SCM Regulations Chapter 16A: A Practical Guide — PFMA

Chapter 16A of the National Treasury Regulations is the operational backbone of government procurement in South Africa. Issued under Section 76 of the Public Finance Management Act, it translates the broad principles of the Act into specific, actionable rules for every organ of state covered by the PFMA.

For government suppliers, understanding Chapter 16A means understanding how decisions are made about your bid — and why certain rules exist that can affect your submission.

The SCM Framework Overview

Treasury Regulation 16A3 establishes the supply chain management system as covering five distinct phases:

1. Demand Management (16A4)

Before any procurement happens, government entities must plan what they need. Demand management involves:

Assessing current and future needs
Identifying what must be bought versus what can be done internally
Planning the timing and volume of acquisitions
Developing specifications and terms of reference

Why this matters for suppliers: Poor demand management leads to vague specifications, rushed procurement, and contracts that are hard to price accurately. A good accounting officer invests in demand management — and better specifications make for better bids.

2. Acquisition Management (16A5–16A9)

This covers the actual procurement process — how government buys. This is the section with the most practical impact on bidders.

16A5: Acquisition Management Policy Accounting officers must have a documented acquisition management policy that determines:

Which procurement method applies to which value or type of purchase
How specifications are developed
How bids are solicited and evaluated
How contracts are awarded

16A6: Competitive Bidding The formal tender process applies to:

All transactions above R500,000 (current threshold, subject to Treasury instruction)
Transactions of lower value that are deemed to require formal tendering based on risk
Multi-year contracts regardless of annual value if total value exceeds the threshold

Requirements for a valid competitive bid process include:

Advertising the bid for a minimum period (typically 21 days for formal tenders, though critical infrastructure and specialist bids may require 30+ days)
Providing complete, non-discriminatory specifications
Receiving bids at a public bid-opening session
Evaluating bids in a structured, documented manner

16A6.3: Quotation Processes For transactions between R30,000 and R500,000 (below formal tender threshold):

A minimum of three written quotations must be obtained from prospective suppliers
Suppliers must be rotated — the same three suppliers cannot be used repeatedly
Quotations must be documented and filed

16A6.4: Emergency Procurement Deviations from competitive bidding are allowed for genuine emergencies where:

Lives, property, or the environment are at risk
There is insufficient time to conduct a competitive process
The emergency was not reasonably foreseeable

Emergency procurement must be:

Approved by the accounting officer
Awarded competitively if at all possible (even emergency situations may allow for phone quotations)
Reported to the Auditor-General within 10 working days

Abuse of emergency procurement is a significant source of irregular expenditure findings in SA government.

3. Logistics Management (16A10)

Once goods or services are procured, logistics management covers:

Receipt of goods against purchase orders and contracts
Inspection and quality verification
Payment certification processes
Storage and distribution of inventory
Management of government stores and warehouses

Payment timeline: Treasury Regulation 16A10 implicitly supports the 30-day payment obligation for suppliers, which is also reinforced by the National Treasury’s Prompt Payment Regulations. Once goods are certified as received and invoiced correctly, payment should occur within 30 days.

4. Disposal Management (16A11)

Covers the lawful disposal of government assets that are surplus, redundant, or unserviceable. Government entities cannot simply sell or give away state assets without following a defined disposal process, which typically involves:

Declaring the asset surplus through the proper authority
Advertising the disposal to interested parties
Conducting a transparent disposal process (auction, tender, or transfer to another organ of state)

5. Risk Management (16A12)

SCM risk management requires organs of state to:

Identify risks in their procurement processes
Monitor supplier performance and delivery
Identify potential conflict of interest situations
Manage the risk of procurement fraud

Evaluation Criteria Under Chapter 16A

Treasury Regulation 16A6.1 requires that bid evaluation criteria be:

Objective and measurable — criteria that cannot be assessed objectively are not permissible
Disclosed in advance — all criteria, including their relative weightings, must be in the bid documents
Consistently applied — the same criteria must be applied to all bids

The Evaluation Committee Structure

Under Chapter 16A, evaluation of formal tenders is performed by a bid evaluation committee (BEC) composed of subject matter experts and an SCM official. The BEC makes a recommendation but does not have authority to award.

The bid adjudication committee (BAC) considers the BEC recommendation and makes the final award decision. The BAC must include a senior official (typically Deputy Director-General or equivalent).

The accounting officer formally awards the contract based on the BAC recommendation.

Two-Stage Evaluation

Most government tender evaluations follow a two-stage process:

Stage 1: Administrative/Functional Compliance

Is the bidder registered on the CSD?
Are all required SBD forms complete?
Does the bidder meet pre-qualification criteria?
Is the tax clearance valid?
Is the B-BBEE certificate/affidavit valid?

Bids that fail Stage 1 are declared non-responsive and removed from evaluation. No matter how good your price or technical offer, a non-responsive bid is disqualified.

Stage 2: Price and Preference Evaluation Compliant bids are scored using the PPPFA preference point system (80/20 or 90/10 depending on contract value).

Some larger or more complex tenders include a third stage — technical evaluation — where proposals are scored against functional requirements before price/preference scoring.

Mandatory Conditions of Contract (16A9)

Government contracts must include certain mandatory provisions required by Treasury Regulations:

Anti-corruption clause: The contractor warrants that no corrupt, fraudulent, collusive, or coercive conduct was engaged in during the bid process and will not occur during contract execution.

Sub-contracting disclosure: Where the contractor intends to sub-contract, this must be disclosed and approved.

Contract performance reporting: The contractor may be required to submit performance reports to facilitate SCM performance monitoring.

Audit access: Government and the Auditor-General retain the right to audit the contractor’s records relating to the contract.

Deviation and Expanded Procurement Reports

Under Treasury Regulation 16A6.6, accounting officers must submit quarterly reports to the relevant Treasury detailing:

All deviations from competitive bidding approved during the quarter
All instances of unsolicited bids considered
All extensions to existing contracts

These reports are scrutinised by Treasury and the AGSA. Excessive or unexplained deviations raise audit risk flags.

Single Quotation Below Threshold

For urgent or low-value procurement (below R30,000), a single quotation may be obtained. This is commonly called petty cash procurement or imprest fund procurement and is governed by each entity’s internal petty cash policy.

The risk: this low-value threshold is frequently abused through quote splitting — artificially dividing a single requirement into multiple small purchases to avoid the competitive process. Quote splitting constitutes irregular expenditure and is specifically identified in audit findings as a recurring problem.

For specific SCM compliance questions, ask the Tenderpreneurs PFMA Assistant for instant answers with regulatory citations.