Amazing paradigm shift for private involvement in PPPs

The recently published Amendments to Treasury Regulation 16 under the PFMA, which are effective 1 June 2025 — specifically the addition of new Regulations 16.11 to 16.15 — has completely upended unsolicited bids by private parties.

This update isn’t just a technical tweak but a massive policy shift. For the first time, government entities can legally receive and consider Unsolicited Proposals (USPs).

Taken together, these sections show a growing commitment to engaging with the private sector, reflecting the realisation that they might bring new technologies and financial investment outside the standard procurement process. That could mean faster development, improved services, or unexpected cost savings, provided the proposed solutions meet the stringent criteria (and, of course, the typical South African caveat that this is not abused).

Regulations 16.11 to 16.15 make it clear that USPs are no longer just allowed but actively sought. There is now a specific procedure to evaluate and negotiate with a private party. In practice, we hope this encourages the public sector to think outside the box, exploring innovative solutions it may not have anticipated.

Regulation 16.11 is the backbone of the new rules. It allows the private sector to propose a PPP USP to the relevant institution, which:

• Is one of the strategic sectors set out by National Treasury.
• Pursues the objectives relating to those institutions’ functions.
• Adds value to the design, development, and cost-effectiveness of service delivery.

Even if these criteria are met, the institution isn’t obligated to accept the USP.

If the institution’s accounting officer/authority decides to accept the USP then, in terms of Regulation 16.11.5(c), they notify the private party (proponent) and, in terms of Regulation 16.11.6, register the development of a feasibility study for the proposed PPP project.

The proponent’s IP is protected in that they must declare any confidential or proprietary information related to the USP as per National Treasury guidelines.

Regulation 16.12.4 ensures that the proponent’s proposal is protected from being “stolen” and that the review fee can’t be used for any other purpose. The standard regulation 16.3 to 16.6, which applies to typical PPPs, applies to any USP. The private party is responsible for both the costs of the USP as well as the review fee in terms of regulation 16.3.1(d).

It is important for the proponent to state a reasonable and appropriate validity period for its USP because, before developing the feasibility study, the institution informs the relevant treasury of this period, which needs to be long enough to consider the time periods to develop and process the necessary approvals.

While the USP is valid, the institution cannot:

• Conduct unrelated feasibility studies for the same project.
• Consider another USP for the same project from a different proponent.

The aim is to strike a balance by encouraging innovative, cost-effective solutions while preserving accountability.

It is cause for concern that the obligation preventing the institution from using the review fee for anything other than the feasibility study is limited to the validity period. This money should be ring-fenced, regardless of the validity period.

The proponent of the PPP project will automatically qualify and be shortlisted in any competitive bidding process. If the proponent is not selected as the preferred bidder and the project reaches financial close, the preferred bidder must pay the development fee to the institution to reimburse the proponent. This development fee only covers the costs of the development of the feasibility study and not any other costs, for example, developing the solution. Whether this will hamper private parties from submitting USPs is yet to be seen.

As with every legislative initiative, there is a lot that remains unclear and the ability for various institutions to react positively and proactively to these USPs needs to be evaluated. This is a major step forward for South Africa and PPPs. It shows a commitment to increasing private sector partnerships and leveraging this for the benefit of end users.

For more information and advice, contact Nikita Lalla or Ricardo Pillay.