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[2018] ZAWCHC 7
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ABET Inspection Engineering (Pty) Ltd v The Petroleum Oil and Gas Corporation of South Africa and Another (A280/2017) [2018] ZAWCHC 7 (1 February 2018)
Republic
of South Africa
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)
Case
No: A 280/2017
Before: The Hon. Ms Justice Allie
The Hon. Mr Justice Binns-Ward
The
Hon. Ms Justice Mantame
Hearing: 29 January
2018
Judgment:
1 February 2018
In
the matter between:
ABET
INSPECTION ENGINEERING (PTY)
LTD
Appellant
and
THE
PETROLEUM OIL AND GAS CORPORATION
OF
SOUTH
AFRICA
First
Respondent
VUMELA
INDUSTRIAL CONSULTANCY
(PTY)
LTD
Second
Respondent
JUDGMENT
BINNS-WARD J (ALLIE and MANTAME JJ
concurring):
[1]
The
appellant has come on appeal from the judgment of Holderness AJ
dismissing its application for the review and setting aside
of the
decision by PetroSA (the first respondent) to accept the tender of
Vumela (the second respondent) for the provision of quality
control
and approved inspection authority services at certain of PetroSA’s
installations with effect from the end of August
2016.
[1]
The appeal to the full court was brought with the leave of the judge
at first instance.
[2]
Several
tenders were received in response to the invitation to tender, but
after an initial vetting process, only those of the appellant
and
Vumela were found to have been responsive. Vumela was awarded
the tender contract because its tender achieved the highest
score in
the tender evaluation process. Its tender price was just over
R4,6 million lower than that in the competing
tender submitted
by the appellant. No issue was taken with the scoring of the
tenders. The appellant’s complaint
was that Vumela’s
tender had actually been non-responsive, in that it had not been
accompanied by a certificate of accreditation
by SANAS (the South
African National Accreditation System, an institution established in
terms of s 3 of the ‘Accreditation
Act’
[2]
)
issued in Vumela’s name, or a certificate by the Department of
Labour, in terms of the
Occupational Health and Safety Act 85 of
1993
, certifying Vumela as an approved authority for the inspection
of pressure equipment.
[3]
The appellant contends that Vumela’s tender should consequently
have been disqualified from consideration.
[3]
PetroSA is an organ of state. It is
trite that only an ‘
acceptable
tender
’ within the meaning of the
Preferential Procurement Policy Framework Act 5 of 2000 (‘the
PPPFA’) – an enactment
contemplated by s 217(3) of
the Constitution – can lawfully be accepted by an organ of
state. Moreover, if it
awards a contract pursuant to a tender
process, an organ of state is obliged, in terms of s 2(1)(f) of
the PPPFA, to conclude
the agreement with the tenderer who scored the
highest points, unless objective criteria justify the award to
another tenderer.
It has not been suggested that the contract
in the current matter should have been awarded to anyone but the
highest scoring tenderer.
[4]
An ‘
acceptable
tender
’ is by definition one
‘
which, in all respects, complies
with
the specifications and conditions of tender as set out in the tender
document
’
.
[4]
In
Chairperson:
Standing Tender Committee and Others v JFE Sapela Electronics (Pty)
Ltd and Others
,
it was held
that
‘
[t]
he
acceptance by an organ of state of a tender which is not ‘acceptable’
within the meaning of the
[PPPFA]
is
therefore an invalid act and falls to be set aside. In other words,
the requirement of acceptability is a threshold requirement.
’
[5]
Judicial review is a discretionary remedy, however, and therefore it
does not necessarily follow that an invalid act will
in fact be set
aside.
[6]
[5]
It
was stressed in
Allpay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer of the South African Social Security Agency
and
Others
[7]
that the fairness and lawfulness of a state procurement process must
be assessed independently of its outcome. No discretion
is
involved in that assessment; the answer is determined by law. A
finding of unlawfulness must follow if the evidence establishes
a
ground of review in terms of s 6(2) of the Promotion of
Administrative Justice Act 3 of 2000 (‘PAJA’).
[6]
The
Constitutional Court explained that ‘[t]
he
proper approach
[in
matters of this nature]
is
to establish, factually, whether an irregularity occurred. Then
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 requirements, by linking the question of
compliance to the purpose of the provision, before
concluding that a
review ground under PAJA has been established
’.
[8]
[7]
It is
clear that in its treatment of ‘materiality’ the
Constitutional Court endorsed the principle that substance should
prevail over form. Thus, if the irregularity or apparent
deviation from the legal requirements has not substantively detracted
from or undermined the purpose or object of the relevant governing
provision, a court might conclude upon contextual evaluation
that it
does not make out a cogent basis for judicial review.
[9]
That entails a legal determination. If it is made adversely to
an applicant’s case, that is the end of the matter.
[8]
Assuming a finding of unlawfulness is made,
the court must acknowledge that by making an appropriate declaratory
order. The
outcome or result of the unlawful administrative
action then falls to be considered in the context of determining an
appropriate
remedy. That is where s 8 of PAJA comes to the
fore. It might be that in the peculiar context of the given
case
that it would nevertheless not be in the public interest to set
the process aside. It is in respect of this aspect of the
judicial review process that the court exercises its discretionary
jurisdiction.
[9]
In
the current matter the appellant’s counsel has argued (with a
focus that was absent in the founding papers) that the review
was
founded on s 6(2)(b) of PAJA: namely, that ‘
a
mandatory and material procedure or condition prescribed by an
empowering provision was not complied with
’:
an unacceptable tender was scored, notwithstanding that it had failed
to satisfy the threshold requirement.
[10]
Accordingly, the questions that fell to be determined by the court a
quo were (i) was Vumela’s tender an ‘acceptable
tender’ and (ii) if it was not, should the award of the
contract to Vumela be set aside.
[10]
Having
summarised the legal principles applicable to the adjudication of the
appellant’s review challenge, it is time now
to examine the
factual context in which the court a quo had to bring those
principles to bear. The appellant has not attacked
the
description of the salient facts in the judgment a quo, which is
reported on SAFLII.
[11]
The detail of the matter can be found there. An abbreviated
recitation of the factual background will therefore do
for the
purposes of this judgment.
[11]
The
invitation to tender was issued on 4 March 2016. Tenders had to
be submitted on or before 31 March 2016, and be ‘in
accordance with’, amongst other things, the ‘Draft
Consultancy Agreement’ that had been incorporated by reference
in the tender notice. A ‘special condition of contract’
in the draft consultancy agreement indicated that the
successful
tenderer would be required to ‘
ensure
it maintains its SANAS accreditation to SANS 10227
[12]
and
ISO 17020
[13]
through
out the duration of the contract
’.
The draft agreement also provided that ‘
Suspension
of the Consultant’s SANAS accreditation shall result in
immediate cancellation of this contract …
’.
[12]
The tenders had to be submitted
electronically via a portal on PetroSA’s procurement website.
The tender notice advised
that tenders had to be submitted in
accordance with the online terms and conditions. The online
requirements included the
completion by tenderers of a technical
questionnaire which included a section that read as follows:
SCOPE OF WORK
REQUIREMENTS
ELIMINATION PHASE –
TENDERERS WILL BE ELIMINATED FROM FURTHER EVAULATION FOR FAILURE TO
COMPLY WITH ANY OF THE FOLLOWING
Tenderer to provide a
copy of its SANAS accreditation certificate. Is certificate
attached?
o
No
·
Yes
Tenderer to provide a
copy of its Department of Labour (DOL) and/or Department of Mineral
Resources (DMR) certificate proving tenderer
to be an Approved
Inspection Authority. Is the certificate/s attached?
o
No
·
Yes
[13]
The aforementioned requirements clearly
signalled that the stipulated accreditation and certification were
absolutely essential
qualifications for any contractor to be able to
undertake the quality control work that had been put out to tender;
hence the intimation
that if the accreditation were suspended the
contract would be cancelled immediately. It was also common
ground that it was
not possible to obtain certification as an
approved inspection authority in the relevant respect unless one had
first been afforded
the stipulated accreditation. The
importance in the tender process of the tenderer’s presentation
of the accreditation
and certification documents quite obviously lay
not in the documents as of themselves, but in the assurance they
provided that
the tenderer’s organisation or facility had been
determined by the relevant statutory authorities to be qualified to
do the
work.
[14]
Vumela
had purchased as a going concern the business through which it sought
to obtain the tender only a few days before the tender
notice was
published. The going concern was a business that performed the
examination of processes and plant to determine
their conformity with
specific requirements, or on the basis of professional judgment,
general requirements: ‘
quality
control
’
in everyday parlance;
[14]
the business of an ‘
inspection
body
’
in the language of the Accreditation Act.
[15]
Indeed, it was only by reason of this acquisition that Vumela
possessed the capacity to take on the contract work that PetroSA
had
put out to tender.
[15]
It had bought the business from a company
that was referred to in the judgment at first instance by the acronym
‘PBA’.
The terms of acquisition gave Vumela the
right to use the PBA trademark and effectively to trade in the
business as PBA for
six months after the sale. The business was
accredited by SANAS to the specified standards and it was an approved
inspection
authority. The official documentation in this regard
had, of course, been issued in the name of the seller, PBA.
[16]
It
bears mention in this regard that in terms of the Accreditation Act
the issue of an accreditation certificate results in the
organisation
or facility to which it relates becoming an ‘
accredited
body
’
as defined in s 1 of the Act. The term denotes ‘
an
organisation or facility that has been accredited by SANAS …
’.
On the facts it is evident that it was the division in PBA’s
enterprise that had been accredited that was sold
to Vumela (i.e. the
business that would fall within the classification of an ‘
inspection
body
’
in the language of the Accreditation Act). In other words, the
res
vendita
was a part of PBA’s enterprise that had been found by SANAS, in
terms of s 22(2)(b) of the Accreditation Act, to have
met the
required criteria.
[16]
[17]
Section 23(4) of the Act provides that
an accreditation certificate is the property of SANAS,
not
of the accredited body. A certificate is therefore not
proprietary to the person who applied for it, but rather a document
that affords objective proof that a particular body, be it a testing
or verification laboratory or an inspection body as the case
might
be, has been found by SANAS to meet the required criteria for
accreditation.
Accreditation attaches
to the organisation or facility, not its owner.
[18]
It is convenient at this point to refer to
the appellant’s reliance on a SANAS document, described in its
the founding papers
as ‘SANAS regulation R01/05’.
It is not clear to me that the document is in fact a set of
regulations; no particulars
were furnished concerning its making or
promulgation. But nothing turns on that. Paragraph 1
thereof identifies its
purpose as follows:
The purpose of this
document is to define the requirements concerning the transfer of
South African National Accreditation System
(SANAS)
accreditation/compliance status. This document is applicable to
all divisions of SANAS and accredited laboratories
/ GLP compliant
facilities / bodies.
Paragraph 3 of the document bears the
subheading ‘Regulations’. The appellant relied in
particular on para. 3.2,
which provides:
SANAS shall not transfer
accreditation / compliance status from one accredited / compliant
body to another or from an accredited
/ compliant body to a
non-accredited body.
[19]
It
will be apparent from the description of the working of the
Accreditation Act in paragraphs [16]
- [17]
above that
the transfer of PBA’s accredited ‘Quality Services’
business to Vumela did not entail any transfer
of accreditation; it
involved, rather, a change of ownership of the ‘
accredited
body
’.
Indeed, it is clear from para. 3.4 read with para. 3.3 and 3.5
of document R01-05 that PBA and/or Vumela were
obliged to advise
SANAS of the change of ownership and that SANAS’ right to carry
out a reassessment as a consequence of
the change was reserved.
Para. 3.4 provides that the accreditation of an accredited body might
be suspended should it fail
to inform SANAS of any relevant change in
its organisational status or management.
[17]
As it was, it was evident from Vumela’s tender that SANAS
had been informed of the change of ownership of the business.
(Whilst not relevant to the acceptability of the tender, it
nevertheless bears mention anecdotally that the evidence established
that there was no resultant change in the nature of the
accreditation, save that a certificate of accreditation was issued in
Vumela’s name.)
[20]
The window period during which tenders
might be submitted in response to PetroSA’s tender notice gave
insufficient time for
Vumela to have the necessary accreditation and
certification documents for the business that it had acquired
re-issued in its own
name. That happened later when, in or
about early July 2016, SANAS issued a document certifying that
Vumela’s
business (or ‘facility’ to use the
language employed in the certificate) had been accredited with effect
from 17 March
2016. (SANAS had, however, previously
confirmed in April 2016, that its Approval Committee had granted
‘unconditional
accreditation’ in accordance with ISO/IEC
17020:2012 and SANS 10227:2012 to PBA ‘
now
Vumela Industrial Consultancy (Pty) Ltd
’.
It cited the existing Facility Accreditation Number - that is the
same number as that reflected on the certificate
of accreditation
that had been issued to PBA.) The Department of Labour informed
Vumela of its certification as an approved
inspection authority with
effect from 17 June 2016 by letter dated 7 July 2016.
The letter recorded that the certification
was ‘aligned’
to the accreditation of Vumela’s facilty under the
Accreditation Act.
[21]
Accordingly, when Vumela submitted its
tender, it put in the documents evidencing the accreditation and
certification that had been
issued in respect of the business when it
had been owned by PBA. It also included an explanatory letter
that PBA had addressed
to the existing clients of the business under
the subject heading ‘
Re: SANAS
Accreditation of Vumela Industrial Consultancy
’.
The part of the letter that was most material for present purposes
was a paragraph reading as follows:
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 functionaries at PetroSA who were
responsible for the initial assessment of the responsiveness of the
tenders that had been
submitted (the ‘evaluation team’)
were accordingly informed by the letter that Vumela had acquired the
Quality Services
business of PBA, that the business was currently
accredited, and that Vumela was in the process of engagement with
SANAS to obtain
the certificate of accreditation re-issued in its
name and, similarly, with the Department of Labour in respect of its
required
certification as a government approved inspection authority
in terms of the
Pressure Equipment Regulations.
[22
]
On
the basis of what I have set out in paragraphs [16]-[17]
above
concerning the operation of the Accreditation Act, it is clear that
in the circumstances the evaluation team would have been
entitled to
accept – assuming that the accredited organisation or
facility
[18]
that had belonged to PBA now belonged to Vumela – that the
tenderer’s business was an ‘
accredited
body
’
within the meaning of the Act. The evaluation team would also
understand why the attached certificates were in the
name of PBA
rather than Vumela. Were the team to have rejected the tender
as non-responsive in these circumstances they would,
in my view, have
acted wrongly. As explained earlier, the subject of
accreditation was the organisation or facility that
would perform the
inspection functions, not the people or entities who owned it. As
also mentioned, the Act expressly provides
that a certificate of
accreditation is not proprietary. I am not surprised in the
circumstances by the evidence that some
officials at SANAS were of
the view that it was unnecessary to change the existing Facility
Accreditation Number (LVUP017) and
sufficient merely to note a change
of owner.
[23]
There was no challenge to PetroSA’s
evidence that an appropriately accredited body would be given the
required authorisation
as an inspection body by the Department of
Labour as a matter of course. Indeed, the content of
regulation 7
of the
Pressure Equipment Regulations, quoted
at
para. 104 of the first respondent’s answering affidavit, bears
that out. The evidence adduced by PetroSA was that
‘[t]
he
Evaluation Team’s understanding …
was not only informed by the wording of the regulation, but also by
its experience
and its understanding of the prevailing industry norms
in the Approved Inspection Authority industry
.’
[24]
It would have frustrated, rather than
promoted, the objects of s 217(1) of the Constitution were the
evaluation team to have
disqualified the tender as non-responsive in
the circumstances when, on the face of matters, it was only the name
on the certificates
that required changing, there having been no
change in the character of the body which had been accredited and
certified.
There was nothing unfair, inequitable or opaque
about treating the tender as an acceptable tender in the
circumstances. On
the contrary, it would most obviously have
prejudiced competitiveness and cost-effectiveness not to do so.
I am not persuaded
that the appellant established any irregularity or
deviation from the legal requirements. But if I were wrong, its
nature
was so entirely formalistic that to hold that it gave rise to
a review ground would be to unjustifiably elevate form above
substance.
The irregularity, if there was one, was
incontestably immaterial.
[25]
The indicated precautionary enquiry by
PetroSA in the circumstances was to assure itself that the business
that had been acquired
by Vumela was indeed in substance that which
was the organisation or facility in respect of which PBA had applied
for and obtained
accreditation. This was done in the technical
evaluation phase of the consideration of the responsive tenders.
The
assurance was provided in the April 2016 letter from SANAS
referred to earlier in which it was advised that unconditional
approval
had been given for the accreditation of the facility in
Vumela’s name.
[26]
It is unnecessary in the circumstances to
say anything about the fall-back basis upon which the court a quo
held that it would in
any event have dismissed the review; namely,
that had it been wrong in not declaring the acceptance of the tender
to have been
unlawful, it would nevertheless have exercised its
discretion to decline to set aside the award of the tender contract
to Vumela.
[27]
The only remaining issue arises out of the
order made by the court a quo when granting leave to appeal. It
awarded the costs
of the application for leave to appeal to the
appellant. The appellant’s counsel, Mr
Engela
,
very fairly and correctly agreed that that costs order had been a
patent error on which the appellant would not seek to rely.
He
also agreed that this court might record in the order to be given on
appeal that the costs in the appeal should include the
costs of the
application for leave to appeal. PetroSA was represented by two
counsel at the hearing of the appeal, having
up till that stage been
represented only by Mr
Borgström
.
Mr
Maenetje
SC advisedly did not ask for an order allowing the costs of two
counsel.
[28]
The appeal is dismissed with costs, which
shall include the costs of the application for leave to appeal.
A.G. BINNS-WARD
Judge of the High Court
R. ALLIE
Judge of the High Court
B.P. MANTAME
Judge of the High Court
APPEARANCES
Appellant’s
counsel:
R.B. Engela
Appellant’s
attorneys:
Lombard Kotze Inc.
George
Davidson England
Attorneys
Cape Town
First
Respondent’s counsel:
N.H. Maenetje SC
D.P. Borgström
First
Respondent’s attorneys:
Cliffe Dekker Hofmeyr
Cape Town
No
appearance for the Second Respondent
[1]
The
judgment of the court a quo is reported on SAFLII:
Abet
Inspection Engineering (Pty) Ltd v Petroleum Oil and Gas Corporation
of South Africa (SOC) Ltd and Another
[2017]
ZAWCHC 39
(8 March 2017);
http://www1.saflii.org/za/cases/ZAWCHC/2017/39.pdf
.
[2]
The
full title of the Accreditation Act is the
Accreditation
for Conformity Assessment, Calibration and Good Laboratory Practice
Act 19 of 2006.
[3]
In
terms of section 4(1)(c) of Act 19 of 2006, SANAS is recognised as
the ‘
only
national body responsible for carrying out ... accreditation of
inspection bodies
’.
It is responsible for maintaining an ‘
internationally
recognised accreditation system
’
and for promoting ‘
the
competence and equivalence of accredited bodies
’.
(See the Preamble, and s 5 of the Act.)
[4]
Section
1 of
the
Preferential Procurement Policy Framework Act 5 of 2000
.
[5]
[2005]
ZASCA 90
;
[2005] 4 All SA 487
(SCA);
2008 (2) SA 638
, at para. 11.
[6]
Cf.
Oudekraal
Estates (Pty) Ltd v City of Cape Town and Others
[2004] ZASCA 48
;
[2004] 3 All SA 1
(SCA);
2004 (6) SA 222
, at para.
36: ‘…
a
court that is asked to set aside an invalid administrative act in
proceedings for judicial review has a discretion whether to
grant or
to withhold the remedy. It is that discretion that accords to
judicial review its essential and pivotal role in
administrative
law, for it constitutes the indispensable moderating tool for
avoiding or minimizing injustice when legality and
certainty
collide
’.
(Footnote omitted.) The courts’ discretionary power in
this respect in reviews in terms of the
Promotion of Administrative
Justice Act 3 of 2000
is now regulated by s 172(1) of the
Constitution read with s 8 of the Act.
[7]
[2013]
ZACC 42
;
2014 (1) BCLR 1
(CC);
2014 (1) SA 604
, at para. 22-30.
[8]
Allpay
supra,
at para. 28.
[9]
Cf.
Aurecon
South Africa (Pty) Ltd v City of Cape Town
[2015] ZASCA 209
;
[2016] 1 All SA 313
(SCA);
2016 (2) SA 199
, at
para. 43 (quoted at para. 66 of the judgment a quo), and
Minister
of Social Development and Others v Phoenix Cash & Carry Pmb CC
[2007] ZASCA 26
;
[2007] 3 All SA 115
(SCA);
2007 (9) BCLR 982
, at
para. 2 (quoted at para. 93 of the judgment a quo).
[10]
In
its founding papers the appellant expressly relied on several other
provisions of s 6(2) of PAJA. The relevant averments
in
this respect were quoted
in
extenso
in the judgment of the court a quo at para. 72.
Section 6(2)(b) was not invoked at all by the deponent to the
founding affidavit. Whilst it is desirable in review
proceedings in terms of PAJA for the applicant to identify the
grounds
of review on which it relies with reference to the
provisions of the Act, I nevertheless do not think that an
inappropriate or
incorrect identification precludes a litigant from
relying on the appropriate provision at the hearing if the papers
afford an
evidential basis for such reliance and no incurable
prejudice is occasioned in the circumstances to the other parties to
the
litigation.
[11]
See
note 1
above.
[12]
SANS
is the acronym for ‘South African National Standard’.
[13]
ISO
is the acronym for International Organization for Standardization,
and the nomenclator, ISO 17020, identifies a particular
International Standard issued by the Organisation.
[14]
‘
Quality
control
’
is defined in the
Oxford
Dictionary of English
(Version 2.2.2 (203 © 2005–2017 Apple Inc.) as ‘
a
system of maintaining standards in manufactured products by testing
a sample of the output against the specification
’.
[15]
‘
Inspection
body
’
is defined in s 1 of the Accreditation Act as ‘
an
organization that performs examination of a product design, product
service, process or plant, and determination of their conformity
with specific requirements or, on the basis of professional
judgment, general requirements
’.
[16]
Section
22(2)(b) provides insofar as relevant:
‘
SANAS
must –
issue
a certificate of accreditation … to applicants that meet
required criteria, specifying any conditions applicable
to the
accreditation …
’
.
[17]
Para.
3.3 to 3.5 of SANAS document R01-05 provide:
3.3 SANAS may
perform, or have performed on its behalf, accreditation assessments
or compliance inspections if there are any changes
in a Laboratory’s
/ Facility’s / Body’s:
(a)
legal,
commercial or organisational status;
(b)
organisation
and management, i.e. key managerial staff;
(c)
policies and
procedures (where appropriate);
(d)
premises;
(e)
personnel,
equipment, facilities, working environment or other significant
resources;
(f)
such other
matters that may affect the accredited / compliant body’s
capability or any other relevant criteria specified
by SANAS.
3.4 All bodies
accredited or deemed compliant by SANAS are responsible for
infoirming SANAS immediately should any of the changes
specified in
paragraph 5.3 [this should obviously read ‘3.3’] occur.
Failure to notify SANAS of any such changes
may result in the
accredited / compliant facility being suspended.
3.5 SANAS reserves
the right to decide on the scope of the assessment / inspection as a
result of any changes as described in
3.3 (a) to (f).
[18]
The
Oxford
Dictionary of English
op. cit. supra, gives ‘a business’ as an example in its
definition of the word ‘
organization
’:
‘
an
organized group of people with a particular purpose, such as a
business or government department: a research organization
’.
A ‘
facility
’
is defined in the relevant sense as ‘
an
amenity for a particular purpose
’.