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2024
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[2024] ZAFSHC 79
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Silver Lake Trading 305 (Pty) Ltd t/a Opulentia Financial Services v Bloemwater (now Vaal Central Water) and Another (4689/2023) [2024] ZAFSHC 79 (20 March 2024)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Reportable:
YES/NO
Of
Interest to other Judges: YES/NO
Circulate
to Magistrates: YES/NO
Case
number: 4689/2023
In
the matter between:
SILVER
LAKE TRADING 305(PTY) LTD t/a
OPULENTIA
FINANCIAL SERVICES
Applicant
And
BLOEMWATER
(now VAAL CENTRAL WATER)
1
st
Respondent
SANKOFA
INSURANCE
2
nd
Respondent
CORAM:
NAIDOO, J et MOLITSOANE, J
HEARD
ON:
20 NOVEMBER
2023
JUDGEMENT
BY:
MOLITSOANE, J
DELIVERED
ON:
20 MARCH 2024
[1]
The applicant seeks an order to review and set aside a decision to
award a short-term insurance
tender to the second respondent,
alternatively to have it declared unlawful and be set aside on that
basis. As a just and equitable
remedy in accordance with section 8 of
the Promotion of Administrative Justice Act, 3 of 2000(PAJA), it
seeks an order that the
tender be awarded to it as well as the order
directing the first respondent to conclude an agreement with it.
[2]
The facts of this case are largely common
cause or are not seriously in dispute. The first respondent
invited
tenders from short term insurance brokers for short term insurance
brokering services as well as supporting services such
as claims
management. The closing date for the tender was 12 May 2023. This
closing date was later extended to 19 May 2023.
[3]
On 11 May 2023 the Bill of Quantities was amended to make provision
for the bidders to submit
bids which covered the extended insurable
interests of the first respondent. This amendment was necessitated by
the incorporation
of Sedibeng Water Boards into the first respondent.
The applicant, the second respondent and five other entities
submitted their
offers. All the bids were evaluated at the first
stage as being responsive except one of Mpumelelo Services. The
second and third
stages of the evaluation dealt with the technical
functionality as well as price and preference.
[4]
On 22 June 2023, Mr Lerato Moeketsi, in his capacity as a member of
the Bid Evaluation Committee
addressed emails, on the version of the
first respondent, to bidders whose arithmetic calculations did not
tally with the Bills
of Quantities as per their schedule. According
to the first respondent, Moeketsi sought confirmation from the
bidders on their
offer as per the price schedule.
[5]
On 30 June 2023 the second respondent was appointed to provide short
term insurance services as
the successful bidder. Having learnt of
the outcome of the bid, the applicant, on 7 August 2023 sought
reasons and confirmation
from the first respondent on whether the
award of the tender was made and specifically whether the second
respondent was the appointed
bidder. The first Respondent responded
the next day as follows:
Your organisation was
indeed unsuccessful in the tender, and the reasons are as follows:
(Italics in keeping with the rest of the quote)
1.
Vaal Central Water (Bloem Water) acknowledges that
Silverlake Trading
305 (Pty) Ltd t/a
Opulentia Financial Services submitted a valid bid for the
aforementioned Bid.
Sankofa
Insurance Brokers was appointed for an appointment amount
R8 655 172,72 (Including VAT) and not R9 247 536,38
as stated in your letter.
3.
The tender was thre
e stage
tender
evaluation process and Silverlake Trading 305(Pty)Ltd t/a Opulentia
Financial Services passed the first 2 stages of the evaluation
process, namely Administrative or Compliance Check (commonly referred
to as Responsiveness) and Technical Evaluation
4.
Silverlake Trading 305 (Pty) Ltd t/a Opulentia Financial Services
thus qualified for the final stage Pricing was however
not the
highest point scoring, when the evaluation committee performed the
price and preference comparison with other bidders.”
[6]
The applicant was not satisfied with the response given and addressed
a further letter on 11 August 2023 in
which it confirmed that the
second respondent had submitted a bid for R9 247 53, but was awarded
a bid which was less by R600 000.00.
The applicant thus sought
clarification as to why the second respondent, as the successful
bidder was appointed for a lesser amount
than that for which it
submitted its bid. The first respondent responded as follows:
“
Vaal
Central Water (formerly Bloem Water) acknowledges that Sankofa
Insurance Brokers price at the time of bid opening was R9 247 536,38.
The
sequence of events to arrive at appointment amount of R8 655 172,72
(Including VAT) was as follows:
·
On the day of opening the price, it
was announced that the price read out from
the
tender summary page are not final and subject to further assessment
of the
form
of offer.
·
During the evaluation process, the following discrepancies was
uncovered.
o There were
inconsistencies in the prices of certain bidders.
o The first
clarity seeking questions was sent on Thursday, 22 June 2023.
o The
response deadline was Friday 26/06/2023 16h00.
·
Upon conclusion of the price assessment and clarification price
and preference calculations was applied and Sankofa Insurance Brokers
was the highest scoring bidder.
On page 1- “TENDER
SUMMARY PAGE” of the tender document the following note is
included: - “Note: This page is
used for tender opening
purposes only. Where there is a discrepancy between this page and the
Form of Offer and Acceptance, the
latter will be taken as the valid
offer.”
[7]
The initial tender specifications dated 4 May 2023 stated that the
“
all risk material damage: fire, expulsion, lightening,
special perils. Earthquake, malicious damage”
upon which
assets the first respondent needed short term insurance was for an
amount of R2 694 013 512.00.
[8]
On 11 May 2023 this amount was increased by
the first respondent when it informed the potential bidders
that the
all-risk sum insured was now R 5 816 973 212.00. It appears that the
reason for the increase was as a result of the sudden
insurable
interest the first respondent obtained by other boards
[1]
.
The record of the decision filed in terms of Rule 53, reveals that
the second respondent’s bid incorporated the first and
the
lower amount for its bid. In this regard. The sum assured was limited
to R2 695 013 512. The applicant contends that this amount
was too
low as the second respondent had to provide a bid for almost double
the amount referred to in the record of the decision.
For this
reason, the applicant contends that the second respondent had
submitted a non-responsive bid.
[9]
Section
217(1) of the Constitution lays down that when an organ of state
contracts for goods and services, it must do so in accordance
with a
system which is fair, equitable, transparent, competitive and
cost-effective. The starting point is the acceptance that
the tender
process
constituted
administrative action which entitles the tenderers to a lawful and
procedurally fair process and outcome.
[2]
[10]
Section 217(2) of the Constitution allows organs
of State to implement a preferential procurement policy.
The Court in
Airports
Company South Africa SOC Ltd v Imperial Group Ltd & others
[3]
said the following;
‘
[64] The general
rule under s 217 of the Constitution is that all public procurement
must be effected in accordance with a system
that is fair, equitable,
transparent, competitive, and cost-effective. The only exception to
that general rule is that envisaged
by s 217(2) and (3). Section
217(2) allows organs of the state to implement preferential
procurement policies, that is, policies
that provide for categories
of preference in the allocation of contracts and the protection and
advancement of people disadvantaged
by unfair discrimination. Express
provision to permit this needed to be included in the Constitution in
order for public procurement
to be an instrument of transformation
and to prevent that from being stultified by appeals to the guarantee
of equality and non-discrimination
in s 9 of Constitution. The
freedom conferred on organs of state to implement preferential
procurement policies is however circumscribed
by s 217(3), which
states that national legislation must prescribe a framework within
which those preferential procurement policies
must be implemented.
The clear implication therefore is that preferential procurement
policies may only be implemented within a
framework prescribed by
national legislation….’
[11]
In my view, this application stands to be decided on two grounds of
review. The first ground is that the
tender data did not confer upon
the first respondent the power to correct any arithmetical errors on
the submitted bids. Allied
to this ground is that the applicant
submitted a cheaper bid and ought to have been awarded the tender.
The second ground relied
upon is that the second respondent submitted
a non-responsive bid and thus should not have been granted the
tender.
[12]
As can be gleaned from the above, the facts of this application are
largely common cause or are not seriously
in dispute. The tender
evaluation process was a three-stage process, namely, the first stage
being for responsiveness and eligibility,
the second being for
technical functionality and lastly, for price and preference.
[13]
According to the first respondent, during the
bidding process, it was established that the arithmetical
calculations of some of the bidders did not tally with those carried
out by the BEC. The fist respondent avers that the second
respondent
was one of such bidders. The evidence reveals that the first
respondent then recalculated the bid of the first respondent.
The
second respondent was then called upon to confirm the correctness of
the calculations by the first respondent.
[14]
The first respondent contends that it had reserved itself the right
to seek all information that would enable
it to effectively evaluate
a tender. In this contention, it relies on clause 1.6 of the
“invitation to tender” SBD
6.1) which provides as
follows;
“
The
organ of state reserves the right to require of a tenderer, either
before a tender
is adjudicated or at any time subsequently, to sustainable any claim
in regard to preferences, in any manner required by the organ
of
state”
[15] In
this regard, on 22 June 2023 Lerato Moeketsi addressed an email
[4]
to the second respondent and informed it as follows:
“
The
following arithmetic calculations were made on the tender document
(Price Schedule) as part of the due diligence process performed
for
the above-mentioned project.
1.
The total bid amount of R9 247 536,38 does not correspond with
the bill of quantities(BOQ) total of R8 655 172,72 as calculated by
the employer (Bloem Water). The bill of Quantities is R592 363,66
lower than the form of offer amount.
As
checked and verified by the Employer, advise if the changes must be
effected by the employer….”
[16]
The undisputed fact is that both the first page of the tender as well
as the price schedule indicated that
the second respondent had
tendered for a yearly premium of R9 247 536.38. There was
no inconsistency or arithmetical
error on the first page of the bid
of the first respondent and its offer and acceptance. In my view,
having recalculated the bid
of the second respondent and affording
the second respondent to accept the tender so recalculated,
impermissibly allowed the second
respondent to vary its bid. The
contention that clause 1.6 of the SBD1 entitled the first respondent
to seek ‘clarity’
in respect of the price is misplaced.
There was no need to seek any clarity. There simply was no
arithmetical error.
[17]
The first respondent further submits in the Heads of Argument that
“the reference to “preferences”
refers to the
categories that the bids would be allocated preferential points,
i.e., “price and specific goals”. I
am unable to agree
with the contention by the first respondent. The contention that
‘preference’ points in this regard
also includes ‘price’
is incorrect. The words ‘preference’ and ‘price’
are used disjunctively
at the third stage of the evaluation process.
I agree with the contention by the applicant that SBD6.1 could not
have intended
that a bidder be afforded an opportunity to
ex post
facto
correct the price it submitted.
[18]
In my view, the first respondent did not reserve for itself the right
to correct errors in the bids. Its
recalculation of the tender of the
second respondent in the absence of a discrepancy between the first
page of the tender document
and the offer and acceptance and
affording the first respondent an opportunity to accept the
recalculation without the necessary
authority reserved in the tender
data amounted to impermissibly exercising the power it had not
reserved for itself. There is further
no evidence of further
evaluation of the tenders in light of the so-called correction of the
purported arithmetical error. The
recalculation or ‘correction’
by the first respondent and the failure to subject the process to a
further evaluation
process trumped the fairness concept inherent in
the process of bidding. This in my view constitutes a good ground of
review as
provided for in s6(2)(a)(i) of PAJA. It is unnecessary in
my view to deal with the other ground of review as the first ground
is
dispositive of this application.
[19]
The applicant urges us, relying on s8(1)(c)(ii)(a) of PAJA), to
substitute the decision of the first respondent
with one in terms of
which it is declared the successful bidder. It is contended that, it
is apparent that only the applicant and
the first respondent
submitted responsive bids. Thus, so it is submitted, once the second
respondent leaves the stage, the applicant
becomes the ‘last
man standing.’
[20]
On the other hand, the first respondent has contended that the
applicant does not present any exceptional
circumstances and further
the order it seeks is not just and equitable. In amplification of its
submission, it has raised a number
of reasons why it holds that the
order sought is not just and equitable. According to the first
respondent, the only remedy that
is just and equitable would be to
suspend the declaration of invalidity made, for a period of six
months to permit the first respondent
to remedy any defects in the
procurement process while during the said period, the first
respondent will continue to receive the
services it sought.
[21]
With regard to the proper approach in seeking a just and equitable
remedy, the following was stated in
Steenkamp
NO v Provincial Tender Board, Eastern Cape
[5]
:
“
It goes without
saying that every improper performance of an administrative function
would implicate the Constitution and entitle
the aggrieved party to
appropriate relief. In each case the remedy must fit the injury. The
remedy must be fair to those affected
by it and yet vindicate
effectively the right violated. It must be just and equitable in the
light of the facts, implicated constitutional
principles, if any, and
the controlling law. It is nonetheless appropriate to note that
ordinarily a breach of administrative justice
attracts public-law
remedies and not private-law remedies. The purpose of public-law
remedy is to pre-empt or correct or reverse
improper administrative
function…Ultimately the purpose of a public remedy is to
afford the prejudiced party administrative
justice, to advance
efficient and effective public administration compelled by
constitutional precepts and at a broader level,
to entrench the rule
of law.”
[22]
The Constitutional Court in
Allpay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer, South African Social Security Agency and
others
[6]
said the following with reference to
Steenkamp
case quoted above:
“
[29] ….
The emphasis on
correction and reversal of invalid administrative action is clearly
grounded in section 172(1)(b) of the Constitution,
where it is stated
that an order of suspension of a declaration of invalidity may be
made “to allow the competent authority
to correct the defect.”
Remedial correction is also a logical consequence flowing from
invalid and rescinded contracts and
enrichment law generally.
[30] Logic, general
principle, the Constitution and the binding authority of this Court
all point to a default position that requires
the consequences of
invalidity to be corrected or reversed where they can no longer be
prevented. It is an approach that accords
with the rule of law and
principle of legality”. (footnotes omitted)
[23]
PAJA is the constitutionally mandated legislation that seeks to give
effect to the Constitutional right to
‘just administrative
action’. Section 8(1) (c) (ii)(aa) of PAJA empowers the courts
in review matters to make just
and equitable orders. To this end, the
court may substitute or vary administrative actions or correct a
defect which results from
the administrative defect which results
from the administrative action in exceptional circumstances.
[24]
The Constitutional Court in
Trencon
Construction (Pty) Ltd v Industrial Development Corporation of South
Africa Ltd
[7]
observed that “in administrative review in the context of s8(1)
of the PAJA and the wording under subs (1) (c)(ii) (aa) make
it
perspicuous that substitution remains an extraordinary remedy.
Remittal is still almost always the prudent and proper course.”
[25]
Trencon
formulated the test for exceptional circumstances as
follows:
“…
The first
is whether a court is in as good a position as the administrator to
make the decision. The second is whether the decision
of an
administrator is a foregone conclusion. These two factors must be
considered cumulatively. Thereafter, a court should still
consider
other relevant factors. These may include delay, bias or the
incompetence of the administrator. The ultimate consideration
is
whether a substitution order is just and equitable. This will involve
a consideration of fairness to all implicated parties...”
[26]
I am unable to agree with the applicant that a proper case has been
made out for a substitution order.
While due weight must be accorded
to the two factors enumerated in paragraph 23 above, it has to be
borne in mind that the concept
of fairness must permeate the tender
process implicating the parties. The applicant relies heavily on the
fact that a case has
been made out to satisfy the two requirements of
Trencon
as well as the delay in remitting the matter back to
the first respondent. This submission loses sight of the fact that in
this
case, it is the first respondent which on its own accord,
decided to recalculate and thus in a way amended the tender of the
second
respondent and called upon it (the second respondent) to
accept it.
[27]
The second respondent was aware of the tender amount of the
applicant. I would be surprised if the
second respondent did not jump
at the opportunity when called upon to accept the reduced amount of
the tender offered in view of
its knowledge of the tender amount of
the applicant. Had it not been for the first respondent reducing the
tendered amount of the
second respondent, the second respondent would
in all likelihood not have been granted this tender. It is the
conduct of the first
respondent which enticed the second respondent
to accept the recalculation and thus “submission” of the
amount it had
not tendered for. The second respondent tendered for R9
247 536.38 and not for R8 655 172.72 as recalculated by the first
respondent.
In my view, fairness would dictate that since the
invitation to accept the lowered bid did not emanate from it but from
the employer,
the just and equitable order would be one requiring
remittal to the employer as opposed to substitution. Playing fields
must be
levelled for all and sundry to compete on equal grounds.
Remittal of this matter to the first respondent will be just and
equitable
under these circumstances.
[28]
The first respondent indicated, and it is not
in dispute, that both the applicant and the second respondent
passed
the first two stages of the three-stage tender evaluation process,
and that but for the amended tender amount, the second
respondent may
not have been awarded to tender. Therefore, the stage at which the
applicant was disqualified was the third stage.
It would be just and
equitable and in the interests of all parties concerned for the third
stage to be re-valuated on the original
figures submitted by the
applicant and second respondent.
[29]
The second respondent did not oppose the application and consequently
there can be no justification for a cost
order against it. With
regard to the first respondent, there is no reason why costs should
not follow the cause. I accordingly
make this order:
ORDER
1.
The applicant’s non-compliance with this court’s rules
related to time periods and service
is condoned and the application
is heard as an urgent review application in accordance with the
relevant provisions of rule 6(12),
read with Uniform Rule 53;
2.
The first respondent’s decision to declare as acceptable the
second respondent’s bid related
to Contract: BW241/HO/STI/23:
Request for proposal: Provision of short-term insurance for a period
of 36 months
,
is reviewed and set aside;
3.
The first respondent’s decision to award the tender to the
second respondent is reviewed and set
aside;
4.
The service level agreement concluded between the first and second
respondent is struck down,
subject to
the date of such striking down and cancellation of the said agreement
being suspended for a period of Forty-Five (45)
days as envisaged in
paragraph 5 below;
5.
The matter is remitted to the first respondent for the latter
to reconsider stage three of tender
process for securing of
short-term insurance for its assets as envisaged in
Contract
BW241/HO/STI/23
, namely, the Price and Preference stage. Such
process shall be completed within Forty-Five (45) days of the
granting of this order;
6.
The First Respondent shall be liable for the costs of this
application.
P.
E. MOLITSOANE, J
I
agree
S
NAIDOO, J
For
the applicant:
Adv.
S. Globler SC
Instructed
by:
Peyper
Attorneys
Bloemfontein
Ref:
Sonel
Pienaar
For
the respondents:
Adv.
N. Mahlangu
Instructed
by:
Phatsoane
Henney Attorneys
Ref
26999/MLO
Bloemfontein
[1]
Sedibeng
Water Vaal Gamagara; Sedibeng Namakwa and Sedibeng Water Free State.
[2]
Logbro Properties CC v Bedderson NO and others (372/2001)[2002]
2ASCA 135;
[2003] 1 All SA 424
(SCA) (18 October 2002).
[3]
2020(4) SA17(SCA).
[4]
ROD
page 120.
[5]
2007(3)
SA 121(CC) at para 29.
[6]
[2014]
ZACC 12
;2014(4) SA 179(CC);2014(6) BCLR 641(Allpay 2) paras 29 and
30.
[7]
2015(5)
SA 245(CC) at para 42.