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[2016] ZAWCHC 200
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Professional Security CC t/a Prosec v Robben Island Museum and Others (20559/14) [2016] ZAWCHC 200 (19 August 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE HIGH COURT, CAPE TOWN)
CASE
NO.: 20559/14
In
the matter between:
PROFESSIONAL
SECURITY CC
t/a
PROSEC
Applicant
And
ROBBEN
ISLAND
MUSEUM
First
Respondent
MINISTER
OF ARTS AND
CULTURE
Second
Respondent
KHUSELANI
SECURITY AND RISK MANAGEMENT
(PTY)
LTD
Third
Respondent
ENFORCE
SECURITY SERVICES (PTY)
LTD
Fourth
Respondent
MJAYELI
SECURITY (PTY)
LTD
Fifth
Respondent
MVULA
QUALITY PROTECTION (AFRICA)(PTY)(LTD)
Sixth
Respondent
JUDGMENT
DELIVERED THIS
19th
DAY OF- AUGUST 2016
ERASMUS,
J
Introduction:
[1]
This is an application for the reviewing and setting aside of the
first respondent's decision to award a tender in respect of
the
provision of security services ("the tender") to the third
respondent, declaring invalid any contract concluded pursuant
to that
decision, and an order awarding the tender to the applicant,
alternatively that the matter be remitted to the Bid Adjudication
Committee of first respondent ("the BAC") for a decision on
the awarding of the tender, on the basis that the third respondent
is
excluded.
[2]
Third respondent contends that the applicant's grounds for review are
flawed and oppose the application, the first respondent
in turn took
the stance that they did not want to be seen as partisan and abides
to the decision of the court, but made valuable
contributions to the
resolution of the matter.
Background:
[3]
During 2011, the applicant successfully tendered for the contract to
provide private security services for the first respondent
on Robben
Island as well as at Quay 501, Jetty 1 and the Nelson Mandela
Gateway, V&A Waterfront, Cape Town, and was appointed
on a three
year contract which terminated on 28 February 2014. The contract was
thereafter extended by agreement on a month-to
month basis until a
new contract could be awarded.
[4]
Along with approximately thirty other bidders, the applicant tendered
for the new contract, a three year contract to run from
1 December
2014 to 30 November 201?(the subject of this application). The new
tender specifications are almost identical to the
previous contract.
[4]
The closing date for the tenders was on 24 April 2014, and the third
respondent was announced as the winning tenderer on 27
October 2014,
having submitted the lowest bid price which gave it the highest score
in the evaluation. The applicant's bid price
was the second lowest,
and it's score the second highest.
[5]
This application was launched by applicant on 17 November 2014 in the
form of an urgent application interdicting first respondent
from
implementing its decision and for reinstating a month-to-month
security contract for the provision of security services by
itself to
first respondent, which had been cancelled with effect from 30
November 2014, together with a prayer that the relief
prayed for
above be heard on an semi-urgent basis.
[6]
On 28 November 2014, applicant was successful in it's application to
interdict first respondent from implementing the impugned
decision
pending the expedited hearing of this application. However, it was
not successful in obtaining an order reinstating the
month-to-month
contract that had been cancelled by first respondent.
[7]
The applicant at that stage relied on two irregularities in the
tender process, namely, that the bid process had not been read
out
aloud at the bid opening ceremony; and further that the third
respondent's bid price with reference to the Private Security
Regulation Authority ("PRISA") Illustrative Contractive
Prising Scheme was below the minimum prescribed in the Bid
Specifications.
The vagueness argument was not an issue but rather
that bias on the part of the first respondent was alleged in the
affidavits
before the court.
[8]
Justice Baartman granted the interdict on the basis of a finding
related to the irregularity above, namely that the relevant
Bid
Specification was ambiguous to the extent that the entire process was
compromised. As also appears from the judgment , it was
submitted on
behalf of the first respondent during argument , that the appropriate
remedy to follow upon such a finding would be
that the tender process
would have to be conducted afresh. No order as to costs was made.
[9]
The Rule 53 record of the decision was filed by the first respondent
on 19 December 2014, which was followed by supplementary
founding,
answering and replying papers filed by the parties.
[10]
The parties have also tendered further affidavits , which processes
have been regulated in an order made by the Judge President
on 29
October 2015. There were different versions of the order and the
Judge President inadvertently signed the incorrect one.
but the
parties are
ad idem
about the order intended to be made by the
Judge President. Applicant consented to the further affidavits that
were filed in an
answering affidavit thereto, to which the first and
third respondent have filed replying affidavits.
[11]
The first and third respondents have not consented to a further
affidavits which the applicants seeks to file, but have filed
provisional answering affidavits thereto and the applicant's
application for leave to file its affidavit was to be heard as a
point
in limine.
[12]
A demand for security for costs that the third respondent had filed
on 21 November 2014 led to an interlocutory application
to compel the
applicant to furnish such security, which was finally argued and
dismissed on 29 July 2015.
[13]
The applicant, in its supplementary founding papers, included two
further irregularities on which reliance was placed, namely
that the
third respondent's bid contained misrepresentations relating to the
interests of its sole director, Mr Mohamed Yacoob
in another company,
as well as it's past dealing with the State.
[14]
Before dealing with the specific grounds of review on which the
applicant relies, certain basic legal principles relevant to
adjudication are considered.
Legal
principles
[15]
The legal principles pertaining to the judicial review of public
procurement processes were set out by the Constitutional Court
in the
judgment in the case of
Al/pay Consolidated Investment Holdings
(Pty) Ltd and Others v Chief Executive Officer, South African Social
Security Agency, and
Others
2014 (1) SA 604
(CC) ("Allpay
2014(1))".
The
fairness and lawfulness of administrative action must be evaluated
independent of the result. This means,
inter alia,
that
"If the process
leading to the bid's success was compromised, it cannot be known with
certainty what course the process might
have taken had procedural
requirements been properly observed”
[1]
and
that
"Once
a
ground
of review under PAJA has been established there is no room for shying
away from it”
[2]
the
result being that the decision/action must then be declared unlawful
as required by s 172(1)(a) of the Constitution.
[16]
It is trite that fairness in the procurement process is a value in
itself. In
Tetra Mobile Radio (Pty) Ltd v MEC, Department of Works
2008 (1) SA 438
(SCA) at para 9 the SCA stated as follows:
'[F]airness
is
inherent in the tender procedure. Its very
essence is
to ensure that before government, national or provincial,
purchases goods or services, or enters into contracts for the
procurement
hereof,
a
proper evaluation
is
done of what
is
available and at what price,
so as
to ensure
cost-effectiveness and competitiveness. Fairness, transparency and
the other facts mentioned in
s
217 [of the Constitution]
permeate the procedure for awarding or refusing tenders. '
[17]
For the process to be lawful, proper compliance with the procurement
process is necessary. In
Premier, Free State
&
others v
Firechem Free State (Pty) Ltd
2000 (4) SA 413
(SCA) at para 30,
Schutz JA said:
'One
of the requirements
. . .
is that the body adjudging tenders
be presented with comparable offers in order that its members should
be able to compare. Another
is that
a
tender should speak for
itself its real import may not be tucked away, apart from its terms.
Yet another requirement is that
competitors should be treated
equally, in the sense that they should all be entitled to tender for
the same thing. Competitiveness
is not served by only one or some of
the tenderers knowing what is the true subject of the tender.
. .
.
that would deprive the public of the benefit of an open and
competitive process. '
(My emphasis.)
[18]
Procedure and outcome must not be conflated, the proper approach
being
"to
establish, factually, whether an irregularity occurred''
[3]
which
must then
"be
legally evaluated to determine whether it amounts to a ground of
review under
PAJA".
[4]
[19]
Where appropriate, this legal evaluation must take into account the
materiality of any deviance from legal requirements, which
is done
"by
linking the question of compliance to the purpose of the provision,
before concluding that
a
review
ground under PAJA has been established ".
[5]
[20]
In the case of
Steenkamp NO v Provincial Tender Board, Eastern
Cape
2007 (3) SA 121
;
[2006] ZACC 16
(CC) at para 60, the
Constitutional Court stated that strict compliance with tender
procedures by both bidders and adjudicators
is of central importance
in public procurement tenders. In
Allpay
the court also said
(at para 92) that
'the purpose of
a
tender is not to reward
bidders who are clever enough to decipher unclear directions. It is
to elicit the best solution through
a
process that is fair,
equitable, transparent, cost-effective and
competitive '.
[21]
The strict mechanical approach to assessing the materiality of
compliance with legal requirements has been discarded, the
"central
element”
[6]
being
to
"link
the question of compliance to the purpose of the provision"
[7]
[22]
Any deviation must be assessed in terms of the norms of procedural
fairness codified in PAJA. The basis for any deviations
would have to
be reasonable and justifiable, and the process of change in departing
from the prescribed proceedings must itself
be procedurally fair.
[23]
The court in
Westinghouse Electric Belgium Societe Anonyme v Eskom
Holdings (Soc) Ltd and Another
(2015] JOL 34915 (SCA) at para 37
held that in assessing the lawfulness of the tender process a court
must consider only whether
the bids have been properly evaluated
against the tender criteria, other considerations are not relevant.
[24]
Once a finding of invalidity under PAJA review grounds are made, the
decision or conduct must be declared unlawful/invalid
and a just and
equitable order must then be made in terms of s 8. The possible
inevitability of a similar outcome, if the decision
is retaken, may
be one of the factors that will have to be considered at this stage.
The interests of those most closely associated
with the benefits of
the contract must be given due weight and the rights or expectations
of an unsuccessful bidder will have to
be assessed in that context.
[25]
The question of remedy was dealt with in more detail by the
Constitutional Court in
Al/pay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer, South African Social Security Agency, and
Others
2014
(4) SA 179
(CC) ("Allpay 2014 (4)) and included the following
among the judicial pronouncements regarding the "proper approach
to
remedy"
[8]
[26]
The emphasis is on "correction and reversal" of invalid
administrative action, with reference to s 172(1)(b) of the
Constitution which provides for an order of suspension or declaration
of invalidity to be made to allow the competent authority
to correct
the defect.
[9]
[27]
Logic, general legal principle, the Constitution, binding authorities
of the court, the rule of law and the principle of legality
all point
to a default position that requires the consequences of invalidity to
be corrected or reversed where they can no long
be prevented.
[10]
[28]
In the context of public-procurement matters generally, priority
should be given to the public good which means that he public
interest must be assessed not only in relation to the effect of the
order on future procurement.
[11]
The
first respondent
"primacy
of the public interest in procurement and social security matters
must also be taken into account when the rights,
responsibilities
and obligations of all affected persons are assessed. The enquiry
cannot be one-dimensional and must have a broader
range.
"
[12]
Grounds
of review:
[29]
The applicant relies on four grounds of review, namely:
29.1 The first
respondent's failure to read out the tender prices at the opening of
the bid;
25.2 The first
respondent's failure to disqualify the third respondent on the basis
that the third respondent's bid did not comply
with clause 19.1.2 of
the Bid Specification regarding pricing in accordance with the PSIRA
recommended pricing schedule. (underpricing)
29.3 The first
respondent's bid contained material misrepresentations relating to
the interests of its sole director, Mr Mohamed
Yacoob in a related
company, Khuselani SA.
2.4 The third respondent
also misrepresented it's past business dealing with the State.
[30]
I propose to first deal with the issue of the third respondent's
"underpricing", since if the court's finding in
this
regard, namely that the relevant bid specification is ambiguous , is
confirmed, the appropriate remedy would be that the entire
tender
would have to be run afresh, starting with a re advertising
thereof . The remaining grounds of review raised would
in such event
have little, if any, further significance.
[31]
In this regard, the applicant a Notice of Intention to Amend its
Amended Notice of Motion on 4 November 2015, The amendment
provides
for a re-run of the tender as one of the possible remedies to follow
upon an order setting aside the award of the tender
to the third
respondent.
[32]
The applicant in this regard made an open proposal to the respondents
that the matter be settled on the basis that:
32.1. the awarding of the
tender to the third respondent is declared invalid, such declaration
to be suspended pending a re-run
of the entire process, which is to
be completed within four months, third respondent to pay the
applicant's costs (on the basis
that the applicant was successful or
at least substantially successful);
32.2. alternatively, that
costs be argued.
Third
respondent's bid price below the prescribed minimum pricing:
(underpricing)
[33]
Paragraph 19.1.2 of the Bid Specification contains,
inter alia,
the following mandatory prescript:
"All
bidders are required to submit their costing in line and
as
regulated by PS/RA. Any bidder who submitted
a
quote below
the PS/RA recommended pricing Schedule Plus overheads (1 September
2013 until 31 August 2014) as determined by the First
respondent,
will not be considered for participation in the following phases."
[34]
The PRISA schedule is a printed form divided into columns and
tabulated the different components of the total direct cost of
the
bid. It has a separate line item following the direct cost component
that reads:
"Share
of overheads/40% of direct costs (economy of scale rule applies)"
This
amount will then be added to the direct costs to determine total
costs per month over a period.
The
applicant determined its bid price on a pure methodical completion of
the PSIRA schedule with regard to the live items on the
schedule and
applied the 40% "rule" for overheads
[35]
It is common cause between the parties that the recommended pricing
schedule referred to is the PSIRA schedule that is issued
to its
members periodically, but there is some dispute as to the correct
interpretation of certain provisions thereof.
[36]
The applicant contends that the third respondent's quote fell foul of
the aforesaid prescript and that it's bid ought, accordingly,
to not
have been considered for further participation at all.
[37]
Applicant argues that in not disqualifying the third respondent on
that basis, the first respondent committed an irregularity
which
amounts to grounds of review in terms of ss 6(2)(b); (d); (e)(iii);
(f)(i) and (i) of the PAJA.
[38]
With regard to the irregularity (namely, the failure to apply the
provisions of clause 19.1.12 of the Bid Specifications),
applicant
contends that to be material, the materiality is to be determined
with reference to the purpose thereof for at least
the following
reasons:
38.1. The purpose of
prescribing a minimum bid price, which includes provisions of
overhead costs (i.e. all expenses over and above
the security guards'
wages and including profit), is to avoid the awarding of a contract
to a tenderer that is not able to sustain
the service.
38.2. The third
respondent has effectively conceded that by quoting a price that
exceeds the direct costs of the guards' salaries
by a mere R9700.00
per month, it makes a net loss on this contract. It, however,
explains that it is prepared to make the loss
since it regards this
specific contract as a marketing strategy, and covers the overhead
costs out of its "business development
fund". In effect,
the third respondent's explanation is that it can afford a quote a
price which will result in losses on
this specific contract because
being a large, nation wide company, it is able to do so.
38.3. Applicant contends
that to allow the first respondent to effectively shout out companies
who are not in a position to carry
such losses, would offend ss 33
and 217 of the Constitution, which
inter alia
require
reasonable and procedurally fair administrative action in the case of
the first-mentioned, and a fair, equitable, transparent
, competitive
and cost effective public procurement system in the case of the
last-mentioned.
[39]
Applicant argues, in addition that by satisfying the bid
specifications , the third respondent's tender was not an "acceptable
tender" as defined in the Preferred Policy Framework Act , 5 of
2000 ("the PPFA").
[40]
Applicants argue that at best for the respondents, paragraph 19.1.2
of the Bid Specifications read with the PSIRA Schedule,
is ambiguous.
[41]
The ground of review, in the event of such a finding, would be that
contemplated in ss 6(2)(c) and (i) of the PAJA, and applicant
contends that the only "just and equitable remedy" as
contemplated in s8(1) of the PAJA, that would cure the defective
process, would be for the entire process to be re-run, commencing
with a new, clear and unambiguous bid specification.
[42]
The Applicant contends that the application ought to succeed on this
ground alone, with costs. The first respondent's counsel
in argument
before me by implication concede that:
42.1. The first
respondent made it clear that they do not wish to oppose the rieview
application on the "pricing" issue
and do not take issue
with an order being granted in the following terms:
"that Tender RIM
EST
-
0412013114 be advertised and conducted afresh, the
minimum bid price be stated clearly and unambiguously in the Bid
specification
document(s)"
42.2. They conceded that
it was at least arguable that the bid specification was vague because
the PSIRA pricing schedule might
reasonably be understood in
different ways to different readers. This was because the schedule
did not make it clear whether PSIRA
members were obliged to charge
overheads of 40% and to what degree a lesser percentage might be
charged because of the economy
of scale. The precise meaning of this
not being addressed in the schedule and if this renders it vague a
grant of review would
then be established.
[43]
Mr Edmunds on behalf of the first respondent, in my view, correctly
points out that the wording and contention of 19.1.2 leaves
it open
for interpretation in the following respects:
"1. Are the plus
"plus overheads" referred to directly related to the
overheads mentioned in the PSIRA schedule or
are they additional
thereto
2. What is left to be
determined by RIM?
3. When one looks at
the sectoral determination insofar as it relates to the bid for wages
this might lead to speculation;
4. How are economy of
scale applied, and exactly what does it mean?"
[44]
In the explanation of the process RIM took the salutary precaution by
consulting with PSIRA as to the meaning of the 40% rule
and took
their guidance from the comparative schedule as referred to in
paragraph 42. Whilst this might be salutary it does not
help the
parties that have to read the bid specifications and tender
accordingly.
[45]
Accordingly the bid specifications were vague and does not comply
with the principles as set out above and stand to be set
aside with
its consequences.
Failure
to read out the tender prices at the opening of the tender meeting:
Having
found the bid specifications was vague, I shall deal with the other
aspects as they remain.
[46]
The third respondent did not apply the 40% rule but included a note
in it's bid, qualifying why only a limited amount per month
had been
provided for in respect of overheads (over and above the wages of
security officers). That note read as follows:
"Set
up costs, including accommodation, diesel, transport of vehicle to
island, CCTV maintenance will be expensed from the
KSA Capital Budget
provisions for business development falls within this budget."
[47]
The applicant contends that on a correct interpretation of the Bid
Specification read together with the PSIRA schedule, the
bid prices
had to include the provisions for "share of overheads"
which is prescribed as "40% of direct costs (economy
of scale
rule applies)" in the schedule. The first and third respondents
contend that it was not compulsory for bidders to
include a 40%
provision for overheads.
[48]
First respondent interprets paragraph 19.1.2 and the reference to the
PSIRA guidelines as follows:
48.1. It is apparent from
paragraph 19.1.2 that first respondent is afforded a discretion in
determining compliance with it.
48.2. The PSIRA's
recommended pricing schedule is a non-binding guideline issued by the
PSIRA to assist security companies in formulating
their contract
pricing, taking into account the requirements of national labour
legislation and sectoral determination.
48.3. It sets out the
minimum wages and mandatory benefits and allowances to be paid to
security guards of different grades. The
sum of all these components
is equal to the total direct cost of labour. One of the self-evident
purposes of the schedule is to
provide a guideline to ensure that
security officers are fairly paid. This was a key factor motivating
first respondent's inclusion
of the requirement that costing should
be in line with the schedule.
48.4. The illustrative
overhead cost referred to in the schedule is qualified by the
statement that the
"economy of scale rule applies".
48.5. Economies of scale
are the cost advantages that enterprises obtain due to size, output,
or scale of operation, with cost per
unit of output generally
decreasing with increasing scale as fixed costs are spread out over
more units of output. This provides
a clear indication that the
overhead costs are variable and will differ from case to case
depending on the nature of the bidder
and the nature of the work it
is bidding for. In other words, the pricing for the overheads
component is flexible; the 40% of direct
cost illustration is not
intended to be prescriptive.
48.6. The intention was
that bidders were to ensure that they provided for all the relevant
components of the total direct cost
of labour. This protected
security officers by obliging all bidders, at the very least, to meet
the minimum wage and benefit requirements
provided for in national
labour legislation and relevant sectoral determinations.
48.7. The calculation of
overheads was a distinct and discretionary component. The intention
was that companies should determine
and make provision for
appropriate overheads to cover the overhead costs associated with the
bid specification so that first respondent
had a clear breakdown of
all relevant cost components.
48.8. By referring to
this recommended pricing schedule, first respondent did not seek to
impose a requirement that companies provide
for overheads of 40% of
the direct labour cost. To have done so would have been unduly
prescriptive and irrational.
48.9. First respondent
recognises that overhead costs are highly variable and dependent on
the nature of the bidder and the bid
specification. By obliging
companies to make provision for overheads at 40% of the direct labour
cost, first respondent would be
needlessly increasing costs to the
public purse by obliging companies to build in disproportional
overhead costs that would ultimately
be likely to result in a
significant profit for a successful bidder.
48.10. If first
respondent was to have prescribed the overhead cost, it would have
undermined the competitiveness of the tender
process, this being the
only component in which bidders could innovate to bring down their
costs and differentiate themselves from
other bidders. Had the
overhead provision been prescriptive, the setting of the tender price
would merely have been an arithmetical
exercise for bidders, and
price would not have been a differentiating factor.
48.11. In exercising the
discretion that first respondent reserved for itself to determine the
minimum price that would be accepted
as "in line" with the
schedule plus overheads, first respondent took into account that the
schedule was calculated on
the basis that the security officer would
work 12 hour night shifts, every night in an average month, and such
would need to be
revised for first respondent's bid specification
which required security officers during the day and night, not all of
whom would
work 7 days a week. As part of the valuation process,
first respondent adapted this generic framework to fit its bid
specification.
48.12. First respondent,
however, decided not to provide for a specific amount in respect of
overheads since it was difficult to
gauge what would be an
appropriate amount given the variability of overhead costs and first
respondent was loathe to include an
inappropriate amount which could
result in the exclusion of bidders with innovative proposals that
would ultimately reduce first
respondent's costs.
48.13. First respondent
consulted with PSIRA who confirmed that overheads are extremely
variable from project to project and company
to company, that there
should be flexibility in the calculation of overheads and that it was
correct for first respondent not to
include a fixed cost for
overheads in its calculation.
[49]
It is common cause that the minimum cost of paying the lawful
compensation to the guards as determined by first respondent
(with
reference to the PSIRA schedule) is R 280 420.71 per month and that
the third respondent's tender price is R 290 179.32.
[50]
The third respondent determined it's pricing for the guards for the
purpose of the tender in a similar manner to first respondent,
but it
submitted a bid price in respect of the Grade A security guard which
is higher than the minimum price as determined by first
respondent (R
8200 per month versus R 7611.00).
[51]
First respondent motivated it's preference for the tender of the
third respondent as follows:
51.1. First respondent
had regard to the third respondent's note in its bid, qualifying why
the monthly overhead costs would be
limited.
51.2. It was apparent to
first respondent from the third respondent's bid documentation that
it was a large and experienced security
services firm, employing over
1000 security officers and having carried out work for a number of
government departments, including
the Department of Public Works and
the Department of Education in the past.
51.3. The third
respondent's annual financial statements demonstrated that the
company was able to adequately make provision for
operational costs
and would be in a position to cover the various overheads in
accordance with it's bid.
51.4. Accordingly, in the
considered view of first respondent's bid evaluation committee, the
third respondent's bid was compliant
with the bid specification.
Given this fact and the fact that it was the highest scoring bidder,
it was awarded the tender.
[52]
The applicant initially argued that the third respondent's pricing
rendered its tender unacceptable because it did not submit
its
pricing in respect of the individual guards in line with the PSIRA
schedule and further that it did not include a 40% mark
up on its
direct costs for overhead costs, which it submitted was peremptory if
paragraph 19.1.2 is read together with the PSIRA
schedule, and that
the tender condition leaves no room for discretion on the part of
first respondent to accept the third respondent's
bid for tender.
[53]
The applicant eventually conceded that it's own determination of the
guard pricing was incorrect as it did not apply the schedule
to the
bid specification.
[54]
It is clear from the wording of paragraph 19.1.2 of the bid
specification that first respondent had a discretion to determine
overheads. That is evident from the words "as
determined by"
first respondent, following the word
"overheads"
in paragraph 19.1.2.
[55]
Even if it is found that the inclusion of 40% overheads in the
contract price was required, the following principle stated
in
Millennium Waste Management v Chairperson Tender Board
2008
(2) SA 481
(SCA) at para [17] is apposite:
'Moreover,
our law permits condonation of non-compliance with peremptory
requirements in
cases
where condonation
is
not
incompatible with public interest and if such condonation is granted
by the body in whose benefit the provision
was
enacted (SA
Eagle
Co
Ltd v Bavuma). In this case condonation of the
appellant's failure to sign would have served the public interest
as
it would have facilitated competition among the tenderers. By
condoning the failure the tender committee would have promoted the
values of fairness,
competitiveness and cost-effectiveness
which are listed in
s
217. The appellant had tendered to
provide the needed service at
a
cost of R444 244,43 per month
whereas the consortium had quoted and
was
awarded the
tender at the amount of R3 642 257,28 per month.'
[56]
If it is found that first respondent deviated from its own
requirement as specified in the bid specification, it is submitted
that it did not constitute a material irregularity because it served
the purpose of inserting paragraph 19.1.2 in the bid specification
document.
[57]
The first respondent provided a schedule which shows the application
of the Bid Specifications relating to the security guards
required,
to the PSIRA schedule.
[58]
From the first respondent's schedule it can be seen that:
58.1. the minimum bid
price, excluding any provision for overheads, amounted to
R280,240.71;
58.2. the minimum bid
price, including provision for 40% in respect of overheads , amounted
to R394,215.51.
[59]
The prices bid by the five tenderers that managed to pass the
functionality evaluation process were as follows:
59.1.
Khuselani Security and Risk Management
R290, 179.32
59.2.
Prosec
R411,946.58
59.3.
Enforce
Security
R455,324.00
59.4.
Mjayeli
Security
R482,416.32
59.5.
lmvula Quality Protection (Africa)
R838,180.00
[60]
It is clear from the aforegoing that the third respondent's bid was
far below the minimum price, if a 40% provision for overheads
is to
be included, and indeed on R9758.62 above the minimum price if
overheads are to be excluded.
[61]
As regards to the competing contentions of the parties regarding the
correct interpretation of clause 19.1.1.2 of the Bid Specification
read with the PSIRA schedule, the following facts and circumstances
are pointed out in respect thereof:
61.1. The key to this
question lies not in the PSIRA schedule itself, but in the wording of
clause 19.1.2 which expressly and unambiguously
requires that a quote
may not be below the PSIRA recommended pricing
61.2. Clause 19.1.2 is
clear and unambiguous in that it expressly states that the overheads
must be included;
61.3. The respondents
appear to place stock in the fact that the PSIRA schedule, in
prescribing the 40% also contemplates that the
"economy of scale
rule applies", which as the respondents' contentions are
understood, allegedly makes it clear that
some latitude is
contemplated.
61.4. The difficulty with
this line of argument is that it has not been shown that any
considerations of economies of scale actually
come into play in this
tender. It is by no means a large tender, involving only twenty five
security guards.
61.5. The respondents
also appear to contend that the fact that the PSIRA schedule is
ex
facie
the document an "illustrative pricing structure",
which is expressly repeated in paragraph 3 of the notes thereon,
supports
their interpretation .
61.6. Lastly, in this
regard, the respondents are understood to contend that the words in
clause 19.1.2 " . . as
determined by the Robben-Island
Museum"
means that the first respondent has a discretion to
determine the percentage of overheads that ought to be included.
61.7. Applicant argues
that the words referred to mean nothing more than it is the first
respondent who must determine whether a
quote is indeed below the
PSIRA recommended pricing, by simply applying the Bid Specifications
to the PSIRA schedule .
[62]
Mr Edmunds on behalf of the first respondent, in my view, correctly
points out that the wording and contention of 19.1.2 leaves
it open
for interpretation in the following respects:
"1. Are the plus
"plus overheads" referred to directly related to the
overheads mentioned in the PSIRA schedule or
are they additional
thereto
2. What
is
left
to be determined by RIM?
3. When one looks at
the sectoral determination insofar as it relates to the bid for wages
this might lead to speculation;
4. How are economy of
scale applied, and exactly what does it mean?"
[63]
In the explanation of the process RIM took the salutary precaution by
consulting with PSIRA as to the meaning of the 40% rule
and took
their guidance from the comparative schedule as referred to in
paragraph 42. Whilst this might be salutary it does not
help the
parties that have to read the bid specifications and tender
accordingly.
[64]
Accordingly the bid specifications were vague and does not comply
with the principles as set out above and stand to be set
aside with
its consequences.
Failure
to read out the tender prices at the opening of the tender meeting:
Having
found the bid specifications was vague, I shall deal with the other
aspects as they remain.
[65]
Transparency is a key component of procurement law principles. The
underlying rationale of transparency has been described
by Professor
Phoebe Bolton in
"The Law of Government Procurement in South
Africa"
as follows:
"The
underlying aim or rationale for a transparent procurement system is
to ensure that interested or affected parties, like
the media, the
legislature, potential contractors and the public, as taxpayers, are
free to scrutinise the procedures followed.
This, to a large extent,
ensures public confidence in government procurement procedures and
promotes openness and accountability
on the part of state organs.
Transparent procurement procedures encourage good decision making
and, to a large extent, serve to
combat corrupt procurement
practices. It is a well-known phenomenon that corruption thrives in
the dark. Transparency also fosters
competition because it allows
interested parties to participate in the procurement process ..."
[66]
The first respondent is bound by legislation that prescribes the
application of fair and transparent procurement procedures
for
national and provincial government is the Public Finance Management
Act 1 of 1999 ("PFMA").
[67]
In accordance with s 76(4)(c) of the PFMA, the National Treasury has
issued instructions concerning,
inter alia, "the
determination of a framework for an appropriate procurement and
provisioning system which is fair [and] transparent."
[68]
It is stated in paragraph 4.10 of the National Treasury document
entitled
"Supply Chain Management: A Guide for Accounting
Authorities (the "SCM guide”, which relates to 'opening of
bids",
that:
"...Bids
should be opened in public, that is, bidders or their representatives
should be allowed to be present. If requested
by any bidder, the name
of the
bidders and if practical the total amount of each bid
and of any alternative bids, should be read aloud. The names of the
bidders
and their individual total prices should be recorded when
bids are opened."
[69]
The
"minutes of the compulsory briefing session for the
private security held at First respondent ...dated 10 April 2014 ..."
record that:
"One
of the bidders asked if only the names of the companies was going to
be read and not the prices and in BL: responded to
say only the name
were going to be read (sic)."
[70]
The person having raised the question was the deponent to the
applicant's affidavits, Mr Sitole.
[71]
Applicant argues that by raising the question, the first proviso of a
request in paragraph 4.10 was satisfied.
[72]
With regard to the second proviso in paragraph 4.10, namely whether
it was "practical" to read the prices out aloud,
the first
respondent has stated that it has taken a blanket policy decision to
not read out prices aloud at tender opening sessions.
[73]
First respondent explained, in it's answering affidavit, that it has
a policy that as a general principle bid prices are not
read out
because the lowest price is not the only criterion. In the experience
of first respondent, reading out bid prices tends
to be misleading
and creates unfounded expectations on the part of the bidders who
have submitted bids at the lowest price. Furthermore,
if for whatever
reason the tender needs to be re-advertised, the bidders who are able
to attend the bid opening session would be
advantaged in that they
will be aware of the pricing strategies of all their competitors.
This impairs the competiveness of the
new tender process.
[74]
Mr Sitole, the deponent to the applicant founding and replying
affidavits, alleges that at the opening of tenders on 24 April
2014
he:
'(S)pecifically
raised the question as to why the tender prices of the bid was not
announced, and was told by one of the officials
. ..that they had
been instructed not to read out the prices.'
[75]
This in itself did not amount to a request to read out the prices.
[76]
It is clear that, at the briefing session which was attended by a
representative of the applicant, it was explained that the
tender
prices would not be read out and the applicant had two weeks before
the opening of the bids within which to request, in
writing or
otherwise, that the prices be read out, which it did not do.
Consequently, there was no request that the tender prices
be read out
and first respondent's policy (which is not impugned) applied.
[77]
The decision not to read out the prices had no bearing on the
decision to accept the tender of the third respondent.
[78]
An unsuccessful bidder could request the tender prices. That is
exactly what the applicant did when it requested reasons from
first
respondent and the latter divulged the tender prices thereof and
points scored by the recommended bidder and the applicant.
[79]
According the principles enunciated in
All Pay,
the purpose of
the provision must be considered to determine whether the deviation
was material and amounts to a ground of review
in terms of the PAJA.
[80]
The applicant contends that the purpose of the provision is to
promote transparency and accountability. This proposition is
forfeited by s 217 of the Constitution which specifically refers to
"transparency" and the SCM guide which has been issued
pursuant to s 76(4)(c) of the PFMA, which also refers to transparency
.
[81]
In these circumstances, the decision not to read out the tender
prices did not constitute an irregularity. Even if it can be
said
that there was an irregularity in this regard, it was not material as
it had no bearing on the award of the tender and, in
any event, an
unsuccessful bidder could obtain the information in the way that the
applicant did.
The
remaining issues:
[82]
Shortly before the hearing of the mater the applicant filed a Notice
of Intention to Amend the relief sought by adding a paragraph
7A:
The
relief sought therefore at the time of the hearing was
"7.
Reviewing and
setting aside the First Respondent 's decision to award Tender RIM
EST-0412013114 to the Third Respondent, in terms
of the Promotion of
Administrative Justice Act No 3 of 2000 and declaring invalid any
contract concluded pursuant thereto.
7A. Granting an order
that Tender RIM EST-0412013114 be awarded to the Applicant,
alternatively that the matter be remitted to the
Bid Adjudication
Committee of the First Respondent for a decision on the awarding of
the tender, on the basis that the Third Respondent
is
excluded."
[83]
The amendment was opposed by both the first and third respondent on
the following grounds:
(a) It required the
court to substitute its decision for that of the Bid Adjudication
Committee (BAC)
(b) The basis for
the exclusion of the third respondent was in issue, as a volume of
new evidence was to be introduced that
was in any event challenged on
factual and legal grounds.
(c)
SUBSTITUTION
(d) Section 8(1) of
the PAJA provides that a reviewing court may grant any order that is
just and equitable. Section 8(1)(c)(i)
allows for the matter to be
remitted for reconsideration by the administrator, and 8(1)(c)(ii)
provides that in exceptional circumstances
a court may substitute or
vary the administrative action. In
Gauteng Gambling Board v
Silverstar Development
&
others
2005 (4) SA 67
(SCA)
at para 29, Heher JA said:
(e)
'An
administrative functionary that is vested by statute with the power
to consider and approve or reject an application is generally
best
equipped by the variety of its composition, by experience, and its
access to sources of relevant information and expertise
to make the
right decision. The court typically has none of these advantages and
is
required to recognise its own limitations.
. . .
That
is why remittal is almost always the prudent and proper course.'
(f) Heher JA
relied in this regard on, inter alia, the Constitutional Court
decision in
Bato Star Fishing (Pty) Ltd v Minister of
Environmental Affairs
&
others
[2004] ZACC 15
;
2004 (4) SA 490
(CC) at
paras 46-49. The court in
Gauteng Gambling,
however,
considered that there were exceptional circumstances in that matter
and accepted that remittal was not necessary and substitution
was
appropriate. In my view, this case does not contain exceptional
circumstances and therefore remittal is the prudent and proper
course.
(g)
(h)
(i) In
Commissioner, Competition Commission v General Council of the Bar
of South Africa
&
others
2002 (6) SA 606
(SCA) at para
14 Heter AP said:
(j)
'[T]he remark in Johannesburg City Council v Administrator,
Transvaal
&
another
[1969 (2) SA 72
(T) at 760-E] that
"the Court is slow to assume a discretion which has by statute
been entrusted to another tribunal or functionary"
does not tell
the whole story. For, in order to give full effect to the right which
everyone has to lawful, reasonable and procedurally
fair
administrative action, considerations of fairness also enter the
picture. There will be no remittal to the administrative
authority
where such a step will
operate procedurally unfairly to both
parties.
'
(k) Fairness is,
therefore, essentially the question.
(l)
(m)
(n) The
Constitutional Court in
Trencon Construction (Pty) Ltd v
Industrial Development Corporation of South Africa
&
another
2015 (5) SA 245
(CC) held that substitution was the appropriate
remedy. Khampepe J said, at para 47:
(o)
'To my mind,
given the doctrine of separation of powers, in conducting this
enquiry there are certain factors that should inevitably
hold greater
weight. The first is whether
a
court is in as good
a
position as the administrator to make the decision. The second is
whether the decision of the administrator is a foregone conclusion.
These two factors must be considered cumulatively.
Thereafter,
a
court should still consider other relevant factors. These
may include delay, bias or the incompetence of an administrator. The
ultimate
consideration is whether
a
substitution order is just
and equitable. This will involve
a
consideration of fairness
to all implicated parties. It is prudent to emphasise that the
exceptional circumstances enquiry requires
an examination of each
matter on
a
case-bycase basis that accounts for all relevant
facts and circumstances.'
(Footnote omitted.)
In
order for the applicant to succeed they first had to overcome the
hurdle of third respondent's application to strike out newly
introduced evidence.
I
am of the view that the application to amend must fail for the
following reasons:
(a) It would amount
to a substitution by the court of the role and task of the Bid
Adjudication Committee;
(b) In the event
that prayer 7 be granted on the basis that the specifications were
vague, the appropriate order is a rerun
of the process;
(c) The evidence on
which the new relief is sought is objectionable, and
(d) Any evaluation
and finding on the new evidence might influence the determination the
(BAC) in later evaluations.
These
issues relate to the two additional grounds for review that it is not
necessary to deal with the merits or demerits thereof
at this stage.
Costs:
[84]
The first respondent's lack of clarity has been the cause of the
litigation and the applicant was successful. The general rule
is that
costs follow the result.
[85]
First respondent only opposed a portion of the relief sought in the
application for an interim interdict and they were successful
in
their opposition. The vagueness argument was not an issue but rather
that bias on the part of the first respondent was alleged
in the
affidavits before the court. There is therefore good reason that the
applicant be liable for the first respondent's cost
insofar as it
relates to the interim interdict.
[86]
The first respondent's, vagueness of its bid specifications led to
the litigation; however they conceded this point early on.
There
would therefore be no reason why they should be mulcted in costs
beyond that concession. I found on the facts that there
was no merit
in the applicant's argument relating to the non-disclosure of the bid
prices at the opening of the tenders. The applicant
and third
respondent should and could have accepted this and thereby avoid a
lengthy and drawn out litigation. They chose to rather
become
involved in issues that were not initially alleged that led to
unnecessary costs.
Order:
1) The first respondent's
decision to award Tender RIM EST-04/2013/14 to the third respondent
is declared invalid and any contract
concluded thereto is set aside
2) Applicant is ordered
to pay the costs of the first respondent for the application before
Baartman, J . The third respondent to
pay its own costs.
3) In respect of the main
application first respondent is liable for the costs of the applicant
and third respondent up to the date
of their concession on the
vagueness point. Thereafter the parties each must pay their own
costs.
___________________
ERASMUS,
J
[1]
Allpay 2014 (1) supra at para 24
[2]
Ibid at para 25
[3]
Ibid para 28
[4]
Ibid para 28
[5]
Ibid para 28 - See also Steenkamp NO v Provicial Tender Board,
Eastern Cape
2007 (3) SA 121
CC at Paragraph 60
[6]
Ibid para 30
[7]
Ibid para 30
[8]
Allpay 2014(4) supra para 29-35
[9]
Ibid para 29
[10]
Ibid para 30
[11]
Ibid para 32
[12]
Ibid para 33