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[2015] ZASCA 209
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Aurecon South Africa (Pty) Ltd v City of Cape (20384/2014) [2015] ZASCA 209; [2016] 1 All SA 313 (SCA); 2016 (2) SA 199 (SCA) (9 December 2015)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No.: 20384/2014
In
the matter between:
AURECON
SOUTH AFRICA (PTY)
LTD
Appellant
and
CITY
OF CAPE TOWN
Respondent
Neutral
citation
:
Aurecon South Africa
(Pty) Ltd v City of Cape Town
(20384/2014)
[2015] ZASCA 209
(9 December 2015)
Coram:
Maya ADP, Lewis, Bosielo,
Petse and Willis JJA
Heard:
21 August 2015
Delivered:
9
December 2015
Summary:
Administrative
review – respondent seeking review and setting aside of its own
decision to award tender for the decommissioning
of Athlone Power
Station to appellant – 180 day time limit envisaged in
s 7(1)
of the
Promotion of Administrative Justice Act 3 of 2000
not met –
no fraud or corruption involved in procurement process and
irregularities, if any, not material – no case
made out for the
extension of time limit under
s 9(1)
of the Act.
ORDER
On
appeal from:
Western
Cape Division of the High Court, Cape Town (Yekiso J sitting as court
of first instance):
1
The appeal is upheld with costs.
2
The order of the Western Cape Division of the
High
Court, Cape Town is set aside and replaced with the following:
‘
1
The application is dismissed with costs.
2
Aurecon South Africa (Pty) Ltd (Aurecon) was, and is, not precluded,
in terms of clause 95 of the City of Cape Town’s Supply
Chain
Management Policy, the Supply Chain Management Regulations made in
terms of s 168 of the Local Government: Municipal Finance
Management
Act 56 of 2003 or for any reason, from bidding for the City of Cape
Town’s Tender 459C/2010/2011 or for any tender
pertaining to
the decommissioning of the Athlone Power Station which is based on
the draft scope of work prepared by the joint
venture between Aurecon
Engineering International (Pty) Ltd and ODA (Pty) Ltd.
3
The City of Cape Town is ordered to pay the costs of Aurecon’s
counter-application.’
JUDGMENT
Maya
ADP
(Lewis,
Bosielo, Petse and Willis JJA concurring):
[1]
This is an appeal against the judgment of the Western Cape Division,
Cape Town (Yekiso J). The court a quo reviewed and set
aside the
decision of the City of Cape Town (the City)
[1]
to award Tender No. 459C/2010/11: Provision of Professional Services:
Decommissioning of Athlone Power Station (the tender) to
the
appellant, Aurecon South Africa (Pty) Ltd, a provider of engineering,
management and specialist technical services (Aurecon),
and any
contract which may have come into existence between the City and
Aurecon as a result of the tender award. The
court a quo
further dismissed Aurecon’s counter-application for a
declaratory order that it is not precluded, under paragraph
95 of the
City’s Supply Chain Management Policy (the SCMP), the Supply
Chain Management Regulations (the regulations),
[2]
or for any other reason, from bidding for any tender pertaining to
the decommissioning of the Athlone Power Station (the power
station)
which was based on the draft scope of work prepared by the joint
venture between Aurecon Engineering International (Pty)
Ltd and ODA
(Pty) Ltd.
[2]
The litigation was instituted by the City which sought a judicial
review of its own decision on the basis that reviewable
irregularities
occurred in the course of the evaluation of the
tenders submitted to it and in the ultimate award of the tender. The
irregularities
were said to arise from its officials’
‘ignorance as to the requirements of the various stages of the
consideration
and award of tenders’ and did not entail ‘any
fraudulent, dishonest or corrupt behaviour on the part of the City,
any
of its officials or [Aurecon]’.
[3]
The background facts are briefly these. In 2008 the City appointed a
joint venture (the JV) comprising Aurecon Engineering International
(Pty) Ltd,
[3]
and ODA Consulting (Pty) Ltd
[4]
to
conduct a high level prefeasibility study into the redevelopment of
the defunct power station’s site.
[5]
The
JV’s brief involved a study of the site, the feasibility of its
development and the process necessary to prepare the site
for
redevelopment, as well as the compilation of a scope of work and
specifications for the decommissioning of the power station.
In 2010
the JV submitted a draft scope of work in collaboration with the
City’s Electricity Services Directorate.
[4]
Around this time, the City considered expanding the JV’s brief
to include the preparation of the tender documents for
the
decommissioning of the power station. The idea was, however, aborted
because some of the City’s officials took the view
that the
City had the necessary skills to perform the task internally. The JV
therefore did not assist in the compilation of the
tender documents.
It appears, though, that it was expected by relevant City officials
that Aurecon would tender for the project
management of the
decommissioning works. At a meeting held in the City’s
Electrical Services Department on 1 April 2010 and
in subsequent
email correspondence, the City’s head of Electricity Generation
(Mr J Davidson) informed Aurecon’s project
manager (Mr J Webb)
of such an assumption on his part and expressed the view that this
would not give rise to any conflict of interest
provided that Aurecon
did not provide any input concerning the ‘structure of
preference’, ie ‘functionality vs
price’, and was
not represented on the City’s Bid Evaluation Committee (the
BEC) or Bid Adjudication Committee (the
BAC).
[5]
An invitation for tenders was duly advertised on 11 February 2011 as
tender number 266C/2010/11. This bid was withdrawn on 13
May 2011
owing to queries raised about the tender document and a revised
tender addressing those concerns was re-advertised as
tender number
459C/2010/11. Aurecon tendered for the project on both occasions. In
addition to Aurecon’s tender, the City
received five other
tenders which were found non-responsive by the BAC (on the BEC’s
recommendation) for failure to comply
with the relevant tender
criteria. Only Aurecon’s tender was considered to be
responsive.
[6]
On 31 October 2011 the BAC resolved to accept Aurecon’s tender
‘in the amount of R9 748 973. 15 (excl.
VAT), from
the date of commencement of contract until a date to be determined
during the Section 33 [of the Local Government Municipal
Finance
Management Act 56 of 2003] (MFMA) process’ and duly notified
Aurecon of its decision.
[6]
Thus,
the award of the tender was final, but subject to the fulfilment of
the requirements of s 33 of the MFMA. These regulate the
conclusion
of long-term contracts which will impose financial obligations on a
municipality beyond a financial year. The award
was also subject to a
21 day appeal period envisaged in the Municipal Systems Act
[7]
after
which Aurecon would be notified if any appeals had been lodged
against the decision. A few days later, Aurecon received word
that an
appeal had been lodged against the award, which was being resolved,
and that it would be informed of the commencement date
of the
contract once that process was finalised.
[7]
On 17 January 2012 Aurecon received two letters from the City’s
Director: Supply Chain Management (Mr L Shnaps). The first
one
advised that the appeal against the award of the tender had been
resolved and that it would be contacted by the project manager
for
implementation of the project. The other reiterated that the
commencement of the contract was subject to the conclusion of
the
process under s 33 of the MFMA and that Aurecon would be notified in
due course when the said process had been completed. All
was quiet
and Aurecon did not hear from the City for several months. On 29
August 2012, the approval of the award served before
the City’s
council meeting at which concerns, which were later widely reported
in the media, were raised by some council
members that the tender
process was tainted by corruption and irregularities. The concerns
arose from Aurecon’s involvement
in the prefeasibility study
and drafting the applicable scope of work which was alleged to have
given it unfair advantage over
the other tenderers. These
developments prompted the City’s mayor to commission auditors
Ernst & Young
[8]
to investigate, mainly, the process followed in Aurecon’s
appointment and whether it complied with the relevant legislation
and
the City’s procurement policies and to make appropriate
recommendations.
[8]
The auditors’ forensic report, which was submitted on 22
October 2012, recorded a number of irregularities which allegedly
took place during the procurement process. Its conclusion, which
prompted the review proceedings, was that Aurecon had been afforded
an unfair advantage over the other tenderers which took part in the
procurement process for the following reasons:
·
the final scope of work
that formed part of the bid specifications for the tender was based
directly on the draft scope of work
prepared by the JV in 2010,
allegedly in contravention of clause 95 of the SCMP and regulation
27(4);
·
Aurecon was included in
internal City email communication concerning the pending tender;
·
the BEC did not meet as
a collective to evaluate the functional scoring of the bidders as
required and this omission compromised
the validity of any decisions
taken during this process;
·
an
unauthorised member of the BEC
[9]
participated
in the scoring in breach of the Rules of Order;
·
the
correct evaluation stages were not adhered in scoring the bids as the
Price and Historically Disadvantaged Individual equity
ownership
eligibility criteria were impermissibly scored first and submitted
for technical evaluation in breach of MFMA Circular
No. 53;
[10]
·
the BEC meeting of 5
August 2011 had no chairperson and was therefore not properly
constituted in breach of clause 200 of the SCMP;
·
Aurecon was permitted
to withdraw a qualification contemplated in Schedule 15 of the bid
document ie its initial refusal to submit
audited financial
statements, which impermissibly rendered its non-responsive bid
responsive, in breach of clause F.3.8.2 of the
SCMP which obliges the
BEC to reject a non-responsive tender offer and not allow it to be
made responsive by correction or withdrawal
of the non-conforming
deviation or reservation;
·
the BEC evaluated
Aurecon’s bid after the bid validity period had expired as the
SCM department allowed the period to be irregularly
extended in
breach of clause 140 of the SCMP, which permits the chairperson of
the BEC to extend the period only where the
original bid validity has
not expired and all the bidders are given the opportunity to extend
the period;
·
the BEC’s report
to the BAC contained material factual errors without which the BAC
may not have made the award.
[9]
Upon receipt of the report, the City furnished Aurecon with a copy
thereof and informed it that it was precluded from bidding
for the
tender and any future tender based on the draft scope of work
prepared by the JV. The City further invited Aurecon’s
representations as to why the award should not be invalidated.
Aurecon submitted its representations, to which there was no
response,
on 31 January 2013. What followed instead, on 16 April
2013, was the launch of the review proceedings.
[10]
The court a quo found that in terms of clause 95 of the SCMP and
regulation 27(4) Aurecon’s prior involvement
in the preparation
of the draft scope of works precluded it from bidding for the tender.
In the court’s view, the inclusion
of its tender rendered the
procurement process unfair and constituted a ground for review under
s 6(2)
(c)
of the Promotion of Administrative Justice Act 3 of 2000 (PAJA).
[11]
The court held that the defects discovered by the auditors, even if
immaterial and which could therefore have been condoned,
[12]
were not brought to the BAC’s attention and were therefore not
waived. Thus the BAC failed to take relevant considerations
into
account when it considered the tender and its decision accordingly
fell to be reviewed and set aside in terms of s 6(2)
(e)
(iii)
of PAJA.
[13]
The court further set aside ‘any contract that may have come
into existence between the City and [Aurecon] as a result of
the
award’.
[11]
In response to the City’s prayer for condonation ‘to the
extent necessary’ of its failure to
adhere to the 180 day
period stipulated in s 7 of PAJA for the institution of review
proceedings, the court a quo reasoned that
the time limit ran only
from the date on which the City learnt of the ‘full extent of
the reasons for the award of the tender’
from the auditors’
report. And as the review proceedings were launched within the
contemplated period from that date, they
did not fall foul of the
statutory provisions. On these bases the review application was
granted and Aurecon’s counter-application
accordingly refused.
[12]
On appeal before us, Aurecon contested all the findings made by the
court a quo and the charge that it had enjoyed
an unfair advantage
over the other tenderers. On the other hand, it was contended on the
City’s behalf that it had made out
a proper case for an
extension of the time period prescribed in s 7 of PAJA under s 9 of
this Act. The City also supported the
court a quo’s
interpretation of regulation 27(4)
[14]
and clause 95 of the SCMP as disqualifying Aurecon from bidding for
the tender because of its previous involvement in the prefeasibility
study. It was further contended that, in any event, the
irregularities in the procurement process warranted the review and
setting
aside of the tender.
Delay
[13]
I deal first with the issue of delay. Section 7(1) of PAJA prescribes
the time frames within which judicial review
of administrative action
may be instituted. It reads:
‘
Any
proceedings for judicial review in terms of section 6(1) must be
instituted without unreasonable delay and not later than 180
days
after the date–
(a)
subject to subsection
(2)(
c
),
on which any proceedings instituted in terms of internal remedies as
contemplated in subsection (2)(
a
)
have been concluded; or
(b)
where no such remedies
exist, on which the person concerned was informed of the
administrative action, became aware of the action
and the reasons for
it or might reasonably have been expected to have become aware of the
actions and the reasons.’
On
the other hand, s 9 provides:
‘
(1)
The period of –
(
a
)
…
(
b
)
90 days or 180 days referred to in sections 5 and 7 may be extended
for a fixed period,
by
agreement between the parties or, failing such agreement, by a court
or tribunal on application by the person or administrator
concerned.
(2)
The court or tribunal may grant an application in terms of subsection
(1) where the interests of justice so require.’
[14]
The wording of these provisions is clear. In terms of s 7(1) judicial
review proceedings must be instituted without
undue delay and before
the expiry of 180 days from the date of the administrative action in
issue. However, s 9 empowers a court
to extend the stipulated period
if the interests of justice so require. As stated above,
the impugned administrative
action – the decision to award the
tender to Aurecon – was made on 31 October 2011. The reasons
therefor are contained
in the BEC’s report of the same date
which was adopted by the BAC without qualification. The City’s
review application
was launched 532 days thereafter, on 16 April
2013.
[15]
The City’s counsel conceded that it could not be argued that it
was unaware of Aurecon’s involvement
in the prefeasibility
exercise from the onset and that its application was brought out of
time. The concession was, in my view,
properly made. But he argued
that it was nonetheless in the interests of justice, in light of the
glaring irregularities in the
procurement process and the City’s
obligation to comply with s 217 of the Constitution (which obliges
organs of state to
contract for goods or services ‘in
accordance with a system which is fair, equitable, transparent,
competitive and cost-effective’),
to grant it an
extension of the 180 day period under s 9(1)(
b
)
of PAJA.
[16]
The decision challenged by the City and the reasons therefor were its
own and were always within its knowledge.
Section 7(1) unambiguously
refers to the date on which the reasons for administrative action
became known or ought reasonably to
have become known to the party
seeking its judicial review. The plain wording of these provisions
simply does not support the meaning
ascribed to them by the court a
quo, ie that the application must be launched within 180 days after
the party seeking review became
aware that the administrative action
in issue was tainted by irregularity. That interpretation would
automatically entitle every
aggrieved applicant to an unqualified
right to institute judicial review only upon gaining knowledge that a
decision (and its underlying
reasons), of which he or she had been
aware all along, was tainted by irregularity, whenever that might be.
This result is untenable
as it disregards the potential prejudice to
the respondent (the appellant here) and the public interest in the
finality of administrative
decisions and the exercise of
administrative functions.
[15]
Contrary
to the court a quo’s finding in this regard, the City far
exceeded the time frames stipulated in s 7(1) and
did not launch the
review proceedings within a reasonable time. In that case, it clearly
needed an extension as envisaged in s
9(1)(
b
)
without which the court a quo was otherwise precluded from
entertaining the review application.
[16]
[17]
The question then is whether the City made out a case for such an
extension. Whether it is in the interests of
justice to condone a
delay depends entirely on the facts and circumstances of each
case.
[17]
The relevant factors in that enquiry generally include the nature of
the relief sought, the extent and cause of the delay, its
effect on
the administration of justice and other litigants, the reasonableness
of the explanation for the delay which must cover
the whole period of
delay,
[18]
the importance of the issue to be raised and the prospects of
success.
[19]
The grounds upon which the City’s application for the extension
was based, to which Aurecon strenuously objected, were scanty,
at
best. It merely acknowledged that the relevant time frames had
expired and that it consequently required an extension under
s 9(1);
made a bare allegation that the interests of justice would be served
if the extension was granted and the matter was allowed
to proceed
and then asserted that condonation may in fact not be necessary
because it became aware of the full extent of the reasons
for the
award when it received the forensic report on 22 October 2012 and
accordingly brought its review application timeously.
[18]
Among its objections, Aurecon raised the obvious fact that the City
must have had knowledge of the decision, and
the reasons for it, by
31 October 2011 and of the alleged irregularities, before it
commissioned the forensic audit. It also pointed
out that the City’s
founding affidavit gave no information about the date on which the
auditors were appointed, the nature
of the prior complaints received
by it and when it received them and provided no reasonable
explanation for the lengthy delay in
launching the review
application. The City’s response to the objections was as terse
as its initial explanation. It disclosed
only that the auditors were
appointed in August 2012 following allegations of corruption in the
award of the tender and that it
had ‘some relevant information
at its disposal pursuant to which it appointed’ the auditors
but was unaware of ‘any
reviewable irregularities’ at
that stage. The exact nature of that information, when it came to its
knowledge and its source
were not revealed.
[19]
Thus the period of a whole year between the date of the award (31
October 2011) and the submission to the City
of the forensic report
(22 October 2012) was barely accounted for. And the further two and a
half month delay between the submission
of Aurecon’s response
to the report (31 January 2013) and the institution of the
proceedings on 16 April 2013 was not explained
at all. The
information furnished by the City for its delay was manifestly
inadequate and simply did not provide any basis on which
to determine
the reasonableness thereof. And its terseness seems deliberate in
light of the pertinent objections raised about the
scantiness of its
founding affidavit in this regard. One is left wondering why the City
was not candid with the court. The delay
was inexcusable and for this
reason alone the court a quo should not have granted the application
for review.
[20]
Despite this finding, it is necessary to deal with the alleged
irregularities, with which the City persisted on
appeal so as to
assess if the fair process demanded by the constitutional and
legislative procurement framework to ensure even
treatment of all the
tenderers and the best outcome was followed.
[20]
As stated above, the City’s counsel relied on what he labelled
‘glaring irregularities in the procurement process and
the
City’s obligation to comply with s 217 of the Constitution for
his submission that the interests of justice warranted
the grant of
the extension of the 180 day time limit. The approach to be followed
in this exercise has recently been formulated
by the Constitutional
Court as follows in
AllPay
Consolidated v Chief Executive Officer, SASSA
:
[21]
‘
The
proper approach is to establish, factually, whether an irregularity
occurred. Then the irregularity must be legally evaluated
to
determine whether it amounts to a ground of review under PAJA. This
legal evaluation must, where appropriate, take into account
the
materiality of any deviance from legal requirements, by linking the
question of compliance to the purpose of the provision,
before
concluding that a review ground has been established. … Once
that is done, the potential practical difficulties that
may flow from
declaring the administrative action constitutionally invalid must be
dealt with under the just and equitable remedies
provided for by the
Constitution and PAJA.’
The
extension of the validity period of Aurecon’s bid
[21]
Clause 140 of the SCMP provides for the extension of the validity
period of tenders by the chairperson of the BEC,
provided that the
original validity period (60 days in this case) has not expired, that
all tenderers are given an opportunity
to extend it and that the
extension is agreed to by the tenderer in writing. It was not
disputed that the purpose of these provisions
is to ensure that
tenders are accepted while they are still open for acceptance by
permitting the extension of the validity period
thereof. And the
extension is required to be in writing to provide proof that the
extension has actually been agreed to by the
relevant tenderer.
[22]
In this regard, the complaint was that Aurecon and the other
tenderers were not officially requested to extend
the validity period
of their tenders. What had happened is this. On 26 August 2011, the
power station’s project manager,
Mr van Rooi, who was also a
member of the BEC, instructed his colleagues, Ms J Parks and Ms N
Gaffoor, by an email also copied
to the BEC’s chairman, to
request an extension of Aurecon’s bid which was about to expire
on 11 September 2011. Mr
van Rooi wrote to them again on 1 September
to check if the extension had been obtained. This correspondence was
forwarded to Mr
Webb who duly offered the required extension by a
period of 60 days by return email to Mr van Rooi and Ms Gaffoor on 2
September
2011. None of the other tenderers (who had already been
found ineligible) were invited to extend their tenders. The complaint
therefore
was that Aurecon made its offer to extend by responding to
an internal email. In respect of the other tenderers, it was
contended
that the SCM department had allowed the tender to expire
without inviting them, to their prejudice, to extend the period for
making
their bids, as the tender should have been taken as
non-responsive and fresh tenders invited.
[23]
It is unnecessary to require a ‘formal’ request from the
tenderer in the present circumstances. Clause
140 merely requires an
agreement by the affected tenderer in writing, and a decision by the
chairperson before the expiration date,
both of which were achieved
in this case. In any event, if the procedure followed was irregular
and the City should have issued
a formal request to Aurecon, such
irregularity is trifling and is purely a matter of form. And the
complaint relating to the other
tenderers has no merit whatsoever for
the simple reason that they had already been found ineligible at that
stage and were out
of the picture. Significantly, the only appeal
brought by one of the unsuccessful tenderers was dismissed by the
City’s delegated
appeal authority and those findings have not
been impugned.
The
withdrawal of Aurecon’s tender qualifications
[24]
The tender document listed returnable documents to be completed by
the tenderers. Among these documents was schedule
15 dealing with
‘Proposed Amendments and Qualifications by Tenderers’
which provided that
‘
The
Tenderer should record any proposed deviations or qualifications he
may wish to make to the tender documents in this Returnable
Schedule.
Alternatively, a tenderer may state such proposed deviations and
qualifications in a covering letter attached to his
tender …
The Tenderer’s attention is drawn to clause F.3.8 of the
Standard Conditions of Tender referenced in the
Tender Data regarding
the Employer’s handling of material deviations and
qualifications’.
Clause
F.3.8 of the contract document sets out the test for responsiveness
of tenders, which includes a requirement ‘to clarify
or submit
any supporting documentation within the time for submission stated in
the employer’s written request’, failing
which the tender
will be considered non-responsive. In terms of clause F.3.8.2 of the
Standard Conditions of Tender, the employer
must ‘[r]eject a
non-responsive tender offer, and not allow it to be subsequently made
responsive by correction or withdrawal
of the non-conforming
deviation or reservation’.
[25]
Tenderers were therefore invited in terms of these provisions to
record any proposed deviations or qualifications
they wished to make
to the tender documents. Aurecon accepted the invitation and proposed
certain additions to the documents including
a clause in terms of
which the City would indemnify it against liability resulting from
exposure to hazardous substances such as
asbestos. The BEC rejected
the proposed qualification and asked Aurecon to withdraw it, failing
which its tender would be considered
non-responsive. Aurecon acceded
to the request and unconditionally withdrew the proposed
qualification. The City objected to this
conduct on the strength of
the auditors’ finding that it afforded Aurecon an unfair
advantage over other tenderers as they
were not given a similar
opportunity to amend their tender documents.
[26]
In view of clause F.3.8.2, I agree with Aurecon’s argument that
the only valid criticism that may possibly
be levelled against the
BEC in this instance is that it did not reject its tender, as it had
done with the other tenders, on the
basis that the proposed
qualifications rendered it non-responsive. In terms of clause
F.2.8.2 of the Standard Terms of Contract,
a responsive tender is one
that conforms to all the terms, conditions and specifications of the
tender documents without
material
deviation. Whether or not a deviation or qualification is material is
obviously a question to be determined by the BEC in its discretion
taking into account the eligibility criteria set out in the Standard
Terms of Contract and the Tender Data. It would appear from
the
BEC’s conduct that it did not consider the proposed
qualification to be of a disqualifying nature.
[22]
[27]
Importantly, clause F.4.2 of the Standard Terms of Contract makes
provision for negotiations with preferred tenderers
and permits the
employer ‘to negotiate the final terms of the contract with
tenderers identified through a competitive tendering
process as
preferred tenderers provided that such negotiation: a) does not allow
any preferred tenderer a second or unfair opportunity;
b) is not to
the detriment of any other tenderer; and c) does not lead to a higher
price than the tender as submitted.’ The
similarly worded
clause 231 of the SCMP grants the City Manager the same right. These
provisions make clear that the mere proposal
of qualifications cannot
in itself render a bid non-responsive. It was common cause that when
Aurecon was asked to withdraw its
qualifications it had become the
City’s preferred tenderer. In that case the City was entitled
to negotiate the final terms
of the contract with it. Needless
to say, the other tenderers had already been eliminated from the
process in the initial
evaluation for failing to meet the relevant
eligibility criteria. There would, therefore, have been no room to
negotiate anything
with them. In any event, it is not known what
amendments they should have been allowed to make so it is not
possible to determine
if the BEC could have exercised its discretion
in their favour.
Aurecon’s
‘refusal’ to provide its annual financial statements
[28]
Clause F.2.18.1 of the contract enjoins a tenderer to provide ‘on
written request by the Employer, where
the tendered amount inclusive
of VAT exceeds R10 million … audited annual financial
statements for 3 years, or for the period
since establishment if
established during the last 3 years, if required by law to prepare
annual financial statements for auditing’.
In terms of
F.2.17 a tender
may
be rejected as non-responsive if the tenderer fails to comply with
this request. The object of the provisions is obviously to enable
the
employer to assess the tenderer’s financial credentials and its
commercial capacity to execute a large contract.
[29]
On the basis of these provisions Aurecon was asked to furnish the BEC
with its audited financial statements. Citing
confidentiality
concerns, Aurecon offered to submit only summarised audited financial
statements but tendered to make the required
documents available for
perusal ‘around the table by the relevant parties at your
convenience’. Thereafter, in a letter
signed by a Mr Bindeman
on behalf of Mr Shnaps, Aurecon was informed that its tender was
deemed non-responsive for its failure
to comply with the request.
Preparations were set in motion to cancel and reissue the tender.
However, Aurecon wrote back and lodged
its objection to this
decision. It argued that it had not refused to give the City access
to the required information, had now
reviewed its policy and was
willing to accede to the City’s request. It was then allowed to
submit the documents and did
so. As it subsequently turned out, Mr
Bindeman, who wrote the letter merely to serve as a threat to Aurecon
and get it to comply,
was not a BEC member and neither had any
involvement with the evaluation process nor any authority to act on
the BEC’s behalf.
In fact Mr Shnaps disagreed with the contents
of the letter purportedly issued in his name.
[30]
The City’s argument, based on the auditors’ findings in
this regard, was that once Aurecon’s
tender was deemed
non-responsive it could not be revived and that the City officials,
who allowed the submission of the financial
statements, acted in
breach of clause F.3.8.2. That breach, it was contended, founded
basis for the review of the award of the
tender in terms of s
6(2)
(b)
,
[23]
(c)
and
(e)
(iii)
of PAJA. This argument has no merit in view of Mr Bindeman’s
lack of authority to issue the ‘deeming’ letter
in the
first place; the purpose of clause F.2.18.1; the use of the
permissive word ‘may’ in clause F.2.17 and the simple
fact that Aurecon did not refuse to comply with the City’s
request. And even if it had, the BEC allowed the submission of
the
relevant documents in the exercise of its clear discretion which was
not criticised in any manner in the papers.
(a)
BEC members did not evaluate the functional scoring of the tenders as
a collective; (b) a non-member of the BEC participated
in the scoring
in breach of the Rules of Order; and (c) the meeting of 5 August 2011
was not properly constituted
[31]
The City complained that the BEC had not complied with its Rules of
Order
[24]
which, in its view, require it to conduct bid evaluations as a
collective and convene properly constituted meetings and that a
non-member of the BEC participated in the scoring process. This was
so, it was contended, because the administrative evaluation
for price
and HDI (Historically Disadvantaged Individual) criteria had been
conducted by one member, Ms Park. The functionality
technical
evaluation was done in part by Mr Eybers, who was not a member of the
BEC, on the instructions of the chairperson, Mr
Davidson, who merely
checked the scoring sheet. The City argued that once the tenders
passed administrative evaluation, the BEC
should have scored the
functionality of the tenderers as a group and their failure to do so
breached clause 5.3.3(f) of the
Rules of Order,
[25]
compromised the validity of the award and constituted a reviewable
irregularity in terms of s 6(2)(b) and (c) of PAJA.
[32]
Regarding complaint (a) the first point is that the Rules of Order
merely provide that quorums do not apply and
that no decision of a
Bid Specification, Evaluation or Adjudication Committee will be valid
if the relevant committee is not properly
constituted.
[26]
They
contain no provisions which require the BEC to act as a collective
when evaluating tenders. Interestingly, clause 201 of the
SCMP
provides that the Responsible Agent (ie internal project managers who
are City officials or external consultants appointed
by the City
responsible for the administration of a project or contract),
[27]
shall carry out a preliminary evaluation of all valid tenders
received and shall submit a draft tender evaluation report to the
BEC
for evaluation.
Furthermore,
rule 14.2 contemplates matters being decided ‘by a supporting
vote of a majority of the members present’
where decisions
cannot be made by consensus. These provisions show beyond doubt that
it was not envisaged that the BEC would perform
the entire evaluation
process as a collective. In any case there was only one eligible
tenderer here which was nonetheless scored
for quality and met the
requirements even after the other tenders were found non-responsive.
Therefore the fact that the BEC did
not score and evaluate the
tenders as a collective did not amount to an irregularity.
[33]
As for complaint (b), no provision in the Rules of Order or any other
relevant document precludes a non-member
of the BEC from
participating in or advising the BEC in connection with the scoring
process or attending committee meetings in
an advisory capacity.
Instead, clause 198 of the SCMP allows that ‘[w]here
appropriate, a representative of Internal Audit
and/or Legal Services
may form part of [the BEC], which may also include other internal
specialists/experts as necessary …
[e]xternal
specialists/experts may advise [the BEC], as required’. And
clause 5.1.4 of the Rules of Order provides that ‘[w]hen
appropriate, a representative of Internal Audit and/or Legal Services
may assist the BEC, which may also include an internal or
external
specialist expert, when necessary. The regulatory framework therefore
allows participation by non-members of the BEC in
the evaluation of
tenders and Mr Eybers’ involvement in the scoring process was
not irregular.
[34]
The validity of the BEC meeting of 5 August 2011 was challenged on
the basis that its constitution was irregular
as Mr Davidson was
absent and a non-member of the committee, Mr Tshivase, attended as an
observer in the company of Ms Park and
Mr van Rooi. I have already
dealt with the right of non-members to participate in the business of
the BEC and nothing more need
be said in this regard. As for the
absence of the chairperson, it appears that the meeting was not
legally required anyway and
that there would have been no cause for
complaint if it had not been held as long as the BEC performed its
functions, which it
did. At worst, the resolutions taken there would
not be invalid. The next meeting of 25 August 2011 was, however,
attended by all
the BEC members and the proceedings of the previous
meeting were unanimously adopted. Importantly, the decision to make
the recommendations
contained in the BEC’s report to the BAC,
signed by all its three members to signify their agreement with its
contents, was
taken by consensus reached at the properly constituted
meeting of 25 August 2011 in accordance with the provisions of rule
14.1
of the Rules of Order.
[28]
The chairperson’s absence at the earlier meeting was thus of no
moment.
Aurecon
had access to information not provided to other tenderers
[35]
There was another complaint that was not raised in argument, but that
was not expressly abandoned, that Aurecon,
by virtue of its
involvement in the pre-feasibility study, was in possession of a
compact disc which contained additional information
not contained in
the tender documents which was not provided to the other bidders who
were thus unfairly prejudiced. It was argued
that Aurecon enjoyed an
unfair advantage over the bidders in that it had been placed in
possession of pertinent information relating
to the tender even
before the formal initiation of the tender. However, Aurecon’s
version that such information was not relevant
for the tender and was
in fact offered to tenderers for a different, though related
contract, and prospective tenderers were supplied
with all the
necessary information, was not placed in dispute in the affidavits
and that puts paid to the complaint.
Were
clause 95 of the SCMP and regulation 27(4) contravened?
[36]
The City’s real complaint, and the only one of substance, was
that Aurecon was precluded from bidding for
the tender or any tender
pertaining to the decommissioning of the power station which is based
on the draft scope of work prepared
by the JV. For its view, the City
relied on clause 95 of the SCMP read with regulation 27(4).
[37]
The City argued that because the JV’s draft scope of work was
incorporated almost in its entirety into the
final scope of work
prepared by the City’s Bid Specification Committee (the BIC)
Aurecon was ‘involved with the bid
specification committee’
and was therefore disqualified from bidding for any tender connected
with the decommissioning of
the power station. It was argued that it
was not necessary, for purposes of these provisions, to show that a
tenderer actively
participated in the actual proceedings of the BIC,
or actively attempted to influence the design or content of the
specification,
or even that the tenderer intended or hoped to
influence the outcome of the tender process, or that the resultant
outcome was indeed
so influenced. This was so because the ambit of
the relevant provisions, read against the backdrop of s 217 of the
Constitution,
is sufficiently wide that it need merely be shown that
the tenderer was afforded an unfair advantage over the other
tenderers who
participated in the procurement process, so continued
the argument.
[38]
The court a quo favoured this line of argument. In its view ‘to
allow a party to bid for a contract, the
specifications of which are
to a significant extent determined by the same party, is inconsistent
with the values underpinning
fairness’ even if the BIC and BEC
may have bona fide believed that this conduct was lawful. The court a
quo concluded that
allowing Aurecon to tender rendered the
procurement process unfair and constituted a ground for review in
terms of s 6(2)
(c)
of PAJA.
[39]
The provisions relied upon by the City form part of a framework with
which municipal supply management policies
must comply. To comply
with s 111 of the MFMA, which requires each municipality and each
municipal entity to implement a supply
chain management policy, the
City adopted the SCMP which reads in relevant part:
‘
81.
Bid specifications must be drafted in an unbiased manner to allow all
potential suppliers to offer their goods and services.
. . .
89.
All bid specifications and bid documentation must be compiled by an
ad-hoc bid specification committee constituted for each
project or
procurement activity.
90.
The Bid Specification Committee shall be comprised of at least three
City officials, an appointed Chairman, a responsible official
and at
least one Supply Chain Management Practitioner of the City.
91.
Where appropriate a representative of Internal Audit and/or Legal
Services and/or an external specialist advisor may form part
of this
committee.
94.
The City Manager, or his delegated authority, shall, taking into
account section117 of the MFMA [which bars councillors from
serving
on municipal tender committees], appoint the members of the Bid
Specification Committees.
95.
No person, advisor or corporate entity
involved
with
the bid
specification committee, or director of such corporate entity, may
bid for any resulting contracts.
[My
emphasis.] . . .
102.
The bid documentation and evaluation criteria shall not be aimed at
hampering competition, but rather to ensure fair, equitable
,
transparent, competitive and cost effective bidding, as well as the
protection or advancement of persons, or categories of persons,
as
embodied in the preferential procurement section of this Policy.’
[40]
Regulation 27 sets out the requirements with which municipal supply
chain management policies must comply. It reads:
‘
(1)
A bid specification committee must compile the specifications for
each procurement of goods or services by the municipality
or
municipal entity.
(2)
Specifications–
(
a
)
must be drafted in an unbiased manner to allow all potential
suppliers to offer their goods or services;
(
b
)
must take account of any accepted standards such as those issued by
Standards South Africa, the International Standards Organisation,
or
an authority accredited or recognised by the South African National
Accreditation System with which the equipment or material
or
workmanship should comply;
(
c
)
where possible, be described in terms of performance required rather
than in terms of descriptive characteristics for design;
(
d
)
may not create trade barriers in contract requirements in the forms
of specifications, plans, drawings, designs, testing and test
methods, packaging, marking or labelling of conformity certification;
(
e
)
may not make reference to any particular trade mark, name, patent,
design, type, specific origin or producer unless there is no
other
sufficiently precise or intelligible way of describing the
characteristics of the work, in which case such reference must
be
accompanied by the words “equivalent”;
(
f
)
must indicate each specific goal for which points may be awarded in
terms of the points system set out in the supply chain management
policy of the municipality or municipal entity; and
(
g
)
must be approved by the accounting officer prior to publication of
the invitation for bids in terms of regulation 22.
(3)
A bid specification committee must be composed of one or more
officials of the municipality or municipal entity, preferably
the
manager responsible for the function involved, and may, when
appropriate, include external specialist advisors.
(4)
No person, advisor or corporate entity involved with the bid
specification committee, or director of such corporate entity,
may
bid for any resulting contracts’.
[41]
In order to give meaning to clause 95 of the SCMP and regulation
27(4) regard must be had to their wording, read
in context, and
having regard to their purpose and the background to the preparation
and production of the SCMP.
[29]
The key words ‘involved with’ are not defined either in
the SCMP or in the Regulations. Their ordinary grammatical
meaning is
‘connected, engaged typically in an emotional or personal
relationship’.
[30]
Read against this backdrop, the plain wording of the relevant
provisions and the scheme of regulation 27, which deals mainly with
the composition of the bid specification committee, make clear that
the provisions were meant to ensure a fair, equitable, transparent,
competitive procurement process by combating corruption and nepotism.
The wide meaning ascribed to the provisions by the City,
which would
preclude a prospective tenderer who has no personal connection
whatsoever to the committee from bidding, does not make
commercial
sense and goes against standard engineering practice. This was
attested to by Mr H Silbernagl, an engineer with extensive
consulting
engineering experience and knowledge of the accepted norms and
practices in the consulting engineering industry. None
of Mr
Silbernagl’s evidence was gainsaid. He expressed the view that
barring engineers with intimate knowledge of a particular
project
because of their prior involvement therewith from tendering would
lead to unnecessary and wasteful expenditure, and would
not be in the
best interests of taxpayers and organs of state, and that they should
rather be encouraged to tender and put such
knowledge to good use.
Indeed, his evidence finds support in the Treasury Guidelines which,
inter alia, approve the appointment
of consultants for tasks that
flow from previous work carried out by them, and state that such
consultants should be permitted
to participate in any competitive
process for ‘downstream’ assignments if they express
interest.
[31]
[42]
The BEC did not act unreasonably by accepting Aurecon’s tender
offer as was found by the court a quo. The
court, whose task was to
determine whether the BAC’s decision fell within the bounds of
reasonableness and fairness, as required
by the Constitution,
[32]
misinterpreted
and misapplied the provisions of clause 95 of the SCMP and regulation
27(4) and, in that course, impermissibly usurped
the BAC’s
function by making the order it granted.
[43]
It is clear from the above discussion that none of the so-called
irregularities constituted irregularities at all.
In any event, it is
firmly established in our law that
administrative
action based on formal or procedural defects is not always invalid
and that legal validity is concerned not with
technical but also with
substantial correctness which should not always be sacrificed to
form.
[33]
I do not understand
AllPay
to overturn this principle. There the Court pointed out that
‘
Once
a particular administrative process is prescribed by law, it is
subject to the norms of procedural fairness codified by PAJA.
Deviations from the procedure will be assessed in terms of those
norms of procedural fairness. That does not mean that administrators
may never depart from the system put in place or that deviations will
necessarily result in unfairness. But it does mean that,
where
administrators depart from procedures, the basis for doing so will
have to be reasonable and justifiable, and the process
of change must
be procedurally fair.’
[34]
[44]
It bears repeating that Aurecon’s tender was found to be the
only responsive one among all those which were
submitted (the other
tenders having been disqualified for non-compliance with the tender
requirements) and that the alleged irregularities
occurred after the
other tenders had been found ineligible. So no other tenderer could
have been prejudiced in any event, having
regard also to the City’s
own disavowal of fraud or corruption in the procurement process,
Aurecon’s evaluation for
quality even after the other tenders
were disqualified, and the BEC’s uncontested conclusions that
its price was reasonable,
that it has the necessary experience,
competence and resources to successfully complete the project.
Aurecon is the only party
which has suffered prejudice in the
process, for the City’s missteps which were seemingly
challenged not to protect the public
interest but solely for
political expedience (as it was described in the affidavits).
[45]
The public interest would undoubtedly be best served by bringing this
long outstanding matter to finality for the
benefit of the community;
holding the City to the contract it concluded freely and voluntarily
with Aurecon, an entity that has
demonstrated its ability to provide
the services required in a competitive tender process, and avoiding
the potential prejudice
arising from reputational damage to the
innocent tenderer.
[35]
Aurecon has had to contend with baseless imputations of impropriety
against it. The City simply did not make out a case for an
extension
in terms of s 9(1) and in fact failed to establish any basis for the
review application at all. The court a quo should
have dismissed its
application on this basis and grant the counter-application.
[46]
In the result, the following order is made:
1
The appeal is upheld with costs.
2
The order of the Western Cape Division of the High Court, Cape Town
is set aside and replaced with the following:
‘
1
The application is dismissed with costs.
2
Aurecon South Africa (Pty) Ltd (Aurecon) was, and is, not precluded,
in terms of clause 95 of the City of Cape Town’s Supply
Chain
Management Policy, the Supply Chain Management Regulations made in
terms of
s 168
of the
Local Government: Municipal Finance Management
Act 56 of 2003
or for any reason, from bidding for the City of Cape
Town’s Tender 459C/2010/2011 or for any tender pertaining to
the decommissioning
of the Athlone Power Station which is based on
the draft scope of work prepared by the joint venture between Aurecon
Engineering
International (Pty) Ltd and ODA (Pty) Ltd.
3
The City of Cape Town is ordered to pay the costs of Aurecon’s
counter-application.’
____________________
MML
MAYA
Acting
Deputy President
APPEARANCES
APPELLANT:
A G Sawma SC
Instructed
by:
Weavind
& Weavind Attorneys, Pretoria
Spangenberg
Zietsman & Bloem, Bloemfontein
RESPONDENT:
I Jamie SC (with PS van Zyl)
Instructed
by:
Cliffe
Dekker Hofmeyr, Cape Town
Honey
Attorneys, Bloemfontein
[1]
A metropolitan
municipality as defined in
s 1
of the
Local Government: Municipal
Structures Act 117 of 1998
.
[2]
Made
in terms of
s 168
of the
Local Government Municipal Finance
Management Act 56 of 2003
.
[3]
Aurecon’s wholly-owned subsidiary then known as Africon
Engineering International (Pty) Ltd).
4
A multi-disciplinary, non-engineering firm.
5
Athlone Power Station has not functioned since 2003.
[6]
On 4 November 2011.
[7]
The
Local Government: Municipal Systems Act 32 of 2000
.
[8]
Ernst
&Young Fraud Investigation & Dispute Services, a Division of
Ernst & Young Advisory Services Ltd.
[9]
Mr Eybers,
the City’s Mechanical Maintenance Manager, Electricity
Generation.
[10]
Issued
by National Treasury on 3 September 2010 to provide a guideline in
respect of bids that include functionality as a criterion
and
prescribes the two stages in which the evaluation of bids must be
conducted.
[11]
Section 6(2)(c)
of
PAJA vests a court with ‘the power to judicially review an
administrative action if … the action was procedurally
unfair’.
[12]
Under
clause 296 of the SCMP.
13
Section 6(2)(e)(iii)
of PAJA empowers a court or tribunal to
‘judicially review an administrative action if … the
action was taken …
because irrelevant considerations were
taken into account or relevant considerations were not considered’.
[14]
Municipal Supply Chain Management Regulations GN
R868,
GG
27636, 30 May 2005.
[15]
Gqwetha v
Transkei Development Corporation Ltd & others
2006
(2) SA 603
(SCA) paras 22 to 23;
Harnaker
v Minister of the Interior
1965
(1) SA 372
(C);
Khumalo
& another v Member of the Executive Council for Education:
KwaZulu-Natal
[2013]
ZACC 49
;
2014 (5) SA 579
(CC) paras 45 to 52.
[16]
Opposition
to Urban Tolling Alliance & others v The South African National
Roads Agency & others
[2013]
4 All SA 639
(SCA) para 40.
[17]
Van Wyk v
Unitas Hospital (Open Democratic Advice Centre as Amicus Curiae)
[2007] ZACC 24
;
2008 (2) SA 472
(CC) para 20.
[18]
Ethekwini
Municipality v Ingonyama Trust
[2013] ZACC; 2014
(3) SA 240 (CC) para 28.
[19]
Van Wyk v Unitas
Hospital
paras 20,
22;
Camps Bay Rate
Payers’ and Residents Association v Harrison
[2010]
ZASCA 3
;
[2010] (2) All SA 519
(SCA) para 54.
[20]
AllPay
Consolidated v Chief Executive Officer, SASSA
[2013]
ZACC 42
;
2014 (1) SA 604
(CC) paras 24, 38 to 40. See also
Steenkamp
NO v Provincial Tender Board, Eastern Cape
[2006] ZACC 16
;
2007 (3) SA 121
(CC) para 60.
[21]
Ibid
,
paras 28 and
29.
[22]
Mr Davidson’s
concern about the qualification and his proposal to consider another
tenderer, Kayad Knight Piesold (Pty)
Ltd, which had been
disqualified because it was not registered with the Engineering
Council of South Africa, as was required
in the bid specifications,
seems to have fallen by the wayside.
[23]
In terms of
s 6(2)(
b
)
of PAJA ‘[a] court or tribunal has the power to judicially
review an administrative action if … a mandatory and
material
procedure or condition prescribed by an empowering provisions was
not complied with’.
[24]
The
City of Cape Town Terms of Reference, Rules of Order and
Implementation Guidelines Regulating the Conduct of meetings of Bid
Specification, Evaluation and Adjudication Committees.
[25]
The clause stipulates that where points are allocated for
functionality, each member of the BEC must, during the evaluation,
consider the score allocated to each tenderer, whether functionality
was scored by the BEC members or by an advisor/technical
person
assisting the BEC.
[26]
Clause 13.
[27]
As defined in
clause 1.48 of the SCMP.
[28]
Which enjoins
the committees to attempt to take decisions by consensus.
[29]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
2012 (4) SA 593
(SCA) paras 17 –26.
[30]
Oxford University
Press
The Concise
Oxford English Dictionary
10 ed (2002) at 746.
[31]
For example, paragraph 5.9.5.5 of the
National
Treasury MFMA Circular No 53: Amended Guidelines in respect of Bids
that include Functionality as a Criterion for Evaluation
dated 3
September 2010.
[32]
Bato Star
Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism &
others
[2004] ZACC
15
;
2004 (4) SA 490
(CC) para 45.
[33]
Baxter
Administrative
Law
(1984) at 446.
[34]
At Paragraph 40.
[35]
Moseme Road
Construction CC & others v King Civil Engineering Contractors
(Pty) Ltd & another
[2010]
ZASCA 13
;
2010 (4) SA 359
(SCA) paras 15-17.