Content analysis and ranking of irregularities in public sector construction procurement in South Africa

Public procurement fulfils an important role in the economy and public expenditure of a country and can be regarded as a critical indicator of the effectiveness of a government, because it is a central aspect of public service delivery. Notwithstanding various reforms made to date to public sector procurement in South Africa and the application of Supply Chain Management as a strategic policy strategic instrument, the South African public procurement system still faces several challenges and has been strongly criticised. This paper aims to understand the current public procurement environment in South Africa, its dilemmas and challenges, and to propose that public procurement be refocused towards a strategically placed business process, implemented by well-trained and competent procurement officials. The purpose is to provide a theoretical foundation as well as practical guidance regarding the role of public procurement in the South African public sector. The methodology involved an intensive literature study and document analysis to evaluate various official policy documents and official publications to determine the status of South African public procurement. The study found that the majority of challenges faced by public procurement in South Africa can probably be attributed to the implementation of the system, rather than to the system itself. In the shorter and longer term, the public procurement system in South Africa will have no choice but to emerge as a stronger, more resilient, streamlined and efficient provider of goods and services for the greater good of all.

Women-owned businesses (“WOBs”) obtain less than 6% of public procurement contracts, despite accounting for close to 30% of registered businesses in South Africa. This contribution examines the reasons for the limited participation of WOBs in the public procurement system and finds that there are policy, legal, institutional and cultural barriers to the participation of WOBs in public procurement in South Africa. Policy barriers arise out of the misalignment between economic, gender and procurement policies and legal barriers arise from the previous limited and currently uncertain approach to preferential procurement legislation. However, the contribution finds that institutional, cultural and structural barriers pose even more of a risk to women’s participation in public procurement in South Africa. These institutional barriers include a reticence to prioritise WOBs by public agencies in the absence of an explicit mandate to do so, the reluctance to favour new market entrants to avoid contract failures and a culturally biased approach to WOBs by public agencies. Other barriers include the gendered impact of procurement corruption; the gendered impact of Covid-19, which terminated public contracts in sectors serviced by WOBs; and the complexity and opacity of the procurement process. The contribution finds that the historical lack of attention to women’s participation in procurement, and the lack of disaggregated data on preferential and gendered contracts, have made it difficult to understand the extent of women’s participation and the nature of required legal and policy interventions. This contribution assesses the barriers to the participation of WOBs in public procurement and makes recommendations aimed at addressing some of these barriers.

Background: Service delivery is the core business of any government around the world, especially in developing economies. The government uses various public procurement legislation that govern how public services are procured. The current procurement legislation to acquire goods, works and services for the public at large are said to be ineffective and inefficient, hindering the accelerated provision of public services.Aim: This article aimed to ascertain the degree to which public sector procurement processes can be modelled to that of the private sector to improve service delivery.Setting: Several studies have revealed a stagnating nature of service delivery in government entities when it comes to the methods used to procure public services in South Africa. The private sector also does procurement successfully; however, it is slightly different as it is not governed by rigid public procurement legislation causing unnecessary red tapes. The red tapes that are sometimes impeding the accelerated service delivery are a major cause for concern if the government was to improve service delivery at a faster and unhindered pace.Methods: The research was qualitative in nature and used unobtrusive research methods focusing on a literature review technique. The research entailed a robust examination of the existing literature and trends analysis in the field of public procurement and private sector procurement.Results: The article revealed that there are several shortcomings in the form of red tapes that the public sector procurement is currently experiencing, which can be mitigated by adopting some of the private sector operational processes. Of course, this might require a total overhaul of the current public procurement processes including some legislation in an attempt to boost service delivery. Such red tapes include inflexibility of government procurement processes to allow for innovations, long-term supplier relationships and effective communication on future government plans. As such, some of these red tapes have a huge impact on improving service delivery, especially if fraud and corruption are involved; some processes are counterproductive and they end up allowing inexperienced suppliers to be chosen who fail to deliver.Conclusion: Public procurement process in South Africa urgently needs an overhaul to adopt some of the best practices used in private sector procurement operations to improve service delivery. This is because most public resources do not yield value for money because of rigid and stifling public procurement processes.

Background: Public procurement in South Africa is challenged by conventional methods that pave the way for human interference resulting in fraud and corruption, delays, unaccountability and poor performance of the value chain in the procurement process. Objectives: This study aimed to investigate the Industry 4.0 capabilities for public procurement improvement. To address the challenges presented by the traditional manual procurement systems, the study embarked on a transformative journey by identifying the prospects and benefits of Industry 4.0 technologies in public procurement in South Africa, and the significance and application thereof. Method: The study followed a six-step qualitative research methodology of content and thematic analysis which facilitated an understanding of the procurement process in South Africa and how it can be automated using Industry 4.0 technologies. Results: The study revealed that Industry 4.0 technologies are crucial as they present digitalisation opportunities through platforms such as e-design, e-inform, e-sourcing, e-evaluation and e-contract. The platform will improve the process, encourage legislation compliance and achieve its goals as outlined in the constitution and Public Finance Management Act of 1996. Conclusion: Implementing digital procurement will assist the government in achieving its policy requirements of value for money, open and effective competition, ethics and fair dealings, accountability and reporting, and equity. The technologies represent a strategic response to the challenges facing public procurement. Contribution: The study contributed to the body of knowledge by presenting the prospects and benefits of Industry 4.0 technologies. In addition, it highlighted the significance and application to the South African public sector.

Public Procurement, Corruption and Blockchain Technology in South Africa: A Preliminary Legal Inquiry

Public procurement is generally known to be the acquisition of goods and services by the government from the private sector. Construction works are considered to constitute services and as such are not specifically referred to in the Constitution of the Republic of South Africa, 1996. Re-categorising public procurement may hold many advantages for the regulation of construction procurement law as a unique form of public procurement in South Africa. The definition of construction works is thus important when establishing what is procured in construction procurement. This definition in turn may indicate that the procurement of construction works is indeed a unique form of procurement and should accordingly be re-categorised in South African public procurement law.

This chapter examines the application of the most-favored nation (MFN) principle under the WTO Agreement on Government Procurement (GPA) with reference to RTAs with substantive government procurement commitments. The chapter initially looks at the operation of the MFN principle among the parties of the GPA, pursuant to Article IV. It then examines the implications of the GATS Article IIMFN principle with reference to the GPA parties’ commitments in the procurement of services and construction services. The chapter finally turns to assessing the RTA market access commitments for the procurement of goods, services, and construction services, again with reference to the scope of the MFN principle operating under Article IV of the GPA. It undertakes this analysis for selected RTAs between GPA parties, RTAs signed between a GPA party and non-GPA party, and, further, those RTAs with procurement provisions signed between non-GPA parties. The liberalization of government procurement markets under the GPA is based on strict reciprocity and a conditional MFN requirement. Under the GPA, the MFN requirement is frequently set aside with respect to the parties’ market access commitments in goods, services and construction services. These exceptions are formally set out in the Annexes and General Notes, which are included in the Appendix to the Agreement and form an integral part of the Agreement. As such, bilaterally negotiated concessions continue to take precedence over a commitment to provide for liberalization through the principle of unconditional non-discrimination between the parties. This reflects the sensitivity of these negotiations. For the adherence to the strict reciprocity principle detracts from the widely accepted benefits that are attached to an open trading system. Second, with regard to the coverage of procurement in services and construction services under the GPA, any access to procurement markets is conditioned and constrained by the GPA’s “relationship of correspondence” (Blank and Marceau, 1996:p. 48) to the GATS schedules and, consequently, by the application of the MFN principle operating within the GATS. This is because even though government procurement is excluded from the core provisions of the GATS, the GPA itself deals only with government procurement policies; it cannot address measures such as trade restrictions that affect the ability of foreign enterprises to sell services to governments (Anderson and Muller, 2008). One of the significant implications of this distinct relationship of correspondence is that GPA parties do not have the mandate to open up markets for services and contract services for the purposes of government procurement beyond that which has already been committed under their GATS schedules. This could be seen to provoke the need to use RTAs as an alternative and established vehicle from which to negotiate commitments that go beyond that provided under the GPA—so called “GPA+” commitments. This is both for those GPA parties seeking further access into the procurement markets of both other GPA parties, as well as with non-GPA parties. Third and consequently, the negotiation of RTAs with GPA+ commitments set out in their schedules nevertheless raises questions about their prima facie legality under the GPA. For under this agreement, there is a noteworthy absence of a general legal provision to permit and condition exceptions to the MFN principle. This is in stark contrast to the GATT, pursuant to Article XXIV, and pursuant to Article V GATS. This presents a dilemma. It is of potential consequence for those RTAs signed by GPA parties that liberalize procurement markets for goods, services, or construction services markets beyond the GPA obligations and schedules. If it is accepted that GPA parties are dependent upon the existing services and construction services they have already negotiated under their GATS schedules, those parties wishing to open their procurement markets any further are presented with no option other than to ignore their obligation to provide MFN treatment under the GPA. The chapter concludes that these overlapping, possibly conflictual, or even trade restricting legal obligations and the methods of negotiating them work against the wider objectives of the WTO and the GPA. More desirable options would most likely involve WTO members moving away from promoting market liberalization based on strict reciprocity and conditional MFN. This could help to prevent the use of government procurement commitments to protect certain domestic producer interests, rather than to seek and maintain an open trading system.

ЗДІЙСНЕННЯ «ЗЕЛЕНИХ» ПУБЛІЧНИХ ЗАКУПІВЕЛЬ: ПОТЕНЦІЙНІ ПЕРЕВАГИ ТА ВИКЛИКИ ДЛЯ УКРАЇНИ

Policy Review: Constitutional Requirements for Preferential Procurement in South Africa

Public construction procurement is a Government program to meet infrastructure needs. As a government program that uses the public budget as a source of funding, public procurement tends to be vulnerable to various problems and criticisms, especially related to public trust as users. Therefore, the government must prove that the implementation of procurement including the procurement of construction can be relied upon, so it must be carried out professionally and ethically. To guarantee that, construction procurement must adhere to the principles set out in the regulation. Presidential Regulation of the Republic of Indonesia Number 16/2018 regulates Public Procurement of Goods and/or Services and establishes 7 principles of procurement implementation, including: efficient, effective, transparent, open, competitive, fair, and accountable. This paper is an initial stage of research to evaluate the implementation of the principles of construction public procurement. The purpose of this study is to identify the indicators that must be met by the government in the implementation of these principles. These principles will become the research variables, while the indicators are obtained from related literature studies. The data in this study were obtained by distributing questionnaires and interviews with several parties concerned with the public procurement in Surabaya. According to the experts’ opinion, there are found that 48 indicators of the principles which could be used to evaluate the principles of the implementation of public construction project procurement in Surabaya.

Public procurement is a relatively new practice of the institutions in public sector associated with the new ideas in public management: to take over the business management principles and adapt them to the public institutions, to save the state money, to efficiently distribute and promote public and private sectors. Institutionalism is described of the 19th-20th centuries, especially when the focus is on the social and economic development of the country, economic problems, appropriate solutions for the public and the private sectors in the search, without distinction between primary and secondary institutions, and analyzing them as a whole in the public procurement process. According to an independent economic institutionalism theory direction, the public procurement process can be understood as a set of institutions with an exceptional inter-relationship between purchasers and suppliers, as well as affecting the economic development of the country. The institute in the procurement process consists of: 1) the formal rules governing public procurement procedures, and informal relations between contracting authorities and suppliers, affecting both their mutual relations and their common agreements and economic development activities, 2) the coercive measures imposed to ensure public procurement procedure norms, sanctions and violence in defiance of state of the Republic of Lithuania procurement legislation. In the public sector, public procurement plays a dominant role in procurement services, law enforcement processes, health, social services, education, defense, transport and the environmental issues sectors, and therefore, to achieve public policy objectives and meet civil society needs in the public sector organizations in the procurement volume is much larger than in the private sector. Institutionalism allows the identification of self-formed purchasers and suppliers to separate the network of economic actors’ public and private sectors, groups and organizations. In the relationship between individual behavior and analyses of these theories, new institutional economic theory is born. New institutionalism encourages looking at the practical and effective institutions in the procurement process, analyzing not under the ideal conditions of a theoretical model, and according to the public procurement law with the alternative, which allows to extend the micro-economic analysis. In addition to physical and technical limitations inherent in classical institutionalism theory, new institutionalism identified and further analyzed the institutional structure of the society. The institutional structure formed in economic circumstances reflects the situation in the procurement process, the state authorities of the contracting authority must be interested in a cost-effective and/or efficient purchasing, while suppliers (business organizations) – the maximum profit possible after the procurement.

This research aims to find applicable emerging procurement trends in private sector for public procurement to bridge the efficiency and effectiveness gap between two sectors through this study. The study was conducted using unobtrusive research technique where it is a part of qualitative methods. Initially, study was focused to understand differences between private and public sector procurements where challenges of public procurements were derived through literature. Then researcher derived emerging procurement trends such as adopting to automated procurement, big data management, collaboration and cooperation, thinking suppliers beyond the price and visibility in supply chains as indicators under independent variable (emerging global procurement trends) of the study while deriving existing challenges in public procurement sector such as limited planning and forecasting, selection of vendors, maintain confidentiality, publication and responses, middlemen operations and poor performances of suppliers as indicators for dependent variable (overcome challenges in public procurement). Then validated the relationships among emerging procurement trends and challenges by referring to the existing knowledge in the study span through literature survey. Finally, researchers found and explored those existing challenges in public procurement can be overcome by adopting to derived emerging global procurement trends in the public sector. Keywords: Challenges in public procurement, Global procurement trends, Private sector procurement, Public sector procurement.

The purpose of this study is to analyse the progress that the post-Apartheid public procurement regime has made in South Africa in achieving its mandate of addressing socio-economic imbalances created by Apartheid. Based on the desktop literature review and research design, this study explores, through a conceptual analytical approach, the pros and cons that have characterized the South African public procurement regime to date. The study appreciate and acknowledge tremendous progress made to date in ensuring that the South African public procurement regime meets the international standards governing supply chain management processes. Nevertheless, research findings have shown some shortcomings in that the current procurement regime as it recycle enterprises without really creating sustenance. This has resulted in most SMEs benefitting from the government procurement, struggling to survive outside public procurement. The current B-BBEE framework have shown fundamental gaps, and consequently created of more black business managers than black industrialists who are sustainable entrepreneurs. Big companies with the capacity to respond to the seven elements of the scorecards hire black executives and pay them salaries while they share dividends and profits. Thus, the Public Procurement in South Africa needs to be constantly evaluated, monitored and adjusted accordingly, considering the highly dynamic contemporary business environment. This is in the ambit of: lack of proper knowledge, skills and capacity; non-compliance with SCM policy and regulations; inadequate planning and the linking of demand to the budget; Accountability, fraud and corruption; inadequate monitoring and evaluation of SCM; unethical behaviour; decentralization of the procurement system without proper regulated mechanism and Irresponsiveness of the B-BBEE policy. The study concludes by recommending a revamp of the B-BBEE framework in its current form in order to make it more responsive and effective. Keywords: Public Procurement, Preferential Procurement Policy Framework, Broad-Based Black Economic Empowerment, Supply Chain Management DOI: 10.7176/EJBM/12-29-02 Publication date: October 31 st 2020

Essays on Public Procurement in South Africa

Studies highlight that public procurement in any country acts as a barometer of public confidence in fairness and transparency of public institutions. A number of cases related to corruption in public procurement in the country have been highlighted by media on regular basis. These incidents raise questions regarding robustness of the procurement framework in vogue in the country. Though no special legislative framework dealing with public procurement exists in the country, the administrative guidelines on the subject are quite exhaustive. Procurement is not a state subject; hence law can be made by the Centre for entire country. However, no separate law governing public procurement has been enacted in India. However, public procurement in India is not bereft of its share of issues. Multiplicity of instructions, absence of procurement law and singular emphasis on upfront value of acquisition without considering life cycle cost mars public procurement in India. Further, social and environmental sustainability has also not received the attention it deserves. Studies highlight that migration of public procurement to Internet could provide us savings of up to 25% by streamlining 30% of Indian Union Budget spent on provisioning of goods / services. However, any such endeavor has 70% chances of failure. With only 13% e-procurement research focusing on public sector make matter worse. In the above backdrop, the chapter would cover: Importance of public procurement, Difference between public and corporate procurement, Overview of procurement framework of the country - covering constitutional/ legislative/ administrative provisions, generic public procurement process, various types of procurements – limited tender, open tender, single tender, issues in public procurement of the country and e-procurement initiatives by Government of India and status thereof.