Supply Chain Management Framework Explained

Supply Chain Management (SCM) is the system government entities use to procure goods, services, and works. Understanding the SCM framework helps you navigate procurement processes, meet compliance requirements, and identify the right opportunities for your business.

Who This Is For

• All bidders participating in government procurement
• Procurement professionals in private sector
• Compliance officers and bid coordinators
• Researchers and civil society monitoring procurement

What Is Supply Chain Management?

Supply Chain Management is the holistic approach government uses to acquire and manage resources. It encompasses:

• Identifying what is needed and when
• Finding and evaluating suppliers
• Procuring goods, services, and works
• Managing contracts and supplier relationships
• Monitoring delivery and performance
• Disposing of assets at end of life

The SCM framework is prescribed by Treasury Regulation 16A (for PFMA entities) and the Municipal SCM Regulations (for municipalities).

The SCM Elements

The SCM system is divided into four key elements, each with specific functions and requirements:

1. Demand Management

Demand management is the first phase, where the entity identifies what it needs and how it will procure it. Key activities include:

• Needs assessment: What goods/services are required?
• Specification development: Defining exactly what is needed
• Market research: Identifying potential suppliers and pricing
• Procurement planning: Scheduling procurements for the year

2. Acquisition Management

This is the procurement phase—where tenders and quotations happen. It includes:

• Sourcing strategy: How will we procure (tender, quotation, panel)?
• Bid documentation: Preparing tender documents
• Advertising: Publishing on eTender Portal, newspapers
• Bid evaluation: Technical, price, and B-BBEE scoring
• Bid adjudication: Committee review and approval
• Contract award: Notifying bidders and signing contracts

3. Logistics Management

Logistics management covers the receipt, storage, and distribution of goods:

• Order management: Placing orders against contracts
• Receiving and inspection: Checking goods against specifications
• Inventory management: Stock control and warehousing
• Distribution: Getting goods to where they're needed
• Asset management: Tracking and maintaining assets

4. Disposal Management

Disposal management covers the end-of-life phase for assets:

• Asset identification: Which assets are obsolete or unserviceable?
• Disposal method: Auction, tender, donation, destruction
• Board approval: Disposal committee sign-off
• Asset register update: Removing disposed assets

SCM Governance Structures

Government entities must establish specific governance structures for SCM:

Bid Committees

Three committees oversee the tender process:

Bid Specification Committee (BSC)

• Compiles specifications for goods/services
• Determines evaluation criteria
• Sets preference points and specific goals

Bid Evaluation Committee (BEC)

• Evaluates bids against published criteria
• Scores functionality, price, and B-BBEE
• Prepares evaluation report with recommendations

Bid Adjudication Committee (BAC)

• Reviews evaluation reports
• Makes final award decision (or recommends to Accounting Officer)
• Ensures process compliance

SCM Unit

Every entity must have a dedicated SCM unit responsible for:

• Implementing the SCM policy
• Providing secretariat to bid committees
• Managing supplier databases and contracts
• Reporting on SCM performance
• Training and capacity building

Procurement Methods

The SCM framework prescribes different methods based on value and circumstances:

Open Competitive Bidding

The default method for contracts over R500,000 (threshold may vary):

• Advertised on eTender Portal and newspapers
• Minimum 21 days for bid submission
• Public bid opening
• Formal evaluation process

Limited/Closed Bidding

Invitations sent to selected suppliers in specific circumstances:

• Panel/Framework contracts: Pre-qualified suppliers
• Specialized work: Limited pool of qualified suppliers
• Urgency: Time doesn't permit open tender (requires approval)

Quotation Process

For lower-value procurement (typically R30,000-R500,000):

• Written quotations from at least 3 suppliers
• Shorter turnaround (often 7-14 days)
• Less formal documentation
• Decision by SCM official or delegated authority

Contract Management

After award, contracts must be actively managed:

• Performance monitoring: Tracking delivery against SLAs
• Variation control: Managing scope and price changes
• Payment management: Processing invoices within 30 days
• Relationship management: Regular supplier engagement
• Contract close-out: Finalizing deliverables and payments

Key Regulations & Instruction Notes

Important regulatory instruments for SCM:

• Treasury Regulation 16A: SCM framework for PFMA entities
• Municipal SCM Regulations (2005): SCM for municipalities
• PPPFA Regulations (2022): Preferential procurement rules
• Treasury Instruction Notes: Specific guidance on current issues
• Practice Notes: Operational guidance for SCM practitioners

Compliance Requirements for Bidders

The SCM framework requires bidders to provide various compliance documents:

• CSD registration: Required for national/provincial tenders
• Tax compliance (TCS): Valid tax status from SARS
• B-BBEE certificate/affidavit: For preference point scoring
• SBD forms: Declaration of interest, tax compliance, etc.
• Company documents: CIPC registration, directors, etc.

Frequently Asked Questions

Next Steps

Deepen your understanding of procurement:

• Tender Beginner Guide
• SBD Forms Guide
• Your Rights as a Bidder
• Read SCM regulations in Accord