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[2019] ZAECPEHC 32
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Aero-Duct Moya CC v Minister of Public Works and Another (936/2019) [2019] ZAECPEHC 32 (21 May 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH)
Case
No: 936/2019
Date
heard: 25 April 2019
Date
delivered: 21 May 2019
NOT
REPORTABLE
In
the matter between:
AERO-DUCT
MOYA
CC Applicant
And
MINISTER
OF PUBLIC WORKS First
Respondent
AIR-TEK
MANUFACTURING (PTY) LTD
Second Respondent
JUDGMENT
Goosen
J:
[1]
This is an application seeking interim relief pending the
finalisation
of a review application to set aside the award of a
tender. The applicant is the unsuccessful tenderer. The first
respondent abides
the decision of the court, whereas the second
respondent opposes the relief.
[2]
The application was commenced on truncated time periods. The second
respondent
was able to file an answering affidavit and, by the time
the matter came before this court, the question of the urgency with
which
the application was commenced was no longer an issue.
[3]
On 3 August
2018 the first respondent advertised a tender for the installation of
air-conditioning equipment at the provincial headquarters
of the
South African Police Services at Zwelitsha. The return date for
submission of tenders was 31 August 2018. The call for tenders
stipulated certain obligatory requirements. These included,
inter
alia
,
that tenders comply with pre-qualification criteria for preferential
procurement; be rated with a CIDB contractor rating designation
of
7ME or higher; be registered on the National Treasury Central
Supplier Database, and submit a valid original or certified copy
of
the B-BBEE status level verification. The tender document
stipulated that only bidders who obtained a B-BBEE status level
of
contributor 2 level would be considered. The tender would be
evaluated on the 80/20 model of evaluation in accordance with the
Preferential
Procurement Policy Framework Act
[1]
(hereinafter
Procurement
Act
).
[4]
It is common cause that the applicant and second respondent duly
submitted
tenders (along with 17 other bidders).
[5]
On 31 August 2018 the Bid Evaluation Committee (hereinafter the BEC)
of
the first respondent assessed the responsiveness of the bids i.e.
whether the bids submitted complied with the formal requirements
stipulated in the tender notice. It determined that the applicant’s
bid and that of another company (Geshom Construction)
was responsive.
It found that the second respondent’s tender bid was
“non-responsive”. This is common cause.
I shall return to
this and other matters pertaining to the bid evaluation and
adjudication process hereunder.
[6]
On 3 September 2018 the BEC conducted the functionality phase of the
evaluation
process. The BEC declined to evaluate the second
respondent’s bid on the basis that it was non-responsive. It
evaluated the
applicant’s functionality at 88%. Geshom
Construction was evaluated at 58%. It then decided to submit the two
bids (i.e.
the applicant’s and Geshom’s) for risk
assessment to the project manager.
[7]
On 17 September 2018 the BEC convened and resolved to re-score Geshom
for functionality. This it did on 20 September 2018 finding that it
only scored 46%, below the 50% threshold requirement. The risk
assessment of the applicant was conducted by Nako Triocon
(hereinafter Nako). It submitted a report verifying the information
supplied by the applicant and that the applicant represented a low
risk to the first respondent.
[8]
The BEC thereafter evaluated the bid submitted by the applicant and
recommended
the appointment of the applicant as the preferred bidder.
Its report to this effect, and dealing with the other bidders, was
submitted
to the Bid Adjudication Committee (hereinafter BAC) on 28
September 2018.
[9]
On 2 November 2018 the BEC reconvened. At this meeting it was
requested
to reconsider its decision to evaluate the second applicant
as non-responsive. I shall deal hereunder with the circumstances. For
present purposes it is necessary only to record that on 13 November
2018 the BAC met. It decided not to accept the recommendation
of the
BEC in respect of the applicant. The BAC indicated that the affidavit
submitted by the second respondent relating to its
B-BBEE status was
acceptable.
[10]
On 26 November 2018 the BEC met and what had transpired at the BAC
meeting was reported
to it. The BEC accepted the second respondent’s
bid and proceeded to assess its bid (and that of 2 other bidders) for
functionality.
The second respondent received a score of 58%.
[11]
On 27 November 2018, at a reconvened BEC meeting, the committee
resolved to recommend the
award of the tender to the second
respondent. On 4 December 2018 the BAC approved the recommendation
and the tender award was made
to the second respondent. I will touch
upon the events subsequent hereto hereunder where relevant.
[12]
As indicated at the outset the applicant herein seeks interim relief
pending a review.
The interim relief takes the form of an order
restraining the first respondent from:
“
2.1.1
concluding an agreement with the Second Respondent pursuant to the
award of
the tender (tender number PE17/2018: reference number
14/1/8/1/6465/5115), in respect of the installation of
air-conditioners at
the provincial headquarters of the South African
Police Services at Zwelitsha (SAPS)(Reference: WCS 054498) (“the
tender”);
or
2.1.2
implementing any agreement concluded between the Respondents pursuant
to the award of the tender, or instructing the Second Respondent to
carry out any work pursuant to the award of the tender.”
[13]
It also seeks an order interdicting and restraining the second
respondent “
from carrying out any work pursuant to the award
of the tender
”. It is common cause that, at the stage when
the application was commenced, the first respondent had already
concluded the
agreement with the second respondent and was continuing
to carry out work pursuant to the agreement. I shall return to this
aspect
hereunder.
[14]
The review relief sought by the applicant (as set out in what is
referred to as “
the second order prayed
”) is that
the award of the tender be set aside and that the tender be awarded
to the applicant. In the alternative to this
the applicant prays that
the tender be remitted for re-evaluation subject to a declaration
that the second respondent’s bid
is non-responsive.
[15]
The grounds upon which it founds its review relief (at this stage of
the proceedings) are
two-fold. It is alleged that:
a) The
BEC and BAC committed an irregularity in allowing the second
respondent’s tender to participate when
it had been determined
to be non-responsive and was in fact non-responsive;
b) The
BEC and BAC committed an error of law in that they failed to comply
with a peremptory duty to investigate
“
suspicions and
allegations of fronting
” when it was required that they do
so.
[16]
These
grounds are elaborated upon in the papers with reference to sections
6(2)(a), (c), (d), (e), (f), (h) and (i) of the
Promotions
of Administrative Justice Act
[2]
(hereinafter
PAJA
).
It is alleged for instance that the BEC unlawfully allowed the
dictates of a person who was not a member of the committee to
influence or determine the evaluation of the second respondent’s
bid and that the BAC failed to apply its mind to the initial
recommendation of the BEC.
[17]
It is, of course, trite that a party seeking interim relief
pendente
lite
must satisfy four requirements. This includes establishing a
prima facie
right (even if that right is open to some doubt);
a reasonable apprehension of irreparable harm if the relief is not
granted; a
balance of convenience which favours the granting of the
relief; and that there is no other suitable or alternative remedy
available
to the applicant.
[18]
Where relief is sought to interdict or restrain conduct pending
determination of the lawfulness
of such conduct the applicant will be
required, in establishing its
prima facie
right, to show that
it enjoys a prospect of success in the further proceedings.
[19]
It was argued by Mr
Saks
, for the applicant, that the
applicant’s
prima facie
right is established upon three
legs. The first concerns the conduct of the BEC and BAC, which is in
essence common cause, in proceeding
with the second respondent’s
bid when it was determined to be non-responsive. The second leg,
submitted to be a more serious
irregularity, is the failure to
investigate suspicions or allegation of fronting. The third
component, raised in argument, is the
extension of the tender
validity period and subsequent conclusion of the contract with the
second respondent. These three elements,
it was submitted, establish
real prospects of success in pursuing the applicant’s rights to
fair and just administrative
action and therefore the
prima facie
right. I shall deal with each in turn.
[20]
In regard to the non-responsiveness of the second respondent’s
bid it is necessary
to deal in some detail with the sequence of
events. As noted above the BEC determined on 31 August 2018 that the
second respondent’s
bid was non-responsive. It came to this
determination on the basis that the affidavit submitted in proof of
its B-BBEE status was
“
invalid
”.
[21]
The minute of the meeting records the following:
“
The bidder was
found to be non-responsive as the bidder did not comply with all the
requirements. Attached an Invalid Affidavit,
Annexure C not fully
completed.”
[22]
It is common cause, based upon the documentation furnished by the
first respondent to the
applicant upon request, that the BAC
considered this issue and took a different view. It considered the
affidavit signed by a director
other than the director authorized to
sign documents in respect of the tender, to be acceptable. It is on
this basis that the issue
was taken up with the BEC.
[23]
The BEC minute of 26 November 2018 records the following:
“
General
·
Mr Mnyaka provided the BEC with feedback and was held between the BEC
and
RBAC.
·
Mr Fono noted that the BEE affidavit of Air-Tek Manufacturing and
that
of Aero Duct Moya are both invalid but the committee must accept
that of Air-Tek because RBAC instructed that it’s acceptable
and that the RBAC Chairperson said that the RBAC will take
responsibility for any related queries.
·
Mr Chipangura advised that the BEC go back and verify the reasons as
to
why other bidders were made non-responsive. He further advised
that Pfunzo be made responsive because they have their own Resolution
of Board of Directors and the Annexure C be relaxed as it was
previously done before.
·
Mr Mnyaka advised the member that Pfunzo is non-responsive but can be
scored
and he will further consult and report back to the BEC.
·
The following bidders were then scored for functionality:
Pfunzo
50%
Air-Tek Manufacturing
58%
Flat-Foot
Engineering 66%
·
Mr Ndwandwa alluded to the fact that, for Air-Tek Manufacturing
PA15.1
Resolution of Board of Directors was not signed by the
majority shareholder to give authority to the signatory in the
document.
Mr Fono and Mr Chipangura further indicated that this could
be the case of possible fronting. Mr Mnyaka dismissed the concern and
said that the members who share these sentiments have no proof thus
Air-Tek is to remain responsive. “
[24]
Mr
Saks
argued that the report to the BEC by Mr
Mnyaka
,
the secretary of the BEC, regarding the news of the BAC constitutes
interference in or dictation to the BEC and is, therefore,
an
irregularity. He further submitted the acceptance of the second
respondent’s bid as responsive also an irregularity.
[25]
Mr
Nepgen
argued that the acceptance of the second
respondent’s bid as responsive, and therefore as qualifying for
further consideration
does not constitute a reviewable irregularity.
This is so because the decision to award the tender to the second
respondent is
not a divisible administrative decision. He further
argued that the initial stance of the BEC that the affidavit
supporting the
second respondent’s B-BBEE status is invalid has
no factual foundation.
[26]
In its answering affidavit the second respondent avers that the bid
documents do not require
that the affidavit in proof of its B-BBEE
status be deposed to by the person duly authorised to sign the bid
documents on behalf
of the company. The second respondent further
avers that the deponent authorized to sign the affidavit (
Boshoff
)
is the person authorized to depose to such B-BBEE verification
affidavits and, further, that said affidavits are, in terms of
the
Code of Practice provided for in the Regulations, valid for a year.
These specific answers to the charge that the affidavit
was “
invalid
”
are not met in reply save with a general denial. Instead, the
applicant suggests that the fact that
Boshoff
deposed to the
B-BBEE affidavit rather than
de Vos
(who was authorized to
sign the bid documents) presents further evidence in respect of the
alleged fronting. An issue which will
be addressed more fully
hereunder.
[27]
In respect of the applicant’s reliance upon the BEC’s
initial determination
of the second respondent’s bid as
non-responsive, the documents put up by the applicant do not
establish that the affidavit
was indeed “
invalid
”.
Prima facie
the basis of the initial determination appears to
be incorrect. Accordingly the BAC decision not to accept the BEC’s
initial
recommendation and to require the BEC to deal with the second
respondent’s bid as responsive appears to be unassailable. This
is of course a matter to be determined in the review in due course.
At this stage of the proceedings the applicant need only establish
that there is a prospect of success on review in order to found its
prima facie
right.
[28]
I am not persuaded that such prospect exists in so far as the alleged
irregularity in the
process is concerned. The principal basis upon
which the applicant founded its case for interim relief, however, was
not the alleged
irregularity regarding the treatment of the second
respondent’s bid as responsive. It was that the first
respondent had failed
in its duty to investigate a reasonable
suspicion of fronting. This failure to act, it is submitted, vitiates
the reasonableness
of the award.
[29]
The applicant founded its argument upon the content of the BEC minute
of 26 November 2018
(quoted above) where the fact that the majority
shareholder did not sign the Resolution of the Board of the second
respondent is
noted and it is stated that this could be a case of
fronting.
[30]
The concept
of a “
fronting
practice
”
is defined in the
Broad-Based
Black Economic Empowerment Act
[3]
to mean:
“
'
fronting
practice
' means a transaction, arrangement or other act or
conduct that directly or indirectly undermines or frustrates the
achievement
of the objectives of this Act or the implementation of
any of the provisions of this Act, including but not limited to
practices
in connection with a B-BBEE initiative-
(a)
in terms of which black persons who are appointed to an enterprise
are discouraged or inhibited from substantially
participating in the
core activities of that enterprise;
(b)
in terms of which the economic benefits received as a result of the
broad-based black economic empowerment status
of an enterprise do not
flow to black people in the ratio specified in the relevant legal
documentation;
(c)
involving the conclusion of a legal relationship with a black person
for the purpose of that enterprise achieving
a certain level of
broad-based black economic empowerment compliance without granting
that black person the economic benefits that
would reasonably be
expected to be associated with the status or position held by that
black person; or
(d)
involving the conclusion of an agreement with another enterprise in
order to achieve or enhance broad-based black
economic empowerment
status in circumstances in which-
(i)
there are significant limitations, whether implicit or explicit, on
the identity of suppliers, service providers,
clients or customers;
(ii)
the maintenance of business operations is reasonably considered to be
improbable, having regard to the resources
available;
(iii)
the terms and conditions were not negotiated at arm's length and on a
fair and reasonable basis;”
[31]
The
definition was inserted in the Act by s 1(e) of the
Amendment
Act
[4]
and came into operation on 24 October 2014. “
Fronting
practice
”
is a very serious irregularity which undermines the objects sought
to be achieved by the preferential procurement
policy sanctioned by
the Constitution.
[32]
As was
noted in
Allpay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer, South African Social Security Agency, and
Others
[5]
:
“
[47] Economic
redress for previously disadvantaged people also lies at the heart of
our constitutional and legislative procurement
framework. Section
217(2) provides for categories of preference in the allocation of
contracts and the protection or advancement
of persons, or categories
of persons, disadvantaged by unfair discrimination. Section 217(3)
provides for the means to effect this,
in the form of national
legislation that must prescribe a framework within which the policy
must be implemented.”
[33]
At par [51] the court said:
“
[51] Various Codes
of Good Practice have also been issued under the Empowerment Act.
These include measures and scores of management
control and of skills
development. The Empowerment Act and the regulations make it clear
that broad and sustainable involvement
by black people is required,
and that the development and transfer of the necessary skills
are an integral part of such transformation.”
[34]
After
citing a passage from that court’s judgment in
Viking
Pony Africa Pumps (Pty) Ltd t/a Tricon Africa v Hidro-Tech Systems
(Pty) Ltd and Another
[6]
,
the court said:
“
[54] The court
further held that an investigation into '(w)hat happens behind
the scenes matters the most when the shareholding
is said to be a
façade'. Does this mean that an investigation into the
propriety of empowerment credentials becomes necessary
only after a
complaint has been lodged, and that there was no obligation on SASSA
to ensure that the empowerment credentials of
the prospective
tenderers were investigated and confirmed before the award was
finally made? I think not, for the reasons that
follow.
[55] Substantive
empowerment, not mere formal compliance, is what matters. It makes a
mockery of true empowerment if two opposite
ends of the spectrum are
allowed to be passed off as compliance with the substantive demands
of empowerment. The one is a misrepresentation
that historically
disadvantaged people are in control and exercising managerial
power, even when that is not the case. That
amounts to exploitation.
The other is to misrepresent that people who hold political power
necessarily also possess managerial
and business skills. Neither
situation advances the kind of economic empowerment that the
Procurement and Empowerment Acts envisage.
Both employ charades.”
[35]
In
Viking
Pony
the Constitution Court was called upon to consider when the duty to
investigate circumstances in which preference may have been
obtained
by fraudulent means. The facts of that matter are briefly the
following
[7]
. Viking Pony and
Hidro-Tech are companies that supply and install mechanical and
electrical equipment for water and sewerage treatment
works. Both
competed for tender for such work at local and provincial government
level. Hidro-Tech considered that Viking Pony
had secured a
disproportionate degree of success notwithstanding that Hidro-Tech
had on occasions submitted lower tender prices.
It caused this to be
investigated and believing that the percentage of shares held by
previously disadvantaged individuals did
not reflect their
participation in management, it lodged a complaint. The litigation
followed its dissatisfaction with the investigation.
[36]
Central to
the decision in the case was the interpretation of Regulation 15(1)
of the
Preferential
Procurement Regulations
,
2001
[8]
. Regulation 15(1) of the
2001 Regulations read:
“
15.(1)An organ of
state must, upon detecting that a preference in terms of the Act and
these regulations has been obtained on a
fraudulent basis, or any
specified goals are not attained in the performance of the contract,
act against the person awarded the
contract.”
[37]
The 2001
Regulations were repealed by the 2011 Regulations
[9]
.
The 2011 Regulations were in turn repealed by the 2017
Regulations
[10]
. These took
effect on 1 April 2017. Regulation 14 of the 2017 Regulations
provides as follows:
“
Remedies
14.(1) Upon detecting
that a tenderer submitted false information regarding its BBBEE
status level of contributor, local production
and content, or any
other matter
required in terms of
these Regulations which will affect or has affected the evaluation of
a tender, or where a tenderer has failed
to declare any
subcontracting arrangements, the organ of state must-
(a) inform the tenderer
accordingly;
(b) give the tenderer an
opportunity to make representations within 14 days as to why-
(i) the tender submitted
should not be disqualified or, if the tender has already been awarded
to the tenderer, the contract should
not be terminated in whole or in
part;
(ii) if the successful
tenderer subcontracted a portion of the tender to another person
without disclosing it, the tenderer should
not be penalised up to 10
percent of the value of the contract; and
(iii) the tenderer should
not be restricted by the National Treasury from
conducting any business
for a period not exceeding 10 years with any organ of state; and
(c) if it concludes,
after considering the representations referred to in subregulation
(1)(b), that-
(i) such false
information was submitted by the tenderer-
(aa) disqualify the
tenderer or terminate the contract in whole or in part; and
(bb) if applicable, claim
damages from the tenderer; or
(ii) the successful
tenderer subcontracted a portion of the tender to another person
without disclosing, penalise the tenderer up
to 10 percent of the
value of the contract.
(2)(a) An organ of state
must-
(i) inform the National
Treasury, in writing, of any actions taken in terms of subregulation
(1);
(ii) provide
written submissions as to whether the tenderer should be restricted
from conducting business with any organ of state;
and
(iii) submit written
representations from the tenderer as to why that tenderer should not
be restricted from conducting business
with any organ of state.
(b) The National Treasury
may request an organ of state to submit further information
pertaining to subregulation (1) within a specified
period.
(3) The National Treasury
must-
(a) after considering the
representations of the tenderer and any other relevant information,
decide whether to restrict the tenderer
from doing business with any
organ of state for a period not exceeding 10 years; and
(b) maintain and publish
on its official website a list of restricted suppliers.”
[38]
In
Viking
Pony
the Constitutional Court held
[11]
:
“
[31] I am
satisfied that 'detect' generally means no more than discovering,
getting to know, coming to the realisation, being informed,
having
reason to believe, entertaining a reasonable suspicion, that
allegations, of a fraudulent misrepresentation by the successful
tenderer, so as to profit from preference points, are plausible. In
other words, it is not the existence of conclusive evidence
of a
fraudulent misrepresentation that should trigger responsive action
from an organ of State. It is the awareness of information
which, if
verified through proper investigation, could potentially expose a
fraudulent scheme.
[32] The context within
which 'detect' is used in reg 15(1) dictates that the word be
interpreted broadly. It would be incorrect
to construe it to mean
that something is detected only when its existence has already been
conclusively established as a fact.
Obtaining any information that
gives rise to a reasonable suspicion that preference points might
have been fraudulently awarded
does amount to a detection. There are,
however, different degrees and levels of detection. At the one level
the information might
be somewhat scanty yet capable of exposing
corruption in a particular tender. At times the information detected
might be conclusive.
It is the level of detection that determines the
appropriateness of the action to be taken against the alleged
offending party.”
[39]
The court
went on to state
[12]
:
“
[34] Whenever an
enterprise is plausibly accused of having furnished false
information in its tender documents, the organ
of State responsible
for the tender is, upon becoming aware of the alleged
misrepresentation, under an obligation to investigate
the matter.
This stems from the tenderer's obligation to vouch for the
truthfulness and correctness of the information provided
in terms of
reg 14. Furthermore, the organ of State has the power to call upon
any tendering enterprise to submit satisfactory
documentary proof of
any issue relating to the tender. This would be done to enable the
organ of State to investigate and satisfy
itself about the
correctness or otherwise of the issues relating to the tender. In
sum, reg 15 enjoins the organ of State to 'act
against' any tenderer
that seems to have flouted the law.”
[40]
Mr
Saks
, relying upon the authority of
Viking Pony
,
argued that the test for determining the trigger to act against a
tenderer suspected of a fronting practice is not onerous. It
is
sufficient if there is a reasonable suspicion. He further argued that
it must be borne in mind that the “
suspicion
” was
one raised by members of the BEC and that it was premised upon the
second respondent’s tender documents.
[41]
Mr
Nepgen
countered the argument on the basis that (a)
Viking
Pony
and
Allpay
are to be read in
the context of the Regulations as they then read; and (b) that, in
any event, no reasonable suspicion existed
which would trigger the
obligation to act.
[42]
It is indeed so that the regulations have undergone important changes
since the decision
in
Viking Pony
. However, the
use of the phrase “
upon detecting
” has not altered
the fundamental basis upon which the obligation to act is triggered.
The finding by the Constitutional Court
is clear. All that is
required is information that gives rise to a reasonable suspicion. It
must be plausibly averred that the
tenderer has provided false
information.
[43]
Once that threshold is established the organ of state is obliged to
act in accordance with
reg 14 of the 2017 Regulations. Regulation 14
sets out not only the procedure to regulate its action against the
tenderer but also
the remedies available to the organ of state.
[44]
The essential question in the present matter is whether that which
was before the BEC and
BAC was sufficient to trigger the obligation
to act in accordance with reg 14. For purposes of the present
application this need
only be established on a
prima facie
basis.
[45]
Mr
Nepgen
submitted that the question is to be answered in the
negative. He submitted that the high water mark of the applicant’s
reliance
upon this alleged ground of review is to be found in the
content of the minute of the BEC meeting of 26 November 2018. The
only
basis upon which the issue was raised was the fact that the
majority shareholder had not signed the resolution of the board of
directors.
[46]
Mr
Nepgen
submitted that the statement, as recorded in the minute, is not in
itself evidence of the existence of a reasonable suspicion of
fronting, nor the existence of a plausible basis for such allegation.
He argued, quite correctly in my view, that it must be accepted
that
the BEC members had had regard to all of the documents submitted by
the second respondent in its bid. This would include,
inter alia,
proof of its B-BBEE status, in the form of the affidavit referred to
earlier. That affidavit falls within the ambit
of Regulation 1 of
2017
[13]
.
[47]
In addition to this the second respondent’s tender bid included
a confirmation by
the accountant of the second respondent of the
shareholding of the second respondent. The letter states that Air-Tek
Holdings (Pty)
Ltd holds 49% of the shares and that
Moegamad
Kahaar
holds 51% of the shares with the equivalent voting rights.
Also included are the share certificates which confirm this.
[48]
These documents, it was submitted, point to the full and accurate
disclosure of relevant
information by the second respondent. On the
basis of these documents, which were before the BEC, there can have
been no reasonable
suspicion of a fronting practice.
[49]
Mr
Nepgen
further pointed to the applicant’s reliance on
the declaration of designated groups for preferential procurement
(PA-40)
as being wholly misplaced. That declaration was not the basis
for the comment made about fronting. The declaration refers to the
shareholding of Air-Tek Manufacturing, i.e. the second respondent,
whereas it declares the shareholding of Air-Tek Holdings. This
was,
he submitted, an error rather than evidence of fronting. Insofar as
the declaration indicates a discrepancy in the actual
shareholding of
the second respondent elsewhere disclosed in the tender documents, it
is against the second respondent in regard
to qualifying preference
points. At best for the applicant, the discrepancy may have required
the first respondent to call upon
the second respondent to clarify.
In that event, it would have furnished the explanation set out in its
answering affidavit. The
discrepancy on its own could not found a
reasonable suspicion of a fronting practice. Mr
Nepgen
also
pointed to the minutes of the meeting of the BAC of 4 December 2018
which records that a risk assessment of the second respondent
had
been done. Such risk assessment verify the information supplied.
[50]
It is not for this court to decide whether or not evidence now
establishes a basis to trigger
the obligation to act in accordance
with reg 14. In order to found a claim for interdictory relief
pending a review based on alleged
non-compliance with reg 14 it must
be shown that at the time of the award there existed a reasonable
suspicion that the second
respondent had supplied false information
regarding its B-BBEE status, local production and content or any
other matter required
which would affect the evaluation of the
tender. All that the applicant can point to is that contained in the
BEC minute. This,
in my view, falls short of what would, in terms of
Viking Pony
amount to detection.
[51]
A final
basis upon which the applicant relies to establish a prima facie
right is the alleged extension of the period of validity
of the offer
constituted by the successful tender. In this regard the applicant
relies upon the judgment in
Joubert
Galpin
and Searle v Road Accident Fund and Others
[14]
where it was held that the award of a tender after the expiry of a
tender validity period was in effect
ultra
vires
.
[52]
The facts, as alleged by the applicant, are that the tender validity
period was extended
after the date of expiry of the validity period
stipulated by the tender notice. It is alleged that the final date
for submission
was 28 August 2018 and that the tender validity period
was 56 days. On the applicant’s calculation the tender
validity
period expired on 23 October and the purported extension
only occurred on 15 November 2018. In support of this the applicant
refers
to a letter sent by the Supply Chain Manager Mnyaka to the
second respondent dated 15 November 2018 in which the consent to
extension
is signed on that date.
[53]
A perusal
of the document (Annexure AA3 to the Founding Affidavit), however,
indicates that the then current validity period extended
to 15
November 2018 and that the extended period would expire on 15 January
2019
[15]
. It is, in my view,
of some significance that the applicant nowhere in its founding
affidavit raises this issue as a ground upon
which it seeks either
interim or review relief
[16]
.
Indeed the founding papers proceed upon the basis that the tender
process continued (in the sense that the BEC and BAC deliberations
proceeded) until 4 December 2018 when the award was made to the
second respondent.
[54]
In setting out the events which gave rise to the commencement of this
application the applicant
refers to correspondence addressed to the
first respondent in January 2019 enquiring regarding process of the
bid process. On 30
January 2019 the first respondent dispatched its
letter to the applicant advising that it was unsuccessful. What
followed was correspondence
regarding the applicant’s intention
to challenge the award and, on 15 February 2019 a request for reasons
and for documents.
There is no reference to the fact that any award
after 23 October 2018 would be invalid by reason of the expiry of the
tender validity
period.
[55]
The only reference to this issue occurs in the applicant’s
replying affidavit in
reply to the averment by the second respondent
that it concluded a written contract with the first respondent on 15
January 2019;
in raising the matter it refers to and annexes the
extension letter referred to above, a copy of which it can only have
obtained
pursuant to its request for documents.
[56]
Mr
Nepgen
did not press that the applicant be precluded from
raising the issue since it was only raised in reply. Had he done so
it would,
in my view, have been appropriate to preclude a belated
supplementing of the applicant’s case in reply. Mr
Nepgen
instead submitted that even if it is to be assumed that there is some
merit in the point, it cannot assist the applicant in respect
of
interim relief. That is so because at best for the applicant it could
contend, at the review, that the award be set aside. The
applicant
cannot contend for an apprehension of irreversible harm based upon
this ground since, even if the point succeeds the
tender process may
at best have to re-open.
[57]
The document upon which the applicant bases this point does not
support the point. It indicates
that the tender validity period then
was 15 November 2018 and that it was to be extended to 15 January
2019. It was indeed so extended
and the contract was concluded on 15
January 2019. No doubt this issue will in due course be addressed in
the review. For present
purposes what is required is the assertion of
a right, which is
prima facie
established. I am not satisfied
that the applicant has met this threshold.
[58]
I have already indicated that I am not persuaded that the applicant
has established a
prima facie
right on the basis alleged. Even
if I am wrong in this conclusion I am of the view that the applicant
has also not succeeded in
establishing other requisites for interim
relief.
[59]
It is common cause that the second respondent has already commenced
the works and that
the works are continuing. The irreparable harm for
which the applicant contends consists therein that the failure to
restrain the
continuation of the works will inevitably have the
result that the contract may very well have been completed by the
time that
the review is decided. In that result the applicant may
then be left with no substantial redress in the review.
[60]
In
National
Treasury and Others v Opposition to Urban Tolling Alliance and
Others
[17]
it was stated that:
“
[50] Under the
Setlogelo test the prima facie right a claimant must establish is not
merely the right to approach a court in order
to review an
administrative decision. It is a right to which, if not protected by
an interdict, irreparable harm would ensue. An
interdict is meant to
prevent future conduct and not decisions already made. Quite apart
from the right to review and to set aside
impugned decisions, the
applicants should have demonstrated a prima facie right that is
threatened by an impending or imminent
irreparable harm. The right to
review the impugned decisions did not require any preservation
pendente lite.”
[61]
As noted in the quoted passage it is not necessary to grant relief
pendente lite
in order to protect the right to review. What
must be shown is that in the review the applicant has some prospect
that it will
obtain an order awarding the contract to it or that upon
the matter being remitted that consequence is probable. It has, in my
view, not advanced such a case.
[62]
The contention that the harm consists therein that the applicant was
not awarded the contract
conflates the apprehension of irreparable
harm with the balance of convenience. The applicant’s argument
in regard to the
consideration of balance of convenience was this:
the right we assert is clear therefore the balance of convenience
ought not to
play a significant role. Whilst a sound general
proposition, it misses the point that the determination of the
balance of convenience
always falls to be considered. This requires
that the harm to be endured by the applicant be weighed against the
harm which the
respondent will bear. (See
Outa
(
supra
) at par [52].)
[63]
The second respondent has, in its answering affidavit, set out in
some detail the prejudice
and harm it is likely to suffer in the
event that the interim relief is granted. It points out that the
contract concluded with
the first respondent is a re-measurement
contract and that contract price adjustment does not apply. This
means, it says, that
when the price of labour, equipment, fuel and
material increases these costs are borne by the second respondent. In
the event that
the implementation of the contract is delayed and
these costs increase the second respondent will bear the cost.
[64]
The second respondent states that practical completion of the
contract must be achieved
within 12 months of the commencement date
which was on 15 January 2019. It has incurred site establishment
costs (of R 36 300)
and has placed orders for material from
suppliers to the value of R 5 205 741.58. Capital
equipment, which includes all
the air-conditioning equipment, has
already been delivered to site.
[65]
The second respondent’s affidavit sets out the extent of work
already completed at
4 of the blocks of the complex. It is not
necessary to repeat those averments, which are uncontested. The
effect is that a substantial
portion of the works has already been
executed.
[66]
The second respondent states further that it has purchased additional
equipment (including
a vehicle); it has concluded agreements for
accommodation of staff; appointed sub-contractors and has
manufactured certain items
to be installed. It has submitted payment
certificates in an amount in excess of R 9.3 million of which an
amount of R 4.6 million
has been paid.
[67]
The applicant’s answer to this is to the effect that the
suspension of the contract
will have no effect upon the work done and
the materials supplied. It further states that the second respondent
either has been
or will be paid for the work done and for materials
supplied. In effect it is contended that the prejudice to be suffered
by the
second respondent can be addressed in a claim that it may have
against the first respondent.
[68]
This is, in my view, no answer to the substantial prejudice that the
second respondent
avers will flow from the granting of interim
relief. Having regard to all of the relevant factors I am unable to
conclude that
the balance of convenience favours the granting of
interim relief. The application accordingly fails on this ground
also.
[69]
I do not consider it necessary to deal with the existence of an
alternative remedy. It
is by now well established that in general in
circumstances such as the present the proper remedy where relief is
sought on review
to set aside the award of a contract is to restrain
its implementation
pendente lite
.
[70]
Mr
Nepgen
, however, raised a further aspect given the
essential basis upon which relief was sought, namely the available
remedies provided
for by reg 14 of the 2017 Procurement Regulations.
The proper course, he argued, was for the applicant to avail itself
of those
remedies which may include pursuing the relief which was
granted in the
Viking Pony
matter.
[71]
It is, for the reasons already set out above, not necessary to decide
the issue. I have
reservations as to whether the remedies provided
for in reg 14 would preclude a court from, in an appropriate case,
interdicting
the implementation of a contract awarded in breach of
the Procurement Regulations pending a judicial review where such
relief is
otherwise warranted. I need not, however, decide the issue.
[72]
In the result the following order will issue:
The
application for interim relief pending the finalization of the
applicant’s review application is dismissed with costs,
including the reserved costs of 16 April 2019.
_________________________
G.G
GOOSEN
JUDGE
OF THE HIGH COURT
Obo
the Applicant:
Adv D.J Saks
Instructed
by: Friedman
Scheckter , 75 2
nd
Avenue, Newton
Park,
Port Elizabeth
Tel:
(041) 395 8412
Ref:
Mr Friedman
Obo
the 2
nd
Respondent:
Adv J.J Nepgen
Instructed
by: JGS,
173 Cape Road, Mill Park, Port Elizabeth
Tel:
(041) 396 9234
Ref:
Mr Parker
[1]
Act No, 5 of 2000
[2]
Act No 2 of 2000
[3]
Act No, 53 of 2003
[4]
Act No, 46 of 2013
[5]
2014 (1) SA 604
(CC) at par [47]
[6]
2011 (1) SA 327 (CC)
[7]
See Viking Pony (
supra
)
at par [5] – [13]
[8]
Government Gazette 22549, 2001 GN R725, 10 August 2001
[9]
Preferential Procurement Policy Framework Act, 2000
: Preferential
Procurement Regulations, 2011, Government Notice No. R.502, 8 June
2011. The 2011 regulations provided as follows
in Reg 13:
“
Remedies
13.
(1) An organ of state must, upon detecting that:
(a)
the BBBEE status level of contribution has been claimed or
obtained on a fraudulent basis; or
(b)
any of the conditions of the contract have not been fulfilled,
act
against the tenderer or person awarded the contract.
(2)
An organ of state may, in addition to any other remedy it may have
against the person contemplated in subregulations
(1)
(a)
disqualify the person from the tendering process;
(b)
recover all costs, losses or damages it has incurred or suffered as
a result of that person's conduct;
(c)
cancel the contract and claim any damages which it has suffered as a
result of having to make less favourable arrangements
due to
such
cancellation;
(d)
restrict the tenderer or contractor, its shareholders and directors,
or only the shareholders and directors who acted on a
fraudulent
basis,
from obtaining business from any organ of state for a period not
exceeding 10 years, after the audi alteram partem (hear
the
other
side) rule has been applied; and
(e)
forward the matter for criminal prosecution.”
[10]
Preferential Procurement Regulations, 2017, Government Gazette 40553
GN R.32, 20 January 2017
[11]
Supra at par [31] and [32]
[12]
At par [34]
[13]
Reg 1 defines “proof of B-BBEE status level of a contributor”
means, inter alia,: “
(b)
a sworn affidavit as prescribed by the B-BBEE Codes of Good
Practice; “
[14]
2014 (4) SA 148
(ECP) at par [74]
[15]
The letter itself refers to the existing period extending to 21
November 2018 whereas the second page refers to 15 November 2018.
[16]
It is of course entitled to supplement its grounds in accordance
with Rule 53.
[17]
2012 (6) SA 223
(CC) at par 50