Preferential Procurement TemplateÂ

A model preferential procurement policy should contain the following elements: Introduction Definitions Policy Procedure Responsibility Policy Review Each one of these sections will be explained individually. The explanation will be followed by a model example using Dream Holidays as the name of the fictitious company for whom the policy applies. 1) Introduction The introduction defines why the policy is necessary and what the company hopes to achieve through the use of the policy. To steer the economy towards a stable environment that nurtures growth and increases the country's economic competitiveness. To foster a synergistic relationship between private and public sector to embrace social investment as a common vision. To develop a wider economic base and maintain profitable business standards. To broaden the tax base. To enlarge the supplier base to reflect the dynamics of the consumer/customer base. To indirectly create jobs and raise the standard of living. To assist with the transfer of skills and technology to previously disadvantaged individuals. To foster an entrepreneurship culture amongst previously disadvantaged groups. To create a climate where diversity is valued and regarded as strength. Dream Holidays BEE procurement policy is a pro-active, preferential procurement initiative to ensure constructive participation by South African black people at all levels of business in the South African economy. It is crucial that, in business practices, external suppliers are engaged and every effort is made to hire a supplier that has strong BEE credentials or is making a concerted and tangible attempt to transform their business in order to be BEE compliant. Dream Holidays will be lead by the guidelines for procurement as outlined in the Tourism Charter. In doing so, the company uses its purchase power to contribute to social and economic change in the country. Back to Top 2) Definitions Definitions should clearly and unambiguously define terms and abbreviations that are used in the document. Additionally, this section will include how the company rates the BEE contribution of supplier companies. Dream Holidays is guided by the Tourism Charter and Scorecard definitions of black companies. At all times the company must be vigilant of fronts when money is "washed" through a black front company. Types of BEE Contributors Excellent BEE Contributor: Total score of 90% and above Good BEE Contributor: Total score of 65% to 89% Satisfactory BEE Contributor: Total score of 40 to 64% Limited BEE Contributor: Total score of less that 40% The Tourism Charter Indicates that spending is graded dependent on existing BEE contribution. Therefore, traditional companies that are in the process of transformation can still be credited. Type of Company Amount Acknowledged Excellent BEE Contributors, Good BEE Contributors, BEE Compliant SMMEs and Black Women Owned Contributors R1 for every R1 spent Satisfactory BEE Contributors 50c for every R1 spent BEE: Black Economic Empowerment BEE Compliant SMME: is a small, medium or micro enterprise (turnover up to R10m/annum) which is an Excellent or a Good BEE Contributor Black Empowered SMME: means a small, medium or micro enterprise (with a turnover of up to R10 million per annum) which has between 25 percent and 50 percent direct ownership and management by black people. Black Owned SMME: means a small, medium or micro enterprise (with a turnover of up to R10 million per annum) which has more than 50 percent direct ownership and management by black people. Black people: refer to African, Indian and Coloured South African citizens. Black Women Owned BEE Contributor: is a company which is more than 30% owned by black women and is an Excellent, Good or Satisfactory Contributor to BEE. BSMME: Black Small Medium and Micro Enterprise Fronting: refers to tokenism which would be the superficial inclusion of historically disadvantaged individuals. Indicators: represent the key measurement yardsticks included to determine the BEE contribution made by tourism enterprises within each broad-based BEE factor of Ownership, Strategic Representation, Employment Equity, Skills Development, Preferential Procurement, Enterprise Development, Social Development and Industry Specific. PDI: Previously Disadvantaged Individuals Targets: represent the ideal scenario at which the tourism enterprise will score full points for the respective indicator. Tourism enterprises under measurement may score proportional points on each indicator, according to the proportion of the relevant target achieved for that particular indicator. Two targets were set for each indicator, namely: a 2009 milestone to be used during the first five years of implementation, ending on 31 December 2009 and a 2014 target, ending on 31 December 2014. The 2009 targets should be used by all companies measuring the BEE status of a tourism enterprise until 31 December 2009. The overall BEE targets for 2014 should be used when one measures the BEE status of a tourism enterprise in the five-year period between 1 January 2010 and 31 December 2014. Weightings of each factor: reflect the relative importance that the Sector places thereon. The seven core factors of BEE are weighted to bring the Scorecard to a maximum of 100 percent. Back to Top 3) Policy The Policy should clearly and unambiguously outline what the exact procurement policy of the company is. Additionally, the policy will outline motivation for and merits of adopting it. Dream Holidays has developed a pro-active, preferential procurement policy and set procurement guidelines that will contribute towards overall economic growth and transformation of the country, by ensuring the constructive participation by South African black people at all levels of business in the South African economy. The company is committed to establishing relationships with their suppliers that will contribute to the commercial, strategic and empowerment objectives of both the company and its suppliers. Dream Holidays strives to implement best procurement practice but also continually seeking ways to reduce the total cost without compromising quality or service. However, this programme is commercially orientated and as such must be differentiated from the Dream Holidays' BEE strategy that has a social upliftment orientation. The primary task of the procurement function in Dream Holidays is to find reliable, cost effective suppliers for the business. The procurement guidelines are thus broadly: Preference will be given to black and black women owned and managed businesses with regard to new suppliers. Encourage, using the company's strategic power as a customer to drive empowerment, transformation and development with regard to existing suppliers. Actively monitor expenditure (both before and after) to achieve the set out transformation goals. Pay specific attention to BEE Compliant SMMEs and Black Women Owned BEE Contributor SMMEs so as to assist the development of new black businesses. Mobilise and build support for Black Economic Empowerment amongst all Dream Holidays suppliers. Identify and approve BEE suppliers for different goods and services. Establish a baseline for purchasing from BEE suppliers, set annual target for purchasing from BEE suppliers and measure progress against it. Implement procurement initiatives aimed at promoting preferential procurement within Dream Holidays. Provide access for BEE suppliers to Dream Holidays business. The Dream Holidays preferential procurement policy will encompass SMME black suppliers and large black owned, empowered or influenced suppliers with sophisticated financial, technical and managerial capacity. The policy shall apply to all levels and types of contracts. Back to Top 4) Procedures Procedures will outline the method that the company will implement in order for it to realise the aims as outlined in the policy. The following are the requirements for managers with regards to spend Target Black Companies Know the supplier and their BEE status Suppliers must produce independently verified rating certificates If the supplier is not rated, request that the supplier rates themselves or, while waiting for suppliers to do so, use the online tourism scorecard as provided in the Tourism Toolkit to get an indication of the BEE status of a supplier. If the entity is too small to require a rating, request ownership information. The SMME is considered a BEE supplier when: o They have 21% Black Ownership (2009 scorecard target) or 30% Black Ownership (2014 scorecard target). o Their turnover is less than R5 million per annum Encourage the transformation of existing suppliers o Send a letter to traditional suppliers informing them of our policy and procedure and encourage them to be rated. A copy of a mock letter has been attached All staff responsible for using a supplier must provide the finance team with the BEE rating of the supplier when signing off the payment Constant vigilance: monitor suppliers and be aware of any changes as well as the development of better competitors Always consider if it is possible to use a Black SMME Would-be suppliers who meet the above criteria will be considered on a competitive basis. Dream Holidays believes in the broad-based scorecard as contained in the Tourism Charter. To smooth the progress of this process, suppliers are encouraged to be independently rated. Alternatively, it is a requirement of the company that would-be suppliers provide broad-based information to so that Dream Holidays can conduct an online assessment using the Tourism Toolkit. Dream Holidays uses seven generic criteria for evaluating and awarding contracts. These criteria are: commercial, administrative performance, delivery and cycle time, responsiveness, quality, safety and environment, technology and business management. In evaluating business management, aspects that will be considered are the following, but not limited to: Black ownership and management The involvement and participation of black women, in the running of the business both at ownership and management control level. Compliance with the government's skills development requirements and transformation in staff profiles. The extent to which the supplier has been or is involved in community upliftment, such as worker and community investment and/or self-management schemes. Project specific sub-contracting is the percentage of the contract that may be sub-contracted to black people is evaluated. Affirmative procurement is the total value spent by the supplier on procuring products from black suppliers. Joint ventures with black suppliers. Dream Holidays has formulated various ways to support BEE suppliers: Facilitate access to its procurement activities to enable black suppliers to participate in the mainstream of the economy. Promote an open, fair and transparent process when awarding contracts using cross business teams where appropriate that encourages new supplier entrants. Review requirements of the evaluating and awarding of contracts process and ensure it is based on functional requirements. Conduct evaluating and awarding of contracts information sessions clarifying Dream Holidays procedures and requirements prior to issuing the request in a product category. Hold post award debriefing meeting with unsuccessful suppliers to enhance future success. Dream Holidays may offer the following developmental assistance to BEE suppliers: Designated spend: Where appropriate set asides or designated spend areas may be set in part or in whole for the exclusive participation of BEE suppliers. Payments cycles: On request a short payment cycle may be implemented. Skills and technology transfer: On request training may be provided. Afterwards, Dream Holidays may conduct a competency assessment to certify the supplier's competency. Supply and purchasing support: Assistance may be give to secure goods and services where labour only contracts are undertaken. Additional help may be provided to the suppliers' procurement function when requested. Each BEE suppliers' performance will be reviewed during the contract. The developmental assistance set out above will be for an agreed period, after which the BEE supplier should be capable of doing business with minimum assistance. Dream Holidays aims to mobilise and build support for a broad understanding of BEE amongst all its suppliers by: Providing incentives to traditional suppliers who implement BEE by proactively using BEE support as criteria for evaluating suppliers. Encourage joint ventures between traditional suppliers and black suppliers. Purchasing processes will facilitate BEE awareness and support. The BEE accreditation process will be established by the supplier submitting a completed and signed Dream Holidays supplier application to apply for supplier approval. The supplier shall submit proof of meeting the Dream Holidays preferential procurement policy criteria or proof of accredited listing as a BEE supplier with a credible forum or company. Areas that will receive specific attention during the BEE status evaluation are: black ownership and management, employment equity, purchases from black suppliers, black female management, employment of the disabled, joint ventures with black suppliers and other BEE initiatives. Accreditation shall mean that Dream Holidays is satisfied that the set qualification criteria as a BEE supplier have been met or that the supplier is already an approved BEE supplier with another credible company. Furthermore, the supplier has the potential and capacity to satisfy Dream Holidays' business requirements. Accreditation granted shall be valid for a period of three years on condition that there is no substantial change in ownership or information submitted in application. Such changes must be reported to Dream Holidays and submitted in writing within seven working days. To remain accredited a BEE supplier will have to submit a new affidavit with required documentation at least two months prior to the expiry of its current accreditation. The following reasons that are not conclusive may warrant de-accreditation: Entity has changed to the extent that it no longer qualifies to be a BEE supplier as defined by the preferential procurement policy. Failure to submit re-certification affidavit within two months of expiry date of certificate. BEE supplier ceases to operate as a business. Any other reason determined by Dream Holidays in its sole discretion. The misrepresentation of information on BEE by suppliers, may lead to disqualification from supplying Dream Holidays from existing contracts or from future procurement processes. Preferential Procurement is weighted at 15 percent during the five-year period ending 31 December 2009, and is increased to 18 percent during the second five years of implementation, ending 31 December 2014. The Tourism Scorecard establishes a target of 40 percent of all procurement by 2009 and 50 percent of all procurement by 2014. Calculating the Preferential Procurement Score of Dream Holidays: Preferential Procurement Information Procurement from BEE suppliers R 200 000 Total Procurement Spend R 1 000 000 Only procurement spend from BEE compliant suppliers counts towards preferential procurement spend. Before calculating raw scores to discover whether targets have been met or not, first calculate the actual percentages, as described by each indicator to measure BEE achievement: Sub-Indicator Calculations Spend on BEE Compliant Companies as % of Total Procurement Spend: = Procurement spend on BEE compliant companies/ Total Procurement Spend = R220 000/ R1.1m = 20% Target Preferential Procurement 40%   Calculating Preferential Procurement Preferential Procurement Spend Calculation Raw Score = % procurement spend on BEE compliant companies/ preferential procurement target 2009 = 20%/ 40% = 50% Target has not been met in full. BEE Score = raw score X indicator weighting = 50% X 15% = 10%   There is no need to calculate the overall BEE score for Preferential Procurement, since there are no sub-indicators. Dream Holidays simply scored 7.5% for Preferential Procurement out of a possible maximum score of 15%, since they did not reach the Preferential Procurement target in full. Back to Top 5) Responsibility Responsibility outlines the person who is responsible for ensuring that policies are abided by. It is the responsibility of departmental heads and the document owner to ensure that the Purchasing Policy and Procedure is adhered to and all employees are fully briefed and acquainted with the procedure. Back to Top 6) Policy Review The section outlines if and when a reassessment of the policy will take place. This policy will be reviewed as and when business dictates such a review. Procurement Letter to Call for a Supplier Rating   Back to Top