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[2022] ZAFSHC 289
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HT Pelatona Projects (Pty) Ltd v Tswelopele Local Municipality and Others (A62/2022) [2022] ZAFSHC 289 (13 October 2022)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: A62/2022
Reportable:
YES
Of
Interest to other Judges: NO
Circulate
to Magistrates: NO
In
the matter between:
HT
PELATONA PROJECTS (PTY) LTD
Applicant
And
TSWELOPELE
LOCAL MUNICIPALITY
First
Respondent
NSM
PROFESSIONAL SERVICES AND GENERAL
PROJECTS
(PTY) LTD
Second
Respondent
[as
joint venture partner of NSM Professional Services
and
General Projects JV Tamane Civils]
TAMANE
CIVIL CONSTRUCTION (PTY) LTD
Third
Respondent
[as
joint venture partner of NSM Professional Services
and
General Projects JV Tamane Civils]
CORAM:
MATHEBULA,
J
et
MOLITSOANE,
J
HEARD
ON:
08
AUGUST 2022
JUDGMENT
BY:
MATHEBULA,
J
DELIVERED
ON:
This
judgment was handed down electronically by circulation to the
parties' representatives by email and by release to SAFLII on
13
OCTOBER 2022. The date and time for hand-down is deemed to be on 13
OCTOBER 2022 at 14H30.
Introduction
and relief sought
[1]
The applicant seeks, on review, to declare as unlawful and set aside
certain decision
made by the first respondent. There are other
ancillary orders sought as well. The discontent of the applicant
emanates from the
appointment made by the highest decision making
body of the first respondent on 26 February 2022. The grounds for
review are dealt
with sufficiently in the founding affidavit. The
first respondent is opposing the application while the second and
third respondents
abide the decision of the court.
[2]
On 23 May 2022 the applicant approached the court on an urgent basis
for an interim
interdict before Daffue J. It was granted and the
costs related thereto remains an issue that will be dealt with later
in this
judgment. The notice of motion issued on 27 May 2022 was
subsequently amended to incorporate the prayer to declare and set
aside
the contract entered into by and between the respondents. The
amendment, we presume, was necessitated by the receipt of the full
record of the decision which brought to the fore more facts and
concomitant further grounds for review.
Facts
[3]
Sometime in January 2022, the first respondent, a municipality duly
constituted in
terms of the governing laws published a notice for bid
number SCM/TSW/11/2021-2022 for the refurbishment of the sewer pump
station
at Phahameng Township, Bultfontein. The requirements and
closing date are set out in the copy of the advertisement annexed to
the
founding affidavit
[1]
. It is
common cause that the applicant, second and third respondents
submitted bids.
[4]
The Bid Evaluation Committee (BEC) of the first respondent evaluated
the bids in accordance
with the specifications contained in the bid
invitation as well as the applicable points system. The other
important factor considered
was the ability of the bidder to execute
the contract. At the end of its meeting held on 16 February 2022 it
submitted its report
and recommendations to the Bid Evaluation
Committee (BAC) for the award of the bid
[2]
.
The second and third respondents, as a joint venture, were named the
preferred bidders. The applicant was named the second preferred
bidder. The budget of the first respondent for the works was set at
R7 million. The bid of the successful bidder was R11 081
891.96
while that of the applicant was R15 652 851.29. Both of
them were over the budget in varying amounts.
[5]
The bid committee system provides that the BAC may be required to
make recommendations
therein to the municipal manager for the award
of the bid. In this matter, it was in agreement with the
recommendations of the
BEC as recorded in the minutes of its meeting
held on 25 February 2022. The appointment of the successful bidder
was conveyed as
such in the letter from the municipal manager dated
21 February 2022. The decision was sanctioned by the Executive
Committee of
the first respondent. Although the date of the
letter from the municipal manager precede the date of the meeting of
the BAC,
none of the parties raised any issue around it. The court
does not express any opinion on this apparent anomaly whether it
constitutes
an irregularity or it is a plain error. For the purpose
of this judgment the court will shy away from discussing the powers
of
the municipal manager in the event he/she disagrees with these
committees.
[6]
Clearly dissatisfied with the outcome, the applicant readied itself
for challenging
it. Sensing that there might be some irregularities
committed, the applicant requested documents and records and reasons
that informed
the decision. These were set out in the letter to the
first respondent dated 24 February 2022. The response of the first
respondent
in a letter dated 1 March 2022 specifically pointed out
that the applicant was the second preferred bidder and that the Broad
Based
Black Economic Empowerment Certificate (BBBEE) annexed for the
purpose of the bid had already expired on 31 December 2021. It was
also mentioned that the certificate could not have made a difference
in the final adjudication of the bid and the first respondent
could
not accept any documents after the closing date of the bid which was
on 26 January 2022.
[7]
The applicant launched an appeal in terms of Section 62 of the Local
Government: Municipal
System Act 32 of 2000
[3]
.
The matter served before the Executive Committee of the first
respondent on 12 April 2022 and it was dismissed. The first
respondent
gave no undertaking of halting the works while the
applicant was still considering its remaining options, and that
resulted in
the launching of the urgent application before Daffue J.
[8]
As to whether the order he granted was final in effect or not was
considered by Reinders
ADJP who ruled that it was not. Her
well-reasoned judgment was delivered on 13 June 2022. It appears that
in the interim the second
and the third respondents continued with
the works. At the time of the oral hearing of this matter, the court
was informed that
78% of the works was already concluded. It is
imperative to set out the background to understand the context that
informed the
decision of the court.
Grounds
of review
[9]
The applicant has raised various grounds of review. Chief among them
is the averment
that the second and third respondents did not meet
the peremptory Construction Industry Development Board (CIDB) grading
requirements
in terms of the tender data. The key point made is that
any bidder was in a position to submit a bid only if the bid met the
criteria
stated in the tender data. The second ground relied upon is
that the second and third respondents, that is their new entity as
the joint venture, failed to submit mandatory returnable documents.
The document referred to is that its bank rating could not be
verified. The third ground is that the bid awarded was in excess of
the budget for the works in issue. The amount approved for
the two
(2) respondents was in excess of R10 million. All the stated grounds
are vehemently opposed by the first respondent.
Submissions
[10]
Both counsel made compelling submissions and referred us to a wealth
of authorities. They presented
and interpreted the facts and the law
from diametrically opposing views. It is imperative to briefly repeat
them.
[11]
Mr van Aswegen submitted for the applicant that procurement in the
public domain is underpinned
by the requirements of fair and
competitive processes. On this matter the first respondent has
strikingly failed through non-compliance
with mandatory requirements.
On that score alone he opined that the opposition to the application
should fail. This point is strongly
reliant on the notice on
evaluation which provided that the bids with errors or
omissions on peremptory requirements will
be deemed non
responsive.
[4]
The document in
issue is the bank rating certificate which was not submitted and
verified on behalf of the third respondent. The
second document was
the company profile. He argued that the non-compliance thereof
carried with it consequences that such a bidder
should be
disqualified.
[12]
He raised another issue relating to the CIDB registration
requirements. The fact is that the
third respondent was not
registered in the Mechanical Engineering (ME) class. The works
involved Mechanical and Construction Engineering
capabilities. That
being the mandatory requirement and non-compliance thereto should
have led to disqualification of the joint
bid of the second and third
respondents.
[13]
The other ground argued was whether a bidder had to be registered at
level of four or higher
in both mechanical and construction
engineering class. The contention between the parties is that the bid
invitation required 4CE/4ME
PE or higher. The lead partner was not
registered in both and relying on the report of NEP Consulting
Engineers, he posed a question
as to what was done with the
incongruities mentioned in it. He submitted that upon proper
interpretation of the document, a bidder
was required to be
registered at the set level in both classes.
[14]
The last ground argued was that the form of offer and acceptance was
in excess of R10 million.
[5]
The
first respondent contracted with the two respondents for the amount
exceeding the budget. My brother broached it with counsel
as to how
we should read the agreement which was in excess of R10 million with
the letter of appointment which specifically provided
that the
contract amount was R9 969 447.24 VAT included.
[6]
His response was that he was unsure as to how it will play out should
a dispute arise between the respondents. He plainly conceded
that it
was a conundrum.
[15]
He launched a scathing attack on the issue that the funds were spent
by the first respondent
to purchase the material. That, he argued,
was a fertile ground for malfeasance. Despite its submitted bid being
almost double
the budget, the applicant was committing to complete
the works within the stated cap. The cornerstone of his submissions
was that
the courts were perfectly placed to make a far reaching
order of substituting the joint venture with the applicant. We
pointed
out to him that the horse may have bolted in that over 70% of
the works was already completed. He sharply differed and responded
that it was only the purchase of the material and site establishment.
The nub of his submission was that substantial work still
had to be
done and that there is no evidence that the applicant will be unable
to complete it.
[16]
The contrasting approach of Mr Ayeye was to refer to the amended
notice of motion as a basis
upon which the application should be
dismissed.
[7]
. The proper
enquiry was whether or not a review ground has been stablished in
terms of section 6 of Promotion of Administrative
Justice Act 3 of
2000 (PAJA). Once the ground has been established, the court is
enjoined with the discretion to determine the
just and equitable
remedy. Turning to the distinct prayers in the notice of motion, he
pointed out that the applicant was timidly
pursuing prayer number 5.
The gist of his argument was that the applicant did not make a case
in its papers that entitled it to
be awarded the bid. The case made
found its traction on the default position in the event the second
and third respondents were
removed.
[17]
The reasoning that this argument is fallacious is found on Regulation
21 of the Municipal Supply
Chain Regulation. The substitution relief
cannot be sustained given its value. He referred to the tender notice
and invitation
which requires that 30% of the work must be allocated
to a local contractor within the municipal area of the first
respondent.
Therefore, there is nothing much left on the works still
to be completed by the applicant in the context of the bid.
[18]
Turning to the values set out in the law pertaining to procurement he
argued that there is no
absolute standard to explain a particular
value mentioned in section 217 of the Constitution of the
Republic. The joint venture
bid was competitive in terms of price.
The mere fact of the existence of irregularities does not establish a
ground for review.
The centrepiece of his argument was that the
irregularities referred to must be adjudged to transgress all values
not one or two
that are suitable to the applicant. In essence not
every slip in the process can be visited by judicial scrutiny and
sanction.
[19]
In answer to more questions from the court, he pointed out that this
was not a case where both
partners of the joint venture did not
provide the bank rating certificate. In the present matter only one
partner mainly the third
respondent did not do so. The bank rating
certificate of the second respondent was sufficient on its own. On
the issue of the company
profile, he argued that the BEC did not
place much emphasis on it. It was not part of the checklist of key
documents submitted
by bidders. This information was nothing more
than an information provided by the entity concerned about itself.
[20]
On the CIDB registration, he readily conceded that the third
respondent was not registered. However,
the third respondent was not
on its own but had partnered with the second respondent who had more
than what was required. Another
concession was that there were
conflicting requirements set out in various documents.
Notwithstanding these problems, the list
of returnable documents was
explained in the compulsory site meeting. Therefore, the bid of the
applicant was not jeopardised or
prejudiced by allowing the third
respondent to bid.
[21]
He made light work of the complaint pertaining to the grading level.
According to him the bidders
simply had to have either or but not
both. In order to fortify his point, he referred to the document
circulated during the compulsory
bid briefing which required that a
bid must comply with tender data. Paragraph F.2.1 of the tender data
required a bidder to have
one not both of the grading level in
different categories. He conceded that the first respondent had
overlooked the requirements
of the second respondent to register in
ME class, but it was superfluous, so he submitted. It did not work to
directly prejudice
the applicant. Importantly it had the negative
effect of excluding joint ventures. He beseeched the court to dismiss
the application.
In the alternative, should we find for the applicant
on prayer 1, taking all circumstances into consideration we should
not struck
down the service agreement.
Discussion
[22]
The starting point of the discussion in procurement matters is fixed
firmly in section 217 of
the Constitution of the Republic of South
Africa Act 108 of 1996. The section provides that an organ of state
must acquire goods
and services in accordance with a system which is
fair, equitable, transparent, competitive and cost effective. Flowing
from this
section is a myriad of other acts, regulations and policies
that buttress this point. There is no doubt that any evaluation and
adjudication of a bid can only take place when any decision meet
these requirements. These cardinal values must exist at the same
time
for the process to be compliant. The decision to award a bid is an
administrative action and must comply with the prescripts
of the
Promotion of Administrative Justice Act 3 of 2000.
[23]
The contentions always centres around the interpretation and
application of these noble principles
to the facts and circumstances
on hand. That is the crux of this matter. It is to the wealth of
authorities that this court will
turn to in an effort to unlock this
difficult conundrum. It must be understood that the courts are not
there to legislate or inform
broad policy decisions for other spheres
of government. The returnable documents lie at the heart of the
dispute between the parties.
The matter is not made any easier by the
apparent obfuscation created by documents emanating from the first
respondent which do
not talk to each other in material respects. At
times they seem to be prejudicial and onerous to a particular
category of bidders
like the joint venture.
[24]
The notice and invitation to bid required bidders to be registered
with the CIDB in both Civil
Engineering (CE) and Mechanical
Engineering (ME) class of Construction Works (Grade 5 CE/ME or
higher, 4 CE/ 4 ME PE (Potentially
Emerging Contractors) or higher).
On the other hand, paragraph 12 (a) of the Notice on Evaluation reads
as follows: - “
Failure to provide written proof of
registration with the CIBD, in an appropriate contractor grading
designation 4CE / 4ME PE or
higher, as required in the bid document
”.
On plain reading of the provision, it will appear that there is no
longer a requirement for registration in both categories.
[25]
The battle cry for the applicant is that the first respondent did not
comply with its own processes
and that should put paid to the
opposition of the first respondent. Only strict compliance will be
considered to be satisfactory.
This proposition is reliant on the
decision of
Dr
J.S. Moroka Municipality and Others v Betram (Pty) Ltd and Another
.
In that matter the court held that it was for the applicant
(municipality), and not the court, to decide what should be the
prerequisite
for a valid bid. The failure to comply thereto would
result in a tender being disqualified as an acceptable tender. It
seems that
the only acceptable excuse will be where the condition(s)
is/are immaterial, unreasonable and unconstitutional.
[8]
[26]
The decision of Dr J.S. Moroka
supra
was
predicated on an earlier decision of the same court where Brand JA in
Minister
of Environmental Affairs and Tourism v Pepper Bay Fishing
[9]
stated
: -
“
As
a general principle an administrative authority has no inherent power
to condone failure to comply with a peremptory requirement.
It only
has such power if it has been afforded the discretion to do so.”
The
point made pertinent to this matter is that the first respondent on
any reading of the bid invitation document did not possess
any
discretion.
[27]
The first respondent relies
inter alia
on the judgment of the
Supreme Court of Appeal in
Millennium Waste Management (Pty) Ltd v
Chairperson, Tender Board: Limpopo Province and Others
. On
paragraph 17 the court said the following: -
“
Moreover,
our 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 benefit the provision was enacted (
SA
Eagle Co Ltd v Bavuma
).
In this case condonation of the appellant's failure to sign would
have served the public interest as it would have facilitated
competition among the tenderers. By condoning the failure, the tender
committee would have promoted the values of fairness, competitiveness
and cost-effectiveness which are listed in s 217. The appellant had
tendered to provide the needed service at a cost of R444 244,
43 per
month whereas the consortium had quoted and was awarded the tender at
the amount of R3 642 257, 28 per month”.
[10]
[28]
The notice of evaluation circulated at the meeting is substantively
different to the notice and
invitation to bid. It seems that during
the briefing session the bidders who did not even qualify were told
they could qualify.
The question is whether the fact that certain
irregularities existed does mean that there is a ground for review.
The second respondent
provided the bank rating certificate which if
it submitted the bid on its own would have been sufficient.
Therefore, there is no
merit in the argument that because the third
respondent did not attach the bank rating certificate it is fatal to
the joint bid.
[29]
Obviously the purpose of the returnable documents must be assessed in
context. The importance
of the bank rating certificate is to
establish the financial muscle of the bidder to complete the work.
This is clearly demonstrable
in the bank rating certificate provided
by the third respondent. This is distinguishable from a situation
where both partners of
the joint venture failed to provide the same.
That the second respondent has not provided the bank rating
certificate is immaterial
in the bigger of scheme of things. The
court takes the view that substantial compliance with the returnable
documents was achieved
on this aspect.
[30]
The failure to annex a company profile does not take the matter on
behalf of the applicant any
further either. The court agrees with
counsel for the first respondent that this is the document that an
entity presents itself
to the public primarily for marketing
purposes. Most of what is required without which a proper assessment
of a bid cannot take
place are already provided in other returnable
documents. A curious observation about the crucial importance of this
document (if
any) can be found in the report compiled by the Supply
Chain Management (SCM) practitioner on the closing ceremony of
tenders.
It was not among the list of documents which were considered
for all bidders to determine the responsiveness of any bid by
bidders.
On the papers before us, it cannot be said to have played
any role to advantage or disadvantage any bidder.
[31]
Then there is an issue of the registration with CIBD grading
requirements. The lead partner in
the joint venture more than qualify
as per the requirements. The case for the applicant may be predicated
on the confusion created
by documents that do not tally with each
other. Clearly the tender data require a grading designation of 4CE
or 4ME PE or higher.
This defeat the argument of the applicant that
what was required was either CE and ME. The applicant cannot succeed
on this point.
[32]
The preceding point is also reliant on the report authored by the
Consulting Engineers. The copy
attached to the founding papers is
unsigned and does not appear to be an official document. There is no
confirmatory affidavit
about its status or the weight to be attached
to its contents. The only point made is that it found its way into
the papers because
the first respondent made it available to the
applicant. Nevertheless, counsel for the applicant correctly conceded
that it is
not his assertion that it is an official document. What
remains then is what is its role in the appointment or
non-appointment
of any bidder. Seemingly none and therefore the
applicant cannot succeed on the strength of this point.
[33]
The applicant raised a problematic point that the bid was awarded for
an amount in excess of
R10 million. This is as a result of the
difference in the bid amount between the letter of appointment and
the agreement entered
into by the parties. This court is not called
upon to adjudicate the point which one of the two documents can
validly be relied
upon by them. The question whether the letter of
appointment takes precedence over the agreement or
vice versa
does not arise in these proceedings. What seems apparent is that the
appointment was made for an amount less than R10 million.
[34]
Without a determination being made between the two, this point cannot
be sustained. Counsel for
the applicant was at pains to argue around
it and could only speculate what could be the cause of action in the
event of a dispute
arising between them. In the absence of any
conclusive evidence and substantive argument on this aspect, this
ground falls to be
rejected.
[35]
The conclusion is that the irregularities pointed out did not
distinctly work against the applicant.
The stark reality is that
there is no perfect bid process. This should not be interpreted to
mean that administrators can bend
the procurement system according to
their whims and deviate for the sake of it. This was made clear in
Allpay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer, South African Social Security Agency and
Others
.
[11]
It may well be so that public officials may bend the requirements in
order to weaken efforts to achieve good administrative and
governance
practices.
Remedy
[36]
Even if the court is wrong in reaching the conclusion it did, the
remedy sought by the applicant
cannot be afforded it. There are
numerous practical problems which militate against. We have been
informed conclusively that about
78% of the works have been
concluded. The applicant argued that it is willing to carry out the
works on the same conditions as
those agreed upon by the respondents.
Not only that but also that the percentage referred to only cover the
non-essentials of the
agreement. It is not the duty of the court to
negotiate agreements between the parties. They are free to do so
themselves without
the intervention of the court. We broached it with
counsel that these may stem from incorrect material procured by the
first respondent
or poor workmanship on the part of the other
respondents. There may also be contractual dispute that may come to
the fore. Chief
among these of course, it is the interest of the
community who are on the receiving end because of this bitter wrangle
between
the parties.
[37]
It is trite that an appropriate relief will undoubtedly be determined
by the circumstances of
that case. The court must make a just and
equitable relief after consideration of all factors which must extend
beyond those of
the parties but the public as well. This requires a
delicate balancing act of all these competing interests.
[12]
In the exercise of its wide discretion, the court may not even choose
one alternative relief based on what is just and equitable
in the
circumstances of the case.
[38]
It is not the case of the applicant that the first and second
respondents were in any conceivable
manner complicit in the awarding
of the bid to themselves. The Supreme Court of Appeal has pointed out
there must be a distinction
drawn between the lawbreakers and
innocent parties. The court recognised that those who fall in the
former category should not
be allowed to benefit from their unlawful
conduct. At the same time, innocent parties must not suffer any loss
as a result of the
invalidation of a contract.
[13]
[39]
Taking all the facts and circumstances of the matter on hand the
court conclude that it will
not be just and equitable to invalidate
the contract. The sizeable bulk of the works in terms of the contract
has been performed.
The first and second respondents are an innocent
party and will be hard done to be punished for the wrong they did not
commit.
Most importantly, the community is desperate for service
delivery in that regard to improve the quality of life and restore
its
dignity. It is a well-known fact how bureaucratic ineptness will
impact negatively on service delivery should the allocated funds
be
returned to the Treasury coffers. The process of starting the bid
process
de novo
is not a palatable option in the
circumstances. The cost of further delay is too much to contemplate.
Costs
[39]
The applicant sought urgent interim relief pending finalisation of
the application on review.
The costs were reserved in the sense that
they will be dealt with as costs in the cause. In that way, they will
be dealt with in
accordance with the principle that the losing party
must pay the costs. There is no reason why the court should depart
from the
principle mentioned above.
Order
[40]
The following order is made: -
40.1. The
application for review is dismissed with costs which includes the
reserved costs of 23 May 2022.
M.A.
MATHEBULA, J
I
concur,
P.E.
MOLITSOANE, J
On
behalf of the applicant:
Adv. W.A.
Van Aswegen
Instructed
by: Peyper
Attorneys
Bloemfontein
On
behalf of the first respondent:
Adv.
A.E. Ayayee
Instructed
by: Majavu
Incorporated
Johannesburg
C/O
Rampai Attorneys
Bloemfontein
On
behalf of the second respondent:
No
appearance.
On
behalf of the third respondent:
No
appearance.
[1]
Page 26 of the indexed papers.
[2]
Page 40 to 50 of the indexed papers.
[3]
Section
62 reads as follows: (1) A
person
whose rights are affected by a decision taken by a political
structure, political office bearer, councillor or staff
member of a
municipality in terms of a power or duty delegated or sub-delegated
by a delegating authority to the political structure,
political
office bearer, councillor or staff member, may appeal against that
decision by giving written notice of the appeal
and reasons to the
municipal manager within 21 days of the date of the notification of
the decision.(2) The municipal manager
must promptly submit the
appeal to the appropriate appeal authority mentioned in subsection
(4). (3) The appeal authority must
consider the appeal, and confirm,
vary or revoke the decision, but no such variation or revocation of
a decision may detract
from any rights that may have accrued as a
result of the decision.
(4)
When the appeal is against a decision taken by-
(
a)
a
staff member other than the municipal manager, the municipal manager
is the appeal authority.
[4]
Page
83 of volume 1 of the indexed papers.
[5]
Page
37 of volume 1 of the indexed papers.
[6]
Page
386 of volume 3 of the indexed papers.
[7]
Page
107 of volume 2 of the indexed papers
[8]
2014 (1) All SA 545
(SCA) at para 10.
[9]
2004 (1) SA 308
(SCA) at para 31.
[10]
2008 (2) SA 481 (SCA).
[11]
2014 (1) SA 604
(CC) at para 40.
[12]
Residents of Industry House, 5 Davies Street, New Doornfontein,
Johannesburg and Others v Minister of Police and Others
2022 (1)
BCLR 46
(CC) at para 114.
[13]
Central
Energy Fund SOC Ltd and Another v Venus Rays Trade (Pty) Ltd and
Others
2022 (5) SA 56
(SCA) at para 42.