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[2015] ZASCA 167
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City of Tshwane Metropolitan Municipality and Others v Nambiti Technologies (Pty) Ltd (20580/2014) [2015] ZASCA 167; [2016] 1 All SA 332 (SCA); 2016 (2) SA 494 (SCA) (26 November 2015)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
no: 20580/2014
DATE:
26 NOVEMBER 2015
Reportable
In
the matter between:
THE
CITY OF TSHWANE METROPOLITAN
MUNICIPALITY
.............................................................................................................
First
Appellant
THE
CITY MANAGER OF THE CITY OF TSHWANE
METROPOLITAN
MUNICIPALITY
........................................................................
Second
Appellant
DUMISANE
J OTUMILE
NO
......................................................................................
Third
Appellant
THE
EXECUTIVE DIRECTOR SUPPLY CHAIN MANAGEMENT OF THE CITY OF
TSHWANE
....................................................................................................................
Fourth
Appellant
THE
CHAIRPERSON OF THE BID EVALUATION
COMMITTEE
OF THE CITY OF TSHWANE
METROPOLITAN
MUNICIPALITY
............................................................................
Fifth
Appellant
THE
CHAIRPERSON OF THE BID ADJUDICATION
COMMITTEE
OF THE CITY OF TSHWANE
METROPOLITAN
MUNICIPALITY
...........................................................................
Sixth
Appellant
And
NAMBITI
TECHNOLOGIES (PTY)
LTD
.........................................................................
Respondent
Neutral
citation:
City of Tshwane v Nambiti
Technologies (Pty) Ltd
(20580/2014)
2015 ZASCA 167
(26 November 2015)
Coram:
MAYA DP, BOSIELO, WALLIS, PETSE and DAMBUZA JJA
Heard
:
17 November 2015
Delivered
:
26 November 2015
Summary:
Tender – cancellation thereof –
terms of tender authorising its withdrawal – cancellation not
administrative action
– cancellation set aside by High Court as
unfair and municipality ordered to adjudicate tender – no
grounds for holding
cancellation unfair – relief granted by
High Court impinging on municipality’s powers and obligations
in regard to
procurement – such impermissible as infringing the
doctrine of the separation of powers.
ORDER
On
appeal from:
Gauteng Division, Pretoria
(Kganyago AJ, sitting as court of first instance):
1
The appeal is upheld with costs, such costs to include those
consequent upon the employment
of two counsel.
2
The order of the High Court is set aside and the following
substituted therefor:
‘
The
application is dismissed with costs.’
JUDGMENT
Wallis
JA (Maya DP, Bosielo, Petse and Dambuza JJA)
Introduction
[1]
From 1 August 2009 until
31 December 2012, the respondent, Nambiti Technologies
(Pty) Ltd (Nambiti) was contracted
to the first appellant, the City
of Tshwane Metropolitan Municipality (the City), to provide it with
SAP support services. On 12 October 2012
the City published
an invitation to submit tender CB204/2012, for:
‘
The
provisioning of on-site and off-site SAP support services for the
City of Tshwane.’
Nambiti,
along with a number of other parties, submitted a tender to supply
these services. On 11 December 2012 it was
informed that
the tender would be cancelled and a new tender issued. In the
meantime on 20 December 2012 its services
were effectively
terminated and a new contractor EOH Mthombo Limited (EOH), which was
the fifth respondent in the high court but
has played no role in the
litigation, was employed to provide those services. It is accepted in
these proceedings that EOH lawfully
provided SAP support services to
the City until 31 December 2013. The papers do not reveal what
occurred after that date.
[2]
Nambiti was dissatisfied with this course
of events. After an exchange of correspondence it launched
proceedings on 1 March 2013
in which it claimed the
following relief:
‘
2.
The decision of the First
alternatively
Second
alternatively
Third
alternatively
Fourth
respondent to appoint the Fifth Respondent as service provider to the
First Respondent in respect of on- and off-site SAP
support services
for the period 1 January to 30 June 2013 is reviewed and set
aside.
3.
The decision of the First
alternatively
Second
alternatively
Third
alternatively
Fourth Respondent to cancel tender
CB204/2012 for the provision of on- and off-site SAP support services
to the First Respondent
for a three year period with effect 1 January
2013 is reviewed and set aside.
4.
The First Respondent is ordered without delay to invite new tenders
in respect of the provision of on- and off-site SAP support
services
to the First Respondent.’
[3]
Subsequently there was an amendment to the
notice of motion and the relief sought was varied. After the
application was argued,
the high court held that, while the award of
the contract to EOH was deficient, it should not be set aside. There
is no challenge
to that decision. But the high court granted relief
in relation to the cancellation of tender CB204/2012.
[4]
The net effect of the high court’s
order was to resuscitate the cancelled tender and compel the City to
adjudicate and award
the tender within two months of this order.
Tenderers were permitted to adjust their tariffs upwards or to
withdraw their tenders,
but otherwise the process was to continue as
if the tender had never been cancelled. Leave to appeal against the
order was refused
but granted by this Court.
Mootness
[5]
The immediate question is whether the
appeal still raises a live dispute. Counsel were at one that the
order granted by the high
court could not be implemented at this
stage. The contract period of the tender the City was ordered to
adjudicate will expire
at the end of next month. The original
contract with EOH has also expired. Presumably the City has made
fresh arrangements in respect
of SAP support services. When asked
about this counsel for Nambiti said that they were not here to defend
the order, but to defend
the judgment. But that is a classic
indication that the outcome of this appeal will have no practical
effect or result and the
appeal has become moot. Why then should it
not be dismissed in terms of s 16(2)(
a
)(i)
of the
Superior Courts Act 10 of 2013
?
[6]
There
is no need to rehearse the jurisprudence that developed around
section 21A(1) of the Supreme Court Act 59 of 1959, which
jurisprudence is equally applicable under section 16(2)(
a
)(i)
of the
Superior Courts Act. The
court has a discretion
notwithstanding that an appeal has become moot, to hear and dispose
of it on its merits. The usual ground
for exercising that discretion
in favour of dealing with it on the merits is that the case raises a
discrete issue of public importance
that will have an effect on
future matters.
[1]
[7]
In
my view there is such an issue in this case. This is the first
occasion in the reported cases where a decision by a public authority
to cancel a tender has been challenged by way of judicial review. Not
only is this the first such case, but the review succeeded
and the
court ordered the City to adjudicate and award the cancelled tender.
That was a far-reaching order impinging as it did
on the power of a
municipal council to determine for itself what goods and services it
needed and would procure by a process complying
with s 217 of
the Constitution. Whether such a decision is administrative action
bringing the case within the purview of PAJA
[2]
is central to the case. Furthermore the terms of the order granted by
the high court had the potential to infringe upon the constitutional
powers and obligations of a municipal council. Accordingly the
mootness of the appeal should not bar the court from addressing
the
merits.
The
facts
[8]
A brief exposition of the facts surrounding
the disputed tender and its cancellation is called for. The
call for tenders was
issued in the ordinary course and Nambiti and
various other parties submitted tenders. These were opened on
13 November 2012.
[9]
On 5 November 2012, the City
appointed the third appellant, Mr Dumisane Otumile, as its Group
Chief Information Officer.
Mr Otumile’s responsibilities
extended to oversight of all matters relating to information systems
used by the City. As such
he had a material interest in the basis
upon which SAP support services were provided to the City. His first
intervention in relation
to this tender came on 23 November 2012,
when he, on behalf of his department, placed a motivation before the
Executive
Acquisition Committee, a Supply Chain Committee chaired by
the Municipal Manager, asking that it approve an effective extension
of the existing contracts of Nambiti and Baraka, another contractor
providing similar services, until September 2013.
[10]
This
proposal did not find favour with the committee. Instead it resolved
to refer the matter back to Mr Otumile’s department
on one of
two bases. The first was that it should consider the use of other SAP
entities used by different organs of state for
support and
maintenance and appoint them in line with regulation 32 of the
regulations published in terms of the
Local Government: Municipal
Finance Management Act 56 of 2003
.
[3]
The second option was to fast-track and finalise tender CB204/2012.
The municipal manager signed a resolution to this effect on
30
November 2012. Fast-tracking the tender was the option that Mr
Otumile and his department decided to explore, but first they
reviewed the terms of the tender in the light of the needs of the
City as determined by Mr Otumile.
[11]
The results of that review were
unfavourable. It concluded that the tender as published was seeking
services inconsistent with the
City’s needs and for a longer
period than the policy of the City permitted. In part, at least,
these conclusions flowed from
Mr Otumile’s re-evaluation of the
City’s technological needs since his appointment. He identified
three issues. They
were that:
·
The City had outsourced its requirements in
respect of SAP support services without building its own internal
capacity.
·
The arrangements in place for the provision
of SAP support services provided that such support be given both
on-site and off-site,
and in the case of the latter it was not
possible to monitor the work and assess whether it was being done and
the value of the
services being rendered.
·
The City had decided that it was
undesirable to have contracts of this type extend over a period of
three years in the light of
the rapidity with which technological
change can occur. It had accordingly taken a decision that it would
no longer contract on
that basis.
[12]
These conclusions appear to have been
reported to the Bid Adjudication Committee of the City (BAC), because
on 7 December 2012
it took a decision to cancel tender
CB204/2012. The resolution recorded that the tender would be
re-advertised, with a changed
specification addressing the current
needs of the City.
[13]
There was some debate on the papers whether
the decision to cancel the tender was in fact taken on
7 December 2012. However,
the debate appears to be academic
as it is plain that the City proceeded on the basis that a firm
decision had been taken on that
date. On 11 December 2012
Mr Otumile met with Mr Paul and Ms Easton, representing Nambiti. The
minute of the meeting
prepared by Nambiti reflected in its conclusion
that tender CB204/2012 would be cancelled and a new tender released.
So by that
date a decision had been taken and appropriate steps were
being pursued in consequence of that decision. Principal among these
was the appointment of a new service provider to provide SAP support
services.
[14]
In view of the imminent expiry of Nambiti’s
contract Mr Otumile was to advise it by no later than 21 December
whether
their contract would be further extended. On 18 December 2012
a letter was addressed to Nambiti informing it formally
of the
cancellation of the tender. On the following day Mr Otumile sent an
email to Mr Paul advising him that Nambiti’s contract
would be
expiring at the end of the month and that it was unnecessary, with
effect from 20 December 2012, for it to continue
rendering
services to the City. It is common cause on the affidavits that from
20 December 2012 Nambiti’s representatives
were
excluded from the municipal offices. At the same time employees of
EOH started to render SAP support services to the City.
[15]
In
the light of these events there was an exchange of letters on 18 and
19 December 2012, and on 27 December 2012
attorneys representing Nambiti wrote to the City Manager requesting
written reasons in terms of
s 5(1)
of PAJA
[4]
.
The ‘decisions’
[5]
in respect of which reasons were sought were the appointment of a new
service provider, in the form of EOH, and the cancellation
of the
tender CB204/2012. The City responded to this request on
18 January 2013. It took the attitude that these were
contractual matters and that they did not fall within the category of
decisions subject to PAJA, but nonetheless certain reasons
were
proffered, presumably in the interests of open and transparent
government.
[16]
In regard to the termination of Nambiti’s
contract it was pointed out that this terminated by effluxion of time
on 31 December 2012.
As to its complaint that insufficient
was done to provide for an orderly handover, the City’s
approach was that it did not
require Nambiti’s assistance in
that regard. Finally in regard to the cancellation of the tender and
the appointment of a
new contractor the letter said:
‘
Please
note that a number of factors arose that have made the COT [City of
Tshwane] reconsider the way it would procure its IT services
going
forward, not the least of which was the recent appointment of a Chief
Information Officer (CIO) within the COT. Unfortunately,
the CIO was
not appointed at the time the renewal of IT services tender was
dispatched. Since his appointment, the CIO was authorised
to review
the specifications of any tender that would serve his portfolio. It
is for this reason that the tender that was in progress
was
abandoned, with certain provisional ensure continued business
operation.
We
advise that the new service provider has been appointed in terms of
Regulation 32
to
Municipal Supply Chain Management Regulations. The
regulations are in terms of the Municipal Finance Management Act 56
of 2003. The service provider was the IT service provider at
the City
of Johannesburg.
You
will appreciate that in order to procure prudently within the present
circumstances, a sensitive balance of the rights and obligations,
as
well as procurement procedures had to be weighed by the COT. We
assure your client that legal advice has been taken every step
of the
way and the COT is committed to good governance and legal compliance
in its operations. The COT therefore denies that any
laws have been
side-stepped in the present circumstances.’
[17]
Nambiti did not accept this response and on
1 March 2013 it launched review proceedings directed at
challenging both EOH’s
appointment and the cancellation of
tender CB204/2012. After the delivery of further affidavits and the
production, in a somewhat
sporadic fashion, of the record, Nambiti
delivered a supplementary founding affidavit and an amended notice of
motion. It
continued to challenge the appointment of EOH, but
added a challenge to any extension of the latter’s contract on
a month
to month basis after the expiry of the initial period. It
also sought an order preventing the City from continuing with a fresh
tender CB107/2013 for SAP services issued on 10 May 2013.
The
Review
[18]
The review was eventually heard by Kganyago
AJ. On 1 November 2013 judgment was handed down with the
following order:
‘
1.
The decision of the respondent to cancel tender CB204/2012 for the
provision of on- and off-[site SAP] support services to first
respondent of a three year period with effect from 1
st
January 2013 is hereby reviewed and set aside.
2.
The City of Tshwane must give written notice within ten days of this
order to all the short-listed tenderers in respect of CB204/2012.
The
said notice must inform the tenderers that they are only allowed to
adjust their tariffs upwards (to make provision for inflation)
or
withdraw their tenders should they wish to do so and to give notice
to the City of Tshwane of their decision within ten days
of receiving
such notice.
3.
The City of Tshwane must proceed to adjudicate tender CB204/2012
within two months after the expiry of the ten days period.
4.
The fifth respondent to be allowed to honour the contract until the
31/12/13 when it expires.’
[19]
Some explanation of the basis for this
order is necessary. The judge held that the award of the contract to
EOH was flawed, rendering
it liable to be set aside, but decided
that, as it only had two more months to run, it should not be set
aside. That explains para
4 of the order. That order was unnecessary
and it has in any event long since expired. In the heads of argument
of Nambiti’s
counsel it was accepted that during the year from
1 January to 31 December 2012, SAP services were
lawfully rendered
to the City by EOH. We do not know what happened
thereafter, but that is not a concern in these proceedings.
[20]
The remaining portions of the order relate
to the cancelled tender CB204/2012. They required the City to proceed
to adjudicate that
tender after allowing tenderers to withdraw or to
adjust their prices upwards to make provision for inflation. The
order was silent
about the fresh tender CB107/2013. Presumably that
was because there was an interim order in place prohibiting the City
from proceeding
with that tender pending the outcome of the review.
[21]
The high court concluded that there were no
justifiable reasons for the cancellation of tender CB204/2012 and
that it was unfairly
cancelled. The judge appears to have been
greatly influenced by the resolution taken on 30 November 2012
referred to
in para 10 above. He said that it provided for the fast
tracking of the tender process in respect of CB204/2012. He described
the
reasons given for the cancellation of the tender as flimsy. In
his view the revised tender CB107/2013 was only marginally different
from that under CB204/2012. Accordingly he said that the earlier
tender could have been proceeded with and minimal changes negotiated
with the successful tenderer after the award of the contract.
Was
this administrative action?
[22]
PAJA
gives effect to the right to just administrative action in section 33
of the Constitution. It provides for judicial review
of
administrative action. What constitutes administrative action is the
subject of a lengthy and somewhat convoluted definition,
which was
consolidated and abbreviated by Nugent JA in
Grey’s
Marine
,
[6]
in the following terms:
‘
Administrative
action means any decision of an administrative nature made …
under an empowering provision [and] taken …
by an organ of
State, when exercising a power in terms of the Constitution or a
provincial constitution, or exercising a public
power or performing a
public function in terms of any legislation, or [taken by] a natural
or juristic person, other than an organ
of State, when exercising a
public power or performing a public function in terms of an
empowering provision, which adversely affects
the rights of any
person and which has a direct external legal effect …’
[23]
The
Constitutional Court,
[7]
citing
Grey’s
Marine
with
approval, has broken the definition into seven components, namely
that ‘
there
must be (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 legal effect; and (g) that
does not fall under any of the listed exclusions.
’
[24]
Whether the cancellation of a tender before
adjudication is administrative action in terms of these requirements
depends on whether
it involves a decision of an administrative nature
and whether it has direct, external legal effect. I do not think that
the decision
in this case satisfied either of these criteria.
[25]
To
determine if action by an organ of State is administrative action
requires an analysis of the nature of the action in question
and a
positive decision that it is of an administrative character.
[8]
Here the decision related to a matter of procurement. The issue of a
tender indicated that the City wished to procure certain
services.
But its desire to procure them was always provisional. That follows
from the terms of the advertisement of the tenders,
which contained
the caveat that ‘the lowest or any tender will not necessarily
be accepted’. In the standard conditions
of tender, which
counsel agreed applied to both tenders, clause F.1.5.1 provided even
more explicitly that the City ‘may
cancel the tender process
and reject all tender offers at any time before the formation of a
contract’. In cancelling tender
CB204/2012 the City was doing
no more than exercising a right it reserved to itself not to proceed
to procure those particular
services on the footing set out in that
tender.
[26]
It is possible that these express
reservations merely made explicit what would in any event have been
the position, namely, that
it is always open to a public authority,
as it would be 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. (I
stress that there
is no allegation in this case that the decision was
tainted by impropriety such as improper political influence, fraud,
bribery
or corruption, where different considerations may apply.)
[27]
In
saying this I am aware that regulation 10(4) of the Procurement
Framework Regulations 2011
[9]
provides that prior to awarding a tender an organ of state may cancel
a tender in three circumstances, namely if:
·
Due to changed circumstances there is no
longer a need for the services, works or goods requested;
·
Funds are no longer available to cover the
total envisaged expenditure;
·
No acceptable tenders are received.
[28]
In
Trencon
[10]
it was said that this regulation constrained the discretion afforded
an organ of state by the terms of the tender and that a tender
could
only be cancelled if one of the grounds set out in the regulations
existed. It is unclear what is meant by ‘changed
circumstances’
in this regard. Would it be a changed circumstance if the organ of
state concluded that the terms of the tender
were detrimental to its
interests? What if the goods or services were still required, but the
terms of the tender were no longer
thought to be favourable? Why
should an organ of state be constrained by the necessity to
demonstrate a change of circumstances,
in order to cancel a tender
for goods or services that it had decided it no longer needed? A
change in control of a municipality
could easily lead to a change in
priorities. Is it suggested that the incoming council would be forced
to go ahead with procurement
decisions with which it did not agree?
Take the simple example of a tender to purchase a new mayoral car.
That the
mayor needed a car might not be in dispute. But the
outgoing council might have issued a tender for the acquisition of a
luxury vehicle, while the incoming council might believe that
something more modest would be appropriate. Would that be a
sufficient
change of circumstances?
[29]
These are difficult questions.
Trencon
was not concerned with the cancellation of a tender. It was concerned
with whether the court should have made a substitution order
that a
tender awarded to one company unlawfully be awarded to the tenderer
whose bid had been unlawfully excluded. It is not clear
in what
context the argument was advanced that the public body concerned was
not obliged to award any contract at all. That
was not the
factual situation with which the court was confronted. Assuming that
to have been correct, the reality was that a contract
had been
awarded and it was the intention to proceed with the work. So
cancellation was not an issue. Furthermore the statement
in question
was based on a concession by counsel that was accepted as correct
without explanation.
[30]
The regulation is couched in permissive,
not mandatory, terms. There is nothing to show that it is intended to
be restrictive in
regard to an organ of state’s powers to
cancel a tender. In addition the organ of state is equally obliged to
conduct the
tender process strictly in accordance with the tender
conditions, which also have a statutory provenance. But there is no
need
to resolve these questions because in this case there was a
change in circumstances. The needs of the City had been reviewed and
it no longer required that SAP support services be provided to it for
the period stipulated in CB 204/2012 or on the same terms
as those in
that tender. Its requirements changed and that is why it cancelled
the tender. In terms of the regulation it was entitled
to do so. No
contrary argument was advanced in Nambiti’s heads of argument.
[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 CB204/2012. 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 CB204/2012 was desirable and then, on
reconsideration changed that view, the decision to cancel
CB204/2012
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 the 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 easily into
that framework.
[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. When asked to identify the direct,
external, legal effect of cancelling tender CB204/2012 his sole
submission was that
his client had a reasonable expectation that its
tender would be considered by the Bid Evaluation Committee (BEC) and
thereafter
by the BAC. But that expectation was dependent on there
being an ongoing tender process, where principles of just
administrative
action are of full application. Once the entire tender
was cancelled any expectation that the tenders submitted by tenderers
would
be adjudicated by the BEC and the BAC fell away.
[33]
No
other direct external legal effect was suggested to us and I can
think of none. Nambiti’s legal entitlement to provide
SAP
support services to the City would expire at the end of
December 2012. Thereafter it had no right to provide those
services.
It had a right to a fair adjudication of tender CB204/2012,
but only so long as that tender remained extant. Once it was
cancelled
none of the tenderers had any rights in relation to, or
arising from, it. In the words of King Lear ‘Nothing will come
of
nothing.’
[11]
There
is no scope in that situation for the King’s injunction to
think again.
[34]
It follows that the decision by the City to
cancel the tender was not administrative action and was not
susceptible of review in
terms of PAJA. As that was the sole basis
upon which the review was brought it should have failed on this
ground. But even if the
decision had been susceptible to judicial
review on the grounds of unfairness advanced by Nambiti it should not
I think have succeeded.
It is appropriate briefly to state my reasons
for saying that.
The
fairness of the cancellation
[35]
The judge’s reasoning that led him to
the conclusion that the decision to cancel the tender was unfair has
been summarised
in para 21 above. Three factors were identified
as leading to that conclusion. They were the resolution to fast-track
tender
CB204/2012; that the reasons given for cancelling the tender
were ‘flimsy’; and that CB204/2012 and CB107/2013 were
so
similar that the City could easily have proceeded with the earlier
tender and, after awarding it, negotiated with the successful
bidder
to adjust the terms of the contract to fit its concerns.
[36]
There are a number of difficulties with
these reasons. In regard to the resolution they overlooked the fact
that the resolution
included an alternative of appointing a fresh
service provider under regulation 32(1). No preference was expressed
between these
two options. What Mr Otumile did was, in the first
instance, to review CB204/2012 with a view to fast-tracking it. Once
he had
done so and concluded that it was not suitable the BAC agreed
that it should be withdrawn and steps were taken to appoint EOH in
terms of regulation 32(1). So the resolution had been followed and no
significance could be attached to the fact that the cancellation
occurred only a week after the resolution was taken. There was in
fact no obligation at all on Mr Otumile to consider fast-tracking
CB204/2012.
[37]
Turning to the reasons for cancelling the
tender advanced by Mr Otumile in his affidavit, the judge did not
analyse those reasons.
He simply said that they were flimsy. Why he
did so is unclear, because he did not explain his conclusion. It is
not suggested
that Mr Otumile did not genuinely entertain the views
expressed by him in advancing those reasons. Nor was it suggested
that those
were not the reasons that motivated the decision by the
BAC not to proceed with the tender, but to appoint EOH on a short
term
contract, while preparing and then issuing a revised tender.
Furthermore, Mr Otumile’s reasons related to the technical
requirements
of the City in regard to information technology and
support for its existing systems. Judges do not ordinarily have the
qualifications,
in the absence of expert testimony to assist them, to
make judgments on the weight to be attached to reasons for taking
technical
and strategic decisions in the field of technology.
[38]
The first reason was that it was necessary
to develop the City’s own capacity to deal with issues around
SAP and the support
that the SAP system required. On the face of it
this was a reasonable desire on the part of the City and it was
something provided
for in Nambiti’s original contract. The
minutes prepared by Nambiti of the meeting on 11 December, when
it was told
that the tender was to be withdrawn, reflected that there
had been a problem in this regard. Nambiti’s representative
attributed
this to the City’s failure to ‘up skill’
and retain staff rather than to any deficiency in the training they
had received. Right or wrong this was an issue and it was legitimate
for Mr Otumile to form his own view on how it could be addressed
and
whether simply proceeding with CB204/2012 would resolve the problem.
We were referred to a passage from a recording of that
meeting in
support of the submission that Mr Otumile always intended to continue
outsourcing SAP support services, but this was
beside the point. The
concerns related to oversight functions and the ability to account
internally for the performance of these
services, as well as dealing
with changing circumstances.
[39]
Mr Otumile’s second reason relating
to the fact that the support services were furnished both on-site and
off-site was not
addressed in the judgment. The affidavits did
not suggest that it was not a real concern. Finally there was the
point that
the tender was for three years and the City had decided
that contracts involving technology should not be for longer than two
years
in view of the rate at which technology was changing. As I
understand the judgment, the judge’s approach was that this was
a minor matter that could be adjusted after the tender had been
awarded by way of negotiations with the successful bidder. I am
unable to agree. First, there would be no reason why a contractor
appointed for three years would be willing to reduce the contractual
period to two years. Second, this would be a material, not an
insignificant, alteration to the contract. And it is, at its lowest,
doubtful whether it is open to an organ of State to make such a
substantial change to a contract secured by way of public tender
after letting the contract. That would possibly expose it to legal
challenges on the grounds that it thereby subverted the procurement
process and rendered it unfair.
[40]
The judge’s conclusion that the
reasons given by the City for cancelling the tender were flimsy was
not therefore justified.
His last ground related to the differences
between CB204/2012 and CB107/2013. He regarded these as
inconsequential. But he did
not have the two tenders before him, as
CB204/2012 was not included in the application papers. On what basis
he compared the two
is therefore unclear. In any event these were
tenders dealing with a technical subject and the affidavits did not
contain a detailed
analysis of the similarities and differences
between the two. In those circumstances this was not a conclusion
that could be reached
on these papers.
[41]
It follows that there were no grounds upon
which the judge was entitled to come to the conclusion that the
decision to cancel the
tender CB204/2012 was unfair, even if one
assumes that this was a ground on which the court was entitled to
intervene. On that
ground as well the appeal must succeed. But before
concluding it is desirable that I say something about the relief
granted by
the high court.
The
relief
[42]
I have already set out the terms of the
order granted by the high court. It effectively compelled the City to
consider and award
a tender that it had decided should not be
proceeded with. The fact that the tender, on its own terms, reserved
the City’s
right not to accept any of the tenders was ignored.
Instead the court took it upon itself to order the City to procure
SAP support
services in terms of a contract concluded after a tender
process on the terms stipulated by the high court.
[43]
That
this was the effect of the order should have given pause for thought.
A decision as to the procurement of goods and services
by an organ of
State is one that lies within the heartland of the exercise of
executive authority by that organ of State. We live
in a country of
finite resources at every level of government. Decisions by organs of
State on how their limited resources will
be spent inevitably involve
painful compromises.
[12]
A
decision to spend money on support systems for computer technology
will divert those resources from other projects such as the
construction of roads or the provision of rubbish collection in
residential areas. The Constitution entrusts these decisions to
elected bodies at all three tiers of government. In turn the elected
representatives at every tier select the executive that is
required
to carry out the chosen programme of government. It is an extremely
serious matter for a court to intervene in such decisions.
But for it
to do so by compelling the organ of State to enter into contracts and
acquire goods and services that it has determined
not to acquire, or
at least not to acquire on the terms of a specific tender, is
something that, if open to a court to do at all,
should only be done
in extreme circumstances. These issues are among those comprehended
by the broad doctrine of the separation
of powers. But the court here
does not appear to have been alive to them or to the impact of its
orders. That should not have been
the case.
Result
[44]
In the result the appeal must succeed. The
following order is granted:
1
The appeal is upheld with costs, such costs to include those
consequent upon the employment of two counsel.
2
The order of the High Court is set aside and the following
substituted therefor:
‘
The
application is dismissed with costs.’
M
J D WALLIS
JUDGE
OF APPEAL
Appearances
For
appellant: Vuyani Ngalwana SC (with him Khaya Mnyandu)
Instructed
by: Dlamini Attorneys, Sandton
Honey
Attorneys, Bloemfontein
For
respondent: Q Pelser SC (with him C J Welegemoed)
Instructed
by: Thapelo Kharametsane Attorneys, Pretoria
Symington
& De Kok, Bloemfontein.
[1]
Qoboshiyane
NO & others v Avusa Publishing Eastern Cape (Pty) Ltd &
others
2013
(3) SA 315
(SCA) para 5.
[2]
The
Promotion of Administrative Justice Act 3 of 2000
.
[3]
The
resolution referred to
regulation 36
, but Mr Otumile said, without
dispute, that this was an error and should refer to
regulation 32.
[4]
The
Promotion of Administrative Justice Act 3 of 2000
.
[5]
The definition of administrative action in PAJA relates to decisions
as defined in
s 1
of that Act.
[6]
Grey’s
Marine Hout Bay (Pty) Ltd & others v Minister of Public Works &
others
[2005]
ZASCA 43
;
2005 (6) SA 313
(SCA) para 21.
[7]
Minister
of Defence and Military Veterans v Motau & others
[2014]
ZACC 18
;
2014 (5) SA 69
(CC) (
Motau
)
para 33.
[8]
Sokhela
& others v MEC for Agricultural and Environmental Affairs
(KwaZulu-Natal) & others
[2009]
ZAKZPHC 30;
2010 (5) SA 574
(KZP) para 60 quoted with approval in
Motau
para
34 and
Minister
of Home Affairs & others v Scalabrini Centre & others
2013
(6) SA 421
(SCA) para 52.
[9]
Published in
Government
Gazette
34350
of 8 June 2011 in terms of
s 5
of the
Preferential Procurement
Policy Framework Act 5 of 2000
.
[10]
Trencon
Construction (Pty) Ltd v Industrial Development Corporation of South
Africa Ltd & another
[2015]
ZACC 22
para 68.
[11]
William Shakespeare
King
Lear
Act
1, scene I, line 92.
[12]
None more so than that in
Soobramoney
v Minister of Health. KwaZulu-Natal
[1997]
ZACC 17
; 1998 (1) A 765 (CC).