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[2023] ZAFSHC 325
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Fezi Consultants and Auditors (Pty) Ltd v Centlec (SOC) Ltd (1381/2022) [2023] ZAFSHC 325 (15 August 2023)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE STATE
DIVISION, BLOEMFONTEIN
Case
Number: 1318/2022
In
the matter between: -
FEZI
CONSULTANTS AND AUDITORS (PTY) LTD
APPLICANT
and
CENTLEC
(SOC) LTD
1
ST
RESPONDENT
MAKOMOTA
INVESTMENT HOLDINGS (PTY) LTD
2
ND
RESPONDENT
CORAM:
MBHELE, DJP
et
DANISO, J
JUDGMENT
BY:
MBHELE,
DJP
HEARD
ON:
15 MAY 2023
DELIVERED
ON:
15
AUGUST 2023
[1]
The applicant (Fezi) seeks and order reviewing and setting aside the
decision by the first respondent
(CENTLEC) to appoint the second
respondent (Makomota) as the successful bidder. On 7 May 2021 CENTLEC
requested proposals from
suitable and qualified service providers to
perform the task on behalf of CENTLEC to compile an Infrastructure
Fixed Asset Register.
Ten (10 Bidders submitted bids including Fezi.
Fezi’s is one of unsuccessful bidders.
[2] The
following were Technical Specifications for the tender accompanied by
a summary of the infrastructure
Fixed Asset Register value:
‘
4.
TECHNICAL SPECIFICATION
4.1.
Develop the verification and condition assessment methodology (using
a sliding scale) which should
be submitted to the Management, Auditor
General and National Treasury for approval.
4.2.
Perform a physical verification (and update / include GIS shape
files) of all additions
of electricity infrastructure assets,
per the entity’s Fixed Asset Register and updated periodically
during financial year
under review.
4.3.
Perform a condition assessment of each item of electricity
infrastructure assets listed
per the entity’s Fixed Asset
Register.
4.4.
The team should be available, after the assignment, to assist in
addressing Audit queries
based on the valuations that they have
performed.
4.5.
Draft the required adjusting journals to account for changes arising
from the asset related
process (e.g. Depreciation, Disposals, Work in
Progress).
4.6.
Compile a detailed working paper file with sufficient support for all
adjustments make
to the Fixed Asset Register.
4.7.
Summary of the Infrastructure Fixed Asset Register value:
Description
Closing
balance 2019/2020 Value
HV
Civil
R
160, 656,950.87
HV
Conductors
R
442,235,069.33
HV
Equipment
R
131,197,467.90
HV
Towers
R
894,518,539.90
HV
Transformer
R
278,802,483.42
Load
Control Equipment
R
2,896,114.48
LV
Conductors
R
1,251,126,260.88
LV
Service Connections
R
28,334,830.20
LV
Service Distribution Box
R
190,943,127.55
Meter
R
68,715,279.25
Poles
R
450,906,855.53
Battery
Chargers
R
29,567,650.85
MV
Conductors
R
1,130,245,766.67
Load
Centers
R
332,869,736.84
MV
Substation Building
R
60,712,986.31
Overhead
Line Equipment
R
30,861,032.51
Protection
Metering Equipment
R
33,415,990.25
Quality
of Supply
R
1,902.795.72
Street
Lights
R
75,324,104.62
Switchgear
R
749,557,058.60
R
6,344,790,101.00
4.8.
The work in progress will need to be inspected and any completed
projects need to be componentized and capitalized as additions.
4.9.
Disposals/scrapped assets will need to be identified and ensure that
the correct accounting treatments is applied to these items.’
[3]
Paragraph 4.2 above shows that the bidders were
required to
perform a physical verification
and update of all additions of electricity infrastructure assets, per
the entity’s Fixed Asset
Register and update same periodically
during financial year under review. One of the conditions of the
tender was that the request
for proposal contract price shall be for
a fixed price and tenderers were required to complete a precast
pricing schedule. The
precast schedule made provision for four
constituencies of services to be rendered as tabulated below:
‘
7.
PRICING SCHEDULES
The contract price(s)
shall be a fixed priced.
The pricing should be
based on the Annexures attached.
DESCRIPTION
ELECTRICAL
INFRASTRUCTURE ASSETS
Unit
of Measure
Price
in Rand (Excluding VAT) Year 1
Price
in Rand (Excluding VAT) Year 2
Price
in Rand (Excluding VAT) Year 3
Verification
of additions
Condition
Assessment per asset
•
GPS
co-ordinate per asset
Per
Asset
10
Identification
of assets:
Barcode
assets per CENTLEC requirement
Per
Asset
Accounting
Journals
for all adjustment relating to the assets in line with the
applicable GRAP standards
Once
off
Record
all assets in the Fixed Asset Register of CENTLEC as per current
componentisation
Once
off
Table
3 – Pricing Schedule
[4]
From the above table it is clear that bidders were required to quote
fixed prices according to the
price schedule provided i.e. rand and
cents. Under item 4 of the pricing schedule, which item required a
once off amount, Fezi
quoted that
price
in rand is included in the price per asset. This is the item in terms
of which bidders were required to record all assets
in the Fixed
Asset Register per componentisation. Item 1 and 2 of the bid required
verification and identification of assets. As
per the bid
specification, only additions to the Fixed Asset Register required
verification and identification.
[5]
Fezi’ s bid was disqualified at the second stage of evaluation
(Price and BEE stage). The main reason
advanced was that Fezi did not
quote a fixed price for the task of recording all assets in the Fixed
Asset Register.
[6]
Fezi submits that it should have been awarded the tender and contends
that CENTLEC elevated form over
substance when it evaluated its
tender in that its bid was the most cost effective and would have
saved public funds. Fezi further
submits that the technology it uses
would, in the natural course of executing the other components of the
deliverables, automatically
generate the required register of
assets. It submits that it would not charge CENTLEC for item 4
as it would have been covered
in price per asset charged under item
2.
[7]
CENTLEC’s case is that Fezi’s entire bid pricing is
predicated on the wrong notion that bidders
had to compile a Fixed
Asset Register from scratch. CENTLEC submits that items 1 and 2 of
the pricing schedule do not relate to
the total number of the current
assets, they relate to additions to the Fixed Asset Register while
item 4 relates to both additions
as well as total number of current
assets.
[8]
The applicant’s grounds of
review as predicated on the provisions of the
Promotion
of Administrative Justice Act 3 of 2000 (PAJA)
are
that the impugned decision -:
8.1
was taken arbitrarily or capriciously;
8.2
was taken because irrelevant consideration was
taken into account and/or because relevant consideration was
not
taken into account;
8.3
is not rationally connected to the purpose for which it
was taken, treason (sic) given for it by the administrator.
[9] Fezi’s
calculation of bid pricing was based on verification and
identification of
1 030 501 assets
provided by
CENTLEC as per its existing Fixed Asset Register. The above is more
apparent from the comments on the footnote of Fezi’s
pricing
schedule where the following was said:
‘
Note:
The pricing schedule
provided in the bid tender document and the number of assets provided
by Centlec do not match, therefore, should
Fezi be successful in the
awarding of this request the alignment of the factors can be
negotiated as provided in Municipal Financial
Management Act.
*****Number of Assets
for Year 2 and Year [sic] was not provided, however for the purpose
of bidding processes we assume the number
of assets will remain
constant
.
******Year 2 and year
is based on a flat rate, however due to the uncertainties of the of
the economic [sic] can be increased based
on the real interest rates
[sic].’
[10]
The above comment is a clear indication that Fezi’s bid did not
meet the requirements set out under
technical specifications. As a
result of the wrong premise from which Fezi calculated its pricing on
items 1 and 2 it became difficult
to quote for year 2 and 3. Fezi’s
response on item 4 is also not in line with the bid instructions.
CENTLEC, further submits
that Item 4 of the pricing schedule required
of the successful bidder to update the existing Fixed Asset Register
and make sure
it is compliant with the GRAP standards. This exercise
would require the successful bidder to produce a GRAP compliant
register
which would account for depreciation for each asset as well
as disposals.
[11] Section
217(1) of the Constitution
[1]
provides that an organ of state contracting for goods or services
must do so in accordance with a system which is fair, equitable,
transparent, competitive and cost-effective. Section 1 of the
Preferential
Procurement Policy Framework Act
[2]
(PPPFA) defines an acceptable tender as any tender which, in all
respects, complies with the specifications and conditions as set
out
in the tender document.
[12]
In
Chairperson,
Standing Tender Committee and Others v JFE Sapela Electronics and
Others
[3]
the
Supreme Court of Appeal had this to say about an “acceptable
tender”:
“
An
'acceptable tender' in turn is defined in s 1 as meaning 'any tender
which, in all respects, complies with the specifications
and
conditions of tender as set out in the tender document'. It is
well established that the legislature and executive in
all spheres
are constrained by the principle that they may exercise no power and
perform no function beyond those conferred upon
them by law. This is
the doctrine of legality. ….. The acceptance by an organ of
State of a tender which is not 'acceptable'
within the meaning of the
Preferential Act is therefore an invalid act and falls to be set
aside. In other words, the requirement
of acceptability is a
threshold requirement.
…
What
the Preferential Act does not permit a tenderer to do is in effect
omit from his tender a whole section of the work itemized
in the bill
of schedules and required to be performed. A tenderer who is
permitted to do this has an unfair advantage over competing
tenderers
who base their tenders on the premise, inherent in the tender
documents, that all the work itemized in the schedule of
quantities
is to be performed. Whether work may later be omitted is of no
consequence. What is imperative is that all tenderers
tender for the
same thing. By tendering on the basis that certain work will not be
required a tenderer is able to reduce his price
to the detriment of
other tenderers, and almost certainly also to the detriment of the
public purse since he is likely to load
other items to the detriment
of the employer. Such a tender offends each of the core values which
s 217 (1) of the Constitution
seeks to uphold. It would not be a
tender which is ‘acceptable’ within the meaning of the
Preferential Act.”
[13]
In
Sapela
above
one of the tenderer’s bid was found to have been unresponsive
because the tenderer misunderstood 2 items in the schedule
as it is
the case with the current matter. Tenderers are expected to
comply with the set criteria for the tender in order
to promote
fairness, competitiveness, equity and transparency. The Bid
evaluation committees are not at liberty to deviate from
the
conditions of a tender and the law governing procurement in
their quest to accommodate mistakes committed by competing
bidders.
See also
Dr
JS
Moroka
Municipality & Others v Bertram (PTY) Limited & Another
[4]
where
it was said:
‘
A
bid that does not satisfy the necessary prescribed minimum qualifying
requirements simply cannot be viewed as a bid ‘validly
submitted’. Moreover, the tender process consists of various
stages: first, examination of all bids received, at which stage
those
which do not comply with the prescribed minimum standards are liable
to be rejected as invalid; second, the evaluation of
all bids
‘validly submitted’ as prescribed in clause 3; and third,
a decision on which of the validly submitted bids
should be accepted.
The fact that all bids validly submitted are to be taken into
consideration as set out in clause 3.1 affords
no discretion to
condone and take into account bids not validly submitted but
disqualified.
[16]
In these circumstances it is clear that there was no discretion to
condone a
failure to comply with
the prescribed minimum prerequisite of a valid and original tax
clearance certificate. That being so, the
tender submitted by the
first respondent was not an ‘acceptable tender’ as
envisaged by the Procurement Act and did
not pass the so-called
‘threshold requirement’ to allow it to be considered and
evaluated. Indeed, its acceptance would
have been invalid and liable
to be set aside – as was held by this court in Sapela
Electronics. On this basis the appellants
were perfectly entitled to
disqualify the first respondent’s tender as they did.
[17]
As a last line of defence, so to speak, the first respondent argued
in the alternative that for
reasons of public policy its tender ought
not to have been disqualified but should have been evaluated. This
argument was founded
essentially on the fact that it was lower than
that of Eldocrete and the statement in Millennium Waste Management
that: ‘(O)ur
law permits condonation of non-compliance with
peremptory requirements in cases where condonation is not
incompatible with public
interest and if such condonation is granted
by the body in whose favour the provision was enacted (SA Eagle
Insurance Co Ltd v
Bavuma)’.
[18]
The first respondent’s argument on this issue faces a
fundamental difficulty. The decision
in SA Eagle Insurance Co Ltd v
Bavuma, referred to as authority for the proposition in the dictum in
Millennium Waste Management
quoted above that condonation can be
granted where it is not inconsistent with public policy, related to a
statutory provision
enacted for the specific benefit of an individual
or body. It was held that such a benefit may be waived by that
individual or
body provided that no public interests were affected
thereby and that it was not open to another person, whom the statute
was not
intended to benefit, to insist that the provision be
observed. In my view, that does not support the proposition that, if
it is
not inconsistent with public policy, non-compliance with a
peremptory requirement of a tender can be condoned so that a tender
which is ‘unacceptable’ as envisaged by the Procurement
Act may be accepted. Not only is such a proposition inconsistent
with
the decision of this court in Pepper Bay – a decision regularly
followed and approved, including in Millennium Waste
Management –
but it also offends the principle of legality, as emphasised by this
court in Sapela Electronics. Accordingly,
in my respectful view,
insofar as the judgment in Millennium Waste Management may be
construed as accepting that a failure to comply
with the peremptory
requirement of a tender may be condoned by a municipal functionary
who is of the view that it would be in the
public interest for such
tender to be accepted, it should be regarded as incorrect.’
[14] Having
regard to the tender documents and bids submitted it is clear that
Fezi misunderstood the requirements
of the tender hence its non-
responsive pricing. Fezi has failed to meet the set pre-qualifying
criteria and its bid was thus correctly
rejected. There was nothing
ambiguous with what bidders had to comply with. Makomota submitted a
bid that is in compliance with
the set requirements. The application
ought to fail. There is no reason to deviate from the general rule
that costs follow the
event.
[15]
Therefore the following order is made:
1.
The application is dismissed with costs.
2.
Costs to include that of counsel
N.M. MBHELE, DJP
I concur
N.S. DANISO, J
Appearances:
Counsel
for the Applicant:
Adv.
W.A. Van Aswegen
Instructed
by :
Symington
and De Kok Attorneys
BLOEMFONTEIN
Counsel
for the First Respondent:
Adv.
D.R Thompson
Instructed
by:
Raynard
& Associates INC.
BLOEMFONTEIN
[1]
Constitution
Act No, 108 of 1996.
[2]
Act
No, 5 of 2000.
[3]
2008
(2) SA 638
(SCA)
para 11 &14.
[4]
[2014]
1 All SA 545
(SCA)
para 15 -18.