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[2014] ZAGPJHC 224
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Autozone Retail And Distribution (Pty) Ltd v National Commissioner of Police N.O and Others (52240/14) [2014] ZAGPJHC 224 (25 September 2014)
IN
THE GAUTENG HIGH COURT, PRETORIA
(REPUBLIC
OF SOUTH AFRICA)
CASE
NO: 52240/14
DATE:
25 SEPTEMBER 2014
In
the matter between
AUTOZONE
RETAIL AND DISTRIBUTION (PTY) LTD
......................
Applicant
And
THE
NATIONAL COMMISSIONER OF POLICE N.O
................
1st
Respondent
THE
MINISTER OF POLICE
N.O
..............................................
2nd
Respondent
ALPHEUS
THEMBINKOSI NGEMA N.O
.................................
3rd
Respondent
ABE
MOTOR SPARES CC t/a ABE MIDAS
..............................
4th
Respondent
PINNACLE
AUTO PARTS (PTY) LTD
.......................................
5th
Respondent
JUDGMENT
Summary
Review
proceedings – record of proceedings produced by party to be
reviewed need not be authenticated – Failure to produce
complete record - Applicant not insisting on additional
portions of the record being made available - decision maker may
be
at risk if it fails to produce complete record. Failure of person
whose decision is to be reviewed to respond to allegations
of
irregularity – can be taken to have no answer.
WEPENER
J
[1]
The applicant seeks a review of a decision of the third respondent
to award a tender for the supply of vehicle parts to the
South
African Police Service (SAPS), to the fourth and fifth respondents.
It also seeks an order replacing the decision of
the third respondent
with a decision to award the tender to the applicant.
[2]
The applicant is an independent wholesaler and retail distributor of
automotive parts and accessories in Southern Africa.
It has
been the contracted supplier of automotive spare parts to the SAPS
garages country wide for the past thirteen years.
This supply
of spare parts was pursuant to a contract that was awarded to the
applicant in 2011 for a period of two years.
However, upon the
expiration of the contract, it was extended several times until the
extensions came to an end on 30 June 2014.
[3]
The first respondent is the National Commissioner of Police who was
cited nomine officio as representative of the SAPS.
The second
respondent is the Minister of Police, also cited nomine officio as
the member of the national executive responsible
for the SAPS. The
third respondent is brigadier Ngema, cited nomine officio as the
chairperson of the bid-evaluation committee
of the SAPS.
[4]
The fourth respondent is ABE Motor Spares CC, a Close Corporation
trading under the name of ABE Midas who was one of the successful
bidders referred to herein in below (ABE Midas). The fifth respondent
is Pinnacle Auto Spares (Pty) Ltd who was also a successful
bidder in
the process referred to below (Pinnacle). It became evident at the
outset of the hearing that the fifth respondent was
placed under
voluntary business rescue a few days prior to the hearing. An
application by the business rescue practitioner
for a postponement in
order “to consider its position” was refused.
[5]
A tender process which commenced during the early part of 2013
became, for reasons unrelated to the present application, a
protracted process due to cancellations of the process by the SAPS.
Eventually, on 15 November 2013 a notice appeared in the
Government
Tender Bulletin regarding the tender that forms the subject matter of
this litigation, for the supply and delivery of
spare parts to the
SAPS for a period of two years in accordance with the published
specifications published. It is common
cause that the notice,
the specifications, the bid document, the matters discussed at
compulsory briefing sessions, letters written
in amplification
together with the information contained on a compact disc, all formed
part of the bid specifications. Bidders
were required to
certify that they had taken note and would abide by the general
conditions of contract, the special conditions
of contract and the
specifications.
[6]
The general conditions of contract contain the following relevant
provisions. In terms of clause 22 it was stipulated
that “The
purchaser, without prejudice to any other remedy for breach of
contract, by written notice of default sent to the
supplier, may
terminate this contract in whole or in part-
…
(c)
if the supplier, in the judgment of the purchaser, has engaged in
corrupt or fraudulent practices in competing for or in executing
the
contract.”
In
this regard the purchaser is the SAPS and the supplier the bidder.
Fraudulent practice is defined in clause 1.13 as “…
a
representation of such an order to influence a procurement process or
the execution of a contract to detriment of any bidder,
and includes
collusive practice amongst bidders, (prior or after bid submission)
designed to establish bid prices at artificial
non-competitive levels
and deprive the bidder of the benefits of free and open
competition”. (This provision led the
SAPS respondents to
concede that the allocation of a portion of the tender to Pinnacle
could not withstand the scrutiny of a review
process).
[7]
There were a number of special conditions of contract and mandatory
requirements. I will refer to the specific bid conditions
that
are relevant when dealing with the specific grounds of review.
[8]
By 10 April 2014 the applicant, ABE Midas and Pinnacle were informed
at a meeting that they were the only bidders remaining
in the bid
process. Apparent from this is that after the completion of the
first phase of the evaluation process, the applicant
and the two
other bidders had all been found to have complied with the mandatory
requirements of the tender. The three remaining
bidders were
required to submit further information and on 30 June 2014 the
applicant was advised that a new contract had been
signed on that
day. At the same time an instruction was issued to all SAPS
garages not to place any orders with the applicant
“as the
contract has been closed.”
[9]
It then transpired that the SAPS respondents awarded a tender in
respect of fifty six of the SAPS garages in eight provinces
to
Pinnacle and the tender in respect of the remaining 41 garages, to
the ABE Midas.
[10]
Since then, it is common cause that the garages were not able to
obtain parts expeditiously and were directed to work on a
three quote
system by obtaining quotes from three different sources where after
approval had to be obtained to accept any of the
three quotes.
[11]
This system is in stark contrast to the requirements that the
successful bidder should be able to supply spares parts within
a
period of two to three hours from the time of its request. It
also became apparent from the SAPS respondents notes that
ABE Midas
and Pinnacle would not deliver spare parts “at all garages at
the moment.” The garage commanders were
further advised
that the “two suppliers awarded the contract will only be ready
to supply parts from 1 August 2014”.
The applicant’s
investigations at the various SAPS garages then showed that the
successful tenderers were evidently not during
July 2014 in a
position to meet the obligations in terms of the provisions of
the tenders that they had been awarded.
The ability of the SAPS
garages to operate was seriously hampered. The three quote
procurement system was not successfully
implemented, in some
instances due to the fact that accounts had not been opened with the
potential suppliers. Further complaints
of the applicant regarding
non-compliance with the tender process will become apparent when I
deal with the specific grounds of
review.
Record of
Proceedings
[12]
The applicant launched the application at a time when the record of
proceedings was not available to it. In those circumstances
it
made certain allegations regarding the tender procedure whilst
relying on hearsay evidence and the number of suppositions. However,
since the filing of the record, the facts which have emerged prompted
the applicant to amend or supplement the allegations contained
in the
founding affidavit. It was not disputed that the applicant was
entitled to so supplement its grounds of review.
[1]
The respondents decided not respond to these allegations and the
inference is that they are unable to gainsay it.
[2]
[13]
It was submitted on behalf ABE Midas that the application for review
cannot be properly heard by virtue of the fact that firstly,
the
record of proceedings provided by the SAPS is incomplete and
secondly, it has not been verified or authenticated and thirdly,
that
it does not contain permissible evidence upon which a party may
rely. For this proposition counsel for the ABE Midas
relied on
I O
Tech Manufacturing (Pty) Ltd vs Nemtek (Pty) Ltd.
[3]
[14]
There are four reasons why this submission cannot be upheld.
Firstly, the applicant is prepared to present its case based
on the
record which the SAPS respondents made available. It waived the
right to compel those respondents to disclose such
portions of the
record which clearly were not made available. In my view the
applicant is entitled to waive the benefit of
receiving the whole or
part of the record to be reviewed and is entitled to make its case on
the information that is made available.
In
Motaung vs Mothiba N.O.
[4]
MT Steyn J (as he then was) said as follows:
[5]
- “To my mind Rule 53(1)(b) is primarily intended to operate in
favour and to the benefit of an applicant in a review
proceedings, who may be, or who is in fact, unaware of the full
or true reasons for the decisions he seeks to have corrected
or set
aside and who may, after a perusal of the record of the proceedings
in question and for the reasons, if any, for the decision
in issue,
decide to amend, add or to vary the terms of the notice of motion and
to supplement his supporting affidavit, in order
to formulate his
application in such manner as he deems necessary to properly set out
there in the true facts and their legal effect
and consequences.
The
provisions of Rule 53(4,) in my view, indicate clearly such is indeed
the intended effect of Rule 53(1) (b). Should the
respondent in
an application for review, brought in terms of Rule of Court 53, be
permitted to delay the hearing of such application
by his refusal of
failure to perform the duties imposed upon him by Rule 53(1)(b), even
where the applicant is willing to proceed
with his application
despite such refusal or failure, the particular Rule of Court would
thereby be rendered ineffective
and a premium would then be
placed on disobedience of the Rules of Court, whilst the party
relying on those Rules would thereby
be penalised. The
existence of such a state of affairs cannot be tolerated. It is
clear, furthermore, that the party
may waive a stipulation intended
for this benefit. Cf. Hilsage Investments (Pty) Ltd vs National
Exposition (Pty) Ltd and
others 1974(3) SA 346(W) at p354A-C.
The applicant is, therefore, in my opinion entitled to waive the
rights and benefits
conferred upon him by Rule 53(1) (b) and to have
both applications heard and adjudicated upon despite the failure of
the respondents
to comply with the requirements of that Rule.
Cf. Wacks vs Goldman
1965 (4) SA 386(W)
at pp388-389.”
[15]
Secondly, there is no requirement in Rule 53 that the record which
the SAPS respondents are required to furnish should be authenticated
or verified. Not only is this so, the documents before this
court were supplied by the decision maker in compliance with
Rule 53
as constituting the relevant record of proceedings. In
addition, the particular document which ABE Midas complains
of forms
part of the record produced by the SAPS respondents and is referred
to by its deponent as follows: “Annexed
hereto marked
“SAP3” is a copy of the BEC’s submission to the BAC
for purposes of adjudicating upon the tenders
concerned.”
Insofar as verification might have been required, the document has
been disclosed under oath as being the relevant
document which was
the subject of consideration by the SAPS.
[16]
Thirdly, as between the applicant and the decision maker, and in fact
all of the first three respondents, the record produced
and relied
upon by the parties is the record which this court should take into
account for purposes of considering the application.
ABE
Midas being an outsider
[6]
in
the review application brought by the applicant against a public
authority, cannot be heard to say that that which is common
cause
between the applicant and the SAPS respondents is not the record upon
which the applicant and all those respondents may rely
because of
some omission to authenticate the record.
[17]
Fourthly, the
I
O Tech Manufacturing
matter
dealt with the well-known principle that where a witness, such as an
expert witness, relies on facts which he obtained from
another party
which is not the opposing party, such facts must be independently
proved. The reference
in
I O Tech Manufacturing
[7]
to authentication of the record, in my view, is nothing other than a
duty to prove the underlying facts as was explained by Meyer
AJ (as
then was) in
Mathebula
vs Road Accident Fund
(05967/08)[2006] ZAGPHC 261(8 November 2006) at para 13: “An
expert is not entitled, any more than any other witness,
to give
hearsay evidence as to any fact, and all facts on which the expert
witness relies must ordinarily be established during
the trial,
except those facts which the expert draws as a conclusion by reason
of his or her expertise from other facts which have
been admitted by
the other party or established by admissible evidence. (See:
Coopers (South Africa) (Pty) Ltd v Deutsche
Gesellschaft für
Schädlingsbekämpfung MBH 1976(3) SA 352 (A) at p 371G;
Reckitt & Colman SA (Pty) Ltd v S C
Johnson & Son SA (Pty)
Ltd
1993 (2) SA 307
(A) at p315E; Lornadawn Investments (Pty) Ltd v
Minister van Landbou 1977 (3) 618 (T) at p 623; and Holtzhauzen v
Roodt
1997 (4) SA 766
(W) at 772I).”
[18]
The rule against allowing inadmissible evidence referred to in the
I
O Tech Manufacturing
was based on the fact that there was no proof that the documents used
to base evidence on, originated from the opposing party.
[8]
The rule is no different from the rule that the facts upon which an
expert bases his or her opinion need to be proved as was held
in
Mathebula.
[19]
The record in this matter contains common cause facts which have been
admitted by the SAPS respondents as being the correct
facts. It
is distinguishable from the
I O Tech Manufacturing
matter
where the underlying facts, namely the contents of the document
relied upon by a party, were not proved to be a document
emanating
from the opposing party nor was the document admitted by the opposing
party as containing the correct facts.
[20]
I am not concerned with witnesses who base their evidence on such
facts which would be hearsay and inadmissible for want of
proof.
In the circumstances, reliance on
IO Tech Manufacturing
is, in
my view, misplaced and the technical defense that there is no
permissible record before the court, cannot be upheld.
Final
Relief
[21]
The applicant initially sought relief in two stages. Part A of
the Notice of Motion sought an interim interdict suspending
the award
of a tender to ABE Midas and Pinnacle, pending a review of the
award. A review was sought in the second part of
the Notice of
Motion. During the hearing before me it became common cause
that the matter has been fully dealt with in the
affidavits and there
is no reason why I should not deal with the review application on its
merits resulting in an interim interdict
not being necessary to
adjudicate upon.
[22]
The applicant bases its case on the fact that the tender award
challenged in these proceedings, constitutes administrative
action
within the meaning of that term in s1of PAJA.
[9]
There is no dispute that the actions of the SAPS in considering and
awarding the tender do indeed fall within the provisions
of s 6 of
PAJA.
[10]
The SAPS
respondents are organs of state which are bound by the basic values
and principles governing public administration
set out in s 195 of
the Constitution.
[11]
This
fact was unreservedly accepted by counsel for the SAPS respondents.
Legal
Position
[23]
Before analysing the facts it is necessary to set out the legal
principles applicable to a review of tender awards.
[24]
Decisions to award tenders such as those challenged in these
proceedings must not only to be taken pursuant to a process that
is
“fair, equitable, transparent, competitive and
cost-effective”
[12]
but
also according to the prescripts of administrative justice set out
in s 6 of PAJA.
[13]
[14]
[25]
Tender processes and decisions must also comply with the legislation
adopted in terms of s 217 (3) of the Constitution, namely
the
Preferential Procurement Policy Framework Act, 5 of 2000 (the PPPFA),
which defines an acceptable tender as any “tender
which, in all
respects, complies with the specifications and conditions of tender
as set out in the tender document.”
[26]
In
Steenkamp
[15]
,
the
Constitutional Court stated that tender processes require “strict
equal compliance by all competing tenderers, on the
closing day for
submission of tenders.”
[27]
The proper legal approach was set out in Allpay (1) para 22.
[16]
[28]
When considering the fairness and lawfulness of the administrative
action (independent from the result) the following approach
is to be
followed: “Once the ground of review under PAJA has been
established there is no room for shying away from it.
Section
172(2) (a) of the Constitution requires the decision to be declared
unlawful. The consequences of the declaration
of unlawfulness
must then be dealt with in a just and equitable order under Section
172(1) (b). Section 8 of PAJA gives detailed
legislative
content to the Constitution’s “just and equitable”
remedy.” (Footnotes omitted).
[29]
The Constitutional Court further considered that
[17]
“… deviations from fair process may themselves all too
often be symptoms of corruption or malfeasance in the process.
In other words, an unfair process may betoken a deliberately skewed
process. Hence insistence on compliance with process
formalities has a threefold purpose: (a) it ensures fairness to
participants in the bid process; (b) it enhances the likelihood
of
efficiency and optimality in the outcome; and (c) it serves as a
guardian against a process skewed by corrupt influences.”
[18]
[30]
The procurement framework legality was set out by Froneman J in
Allpay(1)
paras 31-37:
‘
[31]
In
Steenkamp
Moseneke DCJ stated:-
“
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 s 33 and the basic values governing
public administration
in section 195(1). [Footnotes omitted.]
In
Millennium Waste
the Supreme Court of Appeal (per Jafta JA)
elaborated:
“
The
. . . Constitution lays down minimum requirements for a valid tender
process and contracts entered into following an award of
tender to a
successful tenderer (s 217). The section requires that the tender
process, preceding the conclusion of contracts for
the supply of
goods and services, must be ''fair, equitable, transparent,
competitive and cost-effective''. Finally, as the decision
to award a
tender constitutes administrative action, it follows that the
provisions of [PAJA] apply to the process. (footnotes
omitted).
[32]
The starting point for an evaluation of the proper approach to an
assessment of the constitutional validity of outcomes under
the
state procurement process is thus s 217 of the Constitution:
“
(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.”
[33]
The national legislation prescribing the framework within which
procurement policy must be implemented is the
Preferential
Procurement Policy Framework Act 31 (Procurement
Act).
The Public Finance Management Act 32 is also relevant.
[34]
An “acceptable tender” under the Procurement Act is any
“tender which, in all respects, complies with the
specifications and conditions of tender as set out in the tender
document; . . . .”The Preferential Procurement
Regulations 34 (Procurement Regulations) define a tender as —
“
a
written offer in a prescribed or stipulated form in response to an
invitation by an organ of state for the provision of services,
works
or goods, through price quotations, advertised competitive tendering
processes or proposals; . . . .”
[35]
An organ of state must indicate in the invitation to submit a tender
—
(a)
if that tender will be evaluated on functionality;
(b)
that the evaluation criteria for measuring functionality are
objective;
(c)
the evaluation criteria, weight of each criterion, applicable values
and minimum qualifying score for functionality;
(d)
that no tender will be regarded as an acceptable tender if it fails
to achieve the minimum qualifying score for functionality
as
indicated in the tender invitation; and
(e)
that tenders that have achieved the minimum qualification score for
functionality must be evaluated further in terms of the
applicable
prescribed point systems.
[36]
The object of the Public Finance Management Act is to 'secure
transparency, accountability and sound management of the revenue,
expenditure, assets and liabilities of the institutions ”to
which it applies, SASSA being one of them. Section 51(1)(a)(iii)
provides that an accounting authority for a public entity must ensure
and maintain 'an appropriate procurement and provisioning
system
which is fair, equitable, transparent, competitive and
cost-effective; . . . .”
[37]
The Treasury Regulations issued pursuant to s 76 of the Public
Finance Management Act require the development and implementation
of
an effective and efficient supply chain management system for
the acquisition of goods and services that must be fair,
equitable, transparent, competitive and cost-effective. In the
case of procurement through a bidding process, the supply
chain
management system must provide for the adjudication of bids through a
bid adjudication committee; the establishment, composition
and
functioning of bid specification, evaluation and adjudication
committees; the selection of bid adjudication members;
bidding
procedures; and the approval of bid evaluation and/or adjudication
committee recommendations. The accounting officer
or accounting
authority must ensure that the bid documentation and the general
conditions of contract are in accordance with the
instructions of the
National Treasury, and that the bid documentation includes H
evaluation and adjudication criteria, including
criteria prescribed
by the Procurement Act and the Broad-Based Black Economic Empowerment
Act 40 (Empowerment Act).
[31]
It is only after applying the proper principles that consideration to
a remedy, if applicable, should be given. In this
regard
Froneman J said in Allpay (1)
[19]
as follows:
“
Irregularities
[32]
Although the applicant relies on nine grounds of irregular conduct in
the award of the tender, the ninth ground was not pursued
during
argument before me and the eighth ground only sought to impugn the
tender award to Pinnacle.
[33]
I can shortly deal with the position as far as Pinnacle is
concerned. Counsel for the SAPS respondents argued that
Pinnacle
did not respond to serious allegations against it which,
inter alia, includes a supply of a false B-BBEE certification.
[20]
According to the special requirements and conditions of contract, the
calculation of points in accordance to the PPFA and Regulations
[21]
was set out in the bid document. The calculation is not
relevant to these proceedings. The certificate submitted by
Pinnacle was false as it was not issued by the entity which purported
to have issued it and in any event, no entity by that name
had been
accredited as a BEE verification agency according to the record
keepers of all accredited verification agencies, the South
African
National Accreditation System. The irregularities, as far as Pinnacle
is concerned, are so serious that Pinnacle’s
opposition to a
review process could not be justified on any basis. Later, during
argument, counsel for the SAPS respondents conceded
without
hesitation that the award of the tender to Pinnacle was so irregular
that it had to be set aside. It is not necessary for
met to set out
the full grounds of review individually and to analyze each of them.
In addition to the review grounds advanced
in relation to ABE Midas,
which are also applicable to Pinnacle, the review grounds in relation
to it exhibit additional serious
and fatal irregularities to those
referred to below in relation to ABE Midas. Having regard
thereto it became common cause
between the applicant and the SAPS
respondents that the award of the tender to Pinnacle should be
reviewed and set aside. ABE Midas
did not argue differently.
I
deal with the remaining irregularities which, although also
applicable to Pinnacle, in the main, are applicable to ABE Midas.
First
irregularity – Pricing in absence of volumes.
[34]
It was submitted that the bidders’ respective comparative
prices were determined on the basis of prices
[22]
they submitted in respect of twenty three categories of parts
identified in sample spreadsheets. The applicant’s
ability to determine prices that it is able to offer for the parts in
question would depend on the number of each part that it
would be
required to supply as volumes materially affect prices.
[23]
[35]
The SAPS respondents boldly confirm that there was intentionally no
indication of the expected volumes of the parts contained
on the
compact disc. The approach, in my view, is irrational and the
irrationality that this approach imported into the tender
process is
confirmed by the common cause fact that when the bidders’
pricing was compared, the evaluation committee did indeed
apply a
multiplication factor to the unit prices supplied by the bidders in
order to reach a total price. This was compounded
by the fact
that the multiplication factor was not applied uniformly to each of
the bidders, resulting in skewed results being
attained.
[24]
The process attained the result which the Constitutional Court warned
against.
[36]
To this allegation the SAPS respondents responded that although the
criticisms raised by the applicant are valid, the irregularity
is not
material. ABE Midas associated itself with the SAPS
respondents’ argument and relied on the failure of the SAPS
to
confirm the authenticity of the record of proceedings, the latter
argument which I have already shown to be unsustainable.
[37]
The Constitutional Court made it clear in
Allpay
(1)
that the suggestion that inconsequential irregularities are of no
moment conflates the test for their irregularities and their
impact.
[25]
[38]
After an analysis of the relevant documents it became common cause
between the applicant and the SAPS respondents that the
discrepancies
contained in the evaluation document regarding the comparison of
prices of the bidders were obvious but unexplained.
In the specific
context of judicial review of tender awards the Supreme Court of
Appeal said that “One of the requirements
of... (a tender)
procedure is that the body adjudging tenders be presented with
comparable offers in order that its members should
be able to
compare. …. requirement is that competitors should be treated
equally, in the sense that they should all be
entitled to tender for
the same thing.”
[26]
[39]
It is consequently clear that the decisions to award the tenders were
arbitrarily reached
[27]
and
not rationally connected to the purpose for which they were made,
namely to achieve the purpose of the process which is the
most
competitive contract pricing for parts (with due regard to the points
system). That being so, the failure to apply the
constitutional
prescripts by failing to follow a process that was equitable,
transparent or cost-effect as required by s 217(1)
of the
Constitution, renders the process unlawful. As such the purpose
for which the requirements are in place,
[28]
was not attained. The argument that the irregularity was not
material can consequently not be upheld.
Second irregularity
– Failure to exclude buy-out prices.
[40]
Included in the bid was a requirement to tender for buy-out parts.
These are vehicle parts that are not available in
the open market
generally and which had to be purchased from the manufacturers’
dealer networks. The applicant complained
that the evaluation
committee of the SAPS did not compare apples with apples when it
dealt with these buy-out parts. In response
to the allegation
that it would not have been possible to meaningfully compare the
prices of parts in the sample spreadsheet where
one bidder quoted on
the basis on a buy-out price, and one or more of the others included
aftermarket prices, the SAPS responded
that in such case the parts
concerned were not taken into consideration in order to evaluate the
tenders. However, this answer
must fail because there are a number of
instances where the buy-out prices were indeed included in the
calculation of the applicants
bid but not in any instance was any
other price of the applicant excluded from the total price in any of
the part categories. The
approach advocated by the SAPS respondents
was consequently not applied at all or not applied in a uniform
manner to the detriment
of the applicant. The award was based
on skewed calculations and the final decision was not rationally
connected with the
information before the decision maker. Again, the
purpose of the regulated tender process is to attain that which is
set out in
s 217 of the Constitution and the process violated the
critical prescripts and was unlawful. The process was neither
fair
nor equitable and could not have resulted in a competitive and
cost-effective procurement.
[29]
The purpose of the compliance provisions has thus been undermined.
Third
irregularity - Price amendment after closing date.
[41]
ABE Midas and Pinnacle were allowed to amend their pricing although
there were instances where the only adjustment was occasioned
to
allow for the inclusion of Value Added Tax which had been omitted.
There is indeed an instance where Pinnacle’s final
total price
for oil filters was reduced to half its original price. Because
Pinnacle plays no further role as a result of
the concession by the
SAPS respondents that its award of the tender should be set aside, I
need not consider this aspect further.
The applicant, however,
submitted that the existence of this material anomaly in relation to
the amendment of Pinnacle’s
bid pricing gives rise to valid
concerned about the overall integrity of the bidding process.
Such concerns, in my view,
would not be sufficient to find any
irregularity in so far as the bid of ABE Midas is concerned.
Fourth
irregularity - Outlets in Municipal areas – the question of
subcontracting
[42]
The tender document required in its special requirements and
conditions that a bid should fully comply with the specifications,
a
failure whereof which could result in disqualification.
[43]
One such requirement was that “in the case of urban areas the
bidder needs to be situated within the same municipal boundaries
as
the SAPS garage.” This requirement is understandable
because the mobility of the SAPS vehicles should be a primary
concern
of the SAPS in order to attend to their important public functions.
It is understandable that there is a provision
for a two to three
hour turn-around time from the time of order to the time of supply of
parts. A speedy and efficient delivery
of parts to the SAPS
garages is vital for the latter’s ability to ensure an
affective police service. It is not disputed
that ABE Midas
consists of a single store situated in Pretoria (Pinnacle suffered a
similar disability). In these circumstances
the ABE Midas bid
could not have complied with requirement unless it involved
sub-contracting with other parties who are within
the municipal
boundaries of the SAPS garages outside of Pretoria. Such
sub-contracting would be permissible on certain conditions.
[44]
It was argued by the applicant that the award of the tender to ABE
Midas occurred in circumstances where it had not complied
with that
which is described in the tender document as a mandatory condition.
Indeed it goes further. The bid document of
ABE Midas specifically
records that no portion of the contract will be subcontracted –
the relevance whereof needs some elaboration.
The specification
provides that in the event of a bidder intending to utilise the
services of sub-contractors, certain information
is required to be
furnished regarding sub-contractors. That information was not
furnished by ABE Midas. Being unable to have a
presence in the
municipal areas, as required, will seriously hamper the ability of
ABE Midas to deliver spares to the SAPS garages
within the fairly
demanding timeframes.
[45]
In the circumstances both bidders were either awarded their tenders
despite not having complied with a mandatory or material
condition
prescribed by the bid conditions or awarded their tenders on the
basis of sub-contracting in circumstances where ABE
Midas
specifically represented in its bid that no portion of the contract
will be sub-contracted. In the first instance it
was submitted
that the mandatory and material condition was not complied with and
in the latter instance that relevant circumstance
namely, that the
bidder had made a misrepresentation in the bid document, were not
taken into account.
[46]
It is, however, clear on the evidence that ABE Midas based its bid on
extensive sub-contracting contrary to the declaration
which it made
in the bid document. The SAPS respondents said that in
evaluating the bid documents submitted by tenderers,
the SAPS did not
investigate the veracity of the statements made by the various
bidders but accepted the truthfulness and correctness
thereof.
Such an investigation should have been done.
[30]
The failure to investigate flies in the face of the assurance given
by the chair of the adjudication committee to the national
commissioner of police that the evaluation process “…
included the verification of the capability of bidders to render
a
satisfactory service to ninety five garages countrywide.”
[47]
The evidence further shows that the SAPS respondents were aware of
the fact that ABE Midas intended to utilise the services
of other
franchisees in the Midas Group in the performance of its obligations
under the tender despite its assertions to the contrary.
An
opinion by the SAPS Legal Services advised the relevant officials
that it would appear that ABE Midas were sub-contracting.
The
opinion was, in my view, correct and the contrary view expressed by a
Treasury official cannot detract from the facts.
[48]
I agree with the submission by counsel for the applicant that the
SAPS respondents failed to take into account this relevant
information. In considering a similar situation, the Supreme
Court of Appeal concluded that “In the words of (PAJA),
Eskom,
in awarding the tender to Kwanda took into account irrelevant
considerations (the financial ability of Rappa Group to perform
the
contract) and it did not consider relevant considerations (the
financial ability of Kwanda to perform the contract);
and the
award of the tender was not rationally connected to the information
before Eskom.”
[31]
The
fifth irregularity - Failure to supply proof of supplier relations.
[49]
The complaint regarding this ground of review only applies to
Pinnacle and as a result of what has already been said in this
judgment, I do not consider this ground of review.
The
sixth ground –absence of established distribution networks
[50]
The specification document requires mandatory and full compliance
with its conditions. Paragraph 3 of the specification
stipulates, inter alia, that:-
“
3.1
It is required for the contractor to supply and deliver the full
range of spare parts to all SAPS Garages as and when required
by the
individual garages in order to enhance service delivery. This service
will be rendered by a single contractor per garage
within 2-3 hours
after receipt of order.
3.2
It is … imperative that bidders who did Nationally must
have well established infrastructure in place by rendering a service
through the utilization of an existing dealership-network / agent per
garage for which he/she applied to render the service.
Taking
the provisions of par 3.1 above into account it is not imperative
that bidders, who bid per garage, must be in a close proximity
of the
street address of the SAPS Garage as per annexure “A”
i.e. in the case of urban areas the bidder needs to be
situated
within the same municipality boundaries as the SAPS garage.
This is required to ensure compliance with the provisions
of par 3.1
above. …
3.3
Spare parts must be delivered directly to a SAPS Garage through an
existing dealership / agent outlet network
which must already be
established
. …
3.4
All deliveries from
an existing outlet
, for spare parts
carried in stock [on the shelf at the time of ordering] must take
place within 2-3 hours from time of ordering
during normal working
hours.
3.5
In cases where spare parts are not carried in stock or where spare
parts are out of stock [on the shelf at the time of ordering]
or
spare parts which have been ordered from manufacturers, the necessary
spare parts must be delivered within 48 hours from the
date of the
order from the
existing dealership / agent / business address
where such part is in stock” … (emphasis supplied).
[51]
Despite this requirement, is was clearly established on the papers
that neither ABE Midas nor Pinnacle had any existing and
already
established dealership or agent outlet networks in place at the time
they were awarded the tenders (let alone on the closing
day for
submission of tenders
[32]
).
[52]
After the allocation of the tender, ABE Midas was attempting to put
in place a distribution network “to assist with the
delivery of
the contract.” A letter was sent to other franchisees to
“request” them to “participate
in the tender.”
ABE Midas did clearly not fulfill the requirement at the time when
its tender was considered.
Ignoring this inability, was unfair
vis-à-vis the applicant. It also impacts upon its
ability to deliver parts within
the timeframe stipulated in the
conditions of tender.
[53]
This irregularity is highly material as the purpose of the
requirement in question was to ensure that the bidders were capable
of performing the obligations under the contract should the tender be
awarded to it. The inability of the successful bidders
to
perform has been referred to earlier in this judgment. The
award of the tender to ABE Midas, who is incapable to perform
its
obligations, cannot be in the public interest.
[54]
As with the previous irregularity, it is apparent that the applicant
has clearly established that the tenders were awarded
to ABE Midas
and Pinnacle despite the fact that the mandatory requirement in
question was not met by either of them. The
decisions to award
the tenders are therefore reviewable under section 6(2)(b) on the
basis that a mandatory condition of the tender
was not complied with,
or under section 6(2)(e)(iii) on the basis that a material
consideration (i.e. the fact that the successful
bidder did not
demonstrate the presence of existing distribution networks) was not
taken into account.
The
seventh irregularity – Tax Certificates of Subc-ontractors not
provided.
[55]
It has been shown that ABE Midas’ bid involved extensive
sub-contracting of its obligations to other franchisees in the
Midas
Group. In addition, it was a mandatory requirement of the tender that
“… in bids where Consortia / Joint Ventures
/
Sub-contractors are involved,
each party must submit a separate
Tax Clearance Certificate.”
(emphasis supplied).
[56]
It is common cause that no tax certificates were submitted in respect
of ABE Midas’ proposed sub-contractors. As such
the
non-submission is a fatal irregularity.
[33]
[57]
The importance of the policy reasons behind the imposition of this
mandatory condition of the tender is referred to in
Dr JS Moroka
Municipality
. The award of the tenders to ABE Midas and
Pinnacle despite the clear evidence of their non-compliance
constitutes a serious
irregularity that is reviewable in term of
section 6(2)(b) of PAJA on the basis that a mandatory condition of
the tender was not
complied with, or under section 6(2)(e)(iii)
thereof on the basis that a material consideration (namely, the fact
that ABE Midas
and Pinnacle had not submitted the required tax
certificates) was not taken into account.
Conclusion
[58]
Having regarded to the aforegoing irregularities in the bid process,
the decision to award the tender to ABE Midas and Pinnacle
was
unlawful and invalid. I have indicated in the analysis of the
various grounds why each of those grounds is indeed material.
The
award of the tenders consequently falls to be reviewed and set
aside.
Relief
[59]
This conclusion, in turn, requires that a just and equitable order
under s 172(1)(b) of the Constitution be issued.
[34]
The remedy lies in s 8 of PAJA
[35]
.
[59]
The unfair advantage afforded the successful bidders should, in my
view, be removed from the equation in order to allow for
bidders to
be evaluated in an equal footing.
[60]
APPEARANCES
:
Counsel
for the Applicant - D Unterhalter SC
RJA
Moultrie
Attorney
for the Applicant - Goldman Judin Inc
Counsel
for the First to Third Respondent - DA Preiss SC
Attorney
for the First to Third Respondents State Attorney
Counsel
for the Fourth Respondent - AJ Bester SC
Attorneys
for the Fourth Respondent Steve Bester Attorneys
Fifth
Respondent- No appearance
Date
of Hearing: 9 September 2014
Judgment
delivered on: 25 September 2014
[1]
Strydom
v Engen Petroleum Ltd 2013(2) SA 187(SCA) para 19.
[3]
[2014] 2 All SA 134
(SCA) para 9.
[4]
1975 (1) SA 618(O).
[5]
At 625E – 626A.
[6]
See
Dr JS Moroka Municipality vs Betram (Pty) Ltd 2013 JDR 2728(SCA)
para 18
[7]
At
para 9
[8]
See
I
O Tech Manufacturing para 9.
[9]
Promotion
of Administrative Justice Act 3 of 2000
; See Millenium Waste
Management (Pty) Ltd vs Chairperson, Tender Board: Limpopo Province
2008(2)SA481(SCA) para 21
[10]
S
6.
“Judicial Review of Administrative Action. –
(1)
Any person may institute proceedings in a
court of a tribunal for the judicial review of an administrative
action.
(2)
A court or tribunal has the power to
judicial review and administrative action if –
(a)
the administrator will took it –
(i)
(ii) (a)….
(b)
a mandatory and material procedure or
condition prescribed by an empowering provision was not complied
with;
(c)
the action was procedurally unfair;
(d)
…
(e)
the action taken – (i) … (ii)
… (iii) because irrelevant considerations were taken into
account or relevant
considerations were not considered; (iv) …
(v) … (vi ) arbitrarily or capriciously;
(f)
the action itself –
(i)
contravenes a law or is not authorised by
the empowering provision; or
(ii)
it 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)
(h)
…
(i)
the action is otherwise unconstitutional or unlawful”
[11]
Allpay
Consolidated Investment vs CEO, SA Social Security Agency 2014(4) SA
179 CC para 73. (Allpay (1)).
[12]
Constitution,
S217(1).
[13]
Footnote 7 above.
[14]
Allpay (1) para 41
[15]
Steenkamp
NO vs Provincial Tender Board, Eastern Cape 2007(3) SA 121 (CC) para
60, confirmed in
Allpay
(1) para 39.
[16]
This
judgment holds that:
(a)
The suggestions that “inconsequential
irregularities” are of no moment conflates the test for
irregularities and their
import; hence an assessment of the fairness
lawfulness of the procurement process must be independent of the
outcome of the tender
process.
(b)
The materiality of compliance with legal
requirements depends on the extent to which the purpose of
requirements is attained.)
(c)
The constitutional and legislative
procurement framework entails supply chain management prescripts
that are legally binding.
(d)
The fairness and lawfulness of the
procurement process must be assessed in terms of the provisions of
the
Promotion of Administrative Justice Act (PAJA
).
(e)
Black economic empowerment generally
requires substantive participation in the management and the running
of any enterprise.
(f)
The remedy stage is where appropriate
consideration must be given to the public interest in the
consequences of setting the procurement
process aside.”
[17]
Allpay(1)
para 27
[18]
Allpay
(1) at para 27
[19]
Allpay
(1) para 56.
[20]
Broad-Based
Black Economic Empowerment
[21]
Preferential
Procurement Finance Act
[22]
Which accounted for 90 percent of the preference points to be
allocated.
[23]
The
applicant argued that this is impliedly conceded by the SAPS
respondents in that the respondents said that the applicant knew
how
many vehicles were involved and had a thirteen year history to work
on. I agree with the applicant’s counsel’s
submission
that the SAPS respondents, at least impliedly, admitted that the
number of parts would be important. The answer that
the applicant
had substantial experience may very well be true but is misses the
point which is that the envisaged volumes were
required in order for
the bidders to rationally determine their best offers for inclusion
in their bids.
[24]
Allpay(1) para 27.
[25]
Allpay
(1) para 22
[26]
Premier,
Free State vs Firechem Free State (Pty) Ltd 2000(4) SA 413 (SCA)
para 30; Allpay (1) para 39.
[27]
Section
6(2)(vi) of PAJA
[28]
“
The
SAPS respondents were in agreement that the purpose of the
procurement legislation was to achieve a “proper price
comparison and an award of a cost-effective tender… .”
SAPS heads para 2.3. Indeed ABE Midas was similarly in agreement.
ABE Midas heads para 47.
[29]
See
Allpay (1) at para 92
[30]
Allpay
(1) para’s 21, 52, 53, 54, 69, 70 and 72
[31]
Eskom
Holdings Ltd vs New Reclamation Group (Pty) Ltd
2009 (4) SA 628(SCA)
para 6.
[32]
See para 26 abaove.
[33]
See Dr JS Moroka Municipality para 16.
[34]
AllPay
(1) para 25
[35]
Consolidated Investment Holdings (Pty) Ltd and another v Chief
Executive Officer, South African Social Security Agency and others
(2014 (4) SA 179
(CC) (Allpay (2) para 29 – 32.