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[2010] ZAGPPHC 144
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Azola Recruitment Solutions CC v National Energy Regulator of South Africa and Another (42023/09) [2010] ZAGPPHC 144 (8 October 2010)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
/ES
(
NORTH
GAUTENG HIGH COURT. PRETORIA
)
CASE
NO: 42023/09
DATE:
08/10/2010
IN
THE MATTER BETWEEN
AZOLA
RECRUITMENT SOLUTIONS CC
........................................
APPLICANT
AND
THE
NATIONAL ENERGY REGULATOR
OF
SOUTH
AFRICA
.............................................................................
1
st
RESPONDENT
DELOITTE
CONSULTING (PTY)
LTD
................................................
2
nd
RESPONDENT
JUDGMENT
KOLLAPEN.
AJ
Introduction
[1]
Section 217(1) of the Constitution of the Republic of South
Africa requires that when an organ of state contracts for the
provision of goods or services it must do
so
in accordance with a system which is fair, equitable, transparent,
competitive and cost effective. Those constitutional provisions
are
also mirrored in the provisions of the
Public Finance Management Act
no 1 of 1999
, which is of application to the powers and functions of
the first respondent.
The
factual background
[2]
The applicant in this matter responded to a call put out by the
second respondent acting as agent of the first respondent calling
for
bids in respect of a tender for the appointment of a service provider
to conduct recruitment and selection processes for the
first
respondent. The process that was to be followed was set out in a
document called "requests for bids - general services"
and
it was contemplated that awards would be made by a Bid Adjudication
Committee appointed by the first respondent. It was further
contemplated that any such award made by the Bid Adjudication
Committee would be a final award. The closing date for submissions
in
response to the tender was 4 March 2009 at 11:00. The request for bid
document provided expressly in clause 5 thereof that late
bids would
not be considered and that a late bid would be considered to be any
bid that arrived even one second after 11:00. The
procedure for late
bids would be that the bid would be returned unopened to the bidder.
[3]
The applicant in response to the request for bids submitted a
response which was submitted at approximately 11:15 on 4 March
2009
(fifteen minutes late). Due to an administrative error the
applicant's late bid was not returned unopened as provided for
in the
rules relating to the bid but was evaluated with all the other bids
that had been received on 4 March 2009. The applicant's
bid scored
the highest of all the bids that were considered and the Bid
Adjudication Committee approved the award of the tender
to the
applicant.
[4]
This award was made on 21 May 2009 whereafter the applicant was
advised in writing of a successful bid and discussions ensued
between
the applicant and the second respondent acting as agent for the first
respondent to take the matter forward with a view
to entering into a
contract as contemplated in the request for bids document.
[5]
It appears that some time thereafter in particular on 1 June 2009 the
second respondent discovered the error made in considering
the late
bid of the applicant and advised the first respondent of this error
coupled with a recommendation that the contract be
cancelled and they
then proceed to make the correct award. On 5 June 2009 the applicant
was advised that a decision had been taken
to withdraw the award of
the tender to itself and that the first respondent would not be
concluding a contract with the applicant.
Legal
issues
[6]
The applicant seeks to challenge the decision taken by the first
respondent to revoke the award of the tender to itself. In
support of
such challenge the applicant contends that:
(a)
having taken a final decision to award the tender to the applicant
the first respondent was
functus
officio
and
was not entitled to revoke its decision;
(b)
even if there was a basis on which to revoke the award of the tender
to the applicant the applicant contends that any such decision
had to
be taken by the Bid Adjudication Committee and not by any other
person;
(c)
that even if the respondent was entitled to revoke the award the
decision still falls to be reviewed and set aside for the following
reasons:
(i)
the decision-maker failed to appreciate that they had a discretion to
condone the late submission of the applicant's bid;
(ii)
the decision-maker failed to exercise such discretion at all, let
alone in accordance with the principles set out in section
217(1) of
the Constitution;
(iii)
the decision-maker failed to give the applicant an opportunity to be
heard prior to deciding to revoke the award of the tender
to it.
Most
of the facts appear to be common cause between the parties and the
challenge brought by the applicant centres essentially around
firstly
the capacity and authority of the first respondent to revoke the
award. In this regard there is a dispute of fact with
regard to
whether the first respondent revoked the award or whether the first
respondent cancelled the procurement process in its
entirety which
cancellation carried the consequence that the award was revoked. It
appears from the papers that the decision to
revoke the award was
taken separately from the decision to cancel the procurement process.
In addition the dates of these respective
decisions - 5 June 2009 in
respect of the revocation of the award and 7 July 2009 in respect of
the cancellation of the procurement
process clearly indicates that
these decisions though related were separate decisions.
A.
Functus
officio
[8]
In terms of the request for bids document it was communicated that
the decision of the Bid Adjudication Committee would be a
final
decision. Indeed from the record of proceedings of the Bid
Adjudication Committee it was clear that all that was required
beyond
the decision of the committee was for the CEO of the first respondent
to act on the award made. It was argued that no provision
was made
for the CEO to cancel or revoke the award that had been made and in
this regard this was used to support the contention
that the CEO
was
functus officio.
[9]
In
Pering
Mine (Pty) Ltd v The Director-General of Mineral and Energy Affairs
All
SA 2005(4) SA 641 (T) the court held that:
"It
is trite that where an administrative official has made a decision
that affects a private individual's interest, he is
functus
officio
and
unless the enabling statute expressly or by necessary implication
gives him the authority to do so he may not re-open the decision
which he has taken."
[10]
However, the request for bids document and the terms and
conditions incorporated therein cannot be viewed in isolation.
They
have to be understood
and
interpreted in the context of the enabling legislation that governs
the operations of the first respondent.
[11]
Now in this regard it is clear that the first respondent is an organ
of state and that the Public Finance Management Act no
1 of 1999
("PFMA") applies to the operations of the first respondent.
In terms of the PFMA the CEO of the first respondent
is the
accounting authority of the first respondent and in terms of section
51(l)(a)(iii) the accounting authority must ensure-
"An
appropriate procurement and provisioning system which is fair,
equitable, transparent, competitive and cost effective."
In this
regard the PFMA in terms of section 56(1) grants to such an
accounting authority the power to delegate functions or to
instruct
officials to perform duties assigned to the accounting authority. It
must be evident that the decision to establish a
Bid Adjudication
Committee and to entrust it with the authority to take final
decisions must be a power that was delegated by the
accounting
authority to the Bid Adjudication Committee. While ordinarily such a
decision of the Bid Adjudication Committee would
be a final decision
it is significant that the PFMA provides in terms of section 56(3)
that the accounting authority "may
confirm, vary or evoke any
decision taken by an official as a result of a delegation or
instruction in terms of subsection (1),
subject to any rights that
may have become vested as a consequence of the decision."
[12]
Such a provision is clearly understandable in the context of the
position of public entities and the ultimate responsibility
of both
accounting officers and CEO's of such entities.
It
would be inconceivable that a delegation of authority could take
place and that a CEO or accounting authority would be bound
to act in
terms of any decision taken as a result of such delegation which is
patently wrong or patently in violation of the law.
One must have
regard to the fact that public entities ultimately utilise public
resources and account in the public domain for
the exercise of their
powers and functions and under those circumstances it is clearly
understandable that the residual power to
revoke or vary or confirm a
decision taken fits into the broad architecture of the manner in
which public entities are structured
and in the manner in which they
are required to exercise their powers and functions. Of course such a
power, when exercised must
be exercised lawfully and for good reason.
Under
these circumstances I am not convinced that the CEO of the first
respondent was
functus
officio
at
the time when the first respondent revoked the award.
[13]
For the reasons already given such a power continued to vest in the
first respondent and the revocation of the award was consistent
with
the broad terms of
the
power of the first respondent set out more fully in the
Public
Finance Management Act.
From
that it must also follow that the revocation which occurred in this
instance need not have been effected by the Bid Adjudication
Committee. The CEO had the express authority to effect such
revocation and under those circumstances the argument that the first
respondent was
functus
officio
when
it revoked the award on 5 June 2009 is not sustainable.
B.
The
discretion to condone late submissions
[14]
In this instance and save for the bid being submitted late it is
common cause that the applicant's tender was in terms of the
criteria
determined by the first respondent the most suitable bid. The issue
as to whether the late submission of the bid should
have resulted in
the disqualification of the bid even after it was adjudicated upon
has been raised by the respondent as a term
that bound the applicant
entitling the respondent to resile from the award made. While such
conditions with regard to the timeous
submission of bids are not
uncommon one must assume that their inclusion would be to advance
fairness and equity amongst those
who wish to tender for state
contracts. There is also a public interest consideration that cannot
be ignored, namely that bidders
should not be able to extract any
unfair advantage by submitting a bid out of time. In the formal sense
one must associate oneself
with the sentiments to the extent that
they seek to promote fairness and equity amongst competing parties.
On the other hand one
must guard against such conditions being
interpreted and imposed with rigidity.
[15]
It was argued on behalf of the first respondent that the conditions
relating to the submission of bids constituted contractual
terms and
once the applicant had elected to submit such a bid the applicant was
bound by the contractual terms, namely that no
late bids would be
considered and the respondent suggested that under those
circumstances the contractual terms should take precedence.
[16]
At the same time and in response to this it was pointed out that even
if the conditions contained in the bid document constituted
a
contract its provisions were subject to the principles of
administrative justice. In
Logbro
Properties CC v Bedderson NO & Others
2003
2 SA 460
the Supreme Court of Appeal held that notwithstanding that
some of those conditions that would be inserted in a request for bids
document were contractual in nature, they did not supersede the
principles of administrative justice which continued to govern
the
relationship between the parties and under those circumstances some
of the contractual rights and obligations would necessarily
yield
before the public duties and organ of state had under the
Constitution. These public duties were to ensure that it acted
lawfully, procedurally and fairly.
[17]
It is evident, therefore, that the exclusive reliance by the first
respondent on the contractual terms of the bid without regard
being
had to the broader principles of
administrative
law cannot be sustainable and that a court is both entitled and
enjoined to consider those contractual provisions
against the broader
context of the principles of administrative justice.
[18]
The next question which must be determined is whether the contractual
requirement with regard to submitting the bid in time
is consistent
with the principles of fairness, equity and transparency. It was a
clear requirement that time was not only a formal
requirement but
also a substantial one which appears to go to the heart of the issue
of the fairness and transparency of the endearing
process. While I am
mindful that our courts have cautioned against placing undue reliance
on form as opposed to substance in this
regard see
Millennium
Waste Management
v
Chairperson
Tender Board
2008
2 SA 481
as well as
Minister
of Social Development
v
Phoenix
Cash & Carry Pietermaritzhurg
CC.
2007
3 All SA 115
(SCA) where the courts cautioned against an
over-reliance on form as opposed to substance indeed where the court
alluded to the
possibility of permitting condonation for
non-compliance with peremptory requirements in certain circumscribed
instances.
[19]
At the same time when a public body such as the first respondent puts
out a call for tenders and stipulates a cut-off time
and the
consequences of any late submissions, it represents to the world at
large that it will act on the process it has publicised
and there
must be a compelling argument that acting on and enforcing those
substantial requirements is consistent with fairness
and transparency
and may well indeed be demanded by the requirements of fairness and
transparency.
[20]
I am accordingly of the view that the cut-off time that was
advertised was simply not a technical requirement. It was central
in
ensuring fair competition by requiring all potential bidders to
submit their bids by a specified time. In this regard it also
warrants mention that the fairness is not only to those who were
being considered for awards but to the public at large were entitled
to act upon the request for bids and to assume that the first
respondent will comply with the requirements set out in the request
for bid documents with regard to the time for submissions as well as
the consequences for late submission.
[21]
It was hardly suggested that the cut-off time was arbitrary or that
its operation resulted in any unfairness or prejudice to
the
applicant or any other potential bidder.
[22]
Under those circumstances it certainly appears to me that the
contractual requirement of a specified cut-off time was consistent
with the requirements of fairness and equity required in terms of the
principles of administrative justice.
[23]
I now deal with the issue of the discretion that the decision-maker
may have had and the manner in which such discretion may
have been
exercised.
[24]
It appears from the papers that once the first respondent had
discovered the error in considering the late bid of the applicant
the
first and second respondent took various measures and these included
consulting with National Treasury whose advice was that
the first
respondent not proceed with the contract on account of the
irregularity. The first respondent was also advised by the
second
respondent that proceeding with the contract in the light of the now
discovered irregularity would possibly constitute irregular
expenditure.
[25]
It is accordingly clear that the first respondent applied its mind to
the options open to it including the option of condonation
and the
consequences of such options. It was probably correct in concluding
that it was bound to ensure compliance with the terms
of the tender
including the time-limits for the submission of bids and that its
scope for condonation was limited if it existed
at all.
[26]
The first respondent then convened a meeting with the applicant for 5
June 2009 to put forward its position and at such meeting
provided
proof to the applicant of the late submission of the bid by the
applicant. The applicant was not able to refute the evidence
provided
relevant to the late submission of the bid. There were further
discussions in this meeting with regard to why the bid
was considered
if indeed it was late.
[27]
The meeting of 5 June 2009 provided the space and the opportunity for
the applicant to be heard prior to the revocation of
the award and I
am of the view that the decision to revoke the award is accordingly
not reviewable on the ground that the applicant
had not been afforded
an opportunity to be heard prior to revocation of the tender to it.
[28]
It warrants mention that beyond deciding to revoke the award the
first respondent has also taken a decision to cancel the entire
procurement process and to start it
de
novo.
I
believe such an approach is consistent with the requirements of
fairness and transparency in that not only does it seek to correct
an
irregularity which appears cannot be corrected but creates the space
and the opportunity for all who are interested including
the
applicant to have a fresh opportunity to make submissions with regard
to the appointment of experts required by the first respondent.
[29]
In the circumstances I am satisfied that:
(a)
the first respondent was not
functus
officio
when
it revoked the tender to the applicant:
(b)
the first respondent did apply its mind to the option of condonation
of the late bid but for good reasons was not able to condone
the late
submission of the bid by the applicant;
(c)
the applicant was afforded the opportunity to be heard before the
award was revoked.
I
accordingly make the following order: The application is dismissed
with costs.
J
KOLLAPEN
ACTING
JUDGE OF THE NORTH GAUTENG HIGH COURT
HEARD
ON: 3 AUGUST 2010
FOR
THE APPELLANT: ADV H BARNES
INSTRUCTED
BY: BOWMAN GILFILLAN c/o SAVAGE JOOSTE & ADAMS INC FOR THE
RESPONDENTS: ADV M M RIP SC INSTRUCTED BY: DE SWART VOGEL
MYAMBO