Article – How SMMEs can benefit from compulsory subcontracting in Government Tenders

The revised PPPFA Regulations that became effective on 01 April 2017 require that, if feasible to subcontract, for contracts above R30 million, organs of state must apply subcontracting to advance designated groups. The Regulations further state that if an organ of state applies subcontracting, they must advertise the tender with a specific tendering condition that the successful tenderer must subcontract a minimum of 30% of the value of the contract to specified EMEs, QSEs or Cooperatives.

  • EMEs – Exempt Micro Enterprises (Revenue below R10 million)
  • QSEs – Qualifying Small Enterprises (Revenue between R10 million and R50 million

The regulations are applicable to all organs of state including National and Provincial Departments, Municipalities and Municipal entities, Constitutional Institution, Parliament, Provincial legislatures and any other institution included by Section 239 of the constitution.

The organ of state is required to make available the list of all suppliers registered on a Central Supplier Database to provide the required goods or services in respect of the applicable designated groups from which the tenderer must select a supplier.

What does this mean for SMMEs?

  • SMMEs must ensure that they are registered on the Central Supplier Database to benefit from this process
  • SMMEs must check regularly for advertised tenders with a subcontracting condition on the E-tender portal.

It is also worth noting that organs of state may allow for subcontracting for procurement below R 30 million.

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