In a media statement, he says literature reveals many objectives for procurement, that when broadly summarised include concepts of fairness; competition; transparency; value for money; quality and application of standards for the purchase, construction, operation, maintenance and disposal of assets.
He asserts that, for these objectives to be achieved, the requestor typically needs to know the product or service required, the location of where it is needed, the quantity desired, the time it is needed and the price of the products or services.
“It is simplified intentionally to give easy articulation of the objectives that are often ignored and postulated in a manner that does not give effect to these objectives in a balanced manner. It may also be that the complexity of designing such a system to achieve these objectives may be difficult to implement; however, attempts to do so are unfortunately not apparent in the latest revision of the Public Procurement Bill,” Lutchman avers.
“Simply, if we seek to address balance across the objectives, implemented with efficiency, professionalism and integrity, this would go a long way in creating much improved public-private collaboration to the benefit of both parties,” he posits.
Lutchman says that, when considering new regulations or regulatory amendments, it is reasonable to identify a good sense of the gaps: what is not working, what is best for now and the future based on the objectives that are being pursued.
“The regulations should make explicit reference to such objectives and give such effect in the construction of the relevant clauses,” he emphasises.
The criteria for Lutchman’s assertion regarding the Bill being inadequate are based on the objectives, he says.
“My main assertion is that the regulations are too high level, and leave much to the regulations, that may not segue into the guidelines. Further, if the regulations are not granular enough, then the achievement of the procurement objectives will be unsuccessful, thereby perpetuating the status quo. The remedy will remain in the guidelines and not in the regulations and details will remain unclear,” he explains.
“As much as I may simplify this assessment, we have numerous research reports, academic articles, and the Zondo Commission’s findings, that clearly explain that one of the primary causes of the dysfunctional state of public procurement in South Africa is the complex nature of our regulatory framework.
“Currently, there are more than 100 pieces of legislation plus a wide array of regulations, instruction notes, practice notes, policies, “circulars” and guidelines aimed at regulating public procurement. It makes for complexity but how is it that we do not embrace the concept of complexity and deviate to abuse the existing procurement regulations and guidelines,” Lutchman asks.
He also asserts that the emphasis on government intervention and preferential treatment of specified demographic groups is in contrast to the principle of non-racialism, and counterproductive to market principles and the development of a truly competitive business environment.
“I believe that seeking to achieve equitable redress requires that focus groups have to be preferred and therefore disagree with the Harvard Growth Hub that recently highlighted preferential procurement as a primary cause of the collapse of State capacity.
“As much as redress is an objective for South Africa, I do agree that officials have not given much credence to its effective implementation without ‘fear of favour’ but chose to subvert this objective over time to the detriment of exposed or vulnerable groups,” he says.
Lutchman emphasises that the primary purpose of the Bill should be to integrate existing legislation to create a single piece of national legislation that regulates public procurement, including preferential procurement.
“It does not appear to be the case at the moment. The significance of preferential procurement is to assist our country with redress [and] create an environment for new business growth and economic inclusion, among others. This Bill is intended to give effect to the entirety of Section 217 of the Constitution and its introduction is probably the most significant development in public procurement regulation in South Africa,” he points out.
“I mention this as it can no longer remain an assumption, that if there are regulations by the State, effective implementation will happen. If we reflect on the past performance of our public procurement, we may easily argue that preferential procurement has not yielded the desired effect, although significant gains have been made.
“Some of the objectives missed are the development of rural economies; skills development to serve economic needs of the country; value for money, with many transactions having exceeded the appointment value; delayed provision of infrastructure solutions; and sustainable job creation,” Lutchman adds.
He asserts that simplifying the Bill’s legal framework is the most effective step government can take towards improving the public procurement system.
“An overarching legal framework will be welcomed as a positive step towards reform. The simplification of such a process can be made easier, and transparency can be achieved, through the adoption of digital solutions to enable integrity in the procurement process and artificial intelligence to assess the quality of the bid,” Lutchman suggests, adding that these options have been available for some time, but not considered for adoption.
“In its current form, the Bill fails in its primary objective as it does not contain provisions that meaningfully improve the public procurement system, thus falling short of the standards in Section 217 of the Constitution.
“Should it be promulgated, we will find that the systemic issues will remain, if not worsen, as the guidelines leave agencies with the decision to determine preferential procurement with no guarantee that its objectives will be attained,” Lutchman emphasises.
He warns that the Bill gives the National Treasury, the Public Procurement Office and organs of State significant regulatory-making powers, instead of providing concrete rules for implementation.
“This could be problematic as most of the rules that have to be followed or applied will be contained in various pieces of subordinate legislation and may be inconsistent across public sector agencies. It is unclear when these subordinate pieces of legislation will be provided to the public for meaningful input.
“Key legal requirements for all procurement systems should be contained in the Bill and not left to subordinate regulations and/or policies, where these legal requirements may be subject to watering down, softer interpretation and/or regular reform,” Lutchman explains.
“Given that government has not been able to manage its capital outflow efficiently, coupled with the nationwide enforceability of the Bill, it should provide clear, unambiguous, accurate and consistent definitions and other core concepts, that in its current form are lacking,” Lutchman posits.
"In principle, the Bill is correct but lacks a multidimensional view of all its affected participants, lacks collaboration and consistency, and has not undergone any confirmation testing or details of how it will provide value for money. As such a fundamentally important piece of legislation, it is more than appropriate that it must be phased in, offering the potential of finetuning,” Lutchman asserts.
In addition, the Bill does not stand on its own and there are enabling initiatives required to give meaningful effect to the intention of the Bill, he adds.
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