PPPFA Preference Points: How to Calculate and Maximise Your Score
The Preferential Procurement Policy Framework Act (PPPFA) governs how preference points are awarded in South African government tenders. Understanding the preference point system and knowing how to calculate your score relative to competitors is a fundamental skill for any business pursuing government contracts. This guide explains the PPPFA preference point formulas in detail, with worked examples.
The 90/10 Formula (Tenders Above R50 Million)
For tenders with a total value above R50 million, the 90/10 formula applies. Of the 100 available evaluation points, 90 are allocated to price and 10 are allocated to BBBEE preference. The price points are calculated using this formula: Ps = 90 × (1 − (Pt − Pmin) / Pmin), where Ps is the score for the bidder being evaluated, Pt is the price of that bidder, and Pmin is the lowest compliant price submitted.
For example, if the lowest compliant bid is R10 million and your bid is R11 million, your price score is: 90 × (1 − (11,000,000 − 10,000,000) / 10,000,000) = 90 × (1 − 0.1) = 90 × 0.9 = 81 price points. If you are BBBEE Level 1 (10 preference points), your total is 81 + 10 = 91 points. The lowest bidder (R10 million) with Level 4 BBBEE (5 preference points) would score 90 + 5 = 95 points — winning the tender despite being the cheapest. This illustrates how BBBEE can sometimes be decisive.
- 90/10 formula applies to tenders above R50 million
- Price formula: Ps = 90 × (1 − (Pt − Pmin) / Pmin)
- Level 1 BBBEE = 10 preference points; Level 2 = 9; Level 3 = 6; Level 4 = 5
- Non-compliant entities receive 0 BBBEE preference points
The 80/20 Formula (Tenders Below R50 Million)
For tenders below R50 million, the 80/20 formula applies. Of the 100 available points, 80 are for price and 20 are for BBBEE. The price formula is: Ps = 80 × (1 − (Pt − Pmin) / Pmin). BBBEE points under the 80/20 system are: Level 1 = 20 points, Level 2 = 18 points, Level 3 = 14 points, Level 4 = 12 points, Level 5 = 8 points, Level 6 = 6 points, Level 7 = 4 points, Level 8 = 2 points, Non-compliant = 0 points.
The 80/20 system amplifies the importance of BBBEE because 20 preference points is a much larger share of 100 total points. Under the 80/20 system, a Level 1 business with a 20% higher price than the lowest bidder will still outscore the lowest bidder if that bidder is non-BBBEE compliant: 80 × (1 − 20/100) = 80 × 0.8 = 64 price points + 20 BBBEE points = 84 total, versus the non-compliant bidder's 80 price points + 0 BBBEE = 80 points. The higher-priced Level 1 business wins.
- 80/20 formula applies to tenders below R50 million
- Level 1 BBBEE = 20 preference points under 80/20
- Higher BBBEE weighting means price premium can be justified
- Calculate your score before submitting to understand your position
Frequently Asked Questions
What BBBEE level gives the maximum preference points?
Level 1 BBBEE gives the maximum preference points — 20 points under the 80/20 formula and 10 points under the 90/10 formula. Exempt Micro Enterprises (EMEs) and Qualifying Small Enterprises (QSEs) that are 100% black-owned are automatically treated as Level 1.
Does the preference point formula change under the Public Procurement Act?
Yes. The Public Procurement Act (PPA) is replacing the PPPFA framework with sector-specific preference systems. The exact formulas under the PPA have not yet been published for all sectors. Monitor National Treasury publications for updates as the PPA is implemented in your sector.