Sakeliga advises all organs of state to steer clear of pre-qualification criteria


–              Public and businesses encouraged to also approach organs of state

Sakeliga advises all organs of state to refrain from applying pre-qualification criteria in the 2017 procurement regulations that have been found unlawful by the Constitutional Court. This would be constitutionally prudent, economically sound, and in the public interest, regardless of the period of suspension of the order.

Sakeliga also encourages members of the public and businesses to approach different organs of state directly and request them to not apply pre-qualification criteria in tender processes.

In light of the confusion caused by the Department of Finance in recent weeks, it should be stated once more that all state organs are, under the law, free to issue tenders without BEE pre-qualification criteria. Contrary to the Department’s instructions on 25 February, state procurement never had to be halted. The Minister of Finance does not have the necessary regulation-making powers to determine the contents of an organ of state’s preferential procurement policies. Organs of state were not and are not under any obligation either to halt their procurement processes or to apply pre-qualification criteria upon instruction by the Department of Finance.

As the Constitutional Court itself remarked on 30 May: “[T]he Minister’s direction [of 25 February] mentions that, pending the outcome of this application, all government procurement must be halted. [This is mistaken.] It is the Minister who has misread this court’s order. So, the halting of government procurement must be laid at the Minister’s door who has misread this court’s order. It has nothing to do whatsoever with this court’s order.”

Given the confusion and mistaken impressions caused by the Department of Finance, it is necessary to point out that, at best, the 2017 regulations themselves make pre-qualification criteria merely optional. Section 4(1) of the 2017 regulations, unlawful as they are, stipulates that organs of state may decide to apply pre-qualification criteria. That is, they are not obligated to do so. Given the judgment by the Supreme Court of Appeal, confirmed by the Constitutional Court, organs of state should avoid entertaining this option, even if only from a risk-management approach, lest it contributes to disputes and challenges during or after a tender process.

The optionality of applying pre-qualification also means that the public and businesses can influence its application outside of the use of the courts. Sakeliga recommends that members of the public and businesses approach, wherever  possible, political representatives and state entities directly to remind them that they do not need to apply pre-qualification criteria and to request that they do not. No individual municipality, province, state-owned entity, government department, or any other state entity is required to apply pre-qualification even if all others were to do so.

In the meantime, Sakeliga welcomes the publication of draft new procurement regulations by the Minister on 10 March 2022. While the Constitutional Court has confirmed the unlawfulness of the 2017 regulations, it also confirmed a temporary suspension of that order so that the Minister may promulgate new regulations. The court gave the Minister 12 months for this, but the Minister has now made it admirably clear that he could rectify the illegalities of his predecessors within the next few weeks. It would reflect well on the Minister if he complies not only with the letter of the Constitutional Court’s ruling, but also its spirit, by replacing the illegal regulations with legal ones in short order.