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[2020] ZAGPJHC 368
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Ilex South Africa (Pty) Limited v National Health Laboratory Service and Others (16167/2019) [2020] ZAGPJHC 368; 2021 (5) SA 587 (GJ) (15 September 2020)
IN THE HIGH
COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
(1)
REPORTABLE:
NO
(2)
OF INTEREST TO OTHER JUDGES:
NO
(3)
REVISED:
Date:
15
th
September 2020
CASE
NO
:
16167/2019
DATE
:
15
th
SEPTEMBER
2020
In
the matter between:
ILEX SOUTH AFRICA
(PTY)
LIMITED
Applicant
and
NATIONAL
HEALTH LABORATORY SERVICE
First Respondent
CHETTY
,
DR KARMANI N O
Second Respondent
ABBOTT
LABORATORIES SOUTH AFRICA (PTY) LIMITED
Third Respondent
ROCHE
DIAGNOSTICS (PTY)
LIMITED
Fourth Respondent
SIEMENS
HEALTHCARE (PTY)
LIMITED
Fifth Respondent
Coram:
Adams J
Heard
:
17
and 18 June 2020
Delivered:
15 September 2020 – This judgment was handed down
electronically by circulation to the parties' representatives by
email,
by being uploaded to the
CaseLines
system of the GLD
and by release to SAFLII. The date and time for hand-down is deemed
to be 11h00 on 15 September 2020.
Summary:
Administrative law – public tender –
administrative action – such is constituted by
inter
alia
the award of a State tender –
the disqualification of the applicant’s tender was
constitutionally invalid –
Remedy – unlawful
tender – just and equitable remedy – court declined to
set aside the tender –
ORDER
(1)
The first respondent's decision taken on
the 29
th
of November 2018
to award bid number RFB
017/18-19, for the ‘Provision of a total HIV Viral Load
Services Solution to the National Health Laboratory
Services (‘NHLS’)
for a period of three years’, in the medium and high throughput
categories to the third and
fourth respondents (‘the
decision’), is reviewed and declared constitutionally invalid.
(2)
The applicant’s application to set
aside the decision and any contracts concluded
pursuant
thereto between the first respondent and the third and fourth
respondents for the provision of HIV blood sample testing
services to
the National Health Laboratory Services implementing the said
decision (‘the Contracts’) is refused with
costs.
(3)
The applicant shall pay the costs of the
first, second, third and fourth respondents of this review
application, including the costs
consequent upon the employment of
two Counsel (where so employed).
(4)
The applicant shall pay the costs of the
first, second and third respondents relating to the first and second
respondents’
application to set aside the applicant’s
opposing affidavit in the third respondent’s interlocutory
application.
JUDGMENT
Adams J:
[1].
This is an opposed application concerning a public tender for the
provision
of HIV blood sample testing services for a period of three
years. The body that invited the tenders was the National Health
Laboratory
Services (‘NHLS’), a national public entity
established as a juristic person in terms of section 3 of the
National
Health Laboratory Services Act, Act 37 of 2000 (‘the
NHLS Act’). The NHLS and its chief executive officer are the
first
and second respondents respectively. The contract was awarded
to Abbott Laboratories South Africa (Pty) Ltd (‘Abbott’),
the third respondent, and Roche Diagnostics (Pty) Ltd (‘Roche’),
the fourth respondent. The applicant, Ilex South Africa
(Pty) Ltd
(‘Ilex’), and the fifth respondent, Siemens Healthcare
(Pty) Ltd, also tendered but were unsuccessful.
[2].
Aggrieved at the award of the contract, Ilex applies to this Court
for an order
setting aside the decision of NHLS to appoint Abbott and
Roche and the contracts that followed upon that decision. The relief
sought
by Ilex is essentially for an order declaring that the tender
process was illegal, invalid and unconstitutional and for an order
reviewing and setting aside the said decision. In the alternative,
Ilex seeks an order setting aside the award of the tender in
favour
of Roche.
[3].
Ilex contends that the decision to award the tender to Abbot and
Roche and
the subsequent contracts concluded between them should be
declared unlawful and set aside
ab initio
for the following
reasons: (i) the bidders' offers expired on 9 October 2018 prior to
the NHLS accepting any bids; (ii) the NHLS
failed to comply with its
own Request for Bids (‘RFB’) and the Preferential
Procurement Policy Framework Act, Act 5
of 2000 (‘PPPFA’)
regulations in disqualifying Ilex; (iii) the tender process was
unfair as there were no comparable
price submissions; (iv) the
conduct of the NHLS was procedurally unfair during the tender
process; (v) the Bid Adjudicating Committee
of NHLS was not properly
constituted; (vi) the NHLS's decision was not reasonable and
irrational; (vii) the NHLS's decision to
split the bid between high
and medium throughput suppliers was arbitrary and irrational; and
(viii) Roche was awarded the high
throughput category at a price it
did not offer.
[4].
At the heart of the dispute in this application is public procurement
and the
notion that it is not a mere showering of public largesse on
commercial enterprises. It is the acquisition of goods and services
for the benefit of the public.
[5].
The procurement of goods and services by the state and other public
entities
is subject to various legal constraints. Section 217(1) of
the Constitution requires all organs of state, when they contract for
goods or services, to do so ‘in accordance with a system which
is fair, equitable, transparent, competitive and cost effective’.
That is taken up in the Public Finance Management Act, Act 1 of 1999
(‘the PFMA’), which provides in s 51(1)(a)(iii)
that the
accounting authority of a public entity (which includes the NHLS)
‘must ensure that the public entity … has
and maintains
an appropriate procurement and provisioning system which is fair,
equitable, transparent, competitive and cost effective’.
It has
also been held that public procurement constitutes ‘administrative
action’ as contemplated by the Promotion
of Administrative
Justice Act, Act 3 of 2000 (‘PAJA’) and must comply with
the provisions of that Act.
[6].
Section 217 of the Constitution, the Preferential Procurement Policy
Framework
Act, Act 5 of 2000 (‘the Procurement Act’) and
the Public Finance Management Act, Act 1 of 1999] provide the
constitutional and legislative framework within which administrative
action may be taken in the procurement process. The lens for
judicial
review of these actions, as with other administrative action, is
found in PAJA. The central focus of this enquiry is not
whether the
decision was correct, but whether the process is reviewable on the
grounds set out in PAJA.
[7].
Treasury regulations on state acquisitions require tenders to be
evaluated
by a bid evaluation committee (BEC) and a bid adjudication
committee (BAC). The regulations required the state entity concerned
to have a system for constituting those committees. The system
employed by the NHLS was contained in its Supply Chain Management
Policy, which directed how the committees were to be constituted and
set out in some detail their functions and how those functions
were
to be performed.
[8].
Bids would first be screened for compliance with the administrative
requirements
of the RFB. Those that survived would then be evaluated
by the BEC, which would report and make recommendations to the BAC.
The
BAC would in turn make recommendations to the Chief Executive
Officer and to the NHLS Board, which was authorised to approve
finally
a competitive bid.
[9].
The implication of the aforegoing process is that some proposals
might be unmeritorious,
as non-compliant and non-responsive, that
they could be disqualified at the stage of assessment by the BEC. All
other bids would
then be scored according to the formula provided for
in the RFB. I shall return to this aspect of the matter shortly.
[10].
In a nutshell, Ilex contends that when it was disqualified it was
treated unfairly by a flawed
bidding process. There is also a
suggestion by Ilex that the NHLS in certain respects acted
irrationally and unreasonably. What
Ilex says is that it could have
won the day, at least on a certain part of the bid, on its financial
proposals had it proceeded
to that evaluation stage, to which it
would indeed have proceeded absent its unlawful disqualification and
other alleged irregularities
that form the subject of its complaints.
[11].
Before turning to the issues that arise in this case it is convenient
to outline the background
against which the bids of Abbott and Roche
were accepted and the contracts concluded. It is also necessary to
summarise the processes
that culminated in these contracts.
[12].
The NHLS has the sole mandate to provide pathology services to the
South African National Department
of Health (‘NDOH’). At
the relevant time the NDOH reported 7.1 million people living with
HIV in South Africa, with
the total remaining on anti-retroviral
therapy estimated then at 4.1 million people. The 2015 Consolidated
Guidelines for the Management
of HIV of the World Health Organisation
(‘WHO’) and the NDOH recognised the HIV viral load as the
preferred method
of monitoring response to treatment and diagnosing
treatment failure. The NHLS, which is the largest diagnostic
pathology laboratory
service in South Africa with over two hundred
and fifty laboratories in the nine provinces, followed and still
follows the HIV
viral load monitoring regimens recommended by the
aforementioned NDOH guidelines. For that purpose the NHLS required
assistance
from specialised service providers to test blood samples
for HIV.
[13].
The invitation to bid – also referred to as an RFB, which,
according to the tender documents,
is an acronym for ‘Request
for Bid’ – was issued by the NHLS on the 4
th
of May 2018 and was directed at identifying service providers for the
‘provision of a total HIV Viral Load Services Solution
to the
NHLS nationally for a period of three (3) years’. The RFB
contained detailed technical specifications, which incorporated
a
number of ‘mandatory requirements’, and provided for the
assessment of technical functionality in accordance with
express and
specified ‘technical evaluation criteria’.
[14].
There were a number of elements to the service that was required, but
it was directed primarily
at the viral load testing of individuals at
a number of laboratories across the country and the production of the
test results
in a coordinated and technologically advanced format.
The closing date by which the bids were to be submitted to the NHLS
was the
11
th
of June 2018.
[15].
As aptly put by Ilex in its founding affidavit, the NHLS was seeking
a service provider to set
up machines in each of its sixteen country
wide laboratories and deliver the services of testing blood samples
for HIV at particular
speeds which are respectively referred to as
medium and high throughput volumes. HIV testing at medium and high
throughput volumes
is highly specialised. There are only few
companies in the market that can offer these services.
[16].
After the issue of the RFB the NHLS held a compulsory briefing
session on the 17
th
of May 2018, whereafter Ilex submitted
its bid on the 11
th
of June 2018. A public tender opening
took place at the NHLS's offices on the 11
th
of June 2018.
It was disclosed at that meeting that four parties had submitted
bids, namely Ilex, Abbott, Roche and Siemens.
[17].
The evaluation of the bids by the NHLS was done firstly through its
Bid Evaluation Committee
(‘BEC’), also referred to at
times in the documentation as the Cross Functional Evaluation Team
(‘the CFET’),
which issued its final report on the 16
th
of October 2018, which was after the date on which, according to the
RFB, the NHLS was to accept any compliant bids.
[18].
Before then, the CFET had done a technical functionality evaluation
of the bids and in its report,
which was signed off on the 2
nd
and the 7
th
of August 2018, made certain recommendations
to be presented to and considered by the Finance Evaluation Team. The
functional evaluation
entailed the CFET members: (1) discussing
and evaluating compliance by the bidders of the technical mandatory
requirements;
(2) scoring each qualifying bid submission for the
non-mandatory requirements; and (3) preparing and submitting its
functional
evaluation report for consideration by the Finance
Evaluation Team.
[19].
It was in this report by the CFET that the bidders were scored, on
the technical evaluation,
by the members as follows: In respect of
medium throughput volumes: Roche – 86.5%; Ilex – 88% and
Abbott – 85%.
In respect of high throughput volumes, Abbott was
disqualified and Roche was scored at 85% and Ilex at 84%. In
conclusion, the
CFET report then recommended that Ilex and Roche be
further evaluated for price and B-BBEE in respect of their bids for
high throughput
volumes. Roche, Ilex and Abbot were similarly
recommended to be further evaluated in respect of their medium
throughput volumes.
The import of this report, from the point of view
of Ilex, was that it was found by NHLS to be compliant with the
administrative
requirements of the bid, as well as with the technical
mandatory requirements thereof.
[20].
Thereafter, the tender process and the assessment of bids by Roche,
Ilex and Abbotts moved onto
the next stage of the evaluation process
by the Price Evaluation Committee (‘the PEC’), another
sub-committee of the
BEC. The recommendations by the PEC are
contained in its report, tilted ‘Consolidated Price Report’
and dated the 24
th
of August 2018. This report and the
findings made therein form the basis of most of the complaints by
Ilex in this review application.
The Price Committee evaluated two
bidders, namely Abbott and Roche, and found in its price evaluation
the ‘lowest tendered
price’ to be that of Roche, namely
R1 207
500 000 (inclusive of 15%
VAT). Abbott’s tendered price of R1 371 375 was found
to be the second lowest. In
the result the committee recommended that
‘the lowest bidder be allocated the project as per the order of
the merit’.
It also recommended ‘Abbot as the bidder that
will provide the cost effective service for the proposed solution’.
[21].
Importantly, the Consolidated Price Evaluation Report disqualified
Ilex on the following bases:
‘-
Their
copy of the pricing schedule or quote does not correspond with the
original.
-
Their copy of the
original pricing schedule was manually amended with a pen and there
is no initial on the changes made.
-
Their pricing declaration
amount is the same as the annual costs and not for the 3 (three)
years and not for the three years as
required in the bid documents’.
[22].
On the 8
th
of November 2018 the BAC submitted a report,
which incorporated the aforementioned recommendations in the reports
by the CFET and
the PEC, to the Finance Committee of the NHLS Board.
This report required of the Finance Committee to award the tender to
Roche
and Abbott in respect of high throughput and medium throughput
respectively. The Financial Committee accepted the recommendation
and, in turn, made its recommendation on the 23
rd
of
November 2018 to the board of the NHLS. Finally, on the 29
th
of November 2018 the Board made its decision and resolved to accept
the bids of Abbott and Roche, the bid by Ilex having been
disqualified in accordance with the recommendations by the PEC.
[23].
Between 29 November 2018 and 23 January 2019 the NHLS took no steps
to notify the successful
bidders of their decision to accept their
bids.
[24].
On the 24
th
of January 2019 the NHLS advised Abbott that
its bid has been accepted in respect of ten listed ‘medium
throughput sized
labs’, namely Addington, Nelson Mandela
Academic, IALCH, Edenvale, Madadeni, Groote Schuur, Tygerberg,
Tshepong, Port Elizabeth
and East London. The award of the bid to
Abbott was expressly subject to the following: ‘(a) Contract
will be drafted by
NHLS; and (b) SLA Agreement between NHLS and Abbot
Laboratories SA (Pty) Limited’. The award was ‘accepted’
by
Abbott on 25 January 2019.
[25].
Also, on the 24
th
of January 2019 the NHLS addressed a
similar written
communiqué
to Roche, advising that its
bid has been accepted in respect of six listed ‘high throughput
sized labs’, namely Charlotte
Maxeke, Rob Ferreira (Nelspruit),
Ngwelezana, Mankweng, Dr George Mukhari Academic and Universitas
Academic. The award of the bid
to Roche was expressly subject to the
same conditions as those imposed on Abbott: Roche was however not
agreeable to ‘accepting’
the award.
[26].
As for the bid submitted by Ilex, on the 13
th
of February
2019 NHLS advised it (Ilex) that its response to the RFB had been
unsuccessful. The notification to Ilex was rather
terse and gave no
reason for Ilex’s unsuccessful bid. NHLS simply advised Ilex as
follows: ‘We regret to inform you
that your response to the
above mentioned bid has been unsuccessful’. Eventually, and
only after Ilex had availed itself
of the discovery processes in
anticipation of this review application and during the application,
it transpired that it (Ilex)
had in fact been disqualified several
months prior to that notification on the 24
th
of August
2018 by the Price Evaluation Committee in their report of that date.
[27].
As indicate above, the reason for Ilex’s disqualification,
according to the Price Evaluation
Report, and the basis for same was
the following: the original of their pricing schedule or quote did
not correspond with the copy
as submitted by Ilex; Ilex’s
original pricing schedule was manually amended with a pen and there
is no initial on the changes
made; and Ilex’s pricing
declaration amount was the same as the annual costs and not for the
three (3) years as required
in the bid document.
[28].
Ilex is unhappy with this decision by the PEC and is even more
aggrieved by the fact that for
a period of approximately six months
the NHLS did not consider it appropriate to notify them of the fact
that they had been disqualified
during the very early stages of the
bid evaluation process.
[29].
On the 9
th
of March 2019 Roche ‘accepted’ the
NHLS’s acceptance as per their letter of the 24
th
of
January 2018 of its (Roche’s) bid with substantial changes to
the contents of the said letter. The bid was awarded in
respect of
six ‘high throughput sized labs’. The award of the bid as
per the letter of the 24
th
of January 2018 had been
amended, after further negotiations between NHLS and Roche, to
expressly provide that services would be
rendered for the following
price: ‘At an amount of R86 per single (one) viral load result
per volume, for 3.5 million VL’s
in 2019’.
[30].
It is the case of Ilex that by the time Roche ‘accepted’
the award of the bid by
NHLS, same had already expired and it could
not have been accepted. Moreover, so Ilex contends, because the
‘acceptance’
was conditional and the conditions had not
been fulfilled timeously, i e before the expiration of the bids, the
contracts concluded
between NHLS and Roche were unlawful. In
addition, Ilex contends that the agreement concluded between NHLS and
Ilex pursuant to
the latter’s acceptance of the Bid on the 9
th
of March 2019 contains additional terms, which afforded Roche a
minimum volume of 3.5 million tests for 2019. This means, so the
argument goes on behalf of Ilex, that the NHLS and Roche had
negotiated on a basis that was never available to the other bidders.
[31].
On the 1
st
of July 2019 the NHLS, Roche and Abbott
commenced with the implementation of the bids. On 2 July 2019 the
NHLS and Roche concluded
a service level agreement.
[32].
With that background I turn to Ilex’s complaints and its
grounds of review, which were
many, all attacking the award of the
tender to Roche and Abbot. The real complaint was however the
disqualification of Ilex’s
tender.
The
first Ground of Review – the Bids by Roche and Abbot had lapsed
[33].
As indicated above, the closing date for bid submissions was the 11
th
of June 2018. The ‘bid validity period’ was 120 days
‘commencing on the RFB closing date’. This means that
the
bids presented by Ilex, Abbott, Roche and Siemens were open for
acceptance by the NHLS until the 9
th
of October 2018.
[34].
By the 10
th
of October 2018 the NHLS, who was still in the
process of evaluating the bids by Abbott and Roche, with the Ilex’s
bid having
already been disqualified on the 24
th
of August
2018, had not yet accepted any of the offers, which means, so Ilex
contends, the bids were no longer open for acceptance
by NHLS as they
had lapsed the previous day.
[35].
However, on that day, namely the 10
th
of October 2018, the
NHLS addressed a letter to all of the bidders (Ilex, Roche, Abbott
and Siemens) in which the NHLS acknowledged
that the validity period
of the RFB had expired. They therefore enquired from all of these
parties whether they would be willing
to hold their bids open and
valid in all respects for a further period of 120 calendar days.
[36].
It is common cause that the NHLS had a discretion to extend the bid
validity period should the
evaluation of the bid not be completed
within the stipulated validity period. However, Ilex is of the view
that this provision
in the RFB did not avail the NHLS after the
expiration of the bid period – the right to extend the validity
period of the
bid as provided for in the RFB, so Ilex contends, has
no independent life of its own and lapsed with the rest of the RFB on
the
9
th
of October 2018.
[37].
All the same Ilex and the other bidders (Abbott, Roche and Siemens)
all agreed in writing to
the NHLS’s request for an extension of
the bid validity period.
[38].
As I have indicated, Ilex contends that this purported extension of
the bid validity period
is of no moment as the RFB in its entirety
had lapsed. In addition, so Ilex submits, its consent to the
extension of the bid was
procured by the NHLS on the basis of a
material non-disclosure, that being that it was not communicated to
Ilex that the NHLS's
PEC had by then already disqualified it from the
bidding process.
[39].
I am inclined to agree with these submissions by Ilex. If regard is
had to the applicable principles
relating to public tenders and the
requirement that there should be transparency, the bids had expired
on the 9
th
of October 2018. To continue with the processes
after that date amounted to a reviewable irregularity and on that
basis alone Ilex
should be granted the relief prayed for in this
review application.
[40].
I do not accept NHLS’s view that after the lapsing of the
initial bids the NHLS solicited
new offers from the tenderers –
the solicitation of new offers in those terms would have been
contrary to the PFMA and the
Constitution. It flies in the face of
the philosophy underpinning public tenders as underwritten by the
constitution. Those offers
did not follow on a public procurement
process and were unlawful. The correct course of action would have
been for the NHLS to
publicly republish the RFB to solicit new
offers.
[41].
Once the validity period of the bid submissions had expired without
the NHLS having awarded
the bid, the tender process was complete and
the NHLS was no longer free to continue with that process or take any
decisions pursuant
to bids submitted in response to the RFB. The NHLS
was then compelled to re-advertise the bid.
[42].
As was held in
Telkom SA Ltd v Mend Trading (Pty) Ltd and Others
2011 JDR 0004 (GNP) at par [14]:
‘
[14]
As soon As soon as the validity period of the proposals had expired
without the applicant awarding
a tender, the tender process was
complete – albeit unsuccessfully – and the applicant was
no longer free to negotiate
with the respondents as if they were
simply attempting to enter into a contract. The process was no longer
transparent, equitable
or competitive. All the tenderers were
entitled to expect the applicant to apply its own procedure and
either award or not award
a tender within the validity period of the
proposals. If it failed to award a tender within the validity period
of the proposals
it received it had to offer all interested parties a
further opportunity to tender. Negotiations with some tenderers to
extend
the period of validity lacked transparency and was not
equitable or competitive’.
[43].
This passage in
Telkom SA Ltd v Merid Trading (Pty) Ltd
was
referred to with approval by Plasket J in
Joubert Galpin Searle
Inc and Others v Road Accident Fund and Others
2014 (4) SA 148
(ECP), in which it was held that the
National Treasury's Supply
Chain Management: A Guide for Accounting Officers/Authorities
,
which provided a step-by-step guide for institutions such as the NHLS
to apply when engaged in procurement processes, made it
clear that an
'extension of bid validity, if justified in exceptional
circumstances, should be requested in writing from all bidders
before
the expiration date'. The reason for this provision, so Plasket J
held, was clear: by the time the tender validity period
had expired,
there was nothing to extend because the tender process was concluded.
[44].
I am in agreement with Plasket J for the reasons given by him. As a
result, it is my view that,
in this case, once the tender validity
period had expired on the 9
th
of October 2018, the tender
process had been completed, albeit unsuccessfully.
[45].
There is another leg to the expiration of the bid argument of Ilex
and that relates to the fact
that, according to Ilex, even during the
purported extended bid validity period, the NHLS did not accept the
bids. On the NHLS's
version, so Ilex contends, the bid validity
period was extended to the 11
th
February 2019. Roche, so
Ilex’s argument goes, rejected the NHLS's acceptance of their
bid on the 24
th
of January 2019 and only accepted same on
the 9
th
of March 2019, which, according to Ilex, fell
after the expiration of the extended validity period. Accordingly, so
Ilex argues,
Roche’s bid lapsed as it had not been accepted
within the validity period.
[46].
I am not persuaded by this argument. The point is that, in terms of
the RFB, all the appended
documentation, and the proposal in response
thereto read together, form the basis for a formal contract to be
negotiated and finalised
between NHLS and the entity to which the
NHLS awarded the bid. This then means that, in my view, when the NHLS
accepted Roche’s
bid on the 24
th
of January 2019,
legally a contract was concluded with the detail still to be
negotiated and finalised obviously within the parameters
and on the
basis of that agreement. That is what happened between NHLS and Roche
after the 24
th
of January 2019.
[47]. The
bidders had in any event also agreed that until formal contract
documents had been prepared and executed,
the Form of Tender,
together with a written acceptance from the NHLS would constitute a
binding agreement between them, governed
by the terms and conditions
set out in the Request for Bid.
[48]. I
therefore do not accept Ilex’s contention that by the 9
th
of March 2019, when the final contractual agreement was finalised
between the NHLS and Roche, NHLS had not accepted Roche’s
bid,
which, in turn, means that same lapsed before being accepted.
[49].
The same principle applies to Ilex’s submission that, as regard
Abbott, a written agreement
had not been concluded with Abbott until
July 2019, by which time their bid had already lapsed. There is no
merit in this contention
by Ilex and in the contention that ‘the
suspensive condition’ contained in the 24 January 2019 letter
from NHLS meant
that the bid was never accepted timeously, as the
condition had not been fulfilled by the time the validity period
expired.
[50].
I am nevertheless persuaded, as indicated above, that the bids by
Roche and Abbotts lapsed on
the 9
th
of October 2018 and
were thereafter no longer open for acceptance by the NHLS. On that
ground alone, the award of the tender to
these two companies stands
to be reviewed and set aside.
The second Ground of
Review – Ilex’s disqualification was unlawful
[51].
This complaint by Ilex is the mainstay of its review application. The
contention by Ilex is
that in disqualifying it on the basis of a
technicality which relates to the fact that on the price declaration
form the total
amount for the three years of the contract had not
been stated, the NHLS acted irrationally and unfairly.
[52].
The NHLS is required to comply with the PPPFA and the PPPFA
Regulations when evaluating and
adjudicating bid submissions, as well
as with the provisions of the RFB. Those provisions effectively
establish the ‘rules
of the game’, and non-compliance
with these rules would be unlawful.
[53].
Ilex contends that non-compliance with the provisions of the tender
document (the RFB) –
especially a pivotal provision such as
those relating to disqualification – carries with it the
inevitable result that bidders
are not treated fairly or equitably
and do not compete on an equal footing. Compliance with the RFB is
therefore essential for
preserving the integrity of the tender
process.
[54].
As was held at par [40] in
Allpay Consolidated Investment Holdings
(Pty) Ltd and Others v Chief Executive Officer, South African Social
Security Agency and
Others,
2014 (1) SA 604
(CC), ‘[compliance]
with the requirements for a valid tender process, issued in
accordance with the constitutional and legislative
procurement
framework, is thus legally required. These requirements are not
merely internal prescripts that [the tender adjudicating
body] may
disregard at whim. To hold otherwise would undermine the demands of
equal treatment, transparency and efficiency under
the Constitution’.
See also:
Premier, Free State and Others v Firechem Free State
(Pty) Ltd
2000 (4) SA 43
(SCA) at par 30 and
Steenkamp NO v
Provincial Tender Board, Eastern Cape
2007 (3) SA 12
(CC) at par
50.
[55].
In disqualifying it, so Ilex contends, the NHLS failed to comply with
the RFB's provisions on
disqualification and the PPPFA and PPPFA
Regulations requirement to evaluate (and not to disqualify) an
‘acceptable tender’.
[56].
Clause 10 of the RFB contained the provisions relating to the
disqualification of a bidder,
and provided
inter alia
that the
NHLS reserved the right to disqualify a bidder in the event that it
did ‘not comply with mandatory requirements
as stipulated in
the RFB’, and, in terms of Clause 10.8 a bidder could be
disqualified if it failed ‘to price according
to the costing
template’.
[57].
The ‘costing template’ appears as ‘Annex B:
Pricing’ to the RFB, titled
‘HIV Viral Load Price Bid
Form’, and incorporates a ‘Price Declaration Form’
The latter form, as completed
by Ilex, was in essence the basis on
which the bid by Ilex was disqualified, the allegation by the NHLS
being that Ilex gave an
amount for the provision of HIV Viral Load
Tests for one year only, when the form required that a price be
quoted for the full
period of the tender, being for a period of three
years. The RFB itself refers to the ‘HIV Viral Load Price Bid
Form’
as a ‘template’. The ‘HIV Viral Load
Price Bid Form’, which is the first page of the costing
template,
allowed bidders to provide twelve different prices.
Importantly, the bidders were required to provide a ‘total bid
price’
(excluding value added tax) respectively for 5 million,
2.5 million and 1.25 million tests per year. This portion of the
template
as populated by Ilex was acceptable to NHLS as being
compliant with the mandatory bid requirements. Ilex also complied
with other
mandatory and technical mandatory requirements as
evidenced by the evaluation report submitted by the BAC, which
incorporated the
CFET report, which provided that Ilex complied with
the technical mandatory requirements in the high and medium
throughput categories.
[58].
The major difficulty with Ilex’s bid, according to the NHLS,
was this: On the first page
of the pricing template, they quoted an
amount of R409 750 000 (excluding VAT) for 5 million
tests per year, which
translated into R81.95 per single viral load
test if 5 million tests were performed. So far, so good. Then
Ilex simply transferred
this total amount of R409 750 000
onto the next page, being the ‘Price Declaration Form’,
as representing
their offer ‘to provide the provision of the
total Viral Load Services Solutions to the NHLS nationally for a
period of three
years, as detailed in the RFB 017/18-19, for the
total tendered sum in words. The problem is that this form, according
to NHLS,
although it did not expressly say so in as many words,
contemplated the total amount quoted for the three period for the
provision
of 5 million test results per annum.
[59].
The question to be answered is whether this entitled the NHLS to
disqualify Ilex. One of the
primary disputes between Ilex and the
NHLS is whether Ilex was lawfully disqualified owing to the manner in
which it completed
the price requirements of its bid submission.
[60].
The NHLS is of the view that it was entitled to disqualify Ilex as it
had failed to comply with
the mandatory requirements, which provides
‘that it is mandatory to indicate your total bid price as
requested in the Price
Declaration Form’. The NHLS’s
stance is that, if a bidder failed to comply with this requirement
that the combined
price for the three year period (for 5 million
tests per annum) be inserted in the Price Declaration Form, it was
entitled to disqualify
that bidder.
[61].
Ilex contends that the proper interpretation of the RFB only allows
for a bidder to be disqualified
for failing to price in accordance
with the costing template and not with the ‘Price Declaration
Form’. Any other interpretation,
including that adopted by the
NHLS, results in an absurdity.
[62].
I am inclined to agree with these submissions on behalf of Ilex. The
text of the RFB does not
support the NHLS’s approach. In fact
the introductory portions of ‘Annex B’ suggest the
opposite: ‘bidders
will be disqualified should they not price
according to the costing template’. The introductory wording in
‘Annex B'
reads that ‘it is mandatory to indicate your
total bid price in the Price Declaration Form’. This provision
is reasonably
susceptible to the interpretation given by Ilex.
[63].
It is true that Ilex understood that a bidder, in completing the
price declaration form, was
required to quote total prices per annum
for HIV Viral Load tests at the specified volume levels. And that is
what they did –
they quoted R409 750 000 per annum
for 5 million tests, R204 875 000 per annum for 2.5 million
tests and R104 937 500
for R1.25 million tests per annum.
In that regard, it is probable that Ilex was influenced by the
nota
bene
at the start of the pricing documentation, which reads as
follows:
‘
It
is mandatory to indicate your bid price as requested in the Price
Declaration Form. This price must be the same as the total
bid price
you submit in your pricing schedule.’
[64].
In this regard, it appears that Ilex might have subjectively misread
what was stated. Even if
one disregards Ilex’s possible
subjective misreading, I am of the view that objectively the
intention on the part of Ilex
was to tender to render the services
for a ‘total bid price’, as NHLS understood this to mean,
of R1 229 250 000,
which translates into R81.95 per
single test result.
[65].
In my judgment, the way in which the pricing documentation was
formulated and the wording thereof,
created vagueness and uncertainty
about what exactly was required by NHLS as the ‘total tendered
contract sum’. This
has a direct bearing on the objective
clarity of the evaluation criteria and thus, the fairness of the
process. The question is
whether it was clear to bidders that the
amount required in the ‘Price Declaration Form’ was to be
based 5 million
test per annum for period of three years. I have no
doubt that there was confusion over this question which arose as a
result of
the wording of the RFB. It can hardly be maintained that
Ilex’s confusion was wholly subjective and self-induced.
[66].
Vagueness and uncertainty are grounds for review under section
6(2)(i) of PAJA.
[67].
As was said in
AllPay
(supra), ‘[t]he purpose of a
tender is not to reward bidders who are clever enough to decipher
unclear directions. It is
to elicit the best solution through a
process that is fair, equitable, transparent, cost-effective and
competitive’. Because
of the uncertainty caused by the wording
of the RFB, which led to the disqualification of Ilex, that purpose
was not achieved in
this case.
[68].
For this reason the decision to award the tender to Roche and Abbott
is constitutionally invalid.
[69].
Moreover, The PPPFA and the PPPFA Regulations, properly interpreted,
supports a conclusion that
the NHLS was not entitled to disqualify
Ilex on the basis that it failed to furnish a combined three year
price for 5 million tests
in the Price Declaration Form. The PPPFA
stipulates that an ‘acceptable tender’ is ‘any
tender which, in all
respects, complies with the specifications and
conditions of tender as contained in the tender document’. Only
acceptable
tenders are to be evaluated in accordance with the PPPFA
Regulations. By all accounts Ilex’s tender was an acceptable
tender.
[70].
It is common cause that Ilex satisfied the minimum functionality
requirement (scoring well over
75%) in relation to both the medium
and high throughput categories. Accordingly, the NHLS was required to
treat Ilex's bid as an
acceptable tender and evaluate its bid in
accordance with the PPPFA Regulations, which provide that '[e]ach
tender that obtained
the minimum qualifying score for functionality
must be evaluated further in terms of price and the preference point
system’.
I therefore agree that the NHLS was required to
further evaluate Ilex in terms of the price and preference point
scoring provisions
of the PPPFA Regulations.
[71].
Moreover, the RFB expressly required that a total bid price be
inserted in the costing template
at three different volumes, 1.25
million, 2.5 million and 5 million. The RFB stipulates that the price
offered in the Price Declaration
Form, which the NHLS seems to regard
as the official and definitive document relating to the price quoted,
must be the same as
the total bid price submitted in the ‘pricing
schedule’, which the NHLS interprets to be the Price Bid Form,
which
makes provision in total for twelve prices to be quoted at
three different levels of volumes, as indicated above.
[72].
It should be borne in mind that the RFB, in relation to the bid
price, provided that ‘bidders
who fail to price according to
the costing template provided’ will be disqualified. The
pricing form itself provides that
it is mandatory for a bidder to
indicate its ‘total bid price’ in the ‘Price
Declaration Form’. Also, ‘this
price must be the same as
the total bid price as the total bid price you submit in your pricing
schedule. Should the total bid
prices differ, the one indicated in
the Price Declaration Form shall be considered the correct price’.
[73].
Ex facie
Ilex did exactly what the RFB required it to do. In
the Price Bid Form it quoted
inter alia
a total amount of
R409 750 000 (excluding VAT) for 5 million test
results per annum. In the ‘Price Declaration
Form’ Ilex
simply repeated what it had stated in the Price Bid Form –
therefore, the way I see it, the price in the
price declaration form
was the same as per the pricing schedule. NHLS disagrees. It is of
the view that the price in the price
declaration form should have
been for the whole three period of the bid. Ilex failed to comply, so
the NHLS argues, and therefore,
they were rightly disqualified.
[74].
Ilex contends that it expressed its price in the Price Declaration
Form as a firm price per
annum for the duration of the three year
contract as envisaged in the RFB, as confirmed specifically in the
price declaration form,
which prefaced the quoted amounts with the
following undertaking:
‘
Having
read through and examined the Tender Document, RFB No: 017/18-19
General Conditions, The Requirement and all other Annexures
to the
Tender Document, we offer to provide the Provision of a total HIV
Viral Load Services Solution to the NHLS nationally for
a period of
Three (3) years, as detailed in the RFB 017/18-19, for the total
Tendered Contract Sum of in words:’
[75].
I do not think the RFB is to be construed only as requiring a bidder
to state in the ‘Price
Declaration Form’ total sum which
represents its amount tendered for conducting 5 000 000
Viral Load Tests per
annum for a period of three years. The document
itself certainly does not expressly state thus – far from it.
In fact, if
one reads the ‘Annex B: Pricing’, consisting
of the Price Bid Form and the Price Declaration Form, it has to be
said
that the way in which Ilex completed the pricing template
complies exactly with the requirements. Commercial documents must be
construed in a businesslike manner and that would be a businesslike
construction.
[76].
What is clear as day is that Ilex’s offer was for a period of
three years at R409 750
000 per year if
they were required to do 5 000 000 test in a year
.
There cannot possibly be any other interpretation to be attached to
their price declaration. The only question is whether this
difference
in interpretation entitled the NHLS to disqualify Ilex from the bid.
In other words, should the NHLS have done, as suggested
by Ilex, and
simply multiply by three the maximum amount stated, to get the actual
sum, which they intended to quote.
[77].
I am inclined to agree with the contention on behalf of Ilex. There
was no legal basis on which
to disqualify them.
[78].
Similarly, the other grounds on which the NHLS disqualified Ilex was
devoid of any merit. The
original Costing Template was manually
amended only by means of the insertion of commas at the appropriate
places to indicate for
example the cents part of the unit prices. How
could that possibly be a ground for the disqualification of a bid
especially if
regard is had to the fact that the total prices
correlated with the unit prices. Ilex’s very reasonable
explanation for the
manuscript insertion was that the word format of
the Costing Template provided by the NHLS did not allow for the
insertion of commas.
The Price Declaration Form submitted by Ilex
contained no manual amendments.
[79].
In the circumstances I find myself in agreement that Ilex's
disqualification was arbitrary,
irrational and unlawful. The NHLS's
disqualification of Ilex therefore fails to comply with the RFB, the
PPPFA and the PPPFA Regulations.
[80].
The decision is accordingly tainted by this failure and is an
unlawful exercise of public power
contrary to the principle of
legality embodied in section 1(c) of the Constitution; and an
unlawful administrative decision which
is subject to review in terms
of sections 6(2)(d), 6(2)(e)(iii), 6(2)(f)(i), 6(2)(f)(ii) and
6(2)(i) of PAJA.
[81].
In the light of these findings, it is not necessary, in my view, to
consider the other grounds
raised by Ilex. Suffice it to say that it
appears that Ilex could have succeeded on one or more of the other
grounds.
[82].
In all of the circumstances and for the reasons mentioned above the
NHLS’s decision to
award the tender to Roche and Abbott is
constitutionally invalid.
The
Remedy
[83].
The difficulty faced by a court when a contract should be set aside
as being constitutionally
invalid, as in this matter, was expressed
by the SCA in
Millenium Waste Management (Pty) Ltd v Chairperson
of the Tender Board: Limpopo Province
2008 (2) SA 481
(SCA) and
later in
Moseme Road Construction CC v King Civil Engineering
Contractors (Pty) Ltd
2010 (4) SA 359
(SCA). What was said in the
former case bears repeating:
‘
The
difficulty that is presented by invalid administrative acts, as
pointed out by this court in
Oudekraal
Estates
, is that they
often have been acted upon by the time they are brought under review.
That difficulty is particularly acute when
a decision is taken to
accept a tender. A decision to accept a tender is almost always acted
upon immediately by the conclusion
of a contract with the tenderer,
and that is often immediately followed by further contracts concluded
by the tenderer in executing
the contract. To set aside the decision
to accept the tender, with the effect that the contract is rendered
void from the outset,
can have catastrophic consequences for an
innocent tenderer, and adverse consequences for the public at large
in whose interests
the administrative body or official purported to
act. Those interests must be carefully weighed against those of the
disappointed
tenderer if an order is to be made that is just and
equitable.’
[84].
There can be no doubt that immense disruption would be caused, with
dire consequences to millions
of South Africans living with aids, if
the contracts concluded by the NHLS with Roche and Abbott were to be
summarily set aside.
It is unthinkable that that should occur.
[85].
Such an order was sought by Ilex in its amended notice of motion. In
essence Ilex asked for
an order setting aside these contracts
concluded between NHLS and Roche and between NHLS and Abbott. In the
alternative, Ilex asked
that the contract between NHLS and Roche be
set aside and re-allocated to it. In his Heads of Argument and during
the oral hearing
of the application Mr Mundell proposed an order
which would have the effect of suspending the order setting aside the
contracts
pending a new tender process to be directed by the court.
[86].
NHLS’s stance is that, even if reviewable irregularities are
found to exist, the award
should not be set aside because, so NHLS
contends, a re-tender would compromise one of the key principles of a
public tender, namely
competiveness. Abbott aligns itself with the
approach adopted by NHLS relative to the relief to be granted. The
public interest
should be the lodestar, so Abbott contends. In
addition, Abbott argues that its position as an innocent tenderer
should not be
overlooked. It would be severely prejudiced and suffer
irreparable harm should the award of the tender to it be set aside.
In its
answering affidavit Abbott sets out details of the financial
loss it would suffer if the award of the tender is set aside.
[87].
Simirlarly, Roche adopted the approach that, even if a declarator of
unlawfulness is made with
respect to the impugned decision, the
ensuing contracts should not be set aside. Only as a last resort, so
it was submitted on
behalf of Roche, should the award of the tender
be set aside, in which event the NHLS should simply to be afforded
the opportunity
(as the functionary with the technical expertise) to
deal with a new tender as it deems appropriate. Roche therefore
submits that
the Court should refer the matter back to the NHLS only
with directions that a new tender should be advertised.
[88].
This Court is constitutionally authorised, once it has found conduct
to be unlawful, to craft
an order that is appropriate to the
circumstances. Section 172(1)(b) of the Constitution provides that,
following upon a declaration
of constitutional invalidity, a Court
may make any order that is just and equitable, including an order
limiting the retrospective
effect of the declaration of invalidity;
and an order suspending the declaration of invalidity for any period
and on any conditions,
to allow the competent authority to correct
the defect.
[89].
The approach to section 172(1)(b) was dealt with in
AllPay
Consolidated Investments (Pty) Ltd v Chief Executive Officer: South
African Social Security Agency and Others
2014 (4) SA 179
(CC).
The Constitutional Court held that the emphasis on correction and
reversal of invalid administrative action is clearly grounded
in s
172(1)(b) and that the corrective principle operates at two levels.
First it must be applied to correct the wrongs that led
to
invalidity. Second it must prioritise the public good.
[90].
The following excerpt from
AllPay 2
adequately captures this
approach:
‘
[29]
In
Steenkamp
Moseneke DCJ stated:
“
It goes without saying
that every improper performance of an administrative function would
implicate the Constitution and entitle
the aggrieved party to
appropriate relief. In each case the remedy must fit the injury. The
remedy must be fair to those affected
by it and yet vindicate
effectively the right violated. It must be just and equitable in the
light of the facts, the implicated
constitutional principles, if any,
and the controlling law. It is nonetheless appropriate to note that
ordinarily a breach of administrative
justice attracts public-law
remedies and not private-law remedies. The purpose of a public-law
remedy is to pre-empt or correct
or reverse an improper
administrative function. . . . Ultimately the purpose of a public
remedy is to afford the prejudiced party
administrative justice, to
advance efficient and effective public administration compelled by
constitutional precepts and at a
broader level, to entrench the rule
of law.”
The
emphasis on correction and reversal of invalid administrative action
is clearly grounded in s 172(1)(b) of the Constitution,
where it is
stated that an order of suspension of a declaration of invalidity may
be made “to allow the competent authority
to correct the
defect”. Remedial correction is also a logical consequence
flowing from invalid and rescinded contracts and
enrichment law
generally.
[30]
Logic, general legal principle, the Constitution and the binding
authority of this court all point to a default position that
requires
the consequences of invalidity to be corrected or reversed where they
can no longer be prevented. It is an approach that
accords with the
rule of law and principle of legality.’
[91].
In the present matter, the appropriate remedy would need to take
account of the national importance
of the service that is being
provided, the disruption that it would cause and importantly the
interests of the public. From the
point of view of the public
interest serious questions arise if the contracts are now terminated.
The service of the provision
of HIV Viral Load tests must be carried
out without interruption These are the identifiable interests that
need to be weighed up
when the Court decides on a remedy which is
‘just and equitable’, in addition to having regard to the
interest of the
innocent successful bidder and the financial effect
on the public purse in the event of the award being set aside. It
should also
be borne in mind that the unfairness
in casu
does
not lay in the process of inviting tenders. It lies only in the
disqualification of Ilex’s tender from the process of
evaluation.
[92].
As regards the interest of the public purse, the key question is
whether a re-tender or for
that matter the completion of the tender
process with Ilex as one of the qualifying bidders and the subsequent
award of the tender
to Ilex would cost the NHLS more than it is
currently paying for the service. Because the cost of ordering a
fresh tender or the
completion of the tender process, without the
unlawful disqualification of Ilex, is the normal consequence of an
unlawful tender
process, any expense considerations must be viewed in
the light of the benefits of a more competitive tender. This
underlies the
principle in section 217 of the Constitution that fair
public tendering leads to more cost-effective solutions.
[93].
Mr Roux, Counsel for the NHLS, submitted that, even if Ilex was not
disqualified, it would have
scored the least number of points
compared to Abbott and Roche, which, in turn, means that its tender
would in any event have been
unsuccessful. This conclusion is based
on the simple fact that Ilex’s quoted prices in South African
rands to provide the
service at any and all of the throughput volume
levels were consistently the highest prices quoted. This means, so
the argument
was concluded, that it is clear that there may be
significant financial benefits to not setting aside the contracts
despite the
fact that they were tainted by constitutional invalidity.
[94].
There appears to be merit in this argument. The point is that even
when the tender is redone
or the tender completed at the associated
costs, it is unlikely that that process would result in the state
entity receiving a
more cost-effective solution. It is therefore
probable that setting aside the award of the tender and the
subsequent contracts
would have no financial benefit to the public
purse.
[95].
In my judgment the circumstances of the present case as outlined
above, are such that it falls
within the category of those cases
where by reason of the effluxion of time and other considerations,
notably the fact that there
is a real possibility that if the defect
is remedied by the completion of the tender process the result would
be the same, an invalid
administrative act must be permitted to
stand. I am of the view that I should exercise my discretion in
favour of declining to
set aside the awards.
[96].
In sum, I intend to decline
to set aside the award of the tender to Abbott and Roche whilst at
the same time declaring the award
to be constitutionally invalid.
Costs
[97].
The general rule in matters of costs is that the
successful party should be given his costs, and this rule should not
be departed
from except where there are good grounds for doing so. In
this matter the respondents have by and large been successful and
that
is despite the order declaring the award of the tender invalid.
[98].
I can think of no reason to depart from that
general rule and it follows that an order for costs should be granted
against applicant
in favour of the respondents.
[99].
There is just one other aspect relating to costs
which I need to deal with and that relates to an interlocutory
application by NHLS
to set aside an affidavit by Ilex in Abbott’s
application for condonation. Shortly after the application was
lodged, Ilex
withdrew the said affidavit, which rendered the
application unnecessary. There cannot be any dispute that Ilex should
pay NHLS’s
costs of that application. There is however a
dispute in regard to Abbott’s costs in relation to that
application, Abbott
having filed an affidavit in support of the
NHLS’s application to set aside Ilex’s irregular step,
being the filing
of the opposing affidavit in the interlocutory
application. I am of the view that Ilex should pay the costs relative
to that application
of both the NHLS and Abbott, which was the
applicant in the interlocutory application.
Order
In the result, I make the following order:
(1)
The first respondent's decision taken on
the 29
th
of November 2018
to award bid number RFB
017/18-19, for the ‘Provision of a total HIV Viral Load
Services Solution to the National Health Laboratory
Services (‘NHLS’)
for a period of three years’, in the medium and high throughput
categories to the third and
fourth respondents (‘the
decision’), is reviewed and declared constitutionally invalid.
(2)
The applicant’s application to set
aside the decision and any contracts concluded
pursuant
thereto between the first respondent and the third and fourth
respondents for the provision of HIV blood sample testing
services to
the National Health Laboratory Services implementing the said
decision (‘the Contracts’) is refused with
costs.
(3)
The applicant shall pay the costs of the
first, second, third and fourth respondents of this review
application, including the costs
consequent upon the employment of
two Counsel (where so employed).
(4)
The applicant shall pay the costs of the
first, second and third respondents relating to the first and second
respondents’
application to set aside the applicant’s
opposing affidavit in the third respondent’s interlocutory
application.
L
R ADAMS
Judge of the High Court
Gauteng
Local Division, Johannesburg
HEARD ON:
17
th
and 18
th
June 2020
JUDGMENT DATE:
15
th
September 2020
FOR THE APPLICANT:
Adv A R G Mundell SC
INSTRUCTED BY:
Webber Wentzel Attorneys, Johannesburg
FOR THE FIRST AND SECOND RESPONDENTS:
Adv B Roux, together with Adv S Tshikila
INSTRUCTED BY:
Cliffe Dekker Hofmeyr, Johannesburg
FOR THE THIRD RESPONDENT:
Adv A Stein SC, together with Adv S Stuart
INSTRUCTED BY:
Bowman Gilfillan, Johannesburg
FOR THE FOURTH RESPONDENT:
Adv M Chohan, together with Adv A Govender
INSTRUCTED BY:
Werksmans Attorneys, Johannesburg
FOR THE FIFTH RESPONDENT
No appearance
INSTRUCTED BY
No appearance