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This presentation unpacks the aims and regulations of the Preferential Procurement Policy Framework Act (PPPFA) and its revised Regulations of 2017, focusing on the promotion of locally produced goods, services, and works. Learn about the local content requirements and how they align with the Broad Based Black Economic Empowerment Act (B-BBEE).
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CIGFARO PRESENTATIONUNPACKING THE PREFERENTIAL PROCUREMENT POLICY FRAMEWORK ACT, REGULATIONS(2017):LOCAL SUPPLIERS, LOCAL CONTENT. PHILIA POTGIETER SCM ADVISOR
PURPOSE To focus on the alignment of the aims of the Preferential Procurement Policy Framework Act (PPPFA) and its revised Regulations of 2017 with the Broad Based Black Economic Empowerment Act (B-BBEE) that makes provision for the promotion of locally produced goods, services and works.
POLICIES • With reference to the Preferential Procurement Regulations of 2017, regulation 8 for Local Production and Content, policy prescripts inc- ludes: • Regulation 8(2) compel organs of state, in the case of a designated sector, to advertise a tender with a specific condition that only locally produced goods or locally manufactured goods, meeting the stipulated minimum threshold for local production and content will be considered. • Regulation 8 (4) allows organs of state to “self designate” services or goods. This can only be done in conjunction with dti and NT.
POLICIES • Regulation 8 (5) is clear , if a tenderer fails to meet the required minimum local content threshold it is an unacceptable tender and will not be evaluated further on points for price and B-BBEE status, except if dti approve exemption on request of a supplier. • AO are oblige to implement local content requirements for all designated products when advertising tenders, as per instruction notes/circulars.
DEFINE LOCAL CONTENT INTRODUCTION: • The stipulated minimum threshold for local production and content can vary between 10 - 100%. • Manufacturing is described as any kind of working or processing including assembly to specific operations. • Material is described as ingredient, raw material, component or part used in the manufacturing of a product. • Products is described as goods, services or works or manufactured goods as defined in the relevant National Legislation.
DEFINE LOCAL CONTENT DEFENITION: • The local content of a product is the tender price less the value of imported content, expressed as a percentage. It is therefore, necessary to first compute the imported value of a product to determine the local content of a product. • To summarise, it is that portion of the tender price that is not included in the imported content, provided that local manufacturing takes place and is calculated in accordance with the local content formula. • Suppliers must differentiate between local and imported content.
DEFINE LOCAL CONTENT • Imported content of a product by components/material/services is separated in two categories, e.g.: • Products imported directly by the supplier; and • Products imported by a third party and supplied to the supplier. • This information is necessary to complete annexure D –Import content declaration a supporting schedule to complete annexure C Local Content declaration summary schedule. • All commercial invoices, bills of entry must be kept on file that was used to calculate local content.
DEFINE LOCAL CONTENT • Types of services that can be imported- project management, design, testing, marketing, etc. Royalty and lease payments as applicable to be included when calculating imported content. • Exempted imported content:-A supplier may request in writing from dti exemption if they cant comply with the prescribed local production and content requirements. The request must include the procuring entity, tender number, closing date, items requesting exemption for, reasons and supporting letters from local manufacturers and suppliers. Turn around time 5-7 working days. Exemptions is not transferable to other tenders, its tender specific and the original letter to be appended to relevant tender.
LOCAL CONTENT MEASUREMENT. • The local content percentage of a product shall be as specified in the tender document on SBD/MBD 6.2 –Declaration for Local Production and content for designated sectors, paragraph 2. • The description of services, works or goods and stipulate minimum threshold % is copied by the procuring organ of state from the relevant circular/instruction note. • LC = ( 1 – x/y )*100 • LC Local Content • X is the imported content in RAND excluding VAT. • Y is the tender price in RAND excluding VAT.
APPLICATION IN THE PROCUREMENT PROCESSES. • Advertisement of a tender of a designated sector: • NT has issued since 2012, 22 circulars/instruction notes to establish designated sectors. It can be down loaded from NT website. • In the case of a designated sector a tender will include a specific condition that only locally produced goods or locally manufactured goods, meeting the stipulated minimum threshold that’s indicated in paragraph 2 of SBD/MBD 6.2 will be considered. Non compliance will be a unacceptable tender. • Applicable tender documentation: • STB/MBD 6.2- Declaration certificate for designated sectors.
APPLICATION IN THE PROCUREMENT PROCESSES. • Paragraph 2 will be completed by the procuring authority, giving a description of services, works or goods and stipulated minimum threshold % that may not be changed by a supplier. • Sub-contracting may not be done in such a manner that the local production and content of the overall contract value is reduced below the stipulated minimum threshold. • Reference is made to SATS 1286:2011 a technical specification issued by SABS to provide guidance to suppliers when calculating local content. It can be downloaded from dti website. • To determine X of the formula prices of products purchased in
APPLICATION IN THE PROCUREMENT PROCESSES. • Foreign currency must first be converted to rand using SARB exchange rate on the date of advertisement of the tender. The exchange rates is on SARB website and must be downloaded and a printout appended to SBD/MBD 6.2. • Annexure C –Local content declaration, summary schedule MUST be completed , signed and appended to tender document. • Annexure D – Imported content declaration is supporting to annexure C and a copy can be submitted if requested. • Annexure E – Local content declaration supporting to schedule C and a copy can be submitted if requested.
APPLICATION IN THE PROCUREMENT PROCESSES. • If there is no imported content only annexure C and E will be completed. • Dti issued a guidance document for the calculation of local content and how to complete annexures C, D, E step by step. • When a tender is awarded and local production and content is applicable the relevant procuring authority MUST without delay: • Inform dti. • Submit copy's of the tender document, SBD/MBD 6.2 , SARB print out on exchange rate if applicable, Annexure C and if so required annexure D and E as applicable.
APPLICATION IN THE PROCUREMENT PROCESSES. • Once the tender is awarded the relevant supplier MUST: • Keep copy’s of all documentation, invoices, calculations etc. for a period of 5 years. During this period DTI, SABS, SANAS OR IRBA or any other verification agency appointed by dti may do a inspection to verify calculations and information as reflected on annexures C,D,E. • EVALUATION OF TENDERS: • Two stage process. • First pre-qualification criteria is compliance with local content requirements. • Tenders who do not meet the stipulated minimum threshold values and do not have exemption from dti is a unacceptable tender and will be eliminated.
