Abstract
This chapter discusses the impact of discretion given to the function of accounting in public procurement performance. A measure of discretion, or the ability to deviate from formal procurement rules in specific circumstances, is often seen as valuable in bureaucratic transformation key to reinventing government. The point here is to make civil servants key partners in the making of a robust public sector by promoting decisional mechanisms that are not just rule-bound but also amendable to situational variables and common sense.
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Notes
- 1.
The approach has been described as intellectual drift in academic law, characterized by a movement away from an exclusively black letter culture to a pluralistic one. See Cownie, Fiona. “Inhabiting the Discipline of Law” in Legal Academics, edited by Fiona Cownie, 72. Hart, 2004.
- 2.
Bolton, Phoebe. The Law of Government Procurement in South Africa. LexisNexis Butterworths, 2007.
- 3.
Bolton, Phoebe. “Grounds for Dispensing with Public Tender Procedures in Government Contracting.” Potchefstroom Electronic Law Journal 9 no. 2 (2006): 1–39.
- 4.
Quinot, Geo and Arrowsmith, Sue. Public Procurement Regulation in Africa. Cambridge: Cambridge University Press, 2013.
- 5.
Quinot and Arrowsmith (n. 4 above), xiii.
- 6.
The text states:
217. Procurement.-(1) When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.
- 7.
Ministry of Finance and Public Works: Green Paper on Public Sector Procurement Reform in South Africa, GG No. 17928 of 14 April 1997.
- 8.
Ibid.
- 9.
Bolton, Phoebe. “Grounds for Dispensing with Public Tender Procedures in Government Contracting.” Potchefstroom Electronic Law Journal 9 no. 2 (2006): 1–39.
- 10.
Bolton (n. 4 above) 15/197.
- 11.
Bolton (n. 4 above) 13/197.
- 12.
The Cabinet adopted a policy document on 10 September 2003, titled “Policy To Guide Uniformity in Procurement Reform Processes in Government.” The document is intended as a guide for the implementation of various procurement reform initiatives, including the establishment of a framework for supply chain management. An overview of the document is http://www.treasury.gov.za/legislation/pfma/supplychain/Policy%20to%20Guide%20Uniformity%20in%20Procurement%20Reform%20Processes%20in%20Government.pdf (1 March 2013).
- 13.
GNR.225 was published on 15 March 2005 as Amendment of the Treasury Regulations in terms of Section 76 (of the Public Finance Management Act No. 1 of 1999).
- 14.
Why this should be the case is not entirely clear. The relevant legislative provisions were published within a few months of each other, but in terms of different Acts.
- 15.
Compare with sub-regulation 16A.6 of the Treasury Regulations published as GNR.225 of 15 March 2005.
- 16.
See regulations 20, 21, 22, 25 and 26 of the Municipal Supply Chain Management Regulations.
- 17.
The remaining circumstances have not been mentioned because they are very specific and not often encountered, namely the acquisition of special works of art or historical objects, and the acquisition of animals for zoos. Such instances of procurement are clearly examples of the exception rather than the norm for municipalities and municipal entities.
- 18.
Supply Chain Management: A Guide for Accounting Officers/Authorities, http://www.treasury.gov.za/legislation/pfma/guidelines/Accounting%20Officers%20Guide%20to%20the%20PFMA.pdf (1 March 2013).
- 19.
Issued by the Chief Director: Norms and Standards, National Treasury on 10 May 2005.
- 20.
About $18000 US dollars.
- 21.
Supply Chain Management: A Guide for Accounting Officers of Municipalities and Municipal Entities, http://mfma.treasury.gov.za/MFMA/Guidelines/Guide%20for%20Municipal%20Accounting%20Officers_1.pdf (1 March 2013).
- 22.
See the description of sub-paragraphs 4.7.7 and 4.7.8 above.
- 23.
Issued on 18 April 2007 by the Accountant-General.
- 24.
Sub-paragraph 2.4 states:
Despite Treasury Regulation 16A.6.4 being intended for cases of emergency or where goods and services are available from sole service providers, it has come to light that institutions are deliberately utilizing this provision to circumvent the required competitive bidding process in order to, among others, enter into contractual commitments or incur expenditure at the end of a financial year with the view to avoiding the surrender of unspent voted funds to the National / Provincial Revenue Funds.
- 25.
See sub-paragraph 2.5.
- 26.
See sub-paragraphs 3.1 to 3.4.
- 27.
Issued on 29 November 2007 by the Accountant-General.
- 28.
See paragraph 7.
- 29.
There is no mention of guidelines in the PFMA. In terms of sub-section 76 (4), the National Treasury “may make regulations or issue instructions.” The position is different in the MFMA. For municipalities and municipal entities, sub-section 168 (1) of the MFMA states that the Minister of Finance “may make regulations or guidelines.” However, sub-section 168 (3) states that guidelines are not binding unless adopted by the council of a municipality or the council of a parent municipality in relation to a municipal entity.
- 30.
Sub-section 76 (4) of the PFMA states that:
(4) The National Treasury may make regulations or issue instructions applicable to all institutions to which this Act applies concerning
(a)–(b) …
(c) the determination of a framework for an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost-effective;
(d)–(g) …
- 31.
This is known colloquially as the SASSA case. The Supreme Court of Appeal was required to decide whether a decision taken by the South African Social Security Agency, “SASSA”, to appoint the South African Post Office Ltd (“SAPO”) for the provision of basic banking services to facilitate the payment of social grants to eligible members of the public, was lawful. In doing so, SASSA had not followed a competitive process.
- 32.
At paragraphs 21 and 28.
- 33.
Bolton (n. 4 above).
- 34.
In this regard, the supply chain management policy for the City of Cape Town is an exception to the norm. It discusses, in detail, what constitutes emergency dispensation (at paragraphs 289–293). Unfortunately, it does not deal as comprehensively with the acquisition of services from a single provider or circumstances where it is impractical or impossible to follow official procurement processes. http://www.capetown.gov.za/en/SupplyChainManagement/Documents/SCM_Policy_Approved_on_08Dec2011.pdf (1 March 2013).
- 35.
United Nations Commission on International Trade Law.
- 36.
The Model Law on Procurement of Goods, Construction and Services is a template that can be used for the regulation of procurement. The most recent version was adopted in 2011 and it has been successfully applied to many countries for purposes of procurement reform. http://www.uncitral.org/pdf/english/texts/procurem/ml-procurement-2011/ML_Public_Procurement_A_66_17_E.pdf (1 March 2013).
- 37.
Arrowsmith, Sue and S. Nicholas. “The UNCITRAL Model Law on Procurement: Past, Present and Future.” In Public Procurement Regulation in the 21st Century: Reform of the UNCITRAL Model Law on Procurement, edited by Sue Arrowsmith, 4–5. St. Paul: West, 2009.
- 38.
Arrowsmith, The Law of Public and Utilities Procurement (2005) 3.9.
- 39.
Ibid.
- 40.
Considering that direct negotiations or limited bidding is often carried out under very subjective circumstances of impracticality, urgency or emergency, the public entity starts the procurement process with an immediate handicap, thereby playing into the hands of a skillful supplier who is able to convert such handicap into a significant bargaining advantage.
- 41.
For example, a flawed interpretation may underpin a higher authority’s monitoring and enforcement of a system of rules relating to the non-use of tendering, possibly resulting in the unlawful granting or refusal of approval.
- 42.
Arrowsmith (n. 33 above).
- 43.
Trepte, Peter. “Transparency and Accountability as Tools for Promoting Integrity and Preventing Corruption in Public Procurement.” OECD Journal 34 no. 10 ( 2005): 1–38.
- 44.
Trepte (n. 38 above), 7.
- 45.
Ibid.
- 46.
Ibid.
- 47.
Ibid.
- 48.
Kelman, Steve. Procurement and Public Management: The Fear of Discretion and the Quality of Government Performance. Washington D.C.: The American Enterprise Institute, 1990. Also see Mashaw, Jerry. “The Fear of Discretion in Government Procurement.” The Yale Journal on Regulation 8 (1991): 511–519.
- 49.
Kelman (n. 43 above), 90.
- 50.
Arrowsmith and Nicholas (n. 32 above), 8.
- 51.
Ibid.
- 52.
See Directive 2004/18/EC of the European Parliament and of the Council, 31 March 2004, on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts, at Article 28.
- 53.
The focus of the analysis is restricted to the circumstances under which, from the author’s professional experience, the discretion of a procurement officer is especially vulnerable to misuse or abuse, namely impracticality, emergency or single-source procurement. Bolton mentioned these in her 2006 article. See n. 4 above. There are several other types of procurement methods available for situations where tendering would not be appropriate. However, it is not the author’s intention to include these within the scope of this chapter.
- 54.
Draft Guide to Enactment of UNCITRAL Model Law on Procurement of Goods, Construction and Services. http://www.uncitral.org/pdf/english/texts/procurem/construction/Final-MU-CONSOLIDATED-Guide-post-WG-session-may-2012.pdf (1 March 2013).
- 55.
At 175.
- 56.
At 177.
- 57.
Arrowsmith and Nicholas (n. 32 above), 6.
- 58.
Ibid.
- 59.
For a thorough analysis of the law governing public procurement in several African systems, see Quinot, Geo and Sue Arrowsmith, eds. Public Procurement Regulation in Africa. Cambridge: Cambridge University Press, 2013.
- 60.
Examples of reform based on the Model Law are the public procurement systems of Ghana, Kenya and Nigeria. http://www.ppda.go.ug/index.php/acts-a-regulations.html (24 June 2013), http://www.ppoa.go.ke/index.php?option=com_content&view=category&id=50&Itemid=132 (24 June 2013) and http://www.bpp.gov.ng/index.php?option=com_joomdoc&view=documents&path=Public_Procurement_Act_2007.pdf&Itemid=614 (24 June 2013).
- 61.
Quinot and Arrowsmith (n 54 above) 195.
- 62.
The members of the WTO previously regarded public procurement as an area that required regulation for purposes of protecting and promoting the principles of free trade. Consequently, the GPA was developed during the Uruguay Round of trade talks in the mid-1990s. It was drafted to bring public procurement within the ambit of the principles of non-discrimination, both in relation to the need for a member’s equal treatment of different foreign suppliers (the most favored nation principle) and in relation to a member’s equal treatment of a foreign and a domestic supplier, respectively (the national treatment principle). The GPA is a plurilateral agreement, meaning that it is binding on only those members of the WTO who have acceded to it. http://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm (1 March 2013).
- 63.
The text of the GPA has been revised. However, the original text remains operative among members, unless stated to the contrary in terms of any bilateral agreement. The adoption of the revised text is often a prerequisite for accession by new members. The revised text deals with limited tendering in terms of Article XIII.
- 64.
See Article I.
- 65.
The complicated and unwieldy implementation of the GPA can be attributed, in a large measure, to the structure of the agreement. The GPA contains several annexures that describe the extent to which a member’s procuring entities at state, regional and local levels are regulated. This will differ according to the nature of such member’s various bilateral relations. For example, country A will bring all procuring entities at a national level within the scope of the GPA for purposes of its trade relations with country B, but will not do the same for country C because country C refuses to grant procurement access to procuring entities at a regional level. This illustrates, very crudely, the principle of reciprocity that operates in the implementation of the GPA, contributing to its complicated and unwieldy nature.
- 66.
The GPA is not an appropriate model if only because it was developed within a completely different context, that is, the promotion of global free trade, as opposed to the regulation of public procurement for a particular country.
- 67.
Arrowsmith Introduction to Public Procurement Regulation: Basic Principles and Concepts (2010/2011), Book 2, Postgraduate Program in Public Procurement Law and Policy (Executive Program), M34140, University of Nottingham, cited as Reading 2/D.
- 68.
Ibid.
- 69.
Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts [2004] OJ L134/114.
- 70.
Cited in Arrowsmith, Sue, John Linarelli and Don Wallace, Jr., eds. Regulating Public Procurement: National and International Perspectives. The Hague: Kluwer Law International, 2000.
- 71.
See Case C-318/94 Commission v Germany [1996] ECR I-1949, Case C-337/98 Commission of the European Communities v French Republic [2000] ECR I-8377 and Case C-385/02 Commission of the European Communities v Italy ECJ [2004] ECR I-8121.
- 72.
The accelerated version permits a bid to be finalized within 20 days. See Case C-24/91 Commission of the European Communities v Kingdom of Spain [1992] ECR I-1989.
- 73.
Case C-318/94 (n. 66 above).
- 74.
Arrowsmith (n. 62 above) at 17.
- 75.
See section 2 of the Constitution of the Republic of South Africa Act No. 108 of 1996.
- 76.
Bolton (n. 4 above).
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Laing, J. (2016). Deviations and (In)discretions in the Governance of South African Public Entities. In: Nyeck, S. (eds) Public Procurement Reform and Governance in Africa. Contemporary African Political Economy. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-52137-8_6
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