Government has addressed the growing problem of tenderpreneurs, typically businesses and individuals that are enriched unfairly from government tenders.
The new government rules are B-BBEE-based compared to the previous government tender selectioncriteria and now apply to all tenders from state owned enterprises as well as government entities issued after 7 December 2012.
Now, the PPPFA has stated that a business cannot subcontract more than 25% of the contract value to a BEE entity that has a worse BEE score. This is one of the provisions providing opportunities for entities with good BEE scores.
Tenders will have prequalification requirements that are able to weed out tenderpreneurs. The rules will ensure that business owners will no longer need to sell a share in their business to gain a competitive BEE rating.
“If you ask the average business owner what concerns they have with B-BBEE, their answer will most likely be government awarding tenders only to black-owned business. Sadly this has been the case even though it was not directly part of the B-BBEE act,” says Keith Levenstein, CEO of EconoBEE, a B-BBEE advisory firm.
“However, with the changes to the tender act, all new business awarded by government must take into account the supplier’s broad-based BEE scorecard and not their ownership. Further, the tender act uses a formula to determine the winner of a tender.”
The current status is that:
· A supplier who has no competition will win.
· A supplier who is significantly cheaper with no BEE status will win.
· A supplier who is marginally cheaper with no BEE status may not win.
· A supplier who is equal with price but a better BEE status will win.
“This is good news. It provides consistency and openness. Tenderpreneurs and subsistence businesses will now be ineligible to win tenders,” he says.
“A small change to the PPPFA will mean more emphasis is placed on becoming BEE compliant. However, to gain full benefit and generate business opportunities, access new markets and maintain existing business, BEE scorecards will need to improve.”
“Businesses are now motivated to improve their overall score, thereby increasing their chances of winning government tenders. A good BEE status will now be a major advantage,” says Levenstein.