BEE cannot be ignored

It used to be thought that BEE was one of those things that, like accidents, happen to other people. Many companies ignored the matter of BEE accreditation while some merely paid lip service to it.

However, the net is closing in. From the smallest BEE exempt one-man shows, to multinationals with overseas shareholders, by law, every business in this country now has to address BEE accreditation.

What does this have to do with contract life cycle management (CLM)? Simply this: One of the seven pillars of BEE (and quite its most complex one) is preferential procurement. A good way of managing the BEE status of your suppliers is through your CLM system, since your suppliers' BEE status can be a contractual requirement and reflects on your relationship with them.

BEE needs to be managed in much the same way as many of the other disciplines in business, though - since BEE is a philosophy as well as a set of practices - it would be preferable that the implementation of BEE is integrated into an operation rather than be a standalone function.

Since the introduction of the BEE Act in 2003, the focus has been mainly on the role of large corporations. However, with the introduction of the Codes of Good Practice, in 2007, the focus has changed to include medium-sized companies and exempt companies, with the idea of obtaining complete and transparent reporting of BEE status ("what gets measured, gets managed").

Obtaining a BEE scorecard has become a priority for business, especially those wanting to become government suppliers.

Paul Maddison is MD of Realyst.

Most businesses are aware that they either qualify as a BEE enterprise or they do not. The ones that think they do not qualify may not be aware that they must now be certificated to prove their non-qualification (exemption status). Even black-owned businesses must comply and are not automatically exempt.

Those that do qualify must be certified at a certain level for B-BBEE procurement recognition. In fact, if any business has a turnover in excess of R5 million per annum, it must prove compliance to four of the seven elements of the BEE scorecard, namely ownership, management and control, employment equity, skills development, preferential procurement, enterprise development and socio-economic development.

All businesses in this country are now linked to each other through BEE, in a domino effect.

Obtaining a BEE scorecard has become a priority for business, especially those wanting to become government suppliers.

A 2004 Meta Group study indicated the BEE profile of suppliers was a critical criterion for 56% of companies in their selection process, up from 40% in the previous measurement. This emphasis has increased year on year, as businesses realise they cannot function outside the BEE system.

Ownership, management and control, employment equity and skills development are often statements of percentages and easy to verify in-house, but procurement and enterprise development are much harder to corroborate and maintain.

Another difficulty is the scorecard itself, which is notoriously complicated. Also, any of the different forms of the scorecard (generic, adjusted generic, QSE, transitional or EME) may apply. Because of this, BEE accreditation agencies are certified by government to do the sleuth work, as long as the companies being ranked organise the verification of their own suppliers.

The catch is, even after having obtained a highly valued BEE certificate, it is only valid for a year. After that, the whole process has to be repeated. It, therefore, makes sense to have each supplier's BEE status on record, specifying:

* The type of accreditation (BEE, QSE, ESE, BWO, etc)
* Level of accreditation (from one to eight or non-compliant)
* Areas and degree of compliance within those areas (eg, ownership and management percentages)
* Supplier verification agency
* BEE accreditation agency
* Expiry date of the certificate

Since supplier status is linked to BEE status, it would make also make sense to link a supplier's accreditation details to their contract within a CLM database. According to Ian Russell, Absa's chief administration officer, a benefit unique to SA is being able to keep track of BEE.

He says one can see the BEE levels easily in the suppliers' database and adjust the business and spend accordingly. "How can you accurately attest to BEE without the data?" Russell asks.

It would not be sensible to buy a CLM system just because you can use it as a central repository for BEE supplier data.

But, buying a CLM system because it will organise contracts, save you from making serious mistakes in contract management, give access to valuable information, increase revenue, prevent financial haemorrhaging, and house, manage and report the BEE status of suppliers - now there's a much better idea.

* Paul Maddison is MD of Realyst.