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Flawed Public Procurement Bill risks State Capture 2.0

Flawed Public Procurement Bill risks State Capture 2.0
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Parliament has published the Public Procurement Bill — a law that will shape our tender processes for a generation. With comments due on 11 September, Parliament is rushing through a fundamentally flawed bill that could set the scene for State Capture 2.0.

There were many moments from the State Capture era that stood out; moments that — in a sea of shocking events — were so outrageous that they have entered the lexicon and common memory of all South Africans. 

The video demonstrating the “fire pool” at Nkandla with its hapless firefighters is one.

The appointment of Des van Rooyen as a “weekend special” finance minister arriving at the National Treasury with his dubious advisers is another.

The shadow of Van Rooyen — or some other populist pretender — looms large over the draft Public Procurement Bill currently before Parliament. 

That is because the statute creates only the bare bones of a public procurement framework and instead delegates much of the substantive decision-making power to the minister of finance and the Public Procurement Office (PPO) in the National Treasury.

The consequence is that the executive and civil servants will be responsible for outlining how procurement will operate.

Van Rooyen’s short stint as minister demonstrated the vulnerability of a captured executive, especially where it has relatively unchecked discretion — which is precisely the problem with this bill.

In our post-State Capture era, we have to be deliberate in strengthening our systems. 

The objective of the bill is to create a single framework to regulate public procurement.

Procurement has become regulated through regulations issued by the minister of finance and ad hoc instructions issued by the National Treasury. This web of conflicting and overlapping instructions has resulted in confused practitioners, ineffective processes and a slew of court applications challenging the constitutionality of these laws. 

The danger of secondary legislation

The bill is supposed to resolve this tangle, but instead, it recreates the conditions by delegating sweeping powers to the minister and the PPO — to be exercised through the issuance of regulations and instructions. 

This reliance on secondary legislation is extremely dangerous.

The delegation removes the primary lawmaking power from the legislative and gives it to the executive. 

When legislation is passed in Parliament, it is subject to deliberation and debate by democratically elected public officials representing all parties. Parliament is bound to conduct meaningful public participation, ensuring that legislators are exposed to subject-matter experts and citizens with real-world experience of the issues underpinning the laws. Political party or special interests are tempered by the deliberation from other parties’ representatives and the ventilation of the issues in public.

Regulations passed by the executive are not subject to this thorough engagement; there is a watered-down public participation process but no multiparty debate. Instructions issued by the National Treasury are administrative documents, with no public participation.

The bill confers power on the minister to determine procurement methods and the procedures for bid specification, invitation, submission, opening, evaluation, adjudication and awarding of bids. Emergency procurement procedures are also left to regulation. The minister is given the discretion to regulate negotiations with bidders before the award of tenders, the need for lifestyle audits of persons automatically excluded from tender participation, and how procurement data should be retained.

The most concerning power given to the PPO is to control the public’s access to procurement information through instruction. The PPO can determine whether to limit access to certain categories of procurement or tenders over or above a certain monetary value.

System is open to abuse

This means the PPO is empowered to prevent any public access to, for example, information on the procurement of energy, or of high-value tenders. 

By not providing an overarching structure of principle and policy for the procurement system, the bill opens it up to abuse.

Secondary and tertiary legislation have their place in our democratic system — they provide the practical guidelines to implement the legislation.

In this bill, the regulations and instructions will reflect policy decisions based on the prevailing political winds. 

A pliable minister and his department can shape the way procurement is conducted to favour certain interest groups or to facilitate the manipulation of tender processes for individual financial gain.

Read more in Daily Maverick: Public Procurement Bill fails to address systemic vulnerability to tender corruption

On a more practical level, relying so heavily on regulations and instructions risks recreating the fragmented system we have now. 

The bill also allows provincial treasuries to issue instructions binding on procuring entities within their province. This will contribute to an already saturated environment of laws, regulations and instructions. 

The web that the bill is supposed to be unravelling will simply be rebuilt. 

This bill has been in development since 2014.

Countless experts on procurement law and practice have provided advice and recommendations to the drafters.

The Zondo Commission sat for four years, hearing evidence detailing how the procurement system was used for wealth accumulation, and then published voluminous reports with recommendations on how to create a stronger system.

At Nedlac, a Public Procurement Bill Task Team was formed, comprised of government, business and labour, to engage on the bill — and, at the request of business and labour, a small group of individuals with expertise in public procurement was constituted as a Joint Strategic Resource to advise on the process.

Business and labour ignored

According to a paper by Jonathan Klaaren, Ryan Brunette, Geo Quinot and Ron Watermeyer, “Remarkably, business and labour were aligned on most issues. They often found themselves speaking in unison to persuade government about policy positions.” 

And yet, they were largely ignored and the bill still fails to address the systemic weaknesses identified in those processes.

As the paper puts it, “The legal architecture of the National Treasury [version of the] Bill contains little if any hope of moving away from a repetition of the lack of success of the earlier generations of regulatory instruments in this field.”

This, they argue, is because the Treasury opted NOT to exercise the policy-making power of the state to adopt, promulgate, and enforce a comprehensive public procurement statute: “The … Bill should itself contain clear and accessible substantive policy choices in this area and not delegate and allow for such decisions to be taken (or fail to be taken) in the sub-units of National Treasury.”

Instead, the bill kicks key policy choices and justiciable principles down to the minister and subordinate legislation.

The question is, why?

The biggest beneficiaries of an ineffective system are those who seek to abuse and manipulate it. They have a vested interest in maintaining the instability, uncertainty and lack of legislative procedure and guardrails. 

At the heart of the bill’s incoherence is a failure to deal with the political reality that procurement is still seen as the core route to the redistribution of wealth and the pressures that reality brings to bear on how the bill is compromised and how the system will operate.

This is the reality despite the evidence from the Zondo Commission and elsewhere that the use of the procurement system for redistribution has been deeply destructive of the state’s ability to achieve its broader transformative, developmental and redistributive goals.

The bill tries to dodge this contradiction by postponing most of the battle and by introducing the appearance of greater policing powers, despite the reality that state capacity to manage and police procurement has deteriorated and is wholly unlikely to reverse that trend, especially given the fragmented, devolved system the bill proposes.

Where it should create certainty, standardisation, uniformity across like-for-like situations, and a transparent and clearly defined basis for defining, justifying, limiting and monitoring all deviations, including preferential procurement, the bill instead expands the opportunities for the rent-seeking frameworks and factions that have bedevilled the procurement system up to now.

With comments on the bill due by 11 September, we need to call on parliamentarians to exercise their responsibility and not cede their lawmaking power to executives and officials. DM


Comments - Please in order to comment.

  • Luan Nel says:

    In other words, if anything changes, then the changes will be for further devolution of policing and making procurement transparent. It is an old tactic – when in doubt, complicate the situation.

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