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[2014] ZASCA 163
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Industrial Development Corporation of South Africa Limited v Trencon Construction (Pty) Limited and Another (642/2013) [2014] ZASCA 163; [2014] 4 All SA 561 (SCA) (1 October 2014)
THE SUPREME COURT
OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 642/2013
In
the matter between:
THE
INDUSTRIAL DEVELOPMENT
CORPORATION
OF SOUTH AFRICA LIMITED
Appellant
and
TRENCON
CONSTRUCTION (PTY) LIMITED
First Respondent
BASIL
READ (PTY) LIMITED
Second
Respondent
Neutral
citation:
IDC v Trencon
Construction
(642/13)[2014] ZASCA 163
(1 October 2014)
Coram:
LEWIS, MAYA, TSHIQI JJA and SCHOEMAN and FOURIE
AJJA
Heard:
4 September 2014
Delivered:
1 October 2014
Summary
:
Tender procedures – evaluation of tenders – decision not
to award tender to first respondent influenced by a material
error of
law – decision correctly reviewed and set aside – no
exceptional circumstances shown to warrant substitution
order in
terms of
s 8(1)(c)(ii)(aa)
of the
Promotion of Administrative Justice
Act 3 of 2000
.
ORDER
On
appeal from: North Gauteng High Court, Pretoria (Mothle J
sitting as court of first instance)
1 The appeal is
upheld to the limited extent set out below with each party to pay its
own costs.
2 Paragraph 1 of the
order of the court below is deleted and replaced with the following:
‘
The decision
of the first respondent to declare the tender submission of the
applicant non-responsive and to award the tender T27/07/12:
Tender
Enquiry for the Principal Building Contract for the IDC Head Office
External Upgrade Sandton, Johannesburg to the second
respondent is
reviewed and set aside. The matter is remitted to the IDC’s
Executive Management Committee for reconsideration
in terms of
s
8(1)(c)(i)
of the
Promotion of Administrative Justice Act 3 of 2000
.’
JUDGMENT
Maya
JA: (Lewis, Tshiqi JJA and Schoeman and Fourie AJJA concurring)
[1]
This is an appeal against the judgment of the North Gauteng High
Court, Pretoria (Mothle J). The high court reviewed and set
aside the
decision of the appellant (IDC) to award a tender for the external
upgrade of its head office in Sandton, Johannesburg
(the Works) to
the second respondent, Basil Read (Pty) Limited (Basil Read) and
substituted it with an order that the tender be
awarded to Trencon
Construction (Pty) Limited (Trencon). The appeal is with the leave of
the court below.
[2]
The background facts are common cause. On 18 May 2012 IDC invited
prospective building contractors to submit proposals (the
RFP) to
prequalify for the tender. The tender process would be conducted in
two phases. The first phase involved the request for
and screening of
the contractors’ profiles based on their technical ability,
management experience, personnel capabilities,
financial standing and
litigation history. Shortlisted contractors would be eligible to
participate in the second phase which concerned
the bidding itself.
In this leg, their tender submissions would be evaluated on the basis
of price and preferences in a staggered
process conducted at
different stages by IDC’s bid evaluation committee (the BEC),
procurement department, procurement committee
(the PC) and, finally,
IDC’s executive committee (Exco). These committees would be
assisted in this process by Snow Consultants
Incorporated (Snow), an
independent firm of experts engaged by IDC as its principal agent to
conduct the tender evaluation process.
[3]
The RFP provided various rules and conditions which, subject to IDC’s
Procurement Policy, would govern the process. Among
these were
clauses 2.6 which stated that IDC did not bind itself to accept any
of the applications submitted nor to continue with
the tender
process; 2.7 in terms of which applications received after the
stipulated closing date, ‘Monday 04 June 2012 at
12:00 noon’,
would not be evaluated or assessed; 2.9 which entitled IDC at its
sole discretion to disqualify any application
or applicant that
failed to conform to the RFP rules and conditions and the
instructions in the official invitation; and 2.15.2
in terms of which
IDC reserved the right to reject or accept any application and/or
cancel the RFP process and reject all applications.
[4]
Trencon
and other bidding contractors submitted their RFP timeously. Basil
Read submitted 14 minutes after closing time. IDC’s
procurement
manager and member of the PC considered that the Guidelines of IDC,
which allowed the acceptance of late bids received
on the closing
date if it was in IDC’s interest to do so, empowered it to
condone the transgression and accepted the late
RFP. Subsequently,
Snow recommended Trencon, Basil Read and five other contractors to
proceed to the second phase. On 12 July 2012
IDC issued a tender
invitation to the shortlisted contractors which fixed the site
handover date as 6 September 2012.
[5]
Trencon duly submitted its tender which offered a total price of
R133 508 788, the lowest of the bid prices. It
stated
that its price would ‘remain fixed and firm for the planned
duration of the contract provided the Works start as per
the date
indicated in the tender document’. Thereafter, the tenderers
were requested to advise on their conditions should
site handover
occur on 1 October 2012, which was a date later than that
contemplated in the conditions of tender. Trencon responded
that in
that case it would charge an additional monthly 0,6 per cent
escalation in the sum of R315 000 excluding VAT. Basil
Read on
the other hand indicated that its price would remain firm despite the
proposed change.
[6]
Trencon scored the highest points on price and BEE rating, which were
relevant considerations in the evaluation. The BEC recommended
its
revised bid subject to a number of conditions relating, inter alia,
to arithmetical errors allegedly made by Trencon in respect
of
certain items and the quantity surveyor’s interpretation of the
bill of quantities. During September 2012 a meeting of
the PC
considered the recommendation of the appointment of Trencon as the
preferred tenderer. Consequently, it recommended Trencon’s
appointment to Exco for approval subject to several conditions which
included a request for clarity on the total estimated price
and the
additional cost for site handover after 1 October 2012. One of the
issues raised in the recommendation was a view that
the additional
cost relating to the changed site handover date, which would now
possibly shift to 1 November 2012, constituted
a contravention of
‘IDC’s conditions of tender (tender validity period and
fixed price) … and thus potentially
posed an audit challenge
regarding compliance with internal processes’. The PC’s
view was that Trencon’s additional
charge had no basis as the
new site handover date fell within the tender validity period of 120
days prescribed in the tender document,
which would lapse only on 4
December 2012.
[7]
Prior to Exco’s meeting on 19 September 2012, a confidential
legal opinion was obtained on this issue and the PC’s
other
concerns. It was subsequently submitted to Exco together with the
PC’s recommendation in a comprehensive board pack.
The opinion
expressed a view that Trencon’s bid was not firm and fixed and
would likely attract a challenge by the other
bidders if accepted.
After its deliberations, Exco resolved that (a) the Trencon bid was
not fixed and valid for 120 days; (b)
after the closing date Trencon
amended its initial price which rendered the bid non-responsive
[1]
and invalid as it contravened the tender conditions. Exco then
declined to award the tender to Trencon and decided to appoint Basil
Read.
[8]
It is this decision that Trencon challenged in the court below. It
contended that Exco’s decision that its bid was invalid
was
influenced by a material error of law. This was so, it was argued,
because Exco misunderstood the provisions of the tender
documents in
relation to the adjustment of the contract price. According to
Trencon, the SCT and the JBCC Series 2000 Principal
Building
Agreement,
[2]
which
also applied to the tender, prohibited the adjustment of the bid
price as a result of costs in labour, plant and material
but allowed
price adjustment resulting from delays in site handover, which IDC
also conceded. All that Trencon did, it was contended,
was to
undertake to keep its price fixed for the duration of the contract
provided the work started on the date specified in the
tender
document. And there was no evidence in any event that it changed its
bid price at any time as it merely responded to a speculative
question about a possible shift of the site handover date.
[9]
Trencon further argued that Exco committed a material procedural
irregularity by considering Basil Read’s late RFP because
clause 19.3.2 of the Procurement Policy, which in its view superseded
the Procurement Procedure Guidelines relied upon, allows
condonation
only where no bid or acceptable bid has been received. It also
imputed bias to IDC officials and its lawyers which
the court below
correctly dismissed as baseless.
[10]
The court below found merit in these contentions. It held that the
decision to award the tender to Basil Read, which scored
lower points
than Trencon and was not recommended by the tender evaluators, had to
be reviewed and set aside
on
two separate and distinct grounds: Exco (a) committed an error of law
in declaring Trencon’s bid non-responsive and (b)
acted in a
manner that was procedurally unfair,
as
contemplated in s 6 of the Promotion of Administrative Justice Act 3
of 2000 (PAJA),
[3]
by
accepting, evaluating and assessing Basil Read’s late RFP at
the initial stage of the tender evaluation process.
Having
thus found, the court below refused to cancel the tender process and
order it to start afresh or remit the matter to IDC
for
reconsideration. In its view, IDC had shown no reason why the tender
should not be awarded to Trencon when the decision was
a foregone
conclusion considering the recommendations which favoured Trencon.
The court below concluded that it would be just and
equitable to
award the tender to Trencon itself as delaying the implementation of
the project would prejudice not only Trencon
but IDC and National
Treasury too in view of the substantial public funds involved.
[11]
On appeal before us, the issues concerned only the correctness of the
finding of the court below that Basil Read’s tender
should have
been disqualified and the substitution order. IDC did not challenge
the finding that
Exco committed an error of
law in declaring Trencon’s bid non-responsive. Instead it was
conceded on its behalf that Exco
could properly have awarded the
tender to Trencon and that its decision was therefore reviewable in
that regard.
It merely argued that
the court below erred in finding that Basil Read’s tender was
disqualified because the degree of its
submission’s lateness
was immaterial, caused no prejudice and ought to have been condoned.
It also contended that the court
below wrongly granted the remedy of
substitution on the facts of this case.
[12]
It is established that the starting point for an evaluation of the
proper approach to an assessment of the constitutional validity
of
outcomes under the state procurement process is s 217 of the
Constitution.
[4]
The section
requires an organ of state in the national, provincial or local
sphere, when contracting for goods or services, to
do so in
accordance with a system which is fair, equitable, transparent,
competitive and cost-effective.
[5]
The national legislation prescribing the framework within which
procurement policy must be implemented includes the Preferential
Procurement Policy Framework Act 5 of 2000 (the Procurement Act) and
the Preferential Procurement Regulations.
[6]
A decision to award a tender constitutes administrative action so the
provisions of PAJA, from which a cause of action for the
judicial
review of administrative action arises, apply to the process.
[7]
[13]
In line with these prescripts, IDC’s Procurement Policy states
among its objectives, in clause 5, the aim ‘to ensure
a fair,
equitable, transparent, competitive and cost-effective procurement
process … and to achieve value for money in all
procurement
activities’. Clause 3.6.1 expressly requires IDC to apply
the Procurement Act and its regulations.
[14]
It seems to me that IDC’s concession was proper. Section 2
(f)
of the Procurement Act provides that ‘a
contract must be awarded to the tenderer who scores the highest
points, unless objective
criteria … justify the award to
another tenderer.’ Clause F.3.11.3(d) of the SCT similarly
enjoins the ‘employer’,
IDC, to ‘recommend the
tenderer with the highest number of tender evaluation points for the
award of the contract, unless
there are compelling and justifiable
reasons not to do so.’ Trencon scored the most points in
respect of all the relevant
tender evaluation criteria both before
and after making adjustments for any delay that may have beset the
site handover as contemplated
in the Procurement Act. It was
recommended as the preferred tenderer above Basil Read at all the
stages of the rigorous evaluation
process. Although various concerns
were raised in connection with Trencon’s tender, the only
reason ultimately given by Exco
for the award of the tender to Basil
Read is the one disavowed by IDC itself; that Trencon’s ‘rates
and prices were
not fixed for the duration of the contract and its
tender offer was not valid for 120 days’.
[15]
As indicated above, Trencon declared at the outset that its price
would remain firm for the entire contract period if the works
started
on the scheduled date. This elicited no objection from IDC. Its
contention that a price adjustment resulting from a site
handover
delay, such as it proposed, was permissible was conceded. Apart from
this failed reason, there are no apparent objective
criteria or
compelling reasons justifying Exco’s decision that Trencon’s
bid was non-responsive and invalid. To my
mind, once it is accepted
that Exco erroneously excluded Trencon from the tender process and
that its decision therefore constitutes
a reviewable error, as was
conceded, it must follow that Exco could not have lawfully awarded
the tender to another bidder. Any
attempt to do so would, of
necessity, have resulted in another reviewable error. Whether or not
Basil Read’s late RFP was
responsive is wholly irrelevant and
cannot sustain the appeal.
[16]
But there remains the question concerning the correctness of the
substitution remedy granted by the court below in terms of
s 8 of
PAJA. The section provides a wide range of ‘just and equitable’
remedies following upon a declaration of unlawful
administrative
action in proceedings for judicial review in terms of s 6(1) of PAJA.
These remedies are meant ‘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.’
[8]
There are no hard and fast rules in determining a just and equitable
remedy. Depending on the circumstances of each case, the court
will
be guided by the ‘kind of challenge presented … the
interests involved and the extent or materiality of the breach
of the
… administrative right to just administrative action in each
particular case’
[9]
in
balancing the competing interests of the parties.
[17]
The power of a court provided in s 8(1)
(c)(
ii)(aa)
of PAJA to substitute or vary administrative action or to correct a
defect resulting from an administrative action is extraordinary.
It
is exercised sparingly, in exceptional circumstances. In
Gauteng
Gambling Board v Silverstar Development
this
court described ‘exceptional’ as follows:
[10]
‘
Since
the normal rule of common law is that an administrative organ on
which a power is conferred is the appropriate entity to exercise
that
power, a case is exceptional when, upon a proper consideration of all
the relevant facts, a court is persuaded that a decision
to exercise
a power should not be left to the designated functionary. How that
conclusion is to be reached is not statutorily ordained
and will
depend on established principles informed by the constitutional
imperative that administrative action must be lawful,
reasonable and
procedurally fair.’
[18]
With these principles in mind, it is clear that the court below erred
in substituting its own decision in the circumstances
of this case.
It overlooked the fact that IDC was not obliged to award the tender
to the lowest bidder or at all. The award of
the tender could not be
a foregone conclusion in the circumstances. Furthermore, the court
does not appear to have balanced the
substitution remedy against the
requirements of the separation of powers and failed to exercise
judicial deference.
[11]
As was
pointed out in
Gauteng
Gambling Board
:
[12]
An
administrative functionary that is vested by statute with the power
to consider and approve or reject an application is generally
best
equipped by the variety of its composition, by experience, and its
access to sources of relevant information and expertise
to make the
right decision. The court typically has none of these advantages and
is required to recognise its own limitations.
See
Minister
of Environmental Affairs and Tourism and Others v Phambili Fisheries
(Pty) Ltd; Minister of Environmental Affairs and Tourism
and Others v
Bato Star Fishing (Pty) Ltd
2003 (6) SA
407
(SCA) at paras [47]-[50]; and
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs and others
[2004] ZACC 15
;
2004 (4) SA 490
(CC) at paras [46]-[49]. That is
why remittal is almost always the prudent course.’
[19]
There is additional practical difficulty which would challenge the
implementation of the substitution order. Over two years
have elapsed
since the beginning of the tender process. The information upon which
the tenders were evaluated is obviously dated.
The order does not
accommodate unavoidable supervening circumstances such as price
increases that have to be taken into account.
[13]
[20]
No exceptional circumstances exist here to justify the order of
substitution. This is a proper case to refer back to the
administrator
for its reconsideration. In light of IDC’s
built-in discretion to forego the tender process should it so wish,
it does not
seem appropriate to impose any conditions for the
remittal. The appeal must accordingly succeed in this respect.
The parties
have each enjoyed success on appeal. Each party therefore
should pay its own cost.
[21]
In the result the following order is made:
1 The appeal is
upheld to the limited extent set out below with each party to pay its
own costs.
2 Paragraph 1 of the
order of the court below is deleted and replaced with the following:
‘
The
decision of the first respondent to declare the tender submission of
the applicant non-responsive and to award the tender T27/07/12:
Tender Enquiry for the Principal Building Contract for the IDC Head
Office External Upgrade Sandton, Johannesburg to the second
respondent is reviewed and set aside. The matter is remitted to the
IDC’s Executive Management Committee for reconsideration
in
terms of s 8(1)
(c)(
i)
of the
Promotion of Administrative Justice Act 3 of 2000
.’
__________________________
MML Maya
JUDGE OF APPEAL
APPEARANCES:
For
Appellant: GJ Marcus
SC (M Sikhakhane)
Instructed
by:
Edward
Nathan Sonnenbergs, Sandton
Webbers,
Bloemfontein
For
Respondent: A Nelson SC
Instructed
by:
Joubert
Galpin Searle, Port Elizabeth
Honey
& Partners Inc, Bloemfontein
[1]
Clause
F.3.8.2 of the Standard Conditions of Tender (SCT), in annexure “F”
of the CIDB Standard for Uniformity in
Construction Procurement in
Board Notice 12 of 2009,
Government
Gazette
No
31823 of 30 January 2009, defines a responsive tender as one ‘that
conforms to all terms, conditions and specifications
of the tender
documents without material deviation or qualification … which
… would … detrimentally affect
the scope, quality, or
performance of the works, services or supply identified in the Scope
of Work … significantly change
the Employer’s or
tenderer’s risks and responsibilities under the contract, or …
affect the competitive position
of other tenderers presenting
responsive tenders, if it were to be rectified.’
[2]
P
ublished
by the Joint Building Contracts Committee Inc.
[3]
Section
6(2)
(c)
and
(d)
of
PAJA respectively empower ‘a court or tribunal … to
judicially review an administrative action if the action was
procedurally unfair [or] the action was materially influenced by an
error of law’.
[4]
AllPay
Consolidated Investment Holdings (Pty) Ltd and others v Chief
Executive Officer of the South African Social Security Agency
and
others
(
Corruption
Watch and another as amici curiae
)
2014 (4) SA 179
(CC) para 32
;
Steenkamp NO v Provincial Tender Board, Eastern Cape
2007
(3) SA 121
(CC) para 33;
Millenium
Waste Management (Pty) v Chairperson, Tender Board: Limpopo Province
and others
2008
(2) SA 481
(SCA) para 4.
[5]
Subsection
(1).
[6]
Published
in
Government
Gazette
34350
of 8 June 2011, issued in terms of s 5 of the Procurement Act.
[7]
AllPay
fn
4 para 41;
Minister
of Health and another v New Clicks South Africa (Pty) Ltd
2006
(2) SA 311
(CC) paras 95-97;
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs and
others
[2004] ZACC 15
;
2004
(4) SA 490
(CC) paras 25-26.
[8]
Steenkamp
NO
fn
4 para 29; see also
Bengwenyama
Mineral (Pty)Ltd and others v Genorah Resources(Pty) Ltd and others
2011
(4) SA 113
(CC) paras 83-84.
[9]
Bengwenyama
para
85.
[10]
Gauteng
Gambling Board v Silverstar Development
2005
(4) SA 67
(SCA) paras 28-29.
[11]
Logbro
Properties CC v Bedderson NO and others
2003
(2) SA 460
para 21.
[12]
Ibid
para 29.
[13]
Logbro
paras
19-21.