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[2011] ZAGPPHC 99
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Steradian Consulting (Pty) Limited v Armaments Corporation of South Africa Limited and Others (51442/10) [2011] ZAGPPHC 99 (20 May 2011)
IN
THE NORTH GAUTENG HIGH COURT,
PRETORIA
(REPUBLIC OF SOUTH AFRICA)
CASE
NO: 51442/10
DATE:
20 May 2011
In
the matter between:
STERADIAN
CONSULTING (PTY)
LIMITED
...........................................................
APPLICANT
AND
ARMAMENTS
CORPORATION OF SOUTH
AFRICA
LIMITED
....................................................................................
FIRST RESPONDENT
ADOAIR
MAINTENANCE (PTY)
LIMITED
.........................................
SECOND
RESPONDENT
INTERJET
MAINTENANCE (PTY)
LIMITED
..........................................
THIRD
RESPONDENT
THE
MINISTER OF DEFENCE
(The
Honourable Me Lindiwe Sisulu
N.O)
...........................................
FOURTH
RESPONDENT
JUDGMENT
MABUSE
J:
(1)
This is an application, by the Applicant for certain relief. Because
of the disparity in what the Applicant seeks in the Notice
of Motion
and what it started as the purpose of the application in the Founding
Affidavit, I would quote verbatim the relief that
the Applicant seeks
in the Notice of Motion.
(2)
The Applicant is a company with limited liability duly registered
and incorporated in terms of the company laws of this country,
with
its registered address at 418 Vista Drive, Faerie Glen, Pretoria,
Gauteng. The First Respondent is a company with limited
liability
duly registered and incorporated in terms of the company laws of the
Republic of South Africa and established in terms
of the Armaments
Corporation of South Africa Act Limited No. 51 of 2003 as amended,
and with its main place of business situated
at 370 Nossob Street,
Erasmuskloof, Extension 4, Pretoria, Gauteng. The Second Respondent
is a company with limited liability duly
registered and incorporated
in terms of the company statutes of the Republic of South Africa and
having its business address at
Lanseria International Airport, Office
1, Mezzanine Level, Lanseria Terminal building, Lanseria. The Third
Respondent is a company
with limited liability duly registered in
terms of the company laws of the Republic of South Africa with is
principal place of
business at Hangar 6, Gate 5, Lanseria
International Airport, Lanseria. The Fourth Respondent is the
Honourable Minister of Defence
cited herein in her official capacity
as contemplated in terms of, among others Section 1 of the Defence
Act 44 of 1957, as amended,
with the address of service at c/o State
Attorney.
(3)
According to the Notice of Motion the Applicant seeks the following
order:
"1.
That the application be heard urgently and that the court dispense
with the forms and rules relating to service in terms
of the
provisions of Rule 6(12);
2.
That the decision of the First Respondent to award the tenders of the
aircraft maintenance under tender ELGS/2010/35, ELGS/2010/36
and
ELGS/2010/37 second and third respondents respectively, be reviewed
and set aside;
3.1
That a request for a proposal for the rendering of the aircraft
maintenance services under ELGS/2010/35, ELGS/2010/36 and
ELGS/2010/37
be cancelled;
3.2
That the first respondent be ordered to immediately inform all
tenderers of the cancellation;
3.3
That the contracts entered into as a result of the tender process be
declared invalid and void ab initio;
(4)
That the first respondent's procurement policy insofar as it is
contrary to and not in line with provisions of the
Preferential
Procurement Policy Framework Act 5 of 2000
be declared to be ultra
vires and set aside;
(5)
That the first respondent be ordered to pay the costs of the
application between attorney and own client;
(6)
A cost order will also be sort against the second, third and fourth
respondents, jointly and severally, only in the event of
opposition
to this application;
(7)
Further and/or alternative relief".
[4]
This application is opposed only by the first respondent, the fourth
respondent having filed a Notice to Abide. According to
the Founding
Affidavit, the second, third and fourth respondents have been cited
only in this application for their interest as
far as it concerns the
subject matter of the application.
(5)
According to paragraph 4 of the Founding Affidavit, the purpose of
this application is said to be the following:
"4.1
This is an application to review and set aside the decision of the
respondent not to accept Applicant's tender submitted
on 7 June 2010
for the provision of product support services for the South African
Airforce Falcon 50 and 900 aircrafts as well
as the South African
Airforce Bechcvalt Kingair, Aircraft as well as the South African
Airforce Cessna Caravan 205 aircraft;
4.2
Secondly an order will be sought in terms whereof the award of the
aforesaid contracts. The second and fourth respondents will
be
reviewed and set aside.
4.3
An order declaring that the first respondent's procurement policy is
ultra vires a
Preferential Procurement Policy Framework Act 5 of 2000
insofar as it allows for points in respect of functionality to be
added to that of price and insofar as price.
4.4
Appropriate cost other will be sought."
(6)
It is common cause between the parties that the issue of urgency has
fallen by the wayside. Accordingly the battle of the parties
is
whether or not the Applicant launched its tender papers at or before
11h00 and whether or not the First respondent's employees
removed the
tender boxes before 11h00. The respondent's counsel put these points
otherwise. According to it the issues that the
Court is called upon
to decide are firstly whether or not the applicant has any locus
standi in this matter, and secondly, whether
or not the points system
utilized by the first respondent in accordance with the first
respondent's procurement policies, is ultra
vires the Preferential
Procurement Policy Framework Act 5 of 2000. ("PPPFA")
(7)
During March 2010, the First Respondent issued three tenders as
follows:
(1)
the first one was for provisioning of a product support service for
the SA Airforce Beechcraft King Aircraft with reference
no.
ELGS2010/35
(2)
the second one was a tender for the provision of products support
services for the South African Airforce Cessna Caravan 208
Aircraft
with reference no. ELGS2010/36; and
(3)
The third one was for the provision of products support services for
the South African Airforce Falcon 50 and 900 aircraft under
reference
no. ELGS2010/37.
(8)
On 7 June 2010, Zodwa Dlamini, the Chief Executive Officer of the
Applicant, and in the company of her assistant, one Lindiwe
Mcube,
personally took the Applicant's tender documents to the Head Office
of the First Respondent where they had to be deposited
into tender
boxes specially designated for that purpose
(9)
On their arrival at the place or in the room where the tender boxes
were kept, they found that two gentlemen from the procurement
department had already removed the boxes. They received this
information from the security and did not themselves witness the two
gentlemen removing the tender boxes. They were informed by the
security at that point that the boxes were removed at 10h45 by the
said employees. Furthermore he informed them that one of the
employees who had removed the boxes was one Van Wyk to whom they had
an occasion to speak to. When spoken to the said Van Wyk refused to
accept the Applicant's tender documents. The deponent is adamant
that
she and her assistant were at the point where the boxes were kept
before 11h00.
(10)
On the same day the Applicant wrote a letter to the First Respondent
in which she complained about Van Wyk's refusal to accept
its tender
documents. The said letter reads as follows:
"UNFAIR
EXCLUSION FROM PARTICIPATING IN TENDER PROCESS DUE TO UNFORESEGERAL
AND WRONGL Y EFFECT CUT OFF TIME OF TENDER SUBMISSIONS.
It
is with regret that I should lodge a complaint of being unfairly
excluded from the participating in the tender process of the
following tender documents which I had arrived at the Armscor tender
box at exactly 11h00. The tenders referred to are: -ELGS/2010/35,
-ELGS/2010/36,-
ELGS/2010/37.
In
the tender KD 17 forms, it is stipulate that the tender submission
time on the stipulated date is up to 11h00 not before 11h00.
I
unfortunately found it grossly unfair to be excluded based on the
grounds that tenders can be submitted at any time of the due
date up
to 11h00. The procurement personnel namely Pieter Van Wyk et al were
already on their way out carrying tender documents
received without
waiting for the cut off time of 11h00. At that point I questioned the
Security officer receiving tenders about
the disregard of the tender
submission closing time of 11h00.
The
Security officer however referred me to Mr Pieter Van Wyk to talk to
him since he indicated that they the Procurement personnel
concerned
started collecting the tenders from the tender box as early as 10h45
today hence they were much earlier than usual in
their collection of
tenders from the tender box. I then enquired from Pieter Van Wyk
himself who unfortunately never wanted to
listen to anything I was
saying as I made it clear to him that it was unfair for him to
collect tenders and leave whilst the submission
closing time of 11h00
was still not over.
I
therefore request your urgent intervention in this matter since it is
legally unfair to exclude any participant based on a procedural
defect. Adjudication of tenders mentioned herein should therefore be
put on hold whilst addressing this concern in order to ensure
that
all participants are given a fair chance to without any deliberate
exclusion.
Your
urgent response will be appreciated.
Yours
faithfully
Zodwa
Dlamini
Chief
Executive Officer".
The
first respondent wrote back and in its reply to the aforementioned
letter by the Applicant, denied that the tender boxes were
removed
before 11h00.
(11)
During August 201 the deponent discovered, while perusing the first
respondent's website, that the three tenders had been awarded
to the
second and third respondents separately. The applicant contends that
the award of the tenders to the said Respondents will
prejudice other
tenderers, such as the applicant itself.
(12)
The first respondent procured on behalf of the National Defence Force
and in particular the South African Airforces, in terms
of the
provisions of the Armaments Corporation Act 51 of 2003. In so
procuring, the Firs Respondent must comply with the provisions
of
Section 217 of the Constitution of the Republic of South Africa Act
108 of 1996 ("the Constitution") which provides
as follows:
"(1)
When on organ of State in the national, provincial or local sphere of
government or any other institution identified in
national
legislation, contracts for goods, it must do so in accordance with a
system which is fair, eguitable, transparent, competitive
and cost
effective.
(2)
Subsection (1) does not prevent the organs of the State or
institutions referred to in that subsection from implementing a
procurement policy providing for:
(a)
Categories of the preference in the allocation of the contracts; and
(b)
The protection or advancement of persons, or categories of persons,
disadvantaged by unfair discrimination.
(3)
National legislation must prescribe a framework within which police
referred to in subsection (2) must be implemented".
(13)
Section 2 of the PPPA enjoins an organ of State to apply a points
system when awarding tenders. According to the said Act,
90 points
must be awarded to the acceptable tender with the lowest tender and
10 points for reaching those goals as set out in
Section 2(d) of the
said Act.
(14)
According to the Applicant, is it clear that the First Respondent's
policy is contrary to the provisions of the PPPA, in particular
where
it provides that points for price will be added to those scored for
functionality. Where the regulations issued in accordance
with the
provisions of the PPP provided for a system in which points for
functionality and points for price are to be added to
those for
(HDI), historically disadvantaged individuals, it is contrary to the
PPPA. This situation has, so contends the Applicant,
been found to be
ultra vires the provisions of the Procurement Act. Accordingly where
the First Respondent's policy is inconsistent
with the provisions of
the Act, it should, to that extent, be declared invalid and set
aside.
(15)
Accordingly the tenders awarded to the second and third respondents
should be set aside on the basis that, in considering and
awarding
them, the First Respondent used completely wrong bases. The principle
on which the tenders awarded were considered was
wrong. For that
reason the Applicant seeks that the tenders should be reviewed and
set aside.
(16)
As I indicated earlier only the First Respondent opposes the
application. In doing so it relies on the Affidavit of one William
Roberts, its legal advisor. On the applicant's complaint that the
points system used is ultra vires the PPPFA, First Respondent's
contends that the tenders involved provide for 40 points for price;
(pp) 40 points for functionality (pf) and 20 points for Broad
Based
Black Economic Empowerment (BBEE).
(17)
According to the said William Robert, the First Respondent is an
organ of State which is subject to the provisions of Promotion
of
Administrative Justice Act 3 of 2000 (PAJA) and the Public Finance
Management Act (PFMA). The PPPFA is applicable to the Department
of
Defence but not to the First Respondent. The First Respondent has not
been included in the institutions gazetted by the Fourth
Respondent.
The First Respondent is, according to First Respondent's affidavit, a
schedule 2 public entity in terms of the PFMA.
The provisions of the
PPPFA will only apply to institutions listed by the Fourth Respondent
in the government gazette. According
to the said William Roberts, the
application of the provisions of the PPPFA has not been extended to
the First Respondent.
(18)
Because of the nature of the defence industry and the nature of the
goods and services procured by the First Respondent for
the Fourth
Respondent, the functionality issue is of critical importance in the
evaluation of the tenders. That it is so, is spelt
out clearly in the
Request For Offers which precede the receipt of the tenders.
According to the First respondent, the value of
the tenders in
question range from R7 million to R9 million.
(19)
The points system of 90/100 is, according to the First Respondent,
not the only system applicable under the PPPPA. In terms
of the
provisions of Regulation 8(3) of the PPPFA, the total combined price
allowed for functionality and price in respect of tenders
whose
estimated value is above R500 000 should not exceed 90 points. In the
circumstances it is not necessary, according to regulation
8(3), that
the price alone should account for the 90 points. With regards to the
Applicant's complaint that the tenders were not
open in public, the
First Respondent contends that no such requirement exists that
tenders should be opened in public. According
to the First
Respondent, it used to be a requirement of the old Tender Board that
tenders should be opened in public. In this requirement
is not
applicable in respect of the First Respondent.
(20)
The First Respondent contends that it does not have a procurement
policy and furthermore that the procurement policy is contained
in
the Rules that apply to prospective contractors and practice for the
selection of contractual forces. The Procurement Policy
requires the
respective suppliers to register as Acquisition Suppliers with the
Department of Defence or as vendors with the First
Respondent. Where
the acquisition of defence related goods and services are
administered by the First Respondent, all the potential
local
suppliers should, in terms of clause 10.2 of the Procurement Policy,
apply for registration. The Procurement Policy outlines
the procedure
that all such potential local suppliers should follow in order to
register. The First Respondent bemoans the failure
of the Applicant
to allege that it has complied with the requirements for the supply
of goods and services to the Department of
Defence.
(21)
According to the Request for Offer, so contends the First Respondent,
the closing date for the submission of the tender was
indicated as
not later than 11h00 on 7 June 2010. According to the First
Respondent, the Applicant failed to submit its tender
by 11h00 on 7
June 2010. As a consequence of the late submission of the tender
documents, the Applicant was precluded from further
participation in
the tender process. It is on the basis of these two reasons that the
First Respondent has applied for the dismal
of the Applicant's
application.
(22)
The battlefield of the parties is twofold, firstly, it is whether or
not the Applicant has locus standi and, secondly, whether
the PPPFA
applies to the First Respondent. It was argued by counsel for the
Applicant that Applicant has jurisdiction in this matter
because it a
registered vendor and, in that capacity, can bring an application of
this nature to challenge the procurement policy
of the First
Respondent.
(23)
Relying on the provisions of Section 217(1) of the Constitution,
Counsel for the Applicant argued that it is imperative that
an organ
of State, as defined by section 239 of the Constitution, must procure
goods and services in a system that is fair, equitable,
competitive,
transparent and cost-effective. It is common cause between the
parties that the First Respondent is an organ of State
as defined by
Section 235 of the said Act. Section 217 of the Constitution states
as follows:
"When
an organ of State in the national, provincial or local sphere of
government, or any other institution identified in national
legislation, contracts for goods or services, it must do so in
accordance with a system which is fair, equitable, competitive,
transparent and cost effective".
According
to the Section 239 of the Constitution an organ of State defined as
meaning:
(a)
Any Department of State or administration national; provincial or
local sphere of government; or
(b)
Any other functionary or institution -
(i)
Exercising the power on performing a function in terms of the
Constitution or a provincial constitution; or
(ii)
Exercising a public power on performing the public function in terms
of any legislation, but does not include a Court or a
judicial
officer".
(24).
The crux of the Applicant's view point is that, because the PPPFA
applies to the Department of Defence, therefore it applies
also to
the First Respondent. The Applicant's view that the said PPPFA
applies to the Respondent is premised on the assumption
that the
First Respondent is regarded as an agent for the Department of
Defence.
(25)
The Applicant's complaint about the points system seems to be without
any merit. Clause 14 of the tender documents, which is
titled
"Awarding of Offers" states as follows:
"The
awarding of offers will be in terms of Armscor Document - PRAC -4011
"BEE" practice. The applicable points are:
Price
(Pp) 40 points
Functionality
(Pf) 40 points
Industrial
participation (Pi) 0 points
Broad
Based Economic 20 points
Empowerment
Total
100 points"
(26)
The Applicant was aware at all material times what the point system
was and never challenged it. It accepted the points system
when it
signed the tender documents. I agree fully with the agreement by the
First Respondent's Counsel that, by signing the tender
documents
containing the above mentioned points system, the Applicant clearly
associated itself with the conditions of the tender.
(27)
In order to succeed with its complaint that the First Respondent's
procurement policy is inconsistent with the provisions of
the PPPFA,
it must satisfy the Court that the First Respondent is one of the
organs of State to which the provisions of the PPPFA
have been made
applicable. The Applicant can do this by showing that the First
Respondent is, in terms of the provisions of the
said PPPFA, an organ
of State. It is not enough for the Applicant to state that the
Department of Defence is an organ of State
in terms of the provisions
of the PPPFA and to conclude, by analogy, that the First Respondent
is, for the purposes of the said
PPPFA, also an organ of State.
(28)
Section 2(1) of the PPPFA states that:
"2(1)
An organ of State must determine its Preferential Procurement Policy
and implement it within the following framework:
(a)
A preferent system must be followed
(b)
(i) For contacts with a rand value of above a prescribed amount a
maximum of 10 points may be allocated for a specific goals
as
contemplated in paragraph D (d), provided that the lowest applicable
tender scores 90 points for the price".
(29)
It is quite clear that the provisions set out in section 2(1) of the
PPPFA apply to an organ of State as defined by section
1 of the said
Act and not because, as was argued by Counsel for the Applicant, the
provisions of Public Finance Management Act
are applicable to it nor
because, as was further argued by Counsel for the Applicant, the
provisions of the said PPPFA are applicable
to the Department of
Defence.
(30)The
crucial question as to whether or not the First Respondent is an
organ of State can best be solved by a quick reference
to the
definition to an "organ of State "as contained in section 1
of the PPPFA. The said section defines an organ of
State as follows:
"Any
other institution or category of institutions included in the
definition of organ of State in Section 239 of the Constitution
and
recognised by the Minister in the Government Gazette as an
institution or category of institutions to which this Act applies".
(31)
It was never the Applicant's case nor was it even argued by its
Counsel, that the First Respondent was recognised as an organ
of
State by the Minister in the Government Gazette. The Applicant's case
has always been that, because certain Acts apply to the
Department of
Defence and that because the First Respondent may be required to
procure for or on behalf of the Department of Defence,
therefore the
provisions of the PPPFA also apply to the First Respondent.
(32)
The Applicant has failed to satisfy the Court that the provisions of
the PPFA are applicable to the First Respondent. Its application
must
therefore fail on this point.
(33)
I now wish to turn to the question whether or not, as the First
Respondent's counsel argued, the Applicant has any locus standi
or as
the First Respondent put it, the Applicant's tender documents were
submitted in or on time. This point, according to the
First
Respondent, stands as a bulwark or a point In limine in the way of
the Applicant. It was argued by counsel for the First
Respondent that
should the Court find that the Applicant did not submit its tender
documents at 11h00 or before on 7 June 2010,
in that event the Court
should find that the Applicant does not have the right to challenge
the First Respondent's points system.
(34)
During argument counsel for the Applicant denied that the Applicant
only challenged the point system as a consequence of sour
grapes
simply because it was late in lodging its tender documents with the
First Respondent. He argued that the Applicant is a
vendor and on
that basis had a right, and therefore a locus standi, to challenge
the First Respondent's point system. In my view
that question is
whether ordinarily the Applicant would have any locus standi, if its
chose to challenge the First Respondent's
points system under a
different circumstance than the current one. If the answer to the
question is yes, then it would have a locus
standi under the current
conditions to challenge the point system. I find that the Applicant
has locus standi whether or not its
papers were lodged in or on time
is another issue which I will deal with hereunder.
(35)
It is common cause that the closing time and date for the submission
of the tender documents were llh00 on 7 June 2010. Accordingly
the
tender document had to be submitted at llh00 before. Failure to
comply with the date and the time set was fatal and would have
resulted in the rejection of the tender documents with the
concomitant exclusion of the Applicant from the tender process. In
her Affidavit,
Zodwa Dlamini, states that:
"My
watch as well as that of my assistant an affidavit of whom are
attached hereto as Annexure A4, were clear that we timeously
arrived
at the facilities of ARMSCOR to submit the relevant documentation''.
I
have two difficulties with this statement. The first difficulty I
have with the statement is that, notwithstanding full knowledge
by
the deponent that time is of essence and, notwithstanding furthermore
that both Zodwa and her assistant had their watches, they
failed to
indicate their precise time of arrival at the facilities of Armscor.
Secondly they have failed to indicate with precision
where at the
facilities of Armscor they arrived timeously. Failure to be precise
on these two points leaves doubt in the mind of
the Court whether or
not her evidence is reliable.
(36)
In the letter that she wrote on 7 June 2010, Zodwa created an
impression that she arrived at the tender boxes at exactly 11h00.
It
is not clear why she did not just deposit the tender documents in the
tender boxes if she was there even before the boxes were
emptied. She
made no attempt seemingly for nowhere does she state that she was
stopped by the procurement personnel from either
depositing her
tender documents into the tender documents. It is clear from the
papers that some of the tender documents were bulky
and for that
reason could not be deposited into the tender boxes. As a consequence
tenders chose to place their tender documents
next to the tender
boxes. In the circumstances removing such tender documents was proper
as they had been duly received. Zodwa
does not even state in her
affidavit that when she tried to place her tender documents where
other people had placed their bulky
tenders she was stopped. What she
has stated in her letter differs in many material respects from what
she stated in her affidavit
with the result that her version of
events is not reliable. In the absence of any reliable evidence from
the Applicant, I can only
make a ruling on the basis of the First
Respondent's evidence as I found it to be reliable.
(37)
In the end I find that the Applicant has failed to satisfy the court
that its tender documents were not brought after 11h00
on 7 June
2010. The application also fails on this point too and ought to be
dismissed with costs and that is the order of this
Court.
MABUSE
J
APPEARANCES
Applicant's
Attorneys: Hugo Ngwenya
Applicant's
Counsel: Adv. Snyman M.
First
Respondent's Attorneys: Gildenhuys, Lessing Malatji
First
Respondent's Counsel: Adv. Heyns G F