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[2017] ZAWCHC 39
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Abet Inspection Engineering (Pty) Ltd v Petroleum Oil and Gas Corporation of South Africa (SOC) Ltd and Another (15599/16) [2017] ZAWCHC 39 (8 March 2017)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
(Coram:
Holderness, AJ)
[Reportable]
Case
number: 15599/16
In
the matter between:
ABET INSPECTION
ENGINEERING (PTY)
LTD Applicant
and
THE PETROLEUM OIL AND
GAS CORPORATION OF
SOUTH AFRICA (SOC)
LTD First
Respondent
VUMELA INDUSTRIAL
CONSULTANCY (PTY) LTD Second
Respondent
JUDGMENT
HOLDERNESS, AJ
INTRODUCTION
[1]
This is an application for the judicial review and setting aside of a
decision by the first respondent (‘PetroSA’)
to award a
tender to the second respondent (‘Vumela’). The applicant
(‘Abet’) also seeks an order setting
aside the contract
concluded between PetroSA and Vumela, pursuant to the tender being
awarded (‘the contract’), and
an order that the tender
instead be awarded to it. This final relief was set out in Part B of
the application. The basis for the
review, in a nutshell, is that
Vumela did not attach two certificates, required by the tender
conditions, to its bid.
[2]
In terms of Part A of the application, Abet sought urgent interim
relief that, pending the hearing of the final relief in the
second
part, the contract be suspended, and that Vumela be prohibited from
rendering any services for PetroSA in terms thereof.
The matter
was set down for hearing on Friday, 2 September 2016. After the
matter was postponed and a timetable agreed upon for
the filing of
further papers, Abet abandoned the relief sought in terms of Part A,
and agreed to an expedited hearing of the review
application.
THE
FACTS
[3]
The facts relevant to the relief sought are straightforward and are
largely common cause. It is convenient to first set out
the
relationship between Vumela and Parsons Brinkerhoff Africa (‘PBA’),
the relevance of which will soon be apparent,
and then to detail the
procurement process followed by PetroSA in the awarding of tenders
for goods and service.
The
acquisition by Vumela of the Quality Services division of PBA
[5]
On 15 February 2016 Vumela purchased the Quality Services (‘QS’)
division of PBA, as a going concern (‘the
sale agreement’).
Vumela took over not only the assets and employees of PBA, but the
entire PBA system, including the same
technical manager and technical
signatories. Vumela was granted the right to use the PBA trademark,
and so to effectively trade
as PBA, for a period of six months after
the sale.
[6]
The effective date of the sale agreement was 29 February 2016. The
tender was advertised four days later, on 4 March 2016. It
was
accordingly not possible for Vumela to obtain the certificates
required to be submitted with its bid, in its name, prior to
the
closing date for the tenders, which was 31 March 2016.
PetroSA’s
Bid Evaluation Process
[7]
PetroSA invited service providers to submit tenders for tender number
CTT13150 for the “
Provision of Statutory QC (Quality
Control) and AIA (Approved Inspection Authority) Inspection Services
for Onshore, Offshore (FA
Platform and Orca), Special Projects (Local
and International/ Major), Turnarounds and Shutdowns for PetroSA
”
(‘the tender’). The tender was published in order to
procure statutory QC and Approved Inspection Authority
(‘AIA’)
inspection services for certain of its installations and maintenance
programmes. Bidders had to submit bids
electronically via PetroSA’s
E-Procurement Portal.
[8]
Bids had to be submitted in accordance with the Draft Consultancy
Agreement.
Clause 1.3 of the Special Conditions of
Contract reads:
“
The
Consultant shall ensure it maintains it’s [sic] SANAS
accreditation to SAN 10227 and ISO 17020 through-out the duration
of
the Contract. Petro SA shall be immediately advised of any
major finding emanating from a SANAS audit and provided with
proof
that these have been closed to the satisfaction of the SANAS
auditors. Suspension of the Consultant’s SANAS
accreditation shall result in immediate cancellation of this
contract
.”
[9]
The South African National Accreditation System (‘SANAS’)
accreditation requirement was also raised at the Scope
Clarification
Meeting held on 15 March 2016. The importance of the service
providers being properly accredited by SANAS was
made clear to all
bidders.
[10]
Twelve bids were submitted. PetroSA’s evaluation process has
two phases. The first phase is referred to as the disqualification
phase, when each bid is assessed to see whether it complies with the
relevant tender requirements. This first part of this process
is
described as the technical evaluation, when the team must determine
whether bids meet the documentary and technical requirements
prescribed by the applicable tender documentation.
[11]
During the second phase, technically compliant bids are commercially
evaluated with regard to each bidder’s proposed
price and
empowerment credentials. This is referred to as the commercial
evaluation.
[12]
The purpose of the desktop evaluation, which is the first step in the
technical evaluation, is to determine whether bids contain
all the
requisite information and documentation. According to Ms Sebothoma
(‘Sebothoma’), Head Legal Counsel for PetroSA
and the
deponent to the answering affidavit filed on its behalf, the desktop
evaluation involves a degree of investigation, and
is often followed
by the further investigation of select bids. The purpose of the
desktop evaluation is to eliminate any obviously
non-compliant bids,
and to allow PetroSA to address any ambiguity or uncertainty about
the status or meaning of a particular bid.
Select bidders may also be
subject to due-diligence investigations.
[13]
The commercial evaluation follows. Where procurement in excess of
R1,000,000 is involved, the evaluation team conducts the
commercial
evaluation in terms of the 90/10 preference-point system, in terms of
which each bidder is awarded a total score out
of 100 points. A
bidder may score a maximum of 90 points for price, with the cheapest
bidder scoring the highest number of points
and the other bidders
beings allocated fewer points based on their comparative prices. The
remaining ten points are allocated on
the basis of each bidder’s
empowerment profile.
[14]
Once it has concluded that exercise, the evaluation team finalises
its recommendation to the PetroSA Procurement Committee
(the ‘PPC’).
Before the PPC considers the recommendation, it is reviewed by
several of PetroSA’s functionaries,
in accordance with the
procurement policy and the procurement procedure. In relation
to tenders such as the tender under
review, where the Rand value of
the contract awarded is in excess of R5,000,000, the PPC has the
delegated authority to make the
final award.
[15]
In terms of clause 8 of the tender notice, PetroSA was not obliged to
accept the lowest or part of all of any bid submitted.
[16]
The process described above was duly followed prior to the awarding
of the tender to Vumela. It bears mentioning that Abet
does not seek
to impugn PetroSA’s procurement policy or process. PetroSA in
turn avers that its procurement system complies
with Section 217 of
the Constitution of the Republic of South Africa, 1996 (‘the
Constitution’) in that contracts awarded
by it are awarded in
accordance with a system that is fair, equitable, transparent,
competitive and cost-effective.
Publication,
evaluation and award of the Tender
[17]
The tender notice required bidders to provide the supporting
documentation required by PetroSA. The contract period was for
one
year, three years or five years, with the option to extend the
agreement for a further two terms of three years each, at the
sole
discretion of PetroSA. The closing time and date for the submission
of bids was 12h00 on 31 March 2016.
[18]
During the evaluation of the bids, it became apparent to PetroSA that
it had to enquire into Vumela’s accreditation with
SANAS, as it
was a requirement of the tender that each bidder had to submit a copy
of its SANAS accreditation certificate.
[19]
Vumela’s bid included a document setting out its business
profile. This document stated that Vumela is a ‘
Government
Approved Inspection Authority’
compliant with ‘
the
ISO 17920 standard’
and ‘
SANS 10227’.
The
bid included a SANAS accreditation certificate which had been issued
not in the name of Vumela, but to PBA.
[20]
Vumela’s bid included a letter dated 14 March 2016, addressed
to it by PBA, confirming the sale of its QS division to
Vumela and
its entitlement to use the PBA trademark for a period of six months,
with effect from 1 March 2016. The letter further
served to inform
PetroSA that ‘
as part of the transition process, Vumela has
engaged with SANAS and the Department of Labour (DoL) regarding their
application
for accreditation as per SANS 17020 and SANS 10227.
Further to this, the PBA accreditation is valid until the 31
st
of July 2019.’
The further correspondence exchanged between
the relevant parties regarding Vumela’s SANAS accreditation is
dealt with hereunder.
[21]
Abet and Vumela had to pass two further tests: a due-diligence
investigation by the Evaluation Team, and a further due diligence
investigation by an independent firm of auditors and accountants,
Morar Inc (‘Morar’). Both bidders were found to be
technically compliant with the tender’s requirements, and
competent to perform the services required by PetroSA. After Morar
had performed the due diligence of Abet and Vumela, it concluded that
both Abet and Vumela possessed the necessary qualifications
and
technical ability to perform the services. There ended the technical
evaluation.
[22]
Abet and Vumela’s bids thereafter proceeded to the commercial
evaluation phase. In terms of this evaluation, Vumela submitted
the
cheapest bid, with a total price of R33,390,571.76, resulting in a
score of 90 points for price. The total price for Abet’s
bid
was R44,366,366.56, resulting in a score of 60.42 points for price.
Both Abet and Vumela scored 10 points for their B-BBEE
status levels.
Vumela was the top-ranking bidder, scoring 100 total preference
points to Abet’s 70.42
[23]
On 20 May 2016 the Evaluation Team finalised the submission and duly
recommended to the PPC that the tender be awarded to Vumela.
Between
20 May 2016 and 27 May 2016, the submission was reviewed by several
of PetroSA’s office bearers On 2 June 2016 the
submission was
considered by the PPC. In view of the fact that Vumela had acquired
the QS division of PBA as a going concern, the
PPC resolved to award
the tender to Vumela, on condition that the Group Supply Chain
Manager and Sebothoma confirmed, after reviewing
the sale agreement,
that Vumela had indeed acquired PBA’s QS division.
[24]
The sale agreement was reviewed and found to be valid and legally
enforceable, and PetroSA was therefore satisfied that Vumela
had duly
acquired the business as a going concern.
[25]
Shortly thereafter, the Evaluation Team became aware of two errors in
its recommendation relating to the returnable commercial
bid
analysis, and an error in the formula. These errors appear to be
common cause and were not cited as irregularities by Abet.
After the
errors had been corrected Vumela’s total contract price
increased by approximately R6,329,000, to R39,719,571.76.
Abet’s
contract price remained unchanged. Notwithstanding the increase in
Vumela’s price, it was still significantly
cheaper than Abet.
After Vumela’s bid price had been revised, it was R4,646,796.32
less than Abet’s original bid price
of R44,366,366.56. Vumela
therefore remained the top-ranking bidder, scoring 100 points to
Abet’s revised 89.47 points. The
recommendation was duly
revised, and subjected to the same procedure outlined above. The
revised submission was considered by the
PPC on 30 June 2016. The PPC
accepted the recommendation in the revised submission, including the
increase in PetroSA’s total
contract price, as well as the
review of the sale of business agreement between PBA and Vumela, and
resolved to award the tender
to Vumela.
[26]
On 11 July 2016, PetroSA received an email from Vumela, annexing a
SANAS certificate issued to Vumela, in terms of which Vumela
was
certified as being duly accredited with effect from 17 March 2016.
Further annexed was a letter addressed to Vumela by the
Chief
Inspector of the DoL dated 7 July 2016 informing Vumela that, with
effect from 17 June 2016, it had been awarded ‘
in-service
inspection authority approval’
under the Occupational
Health and Safety Act Act 85 of 1993 (‘OHASA’) and the
PER promulgated thereunder. A certificate
evidencing the
accreditation by DoL was also annexed.
[27]
On 14 July 2016, pursuant to the award of the tender, PetroSA and
Vumela concluded the contract. On 18 July 2016, Abet was
informed by
PetroSA that its tender was unsuccessful. On 19 July 2016 Abet
addressed an email to PetroSA pointing out that Vumela
did not have a
SANAS certificate as at the closing date of the tender. On 20 July
2016, Ms Gaca, on behalf of PetroSA, responded
by referring to the
right of Vumela to utilise the trademark of PBA until 30 August 2016,
and confirming that the SANAS accreditation
which was provided in the
tender under the name of PBA was accepted.
[28]
On 30 August 2016, the application for review was launched.
SANAS
Accreditation and certification
[29]
In terms of section 4(1)(c) of the
Accreditation
for Conformity Assessment, Calibration and Good Laboratory Practice
Act, 19 of 2006,
SANAS
is established as the “
only
national body responsible for carrying out … accreditation of
inspection bodies
”.
SANAS is responsible for maintaining an “
internationally
recognised accreditation system
”
and for promoting “
the
competence and equivalence of accredited bodies
”.
[30]
As part of its bid, Vumela submitted PBA’s accreditation
certificate for Inspection of Pressure Equipment, which was
issued by
SANAS (‘the AIA certificate’), and PBA’s
certificate issued in terms of the
Pressure Equipment Regulations,
adopted
under the OHASA, which was issued by the Department of Labour
(DoL) (‘the PER certificate’).
[31]
In its bid document, Vumela specifically disclosed, under the heading
‘
RE: SANAS Accreditation of Vumela Industrial Consultancy’,
that:
‘
As
part of the transition process, Vumela has engaged with SANAS and the
Department of Labour (DoL) regarding their application
for
accreditation as per SANAS 17020 and SANS 10227. Further to this, the
PBA accreditation is valid until the 31
st
of July 2019.’
[32]
Vumela further invited PetroSA to contact Donovan Muller from its
offices should any further clarity be required regarding
the
accreditation. At the time of submitting its bid, Vumela had already
applied for the AIA certificate. It could not apply for
the PER
certificate before it had been issued with the AIA certificate.
[33]
As explained by Sebothoma, the purpose of requiring bidders to be
accredited by SANAS was simple: to ensure that the ultimate
service
provider would have the requisite capacity and be appropriately
skilled to perform the services required by PetroSA
[34]
The Tender Questionnaire required each bidder to “
provide a
copy of its SANAS accreditation certificate
”, and
provided that “
tenderers will be eliminated from further
evaluation for failure to submit a SANAS accreditation certificate
”.
PetroSA explained that this was not because of the importance of the
certificate itself, but because of the importance
of the
accreditation as an inspection body from South Africa's sole
accrediting authority. The process in relation to the evaluation
of
Vumela’s SANAS accreditation is set out in detail by Sebothoma.
[35]
PetroSA contends that it was correct not to disqualify Vumela’s
bid at the initial desktop and technical stage of evaluation,
when
the Evaluation Team merely had to ‘tick the boxes’,
rather than evaluate whether there was adequate compliance.
It was
only at the next stage of evaluation that detailed inquiries would be
made on issues raised during the initial stage of
evaluation.
Examples of the issues raised included checking references of the two
other responsive bidders in relation to their
experience in the
petrochemical and chemical industries, and Vumela’s claims made
in respect of the SANAS accreditation.
It is apparent that the
Evaluation Team performed similar tasks in relation to the other bids
that appeared to contain defects
or omissions, but which were not
liable for immediate disqualification.
[36]
On 11 April 2016 the Evaluation Team investigated Vumela’s
claim of accreditation by SANAS, noting in particular that
it had to
be “
assessed for compliance
” by the accreditation
authority. The Evaluation Team proceeded to make the necessary
inquiries relating to whether or not
Vumela was accredited by SANAS.
[37]
The SANAS Approval Committee met on 14 April 2016 and granted the
entity known as “
Vumela Industrial Consultancy (Pty) Ltd
”,
which had formerly been a division of Parsons, “
unconditional
accreditation … in accordance with ISO/IEC 17020:2012 and SANS
10277:2012
”. SANAS initially agreed to change the name on
the PBA certificate without changing the accreditation number
(LPUP017), effectively
transferring its accreditation status to
Vumela. This was conveyed to PetroSA by Vumela in an email, dated 19
April 2016.
[38]
Notwithstanding the above, when Vumela’s application reached
the CEO of SANAS, he decided that a new number had to be
allocated to
Vumela, namely LVUP119. Vumela’s position was that it mattered
not whether a new number was issued or whether
it retained PBA’s
number, what mattered was that SANAS had decided to accredit Vumela
and had conveyed its decision to PetroSA.
Significantly, no
assessment whatsoever of Vumela was done, and the accreditation was
effective retrospectively, with effect from
17 March 2016.
[39]
It is common cause that the purpose of the requirement that a bidder
had to submit the AIA certificate was to ensure that the
tender would
only be awarded to an entity that was duly accredited and
appropriately skilled to perform the required services.
Vumela and
PetroSA argued that the purpose of this requirement was achieved by
the approach adopted by PetroSA, namely that, arising
from its
knowledge that Vumela bought PBA’s QS division as a going
concern, but that as a result of the timing of the tender
could not
secure the necessary certificates in its own name, it was appropriate
to grant it an opportunity to submit same later.
[40]
It would therefore appear that during the course of the evaluation
process, PetroSA received an unequivocal indication from
SANAS that
Vumela (not PBA) had been accredited to provide the services
required. PetroSA was therefore satisfied that it
had the
necessary documentation in relation to Vumela’s accreditation
as a quality-control and approved-inspection-authority
services
provider, in accordance with the Tender Notice, which provided that –
“
documentary
proof regarding any tender submission will be submitted to the
satisfaction of PetroSA when called upon to do so
”.
DoL
Approval and the PER Certificates
[41]
The tender questionnaire indicated that each bidder had to provide “
a
copy of its Department of Labour…certificate, proving [it] to
be an Approved Inspection Authority’
. This is defined above
as the PER certificate.
[42]
The purpose of this requirement was to ensure that the tender would
ultimately be awarded to a bidder accredited by the Department
of
Labour as an “
approved
inspection authority
”
under the OHASA, and the
Pressure Equipment Regulations
promulgated
thereunder. This was important because the inspection services can
only lawfully be provided by a duly accredited entity.
PetroSA was ultimately provided with
Vumela’s certificate, effective from 17 June 2016.
Vumela’s bid did not
include this certificate, it included a
certificate issued to PBA.
[43]
Abet avers that, because Vumela’s bid did not include a DoL
certificate in its own name, the bid failed to comply with
a
mandatory and material ‘pre-qualification condition’ of
the tender, and that its bid should therefore have been declared
non-responsive. Abet contends further that PetroSA’s failure to
declare the bid non-responsive amounted to an irregularity
in the
tender process.
[44]
PetroSA placed emphasis on the fact that Vumela could only apply for
the PER certificate after it obtained the AIA certificate.
It would
seem that, following the issuing of the AIA certificate, the PER
certificate is a
fait accompli,
and all that is required for
the certificate to be issued is an email to the DoL, the SANAS
certificate, and requesting that the
PER certificate be issued. It
appears to have been common cause that no additional requirements
have been imposed by DoL in terms
of
s 7
of the
Pressure Equipment
Regulations, adopted
under the OHASA.
[45]
Vumela addressed emails to PetroSA on 8 April 2016 and in May 2016
stating the steps which it had taken, and advising that
it was still
awaiting the PER certificate.
[46]
The PER certificate was sent by DoL to Vumela on 8 July 2016, and
Vumela sent the certificate to PetroSA on 11 July 2016. The
PER
certificate was valid with effect from 17 June 2016, two weeks before
the award was made.
[47]
PetroSA argued that, in the peculiar circumstances in which Vumela
found itself, it was not unfair nor irregular for PetroSA
to accept
that there was substantial compliance with the requirement, and that
the purpose of the requirement was fulfilled, and
to the extent that
Vumela was treated differently, the different treatment justified.
Vumela’s
B-BBEE Status
[48]
Abet took issue with Vumela’s B-BBEE status in its founding
papers but appeared, wisely, to abandon this issue during
argument.
[49]
Vumela submitted, as part of its bid, an affidavit signed by Mr
Arvind Magan, stating that, as at February 2016, Vumela was
an Exempt
Micro Enterprise (‘EME’) and because it was 100%
black-owned, it qualifies for a Level 1 B-BBEE.
[50]
It appears that there is no merit to this ground of review and it is
accordingly not necessary to deal with it further.
THE
LAW APPLICABLE TO PUBLIC PROCUREMENT DISPUTES – THE
ALLPAY
APPROACH
[51]
I now turn to deal with the prevailing common law position in matters
such as these. In
Allpay
Consolidated Investment Holdings (Pty) Ltd v Chief Executive Officer,
South African Social Security Agency, and Others
[1]
(‘
Allpay’)
,
the Constitutional Court formulated the correct approach to be
followed in procurement matters.
[52]
This landmark judgment provides invaluable guidance regarding the
process which this court is required to follow in determining
whether
a reviewable irregularity has been committed, and, if so, the remedy
which should follow.
[53]
In
Allpay
the
Constutional Court expressed its disagreement with the
dictum
of
the Supreme Court of Appeal (‘SCA’) to the effect that it
would be prejudicial to the public interest if the law
was to
invalidate public contracts for ‘
inconsequential
irregularities’.
On
the approach of the SCA, an irregularity is inconsequential when, ‘
on
a hindsight assessment of the process, the successful bidder would
likely still have been successful despite the presence of
the
irregularity.
’
[2]
[54]
Allpay
held that the proper legal approach is as follows:
‘
(a)
The suggestion that
'inconsequential irregularities' are of no moment conflates
the test for irregularities and their import;
hence an assessment of
the fairness and lawfulness of the procurement process
must be independent of the outcome
of the tender process.
(b)
The materiality of compliance with
legal requirements depends on the extent to which the purpose of the
requirements is attained.
(c)
The constitutional and legislative
procurement framework entails supply chain management prescripts that
are legally binding.
(d)
The fairness and lawfulness of the
procurement process must be assessed in terms of the provisions of
the Promotion of Administrative
Justice Act
(PAJA).
(e)
Black economic empowerment
generally requires substantive participation in the management and
running of any enterprise.
(f)
The remedy stage is where
appropriate consideration must be given to the public interest in the
consequences of setting the procurement
process aside.’
[55]
To the extent that it was suggested by the SCA that the public
interest in procurement matters requires greater caution in
finding
that grounds for review existed in a given matter, the Constitutional
Court found that such an approach seemed detrimental
to important
aspects of the procurement process:
‘
First,
it undermines the roles procedural requirements play in ensuring even
treatment of all bidder. Second, it overlooks that
the purpose of a
fair process is to ensure the best outcome.
[3]
’
[56]
Regarding the requirement of materiality, the Constitutional Court
found that ‘
the
irregularity must be legally evaluated to determine whether it
amounts to a ground of review under PAJA. This legal evaluation
must,
where appropriate, take into account the materiality of any deviance
from legal requirement, by linking the question of compliance
to the
purpose of the provision, before concluding that a review ground
under PAJA has been established.
[4]
’
[57]
Perhaps one of the most decisive findings in the
Allpay
judgment
is that any potential practical difficulties that may flow from
declaring the administrative action constitutionally invalid
must be
dealt with not at the stage when it is determined whether a ground
for review exists, but under the just and equitable
remedies provided
for by the Constitution and PAJA.
[58]
The
Allpay
approach
also took due account of the move away from the strict mechanical and
formalistic approach adopted by our courts previously.
Formal
distinctions were drawn between ‘mandatory’ or
‘peremptory’ provisions on the one hand and ‘directory’
on the other. Strict compliance with the former was required for the
administrative action to be considered valid, and only substantial
or
even non-compliance if the provisions was directory in nature. The
court held that the ‘
strict
mechanical approach has been discarded. Although a number of factors
need to be considered in this kind of enquiry,
the
central element is to link the question of compliance to the purpose
of the provision
..This
is not the same as asking whether compliance with the provisions will
lead to a different result.’
[5]
[59]
A similar approach was adopted by the SCA in
Millennium
Waste Management (Pty) Ltd v Chairperson Tender Board: Limpopo
Province and Others
[6]
,
where the Court had to grapple with whether the failure to sign a
declaration constituted a basis for disqualifying a bidder.
Finding that the bidder should not have been disqualified, Jafta JA
stated that “
[i]
t
seems to me that what is of paramount importance
is the nature
of the information furnished and not the signature.
”
[7]
[60]
In support of its arguments that the failure to ensure that Vumela
was duly accredited in its own name and provided the requisite
certificates before the bid closed constituted material and
reviewable irregularities, Abet relied
inter
alia
on
the decision of the SCA in
Dr
JS Moroka Municipality and Others v Betram (Pty) Ltd and Another
[8]
(‘Moroka’).
The
central issue in this case was whether the
municipality
was justifiably entitled to disqualify a tender supported by a copy
of a tax clearance certificate when the invitation
to tender had
called for an original certificate to be provided. This case of
course preceded, and has been overtaken by,
Allpay.
Moreover
it is distinguishable from the present application, as it concerned
non-compliance with a statutory requirement, which
the Municipality
had no power to condone. In the present matter the accreditation
requirement is in terms of the tender proposal,
and is not a
statutory requirement, and the applicable procurement policy provides
a power to the PetroSA Procurement Committee
to condone
non-compliance with policies or procedures. I find myself in
agreement with counsel for PetroSA that, in any event,
the
formalistic approach was effectively overruled by the Constitutional
Court in
Allpay.
[61]
Abet further placed reliance on the decision of the SCA in
Metro
Projects CC and Another v Klerksdorp Local Municipality and
Others
[9]
(‘Metro Projects’),
in
which a bidder was permitted by a municipal official to fundamentally
increase the competitiveness of its bid after the closing
date, by
changing the floor area size of the houses it proposed to build. This
is very different to the present matter, where Vumela
disclosed the
transition from PBA and the difficulties with obtaining accreditation
in its own name from the outset. There is no
suggestion of deception
or corruption on the part of PetroSA, only that, as a bidder, Vumela
was treated differently and the condonation
of the failure to comply
with the initial technical requirements constituted a material and
reviewable irregularity.
[62]
In the recent decision of the SCA in
Aurecon
v Cape Town City
[10]
(‘Aurecon’)
irregularities
were said to have arisen from the City of Cape Town’s (‘City’)
officials’ ignorance as to
the requirements of the various
stages of the consideration and award of tenders, and, similarly to
the case at hand ‘
did
not entail any fraudulent, dishonest or corrupt behavior on the part
of the City, any of its official or [Aurecon].’
[63]
The basis for the review was that Aurecon had been afforded an unfair
advantage over other tenderers as the final scope of
work that formed
part of the bid specifications for the tender was based directly on
the draft scope of work prepared by the joint
venture of which
Aurecon was a part, and Aurecon was included in internal City email
communication concerning the pending tender.
Further complaints were
raised relating to the scoring participation, the failure of the Bid
Evaluation Committee (‘BEC’)
to meet as a collective to
evaluate the functional scoring, the participation of an unauthorised
member in the scoring, that a
BEC meeting was not properly
constituted, that Aurecon was permitted to withdraw a qualification,
that the BEC evaluated Aurecon’s
bid after the bid validity
period had expired, and that the BEC’s report to the Bid
Approval Committee (‘BAC’)
contained factual material
errors without which the BAC may not have made the award.
[64]
At the risk of this judgment being excessively verbose, I set out the
alleged irregularities in some detail, in order to illustrate
how the
number of and the nature of the complaints which were raised
regarding the tender procedure, in contrast to the comparably
limited
issues raised in the present review.
[65]
In
Aurecon,
the court
a quo
found that in view of
Aurecon’s prior involvement in the preparation of the draft
scope of works, the inclusion of its tender
rendered the procurement
process unfair, and constituted a ground for review under s 6(2)
(c)
of PAJA. The court further found that the BAC’s failure to
take into account relevant considerations when it considered
Aurecon’s
tender resulted in the reviewing and setting aside of
its decision in terms of s 6(2)(
e)
(iii) of PAJA.
[66]
The SCA dealt with each of the alleged irregularities in turn. It
found that:
‘
none
of the so-called irregularities constituted irregularities at all. In
any event, it is firmly established in our law that administrative
action based on formal or procedural defects is not always invalid
and that legal validity is concerned not with technical but
also with
substantial correctness which should not always be sacrificed for
form. I do not understand
Allpay
to overturn this
principle. There the Court pointed out that: “Once a particular
administrative process is prescribed by law,
it is subject to the
norms of procedural fairness codified by PAJA. Deviations from the
procedure will be assessed in terms of
those norms of procedural
fairness. That does not mean that administrators may never depart
from the system put in place or that
deviations will necessarily
result in unfairness. But it does mean that, where administrators
depart from procedures, the basis
for doing so will have to be
reasonable and justifiable, and the process of change must be
procedurally fair.’
[67]
The Constitutional
Court recently dismissed an application for leave to appeal against
the SCA’s decision in Aurecon.
Statutory
framework
[68]
Section 217(1) of the Constitution provides as follows:
‘
217
Procurement
(1)
When
an organ of state in the national, provincial or local sphere of
government, or any other institution identified in national
legislation, contracts for goods or services, it must do so in
accordance with a system which is
fair,
equitable, transparent, competitive and cost-effective.’
[11]
[69]
In terms of section 1 of the Preferential Procurement Policy
Framework Act (the ‘Procurement Act’)
[12]
an ‘
acceptable
tender’
is
any tender ‘
which,
in all respects, complies with the specifications and conditions of
tender as set out in the tender document.’
Section
2(1)(b) of the Procurement Act stipulates that an organ of state must
determine its preferential procurement policy within
the framework
provided for therein. In terms of section 2(1)(f) ‘
the
contract must be awarded to the tenderer who scores the highest
points, unless objective criteria in addition to those contemplated
in paragraphs (d) and (e) justify the award to another tenderer.’
This
is the only basis on which a contract may be awarded to a tenderer
that did not score the highest total number of points.
Grounds
of review
[70]
I turn now to deal with the grounds relied upon by Abet for the
reviewing and setting aside of PetroSA’s decision to
award the
tender to Vumela.
[71]
Abet contended that the application for final relief fell to be
decided in the context of the Constitution, PAJA, the Procurement
Act
and PetroSA’s own policies and procedures.
[72]
Ms. Alexander, who deposed to the affidavit on behalf of Abet,
submitted that PetroSA’s decision to award the tender
is
subject to review on the following grounds as provided for in term of
section 6(2) of PAJA:
‘
6
Judicial review of administrative action
(1)
Any
person may institute proceedings in a court or a tribunal for the
judicial review of an administrative action.
(2)
A
court or tribunal has the power to judicially review an
administrative action if-
(a)
the administrator who took it-
(i)
….
(ii)
…..
(iii)
was biased or reasonably suspected of bias;
(b)
….
(c)
the action was procedurally unfair;
(d)
the action was materially influenced by an error of law;
(e)
the action was taken-
(i)
….
(ii)
for an ulterior purpose or motive;
(iii)
because irrelevant considerations were taken into account or relevant
considerations were not considered;
(iv)
because of the unauthorised or unwarranted dictates of another person
or body;
(v)
in bad faith; or
(vi)
arbitrarily or capriciously;
(f)
the action itself-
(i)
…
(ii)
is not rationally connected to-
(aa)
the purpose for which it was taken;
(bb)
the purpose of the empowering provision;
(cc)
the information before the administrator; or
(dd)
the reasons given for it by the administrator;
(g)
the action concerned consists of a failure to take a decision;
(h)
the exercise of the power or the performance of the function
authorised by the empowering provision, in pursuance of which the
administrative action was purportedly taken, is so unreasonable that
no reasonable person could have so exercised the power or
performed
the function; or
(i)
the action is otherwise unconstitutional or unlawful.’
[73]
Abet contends that the events which transpired after the closing date
of the tender, including the belated issuing of the necessary
certificates, should not have been taken into account by PetroSA, and
that by taking such facts into account in treating Vumela’s
tender as responsive and ultimately awarding the tender to it,
PetroSA acted in a manner that is ‘
unfair, inequitable and
untransparent’.
[74]
Abet averred that:
’
7.1.
By taking into account a SANAS certificate “under the name of”
someone else, the First Respondent clearly acted
in a biased manner,
which was in bad faith, arbitrary and capricious.
7.2
By awarding the QC tender to the Second Respondent in circumstances
where the Second Respondent did not have its own SANAS certificate,
the First Respondent made a decision that was procedurally unfair and
materially influenced by an error of law.’
[75]
In its supplementary affidavit, Abet points out that, after
considering the sale of business agreement entered into between
PBA
and Vumela, it could not find any clause to the effect that there
would be any transfer of accreditation certificates, or that
a
certificate could be provided by Vumela in the name of PBA, or that
there would be a name change as far as any of these entities
are
concerned. It went on to say that as a transfer of accreditation is
prohibited in terms of the SANAS regulations, such a clause
would
have been unenforceable.
[76]
Based on the above, Abet contended that PetroSA’s decision to
treat Vumela’s tender as responsive, on the strength
of a SANAS
certificate that was provided ‘
under the name of’
another entity, was biased (s 6(a)(iii) of PAJA), based on
irrelevant considerations (s 6(2)(d)(iii)), in bad faith (s
6(2)(d)(v)),
and/or arbitrary or capricious (s 6(2)(d)(vi)).
Moreover, the decision was clearly irrational within the meaning of s
6(2)(e)(ii)
of PAJA.
[77]
In response to the allegations regarding the alleged irregularities,
PetroSA
pointed
out that the Evaluation Team only determined that Vumela’s bid
was technically compliant after taking all the relevant
steps in the
process, including consideration of the unequivocal communication
from SANAS regarding Vumela’s unconditional
accreditation. Put
differently, the Evaluation Team did not consider Vumela’s bid
to be responsive after having conducted
the desktop evaluation. It
determined that the bid should be investigated. The ’tick’
on the questionnaire merely indicated
that Vumela’s bid
contained an accreditation by SANAS under the Accreditation Act.
[78]
Lastly, Abet submitted that there existed exceptional circumstances
justifying the court to grant the licence, effectively
substituting
its decision for that of PetroSA’s, in terms of s 8(1)(c)(ii)
of PAJA. In support of this contention it stated
that Abet would be
the only remaining responsive tender, and as it has passed its due
diligence and is therefore properly qualified
and able to perform the
necessary functions pursuant to the award of the tender, such award
is accordingly a foregone conclusion
[13]
.
Did
the failure to provide the necessary certificates prior to the
closing date constitute a material and reviewable irregularity?
[79]
The purpose of requiring bidders to be accredited by SANAS was to
ensure that the service provider, to whom the tender was
ultimately
awarded, would have the requisite capacity and be appropriately
skilled to perform the services required by PetroSA.
It is apparent
that the requirement for the bidder to provide copies of their
accreditation certificate or risk elimination was
not because of the
importance of the certificate as such, but because of the
accreditation of the entity which would be providing
the services by
South Africa’s sole accrediting authority.
[80]
The facts regarding the takeover by Vumela of the QS division of PBA,
including all of its employees and assets, were properly
disclosed by
Vumela to PetroSA when it submitted its bid before the closing date.
There was no suggestion that Vumela was deceptive,
as may have been
argued if it had attempted to pass off PBA’s accreditation as
its own without disclosing the sale of business
agreement.
[81]
Subsequent to the closing date and after only two responsive tenders
remained, PetroSA conducted further investigation and
received an
unequivocal indication from SANAS that Vumela, and not PBA, had been
accredited to provide the services required.
[82]
Abet has failed to set out facts which support its argument that
PetroSA acted in a biased manner. PetroSA led evidence of
steps taken
by its evaluation team to investigate certain aspects of other bids
after the closing date and before such bids were
declared to be
non-responsive.
[83]
The most recent judgments in the SCA and the Constitutional Court,
dealing with procurement matters enjoin the courts to adopt
a
purposive approach. By virtue of the assets and the employees which
it acquired from PBA, which was duly accredited, Vumela was
able to
provide the services required by PetroSA, which was the very purpose
of the accreditation. Significantly, there was no
further assessment
undertaken and Vumela was not required to do anything further to
obtain accreditation in its own name for either
the AIA certificate
or the PER certificate. Accreditation in Vumela’s name in due
course appears to have been a
fait accompli
therefore at the
time of the submission of its bid, and it was accredited by SANAS in
its own name prior to the tender being awarded
to it, and by DoL
prior to the contract being entered into.
[84]
I am accordingly satisfied that the purpose of the requirement for
the SANAS and DoL certificates to be provided was fulfilled.
There is
no cogent reason why PetroSA needed to be satisfied that a party was
duly accredited before the closing date of the bid.
It had to be
satisfied before the party to provide services contracted to do so
for the purpose of this tender requirement to be
fulfilled.
[85]
In my view the allegations of
mala fides,
bias and
capriciousness on the part of the PetroSA procurement officials are
entirely without merit. No factual foundation has been
laid to
support these allegations. I agree with PetroSA that had its
officials acted in bad faith, they would hardly have corrected
their
own calculation errors.
[86]
It appears that, to the contrary, PetroSA acted rationally, and
without arbitrariness or caprice. It evaluated the available
information and documentation and engaged with various bidders, where
necessary, to solicit further information in order to avoid
unnecessarily excluding any service providers and thereby diminishing
the competitiveness of the process.
[87]
I am persuaded by PetroSA’s argument that it made its decision
for sound reasons. It awarded the tender to Vumela because
it was the
cheapest, technically and B-BBEE compliant, bidder. The decision to
award the tender therefore cannot be impugned on
the basis that it
was irrational, arbitrary, motivated by bias or capricious.
[88]
Abet placed reliance not only on
Moroka
supra, but also on
Metro Projects
supra
.
It emphasised that PetroSA and
Vumela do not contend that Vumela’s lack of accreditation and
failure to attach the necessary
documents to its tender was merely a
‘
mistake’
or ‘
oversight’
that
could be corrected. Abet’s complaint is based on the fact that
Vumela was not registered with or approved by the relevant
authorities as at the closing date of the tender, and that its
‘
accordingly did not meet the tender specifications at the
time’.
[89]
In
Metro
Projects
supra
the SCA set aside the decision to award a tender
inter
alia
because
the decision had been unfair. Distinguishable from the facts in the
present case, in that case a high-ranking official purported
to give
one of the tenderers an opportunity to augment its bid, not to comply
belatedly with the tender requirements, but to submit
a more
attractive bid after the other bids had been submitted. The augmented
offer was first concealed from and then represented
to the relevant
committee as having been the tender offer. It was accepted on that
basis. The court cited the decision in
Logbro
Properties CC v Bedderson NO and Others
[14]
,
where
Cameron JA referred to the ‘
ever-flexible
duty to act fairly’
that
rested on a provincial tender committee. Conradie JA in
Metro
Projects
went
on to say:
‘
Fairness
must be decided on the circumstances of each case. It may in given
circumstances be fair to ask a tenderer to explain an
ambiguity in
its tender; it may be fair to allow a tenderer to correct an obvious
mistake;
it
may,
particularly
in a complex tender, be fair to ask for clarification or details
required for its proper evaluation. Whatever is done
may not cause
the process to lose the attribute of fairness or, in the local
government sphere, the
attributes
of transparency, competitiveness and cost-effectiveness.
’
[15]
The
court held that in the circumstances of the case ‘
the
deception stripped the tender process of an essential element of
fairness: the equal evaluation of tenders. Where subterfuge
and
deceit subvert the essence of a tender process, participation in it
is prejudicial to every one of the competing tenderers
whether it
stood a chance of winning the tender or not.’
[16]
[90]
In the present case there was no deception, nor was Vumela given an
undue advantage by being afforded an opportunity to augment
its bid
in order to make it more attractive to the PPC. The PPC was made
fully aware not only of Vumela’s transitional status,
but of
all the issues relating to its accreditation with SANAS and the DoL.
If it had refused to give due consideration to these
issues and
disqualified Vumela’s bid without further investigation, it may
well have committed a reviewable irregularity.
[91]
The question to be answered was succinctly framed by O’Regan J
in
African
Christian Democratic Party v Electoral Commission
[17]
as
being
‘
whether
what the applicant did constituted compliance with the statutory
provisions viewed in the light of their purpose.’
[18]
In
applying the principles enunciated in
Allpay
,
if one proceeds from the premise that Vumela did not comply
(notwithstanding the fact that it had acquired and was effectively
trading as a business which was fully compliant), then the question
which follows is was the purpose of the requirement still attained?
[92]
To my mind, for all practical purposes, there was compliance. But for
the timing of the effective date of the sale agreement,
and the
closing date of the bid, Vumela would have been duly accredited in
its own name. The purpose of the requirement was substantially
met,
and the non-compliance can therefore not be said to be material.
[93]
To find otherwise would be to elevate form over substance. This
strict approach no longer finds favour in our law. In
Minster
of Social Development and others v Phoenix Cash & Carry-PMB
CC
[19]
Heher
JA, in delivering the judgment of the Court, stated as follows:
‘
Without
attempting a comprehensive survey of circumstances which will offend
against section 217(1) certain general observations
are demonstrated
as true by the facts of the present case-
…
a
process which lays undue emphasis on form at the expense of substance
facilitates corrupt practice by providing an excuse for
avoiding the
consideration of substance; it is inimical to fairness,
competitiveness and cost-effectiveness. By purporting to distinguish
between tenderers on grounds of compliance or non-compliance with
formality, transparency in adjudication becomes an artificial
criterion. In saying this I do not suggest that the tender board is
not entitled to prescribe formalities which, if not complied
with,
will render the bid invalid, provided both the prescripts and the
consequences are made clear. What I am concerned to stress
is the
need to appreciate the difference between formal shortcomings which
go to the heart of a process and the elevation of matters
of
subsidiary importance to a level which determines the fate of the
tender.
It
follows that a public tender process should be so interpreted and
applied as to avoid both uncertainty and undue reliance on
form,
bearing in mind that the public interest is, after giving due weight
to preferential points, best served by the selection
of the tenderer
who is best qualified by price.’
[94]
Abet did not make any attempt to explain why it contends that the
alleged irregularity resulted in the purpose of the conditions
not
being fulfilled. There is nothing before me to support the
formalistic interpretation of the tender documents contended for
by
Abet.
[95]
If Abet’s argument is not that the purpose of the requirement
was not met, but rather that Vumela was treated differently
to other
bidders, such an argument would fail because our Constitution
embraces substantive equality (taking different circumstances
into
account) and not formal equality (treating bidders the same
regardless of circumstances). As out Constitutional Court remarked,
the ‘
logical
corollary of the principle that “like should be treated like”,
is that treating unlike alike may be as unequal
as treating like
unlike.’
[20]
[96]
It was submitted by Vumela that the only possible basis on which the
Court can find the award to be reviewable is if it finds
that PetroSA
should not have made the award until it was in possession of Vumela’s
PER certificate. Vumela’s contention
is that if the award is
set aside on this basis, and remitted, then the result of the
remittal would be a foregone conclusion,
i.e. it would have to be
awarded to Vumela again. There is no suggestion that Vumela’s
PER certificate is defective in any
way.
[97]
For the above reason Vumela submitted that even if this Court were to
find that the award was unlawful, the Court should, in
the exercise
of its discretion under s 8 of PAJA, decline to set the award aside
but merely declare the award to be unlawful.
[98]
As I do not intend to make this order, it is not necessary to set out
the grounds relied upon by Vumela for an order that the
award not be
set aside. However, even if I am wrong and the irregularity was
material and rendered the process unlawful, I would
in the peculoiar
circumstances of this case and in the exercise of my discretion,
decline to set aside the award.
[99]
In conclusion, I am of the view that the failure by Vumela to furnish
the AIA and PER certificates timeously amounts to an
irregularity,
however having evaluated such irregularity and for all the reasons
set out above, I find that such irregularity does
not amount to a
ground of review under PAJA.
[93]
I see no reason why costs should not follow the result.
Order
[94]
In the result, I make the following order:
The
application is dismissed, with costs.
________________
HOLDERNESS,
AJ
ACTING JUDGE OF THE HIGH
COURT
APPEARANCES
For
the Applicant:
Adv R B Engela
Instructed
by:
Lombard Kotze Inc.
134
Merriman Street
GEORGE
c/o
Davidson England Attorneys
First
Floor, Equity House
107 St
Georges Mall
Cnr
Church Street
CAPE
TOWN
For
the First Respondent:
Adv T Masuku
Instructed
by:
Cliffe Dekker Hofmeyr Inc.
11
Buitengracht Street
CAPE
TOWN
For
the Second Respondent:
Adv J de Waal
Instructed
by:
Bowmans – Cape Town
22
Bree Street
CAPE
TOWN
Date(s)
of Hearing:
9 November 2016 and 8 December 2016
Judgment
delivered on:
8 March 2017
[1]
2014 (1) SA
604 (CC)
[2]
Allpay n
2
at
para [19]
[3]
Allpay
at
paras [23] – [24]
[4]
Allpay
at
para [28]
[5]
Emphasis
added
[6]
2008(2) SA
481
[7]
Millenium
Waste
n
8, para [20]
[8]
[2013]
ZASCA 186; [2014] 1 All SA 545 (SCA)
[9]
2004 (1) SA
16 (SCA)
[10]
2016 (2) SA
199 (SCA)
[11]
Emphasis
added
[12]
5 of 2000
[13]
See
generally
Trencon
Construction (Pty) Ltd v Industrial Development Corporation of South
Africa Limited and Another
2015
(5) SA 245
(CC), especially paragraphs 34 to 35
[14]
2003 (2) SA
460
(SCA), paras [8] and [9] at 466H-467C
[15]
Emphasis
added
[16]
Metro
Projects
supra
at [13] and [14], page 21
[17]
[2006] ZACC 1
;
2006 (3) SA 305
(CC) at para
[25]
[18]
Emphasis
added, footnotes omitted
[19]
[2007] 3
All SA 115
(SCA) at para [2]
[20]
President of the RSA v Hugo
1997 (4) SA 1
(CC), fn 63