When to sub-contract?
There seems to be a lot of confusion amongst entrepreneurs when it comes to tenders and sub-contracting, due in large part, to the The Draft Preferential Procurement Regulations, 2016 have been gazetted and are currently up for review. Many entrepreneurs ask us whether they should sub-contract or not, when responding to a tender.
Regulation 13 of The Draft Preferential Procurement Regulations 2016, stipulates the following:
(1) For contracts above R30 million, the tenderer MUST sub-contract a minimum of 30% of the value of the contract to –
a. One or more of the categories referred to in regulation 10(1)(b);
(Regulation 10(1)(b):
(i) EME’s or QSE’s owned by black people who are female;
(ii) EME’s or QSE’s owned by black people from the ages 14 to 35;
(iii) EME’s or QSE’s owned by black people;
(iv) EME’s or QSE’s owned by black people with disabilities)
b. One or more Exempt Micro Enterprises (EME’s) or Qualifying Small Enterprises (QSE’s); or
c. One or more small businesses, as defined in the National Small Business Act, 1996 (Act No. 102 of 1996).
(2) If a successful tenderer sub-contracts to another person without disclosing it in its tender documents, the organ of state must penalise the tenderer 10% of the value of the contract, unless the tenderer provides a satisfactory reason for failing to make the disclosure.
Regulation 13 is very clear because its states “the tenderer MUST sub-contract…..”. Thus, once the Regulations are finally gazetted then all contracts with a value of R30 million and above will have to comply with this Regulation. Remember that currently (31 Oct. 16) the Regulations are not finalized yet. Until such time that the Regulations are finalized, the answer is easy, look at the scope of the tender or the special conditions or even the functionality. Somewhere on the tender document it will stipulate whether the tenderer will have to sub-contract. Follow those rules. If the tender document doesn’t contain any sub-contracting instructions (at this stage) then it is not necessary to sub-contract.
The fact is that the tender document will dictate what you should or should not do. Read the tender document carefully, follow the instructions precisely and to the point.
To learn more about this and all the other new developments regarding tenders, please attend one of our How-to-Tender workshops. Tender Workshop dates are published on our website at www.how2tender.com.
For more information on the tender courses please email Marike at .
This article was written by Werner van Rooyen, one of the Directors on Kunaku Procurement Solutions which specializes in tender consulting and tender training. (31/10/2016)