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[2021] ZAKZDHC 46
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Wattpower Solutions CC and Another v Transnet SOC Limited and Another (D6346/2019) [2021] ZAKZDHC 46; [2022] 1 All SA 892 (KZD) (20 December 2021)
THE HIGH COURT OF SOUTH
AFRICA
KWAZULU–NATAL LOCAL
DIVISION, DURBAN
CASE
NO: D6346/2019
In
the matter between:
WATTPOWER SOLUTIONS
CC FIRST
APPLICANT
PRENTEC
(PTY)
LTD SECOND
APPLICANT
and
TRANSENT SOC
LIMITED FIRST
RESPONDENT
MURRAY & DICKSON
(PTY) LTD SECOND
RESPONDENT
This
judgment was handed down electronically by circulation to the
parties’ representatives by email, and released to SAFLII.
The
date for hand down is deemed to be 20 December 2021.
JUDGMENT
Chetty
J:
[1] This
is an application by the first and second applicants (‘the
applicants’), who formed a Joint
Venture in order to bid for a
tender for the upgrading of the first respondent’s (‘Transnet’)
fire protection
system at its Alrode Depot, which is a high- risk
facility and national Key Point. It is one of the largest bulk
storage depots
for fuel in the country, supplying fuel primarily to
Gauteng. The value of the tender was approximately R130 million. As
part of
the five stage procurement process, the applicants and the
second respondent, Murray & Dickson (Pty) Ltd (‘M&D’),
were the only bidders who successfully passed the functional
evaluation stage. The applicants obtained the highest score in the
fourth stage, based on functionality. This part of the process is
referred to by ‘Transnet as a ‘desktop exercise’,
as it assumes at face value the correctness of the information
submitted by the bidders. The next stage of the process was based
primarily on the assessment of price and whether the bidder met the
necessary BBBEE credentials. It is not in dispute that the
evaluation
would be on the basis that price would be accorded 90 points, with
the remaining 10 points accorded to preference. The
applicants
contend that ordinarily, they would have been the successful bidder
having scored the highest points in the fourth stage,
with the last
stage merely entailing post-tender negotiations and the final
awarding of the contract.
[2]
Notwithstanding
the applicants securing the highest points at the fourth stage, they
were not awarded the contract. Instead, Transnet,
relying on, inter
alia, the provisions of the Preferential Procurement Policy Framework
Act 5 of 2000 (‘PPPFA’),
sought to
subject both the applicants and M&D to a due diligence
investigation, supposedly in terms of s 2(1)(
f
)
of the PPPFA, which provides that ‘the contract must
be awarded
to the tenderer who scores the highest points,
unless
objective criteria
in
addition to
those contemplated in paragraphs (d) and (e) justify the award to
another tenderer’.
[1]
This, as will appear from what is set out below, is one of the main
areas of
dispute in
this application.
[3] Transnet
further sought to justify the due diligence investigation on the
basis that clause F3.13 of the invitation
to tender (clause F3.13’)
provides that the employer must accept the highest scoring tender
provided that it does:
‘
. . . not present
any unacceptable commercial risk and only if the tenderer:
(a) .
. .
(b) can
. . . . demonstrate that he or she possesses the professional and
technical qualifications, professional
and technical competence,
financial resources, equipment and other physical facilities,
managerial capability, reliability, experience
and reputation,
expertise and the personnel, to perform the contract’.
Transnet
further relied on the provisions of regulation 25(9) of the
Construction Industry Development Board Regulations GN 692,
GG
26427
(9 June 2004) (‘the CIDB Regulations’), in terms of which
it had to be satisfied that the successful tenderer
has
demonstrated that it has the ‘resource capacity and capability
specific to the contract concerned’ and that its
‘
capacity
to
perform the construction works will not be
unduly
compromised on the award of the contract concerned’.
[2]
[4] Despite
the applicants being the highest scoring tenderer, the contract was
awarded by Transnet to M&D
on the basis that the applicants did
not demonstrate their ‘capacity and capability’ to
execute the tender. The due
diligence investigation was challenged by
the applicants as an unlawful intrusion on their rights and
inconsistent with the provisions
of the legislative framework
governing procurement.
[5]
Prior
to the hearing I convened a video conference with counsel
[3]
and requested
that the
parties submit a joint statement in which the issues they required
the court to
determine
were agreed to in writing.
I am
indebted to counsel for their resolve in doing
so,
particularly as it enabled the court to focus more directly on the
issues in dispute between the parties. At the outset of the
hearing,
Mr
Tsatsawane
SC
, who
appeared
together
with Mr
Chavalala
for the
applicants, indicated that the applicants’ case rested
on two
fundamental points. The first point was based on the due diligence
investigation which was undertaken by Transnet
after
the
applicants had already passed a desktop assessment and were found by
Transnet to have scored the highest
of all the
tenderers. The investigation concluded that the applicants did not
possess the necessary ‘capacity and capability’
to
execute the tender. The second point was that prior to the expiry of
the closing date for the period within which Transnet was
obliged to
award the contract, it applied for an extension of the validity
period. By that
stage, the
only parties ‘alive’ in the race for the contract having
passed the functionality
stage, were
the applicants and M&D. Despite the applicants and M&D
granting their consent for the extension of the period
within which
the contract had to be awarded, the applicants now contend that as
this invitation was only extended to the above
two parties and
not
all the bidders
who
submitted bids, this omission by Transnet invalidated the procurement
process. It was contended that this violated the requirement
for
Transnet
to
act
in
a
‘transparent
and
fair
manner’
as
envisaged
in
s 217 of
the Constitution. Each of these grounds will be considered in detail
below.
[6] M&D,
to whom the contract was awarded, has been drawn into the proceedings
on the basis that the applicants
contend that in the notice of motion
that if the review is successful, then not only should the agreement
between Transnet and
M&D be set aside, but that M&D be
directed to open its audited financial statements ‘and provide
full access of its
records’ to a firm of auditors for the
purpose of conducting a verification of the ‘full amount of the
profits’
earned by M&D in terms of the contract. Once those
amounts have been verified, M&D are required to ‘repay’
to Transnet the profits which it made on the contract. Mr
van
Eetveldt,
who appeared for M&D, described this order for the
disgorgement of profits, in the absence of a shred of evidence of
collusion,
as an extraordinary remedy. This aspect is considered at
the conclusion of this judgment.
[7] A
brief chronology of the events leading up to the awarding of the
contract to M&D and the rejection of
the applicants’ bid
are that in October 2017 Transnet invited interested parties to
submit bids for the construction of a
fire protection system for its
Alrode Depot. The first and second applicants constituted themselves
as a joint venture, with the
second applicant being the lead partner.
The applicants submitted their bid in December 2017. In terms of the
invitation, the validity
period for the tender was for a period of 12
weeks from the closing date of 12 December 2017. The validity period
would lapse if
no tender was made by 13 March 2018. As part of their
submission, the applicants included evidence of them having executed
similar
projects to that envisaged in the tender, thereby
demonstrating their capability and capacity to execute the scope of
work required.
[8] The
applicants and M&D proceeded through to the third stage dealing
with the technical and functionality
evaluation of their bids. During
this phase the bidder’s ability to execute the scope of work
was assessed. Any bidder failing
to achieve the threshold of a 70 per
cent score at this stage of the evaluation was excluded from further
consideration. The fourth
stage, to which both the applicants and M&D
proceeded, considered price and their BBBEE credentials on the basis
of a 90/10
point allocation, where price is allocated 90 points and
preference 10. It is common cause that the applicants scored the
highest
points at the fourth stage of the evaluation, in which event
the awarding of the tender to the applicants would have been a
formality
at the fifth stage.
[9]
However,
on 8 May 2018 Transnet informed the applicants that it would be
subjecting them to a due diligence investigation in which
inter
alia
it
would carry out interviews with key personnel associated with the
bid, conduct site visits and look into
health and
safety matters. The applicants contend that the invitation to tender
constituted a binding contract between Transnet
and the applicants
(and other bidders),
[4]
and on
its interpretation, the contract makes no provision for a second
opportunity to verify a bidder’s ability to meet
the
requirements of the bid. Once this stage has been passed and the
applicants were found to have out-scored the
remaining
competitive bidders (M&D), they contend the contract had to be
awarded to
them. They
submit that the requirement for a second evaluation of competence and
capability was introduced by Transnet in order
to avoid awarding the
contract to them.
To that
end, the primary enquiry in review applications such as this is
whether there has been unfairness in the adjudication process.
In
Millennium
Waste Management (Pty) Ltd v Chairperson of the Tender Board: Limpopo
Province and Others
2008
(2) SA 481
, para 4, Jafta JA stated:
‘
The final
Constitution lays down minimum requirements for a valid tender
process and contracts entered into following an award of
tender to a
successful tenderer (s 217). The section requires that the tender
process, preceding the conclusion of contracts for
the supply
of goods
and services, must be “fair, equitable, transparent,
competitive and cost-effective”. Finally, as the decision
to
award a tender constitutes administrative action, it follows that the
provisions of the
Promotion
of Administrative Justice Act
(PAJA
)
apply to the process. This is
the
legislative background against which the present matter must be
considered.’
[10] In
response, Transnet contends that it applied objective criteria in
assessing the ability of the applicants
to perform the works as
required in terms of the contract and to this extent rely on the
provisions of the PPPFA which was enacted
to give effect to the
provisions of s 217 of the Constitution, in particular s 2(1)(
f
)
of the PPPFA, which provides that ‘the contract must be awarded
to the tenderer who scores the highest points, unless objective
criteria . . . justify the award to another tenderer’.
[11] Transnet
contends that there was no unfairness in the due diligence
investigation and in particular with this
assessment being conducted
after the functionality stage had been completed. Ms
Annadale SC
,
who appeared for Transnet, contends that the reason for this is that
the functionality assessment is a desktop evaluation based
on the
accuracy of what is contained in the documents provided by the
individual tenderer. That being the case, Transnet would
accept, at
face value and without interrogation, the correctness of the contents
of the documents submitted. Until the functionality
stage has been
passed, it would be impractical to conduct due diligence
investigations in respect of all the tenderers. In this
regard,
counsel underscored that there is a fundamental difference between
functionality (where no interrogation of a bidder’s
documents
is undertaken) and due diligence where there is an actual assessment
of whether a bidder is able to deliver in terms
of the contract. The
applicants contend that having passed functionality (in the third
stage) they should be immune from further
scrutiny of their capacity
and competency to perform. In other words, the applicants argue that
they should not have to undergo
a second round of assessing
‘functionality’. However, as Ms
Annandale
submitted,
this argument by the applicants presupposes that functionality and
due diligence are one and the same. It would appear
that one exercise
involves a cursory glance at compliance, while the other is an
in-depth assessment of capability.
[12] A
further issue which arises is whether an organ of state can be
penalised, before the final awarding of the
contract, for wanting to
conduct a more thorough investigation to satisfy itself of the
competence of the bidder to carry out the
works. In the present case
there is no suggestion that the applicants were taken by surprise or
that there was any unfairness in
the manner in which the due
diligence exercise was carried out. The applicants were given notice,
in advance, of the reason for
the investigation and the matters of
focus. They were submitted to the same examination as M&D and
therefore they can point
to no prejudice resulting from the exercise,
other than that they were eventually rejected as the preferred
candidate.
[13]
Transnet
contends that the applicants, although scoring the lowest on price,
omitted key aspects from their method statement.
[5]
To this end, Transnet places reliance on clause F3.13 which is set
out below:
‘
F3.13
Acceptance of tender offer
Accept the tender offer,
if in the opinion of the employer, it does not present any
unacceptable commercial risk and only if the
tenderer:
a. is
not under the restrictions, or has principals who are under the
restrictions, preventing
participating in the employer’s
procurement,
b. can,
as necessary and in relation to the proposed contract, demonstrate
that he or she possesses
the professional and technical
qualifications, professional and technical competence, financial
resources, equipment and other
physical facilities, managerial
capability, reliability, experience and reputation, expertise and the
personnel, to perform the
contract,
c. has
the legal capacity to enter into the contract,
d. is
not insolvent, in receivership, under Business Rescue as provided for
in chapter 6 of the
Companies Act, 2008
, bankrupt or being wound up,
has his affairs administered by a court or a judicial officer, has
suspended his business activities,
or is subject to legal proceedings
in respect of any of the foregoing;
e. complies
the legal requirements, if any, stated in the tender data, and
f. is
able, in the opinion of the employer, to perform the contract free of
conflicts of
interest.’
[14]
Transnet
contends that clause F3.13 of the invitation to tender is the same as
the standard condition of tender included in Annex
‘F’ of
the CIDB Standard for Uniformity in Construction Procurement, July
2015 (‘the Uniformity Standard’).
This is
not
disputed by the applicants.
In
addition, clause 4.3.4 of
the
Uniformity Standard provides that ‘functionality criteria shall
not include. . . matters relating to the basic capability
or capacity
of the tendering entity to execute the contract’, meaning that
functionality and a due diligence investigation
are not the same. It
is in this context that Transnet contends that the due diligence and
risk assessment was different from
the
functionality assessment, which was carried out as a ‘desk top’
assessment. The Uniformity Standard was issued in
terms of the
Construction Industry Development Board Act 38 of 2000
Act (‘CIDB
Act’) and the CIDB Regulations. It is contended that
Transnet,
as an organ of state, is obliged to comply with the CIDB Act which
requires
organs of
state to have an appropriate procurement and provisioning system
which is
fair,
equitable, transparent and cost-effective.
[6]
It is also obliged to comply with the provisions of the CIDB
Regulations that are applicable to ‘construction procurement’
defined in s 1 as ‘procurement in the construction industry,
including the invitation, award and management of contracts’.
Transnet contends that, since clause F3.13 of the invitation to
tender averts to the due diligence assessment, there is no basis
for
the applicants to contend that Transnet belatedly introduced a
standard for assessment that was not disclosed in the invitation
to
tender.
[7]
[15] Transnet
argued that the legislative framework pertaining to procurement and
in particular s 2(1)(
f
) of the PPPFA, read together with the
CIDB Regulations and the provisions of the Uniformity Standard,
clearly contemplates that
apart from the evaluation based on points
and preference, an objective assessment is provided to determine
whether the preferred
(or highest scoring) bidder is capable of
performing in terms of the contract. In other words, it contemplates
that the bidder
scoring the highest points ought to be awarded the
contract, but subject to objective criteria which warrant otherwise.
Accordingly,
it follows that the application of the objective
criteria cannot take place
before
scoring. If that were not
the case, every bidder (even before passing functionality) would have
to be subjected to a due diligence
assessment. This would be
illogical and devoid of any business sense from a cost perspective.
Thus, Transnet state that there can
be no complaint from the
applicants that the reference to objective criteria or an assessment
after passing the functionality stage,
were not disclosed or alluded
to in the invitation. The applicants were not, as it where,
‘operating in the dark’.
[16] Transnet
submits that the objective criteria it applied in not awarding the
contract to the applicant was
essentially the applicants’
inability to ‘get the job done’. In this regard, see
Rainbow Civils CC v Minister of Transport and Public Works,
Western Cape and Others
(21158/2012)
[2013] ZAWCHC 3
(6 February
2013), para 109 where the court stated:
‘
Functionality as
it is variously defined in the Tender Document concerns the ability
of the tenderer to deliver what is required,
to meet the needs of the
tender, to deliver a service or commodity which is fit for purpose.
It is based on the objectively measurable
criteria of experience and
standing, capability and resources. As such it has direct bearing on
the question of whether a tender
is cost-effective, i.e. whether it
yields the best possible value for
money.
[8]
To my mind it is self-evident that it is not cost effective to award
a tender to a party who ticks the right boxes as regards price
and
preference, but is unable to get the job done properly– whether
through lack of experience, adequate personnel or financial
resources.’
In
the context where the PPPFA prescribes that functionality is a
minimum threshold for evaluation in tender process,
Rainbow Civils
suggests that that functionality can serve more than a
‘gate-keeping’ function and can be taken into account a
second
time around after a tenderer has been evaluated on price and
preference where it may not have achieved the highest scores, but has
demonstrated a superior ability to provide the relevant goods or
services.
[17]
Where
functionality is used as an assessment tool in the adjudication of a
tender has generated controversy that has not yet been
resolved by
the courts.
Nexus
Forensic
Services v SASSA
[2016]
ZAGPPHC 579 (21 June 2016) expressly disagreed with the reasoning in
Rainbow
Civils
.
Neither judgment however is binding on this court. In
Nexus,
Van
Niekerk AJ made reference to the article by Quinot
[9]
which
sets
out the history of this controversial issue, and also refers to the
decision in this division of
Sizabonke
Civils CC t/a Pilcon Projects v Zululand District Municipality
2011
4 SA 406
(KZP) which effectively rejected the use of functionality as an award
criterion. In
Nexus
,
the court at para [18] stated
“
[18] The issue
whether or not functional ity has a dual application in the
procurement process of state organs, is a contentious
issue and the
law in this respect is not settled. In this regard, see the
informative article of Professor Q. Quinot "The
Role of Quality
In the Adjudication of Public Tenders" PELJ 2014 (17) 3. In
RH/
Joint
Venture v Minister
of Roads
and Public Works, Eastern Cape and Others
(769/02)
[2003]
ZAECHC 23
(18 March 2003) in para [32] the learned Judge held that
the provisions of section 2(1)(f) of PPPFA are clear namely that the
objective
criteria referred to therein must be additional criteria,
in other words these must be criteria over and above those which have
already received consideration as specific goals in terms of section
2(1)(d) and (e) of PPPFA. However, the reasoning for that
interpretation does not appear from the judgment.
[19] I disagree with the
submission that the
TSP Building
&
Civils (Ply) Ltd
decision relied upon by Counsel for First and Second Respondents
supports the argument in favour of the dual application of functional
i ty ……”.
[18] Van
Niekerk AJ in
Nexus
therefor expressly rejected the “elevation
of the dual application of functionality as part of our law”.
As pointed
out by Quinot at 1123 :
“
The role of
functionality as a qualification criterion was formalised in the new
Preferential Procurement Regulations, 2011, which
became fully
effective in December 2012. Regulation 4 of the 2011 regulations
provides that functionality should be assessed as
a qualification
criterion in a first stage of adjudication with only bidders
obtaining the minimum threshold score for functionality
proceeding to
the second round of adjudication, where only price and preference
points will be taken into account in ranking bidders.
This regulation
thus effectively put in place the approach of National Treasury's
instruction note of 2010. Regulation 4 also removes
any doubt as to
the legal basis for the two-stage adjudication approach and the use
of functionality as a qualification criterion.”
[19] As
I have stated earlier, Transnet contend that the due diligence
investigation was not a repeat of the functionality
assessment
carried out earlier in the process. The difference between the two
processes is not disputed by the applicants, with
the point is
underscored by clause 4.3.4 of the Uniformity Standards, which were
incorporated as part of the terms of the tender
invitation, that
functionality shall not include matters relating to assessment of
capacity and capability. There is no denial
from the applicants that
the due diligence investigation was carried out by an independent
engineering consultant, which exposed
several shortcomings in the
method statement of the applicants. In the context of the
construction to which the tender pertained,
and the safety aspects of
the bulk fuel depot, it was found that the applicants had failed to
make provision for a large concrete
structure referred to as a ‘valve
bank”. When interrogated on this omission, the consultants
found the applicants response
was unsatisfactory. In addition, it was
found that no provision was made for ‘gas freezing’ of
the storage tanks for
the required period of eight days during which
the tanks are to be cleaned. As with the aspect of the valve bank,
Transnet submits
that these omissions displayed a lack of capability
on the part of the applicants to appreciate the nature and scope of
work required.
On this basis, it contended that the applicants had
failed the threshold set in Clause F3.13 as well CIDB Regulation
25(9).
[20] In
a letter dated 11 October 2018 Transnet wrote to the applicants
setting out its reasons for not awarding
contract to it. The letter,
in part, reads:
‘
The standard
conditions of tender under clause F3.13 (Acceptance of tender offer)
as issued in the RFP state[s] “accept the
tender offer,
if
in the opinion
of the
Employer
, it does not present any
unacceptable commercial risk and only if the tenderer can as
necessary and in relation to the proposed
contract, demonstrate that
he or she possesses the professional and technical qualifications,
professional and technical competence,
financial resources, equipment
and other physical facilities, managerial capability, reliability,
experience and reputation, expertise
and personnel to perform the
contract.
The Wattpower Prentec
Joint Venture
did not demonstrate sufficient capacity and
capability
to successfully execute the contract, therefore,
tender offer could not be accepted.’ (emphasis added)
[21] The
reliance by Transnet on clause F3.13 as a ground of rejection is
challenged by the applicants on the basis
that s 2(1)(
f
) of
the PPPFA only permits the consideration of
objective
criteria
in the determination of a tender. According to the applicants, what
is contemplated in clause F3.13 is the expression of
an opinion by
various officials from Transnet. In this regard, counsel for the
applicants submit that any opinion expressed is
subjective and
therefore inconsistent with the requirement in s 2(1)(
f
).
Reliance was placed on
Minister of Law and Order v Dempsey
1988
(3) SA 19
(A) where the court held that the prerequisite of an
opinion (in that case dealing with an arrest and detention) was a
subjective
jurisdictional fact. As it is pointed out in Hoexter
Administrative Law in South Africa
2 ed (2012) at 301, our
courts have moved on to viewing opinions and similar clauses in
legislation, such as where an official has
‘
reason to
believe’
, to be based and assessed on objective facts. This
is aptly captured in
Walele v City of Cape Town
2008 (6) 129
(CC) where the following was stated in the majority judgment:
‘
If
indeed the decision-maker was so satisfied on the basis of these
three documents, his satisfaction was not based on reasonable
grounds. The documents fall far short as a basis for forming a
rational opinion. Nor does the mere statement by the City to the
effect that the decision-maker was satisfied suffice. In the past,
when reasonableness was not taken as a self-standing ground
for
review, the City’s
ipse dixit
could have been adequate.
But that is no longer the position in our law. More is now required
if the decision-maker’s opinion
is challenged on the basis that
the subjective precondition did not exist. The decision-maker must
now show that the subjective
opinion it relied on for exercising
power was based on reasonable grounds. In this case, it cannot be
said that the information,
which the City admitted had been placed
before the decision-maker, constituted reasonable grounds for the
latter to be satisfied.’
[22] Although
Walele
deals with the statement of an official or the
decision-maker as compared to the present matter where Transnet acted
on the basis
of a decision made by officials with particular
experience in construction and engineering, I accept that
Walele
is instructive in the present context. However s 2(1) of the
PPPFA must be read together regulation 11 of the Preferential
Procurement
Regulations 2017, GN R.32,
GG
40553 (20 January
2017) (‘the Procurement Regulations’), which provides
that where a contract is to be awarded to an
entity other than that
which scored the highest points in terms of s 2(1)(
f
), not
only must this decision be based on objective criteria, but the
objective criteria must also be fleshed out in the tender
documents
or in the invitation to tender. The contention of the applicants’
counsel is that even if Transnet did apply objective
criteria in
selecting M&D as the preferred candidate, its failure to
stipulate this much in the invitation constituted an irregularity.
[23] While
the reason given for not awarding the contract to the applicants was
their failure to ‘demonstrate
sufficient capacity and
capability’, they contend that their rejection was based on the
subjective opinion of Transnet’s
officials. The reliance on
subjective criteria, which is at odds with s 2(1)(
f
) of the
PPPFA read with regulation 11 of the Procurement Regulations, has
received the attention of our courts in various cases.
In
Q Civils
(Pty) Ltd v Mangaung Metropolitan Municipality and Others
(A48/2016)
[2016] ZAFSHC 159
(8 September 2016) para 40 the court stated:
‘Objective criteria with reference to section 2(1)(f) of the
PPPFA referred
to
supra
can be defined as those: (a) not
listed in paragraphs (d) and (e) of section 2(1) of the PPPFA; (b)
which are objective in the sense
that these can be ascertained
objectively and their existence or worth does not depend on someone's
opinion; and (c) bear some
degree of rationality and relevance to the
tender or project.’
[24] In
Q Civils
the court, in paragraph 40, referred to
Pelatona
Projects
(
Pty
)
Limited v Phokwane Municipality and 14
others
unreported NCD judgment under Case No. 691/04, para 31,
where it was stated :
‘
. . . objective
criteria must, in my view, be discernable from the information made
available to the decision maker If this is not
the case it would mean
that the decision maker may look at criteria or information which was
never asked from the tenderers. The
decision maker will therefore
look at information other than that put before it. Such a decision
would detract from the fairness
of the process. It may well lead to
subjective factors being taken into consideration. It is well known
that when subjective factors
walk in the door rationality flies out
of the window. The objective criteria justifying the awarding of the
tender to a tenderer
other than the one with the lowest tender should
not cause the process to lose the attributes of fairness,
transparency, competitiveness
and cost effectiveness.’
[25] The
consideration of objective criteria in tender adjudication processes
was clarified in by Wallis JA in
South African National Roads
Agency Limited v Toll Collect
Consortium (‘Tolcon’)
2013 (6) SA 356
(SCA) paras 20-21:
‘
[20] As to
objectivity, which is an aspect of the constitutional requirement
that the public procurement process be fair, it requires
that the
evaluation of the tender be undertaken by means that are explicable
and clear and by standards that do not permit individual
bias and
preference to intrude. It does not, and cannot, mean that in every
case the process is purely mechanical. There will be
tenders where
the process is relatively mechanical, for example, where the price
tendered is the only relevant factor and the competing
prices are
capable of ready comparison. The application of the formula for
adjudicating preferences under the PPPFA may provide
another example.
However, the evaluation of many tenders is a complex process
involving the consideration and weighing of a number
of diverse
factors. The assessment of the relative importance of these requires
skill, expertise
and the exercise of judgment on the part of the
person or body undertaking the evaluation
. That cannot be a
mechanical process. The
evaluator must decide
how to weigh
each factor and determine its significance in arriving at an
appropriate decision. Where that occurs it does not mean
that the
evaluation is not objective.
Provided the evaluator can identify
the relevant criteria by which the evaluation was undertaken and the
judgment that was made
on the relative importance and weight attached
to each, the process is objective and the procurement process is
fair.
[21] Where the evaluation
of a tender requires the weighing of disparate factors it will
frequently be convenient for the evaluator
to allocate scores or
points to the different factors in accordance with the weight that
the evaluator attaches to these factors.
But the adoption of such
a system, without it being disclosed to tenderers in advance, does
not mean that the tender process is
not objective. If anything, the
adoption of the scoring system enhances the objectivity of the
process
, because, in the event of a challenge to the award of the
tender, the basis upon which the evaluation was undertaken emerges
clearly.’
(my emphasis)
[23]
It
would appear that
Tolcon
, in my respectful view, is a discreet
‘claw-back’ from an earlier position which was rooted
firmly to the requirement
of objective criteria, as set out on
Q
Civils
and
Pelatona
.
Tolcon
adopts a balanced
assessment of the complex nature of procurement and an acknowledgment
that it is not always practical to scrutinise
every minute detail of
the process, with the faintest deviation being alleged as a
reviewable irregularity.
Tolcon
is authority for the view that
even if the employer sets the criteria for evaluation, that does not
necessarily make the criteria
less objective. At the same time, it
begs the question who else but the employer or the procuring entity
would be best suited to
establish the criteria it wants bidders to
meet, and who better than the employer to assess whether this
threshold has been met?
The litmus test in procurement cases is to
determine whether the employer, or organ of state as the procuring
entity, acted fairly
in the awarding of the contract and whether
there was equal evaluation of tenders. In
Metro Projects CC and
Another v Klerksdorp Local Municipality and Others
2004 (1) SA 16
(SCA) the court set aside the award by the municipality to the
successful bidder, with Conradie JA stating the following in
paragraph
13:
‘
In the
Logbro
Properties
case
supra
, paragraphs [8] and [9] at
466H–467C, Cameron JA referred to the “ever-flexible duty
to act fairly” that rested
on a provincial tender committee.
Fairness must be decided on the circumstances of each case. It
may
in given circumstances be fair to ask a tenderer to explain an
ambiguity in its tender; it
may
be fair to allow a tenderer to
correct an obvious mistake; it
may
,
particularly in a
complex tender
,
be fair to ask for clarification or details
required for its proper evaluation
. Whatever is done may not
cause the process to lose the attribute of fairness or, in the local
government sphere, the attributes
of transparency, competitiveness
and cost-effectiveness’ (emphasis added).
[24]
It
was submitted by Transnet that the applicants do not take issue with
the conclusions reached in the due diligence investigations
nor have
they shown that any
of those
conclusions are factually incorrect. It is a challenge therefore of
form over substance. The focus of the applicants’
challenge is
that the assessment was performed
after
the
scoring in respect of functionality. One must therefore infer that
the
applicants
would have had no compliant if the due diligence was done as
part
of
the
functionality assessment.
This
however is not feasible for reasons as stated earlier. In
any event,
taken to its conclusion, what this entails is that the applicants
would have been disqualified at the functionality stage,
earlier than
they eventually proceeded to. This gives rise to the question that if
it is found that Transnet ought to have conducted
the due
diligence exercise earlier than it did, and that it had to be part of
the functionality
assessment,
what is the materiality of that deviation (flowing from
Tolcon
)
and what prejudice, if any, did the applicants suffer? On the other
hand, the applicants fail to engage in any manner with the
shortcomings exposed during the due diligence investigation, simply
contending that the exercise was irregular. However, as pointed
out by
counsel for Transnet, in dealing with a high-risk facility such as
the Alrode bulk
fuel depot,
the procuring entity has every right to satisfy itself that not only
does the preferred bidder meet the evaluation in
terms of the
procurement process (‘ticking the
boxes’),
but it must be able to demonstrate its competency to deliver on
performance.
On the
basis of this argument, and folIowing the reasoning in
Rainbow
Civils
I
am satisfied, having regard to the invitation to tender, that the due
diligence investigation carried out by Transnet was not
tainted by
any unfairness to the applicant, nor irregular in the context of the
application of the procurement process, that it
did not constitute a
repeat of
the functionality assessment, and accordingly this ground of the
applicants’ challenge must fail.
[10]
[25]
I
now turn to deal with the aspect of the ‘record’ provided
to the applicants by Transnet, although this was a subsidiary
ground,
belatedly relied on by the applicants. Mr
Tsatsawane
submitted
that when Transnet was asked to furnish the minutes of the meeting of
the Divisional Acquisition Council (‘DAC’)
it was
presumed that they would contain the details of the investigation
carried out by Transnet and the factors that were taken
into account
in arriving at the opinion not to award the contract to the
applicants. What was furnished was a significantly redacted
document.
The second page of the minutes dated 15 August 2018 is redacted to
the extent that only one-eighth of the contents of
the page are
disclosed. It begs the question, irrespective that the applicants did
not frame their notice of motion in terms of
Uniform rule 53, whether
Transnet as an organ of state has acted in a manner that is fair and
transparent when it filed a redacted
‘record’ of the type
that was given to the applicants. When a losing party requests
details as to why it failed to
secure a bid, a responsive organ of
state should disclose as much information as it possibly can, having
due regard to issues of
confidentiality. It must inform the requester
why he or she was found to be deficient or second-best. The actions
of Transnet fell
woefully below that standard. Ms
Annandale
contended that the redacted portions of the minutes refer to
pricing and other confidential aspects, which are of no moment in the
dispute. Moreover, no challenge was raised by the applicants to the
redacted documents with Transnet, which was raised for the
first time
at the hearing.
[26]
The
point emphasised by counsel for the applicants was that the ‘record’
sought from Transnet was not only vital to
the applicants, but also
to the court in assessing from the available information, whether the
actions of Transnet were fair in
the circumstances of the case. No
justification has been advanced by Transnet for so heavily redacting
the minutes, nor has confidentiality
been claimed by any of the other
bidders. At the same time Mr
Tsatsawane
submitted that without
access to the full record or minutes of the DAC meetings, this court
is unable to assess whether Transnet
applied objective criteria in
preferring M&D over the applicants as the successful candidate
for the tender. Ms
Annandale
contended that the applicants
elected not to proceed via Uniform rule 53 and have raised the issue
of a ‘defective record’
only in their heads of argument.
There was no request for the record in terms of Uniform rule 53, but
instead a request in terms
of the Promotion of Access to Information
Act 2 of 2000 (‘PAIA’) in which certain specific
documents (including minutes
of meetings) were requested, including
reasons why the tender was not awarded to the applicants.
[27]
The
minutes of June and August 2018, which are attached in their redacted
form to the founding affidavit, are relevant as they provide
a record
of the findings of the due diligence investigation conducted in terms
of the Uniformity Standard. The minutes (recording
a meeting on 29
August 2018 and signed on 4 October 2018) state, in paragraph 4,
that:
‘
The reason for not
recommending the first rank bidder [the applicants] was not that it
failed the risk analysis, rather the JV could
not demonstrate that it
possesses the skills, competence, resources and capability to perform
on the scope of work as evident by
the due diligence reports
presented.’
The
earlier minutes from June 2018 confirm that reservations were
expressed by those carrying out the due diligence investigation
as to
the capacity and capability of the applicants to carry out the work
forming the scope of works.
[28]
The
investigators carrying out the due diligence further found that the
applicants had a CIDB grading below that required for an
entity
undertaking work for the value of a contract as in the present
matter. The panel ‘unanimously agreed that the joint-
venture
did not demonstrate that it possesses the professional
qualifications, professional technical competence as well as
managerial
capability’. Accordingly, it was found that there
were compelling and justifiable reasons not to recommend the
applicants
for the contract despite them having secured the highest
evaluation points. The minutes further reflect that the applicants
expressed
their disquiet at the procedure being followed by Transnet
and enquired whether this process was also applied to other bidders,
including M&D. Eventually the DAC conducted a due diligence
assessment of M&D. Turning to the minutes of the DAC meeting
on
15 August 2018, it is recorded that a due diligence investigation
would be undertaken in respect of M&D to ensure that the
evaluation process was fair and transparent.
[29]
Mr
Tsatsawane
submitted that this is indicative of a different
set of rules for M&D compared to the applicants who were being
assessed in
terms of their competency and capability to perform in
terms of the contract. Moreover, the minutes themselves record that
the
reports following the due diligence investigation were ‘not
conclusive regarding which contractor is preferable’. It
was
therefore submitted that it is impossible to ascertain what objective
criteria were applied in selecting M&D ahead of the
applicants.
Instead, the minutes of 29 August 2018 note that the applicants were
not recommended as the successful candidate based
on capacity and
capability risks identified. Rather, it is noted that the applicants
‘could not demonstrate’ that they
possessed ‘the
skills, competence, resources and capability to perform on the scope
of works’. Again, this lends credence
to the submission that
the applicants were evaluated on different standards. It bears noting
that Transnet’s letter of rejection
dated 11 October 2018
records that the ‘
Wattpower Prentec Joint Venture did not
demonstrate sufficient capacity and capability to successfully
execute the contract, therefore,
its tender offer could not be
accepted
.’ In addition, it would appear from the minutes
that the due diligence was conducted on the applicants, and only
after the
matter was brought to the DAC did the latter direct that a
similar exercise be performed on M&D. This again raises the
spectre
of different processes applicable to the applicants compared
to M&D.
[30]
In
my view the redacted minutes provided to the applicants was in
response to a
request in
terms of PAIA, and not a request directed in terms of Uniform rule
53.
At
no
stage
prior to the hearing of the matter was the issue of the redacted
minutes raised with Transnet or contended as a ground of
invalidity
in terms of the procurement process. However, as I have stated above,
as an organ of state, Transnet has a duty to act
in a transparent
manner in all matters relating to procurement. This duty does not end
once the contract has been awarded. However,
despite the shortcomings
in their conduct, I am unable to conclude that the failure to furnish
a fuller or un-redacted
version of
the minutes invalidates the procurement process.
[31]
Turning
to the second ground that Transnet acted irregularly and unfairly
when
it
extended the tender validity period, the argument is that even though
the extension was done with the consent of both the applicants
and
M&D, and before the expiry of the period, since the disqualified
bidders
[11]
at that stage had
not been asked for their consent, this was unfair and constitutes a
ground on which the awarding of the tender
must be set
aside. It is clear from the case authorities that a tender period can
be extended, if firstly, the tender data or invitation
made provision
for an extension, and secondly, it is extended
prior
to the
date on which it was due to lapse. Mr
Tsatsawane
placed
much emphasis on the judgment by Southwood J in
Telkom
SA Limited v Merid
Training
(Pty) Ltd and Others; Bihati Solutions (Pty) Ltd v Telkom SA Limited
and Others
(27974/2010,
25945/2010) [2011] ZAGPPHC 1 (7 January 2011), where in paragraph 14
he held:
‘
As soon as the
validity period of the proposals had expired without the applicant
awarding a tender, the tender process was complete
- albeit
unsuccessfully - and the applicant was no longer free to negotiate
with the respondents as if they were simply attempting
to enter into
a contract. The process was no longer transparent, equitable or
competitive. All the tenderers were entitled to expect
the applicant
to apply its own procedure and either award or not award a tender
within the validity period of the proposals. If
it failed to award a
tender within the validity period of the proposals it received it had
to offer all interested parties a further
opportunity to tender.
Negotiations with some tenderers to extend the period of validity
lacked transparency and was not equitable
or competitive.’
[32]
Southwood
J’s approach in
Telkom
has
been followed in a number of decisions
since. In
Joubert
Galpin Searle Inc And Others v Road Accident Fund And Others
2014
(4) SA 148
(ECP) para 66, Plasket J stated that the matter before him
was on ‘all fours’ with that in
Telkom
and
found that an attempt to extend a tender validity period,
after
it had
already expired, was reviewable. This reasoning was followed in this
division in
Ethekwini
Municipality v Mantengu Investments
CC
2020 JDR 0734 (KZD), and
Tactical
Security Services CC v Ethekwini Municipality
2017
JDR 1558 (KZD).
[12]
I agree
with the reasoning in the above cases.
It seems to
me, however, that it is not in dispute that in the present matter the
purported extension of the tender
validity
date occurred
prior
to the
expiry date, and the point of contention is whether the purported
extension was valid despite Transnet failing to request
an extension
from
all
bidders,
and not just those bidders who had been found to be responsive.
[33]
The
issue is whether it was necessary for Transnet to advise
all
bidders
of the
extension,
or whether it was obliged to canvass the views of disqualified
bidders in a ‘race’ where only two responsive
candidates
remained, and in respect of whom such consent was asked and received.
Put differently, did Transnet have any obligation
in
respect of
non-responsive bidders? Mr
Tsatsawane
submits
Transnet was obliged to,
and its
failure to notify
all
bidders
of the extension, lacks transparency. This argument
appears, at
first glance, to be buttressed by Southwood J in
Telkom
,
at paragraph 14,
that
‘[n]egotiations with
some
tenderers
to extend the period of validity lacked transparency and was not
equitable or competitive’.
[13]
[34]
However,
the context in which the above statement was made must be carefully
considered.
The relevant context was that the period of the tender validity had
lapsed,
prior
to
the purported extension of the period of validity (which is not the
case in the present matter). Thus, Southwood J’s statement
does
not necessarily apply to the situation where a tender validity date
has been extended prior to it lapsing. This is a critical
distinction
between
Telkom
and
Joubert
Galpin Searle
and
the facts in the present case. In
Joubert
Galpin Searle
almost
a year after the tender validity period had expired, the Road
Accident Fund (the respondent in that matter) wrote to bidders
to ‘amend
and renew’ their bids. (see paragraph 32 of that judgment). In
the present case, Transnet approached the applicants
and M&D to
extend the validity period
prior
to
expiry.
[14]
[35]
In
Aurecon
South Africa (Pty) Ltd v Cape Town City
2016
(2) SA 199
(SCA) para 23, in circumstances where tenderers who were
found to be ineligible were not asked to extend their tenders, the
court
stated that ‘the complaint relating to the
other
tenderers
has no merit whatsoever for the simple reason that they had
already
been found ineligible
at
that stage and were out of the picture.’
[15]
[36]
The
above comments by the Supreme Court of Appeal in
Aurecon
finds
favour with the argument advanced by Ms
Annandale
who
contended that Transnet had no obligation to consult with the
disqualified bidders as they had no further interest in the awarding
of the tender. Indeed, I put it to counsel for the applicants that
this fact is underscored by the absence of any challenge to
M&D
being awarded the contract. It would appear that the applicants are
raising an argument, essentially on behalf of unsuccessful
bidders,
who have no interest in this matter. There is no prejudice to the
disqualified bidders whatsoever. Mr
Tsatsawane
submits that
this is immaterial. I beg to differ. Even if there is an irregularity
(assuming for one moment that it is found that
Transnet was under an
obligation to engage with disqualified bidders to extend the validity
period) the approach on review is to
enquire into the materiality of
the deviation. Asking the disqualified bidders to extend would have
made no difference to the outcome,
or as Ms
Annandale
submits,
it would have been a pointless exercise. This approach where an
irregularity has been found to exist was set out by the
Constitutional Court in
Allpay Consolidated Investment Holdings
(Pty) Ltd and Others
v Chief Executive Officer, South
African Social Security Agency, and Others
2014 (1) SA 604
(CC)
para 28 where it was stated:
‘
Under
the Constitution there is no reason to conflate procedure and merit.
The proper approach is to establish, factually, whether
an
irregularity occurred. Then the irregularity must be legally
evaluated to determine whether it amounts to a ground of review
under
PAJA. This legal evaluation must, where appropriate, take into
account the materiality of any deviance from legal requirements,
by
linking the question of compliance to the purpose of the provision,
before concluding that a review ground under PAJA has been
established.’
[37]
Another
factor that favours Transnet’s position is that, as a matter of
logic, it appears to be a waste of time and resources
to request a
non-responsive bidder to agree to an extension. As noted in P Bolton
The Law of Government Procurement in South Africa
(2007) at
182:
‘
In the interests
of fairness and transparency (and also competitiveness), an organ of
state should, as a general rule, not consider
tenders that are
“non-responsive”. It should consider only tenders that
comply with the tender specifications.’
[38]
It
was submitted that Transnet’s exclusion from engaging with the
disqualified bidders is justified as regulation 5(6) of
the
Procurement Regulations makes it clear that a tender that fails to
meet the minimum requirements for functionality, is disqualified
from
further participation.
[16]
It
is not considered an ‘acceptable tender’. If that is the
case, what purpose is served by engaging with an entity
which has no
further
interest in
the proceedings and its outcome. On this ground it was submitted that
the present case can be distinguished from the
facts in
Telkom
and
Joubert
Galpin Searle.
Moreover,
as a matter of law, in terms of regulation 5(6) of the Procurement
Regulations once the bidders were disqualified, it
was not competent
for them to consent to the extension of the validity period. Their
bids cannot be resuscitated for any purpose.
For this reason, only
the qualified bidders were engaged on the extension of the validity
period. I can find no reason why this
reasoning can be regarded as
unsound.
[39]
Weighing
up the circumstances of the matter, I am unable to conclude that
either of the legs relied upon by the applicants are meritorious
–
that is, the extension of the validity period without engaging
disqualified bidders and the contention that the due diligence
investigation was not provided for in the tender invitation. Even if
there were merit in these arguments, it does not automatically
follow
that the tender must be set aside. Mr
Tsatsawane
submitted
that in accordance with
Allpay Consolidated Investment Holdings
(Pty) Ltd And Others v Chief Executive Officer, South African Social
Security Agency And
Others
2014 (4) SA 179
(CC), in the event of
this court finding that the awarding of the contract to M&D was
invalid and irregular, a just and equitable
remedy should see the
tender being awarded to the applicants and order a disgorgement of
profits made by M&D in terms of the
contract and that these be
repaid to Transnet. In the event of the scope of work under the
tender being fully completed, the applicants
contend that the matter
should be adjourned to enable the parties to file affidavits as to
what a just and equitable remedy should
be.
[40] Transnet
however argued that the remedy of setting aside is a discretionary
remedy. In
National Energy Regulator of South Africa and Another v
PG Group (Pty) Ltd and Others
2020 (1) SA 450
(CC) para 89 the
court said the following:
‘
The
default remedy for declarations of invalidity of administrative
action is to set aside the invalid action and remit it to the
decision maker for reconsideration. Once a decision has been set
aside, it ceases to have an effect and is treated as if it never
existed. Although this is the default remedy, it remains a
discretionary remedy. As a result, there are certain instances where
setting-aside and non-remittal would be appropriate. The case of
JFE
Sapela Electronics
is a prime example here. In that case, Scott J
reasoned that a remittal would be impractical and disruptive and
accordingly held
that it would be in the interests of finality,
pragmatism and practicality for the invalid action in that case not
to be remitted.
This view was further adopted in
Millennium Waste
Management
.
Oudekraal
has also set out that legality on
occasion may be overridden by these competing considerations.’
[41]
As
will appear from what follows, at the time of the hearing the work in
terms of the contract had all been but completed, with
M&D having
already paid out third parties for their work on the site. Even if
the administrative action is declared invalid,
where there has been a
significant lapse of time before the matter is heard or where there
has been a delay in the institution
of the review application (as
there has been in this case) it does not necessarily follow that a
court will set aside the invalid
action. Scott JA held in
Chairperson, Standing Tender Committee and Others v JFE Sapela
Electronics (Pty) Ltd and Others
2008 (2) SA 638
(SCA)
paras 28-29 that:
‘
In appropriate
circumstances a court will decline, in the exercise of its
discretion, to set aside an invalid administrative act.
As was
observed in
Oudekraal Estates (Pty) Ltd v City of Cape Town
2004
(6) SA 222
SCA para 36 at 246D:
“
It is that
discretion that accords to judicial review its essential and pivotal
role in administrative law, for it constitutes the
indispensable
moderating tool for avoiding or minimising injustice when legality
and certainty collide.”
A typical example would
be the case where an aggrieved party fails to institute review
proceedings within a reasonable time. In
a sense, therefore, the
effect of the delay is to “validate” what would otherwise
be a nullity. See
Oudekraal Estates (Pty) Ltd,
(supra) para 27
at 242E-F. In the present case, as I have found, there was no
culpable delay on the part of the respondents. But
the object of the
rule is not to punish the party seeking the review. Its
raison
d’être
was said by Brand JA in
Associated
Institutions Pension Fund v Van Zyl and Others
2005 (2) SA 302
(SCA) [(2004
4 All SA 133)
in para 46 to be twofold:
“
First, the failure
to bring a review within a reasonable time may cause prejudice to the
respondent. Secondly, there is a public
interest element in the
finality of administrative decisions and the exercise of
administrative functions.”
Under the rubric of the
second I would add considerations of pragmatism and practicality.
[29] In my view the
circumstances of the present case as outlined above, are such that it
falls within the category of those cases
where by reason of the
effluxion of time (and intervening events) an invalid administrative
act must be permitted to stand. While
the court a quo correctly found
that the award of each of the three tenders was invalid when made, it
appears not to have appreciated
that it had a discretion to decline
to set aside those awards. It follows that in my view the court a quo
erred in making the order
it did and this court is free to set aside
that order.’
[42]
Regarding
the applicants’ submission that, in the event that the court
finds that the contract awarded to M&D was invalid
the
proceedings should be adjourned to file written submissions, Ms
Annandale
submitted that this would be a waste of time as a
substantial amount of time has already elapsed since the contract was
awarded.
Even at the stage when the applicants launched their urgent
application (which failed), six months had passed into the contract.
I am in agreement that a bifurcated hearing is not appropriate in
these circumstances, and in any event, for the reasons that follow,
it finds no application in this matter. In any event, it has been
stressed that the remedy in such matters must involve a balancing
of
competing interests
of all parties
– in the case that of
Transnet (not to have its activities disrupted by any late third
party intervention, particularly in
respect of a high-risk activity);
that of M&D which has already completed the works and for all
intents and purposes has ‘moved
on’. It is not certain
what purpose (including monetary) would be served by the awarding of
the contract to the applicants
as this would be entirely moot in
circumstances where all the work has already been completed. Even if
I were to grant a disgorgement
of profits, which is a most drastic
remedy, in whose interest would such an order be made? In
Millennium
Waste Management (Pty) Ltd v Chairperson, Tender Board: Limpopo
Province and Others
2008 (2) SA 481
SCA para 23 it was held that:
‘
The
difficulty that is presented by invalid administrative acts, as
pointed out by this court in
Oudekraal Estates
, is that they
often have been acted upon by the time they are brought under review.
That difficulty is particularly acute when
a decision is taken to
accept a tender. A decision to accept a tender is almost always acted
upon immediately by the conclusion
of a contract with the tenderer,
and that is often immediately followed by further contracts concluded
by the tenderer in executing
the contract. To set aside the decision
to accept the tender, with the effect that the contract is rendered
void from the outset,
can have catastrophic consequences for an
innocent tenderer, and adverse consequences for the public at large
in whose interests
the administrative body or official purported to
act. Those interests must be carefully weighed against those of the
disappointed
tenderer if an order is to be made that is just and
equitable.’
Similarly
in
Serengeti Rise Industries (Pty) Ltd and Another v Aboobaker NO
and Others
2017 (6) SA 581
(SCA) para 19 the court stressed that
‘[r]emedies provided for under s 8 of PAJA and under common law
must be construed as
giving effect to and promoting constitutional
rights’, and cited the comments in JR de Ville J
udicial
Review of Administrative Action in South Africa
(2003) at 331
that ‘[a] finding that the action in question is invalid
(because a ground of review is present) will not necessarily
mean
that the action is to be set aside or declared invalid with
retrospective effect or even at all.’
[43] Mr
van Eetveldt
, for M&D, explained that M&D had been
‘dragged’ into this matter following an urgent
application launched by
the applicants by virtue of relief in the
notice of motion that M&D be subjected to an audit of its
financial affairs, lay
open its financial affairs to investigation
where the applicants seek a disgorgement of profits which it made
under the contract,
as well as an order that it be liable for costs.
M&D was, in light of the above and as the successful bidder of
the contract,
left with no choice but to become embroiled in the
litigation. The bald averment in the founding papers that M&D
should not
be allowed to keep the profits which it has made from the
contract is advanced without a shred of evidence suggesting that it
has
in some manner colluded with Transnet to secure the contract. Nor
for that matter have the applicants been able to point out any
deficiency in the bid submitted by M&D which may have warranted
the contract being awarded to the applicants. For all intents
and
purposes, no further evidence has been produced by the applicants to
dislodge this view, that M&D benefitted from ill-gotten
gains,
even two years after they launched the urgent application in August
2019.
[44]
Mr
van
Eetveldt
firmly
associated himself with the argument of Ms
Annandale
on
the
merits of the matter. With regard to the issue of remedy, Mr
van
Eetveldt
emphasised
that the court in
Millennium
Waste
decided
to keep an unlawful tender in
place
in circumstances where the successful bidder was an innocent party
and there was no suggestion that it was complicit in the
unlawful
activities of the respondent and
that
it had already expended vast sums to pay third parties for work done
on the project. This is on all-fours with the present
case. Relying
on
Millennium
Waste
and
a
host of similar decisions,
[17]
it was submitted that the principle that has emerged is whether it is
just and equitable, in circumstances such as those in the
present
matter,
that
the tender awarded to the successful bidder be allowed to remain in
place.
[45]
Apart
from the issue of disgorgement of profits, at a practical level in
respect of a high-risk facility such as the Alrode Depot
where safety
and construction parameters are critical, if the applicants were to
be instated as the lawful candidate, which entity
would carry the
indemnity in respect of construction work undertaken on the site? The
construction is all but complete. It is not
clear from the papers
what role if any the applicants would assume in respect of the
construction if the contract were to be set
aside. This difficulty is
borne out by the averment in the founding papers where the deponent
states:
‘
Whilst I accept
that a Court hearing a review application is required to formulate a
remedy which addresses the violation of rights
complained of, it
would be difficult, if not impossible, to formulate such a remedy if
the tender has been executed – and
this is even if the relief
which the applicants seek is granted in its entirety’.
In
his replying affidavit to the contention from M&D that this
matter was moot, the deponent contends that M&D have been
drawn
into the dispute to prevent them from benefitting from an unlawful
tender process. Even then, no basis is laid for this far-
reaching
contention.
[46]
Based
on the applicants’ own submission, it recognises the difficulty
in the relief it seeks on the basis that the work in
terms of the
contract has been substantially
completed,
and considerable work had already been done even at the stage when
the
urgent
application was launched in August 2019.
The delay
in bringing the application,
where the
contract was awarded in October 2018, militates against the relief
sought against M&D. No interdict was sought or
obtained to halt
construction at the time of the urgent application. It ought to have
dawned on the applicants at that stage, when
the urgent application
was withdrawn, of the difficulties it would face going forward.
Lastly, as to the reliance by the applicants
on
Allpay
Consolidated Investment Holdings
(Pty)
Ltd And Others v Chief Executive Officer, South African Social
Security Agency
And
Others
2014
(4) SA 179
(CC) (‘
Allpay
II
’)
as authority for the case of disgorgement
of profits,
this is misplaced as if fails to take into account that M&D was
acting as a private entity undertaking construction
works on behalf
of an organ of state. In
Allpay
II
,
Cash Paymaster Services was essentially performing a function of
paying pensions, a function falling squarely within the obligations
of the Department of Social
Security.
Moreover,
as counsel for M&D submitted, and with which contention I agree,
it would
send a chilling message to any private entity contemplating a tender
for work
with an
organ of state if an order for disgorgement or for the financial
affairs of a company were to lay open for ‘investigation’,
were to be granted. Innocent successful
bidders
could, by virtue of such an order, become entangled in litigation in
circumstances where they are without blame.
[18]
[47]
Counsel
for Transnet submitted that the applicants have failed to make out a
case for the declaration of the tender awarded to M&D
as invalid.
For the reasons set out earlier in this judgment I have concluded
that there is no merit in either of the legs advanced
in support of
the argument on the merits – either pertaining to the extension
of the validity period of the tender or the
‘subsequent’
due diligence exercise carried out by Transnet after the applicants
had passed the functionality stage
of the procurement process. That
being the case, Ms
Annandale
submits that costs must follow
the result. This is not a matter where the application has been
brought in the public interest, therefore
the principles in
Biowatch
Trust v Registrar Genetic Resources and Others
2009 (6) SA 232
(CC) find no application.
[48]
As
regards the costs in association with M&D, Mr
van Eetveldt
submitted that costs should be awarded against the applicants on
an attorney-client scale as they dragged M&D into the matter
without any justification whatsoever, seeking far- reaching and
drastic relief against it, where no foundation was laid for such
relief. One is left to speculate as to what may have motivated this
approach. Even on their own papers, as I alluded to earlier,
the
applicants recognised the difficulty in the relief they were seeking
in light of the time which had elapsed when they first
embarked on
the litigation. That ought to have become apparent when the urgent
application was adjourned, where the applicants
conceded that the
matter was not urgent. If the applicants launched their application
in which it was made clear that their dispute
was with the process
followed by Transnet in awarding the contract to M&D, the latter
could simply have avoided the litigation
by filing a notice to abide.
By virtue of the relief sought in the notice of motion, including an
adverse order for costs, M&D
were compelled to join the fray.
Support for the claim for costs can be found in
Normandien Farms
(Pty) Ltd v South African Agency for Promotion of Petroleum
Exportation and Exploitation SOC Ltd and Another
2020 (4) SA 409
(CC) where the court awarded attorney-client costs where it ought to
have been clear to the applicant that their case had become
moot. I
am of the view that this is such a case where the court should show
its disapproval for the manner in which M&D was
unnecessarily
burdened with having to defend itself in circumstances where it had
no role to play.
[49]
In
the result I make the following order:
a. The
application is dismissed with costs, on a party and party scale
including that of senior
counsel in respect of the first respondent,
and costs on an attorney-client scale in respect of the second
respondent, such costs
to include all costs reserved.
M R CHETTY
Appearances
For
the Applicants: Mr
Tsatsawane SC
, with Mr
Chavalala
Mr S Morgan
Instructed
by: HM
Chaane Attorneys Inc
Address: 24
Ridgeside Office Park Umhlanga Rocks
Tel: 031
575 7000
Email:
hope@hmchaane.co.za
and
too
fchristian@wylie.c.za
C/O Shepstone
& Wylie
Ref: HM
Channe/R Seepane/M 00075
For
the First Respondent: Ms
Annadale SC
Instructed
by: Hughes-
Madondo Inc
Address: Unit
7, Level 2
The
centenary Quadrant 1 Umhlanga Rocks
Tel: 031
584 6969
Email:
chanelle@h-m.co.za
For
the Second Respondent: Mr van Eetveldt
Instructed
by: Bennet
Attorneys
Address: 48
Marula Street
Tel: 084
510 2031
Email:
chris.bennett1900@gmail.com
Ref: C
Bennett/M&D/Wattpower
c/o Livingston
Leandy Inc
309
Umhlanga Rocks Drive
Ref: K
Naidoo/ M Mota
Date
of Judgment reserved: 27
August 2021
Date
of delivery: 20
December 2021
[1]
Emphasis added.
[2]
Emphasis added.
[3]
By agreement of the parties and in light of the COVID-19
restrictions in place at the time, the hearing
was
conducted by audio visual means.
[4]
In
Chairperson:
Standing Tender Committee and others v JFE Sapela Electronics (Pty)
Ltd and
others
[2005]
4 All SA 487
(SCA),
para 14 Scott JA said para 14:
‘
The
definition of “acceptable tender” in the Preferential
Act must be construed against the background of the system
envisaged
by section 217(1) of the Constitution, namely one which is “fair,
equitable, transparent, competitive and cost-effective”.
In
other words, whether “the tender in all respects complies with
the specifications and conditions of tender as set out
in the
contract documents” must be judged against these values.’
[5]
The purpose of the method statement, according to Transnet, is to
describe the process pursuant to
which
the bidder proposes to execute and manage the works.
[6]
See CIDB Best Practice Guideline A2: Applying the procurement
prescripts of the CIDB in the Public
Sector
(1002), 5 ed (December 2007).
[7]
See Clause F.1.6.1 of the Standard Conditions of Tender in Annex ‘F’
of the CIDB Standard for
Uniformity
in Construction Procurement July 2015 which reads:
‘
Unless
otherwise stated in the tender data, a contract will,
subject to
F3.13
be concluded with the tenderer who in terms of F3.11 is
the highest ranked or the tenderer scoring the highest number of
tender
evaluation points, as relevant, based on the tender
submissions that are received at the closing time for tenders.’
(emphasis
added).
[8]
Referring to P Bolton
The
Law of Government Procurement in South Africa
at
p.103 where capability
is
treated as a factor relevant to cost-effectiveness.
[9]
G Quinot ‘The Role of Quality in the Adjudication of Public
Tenders’
Potchefstroom
Electronic Law
Journal
2014
(17) 3 at 1110.
[10]
Compare
Nexus
Forensic Services (Pty) Ltd v Minister of Employment and Labour
2020
JDR 2694
(GP).
See further G Quinot ‘The Role of Quality in the Adjudication
of Public Tenders’
Potchefstroom
Electronic
Law Journal
2014
(17) 3 at 1110.
[11]
Those bidders who did not pass functionality.
[12]
See also
Secureco
(Pty) Ltd v Ethekwini Municipality
2016
JDR 0608 (KZD), and, inter alia,
Citiconnect
Business Solutions v City Manager of the City of Tshwane
Metropolitan Municipality NO
.
2015 JDR 0443 (GP);
Nexus
Forensic Services (Pty) Ltd v Minister of Employment and Labour
2020
JDR 2694 (GP), and
Ilex
South Africa (Pty) Limited v National Health Laboratory Service
2021
JDR 0321 (GJ).
[13]
Emphasis added. This contention finds support in
Nexus
Forensic Services (Pty) Ltd v Minister of Employment and Labour
2020
JDR 2694 (GP) para 3.3 in which the court held:
‘
If
it is anticipated that the award of the tender or the signing of the
contract will not take place prior to the expiry of the
bid
[validity] period, the period can be extended. In such a case a
request must be directed prior to the expiry date to
all bidders
who have not yet been disqualified
for their consent to the
extension’ (emphasis added). See also
Pro Khaya JV v The
Nelson Mandela University
2019 JDR 1944 (ECP) which adopted a
similar view.
[14]
See
Joubert
Galpin Searle Inc And Others v Road Accident Fund And Others
2014
(4) SA 148
(ECP)
paras
66-68 which illustrates that the tender validity period was extended
after expiry..
[15]
Emphasis added. See also
Cape
Town City v Aurecon SA (Pty) Ltd
2017
(4) SA 223
(CC) para 20.
[16]
See regulations 5(6) and 5(7) of the Preferential Procurement
Regulations, 2017, GN R32, GG 40553,
January
2017, which are set out below:
‘
(6)
A tender that fails to obtain the minimum qualifying score for
functionality as indicated in the tender documents is
not an
acceptable tender
.
(7)
Each tender that obtained the minimum qualifying score for
functionality must be evaluated further in terms of price and the
preference point system and any objective criteria envisaged in
regulation 11.’
[17]
Chairperson,
Standing Tender Committee and Others v JFE Sapela Electronics (Pty)
Ltd and Others
2008
(2) SA 638
(SCA)
;
Eskom Holdings Ltd and Another v New Reclamation Group (Pty) Ltd
2009
(4) SA 628
(SCA);
Moseme
Road Construction CC and Others v King Civil Engineering Contractors
(Pty) Ltd and Another
2010
(4) SA 359
(SCA) and
Joubert
Galpin Searle Inc And Others v Road Accident Fund And Others
2014
(4) SA 148 (ECP).
[18]
Moseme
Road Construction CC and Others v King Civil Engineering Contractors
(Pty) Ltd and Another
2010
(4) SA 359
(SCA), para 1:
‘
This
appeal concerns the award of a government tender. These awards often
give rise to public concern
–
and they are a fruitful
source of litigation. Courts (including this court) are swamped with
unsuccessful tenderers that seek
to have the award of contracts set
aside and for the contracts to be awarded to them. The grounds on
which these applications
are based are many. Sometimes the award has
been tainted with fraud or corruption, but more often it is the
result of negligence
or incompetence or the failure to comply with
one of the myriad rules and regulations that apply to tenders.
Sometimes the successful
tenderer is to be blamed for the problem,
but then there are cases where he is innocent.
Many
cases are bedevilled by delay, whether in launching the application
(and also because the facts were not readily available
or easily
ascertainable) or because of delays and suspensions inherent in the
appeal procedure. If the applicant succeeds the
contract may have to
be stopped in its tracks with possibly devastating consequences for
government or the successful tenderer
or both. Conversely, if the
works are allowed to be completed, the tenderer that should have
been awarded the tender would
unjustly
be deprived of the benefits of the contract. There are also cases
where the final judgment issues only after completion
of the
contract. It is not necessary to adumbrate further. Tendering has
become a risky business and courts are often placed
in an invidious
position in exercising their administrative law discretion – a
discretion that may be academic in a particular
case, leaving a
wronged tenderer without any effective remedy.’