About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2018
>>
[2018] ZAWCHC 44
|
|
Jocastro (Pty) Ltd v Ekurhuleni Metropolitan Municipality and Others; Jocastro (Pty) Ltd v Ekurhuleni Metropolitan Municipality and Another (9466/2017) [2018] ZAWCHC 44 (11 April 2018)
REPUBLIC
OF SOUTH AFRICA
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
Case
No:
9466/2017
In
the matter between:
JOCASTRO
(PTY)
LTD
Applicant
and
EKURHULENI
METROPOLITAN MUNICIPALITY
First Respondent
MEMOTEK
TRADING
CC
Second Respondent
BSA
HOLDINGS (PTY)
LTD
Third Respondent
And
Case
No: 15596/2017
JOCASTRO
(PTY)
LTD
Applicant
and
EKURHULENI
METROPOLITAN MUNICIPALITY
First Respondent
ACTOM
(PTY) LTD t/a SWITCHGEAR DIVISION
Second Respondent
JUDGMENT
HANDED DOWN 11 APRIL 2018
KUSEVITSKY,
AJ
Introduction
[1]
I have been tasked to consider whether,
it is time
that the Courts should assume a more interventionist role in the
field of public procurement. In this instance, the allegations
are
made by the Applicant, that the main weakness in the regulatory
framework of Public procurement is that the competitiveness
of a
tender process can be rendered illusionary by adopting vaguely
formulated “
acceptability
”
criteria, which is then unequally applied in order to eliminate
so-called unflavoured, but reasonably priced bidders. This,
it is
argued, results in tenders being awarded at hugely inflated prices to
only “
technically competent
”
bidder(s) and that, as a result, officials thus manage to manipulate
the outcomes of these tenders.
[2]
This review application is brought by the Applicant, Jocastro (Pty)
Ltd (“Jocastro”)
against a decision by the Ekurhuleni
Metropolitan Municipality (“the Municipality”) to award
tenders to bidders, Memotek
Trading CC (“Memotek”) and
BSA Holdings (Pty) Ltd (“BSA”), under case number
9466/2017 and Actom (Pty)
Ltd t/a Switchgear Division (“Actom”)
under case number 15596/17.
[3]
At the hearing of the matter, both cases were consolidated as the
facts and legal
issues to be determined were in many respects the
same. In both matters, the winning bidders did not oppose the review
applications,
leaving it to the Municipality to do so.
Factual Background
[4]
In the Memotek and BSA bid, it is common cause that the Municipality
invited bids
under contract number AEE04/2017, for the appointment of
service providers to supply, deliver, and off-load New Metal Enclosed
Ring Main Units (RMU) on an
as-and-when
required basis from
the date of the award until 30 June 2019. The RMUs are used
primarily to control, protect, and isolate
electrical equipment and
are important for purposes of secondary distribution of electricity
within a distribution network. The
RMUs are imported from overseas
but, if required, they are installed into kiosks at the Applicant’s
factory in Atlantis.
[5]
The Actom bid
relates to the award of a
tender under contract number AEE03/2017 for the appointment of a
service provider for the supply, delivery,
and off-loading of
Miniature Substations (Mini Subs) also on an
as-and-when
required basis, from the date of the award until 30 June 2019
(“
the tenders
”).
[6]
The Mini Subs are important for purposes of secondary distribution of
electricity
within a distribution network. A mini-sub is the RMU,
(which is the subject of the tender sought to be reviewed in case
number
9466/17), which has been installed into a metal box. The
Applicant similarly manufactures these metal boxes which house the
RMUs
at its factory in Atlantis.
[7]
During March 2017, Jocastro was informed by the Municipality, that
it’s bid
were unsuccessful in both of the tenders because, it
failed to meet the technical specifications by identifying a
technical adviser
as required in the tender document. According to
Jocastro, the tender process was not competitive nor fair, and was
therefore,
contrary to section 217 of the Constitution and therefore
invalid.
Facts relating to the
Memotek and BSA award
[8]
On the 19 August 2016, the tender was advertised with the
closing date of
21 September 2016. The bids were opened on
the closing day. At the opening of the bids, the prices of Jocastro,
Memotek
and BSA were as follows:
8.1
Memotek’s price was R132 493 489.26 for Schedule A,
and R111 287 622.82 for
Schedule B, with a total of
R243 781 112.08.
8.2
BSA’s price was R148 310 994.96 for Schedule A
and R61 173 794.45 for Schedule B,
with a total of
R209 484 789.42.
8.3
Jocastro quoted R122 762 342.39 for Schedule A, and
R58 922 730.57 for Schedule B,
with a total of
R181 685 072.96.
[9]
It was also recorded at the opening of the bids, that Memotek had not
submitted a
tax clearance certificate, nor had BSA attached any
financial statements.
Facts
relating to the Actom award
[10]
The Municipality published an invitation to bid for the tender on 19
August 2016. The closing
date for the submission of bids was 20
September 2016. A compulsory information session was held for all
bidders on 30 August 2016,
prior to the submission of bids. After the
submitted bids were opened, they were assessed. The recordal of the
prices submitted
by the various bidders indicated the following:
10.1 Jocastro
quoted an amount of R 228 million; and
10.2 Actom quoted
an amount of R236 million.
[11]
According to Jocastro, during March 2017, it heard rumours that the
bid had been awarded. To
request clarification, Jocastro through it’s
attorney, sought clarification from the Municipality and addressed a
letter
requesting details of the award, given that it had not
received any form of notification.
[12]
On 31 March 2017, the Municipality
informed Jocastro that it’s bid was unsuccessful for the
following reason:
“
According to
the departmental bid report the reason for
JOCASTRO
(PTY) LTD
’
s
bid being
unsuccessful is as follows:
Does not comply
with Bid Specification.
·
“
The bidder did not indicate
having a technical adviser with ECSA registration as a Pr Tech or Pr
Eng, as required on page 65 of
the bid document.”
Therefore bidder no 9
JOCASTRO (PTY) LTD
was not evaluated for further
allocation of procurement preference points.”
Notification of the
awards
[13]
According to Jocastro, it was not notified that the awards were made,
and had to direct correspondence
to the Municipality requesting
confirmation of same. In the Memotek bid, Jocastro sent the letter on
17 March 2017, advising that
it had not received any form of
notification that the tender had been awarded, or whether, it had
been successful or not. On the
same day, the Municipality informed
that the tender was awarded to Memotek and BSA in February 2017, and
a rejection letter addressed
to Jocastro dated 13 February 2017, was
attached. According to Jocastro, as at the date of deposing to the
affidavit on 29 May
2017, it had still not received the rejection
letter. It claimed that the Municipality
posts
rejection
letters, yet
emails
successful bidders. This contention was
not seriously disputed by the Municipality. It was however, accepted,
that the Municipality
did in fact publish tender awards on its web
site every month, however, in this instance, it was not clear when
the awards to Memotek
and BSA were placed on its website. This
practice, to my mind is undesirable, as it would most certainly to
some degree impact
upon the timeframe in which unsuccessful bidders
would have to lodge complaints, appeals, or in certain cases seek
relief in the
form of interdict proceedings if this was a route
contemplated. I will return to this issue later. Nothing prevents the
Municipality,
or any such organ of state from similarly notifying
unsuccessful bidders via e-mail of its decision. This would not only
be a more
effective form of communication over and above the written
posted notification, but it would also provide the bidders with
certainty
on a decision taken.
[14]
On 20 March 2017, the Municipality conveyed its reason why Jocastro
had been unsuccessful. It
stated that
“
According to
the departmental bid report the reason for
JOCASTRO
(PTY) LTD
’
s
bid being
unsuccessful is as follows:
Does not comply
with Bid Specification.
·
“
The bidder did not provide the
technical adviser as requested in page 59 paragraph 10.3.2 of the bid
document which clearly states
that the incumbent shall be registered
with ECSA as a Pr Tech or Pr Eng.”
Therefore bidder no 9
JOCASTRO (PTY) LTD
was not evaluated for further
allocation of procurement preference points.”
Review Grounds
[15]
The Applicant’s case is based on the following grounds of
review:
15.1 With regard to
both matters, that the Applicant’s bid was responsive, or
“
acceptable”
within the meaning of section 1
of the Preferential Procurement Policy Framework Act 5 of 2000,
(“PPPFA”) and
its exclusion was unlawful. Had it not been
unlawfully excluded, the tender had to be awarded to it because its
bid was much lower
than those of Memotek and BSA.
15.2. Memotek’s bid
was non-responsive or “
not acceptable”
in terms of
the PPPFA for failing to comply with numerous material and mandatory
conditions in the bid document as well as the regulatory
framework.
The award to Memotek was accordingly inconsistent with
section 6(2)(b) of the Promotion of Administrative Justice
Act 2
of 2000 (“PAJA”) and invalid.
15.3 BSA’s
bid was also non-responsive or “
not acceptable”
in
terms of the PPPFA for failing to comply with numerous material and
mandatory conditions in the bid document as well as the regulatory
framework. The award to BSA was accordingly inconsistent with s 6(2)
(b) of PAJA and invalid.
15.4 In terms of
the stated reason given by the Municipality, the Applicant did not
have to be excluded, but rather was not
to be evaluated for further
allocation of procurement preference points.
15.5 The tender
process was neither competitive, nor fair, and was therefore,
contrary to section 217(1) of the Constitution
and invalid.
15.6 Actom’s
bid document
inter alia
did not comply with the bid
specifications
The
Legislative Framework
[16]
In
AllPay
Consolidated Investment Holdings (PTY) LTD And Others v Chief
Executive Officer, SASSA
And
Others 2014 (1) SA 604 (CC)
[1]
,
the court, referring to Steenkamp
[2]
stated as follows:
"Section 217 of the
Constitution is the source of the powers and function of a government
tender board. It lays down that an
organ of State in any of the three
spheres of government, if authorised by law may contract for goods
and services on behalf of
government. However,
the tendering
system it devises must be fair, equitable, transparent, competitive
and cost-effective
. This requirement must be understood together
with the constitutional precepts on administrative justice in section
33 and the
basic values governing public administration in section
195(1).” (My emphasis)
[17]
Section 217 of the Constitution provides as follows:
"(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.
(2) Subsection (1) does
not prevent the organs of state or institutions referred to in that
subsection from implementing a procurement
policy providing for-
(a) categories of
preference in the allocation of contracts; and
(b) the protection or
advancement of persons, or categories of persons, disadvantaged by
unfair discrimination.
(3) National legislation
must prescribe a framework within which the policy referred to in
subsection (2) must be implemented."
[18]
It is trite that the grounds for judicial review of administrative
action arises from the provisions
of PAJA. Section 6 of PAJA provides
that:
"(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) was not authorised to
do so by the empowering provision;
(ii) acted under a
delegation of power which was not authorised by the empowering
provision; or
(iii) was biased or
reasonably suspected of bias;
(b) a mandatory and
material procedure or condition prescribed by an empowering provision
was not complied with;
(c) the action was
procedurally unfair;
(d) the action was
materially influenced by an error of law;
(e) the action was taken-
(i) for a reason not
authorised by the empowering provision;
(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) contravenes a law or
is not authorised by the empowering provision; or
(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."
[19]
The legislation prescribing the framework within which procurement
policy must be implemented
is the PPPFA. It distinguishes between
“
acceptability
” and “
functionality
”
of bids:
19.1
In terms of section 1 of the PPPFA, 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.
19.2
In
terms of PPPFA Regulation 1,
[3]
“
functionality
”
means the ability of a tenderer to provide goods or services in
accordance with specifications as set out in the tender
documents.
[20]
According to Jocastro, bids must be screened for their
acceptability
in order to ensure that like services or products are compared.
[21]
A
functionality
test on the other hand, is necessary when the delivery of goods and
services are technically complicated. Bidders then need to
be
evaluated in order to ensure that they have the technical ability and
experience to perform. The PPPFA requires that such a
functionality
evaluation must take place in terms of “
objective
”
criteria and in terms of a points system which must be specified in
the bid document.
[4]
[22]
Ultimately, the fairness that is being referred to is the fairness in
the procedure and not the
substantive correctness of the outcome. The
facts of each case will determine whether any shortfall in the
requirements of the
procurement system - unfairness, inequality, lack
of transparency, lack of competitiveness or cost-inefficiency, may
lead to procedural
unfairness, irrationality, unreasonableness, or
any other ground under PAJA. A court under the circumstances is not
to focus on
whether or not the decision is correct, but rather, on
the facts and evidence presented, make an enquiry as to whether any
one
of the the alleged grounds of review exist, and if so, is obliged
to conduct an enquiry with a view to formulating a just and equitable
remedy, after the objective grounds have been established.
[5]
The rejection of the
Applicant’s bid
[23]
It is common cause that Jocastro’s bid was rejected in both
tenders for failing to meet
the technical specifications of the
tender.
[24]
Under the Staffing Profile of the RMU bid, the following clause is
relevant.
“
10.3.1
The appointed service provider will be providing the service
throughout
EMM boundaries for the items under this contract to ensure
that deliveries are not delayed due to that the delivery team is busy
in another area, the supplier must have a minimum of two delivery
teams. Each team shall comprise of a
driver
and
two
assistants
to deliver and off-load and as well as administrative
personnel which must include at least a
technical adviser
on
the ring main units offered. Therefore information indicating fully
the number of persons available to execute the project and
their
respective responsibilities must be provided on Staffing Profile and
Proposed Key Personnel tables provided in the bid document.
10.3.2
The technical adviser indicated in 10.3.1 shall be an individual
registered with ECSA as Pr. Tech or Pr. Eng (Electrical).”
[25]
A similar clause is found in the Mini Subs tender, which states at
Clause 9.1.3 that:
“
The technical
adviser indicated in 9.1.2 shall be an individual registered with
ECSA as Pr. Tech or Pr. Eng.”
[26]
From the bid document, it is evident that Jocastro
under the
heading, “
Staffing Profile”
, indicated
inter
alia
, that it had drivers, painters and grinders under the
sub-heading “
own staff
” and indicated, as
requested, the number of staff in those positions. Under the heading
“
Proposed Key Personnel”
, the form called for the
names, positions, qualifications and experience of the proposed key
personnel. Here, Jocastro had inserted
the name of one Edmund Stokes
whose position was indicated as “
Design
Electrical”
and who had stated his qualifications as ‘
Electrical/Mechanical/Eng
”
with twenty years experience.
[27]
According to Jocastro, the tender application form did not require
under the heading of “
Staff
profile and/or key personnel
”,
bidders to disclose who the technical adviser was. Tender
condition 10.3.1 also merely required the bidders to indicate
fully the
number
of persons available to execute the project and their respective
responsibilities. This was done by the Applicant. Furthermore,
the
Municipality did not consider the fact that it did in fact nominate a
technical advisor who was registered with ECSA as a Pr Eng.
Mr Stokes-Waller was nominated as a key staff member who would
be utilised if the tender was awarded to it. They furthermore
argued,
that there was no requirement to provide
proof
that the technical advisor was registered with ECSA as a Pr Eng.
The reason for this is, that the tender document provides
that “
The
attachment or inclusion of information not specifically asked for is
not desirable, and lead to delays in the awarding of bids.
This
includes Company Profiles and CV’s if not specifically
requested
.”
[6]
In any event, Jocastro argued that if there was any doubt, the
Municipality could have very easily established from the ECSA
website,
that Mr Stokes-Waller was indeed so qualified,
alternatively, they could have requested documentary proof of
Mr Stokes-Waller’s
credentials in line with the provision
of the tender document at paragraph (m).
[7]
Jocastro undertook this exercise again
[8]
after the Municipality, in its answering affidavit contended that it
did check on ECSA website “
as
an abundance of caution
”
and a search of Mr Stokes did not elicit any results. I agree with
Jocastro’s contention that in the absence of any
supporting
evidence in support of this allegation, that this amounts to
impermissible hearsay which in any event is not supported
by the
objective facts as presented by Jocastro on this point.
[28]
Jocastro also argued that the reason for their exclusion from the bid
had changed since the filing
of the Municipality’s answering
affidavit. It seemed the Municipality now contended that Jocastro did
not “
identify
” the technical advisor. Jocastro
argued that it was impermissible to change the reason for excluding a
bidder in the answering
affidavit.
[29]
According to the Municipality, Jocastro did not indicate a technical
adviser as required by Clause
9.3.1 of the tender Specification,
although, it did admit that the name of “
Edmund Stokes”
did appear on Jocastro’s “
Proposed Key Personnel”
table. They further argued that Jocastro’s reading of the
tender document was incomplete, and therefore, incorrect because
on
its interpretation of the clause 9.3.1, the tender document clearly
and unambiguously required that a bidder must “
make known”
its technical adviser. Jocastro ostensibly overlooked the fact
that it failed properly to“
[indicate] fully the number of
persons available to execute the project and their respective
responsibilities”.
This reasoning is flawed in my view.
Firstly, the Municipality’s argument that it was simply unable
to ascertain from Jocastro’s
bid document whether it had a
technical advisor is simply unbelievable by virtue of the simple fact
that Jocastro indicated the
qualifications of its core key personnel,
and most importantly, that of Mr Stokes, and its own provision
provided for the option
to have requested proof of registration with
ECSA, which it failed to do.
[30]
Secondly, the Municipality’s interpretation of what was
required in clause 9.3.1 of the
Tender document is also flawed. In
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012 (4) SA 593
(SCA)
,
the court held thus:
“
The
present state of the law can be expressed as follows. Interpretation
is the process of attributing meaning to the words used
in a
document, be it legislation, some other statutory instrument, or
contract, having regard to the context provided by reading
the
particular provision or provisions in the light of the document as a
whole and the circumstances attendant upon its coming
into existence.
Whatever the nature of the document,
consideration must be given
to the language used in the light of the ordinary rules of grammar
and syntax; the context in which
the provision appears; the apparent
purpose to which it is directed and the material known to those
responsible for its production
. Where more than one meaning is
possible each possibility must be weighed in the light of all these
factors. The process is
objective not subjective. A sensible
meaning is to be preferred to one that leads to insensible or
unbusinesslike results or undermines
the apparent purpose of the
document. Judges must be alert to, and guard against, the temptation
to substitute what they regard
as reasonable, sensible or
businesslike for the words actually used. To do so in regard to a
statute or statutory instrument is
to cross the divide between
interpretation and legislation. In a contractual context it is to
make a contract for the parties other
than the one they in fact made.
The ‘inevitable point of departure is the language of the
provision itself’, read in
context and having regard to the
purpose of the provision and
the background to the preparation and
production of the document
. (“My emphasis”)
[31]
Our courts have consistently held that the interpretative process is
one of ascertaining the
intention of the parties – what they
meant to achieve and in so doing, the court must consider all the
relevant circumstances
surrounding the contract to determine what
their intention was in concluding it.
[9]
From a plain reading of this clause, it is clear that the objective
is to fulfill the mandate of the tender which is to ensure,
inter
alia
,
that the appointed service provider has the necessary capacity to
ensure deliveries are not delayed. Furthermore, the information
that
is required after the use of the adjective “
fully
”
in the last sentence of the paragraph, denotes the information of the
number
of persons available to execute the project and their respective
responsibilities. No where does this clause call for the
identity
of the persons to be stated.
[32]
There was also no specific instruction to identify the technical
adviser, the drivers, assistants
and administrative personnel by
name. At best for the Municipality, tender condition 10.3.1 was
vague and ambiguous as to
what exactly was required. This
[SA1]
meant
that bidders should have asked to clarify who their technical
advisors were, if this was regarded as crucially important.
Jocastro
argued that bidders should not simply be excluded based on vaguely
formulated “
acceptability
”
criteria. I am in agreement that on this basis alone, Jocastro’s
bid was unlawfully excluded within the meaning of
section 1 of the
PPPFA. Even if I am wrong on this construction, I am of the view that
the Municipality committed another irregularity.
According to the
rejection letter, the Municipality advised Jocastro that, because it
did not provide the details of the technical
adviser, that it was not
evaluated for further allocation of procurement preference points.
This in fact did not occur and instead,
its bid was excluded all
together. In my view, on this ground alone, the Municipality is in
breach of section 6(2)(b) of PAJA.
Was the Municipality’s
decision irrational and unreasonable?
[33]
I dealt earlier with the advantages of notifying unsuccessful bidders
of decisions made by organs
of state. In
casu
, when Jocastro
had learnt that its bid had been unsuccessful, the Municipality
directed a letter to Jocastro’s attorneys
on 31 March 2017,
advising it to forward a written complaint which would be dealt with
by its Corporate and legal department. In
this letter of objection,
Jocastro reiterated that it should not have been disqualified because
it did in fact provide a technical
advisor who was registered with
ECSA. On 13 April 2017, the Municipality advised Jocastro that the
matter had been referred to
Malherbe Rigg & Ranwell Inc.
(“Malherbe”) for a determination of the objection. Of
importance is the fact that
Malherbe concluded that the objection was
out of time. This is because
Regulation 49
of the
Municipal Supply
Chain Management Regulations (which
is consistent with
Section 49
of
the EMM Supply Chain Management Policy (“SCMP”)) provides
that the supply chain management policy of a municipality
or
municipal entity must allow persons aggrieved by decisions or actions
taken by the municipality in the implementation of its
supply chain
management system to lodge within 14 days of the decision, or action,
a written objection or complaint to the municipality
against the
decision or action. Malherbe was also of the view that the SCMP did
not provide it with the power or authority to extend
or condone the
relevant time period to lodge the written objection, i.e. within 14
days of the decision or action. As I have already
stated, the timeous
notification
via
email to unsuccessful bidders would go a long
way in preventing these types of difficulties.
[34]
Despite this however, Malherbe chose to deal with the merits of the
objection. During the course
of the determination, Malherbe rightly
questioned whether or not, there was an obligation on Jocastro to
provide more detail relating
to their appointed technical advisor so
as to satisfy the requirements of the Bid documentation. It found
that it was not apparent
from the Bid documentation, a clear
requirement for Jocastro to attach copies of the qualifications of
the technical advisor required
to be appointed in terms of the Bid
documentation. This particular clause did lend itself to some
ambiguity but, to the extent
that the bid document was silent on the
inclusion of proof of registration of the technical advisor with
ECSA, this documentary
proof could have been requested from the
supplier.
[35]
It is common cause that determinations such as these are not binding
in nature. What is however
indicative is the fact that the
Municipality’s own independent consultant concluded that
Jocastro did in fact comply substantively
with the requirements of
the Bid Documentation, and that the reasons given by the Municipality
incorrectly recorded the content
of the Bid Documentation. In my
view, the Municipality could have, based on this determination and
armed with this knowledge of
potential irregularity, adopted a more
proactive approach in resolving the dispute. Its failure to rectify
its decision, on the
principle of fairness, was also contrary to the
prescripts of section 217 of the Constitution.
The manner in which
competing bidders were evaluated
[36]
The question as to whether, it was unreasonable to exclude Jocastro
for the reason as stated, must
also be viewed through the lens in the
manner in which the Municipality dealt with the other so called
omissions, by competing
bidders. It is trite that a measure of
fairness in dealing with bids and tenders is imperative in the
evaluation process. This
is the very reason why the PPPFA was
established. Conradie JA in
Metro
Projects CC and Another v Klerksdorp Local Municipality and Others
All
[SA2]
SA
504 (SCA) 22 September 2003, on this issue stated the following:
“
[12]
There is another reason that the tender procedure of a local
authority must be fair. Invitations to tender by organs of State
and
the awarding of tenders where it is done in the exercise of public
power is an administrative process (see
Logbro
Properties CC v Bedderson NO and Others
2003 (2) SA 460
(SCA) at
465F-466C where the leading cases are collected).
Section 3(2)(a)
of
the
Promotion of Administrative Justice Act 3 of 2000
requires the
process to be lawful, procedurally fair and justifiable. But
primarily, in the case of a local authority, the process
must be fair
because
s10G
(5)(a)
of the
Local Government Transition Act 1993
requires it.
[13]
In the
Logbro
Properties
case
supra
at
466H-467C Cameron JA referred to the ‘ever-flexible duty to act
fairly’ that rested on a provincial tender committee.
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. (My emphasis)
[37]
It was also held in
Allpay supra
,
at 616A-B
, that:
“
Under the
Constitution there is no reason to conflate procedure and merit.
The
proper approach 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. (My
emphasis)
[38]
Tender processes also require strict and equal compliance by all
competing tenderers on the closing
day for submission of tenders
[10]
.
[39]
A further point of review by the Applicant centered around the
ability of the successful bidders
to have fulfilled the mandate of
the tender. It is common cause
that
Memotek did not submit a tax clearance certificate with its bid and
BSA did not submit its financial information, as was required
in the
bid document. The Municipality however, afforded them an opportunity
to provide same, and they were both requested to submit
these
outstanding documents in order to be awarded the tender. This request
ostensibly complied with Circular 1 from the National
Treasury in
terms of which the EMM City Manager had issued a directive for the
adjudication of tenders. In response to these requests,
both Memotek
and BSA provided the requested documentation and both were awarded
the tender.
[40]
According to Jocastro, Memotek’s bid could never have been
accepted, had the Municipality
followed the obligatory mandatory
criteria. Over and above the above complaints, Jocastro,
inter
alia
, also stated that Memotek did not have the required storage
space to execute the contract, and did not have the requisite
experience
of similar contracts nor did BSA have the required three
years experience as required. Having considered these grounds, I find
it apposite to only deal with a few of these complaints.
Failure
to provide a tax clearance certificate
[41]
Page three of the tender document
[11]
,
provides the following:
“
A
BID WILL BE REJECTED:
If a
VALID ORIGINAL
tax clearance certificate or copy thereof (or in the case of a joint
venture or consortium, of all the partners in the joint venture
or
consortium) has not been submitted with the bid document on closing
date of the bid.
(An expired tax clearance certificate submitted
at the closure of the bid will not be accepted.)
”
[42]
If the Municipality adopted the same stringent rules that it had with
Jocastro, then on this
basis alone, the bid of Memotek should have
been rejected as well and subsequently excluded. According to
Jocastro, the bid conditions
made it very clear and explicitly
provided that a tax clearance certificate and financial statements
had to be submitted together
with the bid. In fact, this requirement
is written in big bold letters in the bid application and is
incorporated under the reasons
by which a bid will be rejected.
[43]
The Municipality recorded that at the opening of the bids, there was
no tax clearance certificate
attached to Memotek’s bid, and
this aspect was not challenged by the Municipality in its answering
affidavit. The Municipality
on the other hand explained in its
answering affidavit that some of the mandatory documents required to
be submitted, could be
provided on request after the closing day.
[44]
I am in agreement with Jocastro that this explanation falls to be
rejected. I say this for the
following reasons. First of all, in
terms of Regulation 14 of the Preferential Procurement Regulations, a
municipal tender may
not be awarded to any person whose tax matters
have not been declared by the South African Revenue Service to be in
order.
[12]
In the
Moraka
case
supra
,
where the court similarly dealt with an instance where the tenderer
failed to submit original tax clearance certificates, the
court
opined that it was for a court to decide what should be a
prerequisite for a valid tender and a failure to comply with the
prescribed conditions would result in the tender being disqualified
as an “acceptable tender” under the Procurement
Act
unless those conditions are immaterial, unreasonable, and
unconstitutional. The argument in
Moraka
was that the Municipality had a discretion to condone a failure to
comply with any of the minimum requirements as set out in the
tender
invitation.
[13]
If this was in
deed the case, then fairness dictated that the same discretion should
have been afforded to Jocastro to have satisfied
the Municipality of
the qualifications of Mr Stokes. The same argument was used in the
BSA bid who similarly did not provide financials
along with its bid.
The same considerations apply and consequently, it too should have
been excluded on the criteria adopted as
against Jocastro.
[45]
The other requirement,
inter alia
, which was considered to be
an important criteria, was the ability of a bidder to have had
appropriate infrastructure and resources
available to store the
ordered material on behalf of the Municipality, and to be able to
have the financial ability to deliver
its mandate. In this regard, it
was a requirement that bidders have a turnover of Four Million Rand,
with Two million Rand required
as a minimum turnover for the previous
financial year. According to BSA’s bid documentation, BSA
reported that its turnover
for the previous financial year was nil
and its financials did not indicate that it had the required minimum
turnover. On the face
of it, BSA did not comply with this
requirement. According to Jocastro, not only did Memotek operate from
a suburban home and could
therefore, not have provided the required
storage space as claimed by it, but it simply failed to provide the
financial documents
at all on the closing day. They were however,
provided an opportunity to hand these in after the closing day, but,
as I have mentioned
before, this same opportunity was not afforded to
Jocastro. In the Actom bid, they similar to Jocastro, did not
identify a technical
advisor in the Proposed Key personnel form, yet
Jocastro’s bid was excluded on this basis and Actom’s bid
was successful.
Conclusion
[46]
Mr de Waal for Jocastro indicated that it is precisely these types of
pass/fail bid conditions
which are stipulated in the bid document,
which are used to exclude meritorious bids. He argued that while
masquerading as “
acceptability
” requirements,
these factors are often related to functionality, which is then
assessed on a pass/fail basis rather than
the points system
prescribed by the PPPFA Regulations.
[47]
In the present instance, twelve out of fourteen bids were excluded on
the basis that they failed
to provide information relating to
technical ability, or simply stated, that they failed to “
identify
”
their technical advisor. He argued that this had nothing to do with
the concept of acceptability, but rather related to
functionality, or
the capability to execute the mandate and it is this perversion of
the system, he argued, that resulted in a
situation where an organ of
state selected two completely unknown service providers, which
operate from suburban homes and with
no track record in the specified
industry, at a price that was millions of rands higher than those
well-established competitors.
The justification given for this was
that the two bidders offered the only ‘acceptable’ bids.
This simply could not
be.
[48]
I am therefore of the view that on any rational construction, bidders
Memotek, BSA and Actom,
objectively viewed, could never have met the
general criteria of the bid criteria. Furthermore, the tender
process, as views holistically,
could not be said to have been
competitive or fair as contemplated by section 217(1) of the
Constitution. Accordingly, the awarding
of the tenders to them are
invalid.
Request
for substitution of Municipality’s decision
[49]
In argument, Mr. de Waal for Jocastro urged that this court ought to
substitute the Municipality’s
findings with its findings by
virtue of section 8(1)(c)(ii) (aa) of PAJA. Reliance was also placed
on
Trencon
Construction (Pty) Limted v Industrial Corporation of South Africa
Limited and Another
[14]
where the Constitutional Court stated that, when a court exercises
its authority in terms of the sub-section “
a
court must be satisfied that it would be just and equitable to grant
an order of substitution
.”
I do not believe that it would be just and equitable to award the bid
to Jocastro simply on the basis that I have found
them to have been
unlawfully excluded. On its own papers, Jocastro was but one of
twelve bidders to have been excluded from the
bid process. It would,
in my view, be manifestly unjust to favour Jocastro simply on the
basis that it decided to review the Municipality’s
decision as
we do not know if financial constraints, as a simple example,
prevented others from challenging same. The proper procedure
in this
instance would be for the matter to be remitted back to the
Municipality to consider the matter afresh.
[50]
The following order is made.
Case
Number 9466/17
(a)
The decision
to award tender contract AEE04/2017 for the appointment of service
providers for the supply, delivery and off-loading
of New Metal
Enclosed Ring Main Units on an as-and-when required basis from date
of the award until 30 June 2019 to the Second
and Third Respondents
is reviewed and set aside.
Case
number 15596/17
(b)
The decision
by the First Respondent to award tender contract AEE03/2017 for the
appointment of a service provider for the supply,
delivery and
off-loading of Miniature Substations on an as-and-when required basis
from date of award until 30 June 2019 to the
Second Respondent, is
reviewed and set aside.
(c)
Both tenders,
AEE04/2017 and AEE03/2017 are remitted back to the First Respondent
for fresh evaluation in compliance with the PPPFA.
(d)
The Applicant
is awarded costs of the application against the First Respondent in
both matters, such costs to include the costs
of the Rule 30
Application.
KUSEVITSKY
AJ
[1]
At
para 31
[2]
Steenkamp
NO v Provincial Tender Board, Eastern Cape
2007 (3) SA 121
(CC) at
para 3
[3]
Preferential Procurement Regulations, 2017 (GN R32 of 2017, GG 40553
of 20 Jan 2017). The 2011 Regulations, which
applied
to the assessment of the present tender are in material respects the
same as the 2017 Regulations. Regulation 4
of those
Regulations deals with assessment based on functionality.
[4]
PPPFA Regulation 5
[5]
Allpay
at p622A-E
[6]
Item
3 of page 5 of the Tender document
[7]
(m)
agree that documentary proof regarding any tendering issue will,
when required, be submitted to the satisfaction of the EMM
.
[8]
And attached a copy of the search result which clearly indicated the
name of Edmund Stokes-Waller – Professional Engineer,
Electrical - on the ECSA website
[9]
Novartis
v Maphil
2016 (1) SA 518
SCA at para 27
[10]
Steenkamp
NO v Provincial Tender Board, Eastern Cape
2007 (3) SA 121
(CC) at
paras 20-23
[11]
Point
1
[12]
Dr
JS Moroka Municipality and Others v Betram (Pty) Ltd Limited and
Another (937/2012)
[2013] ZASCA 186
;
[2014] 1 All SA 545
(SCA) (29
November 2013) at para 8(c)
[13]
Ibid,
paras 9 and 12
[14]
2015
(5) SA 245 (CC)
[SA1]
Unclear
[SA2]
2004(1)
SA 16 (SCA)