logical thinking of the court was as follows:
- The primary source of power to procure goods and services by organs of state is section 217 of the Constitution. Section 217(1) provides that all organs of state when procuring goods and services must adopt a system which is fair, equitable, transparent, competitive and cost-effective. Section 217(2) empowers the organs of state when procuring goods and services, to apply a preferential procurement policy for purposes of addressing the imbalances of the past. Section 217(3) provides that Parliament must adopt a legislation that must provide for a framework within which the preferential procurement policy must be applied;
- The Preferential Procurement Policy Framework Act 5 of 2000 (PPPFA) is the legislation envisaged by section 217(3) of the Constitution. This is a very short piece of legislation which is simple and straightforward. It has only five sections. The relevant sections for purposes of this writing are sections 1, 2 and 5. Section 1 defines what is an acceptable tender; Section 2 set the parameters within which the preferential procurement policy must be applied, and section 5 empowers the minister to make regulations that must provide more details as to the application of the preferential procurement policy. The regulations that give more details as to the application of the preferential policy must not exceed the boundaries set by section 2 of the Act. This means that the powers of the Minister to make regulations are confined to the parameters set by section 2 of the Act. These section 2 boundaries/parameters can only be adjusted by Parliament – the latter being empowered to do so by section 217(3) of the Constitution – not by the Minister.
- In the above-mentioned judgment, the Minister had promulgated the procurement regulations (2017) which sought to introduce, among other things, a discretionary pre-qualification requirement that must be met by potential tenderers before their tenders get evaluated on functionality, price, and BBBEE. The intention of this pre-qualification was to reinforce the preferential procurement policy which is an objective sought to be achieved by section 2017(2) of the Constitution. This pre-qualification requirement clearly falls outside the section 2 parameters. This is because: (i) a peremptory language is used in the section; which means that there is no discretion afforded; i.e. the procurement process must be conducted strictly in accordance with the provisions of the section, (ii) the section clearly sets out a preference point system that must be followed – which is a 90/10 and 80/20 point system, and (iii) points for specific goals, clearly specified in the invitation to tender, may be awarded. The section does not accommodate any other preferential procurement system. Therefore, the pre-qualification requirement, aimed at enhancing the current preferential procurement system, does not find support from section 2 parameters; hence, it falls outside. It is the Parliament that drew these perimeters, and it is only it that can expand them. The Minister is only empowered, by section 5 of the Act, to make regulations that provide more details as to how the preferential procurement policy, as clearly outlined in section 2 of the Act, must be implemented.
- The SCA then concluded that the Minister was not clothed with the necessary powers to graze outside the parameters set by Section 2. It is only the Parliament which is clothed with the powers to expand these parameters. Applying the principle of legality and for upholding the rule of law the court then declared the regulations, promulgated by the Minister, invalid for the reason that he did not have the powers to make them. The powers to set out the framework within which the preferential procurement policy must be implemented are exclusively reserved for the Parliament.
The court suspended the operation of the order of invalidity to enable the Minister to take corrective action. What then can the Minister take as a corrective measure? The Minister may elect to remove the pre-qualification requirement (Reg 4) and other related regulations from the Procurement regulations. It is our considered view that the removal of regulation 4 would defeat the whole purpose for which these regulations were promulgated. The options available to the Minister are to take the correct route and go to Parliament either with an amendment bill of the current Act (PPPFA) or fast-tracking the process of finalizing the Public Procurement Bill (PPB). However, it is important to note that chapter 4 [section 26(1) to be exact] of the PPB that deals with the preferential procurement requires a serious re-look into it. This is because the chapter seems to delegate the legislative power, conferred by the constitution [section 217(3)], to prescribe a framework for preferential treatment to the relevant Minister. It is doubtful whether this power (plenary legislative power) can be delegated since its source is directly from the Constitution.
Unless the PPPFA has been amended or the Public Procurement Bill has been passed into law by Parliament, come the 2nd of November 2021 all organs of state must have amended their procurement policies to align them with this new judgment which has taken away a discretion of organs of state to set a pre-qualification for bidders. After 2 November 2021 it would be unlawful for an organ of state to insert, in its invitation to tender, a pre-qualification requirement.
Contributor: Agrippa Mpungose | Director
Email: agrippa@atmd.co.za
Tel: +2733 815 1511
