Direct contracting would be a departure from the preferred open tendering process, which can be justified in an emergency where there is a single supplier of goods or services (“single source”), or if it is not feasible or cost-effective to go through a tendering process. The pppfa regulations provide for a three-step procedure, in which bids are initially verified to verify formal compliance with the specifications and tender conditions set out in the tender documents. As soon as it appears that the offer is acceptable, it will be evaluated on the basis of “functionality” (if the offer objectively meets the technical specifications). If an offer performs the minimum functionality, it is evaluated on the basis of price and preference according to the preferred point-of-purchase system, and then according to all objective criteria. The MFMA regulates, among other things, how municipalities and other local sector institutions are to deal with their fiscal policy issues. The 2005 Municipal Supply Chain Management Regulations (2005), published as part of the MFMA, deal specifically with local public procurement. It should be noted that the rules for the allocation of governments are somewhat stronger than national and provincial procurement rules. As a result, there are generally more reasons why a local public procurement market might be “illegal” than is the case for national or provincial government procurement. 101 Also referred to as “individual source allocation,” “targeted markets,” “negotiated markets” or “special auction” (Arrowsmith et al Regulating Public Procurement). See also in general Turpin Public markets and contracts 144-146.
If a municipality does not expressly enter into a contract with another state agency for the provision of a municipal service contract and/or, in general, for goods or services, it appears that the municipality is bound by paragraph 217 and, therefore, by the application of tendering procedures, that a contract is finally concluded with a private party or other state body.50 The same applies in cases where a state body enters into contracts for goods or services in the area of the national or provincial government. This is particularly the case when commercial entities operating in government or functions participate in the contracting process. These institutions, as state bodies, are entitled to fair, fair, transparent, competitive and cost-effective procurement procedures51.51 There are no general minimum value thresholds for determining whether a contract is subject to public procurement rules. In addition, procurement rules generally do not impose the exact format of supply. However, there are value thresholds that determine the type of purchase process to use.