Western Cape Business News

Send  Share  RSS  Twitter  14 Jun 2011

EMPOWERMENT: Scorecards Required For Government Tenders


Recent Western Cape Business News

Tender fraud, corruption and misrepresentation of BEE status could be a distant memory if the Treasury’s newly gazetted amendments to the PPPFA are effective.  Many companies used the loopholes in the tender act to unfairly win tender contracts from government. This further encouraged other forms of BEE fronting which spread as far as the largest of corporates in South Africa to even the verifiers of this information.

Transformation is a long term process; it cannot be shortened into a single year or even confined to one single person. The intention is for as many black South Africans to benefit as possible. We believe the updates will reward companies who comply with Broad-Based Black Economic Empowerment which includes; Socio-economic Development, Enterprise Development, Preferential Procurement, Skills Development, Employment Equity, Management and Ownership,” says Keith Levenstein, CEO of EconoBEE.  

Any company who contributes to the development of a small black owned business will earn recognition on enterprise development.  In addition, the B-BBEE Act encourages formation of partnerships that would guarantee their sustainability but also earn the company profits in the long run.  Other examples include staff development, whereby companies are further rewarded if the skills are of a high standard such as university degrees or diplomas.

The Broad-Based Black Economic Empowerment scorecard is an excellent, world-leading method of measuring the extent that transformation has taken place in a business. The tender act or PPPFA (Preferential Procurement Policy Framework Act), on the other hand was outdated as soon as the B BBEE Act came into effect. Its method of gauging transformation was based on old outdated principles which allowed loopholes and corruption to seep through.

The implementation of the PPPFA often resulted in only black owned businesses being awarded a tender regardless of compliance with the Broad Based BEE Act.

Many of the problems caused by the misalignment were due to unclear guidelines and a general unwillingness by tender officials to change their policies. The latter point further complicated the tender process and allowed for additional inconsistencies with each tender. Tender officials always had the scope to use broad-based principles in issuing of tenders but never did. They unfortunately decided to only use a black ownership or management figure as an indication of BEE compliance,” added Levenstein.  

The requirements will allocate tender points based purely on compliance with the Broad-Based BEE scorecard.  If a company has achieved highly they will be awarded maximum points or if they are non-compliant or achieved badly will receive little or no recognition. There is a transitional period of 6 months, ending on 7th December by which time only valid certificates will be acceptable.

According to the leading experts in BEE problems will still exist:

·                Training problems of tender officials. Tender officials will require a good knowledge of BBBEE in order to correctly implement these requirements.

·                Black owned businesses will be disqualified without suitable documentation.  A short phase in period will be essential - the anticipated end of this phase is 7th December 2011.

·                Verification capacity. With less than 70 BEE verification agencies the additional companies wanting to be BEE accredited will place huge stress on their capacity.

·                Consistency.  Scorecard fronting (white collar fronting) will need to be watched very carefully. The data applicable to a scorecard will need to become more publicly accessible to avoid irregular scorecards being used.

·                Regulation issues.  Once a certificate is found to be incorrect it needs to be removed from the tender process. An investigation will need to be conducted to discover the reason why the scorecard is incorrect. Tender officers will need training to ensure they vet each certificate.

·                DTI capacity. The DTI has a small team of experts. This team will be required to investigate a massive number of invalid certificates. They will also be required to offer leadership and interpretive guidance to the industry.

·                Time and knowledge.  Companies will have a very limited window to improve their current BEE scorecard or prepare from scratch.

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