Procurement may be regarded as the process that creates, manages and fulfils contracts relating to:
• the provision of supplies, services or engineering and construction works;
• the disposal of property;
• the hiring of anything; and
• the acquisition or granting of any rights and concessions.
A preferential procurement policy is a procurement policy that promotes objectives additional to those associated with the immediate objective of the procurement itself. The procurement of supplies, services and engineering and construction works has been used internationally to support a number of socioeconomic or political (secondary) objectives.
In the last decade, here is South Africa, it has been used to promote a number of broad socio-economic objectives relating to race, gender, disability, job creation and poverty alleviation.
What this essentially means is that those groups/individuals that were previously disadvantaged (PDIs) in the past should be the preferred supplier to those procuring products and services.
The B-BBEE codes further make provisions for, and explain how, businesses are “expected” to support these “PDIs” and what the benefits (including being considered as suppliers to government organisations and listed companies and possible tax incentives) are to businesses who support these PDIs.
For empowered SMEs, this means that procurement contracts may become easier to access.
What SMEs must remember is that service and quality are still very important and to be able to take full advantage of the Preferencial Procurement Act and the new BEE codes requires providing its customers with the best. In other words – being empowered is not enough – while there are incentives for business to provide this support, poor service, product or quality may be enough for the buyer to forgo the benefits.
The key to the being considered for, and gaining, these contracts is in the SMEs understanding how to position themselves to their customers. Being able to explain the codes and the benefits their customer will receive over and above the procurement of the goods/services they are looking for may mean the difference between a once-off sale and being awarded a contract (full points for contracts of 3 years).
Understanding how to apply the codes to everyone’s benefit can sometimes be a challenge. If you are an empowered company, speak to a professional about how to unpack Supplier & Enterprise Development (SED) and start to take advantage of preferential procurement.