pppfa forum
TRANSCRIPT
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Preferential Procurement Policy Framework Act
Leila Moonda
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Preferential Procurement
Policy Framework Act
Regulations and BBBEE
07 December 2010 © 2010,BEE Institute, All Rights Reserved
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.
The PPPFA comes into effect on the 8
December 2011
PPPFA and BBBEE
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Designated Sector
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
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Designated Sector
designated by the DTI
where ONLY locally produced /
manufactured services, works or goods
meet the stipulated minimum threshold
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Local Content
That portion of the price which is not
included in the imported content, provided
that local manufacture does take place.
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Imported Content
Portion of the tender price from the components, parts or materials which have been or still are to be imported. Includes:Costs abroadFreightOther direct importation costs (landing costs, dock duties, import duty, sales duty, other similar taxes)
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Functionality
Invitation must stipulate if the tender will be evaluated on functionality
Invitation to tender must specify:– Evaluation criteria
– Weight for each criteria– Applicable values– Minimum qualifying score
Only once functionality has been met, will preference points be applied
07 December 2010 © 2010,BEE Institute, All Rights Reserved
PPPFA and BBBEE
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
07 December 2010 © 2010,BEE Institute, All Rights Reserved
PPPFA and BBBEE
90/10 Preference system:
Compulsory for Procurement > R1Million(previously R500,000)
Maximum of 90 Points for Price and Technicality
Maximum of 10 Points for BEE Level
07 December 2010 © 2010,BEE Institute, All Rights Reserved
PPPFA and BBBEE
80/20 Preference system
Compulsory for procurement = > R300 000 –
R1000 000.00. May be used for <R300 000
Maximum of 80 Points for Price and Technicality
Maximum of 20 Points BEE Level
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Formula
P = 90/80 (1 – Pt – P min / P min)
Pt = Comparative price
P min = Comparative price of lowest
acceptable tender
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Formula
Effect:Favours lowest price
– At double the lowest price, no points for price
– Lowest price maximises the points
07 December 2010 © 2010,BEE Institute, All Rights Reserved
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
PPPFA and BBBEE
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Original or certified copies of the
Verification Certificate
PPPFA and BBBEE
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Awarding of points
BEE Level Number of points
1 20
2 18
3 16
4 12
5 8
6 6
7 4
8 2
Non-Compliant 0
80:20 points system
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Awarding of points
BEE Level Number of points
1 10
2 9
3 8
4 5
5 4
6 3
7 2
8 1
Non-Compliant 0
90:10 points system
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Not scoring the highest points
A contract can be awarded to a tenderer
who did not score the highest points, only if
objective criteria (other than BEE) justify
the awarding of the contract.
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Equal Points
Where two or more tenderers score equal total
points, the tender must be awarded to the
tenderer with the highest BEE Points.
Except
Where functionality is part of the evaluation
process, then the tender must be awarded to the
tenderer scoring the highest points for
functionality.
07 December 2010 © 2010,BEE Institute, All Rights Reserved
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.*
Fronting Prevention
* Does not apply to EME’s
PPPFA and BBBEE
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Organisations awarded a contract may not sub contract more than 25% of the contract to an organisation with a lower BEE score
than itself.*
Fronting Prevention
* Does not apply to EME’s
PPPFA and BBBEE
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Joint Ventures
An unincorporated joint venture must submit
a combined valid BEE certificate
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Local Content
In designated sectors (where local
production and content is key) tenders must
stipulate a minimum threshold for local
content and production.
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Local Content
Where the tender is not in a designated
sector, a specific requirement for local
content may be included.
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Local Content
National Treasury will issue instructions and
guidelines with specific reporting
mechanisms to ensure compliance.
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Local Content
Where a tender has been issued with a local
content specification, it must be measurable
and audited.
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Local Content
Organisations that are awarded a tender
may not sub contract if the local content is
reduced below the minimum theshold.
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Local Content
Two stage tendering process
2.Functionality including local content
3.Price and BEE
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Tertiary Institutions and Public Entities
Procurement must be done through a tendering process
Tertiary Institutions and Public Entities must submit BEE certificates based on the specialised entities scorecard.
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Fronting
Companies caught fronting:– Disqualified from the tendering process– Costs, losses and damages can be recovered
– Contracted will be cancelled and damages claimed
– Prevented from any tenders for 10 years– May be prosecuted
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Procurement and preferential procurement
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Procurement vs. Preferential Procurement
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.
Preferential Procurement is the acquisition of appropriate goods and/or services that fulfill a procurement function, as well a social responsibility function
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Procurement vs. Preferential Procurement
Procurement Preferential Procurement
Cost Cost +
Service Service -
Quality Quality -
vs
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Total Cost of Ownership
Acquisition cost
Change CostOperating Cost
TCO
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Total BEE Cost of Ownership
Acquisition cost
Change Cost
BEE CostOperating
CostTCO
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Value / Change cost
– Cost of quality including maintenance, disposal, CSR, and
environmental costs
Price / Acquisition cost
– Basic cost of product or service or service
Transaction / Operating cost
– Cost of acquisition, including buying resources, effort, time, and
payment terms
Total Cost of Ownership
07 December 2010 © 2010,BEE Institute, All Rights Reserved
BEE
– Cost of Enterprise Development programmes
– Cost of Socio-economic Development programmes
– Cost of obtaining certificates and monitoring supplier
BEE status
– Possible cost of non-performance
– Possible cost of non-conformance
Total Cost of Ownership
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Developing a BEE Strategy
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Dynamics of BEE
Time
BE
E S
core
Your BEE score
Pressure from competitors, customers, public perception….
Limit of your BEE capabilities
Practical minimum score
30 (40)
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Approaching BEE
Preferential Procurement
But there aren’t any BEE suppliers for…
Speak to your suppliers
Help develop suppliers
REMEMBER TARGETS INCREASE FROM 09/07/2013 (2012)
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Initial Target Score
Do you have proper vendor data?
What can your suppliers offer?
Do you understand your Vendor Data?
Are your systems ready?
07 December 2010 © 2010,BEE Institute, All Rights Reserved
SUSTAINABLE BEE™ APPROACH
1. Buy-in at Senior Level
2. Structure Value Chain Committee
3. Train Committee members
4. Train Line Management
5. Support Line Management
6. BEE Management Tools and Systems
Alignment (if necessary)
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Buy-in from Senior Management
No company-wide change can succeed without the support and buy-in from the top most structures of the organisation, including the CEO.
BEE is no different.
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Socio- Economic Development
Enterprise Development
Preferential Procurement
Value Chain Committee
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Core focus areas Managing Suppliers in terms of BEE Enterprise Development programme
management Socio – Economic Development
programme management
Value Chain Committee
07 December 2010 © 2010,BEE Institute, All Rights Reserved
How to achieve the above: Have a policy, strategy and program Manage supplier BEE information Identify suppliers or customers for Enterprise Development
support initiatives Implement SED initiatives aimed at enhancing current suppliers or
to create future suppliers Manage all programmes to ensure a return on investment Implement Enterprise Development initiatives aimed at either
enhancing your supply chain or customer base Put in place projects and manage them
Value Chain Committee
07 December 2010 © 2010,BEE Institute, All Rights Reserved
A Structured Pref Proc Process
07 December 2010 © 2010,BEE Institute, All Rights Reserved
1. Establish a Policy
3. Undertake an audit – determine current state
5. Formulate Goals and Strategies
a. Set Pref. Procurement goals and strategyb. Align Pref. Procurement strategy to company strategy c. Get input on “Best Practice”d. Review of proposed strategy against “Best Practice”e. Determine Time Frames and Monitoring Mechanisms f. Allocate accountability and identify performance indicators
A Structured BEE Process
07 December 2010 © 2010,BEE Institute, All Rights Reserved
2. Implement strategies
8. Monitor, Evaluate & Manage
a. Develop action plansb. Implement action plans c. Project Managementd. Undertake an Organisational Alignment review to identify gaps between BEE
implementation requirements and existing company structures, procedures and systems
e. Communication, implementation and change management processes
a. Responsibility of Top Management / Governance Committeeb. Cyclic meetings
A Structured BEE Process
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Establishing a Pref. Proc. strategy Understand the external influences on your business
– What are your suppliers able to deliver
– Are there SMME’s, Black Owned and Black Women Owned suppliers available
– Have your suppliers embraced BEE
– PEST Analysis (Political, Economic, Social, Technological)
Understand the internal influences on your business
– Staff understanding of BEE
– Capabilities of systems
– Internal procedures and controls
– SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Establishing BBBEE targets and plan Establish practical and achievable targets that you know
your company can achieve in required time frames Consider 12 month, 2 and 3 year targets and then
ensure that your company can sustain them
Develop a detailed implementation plan for achieving the targets– Who, how, when , cost, impact
Review and align targets based on implementation plan
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Preferential Procurement ProcessPhase 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’sKraljic analysis
Survey suppliers
Request BEE scorecards
Receive scorecards and
capture information
Calculate BEE procurements
figures and score
07 December 2010 © 2010,BEE Institute, All Rights Reserved
Segmenting the Spend
Price of Commodity
Risk to the Business
First Segment the spend, then ...
LeverageNon-critical
StationeryCleaningGarden Service
FuelOffice AutomationCellphonesIT HardwareTravel
StrategicBottleneck
TransportationRaw MaterialsCore Components
Low
Low High
•Critical Spares•Legal and Business Advice
High
•High BEE Levels (1/2)
•Black Owned Suppliers
•Black Women Owned Suppliers
•EME’s and QSE’s
•Level 7 / 5 BEE Level
•Level 4 or higher•Black Owned
Suppliers•Black Women
Owned Suppliers•EME’s and QSE’s
07 December 2010 © 2010,BEE Institute, All Rights Reserved
THANK YOU
LEILA MOONDA011 726 3052