The aim of the Preferential Procurement scorecard is to encourage the usage of black owned professional services and entrepreneurs as suppliers while inherently encouraging measured entities to empower themselves on the broad-based principles of BBBEE. Some of the key aspects found in the preferential procurement element are:
- Key measurement principles,
- Black owned professional service providers and entrepreneurs,
- Total Measured Procurement Spend (TMPS),
- Exclusions from TMPS,
- Measurement of the BBBEE procurement expenditure, and
- the calculation of preferential procurement contributions to BBBEE.
The Preferential Procurement scorecard allocates points for three key areas namely:
- BEE Procurement from all suppliers
- BEE Procurement from Qualifying Small Enterprise or from Exempted Micro-Enterprises
- BEE Procurement as a percentage of Total Measured Procurement Spend from:
- Suppliers that are more than 50% black owned, and
- Suppliers that are more than 30% black women owned.
The measured entity can achieve enhanced recognition for the procurement spend attributable to a supplier if it can show that either or both the following;
- that the supplier it procures from is a Value-Adding Supplier ( a value-adding supplier is defined by, NPBT + total labour cost > 25% of total revenue); and/or
- the supplier it procures from is an enterprise development beneficiary.
The spend attributable to these suppliers are multiplied by factors of 1.25 and 1.2 respectively.
Total Measured Procurement Spend (TMPS)
Targets of the Preferential Procurement scorecard are based on Total Measured Procurement Spend.
The TMPS includes:
- Cost of sales
- Capital expenditure
- Operational expenditure
- Public sector procurement
- Monopolistic Procurement
- Empowerment related expenditure
- Labour brokers and independent contractors
- Pension and medical aid contributions (excluding the capital investment portion of the employee)
- Intra-group procurement
- Trade commissions
The TMPS excludes:
- Salaries, wages and director emoluments
- Pass-through third party procurement
- Public Sector procurement (Procurement from organs of the state and public entities listed in Schedule 1 of the PFMA of 1999)Qualifying Imports include
- Imported capital goods or components for value added production in South Africa provided that:
- There is no existing local production of such capital goods or components; and
- Importing such capital goods or components promotes further production within South Africa
- Imported goods and services (other than capital goods and components) if there is no local production of such goods or services that:
- carry a different brand to the locally produced goods or services; or
- have a different technical specifications to the locally produced goods and services.
- Investments in or loans to an associated enterprise
- Enterprise development and Socio-economic development contributions.
The Preferential Procurement scorecard for Qualifying Small Enterprises allocates points for BEE procurement from all suppliers based on the BEE procurement recognition levels as a percentage of the Total measured procurement spend.