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

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

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

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

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

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

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

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

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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