TMPS Simpified

TMPS simplified

A.       Basic Definition

Total Measured Procurement Spend (TMPS) is a measure of all expenses incurred by an entity throughout their measurement period, with certain expenses being excluded due to the nature of those expenses. This figure is used to calculate an entity’s procurement scorecard, by measuring B-BBEE spend as a fraction of ‘total spend’ or TMPS.

B.       Basic explanation

A verification agency will calculate the TMPS of an entity from their financial statements, in the following way:

1)        Adding up all the entity’s expenditure on goods and services for the measurement period by summing:

1. Cost of Sales;
2. Operational Expenditure; and
3. Capital Expenditure. They will then:

2)        Subtract certain exclusions which represent spend on goods and services for which no B-BBEE certificate is available, or for which they have no choice of services provider. The main exclusions looked at by a Verification Agency are:

1. Salaries and wages paid to employees;
2. Tax related expenditure such as VAT, and rates and taxes paid to a municipality;
3. Imports for which there are no local equivalents.

Treatment of TMPS in our systems
Within the BEEtoolkit, TMPS will always need to be inserted by the user. Within the Supplier Management System however, TMPS can either be inserted by the user, or it can be approximated by the system by selecting ‘sum from the spreadsheet’. In this case, the system will add all the spend items loaded by the user, and use this figure as the TMPS. Please note however, that this is not an accurate TMPS figure, as it is not taken from the entity’s financials, and as such may not include all expense items. Generally, using the approximated TMPS will result in a higher score than the entity will achieve at verification, and should only be used when an accurate calculation from the financials is not practical.

TMPS in Detail (as per the 2007 B-BBEE Codes of Good Practice)

A.       Technical Definition

Total Measured Procurement Spend (TMPS) can be defined as “all goods and services procured by the measured entity (i.e. entity being verified), other than any portion specifically excluded.”

B.       Technical explanation

A Verification Agency will calculate the TMPS of an entity from their financial statements in the following way:

1)        Add up all the expenditure on goods and services for the measurement period which includes the following:

1. Cost of sales;
2. Operational expenditure;
3. Capital Expenditure;
4. Public sector procurement procured from organs of state and public entities listed in Schedule 2 and 3 to the Public Management Act of 1998;
5. Monopolistic procurement from suppliers in a monopolistic position;
6. Third-party procurement where the cost of that procurement is an expense recorded in the measured entity’s annual financial statements;
7. Labour brokers and independent contractors, i.e. outsourced labour expenditure;
8. Pension and medical aid contributions for the measured entity’s employees, excluding any capital investment portion;
9. Trade commission;
10. Empowerment related expenditure, i.e. expenditure incurred in facilitating Enterprise Development and Socio-Economic Development contributions;
11. Imports from a non-South African source
12. Intra-group procurement

And then

2)        Subtract the following exclusions from this amount:

1. Taxation or any amount payable to any person which represents a lawful tax or levy imposed by an organ of state authorised to impose such tax or levy, including rates imposed by a municipality or other local government;
2. Public sector procurement from organs of state and public entities listed in Schedule 1 to the Public Management Act of 1998.  Despite this, procurement from a local government authority, which is a reseller of that service, is measurable at the B-BBEE recognition level of the primary supplier of such goods or services; 
3. Procurement from any organ of state or public entity which enjoys a statutory or regulated monopoly in the supply of such goods or services;
4. Salaries, wages, remunerations and emoluments payable to an employee or director as an element of their salary or wage;
5. Pass-through third-party procurement where the cost of that procurement is an expense recorded in the third-party’s annual financial statements and is not recorded in the measured entity’s annual financial  statements;
6. Empowerment related procurement, i.e. investments in or loans to an Associated Enterprise or investments, loans or donations qualifying for recognition under Enterprise Development or Socio-Economic Development;
7. Imports, if they meet the following criteria:

• i. Imported capital goods or components for value-added production in South Africa for which:

• There is no existing local production of such capital goods or components; and
• Importing those capital goods or components promotes further value-added production within South Africa;

• ii. Imported goods and services other than those listed in (i.) above if there is no local production of those goods or services including, but not limited to, imported goods or services that:

• Carry a brand different to the locally produces goods or services; or

• Have different technical specifications to the locally produced goods or services.