The legislative framework for public procurement: implications for the 2010 ARV tender

1. The legislative framework for public procurement: implications for the 2010 ARV tender Jonathan Berger Senior Researcher AIDS Law Project Friday, February 5th 2010 Budget & Expenditure Monitoring Forum University of the Witwatersrand, Johannesburg

2. Overview of presentation • Legal framework for public procurement • Constitution • Legislation • PFMA, Treasury Regulations and the Code of Conduct • State Tender Board Act • PPPFA • Implications for the 2010 ARV tender • Understanding procurement in the context of access • Impact of Regulation 16 • Show me the money! • National Treasury vs. Department of Health • Compliance with requirements of the PPPFA

3. Legal framework (1) • Constitution • Section 217 • (1) Basic elements of constitutionally acceptable procurement system • (2) Expressly permits – but does not require – preferential procurement • (3) Requires national legislation for preferential procurement framework • Section 216 • Empowers National Treasury to guide and control • Places obligations on the National Treasury • Other provisions • Sections 7(1) and 7(2) – nature of and duties arising from Bill of Rights • Sections 27(1) and 27(2) – right to have access to health care services • Section 41 – co-operative government and intergovernmental relations • Sections 44, 104 and 146 – national vs. provincial government • Sections 214, 215 and 226(4) – budgetary and expenditure matters

4. Legal framework (2) • Public Finance Management Act (PFMA) • Together with Treasury Regulations and Code of Conduct, provides mainstay of legislative framework • Single statutory and regulatory framework for all state procurement • Does not require all organs of state to procure in same way – within framework, free to structure procurement processes to suit own needs • Key provisions • Sections 38 and 51 (responsibilities of accounting officers) • Section 76 (provides basis for Treasury regulations) • Essence of the PFMA in respect of procurement • Places obligations on accounting officers to put in place procurement systems contemplated by the Constitution • Gives National Treasury statutory authority to flesh out the framework

5. Legal framework (3) • Treasury Regulations • 9: “unauthorised, irregular, fruitless and wasteful expenditure” • 16: procurement in the context of PPPs • 16A: national framework for supply chain management (SCM) • Covers state departments, constitutional institutions and public entities • Deals with various aspects of procurement, including: • Obligation to develop and implement an SCM system in institution • Essential elements of any SCM system • Requirements of any bidding process • Adjudicating bids through a bid adjudication committee • Making provision for establishment, composition and functioning of bid specification, evaluation and adjudication committees • Detailed bidding procedures • Mechanism/process for approving evaluation/adjudication recommendations • Compliance with ethical standards

6. Legal framework (4) • Code of Conduct • Contemplated by Regulation 16A8.2 • Deals with issues such as conflicts of interest, accountability, openness and confidentiality • Legally enforceable • SCM guide • Not technically a part of the legislative framework • Useful guide for accounting officers and authorities • State Tender Board Act • Remains in force alongside SCM system • Only for departments that lack capacity to implement system

7. Legal framework (5) • Preferential Procurement Policy Framework Act • Constitution requires legislation to give effect to section 217(2) • Does not contemplate compulsory preferential procurement policies • But PPPFA requires all organs of state to comply with its provisions • Section 3 permits Minister of Finance to grant exemptions: • In the interests of national security • Likely tenderers are international suppliers • In the public interest • Points system not contemplated by Constitution • 90/10 and 80/20 point systems effectively provide subsidies • Constitution contemplates preferences in “allocation of contracts” • Constitution requires “fair, equitable, transparent, competitive and cost-effective” systems • Points system appears to violate both requirements

8. Implications for the ARV tender (1) • Procurement in the context of access • As far as is reasonably possible, legislative framework to be interpreted to give DoH the space to discharge its constitutional obligations regarding access to medicines • Impact of Regulation 16 • Narrows space within which to develop/implement systems • But lets state departments structure own bidding processes – • Structure and composition of bid specification, evaluation and adjudication committees • Special conditions of tender • Own bidding procedures • Processes for approving bid evaluation/adjudication recommendations

9. Implications for the ARV tender (2) • Show me the money! • National government can determine what is procured if it puts up the money (in part or in whole) • May request matching funds for accessing conditional grants • National Treasury vs. Department of Health • Draw distinction between practice and legal requirements • Only capacity may limit DoH’s role in leading bid process • Need to address health concerns and nature of products procured • Compliance with PPPFA • Constitutional vulnerability + obligations in respect of right to health = legal obligation to grant section 3 exemption

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