The value for money approach to public sector procurement

Second peer review: The law of Government Procurement in South Africa

Isac Smith, Director Supply Chain Management, Department of Health, Provincial Government Western Cape, and speaker at the upcoming Supply Chain Management Summit, offers his comments in the second of his review series of Prof. Phoebe Bolton’s legal work, ‘The Law of Government Procurement in South Africa’.

‘The Law of Government Procurement in South Africa’, Lexis Nexis Butterworth, ISBN 9780 4090 2318, R495.90.

The author: Professor Phoebe Bolton, Bproc, LLB, LLM, LLD (UWC), Associate Professor of Law, University of the Western Cape.

The reviewer: Mr. Isac Smith, the Director Supply Chain Management, Department of Health, Provincial Government Western Cape, previously served at senior level in the National Department of Treasury where he was directly responsible for policy and was instrumental in driving the procurement ‘10-Point Plan. Thereafter he was employed by the Department of Treasury WC and headed (the now abolished) Provincial Tender Board Office. Subsequently he was transferred to his present position.

“As mentioned in my previous review, the content of this book is valuable and goes a long way in explaining Government procurement”, says Smith.

“Bolton is correct in approaching Government procurement from a cost effective position. Government does have the choice to decide to outsource or in source services. Government procurement entails the spending of public money. As we know, governments, as a rule, do not have sufficient money to satisfy all the needs of its citizens and hence, great care should be given in spending such money.

“On average 25% of State organs’ budgets, when not a commercial entity, are spent on the procurement of goods and services. The value of intelligent procurement can, therefore, not be underestimated. Bolton goes into great depth to explain the value for money concept from a legislative point of view. However, this is a narrow approach to value for money; there are a number of other factors that need to be taken into account.

“One of the most important factors revolves around the skills set of those Government officials to whom Government procurement has been entrusted. Procurement officials need to have various skills other than understanding the legal framework of government procurement. These skills include an understanding of the economic environment, cost analysis skills to determine which offers are the most cost effective, legal skills to ensure that contracts are properly constructed and entrepreneurial skills to deal with continuous changes in markets and their impact on both the government and service providers.

“Bolton is correct when stating that government procurement law does not lay down clearer conditions in certain instances. In fact, the law is written in such a way that there is sufficient flexibility for procurement authorities to apply their mind in ensuring the best value for money. Whilst this in itself may create legal risks and allow a gap for possible corrupt practices, it does provide adequate scope in taking market conditions into account.

“The new procurement laws are less rigid than those that were applicable up to 2003 and where Tender Boards, instead of Accounting Officers/Authorities, played the major role. The intention of the legislature seems to be to move government procurement more in the direction of private sector procurement and international best practices. If that is the case, logic dictates that there cannot be a rule or prescript for every procurement activity and that there must be room for business practice. The skills set of government officials, therefore, becomes essential to ensure that value for money is attainted”, concludes Smith.

Isac Smith will be presenting a paper, based on his many years experience as a senior State procurement officer in different branches of Government – including National Treasury – at the Public Sector Supply Chain Summit being held at Leriba Lodge, Centurion, Gauteng, from 18 – 20th August 2009.

Summit delegates can also look forward to meeting the author, legal expert Prof. Phoebe Bolton, who will be discussing how to avoid litigation by aggrieved bidders on tenders as a result of the 3 Bid Committees processes, with specific reference to the MFMA.

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