The 30% Subcontracting Rule in SA Tenders

How the 30% subcontracting rule works in South African government tenders: the R30 million threshold, who qualifies, what to submit and what disqualifies you.

The 30% Subcontracting Rule in SA Tenders Explained

Contractors discuss a fencing work package

The 30% subcontracting rule says that on large government contracts, worth more than R30 million, the organ of state may require the winning bidder to hand at least 30% of the contract value to qualifying small businesses. It applies where the buyer decides subcontracting is feasible, it is written into the tender invitation as a condition, and a bid that ignores it is disqualified. Below, we explain where the rule comes from, which tenders it touches, who counts as a qualifying subcontractor and what to put in your bid.

TL;DR

The rule targets contracts above R30 million. The buyer must apply it where feasible and must justify any decision that it is not feasible.
At least 30% of the contract value goes to qualifying subcontractors, such as EMEs and QSEs with the required black ownership, and qualifying cooperatives.
It is a compulsory tender condition. Failing to meet it makes the bid unacceptable and leads to disqualification.
Subcontractors are chosen from suppliers registered on the Central Supplier Database (CSD), and the main contractor stays fully liable for performance.
Always read the tender document itself. It states whether the condition applies, and in what form, for that specific bid.

Where the rule comes from
Which tenders it applies to
What 30% actually means
Who qualifies as a subcontractor
How to build the subcontracting into your bid
After the award: your obligations
What happens if you do not comply
A note from our side
Find large tenders and get ready to bid
Related requirements bidders trip over
FAQ
Sources

Where the rule comes from

The 30% requirement became widely known through the Preferential Procurement Regulations of 2017, issued under the Preferential Procurement Policy Framework Act. Those regulations say that for contracts above R30 million, where feasible, the organ of state must apply subcontracting as a condition of tender, with at least 30% of the contract value going to designated groups.

The legal landscape has moved since. National Treasury issued new Preferential Procurement Regulations in 2022, and Parliament has passed the Public Procurement Act 28 of 2024. Section 19 of that Act lets a procuring institution require bidders to subcontract a portion of the contract, where feasible, above a prescribed threshold, with a minimum percentage going to specified small enterprises or cooperatives.

What this means for you in practice: the 30% figure and the R30 million threshold remain the benchmark that buyers, training providers and bidders refer to, but the exact percentage, threshold and categories a buyer applies are whatever the tender invitation says. Treat the bid document as the final word, and check the current position with National Treasury's Office of the Chief Procurement Officer if the document is unclear.

Which tenders it applies to

Three tests decide whether a tender carries the condition.

Value. The contract must be above R30 million. A R12 million cleaning contract is not caught by this particular rule, however many subcontractors you plan to use.

Feasibility. National Treasury's implementation guide says the institution must consider the nature of the tender. If it decides subcontracting is not feasible, it has to substantiate that with facts and objective analysis. It cannot simply skip the condition.

Stated in the invitation. The condition has to appear in the tender documents so that every bidder prices and plans for it from the start.

In practice the rule shows up most in construction, civil engineering, large facilities management, security and big IT or fleet contracts, where work packages can be split cleanly. If you are scanning for large opportunities in your field, our pages for building tenders, transport and fleet tenders and government IT tenders are good places to start.

What 30% actually means

The percentage is measured against the contract value, not against your profit or your own scope of work. On a R40 million contract, 30% is R12 million of the contract value that must be performed by qualifying subcontractors.

Contract value	30% subcontracting share	Main contractor keeps (at most)
R30 million	R9 million	R21 million
R50 million	R15 million	R35 million
R120 million	R36 million	R84 million

The table is arithmetic on the headline rule. Where a tender document sets a different percentage or defines the base differently, follow the document.

Two practical points follow from this. First, the subcontracted value has to be real work that you would otherwise have done or procured, not a token supply line. Second, you price the 30% into your bid from day one. Bidders who treat subcontracting as something to sort out after award are the ones who end up disqualified or in breach.

Who qualifies as a subcontractor

Under the 2017 regulations, the qualifying subcontractors are:

Exempted Micro Enterprises (EMEs) and Qualifying Small Enterprises (QSEs) that meet the listed ownership categories, including those that are at least 51% black-owned.

Cooperatives that are at least 51% owned by black people.

And the same document sets out the groups the rule is designed to reach. Later legislation, including section 19 of the Public Procurement Act, speaks of specified small enterprises and cooperatives, so the precise list in a given tender may be described in slightly different words. Look for the "subcontracting" clause and the accompanying declaration form in your bid pack.

Check the subcontractor before you sign

A subcontractor that looks qualifying on paper but cannot prove it will cost you the bid. Before you commit, ask for:

A valid B-BBEE certificate or sworn affidavit showing EME or QSE status and ownership percentage.

Their CSD supplier number and a current CSD report. Per the implementation guide, bidders must select subcontractors from suppliers registered on the CSD.

Tax compliance status and, for construction, the relevant CIDB grading for the work being subcontracted.

Evidence that they can actually do the work: references, equipment, staff.

Our guide on how to get government tenders in South Africa covers the registrations you and your partners need in place before any bid.

How to build the subcontracting into your bid

Step 1: Read the condition early

Open the tender document the day you download it and find the subcontracting clause. Note the percentage, the categories of eligible subcontractors, the forms to complete and whether the buyer wants names at bid stage or only after award.

Step 2: Split your scope

Break the work into packages. Look for packages that are self-contained, have measurable outputs and can be done well by a smaller firm: site clearing, painting, fencing, landscaping, cabling, security guarding, transport legs, printing, training. Add them up until you are comfortably at or above 30% of your price.

Step 3: Find qualifying subcontractors

Search the CSD for suppliers in the right commodity and location, then verify each one. Where you already work with small suppliers, check whether they meet the ownership and size criteria. If they do not, they cannot count towards the 30%, however good they are.

Step 4: Select on criteria, not on convenience

The research on subcontractor selection is thin, so here is how we would approach it as bidders, not as a legal requirement. Compare candidates on price against your estimate, capacity for the package, track record, health and safety record, financial stability and willingness to be paid on your payment cycle. Subcontractor charges should be agreed as a clear pricing method, such as fixed price or measured works, with milestones for invoicing. If a cheap subcontractor puts delivery at risk, you are the one who pays, because of the liability point below.

Step 5: Document the arrangement

The implementation guide says tenderers must submit proof of the arrangement, which may include a subcontracting agreement. A written agreement should name the parties, the scope and value, the price and payment terms, timelines, quality and safety standards, insurance, dispute resolution and what happens if either side defaults. A subcontractor agreement template drafted for South African law gives you a starting point, which a lawyer can adapt for larger or more complex packages.

Keep the paperwork tidy for the submission itself. Our electronic submission checklist and the guide to submitting on eTenders help make sure nothing is missing on the day.

After the award: your obligations

Winning does not end the compliance work.

You need approval to subcontract. Under the 2017 regulations, an awarded contractor may not enter into a subcontracting arrangement without the prior approval of the procuring organ of state. Changing subcontractors mid-contract is therefore a request to the buyer, not an internal decision.

You stay liable. The implementation guide states that the main contractor remains solely liable for performance under the contract with the institution, whatever the subcontracting arrangements. A subcontractor's failure is your failure.

Local content still counts. For designated sectors with a local production requirement, you may not subcontract in a way that pushes local content below the stipulated minimum.

Pay on time. Cash flow is the most common reason small subcontractors fail. Build realistic payment terms into the agreement and honour them. Where labour is involved, make sure the arrangement respects the Basic Conditions of Employment Act, including the rules on payment of workers.

What happens if you do not comply

The 30% requirement is a compulsory condition of tender. According to the National Treasury guide, a bid that does not comply is considered unacceptable and is disqualified. There is no partial credit for getting to 22%.

The common ways bidders fall short are predictable:

Naming subcontractors who are not on the CSD or do not meet the ownership criteria.

Leaving the subcontracting declaration blank or incomplete.

Counting supply of materials or the main contractor's own affiliates as subcontracting.

Offering a subcontracting value that adds up to less than 30% once the price is finalised.

Missing the supporting agreement or proof the tender asks for.

If you think the condition has been applied wrongly, for example on a contract that clearly cannot be split, raise a clarification question with the buyer before the closing date through the channel in the tender document. Do not wait until after you lose.

A note from our side

We see the same pattern again and again. Small businesses assume the 30% rule is a problem for big firms. Then they find that it creates demand for them: every large contract carrying the condition needs qualified small subcontractors, and many of those contracts never reach them because nobody knows they exist.

That works in both directions. If you are a prime contractor, build a verified list of CSD-registered subcontractors before tenders drop, because scrambling in the last week produces weak bids. If you are an SMME, get your CSD profile, tax status, B-BBEE affidavit and company profile in order now, and be easy to find. Subcontracting is also a legitimate way to build the track record and references that let you bid as a prime later.

We built ProTenders around that lifecycle: finding the tender, getting compliant, writing the bid and funding delivery. Browsing every live national, provincial and municipal tender needs no sign-up, which makes it easy to spot the large contracts where subcontracting packages will appear.

— Dolene April

Find large tenders and get ready to bid

The contracts where the 30% condition applies are the big ones, and they are easiest to plan for early. Browse every live government tender on ProTenders for free, set up tender alerts for your sector, and check upcoming procurement plans to see large contracts before they are advertised.

Our paid plans add the compliance and workflow tools: Pro is R1 990 per year, Business is R3 990 per year and Enterprise starts from R999 per month. You can compare them on the pricing page. If a large award leaves you needing working capital to pay subcontractors and suppliers, see the business funding programs we list.

Related requirements bidders trip over

The subcontracting condition rarely stands alone. Big tenders usually come with other documents that can sink a bid if they are missing:

Audited financial statements, which many large contracts require as proof of financial standing.

A health and safety plan and safety file on construction and site-based work.

Quality management evidence, where ISO 9001 is asked for or scored.

Plan them alongside the subcontracting package, not after. More walkthroughs are collected in our tender guides.

FAQ

Does the 30% subcontracting rule apply to every government tender?

No. It is aimed at contracts above R30 million, and only where the buyer considers subcontracting feasible. A buyer that decides it is not feasible must substantiate that decision. Always check the tender document for the clause.

Can I subcontract to a company I own or am related to?

The aim of the rule is to move real work to independent qualifying small businesses, so a related-party arrangement is risky and may not be accepted. Check the wording of the tender declaration and ask the buyer for clarification before you submit.

Do I need the buyer's approval to change a subcontractor after award?

Yes. Under the 2017 regulations, an awarded contractor may not enter into a subcontracting arrangement without the prior approval of the organ of state. Apply in writing, with the replacement's proof of qualification, before they start work.

Am I still responsible if my subcontractor fails?

Yes. National Treasury's guide states that the main contractor remains solely liable for performance towards the institution. Protect yourself with a written agreement, clear milestones and proper checks before appointment.

How do I find qualifying subcontractors?

Start with the Central Supplier Database, where you can filter by commodity and location, then verify ownership, tax status and capability yourself. Ask for documents rather than relying on a company's description of itself.

The 30% Subcontracting Rule in SA Tenders Explained