Domestic preference (Section 29)

Public procurement involves a complex set of choices embracing what to buy, how to buy it and who to buy it from. The choice of who to buy it from, may embrace the argument of whether to buy from the national market (discriminatory procurement) or opening

GOVERNMENTS argue that if the economy is to grow and be able to improve the standard of living of its people, some resources should be spent within the economy rather than spending it on foreign sourced goods especially if those goods exist within the economy.

Deciding to buy from national markets will create a stimulus for a country’s socio-economic growth through injections.

Injections to the economy will stimulate the expansion of infant industries, foster growth of underdeveloped regions, create employment and improve the standard of living.

The Public Procurement and Disposal of Public Assets Act [Chapter 22:23] provides that when evaluating bids, a procuring entity may give preference to bids from Zimbabwean or local suppliers and manufacturers and shall:

(a) Take into account the extent to which Zimbabwean or local suppliers

and manufacturers must participate in such bid, or be subcontracted to supply the goods, construction works or services, in accordance with the provisions of the Indigenisation and Economic Empowerment Act [Chapter 14:33] (No. 14 of 2007);

(b) Take into account the extent to which suppliers and manufacturers who are women or entities controlled predominantly by women must participate in such a bid, or be subcontracted to supply the goods, construction works or services; and

(c) Procure technological, engineering and industrial designs, solutions or applications that are or maybe the subject of registration as intellectual property, and that originate from a Zimbabwean university, polytechnic, college or research institution: Any preference shall be : (i) Stated clearly in the bidding documents; and

(ii) Applied strictly in accordance with such procedures and criteria as may be prescribed or as maybe stated in circulars issued by the Authority.

Domestic preference may be applied to the procurement of (i) goods, (ii) works, and (iii) consulting services.

The main argument supporting the use of domestic preference is that businesses in lower-income countries are at a disadvantage when competing with foreign firms, given that there may be an asymmetry of information between local and foreign firms.

Foreign firms may have better access to technology, finance, and infrastructure to increase productivity and lower production costs. Among other things, foreign firms may benefit from economies of scale.

Thus, local firms in lower-income countries may need preference to be able to compete with foreign firms in terms of price and/or other protective measures.

Awarding contracts to local firms is deemed to give greater social and economic benefit to local communities, in the form of increased employment, incomes, and tax revenues, compared to contracts awarded to foreign firms that produce, employ staff, and pay taxes offshore.

By granting domestic preference, it is assumed that local benefits incurred by awarding a contract to a local firm outweigh the potential for higher financial costs to the executing agency compared to a situation where the contract was awarded to a foreign firm.

Section 8 of the PPDPA regulations stipulate that;

(1) Circulars issued by the Authority in regard to domestic preference referred to in section 29 of the Act shall clearly state—

(a) Eligibility for domestic preference, in terms of ownership, location of bidder or production facilities, origin of labour, raw material or components, extent of sub-contracting or association with domestic partners, or any other relevant factor;

(b) The documentation required to demonstrate eligibility for domestic preference;

(c) The percentage allowable for preference and the manner in which domestic preference will be applied during the evaluation.

(2) The percentage domestic preference allowable shall be:

(a) Up to 15 percent for the procurement of goods; and

(b) Up to 7,5 percent for the procurement of contractors’ services; as may be determined by the Authority in a circular:

Where a domestic preference is applied in any procurement proceedings, the procuring entity shall classify the responsive bids, for the purposes of comparison, into one of the following two groups during evaluation;

(a) Group A, that is to say bids exclusively from Zimbabwean companies or offering goods manufactured in Zimbabwe where the bidders establish to the satisfaction of the procuring entity that labour, raw material, and components from within Zimbabwe will account for at least thirty per centum of the ex-works price of the goods, construction work or service offered; and

(b) Group B, that is to say bids from international suppliers or offering goods manufactured abroad that have been already imported or that will be directly imported.

Please note; (a) If the lowest bid from Group A is lower than the lowest from Group B, the procuring entity shall select the Group A bid for the procurement award;

(b) If the lowest bid from Group B is lower than the lowest from Group A, the procuring entity shall compare the two bids further after adding to the Group B bid an amount equal to the allowable domestic preference, and shall select whichever of the two bids is then the lower.