Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003)

Codes of Good Practice on Black Economic Empowerment

Integrated Transport Sector Codes

B-BBEE Sub-Sector Code for Public Sector - Transport

2. Department of Transport Undertaking

2.3 Indicators of Empowerment

2.3.5 Preferential Procurement

Purchase

2.3.5.1 Guiding Principle

2.3.5.1.1

Stakeholders will increase procurement from black-owned enterprises, implement transparent and ethical policies and practices, and develop best-practice supplier development policies. This will require the investment of additional resources to monitor and evaluate performance and eliminate practices such as fronting. The Department will also monitor the B-BBEE performance of SOEs and agencies that report to the DOT.

2.3.5.2 Undertakings

2.3.5.2.1 All stakeholders commits to:

2.3.5.2.1.1

Develop a new B-BBEE procurement policy for the Department that is aligned to the new B-BBEE Act and B-BBEE Strategy; and train all procurement officials about the mechanics of the Generic B-BBEE Scorecard.

2.3.5.2.1.2

Co-ordinate procurement policies and reporting procedures across national and provincial departments and transport sector SOEs and agencies to maximise leverage in the transport industry.

2.3.5.2.1.3

Introduce pre‑qualifying criteria for all suppliers that stipulate a minimum B‑BBEE compliance level for every supplier and stipulates a commitment to increase the B-BBEE score on the Generic B-BBEE Scorecard during the duration of the contract (when a contract exceeds a period of six months).

2.3.5.2.1.4

Constantly evaluate opportunities to increase the value of total procurement that can be procured from B-BBEE companies and create opportunities for black Qualifying Small Enterprises (QSEs) and Exempted Micro Enterprises (EMEs) by unbundling large contracts where possible.

2.3.5.2.1.5

Develop best-practice technology-based monitoring, evaluation and reporting mechanisms for the DOT to enable real-time reporting of B-BBEE procurement and make verification of the B-BBEE credentials of all suppliers according to the Generic B-BBEE Scorecard, a prerequisite for all tenders, in order to eliminate fronting and blacklist offenders.

2.3.5.2.1.6

Develop within the DOT the capacity to monitor and evaluate the performance of the SOEs and agencies that report to the department in meeting the targets in the SOEs B-BBEE Scorecard.

2.3.5.2.1.7

Produce regular reports that record the largest categories of expenditure and a ranking of suppliers by the value of contracts awarded. The reports will evaluate the tenders awarded and compliance in terms of commitments undertaken by B-BBEE compliant enterprises by value to identify the extent to which such enterprises participate in high value-added contracts.

2.3.5.2.1.8

Introduce an e-Procurement system in a manner that will not create new barriers to entry for black entrepreneurs. The system will be introduced with a training programme for B-BBEE suppliers, where necessary.

2.3.5.2.1.9

Implement creative mechanisms to overcome the constraints imposed by the Preferential Procurement Policy Framework Act (PPPFA) and its subsequent amendments. This could be achieved by: reducing barriers to entry by introducing best-practice affirmative procurement policies e.g. price preferences, price matching, and reducing the payment cycle to a maximum of 30 days. Such policies will be developed in conjunction with other government departments.

2.3.5.2.1.10

Renegotiate all long-term contracts to add B-BBEE requirements.

2.3.5.2.1.11

Convene a task team of internal and external specialists to identify areas where the DOT has leverage (for example, permit and license issuing boards) to ensure that the department maximises its leverage across the transport sector value chain to accelerate B-BBEE.

2.3.5.2.1.12

Develop, together with stakeholders, Public Finance Management Principles for Affirmative Procurement and ensure that SOE's and agencies that report to the department adopt them.

2.3.5.2.1.13

The measurement of preferential procurement as portrayed in Appendix A will provide a transparent and consistent manner in which enterprises within the public sector are scored. The targets and required recognition levels for suppliers are lenient initially, becoming stricter in later years as the enterprise gains market experience and starts to grow in stature.

2.3.5.2.1.14

It is envisaged that the gradual lifting of preferential procurement targets will decrease the probability that enterprises will attempt to circumvent the preferential procurement process and thereby render it ineffective.

2.3.5.3

Criteria and targets:

The preferential procurement element will comprise the following criteria and targets:

2.3.5.3.1

Percentage of Total Measured Procurement Spend from all suppliers based on the B-BBEE Procurement Recognition Levels, for which the target will be 60%.

2.3.5.3.2

Procurement from B-BBEE Compliant QSEs and EMEs as defined by B-BBEE recognition levels, for which the target will be 15%.

2.3.5.3.3

Percentage of Total Measured Procurement Spend from enterprises that are 50% Black owned based on the B-BBEE Procurement Recognition Levels, for which the target will be 9%.

2.3.5.3.4

Percentage of Total Measured Procurement Spend from enterprises that are 30% Black Women-owned based on the B-BBEE Procurement Recognition Levels, for which the target will be 6%.

2.3.5.3.5

Bonus Points: Percentage of Total Measured Procurement Spend from enterprises that are owned by Black disabled people based on the B-BBEE Procurement Recognition Levels, for which the target will be 1%.

2.3.5.4

Measurement Principles and Application of the Charter

2.3.5.4.1

Measurement principles associated with the preferential procurement element are contained in Statement 500 of Code 500 of the B-BBEE Generic Codes of Good Practice.

2.3.5.4.2

The formulae required in the determination of the preferential procurement score are contained in Annexure 500 (A) of Statement 500 of Code 500 of the B-BBEE Generic Codes of Good Practice.