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[2016] ZASCA 104
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SAAB Grintek Defence (Pty) Ltd v South African Police Service and Others (316/2015) [2016] ZASCA 104; [2016] 3 All SA 669 (SCA) (5 July 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 316/2015
DATE:
5 JULY 2016
Reportable
In
the matter between:
SAAB
Grintek Defence (Pty)
Ltd
............................................................................................
Appellant
And
South
African Police
Service
........................................................................................
First
Respondent
State
Information Technology Agency (Pty)
Ltd
...................................................
Second
Respondent
National
Commissioner of the
South
African Police
Service
......................................................................................
Third
Respondent
Minister
of
Police
......................................................................................................
Fourth
Respondent
Minister
of Public Service and
Administration
.........................................................
Fifth
Respondent
Neutral
citation:
SAAB
Grintek Defence v South African Police Service
(316/2015)
[2016] ZASCA 104
(5 July 2016)
Coram:
Mpati P, Cachalia, Theron & Wallis JJA &
Victor AJA
Heard:
4 May 2016
Delivered:
5 July 2016
Summary:
Constitutional law – tender –
cancellation of – decision to cancel made in exercise of
executive authority –
decision not constituting administrative
action – reasons for cancellation not offending principle of
legality.
ORDER
On
appeal from:
Gauteng Division of the
High Court, Pretoria (Makgoba J, sitting as a court of first
instance):
The
appeal is dismissed with costs, which shall include the costs
consequent upon the employment of two counsel.
JUDGMENT
Mpati
P (Cachalia, Theron and Wallis JJA and Victor AJA concurring):
[1]
This appeal is against an order issued by the Gauteng Division of the
High Court, Pretoria (Makgoba J), dismissing the appellant’s
application to set aside a decision of the first respondent, the
South African Police Service (SAPS), to cancel a tender. On 13
February 2009 the second respondent, the State Information Technology
Agency (SITA), acting on behalf of SAPS, published a Request
for Bids
in respect of an integrated mobile vehicle data command and control
solution (command solution) to be procured by SAPS.
Following the
evaluation of bids received the appellant, SAAB Grintek Defence (Pty)
Ltd (SAAB) and another bidder, Britehouse,
were shortlisted as
potential suppliers. However, the tender was republished on 3
September 2010. The appellant submitted a bid
and was again
shortlisted, together with Britehouse. The validity period of the
tender was 90 days, calculated from its closing
date, which was 4
October 2010. The validity period was thus to expire on 4 January
2011.
[2]
On 2 February 2011 SITA advised SAAB that the validity of its bid had
expired on 4 January 2011. It requested SAAB to extend
the validity
period of its bid by 90 calendar days ‘as from the date of
expiry’. SAAB acceded to the request with the
result –
according to the unanswered allegation in the founding affidavit –
that the validity period of its bid was
extended to 4 April 2011.
Further periods of extension were agreed upon. On 25 August 2011 and
8 October 2011 the Bid Evaluation
Committee and Ms Thenji Mjoli,
SITA’s Executive: Supply Chain Management, respectively,
recommended to the Recommendation
Committee that the tender be
awarded to SAAB. On 4 November 2011 the Recommendation Committee
resolved to recommend likewise to
the Procurement Committee. Price
negotiations were thereafter conducted at the instance of SITA and in
a letter dated 17 November
2011 SAAB offered certain discounts on its
tender price. Three further extensions, each for a period of 60 days,
were requested
by SITA – and presumably acceded to –
during the first of which (on 16 February 2012) the Procurement
Committee recommended
to SITA’s Board of Directors that the
tender be awarded to SAAB.
[3]
By 26 June 2012 SAAB had not received any indication from SITA or
SAPS concerning the outcome of the tender. On that day it
caused a
letter to be sent to, amongst others, the third and fourth
respondents, expressing its belief that the implementation
of the
command solution ‘will improve the efficiency and effectiveness
of SAPS in the fight against crime and corruption’.
In a letter
dated 9 July 2012, Lieutenant General Ngubane (Ngubane), the
Divisional Commissioner: Technology Management Services
of SAPS,
acknowledged receipt of SAAB’s letter and advised that ‘the
necessary attention and feedback will be provided
in due course’.
The administrative secretary in the office of the Ministry of Police
also responded on behalf of the fourth
respondent by letter dated 17
July 2012, informing SAAB that the matter had been referred to the
third respondent ‘for further
attention’. However, on 8
August 2012, Ngubane wrote to SAAB in the following terms:
‘
2
You are hereby advised that the above-mentioned tender was cancelled
by SAPS in a letter addressed to SITA on 28 May 2012.
3
The reasons for cancellation were due to the time lapse in the
evaluation process and the need for SAPS to review its business
processes.’
On
20 August 2012 SITA informed SAAB that it would not be issuing
requests for extension because the tender was ‘due to be
cancelled’.
[4]
It is not in dispute that the letter of cancellation dated 28 May
2012, referred to in Ngubane’s letter of 8 August 2012
addressed to SAAB, was received by SITA on 4 June 2012. The letter
was signed by Lieutenant General N S Mkhwanazi (Mkhwanazi),
acting
National Commissioner of SAPS and addressed to SITA’s Chief
Executive Officer. It reads:
‘
The
Integrated Mobile Vehicle Data for Command and Control tender . . .
was published through SITA on 2010-08-02 and closed on 2010-10-30.
The tender evaluation process commenced on 2010-11-01 but to date it
has not been completed.
In
view of the time lapse on the evaluation of this tender and till to
date with no outcomes South African Police Service has decided
to
cancel the tender.
The
South African Police Service business requirements has changed and
currently SAPS is reviewing the business requirements specification.
The requirements as they are on this tender are no longer addressing
the current business requirements for SAPS and therefore are
being
revisited and updated.
.
. . .’
On
29 August 2012 SAAB sent a letter to SITA expressing concern
‘regarding the sequence of events’ culminating in the
cancellation of the tender, particularly the fact that it was only
informed of the decision almost three months after it had been
made.
On 25 September 2012 SAAB, through its attorneys and in terms of s
5(2) of the Promotion of Administrative Justice Act 3
of 2000 (PAJA),
requested written reasons from both SITA and SAPS for the ‘purported’
cancellation. It also sought,
in terms of the Promotion of Access to
Information Act 2 of 2000 (PAIA), copies of their respective records
relating to their decisions.
[5]
No responses were forthcoming from SITA or SAPS to the requests in
terms of PAJA and PAIA and, on 26 April 2013, SAAB launched
an
application in the North Gauteng High Court, Pretoria, seeking the
following order:
‘
1
Reviewing and setting aside the decision of the first respondent
[SAPS] purportedly to cancel bid number RFB 822/2010 (“the
tender”);
2
Reviewing and setting aside the decision of the second respondent
[SITA] not to award the tender to the applicant;
3
Directing the second respondent [SITA], alternatively the first
respondent [SAPS], within one (1) month of the date of the order
to
award the tender to the applicant and to conclude a contract with the
applicant on the same terms and conditions contained in
the tender,
provided that this shall not preclude the parties from jointly
agreeing to amend such terms and conditions;
4
Directing that the cost of this application be paid by any respondent
opposing the application; and
5
Granting further and/or alternative relief
.’
It
was alleged in the founding affidavit that the decisions (impugned
decisions) sought to be set aside in prayers (1) and (2) constituted
administrative action as contemplated in s 1 of PAJA. It was alleged
further that even if the impugned decisions ‘were not
to
constitute administrative action, they certainly constitute the
exercise of public power and are thus subject to the principle
of
legality’.
[6]
Two grounds of review were relied upon as a basis for the orders
sought. The first ground was based on s 3(1) of PAJA, which
provides
that administrative action which materially and adversely affects the
rights or legitimate expectations of any person
must be procedurally
fair. Because the Bid Evaluation Committee had recommended that the
tender be awarded to SAAB alone, ‘it
is plain that SAAB’s
rights were materially and adversely affected’, so it was
alleged in the founding affidavit. That
being so, at the very least
SAAB had a legitimate expectation that ‘in the event that SAPS
and SITA were contemplating cancelling
and not awarding the tender,
SAAB would first be given an opportunity to make representations’.
It is not in dispute that
SAAB was not afforded any such opportunity
prior to SAPS’s decision to cancel the tender. The second
ground of review was
based on the contention that there was no good
reason for the impugned decisions and that they were irrational and
unreasonable.
In support of this reliance was placed on s 5(3) of
PAJA, which provides that if an administrator fails to furnish
adequate reasons
for administrative action it must be presumed in any
proceedings for judicial review that the administrative action was
taken without
good reason. It was alleged in the founding affidavit
that the only purported explanations given by SAPS for its decision
to cancel
the tender were ‘vague references in the letter of
[Ngubane] dated 8 August 2012 to “time lapse in the evaluation
process”
and “the need for SAPS to review its business
processes”’. The deponent denied that the ‘explanations’
contained in the letter dated 28 May 2012 addressed to the Chief
Executive Officer of SITA constituted adequate reasons for the
‘decisions’ to cancel and not to award the tender. The
‘decisions’ were therefore irrational and unreasonable.
[7]
SAAB’s application was opposed by the respondents.
[1]
Ngubane, the deponent to the first to fourth respondents’
answering affidavit denied that SAAB had any right to be heard
before
the tender was cancelled, or that the decision to cancel the tender
was taken without good reason. It appears that before
the court a quo
the question of the validity period of SAAB’s bid was raised by
the respondents as a ground for opposing
the order sought by SAAB.
The court found that all the extensions to the bid validity period
were sought and granted after the
initial bid validity period of 90
days had expired on 4 January 2011. In this regard it said:
‘
My
finding is that once the validity period of the proposals had expired
with no extension of the period being arranged before the
expiry of
the validity period, there were no valid bids in existence and an
award could not be validly made. For the reasons set
out above the
applicant has failed to make out a case for review
.’
It
accordingly dismissed the application with costs, including costs
consequent upon the employment of two counsel. This appeal
is with
its leave.
[8]
Five issues were raised by counsel for SAAB for this court’s
consideration. They are: (1) the validity of the extension
of the bid
validity period; (2) whether there were valid grounds for the
cancellation of the tender; (3) whether the cancellation
was
procedurally fair (and thus valid); (4) whether the cancellation was
substantively valid; and (5) the appropriate remedy (in
the event of
a successful appeal). In my view, the third issue hinges on the
question whether the cancellation of the tender constituted
administrative action and was thus susceptible of review in terms of
PAJA. Before I consider that question, which I intend to do
first,
there is the small matter of whether SITA took the decision not to
award the tender. This is important in the light of the
relief sought
by SAAB which asks for a review of ‘the decision by SITA not to
award the tender’ and an order that within
one month SITA
should award the tender to it and conclude a contract with it on the
terms and conditions contained in the tender.
[9]
In its founding affidavit SAAB relies on the contents of a letter it
received from SITA dated 20 August 2012, as the letter
which
effectively communicated the decision to it. The letter reads:
‘
Your
bid response to RFB 822/2010 refers.
This
serves to notify you that SITA will not be issuing requests for
validity extension because the tender is due to be cancelled.’
The
respondents’ answer to the allegation seems to me to be
correct. That answer was, in essence, that what was contained
in the
letter at issue was not a decision not to award the tender. Rather,
it was a decision not to seek a further extension of
the bid validity
period, which had expired on 4 August 2012. It is not in dispute that
SITA received the letter of cancellation
(of 28 May 2012) from SAPS
on 4 June 2012. I cannot fathom how, in the knowledge that the tender
had been cancelled, SITA could
still have taken a decision one way or
the other relating to the award or otherwise of the tender. I am
mindful of the assertion
in the answering affidavit that ‘it
was SITA who had issued the tender and which tender it, SITA, had to
cancel’. But
there is no evidence in the papers to support
SAAB’s allegation that SITA had taken a decision not to award
the tender to
it. There was therefore no basis for the order sought
in paragraph 2 of the notice of motion (see para 5 above).
[10]
There is, in any event, a more fundamental reason why this relief was
inappropriate and why the focus must fall on the actions
of SAPS.
SITA was established in terms of the State Information Technology
Agency Act 88 of 1998 (the Act). Its function in terms
of s 7 of the
Act is to provide certain technology-related infrastructure and
systems and related services to government departments
and certain
public bodies. In terms of subsecs (4) and (7) of s 7 a department
that wishes to acquire a service contemplated by
the Act must acquire
it from SITA or, where SITA is unable to provide it, acquire the
service ‘through’ SITA. Nowhere
in the Act is it provided
that SITA is entitled to award tenders or conclude contracts on
behalf of government departments.
[11]
Instead, SITA acts in terms of business and service level agreements
concluded with departments in terms of s 20 of the Act
and is paid a
fee for services it renders (s 16(1)). All this is made perfectly
clear in the regulations made in terms of the Act,
[2]
in particular regs 8 and 14. And all doubt is dispelled by reg 14.1,
which provides that, after receipt of the recommendation of
the Bid
Evaluation Committee and the risks reports from that committee and
the recommendation Committee, ‘the relevant accounting
authority must make a final decision on the award of the bid to one
or more bidders, as the case may be’. Lastly, reg 14.2
deals
with the situation where the accounting authority awards the bid to a
bidder other than the one recommended by SITA. All
this makes it
clear that SITA’s role is that of an expert agency facilitating
the acquisition of technology services by government
departments, but
it does not decide whether to acquire the technology, nor does it
decide not to proceed with a tender process.
That is the function of
the relevant department.
[12]
I proceed to consider the question whether the decision made by SAPS
to cancel the tender constituted administrative action
as envisaged
in s 1 of PAJA. Administrative action has been defined as ‘(a)
a decision of an administrative nature; (b) by
an organ of State or a
natural or juristic person; (c) exercising a public power or
performing a public function; (d) in terms
of any legislation or an
empowering provision; (e) that adversely affects rights; (f) that has
a direct, external effect; and (g)
that does not fall under the
listed exclusions’.
[3]
It
has been acknowledged that the enquiry to determine whether a
particular decision constitutes administrative action is a difficult
one.
[4]
Thus a court faced with
a review based on the provisions of PAJA has to undertake a careful
analysis of the nature of the action
in question so as to make a
positive finding whether the decision is of an administrative
nature.
[5]
[13]
In
Tshwane City & others v Nambiti
Technologies (Pty) Ltd
2016 (2) SA 494
(SCA);
[2015] ZASCA 167
the respondent (Nambiti), which had been
providing Systems, Applications and Products in data processing (SAP)
support services
to the first appellant (the City), submitted a
tender along with other tenderers in response to an invitation to
tender for the
provision of ‘on-site and off-site SAP support
services for the City of Tshwane’. On 11 December 2012, three
months
after the invitation to tender had been published, Nambiti was
informed that the tender would be cancelled and a new tender issued.
Thereafter its services were terminated and a new contractor was
employed. This offended Nambiti and, after an exchange of
correspondence
it instituted proceedings seeking an order, inter
alia, reviewing and setting aside the decision of the City,
alternatively other
respondents, to cancel the tender in that case.
The Gauteng Division, Pretoria granted, amongst others, the relief
sought in relation
to the cancellation of the tender and directed the
City to adjudicate and award the tender within a specified period.
[14]
On appeal to it this court said the following (para 31):
‘
Until
the tender was issued the City was entirely free to determine for
itself what it required by way of SAP support services.
The evidence
showed that it had decided that it did not want those services on the
conditions set out in [the first tender]. In
other words it decided
to deal with its requirements for SAP support services on a different
basis. That was a decision it could
have reached at the very outset
and Nambiti would have had no grounds for complaint. I cannot think
that because it thought initially
that a fresh contract on the basis
of [the first tender] was desirable and then, on reconsideration
changed that view, the decision
to cancel [the first tender]
constituted administrative action. While there are instances where a
decision not to do something
may constitute administrative action, as
in the case of a failure to issue a passport or an identity document,
inaction is not
ordinarily to be equated with action. Even less so is
it administrative in nature. Administration is concerned with the
implementation
of policies and functions of government after those
policies and functions have been determined, usually through the
political
process or as a result of actions by the executive. A
decision not to procure certain services does not fit into that
framework
.’
And
further (para 32):
‘
But
the second aspect seems to me, if anything, clearer. A decision not
to procure services does not have any direct, external legal
effect.
No rights are infringed thereby. Disappointment may be the sentiment
of a tenderer, optimistic that their bid would be
the successful one,
but their rights are not affected. There can be no legal right to a
contract, and counsel did not suggest that
there was.
’
The
court accordingly held that ‘the decision by the City to cancel
the tender was not administrative action and was not susceptible
of
review in terms of PAJA.’
[6]
[15]
Well before the date of hearing of the present appeal, the
Nambiti
judgment was brought to the parties’ attention. The parties
were invited to file additional heads in this regard, should
they so
wish. We are grateful to counsel for their supplementary heads of
argument. Counsel for SAAB submitted that this court’s
conclusion that the decision of the City in
Nambiti
was not administrative in nature was
incorrect and that, to the extent necessary, it should be overruled.
For this submission counsel
relied on two previous decisions of this
court, the first of which being
Logbro
Properties CC v Bedderson NO & others
2003 (2) SA 460
(SCA);
[2002] ZASCA 135.
In that case a tender for
the sale of a prime property was awarded to one tenderer by the
KwaZulu-Natal provincial government whilst
the appellant’s
tender was rejected. The appellant challenged the decision to award
the tender on the ground that the successful
tenderer had not
complied with the tender conditions. The challenge prevailed and the
award was set aside. The Natal Provincial
Division of the High Court
ordered the assets committee (the committee) of the province to
reconsider the appellant’s tender
and others that had been
compliant with regard to the tender conditions. One of the conditions
stipulated in the tender document
was that the province could
withdraw a property or properties from the tender at any stage
without giving reasons. The committee
decided not to award the tender
because of the increase in property values in the intervening two
years since the court order and
decided to recommend a call for fresh
tenders. The appellant’s challenge to have this decision set
aside failed on the basis
that the province, in reconsidering the
tender, was entitled to take into account new factors, including the
increase in property
values.
[16]
On appeal to this court counsel for the respondent contended that the
tender conditions the province had stipulated gave it
a contractual
right to withdraw the property from the tender, which it could
exercise ‘without having to pass the scrutiny
of lawful
administrative action’. However, this court held as follows:
‘
Even
if the conditions constituted a contract . . . its provisions did not
exhaust the province’s duties towards the tenderers.
Principles
of administrative justice continue to govern that relationship, and
the province in exercising its contractual rights
in the tender
process was obliged to act lawfully, procedurally and fairly.’
[7]
The
key words in that passage are ‘in the tender process’.
The decision taken by the committee was the final stage of
a tender
process. That was necessarily the case in the light of the court
order that had referred the tender back to the committee
for
reconsideration. The issue between the parties was whether, in
fulfilling that obligation, the committee was bound by circumstances
as they had existed when the original decision was taken or whether
it could take account of changed circumstances that had arisen
in the
interim. This court confirmed the committee’s view that it was
entitled to take changed circumstances into account.
It remitted the
matter to the committee on the basis of the procedural fairness of
its decision-making process.
[17]
Thus, in
Logbro
the tender process was to continue to its conclusion, which involved
a decision whether or not to award the tender on its merits.
It was a
tender for the sale of immovable property, so it was highly relevant
that the process should generate a favourable price.
If no tenderer
offered an adequate price the only proper decision by the committee
would have been to recommend that the tender
not be awarded to anyone
and the property not be sold. The issue was whether, in reaching that
decision, the committee was bound
by the prices for land applicable
when the original award was made, or had to take account of the
increase in prices that had occurred
in the interim.
[18]
The distinction between
Logbro
and
Nambiti
is this: In
Logbro
there was a tender process that had progressed to the stage where a
decision had to be made whether to award the tender. In
Nambiti
there was a decision that the services reflected in the tender were
no longer required and the tender process was terminated. A
decision
as to procurement of goods and services by an organ of State, this
court said in
Nambiti
,
is one that lies within the heartland of the exercise of executive
authority by that organ of State.
[8]
It observed further that ‘it is always open to a public
authority, as it would to a private person, to decide that it no
longer wishes to procure the goods or services that are the subject
of the tender, either at all or on the terms of that particular
tender’.
[9]
Counsel
accepted that SAPS’s decision to procure was taken in the
exercise of executive authority. He accepted that without
the
regulations the decision not to procure any more would have been
taken in the exercise of executive authority. Counsel’s
contention was that with the regulations in place the polycentric
character of the decision to cancel the tender had been reduced
to
the level of administrative action. The regulations referred to are
the Preferential Procurement Regulations
[10]
(Procurement Regulations), particularly reg 8(4), (quoted in para 23
below) and the General Regulations
[11]
promulgated in terms of s 23 of the Act, particularly reg 14, which
is headed ‘Award of Bids’.
[19]
It appears that there is a contradiction in the meaning of the term
‘bids’ as used in reg 14 and that defined in
the
definition section. In my view, the term ‘bids’ as used
in reg 14 must mean ‘tender’ and not ‘an
offer’
as set out in the definition section of the regulations. It seems to
me, then, that the two sub-regulations (reg 8(4)
of the Procurement
Regulations and sub-regulation 14.3 of the General Regulations
[12]
)
relied upon by counsel for SAAB deal with two separate situations.
Sub-regulation 14.3 of the General Regulations deals with a
situation
where there is a successful bidder, meaning that a decision has been
taken to award the tender to a bidder or bidders,
but has yet to be
communicated to the successful bidder or bidders. In the present
matter no decision to award the tender had been
taken and the
sub-regulation, therefore, was not applicable.
[20]
As to reg 8(4) of the Procurement Regulations, it must be emphasised
that the authority to control and manage the police service
vests in
the National Commissioner of Police.
[13]
That authority necessarily includes the power to decide what is and
what is not required for the efficient and effective performance,
by
the police service, of their functions.
[14]
It is inconceivable that the decision of SAPS to cancel the tender,
which would otherwise have been taken in the exercise of executive
authority, could, by virtue of a regulation, suddenly change
character and become one of an administrative nature. In any event,
the regulation certainly does not purport to confer a power on SAPS,
in this instance, which it otherwise did not have. All that
the
regulation does, in my view, is identify in broad, but not exclusive,
terms the circumstances in which an organ of State may,
in the
exercise of its discretion, cancel a tender. It does not seek to
constrain the executive decision-making power of an organ
of State to
determine what goods and services are required to fulfil its public
obligations. I therefore disagree with the submission
that SAPS’s
decision to cancel the tender constituted administrative action. It
follows that I am also unable to agree with
the contention on behalf
of SAAB that
Nambiti
was wrongly decided on this point.
[21]
When SAPS, as an organ of State, took the decision to procure the
command solution and later to cancel the tender relating
thereto, it
did so in the exercise of executive authority. Its decision to cancel
the tender, therefore, was not susceptible of
review in terms of
PAJA. This conclusion renders it unnecessary for me to consider the
next contention by counsel, rooted in the
second decision of this
court he relied on, namely
Grey’s
Marine Hout Bay (Pty) Ltd & others v Minister of Public Works &
others
2005 (6) SA 313 (SCA),
[15]
that this court erred in
Nambiti
in concluding that a decision to cancel a tender does not have a
direct, external legal effect on any legal rights.
[22]
The conclusion that the cancellation of the tender did not constitute
administrative action disposes of SAAB’s contentions
based on
PAJA. But it advanced its argument on the basis that these grounds
overlapped with its contentions based on the principle
of legality.
The two differ, firstly, because the circumstances in which the
principle of legality will demand procedural fairness
in the
decision-making process - in the sense of the rationality of the
process by which the decision is made – are not the
same as
under PAJA.
[16]
Secondly, the
level of scrutiny for irrationality under the principle of legality
is a low hurdle requiring only a rational connection
between the
action and the reasons given for it,
[17]
while unreasonableness under PAJA requires that the decision be one
that a reasonable decision-maker could not reach.
[18]
But in this case even if the decision by SAPS is measured against the
higher unreasonableness standard, in my view and for the
reasons that
follow, it met that standard.
[23]
I propose to consider next the fourth issue mentioned in para 8
above, namely, the question whether there were valid grounds
for the
cancellation of the tender. For present purposes I shall assume,
without deciding, that the extension of the bid validity
period after
it had expired on 4 January 2011 was valid, because that was the
point at which counsel commenced their argument.
This issue revolves
around the principle of legality and the starting point, for present
purposes, is reg 8(4) of the Procurement
Regulations which reads:
‘
An
organ of State may, prior to the award of a tender, cancel a tender
if –
(a)
Due to changed circumstances, there is no
longer a need for the services, works or goods requested; or
(b)
Funds are no longer available to cover the
total envisaged expenditure; or
(c)
No acceptable tenders are received.’
As
can be seen above, the letter of 8 August 2012 from Ngubane to SAAB
(quoted in para 3 above) by which SAAB were advised of the
cancellation of the tender, refers to the one of 28 May 2012 (quoted
in para 4 above) addressed to the Chief Executive Officer
of SITA.
The two letters must therefore be read together. This is because SAPS
dealt with SITA and it was thus appropriate for
it (SAPS) to
communicate its decision to SITA. It is fair to assume that SAPS
would have understood that SITA, as the entity that
dealt directly
with SAAB, would advise the latter of the cancellation. In my view,
the contents of the letter of 8 August 2012
are merely a shortened
version of the contents of the previous one of 28 May 2012 addressed
to SITA. The full reasons for the cancellation
are contained in the
earlier letter.
[24]
Apart from the ground of procedural unfairness, which has been dealt
with effectively above, except for the argument that a
rational
process required a hearing before the decision was made to cancel the
tender, three other grounds of review which, it
was argued, can be
accommodated under the principle of legality, were raised on behalf
of SAAB. These were that (1) the cancellation
was procedurally
irregular; (2) the reason for the cancellation was unlawful; and (3)
there were no substantive grounds for the
cancellation. I shall deal
with them in turn and conclude with the rationality argument.
Procedural
irregularity
[25]
The submission on behalf of SAAB was that SAPS and the other
respondents did not have a discretion to cancel tenders as and
when
they chose. They may only to do so, so the argument continued, when
this is permitted by the relevant regulatory framework,
namely reg 8
of the Procurement Regulations and regulation 14 of the General
Regulations. I have already concluded above (para
14) that
sub-regulation 14.3 of the General Regulations had no application in
the present matter. Similarly, sub-regulation 14.4,
which requires
the accounting authority, among other things, to record the reasons
for cancellation of a bid in terms of sub-regulation
14.3, was not
applicable; so also sub-regulation 14.5, which requires the public
body concerned to institute appropriate investigation
in consultation
with SITA, in this instance, where the cancellation is in terms of
sub-regulation 14.3
(d)
.
[26]
It was further contended in SAAB’s heads of argument that there
was no compliance, on the part of SAPS, with the requirements
of reg
8(5) of the Procurement Regulations, which stipulates that ‘[t]he
decision to cancel the tender in terms of sub-regulation
(4) must be
published in the
Government
Tender Bulletin
or the media in which the original tender invitation was advertised’.
The decision to cancel was not published as required,
so it was
argued. The respondents did not deal with the issue of non-compliance
with the requirements of reg 8(5) in their heads
of argument. This is
not surprising because the point was never raised in the affidavits.
This court may of course consider a point
of law not pertinently
raised by an appellant in its motion papers, provided it is covered
by all the relevant facts that are before
court.
[19]
It was not suggested before us that all the relevant facts were
before court for us to consider the point without prejudicing the
respondents. There is therefore no basis for considering it. In the
result, the ground of review based on procedural irregularity
must
fail.
Unlawful
reasons for cancellation
[27]
SAAB’s contention was that one of the reasons proffered in
Ngubane’s letter of 8 August 2012
[20]
addressed to it and the letter from SAPS dated 28 May 2012
[21]
and addressed to SITA was, at the relevant time, patently bad in law
and thus vitiated the decision to cancel the tender. SAAB
relied on
Patel
v Witbank Town Council
1931 TPD 284
in support of the proposition that if one of a
multiplicity of reasons given for a decision is bad the entire
decision must be
set aside. But that depends upon there being a
multiplicity of reasons of which one or more is bad. In the present
matter the alleged
bad reason appears in the two letters just
referred to, as well as in a document containing reasons for the
cancellation –
I shall refer to these as ‘the compelled
reasons’ – delivered on behalf of SAPS and SITA on 3
September 2013
following an order of court directing them to do so:
it is the time lapse in the tender evaluation process. The
contention
was that ‘the presence of this central reason, which
is not sanctioned by the Procurement Regulations or the [General
Regulations]’
was bad in law. The primary question, though, is
whether the issue of the time lapse in the evaluation process
constitutes a stand-alone
reason. I think not. As I have suggested
above, the two letters must be read together.
[28]
In the first paragraph of the letter of 28 May 2012 Mkhwanazi, on
behalf of SAPS, referred to the date upon which the tender
evaluation
process commenced, namely 1 November 2010 and said that up to the
date of the letter (a period of almost one and a half
years) the
process had not been completed. I may mention that in the Invitation
to Bid it was emphasised that the command solution
was sought as an
‘immediate requirement with an option to extend [it]’. In
the second paragraph Mkhwanazi continued
that in view of the lapse of
time in the evaluation process with no outcome until that date, SAPS
had decided to cancel the tender,
not merely because of the lapse of
time, but because during that period (para 3 of the letter) SAPS’s
business requirements
changed and, by the time of the cancellation,
were no longer those that were specified in the tender, the
processing of which was
yet to be completed. SAPS were therefore
reviewing their ‘current’ business requirements
specification. When the letter
of 28 May 2012 is read sensibly and as
a whole, as it must be
[22]
(and even read together with the letter of 8 August 2012), the true
reasons for the cancellation of the tender become clear. The
time
lapse in the evaluation process is clearly not a stand-alone reason
for the cancellation of the tender but, read in the context
of the
letter as a whole, it becomes clear that as a result of the delay in
the tender evaluation process, SAPS could not continue
with the
tender as its business requirements had changed and had to be
reviewed since those specified in the tender no longer addressed
its
‘current’ business requirements. Whether SAPS
contemplated putting out a fresh tender after it had reviewed its
business requirements specification is not clear from the papers.
[29]
Except for a lengthy introductory part setting out what had occurred
during the period from the commencement of the tender
process until
the decision to cancel the tender was made and the inclusion of
‘additional reasons’, the compelled reasons
are no
different from those contained in the letters of 28 May 2012 and 8
August 2012. The two ‘additional reasons’
were: that
‘[i]t was considered prudent to cancel the bid to avoid
fruitless and wasteful expenditure of public funds’
and that
the tender had in any event lapsed ‘when it was not timeously
extended and no decision to award the bid was taken
before it
lapsed’. In the answering affidavit the respondents also made
the allegation that in the ‘2012/2013 Plan
the [command
solution] had not been allocated funds but was being financed out of
the criminal justice system’. It was submitted
on behalf of
SAAB that it was impermissible for SAPS to rely on new reasons for
its decision for the first time in their answering
papers and that a
decision-maker is bound by the reasons given at the time of the
decision, on the basis of the information then
before it. In this
regard reliance was placed on an
obiter
dictum
in
National
Lotteries Board & others v South African Education and
Environment Project
2012 (4) SA 504
(SCA);
[2011] ZASCA 154
para 27.
[30]
It is not necessary for me to express any view on the issue as I am
prepared, for present purposes, to ignore the ‘additional
reasons’ that are not contained in the letter of 28 May 2012,
although the reference to the avoidance of ‘fruitless
and
wasteful expenditure’ is implicit in the reasons given in that
letter. As the respondents asserted in the answering affidavit,
it is
well-known (‘trite’) that information technology is
developed, updated and replaced regularly. This was fully
explained
in the affidavit of Mr Willem Frederick van Wyk (Van Wyk) which was
filed without objection and to which there was no
response. To
purchase out-dated technology or technology that is soon to be
updated would amount to fruitless and wasteful expenditure.
As I have
held above, however, on a proper reading of the letter of 28 May 2012
the reasons for the cancellation of the tender
become clear. It
follows that the time lapse in the evaluation of the tender was not a
separate or bad reason for the cancellation
and this ground of review
must accordingly also fail.
No
substantive grounds for cancellation
[31]
Two issues were raised by SAAB under this sub-heading. The first is
‘the alleged lack of a need for the goods’
and the
second: the alleged change in the evaluation methodology. The second
issue, which was mentioned in the introductory part
of the compelled
reasons, related to a problem that SAPS seemingly had with the
methodology adopted by SITA in the weighting of
scores during the
technical evaluation of tenders. Staying true to what has been said
above in relation to ‘additional reasons’
I shall ignore
this issue because it did not form part of the initial reasons
contained in the letters of 28 May 2012 and 8 August
2012. The first
issue implicates the provisions of reg 8(4)
(a)
of the Procurement Regulations (quoted
in para 23 above). It was submitted on behalf of SAAB that there was
no evidence in the record
delivered in terms of Uniform rule 53 of
any changed circumstances of such a magnitude as to demonstrate that
the need for the
command solution as
described in the tender no longer
existed. In the absence of such evidence justifying the cancellation
due to the absence of a need
for the goods or service SAPS’
argument must fail, so it was contended. Instead, said counsel, the
record indicated that
the subject of the tender remained a priority
need for SAPS.
[32]
It is true that in his affidavit filed in response to SAAB’s
further supplementary affidavit, which was filed after the
replying
affidavit, Van Wyk testified that the respondents’ case was not
that SAPS will not, in future, include a command
solution as part of
its future technology solutions. This statement, so the argument
continued, makes it clear that SAPS could
not and did not contend
that it had abandoned the need for a command solution. But this
argument ignores the very next clarification
to the effect that the
case for SAPS had always been that the command solution ‘as
specified in the Bid, which was the subject-matter
of the [tender] no
longer addressed the then current business requirements for SAPS’.
This means that while SAPS was still
in need of
a
command solution, the one tendered for was no longer required or
needed because it was no longer suitable for SAPS’s current
needs as at the time of the cancellation. I am satisfied that SAPS
indeed demonstrated a change of circumstance and that there
was no
longer a need for the command solution tendered for by SAAB.
[33]
In its replying affidavit SAAB acknowledged that in terms of the
Invitation to Bid, SAPS would not be bound to procure out-dated
technology and would be able to issue a new tender in respect of any
component of a solution should a better component be identified.
With
reference to its letter of 26 June 2012 (referred to in para 3 above)
SAAB stated that it reiterated its commitment to provide
the latest
technology and demonstrated the manner in which it had done so since
the submission of its bid. The short answer to
this is that the
letter referred to was written after the tender had been cancelled on
28 May 2012. In the answering affidavit
Ngubane stated that the order
sought by SAAB in its notice of motion would force SAPS ‘to buy
and pay for with public funds
something that does not address its
current business requirements’. To this statement SAAB
countered that at no point did
SAPS set out what its current
requirements were and how that differed from what was sought to be
procured through the tender. What
had been established by SAPS was
that its business requirements at the time of the cancellation were
no longer as specified in
the tender, but it was still reviewing the
specifications of its ‘current’ business requirements. It
is not surprising,
therefore, that it did not set out what it then
required. I conclude that the grounds given by SAPS for cancelling
the tender were
substantive grounds and that they were covered by reg
8(4)
(a)
of
the Procurement Regulations.
Rational
decision-making
[34]
The question is whether a rational decision-making process in this
case demanded that SAAB be afforded a hearing? In my view
it did not.
When the substantive grounds for cancelling the tender are examined
they show that there had been an elapse of time
and a need to
reconsider SAPS’s business requirements. These were executive
decisions that involved the internal operational
workings of SAPS.
The areas on which SAAB contended that it wished to make
representations were the decision; the effect of the
decision on SAAB
(which is no more than a plea
ad
misericordiam
); and the extent to which
SAAB’s tender could still meet SAPS’s relevant
requirements. In other words they were asking
for an opportunity to
persuade SAPS to change its mind. In my view, that is not sufficient
to show that a rational decision-making
process would be deficient
unless SAAB was afforded a hearing. Importantly, there were no
factual allegations in the affidavits
explaining why this would
render the decision-making process irrational. There is no merit in
the rationality argument.
[35]
In the result, the appeal is dismissed with costs, which shall
include the costs consequent upon the employment of two counsel.
L
Mpati
President
APPEARANCES
For
the Appellant: G Marcus SC (with him S Budlender)
Instructed
by: Adams & Adams Attorneys, Pretoria
Honey
Attorneys, Bloemfontein
For
the Respondent S Hassim and K Pillay SC (with them S Baloyi)
Instructed
by: The State Attorney, Pretoria
The
State Attorney, Bloemfontein
[1]
It
is not clear whether the fifth respondent entered the fray before
the court of first instance, but did not participate in this
court.
I shall, however, refer collectively to the remaining respondents as
‘the respondents’.
[2]
See
fn 11 below.
[3]
Minister
of Defence and Military Veterans v Motau & others
2014
(5) SA 69
(CC);
[2014] ZACC 18
para 33.
[4]
Ibid
paras 36 and 103.
[5]
Sokhela
& others v MEC for Agricultural and Environmental Affairs
(KwaZulu-Natal) & others
2010 (5) SA 574
(KZP) paras 60–61, quoted with approval in
Motau
,
above fn 2 para 34.
[6]
Paragraph
34. An application for leave to appeal to the Constitutional Court
was lodged in which this finding was expressly challenged,
but leave
to appeal was refused.
[7]
Paragraph
7.
[8]
Paragraph
43.
[9]
Paragraph
26.
[10]
Preferential
Procurement Regulations, 2011, GN R502,
GG
34350, 8 June 2011.
[11]
Published
under GN R904 in
GG
28021 of 23 September 2005.
[12]
Sub-regulation
14.3 reads: ‘An accounting authority may, before notifying the
successful bidder or bidders of the award
of the bid, cancel the bid
if-
(a)
Due to changed circumstances, the need
for the information technology goods or services in question no
longer exists;
(b)
The total envisaged expenditure
exceeds the available funding stipulated in the business case for
the bid and additional funding
cannot be obtained;
(c)
No acceptable bids were received; or
(d)
The procurement process did not comply
with the applicable legislation or its integrity has been otherwise
compromised.’
[13]
In
terms of s 207(2) of the Constitution the National Commissioner
exercises control over and manages the police service. The
Commissioner’s powers and duties are set out in
s 11
of the
South African Police Service Act 68 of 1995
.
Section 11(1)
(g)
authorises
the Commissioner to ‘perform any legal act or act in any legal
capacity on behalf of the Service’.
[14]
The
decision to cancel the tender was made by Mkhwanazi in his capacity
as acting National Commissioner.
[15]
Paragraph
23.
[16]
Albutt
v Centre for the Study of Violence and Reconciliation and others
2010 (3) SA 293
(CC) paras 49 and 50;
Minister
of Home Affairs and others v Scalabrini Centre and others
2013 (6) SA 421
(SCA) paras 68 and 69.
[17]
Pharmaceutical
Manufacturers
Association
of SA: In re ex parte President of the Republic of South Africa &
others
2000 (2) SA 674
(CC);
[2000] ZACC 1
, paras 85 and 90;
Democratic
Alliance v President of the Republic of South Africa & others
2013 (1) SA 248
(CC);
[2012] ZACC 24
para 27
[18]
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs &
others
[2004] ZACC 15
;
2004 (4) SA 490
(CC)
para
44.
[19]
Minister
van Wet en Orde v Matshoba
1990 (1) SA 280
(A) at 285E-H; See also
Logbro
v Bedderson NO &
o
thers
2003 (2) SA 460
(SCA);
[2002] ZASCA 135
para 23; and
Fischer
& another v Ramahlele & others
2014
(4) SA 614
(SCA) paras 13 and 14.
[20]
Quoted
in para 3 above.
[21]
Quoted
in para 4 above.
[22]
Natal
Joint Municipal Pension Fund v
Endumeni
Municipality
2012
(4) SA 593
(SCA) para 18.