Brief Summary

Tender — Bid evaluation — Review application — Applicant's bid for office accommodation tender disqualified on functionality grounds — Applicant sought to interdict implementation of tender award pending review — Court condoned late filing of supplementary affidavits and record of decision, finding no prejudice to other parties — Audi alteram partem principle satisfied, allowing applicant to respond to new matters raised — Application to strike out certain evidence deemed unnecessary for decision-making.

Comprehensive Summary

Summary of Judgment

Introduction

The matter concerned a judicial review of a state procurement decision. The applicant, Xoliswa Tini Facilities Management Services (Pty) Ltd (XTFM), sought to review and set aside the decision of the first respondent, the Minister of Public Works and Infrastructure (acting through the Department of Public Works and Infrastructure, referred to in the judgment as the DPW), to award a tender to the third respondent, Omarostax (Pty) Ltd. The Minister of International Relations and Cooperation (DIRCO) was cited as the second respondent as the intended user department, and Liciafin (Pty) Ltd was cited as the fourth respondent as another bidder involved in the procurement process.

The procedural history reflected that, after the tender was awarded to Omarostax, XTFM approached the court urgently and obtained interim interdictory relief. On 28 July 2021, the court interdicted and restrained the DPW and DIRCO from taking steps to implement the tender award, pending finalisation of the review proceedings. The judgment determined the merits of that review application, including certain preliminary procedural disputes relating to affidavits and the record.

The general subject-matter of the dispute was the lawfulness of the DPW’s tender award under tender number H20/011PF, issued for the procurement of alternative office accommodation (with specified floor area and parking requirements) for DIRCO for a five-year period. The review focused on whether Omarostax’s bid was responsive and compliant with mandatory tender requirements, and whether the award complied with constitutional and administrative-law procurement standards.

Material Facts

On 27 November 2020, the DPW issued and advertised tender H20/011PF for the procurement of alternative office accommodation of 12 146 m² and 528 parking bays for a period of five years for DIRCO. The initial closing date was 18 December 2020, later extended to 22 January 2021 by an erratum published on 4 December 2020. The tender documentation recorded a minimum functionality threshold for further evaluation on price and preference (the judgment noted an apparent discrepancy between 50% and 65% but treated it as immaterial on the facts because the remaining bidders exceeded 65%).

Six bids were submitted. The DPW’s Bid Evaluation Committee (BEC) met on 16 February 2021 and found all bids responsive at that stage. On 8 March 2021, the BEC evaluated bids on functionality, disqualified one bidder for offering land rather than an existing building, and eliminated some bidders for failing to achieve the minimum functionality threshold. Three bidders proceeded to further evaluation: XTFM, Omarostax, and Liciafin. Omarostax and Liciafin each scored 80% for functionality, while XTFM scored 76%. At its meeting on 8 March 2021, the BEC recommended Omarostax as the successful bidder to the National Bid Adjudication Committee. XTFM was informed by email on 10 May 2021 that the tender had been awarded to Omarostax on 3 May 2021.

It was common cause that Omarostax and Liciafin both offered the same property, described in the judgment as Oak Avenue, as the accommodation to be leased. In support of its bid, Omarostax relied on a sale agreement concluded with the owner of Oak Avenue during February 2020. That sale agreement contained a condition precedent (treated by the court as a suspensive condition) requiring Omarostax to be successfully awarded a tender referenced as Tender No. H19/014PF, and required Omarostax to advise the seller in writing of fulfilment within a stated period. The judgment recorded that the tender reference number H19/014PF was repeated in the agreement and was not merely a single, isolated reference.

The court treated it as material that no written waiver of the suspensive condition (permitted in principle under the agreement for the purchaser’s benefit) was put before the court, and that the condition could not be fulfilled because Omarostax was not awarded the referenced tender. On the court’s analysis, this meant that, by the time the bidding period for H20/011PF closed, Omarostax did not have a valid sale agreement capable of satisfying the tender’s requirement that a prospective buyer submit a signed purchase agreement (together with a title deed).

In addition, Omarostax’s tender bundle included a zoning certificate issued under the Tshwane Town-Planning Scheme, 2008 (revised 2014) indicating that Oak Avenue was zoned “Use Zone 11: Industrial 2”. The certificate also recorded that a consent use “cannot be verified as the rights might have lapsed.” The court treated it as significant that the tender documentation did not include proof that the municipality had consented to the property being used mainly as offices, and that the office use contemplated by the tender was presented as an exclusive primary use rather than as an office use directly related and subservient to an industrial or commercial main use.

The judgment noted the existence of procedural disputes about the filing of supplementary affidavits and the tender record, and an application by Omarostax to strike out certain material (including an “Ohkre-report”). The court, however, held that the basis upon which it decided the review made it unnecessary to determine the admissibility issues relating to the contested report.

Legal Issues

The central legal questions were whether the DPW’s award of tender H20/011PF to Omarostax was lawful under the constitutional and administrative-law framework governing public procurement, and specifically whether Omarostax’s bid was responsive and compliant with mandatory tender requirements.

The judgment framed key issues (as reflected in the parties’ joint practice note) that included whether Oak Avenue complied with the tender’s requirements, whether it was suitable and met the specified lettable area, whether it was appropriately zoned for the purpose offered, whether there was a valid purchase agreement between Omarostax and the property owner (and whether any challenge to it was permissible), whether Omarostax complied with all tender conditions, and what remedy would be just and equitable if the award was set aside.

The dispute required the court to engage predominantly in the application of law to fact within an administrative-law review framework, rather than determining the “correctness” of the decision on appeal. It involved legal characterisation and evaluation of compliance with tender requirements (including the legal effect of a suspensive condition in a sale agreement) and the materiality of deviations in the procurement context, as well as the assessment of remedy under PAJA and the Constitution.

Court’s Reasoning

The court located the procurement dispute within section 217(1) of the Constitution, emphasising that organs of state must contract for goods and services through a system that is fair, equitable, transparent, competitive, and cost-effective. It accepted that a reviewing court’s function is not to re-decide the tender outcome on the merits, but to scrutinise the lawfulness of the decision-making process, consistently with the separation between review and appeal described in the authorities it cited.

The judgment applied the principle that compliance with tender requirements matters because tenderers must compete on an equal footing and because tender conditions structure fairness, transparency, and objectivity. It endorsed the approach that an “acceptable tender” under the Preferential Procurement Policy Framework Act 5 of 2000 must comply “in all respects” with the tender’s specifications and conditions, and that the acceptance of a non-acceptable tender is invalid. The court further relied on Constitutional Court authority, particularly Allpay, for the proposition that the inquiry into lawfulness should not be diluted by treating irregularities as “inconsequential” in a manner that conflates procedural compliance with the inevitability of the outcome. Instead, the court described the need to identify irregularities and then evaluate whether non-compliance was material by linking compliance to the purpose of the relevant requirement.

On the preliminary and procedural disputes, the court dealt with extensive deviations from ordinary affidavit sequences and with concerns about delays in producing and certifying the record. It accepted that XTFM had experienced difficulties obtaining legible copies of the record from the DPW, and it was satisfied that the record relevant to the decision under review was before the court. It reasoned that the filing of supplementary affidavits flowed from the later availability of a “complete” record, and it held that the audi alteram partem principle had been satisfied because each party had adequate opportunity to address the case ultimately advanced.

Although the court recognised that procedural time periods in the Uniform Rules should be complied with and that condonation is ordinarily pursued under Rule 27, it exercised its discretion to condone the late filing of the record and supplementary founding affidavit. It did so in circumstances where public funds were implicated, the review sought scrutiny for irregularities, interim interdictory relief had already been granted, the explanations for delay were before the court, and prejudice in the conduct of the proceedings was not established on the papers. The court regarded the admissibility dispute about the “Ohkre-report” as redundant because the review could be decided on narrower grounds, and it therefore did not determine that strike-out application on the merits.

Turning to the decisive review grounds, the court first addressed whether Omarostax, as a prospective buyer, submitted a valid purchase agreement as required by the tender’s responsiveness criteria. The tender required that, if the bidder was a prospective buyer, a signed purchase agreement and title deed be submitted. The court analysed the February 2020 sale agreement relied upon by Omarostax and concluded that clause 3.1.3 was a suspensive condition: the agreement would become fully effective and enforceable only upon fulfilment of the condition. Applying the cited authority on suspensive conditions, the court held that the condition was not met and, crucially, could not be met because it depended on Omarostax being awarded a different tender (H19/014PF), which did not occur. No written waiver of that condition was proved, and the tender reference was repeated in the agreement, supporting the conclusion that it was not a mere typographical error. On this basis, the court held that the agreement lapsed, and a valid agreement did not exist when the bidding period for H20/011PF closed. The court therefore concluded that the BEC should have found Omarostax’s bid non-responsive, and that the acceptance of the bid as responsive entailed an error of law.

Secondly, the court addressed the zoning compliance issue. It accepted that the zoning certificate showed the property was zoned “Industrial 2,” and it examined the permitted uses under the Tshwane scheme. It reasoned that, although certain forms of office use might be associated with “commercial use” or be allowed where directly related and subservient to the main use, Omarostax offered the building for exclusive office use unrelated to the prescribed main uses, and it did not submit proof of the necessary municipal consent for that departure. The court rejected the approach of presuming that historical approvals (such as a site development plan) necessarily equated to valid ongoing consent rights, particularly where the zoning certificate itself stated that the consent use could not be verified and might have lapsed. It held that, in the absence of proof to the contrary, the BEC erred by disregarding the zoning position reflected on the certificate.

Having found these two defects, the court held that it was unnecessary to consider the remaining review grounds. It concluded that the award was unlawful because the tender requirements regarding authority/ability to offer the accommodation (through a valid purchase agreement where the bidder was not the owner) went to the core of the bid and served the purpose of ensuring that the bidder could deliver what it offered; and because awarding a tender for a use that would entail zoning contravention was likewise unlawful.

On remedy, the court approached relief through the prism of section 8 of PAJA and the discretion to grant a just and equitable remedy. XTFM sought substitution (an award of the tender to itself), but the court rejected that. It reasoned that the DPW did not regard XTFM’s offered property as best or ideally suited, that awarding the tender to XTFM “by default” would be inappropriate, and that the court was not positioned to determine the suitability of XTFM’s accommodation in place of the DPW. The court therefore considered it just and fair that the tender process commence afresh if the DPW still required the accommodation.

Outcome and Relief

The court reviewed and set aside the decision of the first respondent to award tender H20/011PF to the third respondent, Omarostax, together with all administrative actions pursuant to that award.

The court declined to substitute its own decision for that of the DPW, and instead indicated that the tender process should start anew should office accommodation still be required for DIRCO.

On costs, the court applied the principle that costs follow the result and ordered the first respondent and the third respondent, jointly and severally, to pay the costs of the application.

Cases Cited

Ncoweni v Bezuidenhout 1927 CPD 130.

Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African Social Security Agency and Others 2014 (1) SA 604 (CC).

C & M Fastners CC v Buffalo City Municipality (1371/2017) [2019] ZAECGHC 22 (14 March 2019).

Dr JS Moroka Municipality and Others v Bertram (Pty) Ltd and Another [2014] 1 ALL SA 545 (SCA).

Minister of Environmental Affairs and Tourism v Pepper Bay Fishing (Pty) Ltd; Minister of Environmental Affairs v Smith 2004 (1) SA 308 (SCA).

Chairperson, Standing Tender Committee and Others v JFE Sapela Electronics (Pty) Ltd and Others 2008 (2) SA 638 (SCA).

Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African Social Security Agency and Others 2013 (4) SA 557 (SCA).

Mia v Verimark Holdings (Pty) Ltd [2010] 1 All SA 280 (SCA) (18 September 2009).

Benkenstein v Neisius and Others 1997 (4) SA 835 (C).

Abrinah 7804 (Pty) Ltd v Kapa Koni Investments CC 2018 (3) SA 108 (Nk).

Maccsand (Pty) Ltd v City of Cape Town and Others 2012 (4) SA 181 (CC).

Trencon Construction (Pty) Ltd v Industrial Development Corporation of South Africa Ltd and Another 2015 (5) SA 245 (CC).

Legislation Cited

Constitution of the Republic of South Africa, 1996, section 217(1) and section 172(1)(a).

Preferential Procurement Policy Framework Act 5 of 2000.

Promotion of Administrative Justice Act 3 of 2000, section 8.

Occupational Health and Safety Act 85 of 1993.

Rules of Court Cited

Uniform Rules of Court, Rule 6.

Uniform Rules of Court, Rule 6(15).

Uniform Rules of Court, Rule 27 and Rule 27(3).

Uniform Rules of Court, Rule 37A.

Uniform Rules of Court, Rule 53(3) and Rule 53(4).

Held

The court held that Omarostax’s bid ought to have been treated as non-responsive because, as a prospective buyer, it did not have a valid sale agreement capable of satisfying the tender’s mandatory requirement for a signed purchase agreement: the agreement relied upon was subject to a suspensive condition tied to a different tender number, that condition was not fulfilled or waived, and the contract therefore lapsed.

The court further held that the DPW acted unlawfully in accepting the bid as responsive notwithstanding that the zoning certificate reflected the property as zoned Industrial 2, and Omarostax did not provide proof of municipal consent to use the property primarily as offices in the manner required for the tender. The court rejected reliance on assumptions or presumptions about historical approvals in the absence of proof of valid, current rights.

On remedy, the court held that substitution was not justified and that a fresh tender process was the appropriate course if the DPW still required accommodation. The tender award to Omarostax was reviewed and set aside, and costs were awarded against the DPW and Omarostax jointly and severally.

LEGAL PRINCIPLES

Administrative review of procurement decisions is governed by section 217 of the Constitution, requiring procurement systems to be fair, equitable, transparent, competitive, and cost-effective. A reviewing court’s role is to scrutinise the lawfulness of the decision-making process, not to conduct an appeal on the merits of the tender outcome.

In evaluating deviations from procurement requirements, the court applied the approach associated with Allpay, namely that the inquiry into lawfulness should not be diluted by characterising defects as “inconsequential” based on an assumed inevitability of outcome. Instead, compliance is assessed in light of the purpose of the relevant provision, and once a material review ground is established, unlawfulness must be declared, with questions of remedy addressed separately under the “just and equitable” standard.

A tender award is invalid where the successful tender is not an acceptable tender as contemplated in the procurement framework, meaning that it does not comply “in all respects” with the tender specifications and conditions. Where the tender document requires proof of authority or ability to offer the accommodation (including, for a prospective buyer, a signed purchase agreement and title deed), non-compliance with that requirement goes to the core of the bid and cannot lawfully be overlooked in the absence of a lawful power to condone.

In contract-law terms applied to the responsiveness inquiry, an agreement subject to a suspensive condition is not fully operative until the condition is fulfilled; if the condition is not fulfilled (and is not waived where waiver is permissible and proved), the agreement lapses. A bidder relying on such an agreement to meet mandatory tender requirements fails to meet those requirements where the condition is unfulfilled and incapable of fulfilment.

Compliance with zoning requirements is treated as mandatory in the sense that a tender may not lawfully be awarded where performance would entail contravention of the applicable town-planning scheme. Proof of required municipal consent for a non-permitted primary use cannot be assumed; it must be established by evidence placed before the procurement decision-maker, and speculation about possible prior approvals is insufficient.

Remedial discretion under section 8 of PAJA permits a court to craft a just and equitable remedy, but substitution is not granted as a default consequence of setting aside an award. Where suitability determinations lie within the administrator’s remit and the court lacks an adequate basis to make that assessment, the appropriate remedy may be to set aside the award and allow the tender process to be recommenced.

Xoliswa Tini Facilities Management Services (Pty) Ltd v Minister of Public Works and Infrastructure and Others (33259/2021) [2022] ZAGPPHC 446 (4 July 2022)