Blow to BBE fronting

Blow to BBE fronting – The Witness – 14 Jun 2011
Kavith Harrilall

THE revised Preferential Procurement Policy Framework Act, which was recently gazetted, represents a major advance for private sector companies that wish to do business with the government.

So says Keith Levenstein, CEO of broad-based black economic empowerment (B-BBEE) specialist EconoBEE, who told The Witness yesterday that the new framework takes objective criteria into consideration when evaluating the empowerment aspect of the tender-awarding process.

He described the Act as the most significant change made to the B-BBEE environment this year.

Levenstein said that in the past the assessment of the applicant’s empowerment status — which accounts for about 10% (or 10 points) of the overall tender score — was an arbitrary process based on an understanding of empowerment by the procurement officer, writer of a tender or the tender committee members.

This understanding of an applicant company’s empowerment status was often flawed.

Levenstein said the empowerment status is now based on the broad-based principles of the BEE codes of good practice.

He said this is a major blow to “tenderpreneurship” and BEE fronting.

“The good news about B-BBEE is that there is a certificate that is issued [based on the company’s score on the various codes]. What will happen now is that the company’s official B-BBEE scorecard or certificate will be used to allocate the remaining 10% of the tender score.”

Companies will no longer be able to rely purely on ownership, as the B-BBEE scorecard comprises various other codes, including preferential procurement, skills development and employment equity.

“We found that in the past, many black-owned companies did not bother to get rated by an accredited verification agency. In my opinion, every company that wants government business will have to get rated by an accredited verification agency,” Levenstein added.

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