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[2022] ZAECMKHC 13
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Soma Initiative (Pty) Ltd v The Premier for the Eastern Cape and Others (353/2022) [2022] ZAECMKHC 13 (17 May 2022)
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE DIVISION, MAKHANDA
CASE
NO. 353/2022
In
the matter between:
SOMA
INITIATIVE (PTY) LTD
Applicant
and
THE
PREMIER, EASTERN CAPE
PROVINCIAL
GOVERNMENT
First
Respondent
THE
MEMBER OF THE EXECUTIVE COUNCIL
FOR
HEALTH, EASTERN CAPE
Second
Respondent
THE
MEMBER OF THE EXECUTIVE COUNCIL
FOR
EDUCATION, EASTERN CAPE
Third
Respondent
THE
MINISTER OF PUBLIC SERVICE AND
ADMINISTRATION
OF THE REPUBLIC OF
SOUTH
AFRICA
Fourth
Respondent
ALEXANDER
FORBES HEALTH (PTY) LTD
Fifth Respondent
PROACTIVE
HEALTH SOLUTIONS (PTY) LTD
Sixth Respondent
THANDILE
HEALTH RISK MANAGEMENT
(PTY)
LTD
Seventh
Respondent
MEMBER
OF THE EXECUTIVE COUNCIL FOR
CO-OPERATIVE
GOVERNANCE AND
TRADITIONAL
AFFAIRS, EASTERN CAPE
Eighth Respondent
MEMBER
OF THE EXECUTIVE COUNCIL FOR
COMMUNITY
SAFETY, EASTERN CAPE
Ninth
Respondent
MEMBER
OF THE EXECUTIVE COUNCIL FOR
ECONOMIC
DEVELOPMENT, ENVIRONMENTAL
AFFAIRS
AND TOURISM, EASTERN CAPE
Tenth Respondent
MEMBER
OF THE EXECUTIVE COUNCIL FOR
HUMAN
SETTLEMENT, EASTERN CAPE
Eleventh Respondent
MEMBER
OF THE EXECUTIVE COUNCIL FOR
PUBLIC
WORKS AND INFRASTRUCTURE,
EASTERN
CAPE
Twelfth
Respondent
MEMBER
OF THE EXECUTIVE COUNCIL FOR
RURAL
DEVELOPMENT AND AGRARIAN
REFORM,
EASTERN CAPE
Thirteenth Respondent
MEMBER
OF THE EXECUTIVE COUNCIL FOR
SOCIAL
DEVELOPMENT, EASTERN CAPE
Fourteenth Respondent
MEMBER
OF THE EXECUTIVE COUNCIL FOR
SPORT,
RECREATION, ARTS AND CULTURE,
EASTERN
CAPE
Fifteenth
Respondent
MEMBER
OF THE EXECUTIVE COUNCIL FOR
TRANSPORT,
EASTERN CAPE
Sixteenth Respondent
PROVINCIAL
TREASURY DEPARTMENT FOR THE
EASTERN
CAPE
Seventeenth Respondent
JUDGMENT
LAING
J
[1]
This is an application for the First to the Third
Respondents and the Eighth to Seventeenth Respondents to be
interdicted from implementing
the appointment of the Fifth Respondent
as the Health Risk Manager for the Eastern Cape Provincial Government
pursuant to the Fourth
Respondent’s issue of a request for
proposals (‘RFP’). The RFP pertained to the
implementation of the Policy
and Procedure on Incapacity Leave and
Ill Health Retirement (‘PILIR’) in the public service.
The Applicant brought
the application on an urgent basis.
[2]
The application has been brought pending an
application to be heard in due course for a declarator in relation to
the decision to
appoint the Fifth Respondent; for the appointment of
the Applicant as the Health Risk Manager, alternatively for the
decision to
be remitted back to the First Respondent for final
determination; and for costs.
[3]
A summary of the underlying facts follows.
Background
[4]
The abuse of incapacity leave and ill health
retirement is an issue that needs to be addressed on an ongoing basis
in the public
service. The absence of employees has a negative impact
on service delivery and has financial implications for the state. In
or
about 2006, the PILIR was approved by Cabinet so that structures
and systems could be established to allow suitable interventions
and
the management of incapacity leave to accommodate temporary or
permanently incapacitated employees and to address the consequences
of such incapacity. For such purposes, Health Risk Managers are
appointed to assess employees’ applications for temporary
or
permanent incapacity leave and ill health retirement, and to make
recommendations to the state employer in that regard. They
are
independent entities, comprising a range of multi-disciplinary
experts but with specialisations in occupational medicine.
[5]
Originally, the Department of Public Service and
Administration (‘DPSA’) appointed a Health Risk Manager
for each implementation
area, being a province or a national
department. In 2009, however, the DPSA moved from a centralised to a
decentralised model,
to the effect that a panel would be appointed
from which a provincial or national department could select and
appoint its own accredited
Health Risk Manager. The role of a Health
Risk Manager is,
inter alia
,
to assess individual applications and to provide recommendations to a
Head of Department in either the provincial or national
sphere of
government. This entails an analysis of the details submitted by an
applicant as well as the information provided by
the applicant’s
medical practitioners.
The
2012-2013 tender process
[6]
The
DPSA previously issued an RFP for the 2012-2013 tender, which was a
36-month appointment to provide services to the various
provincial
and national departments that had been identified by the DPSA. The
Applicant submitted a proposal that consisted of
technical
information, supporting documents, and a bid price that was based on
the fee to be charged per employee. A Bid Evaluation
Committee
(‘BEC’) evaluated the bids received, whereupon five
entities were appointed to an accredited panel of Health
Risk
Managers, including the Applicant. In that regard, the Applicant was
responsible for the Cluster 3 and Cluster 4 national
departments,
[1]
the
Eastern Cape Provincial Government, the Mpumalanga Provincial
Government, and the North West Provincial Government.
[7]
At
that point, the DPSA invited those entities that had been appointed
to the panel to engage in negotiations over a uniform price
to be
charged by all Health Risk Managers. Upon reaching agreement, the
entities entered into a contract with the DPSA, regulating
the
standard of services to be provided and the relationship in general
between the DPSA and the entity in question. The contract
made
provision for an ‘employer’, constituting all provincial
and national departments,
[2]
and
a further selection process that was to be carried out for the
appointment of an entity to a specific department. The contract
also
stipulated that a separate service level agreement would be concluded
by the specific department and the entity, to which
the contract
between with the DPSA would be attached as an annexure.
[8]
Subsequent to the appointment of the panel,
successful bidders were invited to make presentations to various
provincial and national
departments, in accordance with a prescribed
format and in relation to pre-determined issues identified by the
DPSA. Delegates
from the various provincial and national departments
then voted for the Health Risk Manager of their choice.
[9]
For
the 2012-2013 tender, four out of the five successful bidders who
were appointed to the panel went on to receive a fair distribution
of
work from the various implementation areas.
[3]
The Applicant received about 355,000 ‘PILIR lives’ while
the others received about 302,000, 260,000 and 160,000 ‘PILIR
lives’ respectively.
[4]
The Applicant alleges that the distribution amongst the four Health
Risk Managers ensured that each would remain commercially viable
but
points out that there were inherent difficulties with the tender
process overall. Ultimately, the appointments were extended
on
several occasions until 2021.
The
2021-2022 tender process
[10]
The DPSA issued another RFP at the end of last
year for a 36-month appointment of a maximum of six Health Risk
Managers to the panel,
commencing 1 January 2022. In that regard, the
DPSA divided the public service into 13 implementation areas,
comprising the nine
provincial governments and four national
department clusters. A selection interview would be held for the
various implementation
areas, which would consider,
inter
alia
, the Health Risk Manager’s
capacity and the implementation areas with regard to which it had
previously been appointed. The
DPSA would provide technical
assistance during the preparations for and conducting of the
interviews but would not participate
in the decision-making process
itself. As with the earlier tender, a successful bidder would be
required to enter into a contract
with the DPSA for appointment to
the panel, after which service level agreements would be concluded
with the individual provincial
or national departments in question.
Bidders were invited to match or improve the price stipulated in the
RFP, which was subject
to later negotiation.
[11]
The BEC would evaluate bids in accordance with two
phases: a Minimum Mandatory Criteria Evaluation Phase, during which
bids would
be assessed for compliance with the minimum compulsory
criteria; and a Substantive Evaluation Phase, during which bids would
be
assessed in accordance with the applicable technical criteria. The
BEC’s report would then be referred to the Bid Adjudication
Committee (‘BAC’), which would in turn make
recommendations to the DPSA’s Director-General.
[12]
Consequently, the Applicant submitted a bid and
was appointed to the panel. Thereafter, it negotiated a price with
the DPSA, which
was eventually set at R8.75 per employee (VAT
inclusive), and it entered into a contract that contained with the
same material
terms as that for the 2012-2013 tender.
[13]
The DPSA arranged for selection interviews to be
conducted with the various provincial departments and national
department clusters.
The interview for the Eastern Cape departments
was scheduled for 22 December 2021. Prior to the interview, the DPSA
distributed
an interview questionnaire, indicating the topics to be
addressed during the presentation to be conducted by each successful
bidder.
The interview proceeded and the representatives for the
various provincial departments voted to appoint the Fifth Respondent
(‘Alexander
Forbes’) as Health Risk Manager for the
Eastern Cape.
Applicant’s
basis for the application
[14]
The Applicant alleges that there were a number of
problems with the interview process. More specifically, there was no
formal structure
for the adjudication of presentations and how voting
would be done. There were no set criteria to determine how an entity
would
be appointed to an individual department.
[15]
Furthermore, the Applicant avers that the
Department of Health and the Department of Education were not
represented during the voting.
This was problematic inasmuch as the
departments, combined, employed 86.69% of the total workforce in the
Eastern Cape Provincial
Government and accounted for 84.62% of the
incapacity leave cases and 87.28% of the ill health retirement cases
for the period,
2016-2021. Moreover, the departments paid a combined
total of 86.47% of the monthly or annual fees payable to the Health
Risk Manager.
[16]
By the time that the Eastern Cape interviews were
held, eight out of the 11 implementation areas had already appointed
Alexander
Forbes and the Sixth Respondent (‘Proactive Health’),
consisting of 733,500 of the 873,800 ‘PILIR lives’
available at that time- or 84% of the total. Besides the Eastern
Cape, only the North West interviews remained. The DPSA
representative
who attended the presentations made little comment
about this during the deliberation process.
[17]
In correspondence sent afterwards to the Director:
General Benefits for the DPSA, Ms Christa Brink, the Applicant’s
managing
director, Dr Douglas Baard, expressed his unhappiness with
the manner in which provincial and national departments had appointed
Health Risk Managers. To this, Ms Brink responded that once appointed
to the panel, a service provider enjoyed an equal chance
of further
appointment to an implementation area. However, the final decision
lay with the relevant implementation area; the DPSA
played no role in
the decision-making process other than facilitating it and providing
certain information. Subsequently, the Applicant’s
attorneys
sent a letter to the DPSA and the First Respondent (‘the
Premier’), requesting that the implementation of
the decision
to appoint Alexander Forbes as Health Risk Manager for the Eastern
Cape be suspended, pending the outcome of a review
application.
State
Respondents’ submissions
[18]
The Director: People Management (HRM&D) in the
Office of the Premier, Ms Nwabisa Ntantiso, deposed to the main
answering affidavit
on behalf of the First to Fourth and Eighth to
Seventeenth Respondents (‘State Respondents’). She
explained that she
coordinated and chaired the Eastern Cape interview
process, which commenced with a request from the Director-General in
the Office
of the Premier (‘the D-G’) to the various
Heads of Department to ensure suitable participation in an online
‘virtual’
meeting to be held electronically with
prospective Health Risk Managers on 22 December 2021. The D-G
indicated that each Department
was required to nominate at least one
representative and emphasised the importance of proper attendance, in
anticipation of the
expiry of the existing contracts on 31 December
2021. The contracts arising from the appointment of Health Risk
Managers as a result
of the 2012-2013 tender had previously been
extended on four separate occasions and the National Treasury had
indicated that no
further extensions would be granted.
[19]
Most of the Departments were represented at the
meeting, except for the Department of Education and the Department of
Community
Safety. The DPSA was represented by a Mr Desmond van der
Westhuizen and a Ms Fredah Tabane. The former confirmed that the
meeting
could proceed because a quorum of 50% plus one had been met,
notwithstanding the absence of two of the Departments. Mr van der
Westhuizen further pointed out that the representatives of each of
the Departments present were required to decide whom they wanted
as
their Health Risk Manager; there was, moreover, no need to score the
prospective service providers inasmuch as this had already
been
completed during the underlying tender process conducted under the
auspices of the DPSA. A decision should be reached by consensus,
failing which the majority would decide, with the chairperson’s
having a casting vote in the event of a deadlock. This approach
had
been the practice that had been followed since the inception of
PILIR.
[20]
Alexander Forbes delivered the first presentation,
describing its B-BBEE status and the nature and extent of its
operations. It
offered real-time claim tracking and maintained
turn-around times of 16-18 days. Proactive Health Solutions followed,
dealing with
similar aspects, but also with questions pertaining to
whether it had local offices and details of its information and
communications
technology (‘ICT’) systems. The same areas
of relevance were addressed during succeeding presentations by the
Seventh
Respondent (‘Thandile Health’) and the Applicant
itself. Each prospective service provider was allocated the same
amount
of time for its presentation and the questions that followed.
[21]
At the conclusion of all the presentations, Mr van
der Westhuizen explained to the representatives of the departments
that decisions
had already been taken to appoint Health Risk Managers
for the majority of implementation areas. Only the North West had yet
to
make such a decision, which translated to 69,000 ‘PILIR
lives’. This information had to be taken into account for
purposes
of the selection of the Health Risk Manager for the Eastern
Cape. For her part, Ms Ntantiso highlighted the areas of interest for
the province: capacity, experience, B-BBEE status and equity
considerations, project management practices, change management
processes,
and what offices would be established for providing the
services required.
[22]
The representatives for the departments agreed
that the decisions already taken by other provincial and national
departments with
regard to the allocation of work would be taken into
account but would not be a decisive criterion. The value that each
prospective
Health Risk Manager offered would also be considered.
During the voting process that followed, six of the departments
supported
Alexander Forbes and four supported the Applicant,
resulting in the appointment of the former. The representative for
the Department
of Health was unable to vote because she lost her
online connection; there were no representatives for the Department
of Education
or the Department of Community Safety.
Alexander
Forbes’s submissions
[23]
The Head of the Health and Management Solutions,
Ms Myrna Sachs, deposed to the answering affidavit for Alexander
Forbes. She stated
that the company had been involved with PILIR
since its inception, when the company entered into a consortium with
Proactive Health
in 2003 for purposes of a PILIR pilot project with
the Department of Correctional Services in both the Eastern Cape and
Mpumalanga.
Subsequent to the full implementation of PILIR in or
about 2006, the same companies have competed for appointment to the
DPSA panel
over the years, with varying degrees of success.
[24]
Ms Sachs emphasised that the RFP clearly indicated
that the departments would, through a separate interview process,
select a Health
Risk Manager of choice from the panel. It stipulated
that the departments would consider,
inter
alia
, the Health Risk Manager’s
capacity and implementation areas with regard to which it was already
contracted. The interviews
would not be a repeat of the tender
process but would take into account the terms of reference contained
in the RFP. Moreover,
the departments were at liberty to develop
their own interview questionnaire.
[25]
It was a condition of the RFP, said Ms Sachs, that
the selection of a Health Risk Manager would take place in accordance
with the
above interview process. She asserted that the Applicant, as
a bidder, had participated in the tender with full knowledge of the
interview process and by doing so it had accepted the underlying
conditions, which would in due course form part of the contract
to be
concluded upon appointment to the panel. She noted that the Applicant
had done so previously, without complaint, for earlier
tenders.
Moreover, she pointed out that the Applicant had been advised of the
interview criteria in terms of the interview questionnaire
that had
been attached to the RFP.
[26]
Alexander Forbes became aware of its appointment
to the Eastern Cape on 28 December 2021. Service level agreements
were consequently
entered into with the various provincial
departments, the last one being signed on 4 January 2022.
Consequently, the Applicant
made immediate arrangements with
Alexander Forbes for the handover of employee files.
[27]
At the heart of the Applicant’s complaint,
asserts Ms Sachs, is the alleged uneven distribution of work. This,
however, was
the reality of appointment to the panel and the
discretionary selection process that followed. Historically, this was
how the procurement
of a Health Risk Manager had always been
conducted and to which the Applicant had willingly subjected itself
previously.
Recent
developments
[28]
Subsequent to argument of the matter on 4 March
2022, the Applicant made application for the admission of Dr Baard’s
supplementary
affidavit. It dealt with the Applicant’s receipt
from the State Respondents, on 14 March 2022, of the transcription of
the
recording for the virtual meeting held on 22 December 2021.
[29]
The court accepted that the transcription was
indeed relevant to the main application and that it would be of
immediate benefit
for purposes of Part A. The transcription
supplemented, significantly, the rather sparse minutes attached to
the State Respondent’s
answering papers and appeared to raise
an issue that pertained directly to the proper determination of
whether the Applicant had
demonstrated that the relief was necessary
to protect a
prima facie
right. This will be discussed further, below, when
dealing with the merits.
[30]
In essence, the transcription reveals that no
recording was made of the deliberations conducted after the
presentations made by
the Health Risk Managers in question. The
Applicant contends, accordingly, that it cannot ascertain how the
decision to appoint
Alexander Forbes was reached.
[31]
The State Respondents filed Ms Ntantiso’s
supplementary affidavit, wherein she explained that the recording was
stopped to
avoid the risk of the Health Risk Managers’ having
access to the deliberations before the provincial leadership was
informed
of any resolution taken. Furthermore, it was stopped so as
to facilitate free discussion by representatives of the various
departments.
Issues
to be decided
[32]
The issues to be decided in the present matter
are: (a) whether the Applicant has demonstrated sufficient urgency
for non-compliance
with the usual rules and practice of this court to
be condoned; and (b) whether there is a basis upon which to grant
interim relief.
[33]
The
requirements for interim relief are well-established. In
National
Treasury and others v Opposition to Urban Tolling Alliance and others
2012
(6) SA 223 (CC),
[5]
the
Constitutional Court affirmed the principles set out in
Setlogelo
v Setlogelo
1914
AD 221
and later refined in
Webster
v Mitchell
1948
(1) SA 1186
(W): a
prima
facie
right
even if it is open to some doubt; a reasonable apprehension of
irreparable and imminent harm to the right if an interdict
is not
granted; the balance of convenience must favour the granting of the
interdict; and the applicant must have no other remedy.
[34]
Crucially, the court is concerned only with Part A
of the application. The determination of Part B must be left for
another court
at another time.
Urgency
[35]
The Applicant asserts that it was informed of the
decision to appoint a Health Risk Manager for the Eastern Cape on 28
December
2021. However, the deponent to its founding affidavit, Dr
Baard, only became aware of procedural irregularities on 13 January
2022.
By reason of the complexity of the matter, a number of
consultations with the Applicant’s legal representatives were
required,
culminating in the delivery of a letter of demand on 24
January 2022. The Applicants instituted urgent proceedings on 7
February
2022 once it became clear that the State Respondents were
not prepared to suspend the implementation of the decision.
[36]
The State Respondents point out that the Applicant
was aware that the previous service level agreements between the
various departments
and the Health Risk Managers appointed as a
consequence of the 2012-2013 tender process were to expire on 31
December 2021. The
Applicant was also aware that new service level
agreements were concluded between the departments and Alexander
Forbes during the
period of 28 December 2021 until 4 January 2022.
Notwithstanding, the Applicant allowed at least a month to pass
before commencing
with litigation.
[37]
Alexander Forbes makes the same point, although
mentions that the last service level agreement was signed on 11
January 2022. In
addition, Alexander Forbes asserts that the
Applicant’s general manager, Ms Anita Paulse, began making
arrangements for the
handover of employee files and related
documentation from as early as 28 December 2021 and that this
exercise continued until as
late as 28 January 2022, without the
Applicant’s having raised any concerns. This was done despite
Ms Paulse’s communication
of possible irregularities to Dr
Baard on 13 January 2022. Furthermore, Alexander Forbes observes that
the Applicant registered
its concern with the DPSA and sought, at the
same time, its assistance to persuade the North West to appoint it as
its Health Risk
Manager. The Applicant, however, sent no
correspondence to Alexander Forbes until delivery of the present
application on 7 February
2022. It took 41 days to institute
proceedings, affording Alexander Forbes a mere week within which to
prepare and deliver its
answering papers. Moreover, the appointment
of the company had already been implemented.
[38]
There can be no dispute that the present matter is
complex, with a lengthy history and a complicated set of
circumstances that accompanied
the decision to appoint Alexander
Forbes. The preparation and commencement of legal proceedings
occurred at a notoriously difficult
time of the year, when
organizations and individuals are often unavailable by reason of
holiday closure or leave. Although some
of the criticism levelled at
the Applicant may be warranted, it cannot be said that the Applicant
failed to act with sufficient
alacrity at all or that the situation
was entirely devoid of urgency. Whereas Alexander Forbes argues that
the harm that the Applicant
sought to prevent had already been
inflicted, inasmuch as the last of the service level agreements had
already been signed on 11
January 2022, it would be difficult to
refute that the nature and extent of the services to be provided,
entailing the allocation
of staff, equipping of local offices, and
proper acceptance and management of a substantial number of employee
files, mean that
the implementation of the appointment would become
increasingly difficult to reverse in the event that a legal challenge
was deferred
or subjected to the usual timeframes under rule 6(5).
The Applicant was well-advised to have proceeded without delay.
[39]
Moreover, the Applicant patently has commercial
interests at stake in the matter. The loss of its appointment to the
Eastern Cape,
a position that it had previously enjoyed for a period
of at least nine years, has an impact on its revenue, with
implications
for its staff and its overall business operations. As
such,
Twentieth Century Fox Film
Corporation v Anthony Black Films (Pty) Ltd
1982
(3) SA 582
(W), at 586F-G, is good authority for the proposition that
the urgency of commercial interests may justify the invocation of
rule
6(12) no less than any other interests. See, too,
Bandle
Investments (Pty) Ltd v Registrar of Deeds and others
2001
(2) SA 203
(SECLD), at 213E.
[40]
Consequently, the court finds that there was
sufficient basis upon which the application could have been brought
as one of urgency.
This aspect has, to a large extent, been rendered
moot; the State Respondents and Alexander Forbes have, despite
protest, been
able to file comprehensive sets of papers, including
supplementary submissions. Nothing further needs to be said in that
regard.
Nature
of the right
[41]
The
question that arises immediately is what is the right that the
applicant seeks to protect? The applicant no longer has a right
to
continue providing health risk services to the State Respondents. It
is common cause that such right, contractual in nature,
fell away
when the service level agreements that it had previously concluded
with various departments expired on 31 December 2021.
What the
applicant has, however, is a right to just administrative action, as
guaranteed in terms of section 33 of the Constitution.
[6]
[42]
The right to just administrative action is given
effect by the Promotion of Administrative Justice Act 3 of 2000
(‘PAJA’).
The grounds upon which a court may judicially
review administrative action are well known and are listed under
section 6(2) thereof.
[43]
It is
settled law that public procurement constitutes administrative
action. See
Logbro
Properties CC v Bedderson NO and others
[2003]
1 All SA 424
(SCA), at [5]. Interestingly, however, the drafters of
the Constitution deemed it necessary to include specific provision
for public
procurement and to stipulate, expressly, that the system
in terms of which an organ of state contracts for goods or services
must
be fair, equitable, transparent, competitive and
cost-effective.
[7]
Consequently,
it can be said that public procurement in South Africa must meet the
general standards apparent from section 33 as
well as the specific
standards apparent from section 217(1) of the Constitution.
[44]
A court may review an organ of state’s
decision to contract for goods or services in the event that one of
the section 6(2)
grounds of PAJA exists. In
AllPay
Consolidated Investment Holdings (Pty) Ltd and others v Chief
Executive Officer of the South African Social Security Agency
and
others (Corruption Watch and another as amici curiae)
2014
(1) BCLR 1
(CC), the Constitutional Court held, at [25], within the
context of a tender dispute, that:
‘
[o]nce
a ground of review under PAJA has been established there is no room
for shying away from it. section 172(1)(a) of the Constitution
requires the decision to be declared unlawful.’
[45]
For
national and provincial government, the Public Finance Management Act
1 of 1999 (‘PFMA’) echoes the specific constitutional
standards for public procurement in section 38(1)(a)(iii), where it
places a duty on the accounting officer to ensure,
inter
alia
,
that a department has and maintains an appropriate procurement and
provisioning system which is fair, equitable, transparent,
competitive and cost-effective. Unlike the detailed set of
regulations that governs public procurement in the sphere of local
government,
[8]
the regulatory
framework for public procurement conducted by a department is
confined to regulation 16A in the Treasury Regulations
published in
terms of GNR 225 of 15 March 2005. Of relevance to this matter is
that regulation 16A6.6 thereof provides that:
‘
[t]he
accounting officer or accounting authority may, on behalf of the
department, constitutional institution or public entity,
participate
in any contract arranged by means of a competitive bidding process by
any other organ of state, subject to the written
approval of such
organ of state and the relevant contractors.’
[46]
The interpretation to be given to the above has a
bearing on whether the Applicant’s right to just administrative
action has
been infringed.
The
infringement of the Applicant’s right
[47]
The Applicant does not take issue with the tender
process followed by the DPSA with regard to the appointment of Health
Risk Managers
to its panel. It challenges, however, the lawfulness of
the subsequent selection of a Health Risk Manager by the departments
in
the Eastern Cape Provincial Government, arguing that the interview
process was entirely arbitrary and lacking in objective criteria.
The
State Respondents justify the approach that was adopted, asserting
that the Applicant knew full well what was entailed at the
time that
it submitted its bid because the process was described in the RFP
itself. Furthermore, the provisions of regulation 16A6.6
permit the
departments to participate in the contracts that were concluded
between the DPSA and successful panel appointees.
[48]
The relevant portions of the RFP are set out
below. The following appears under the sub-heading, ‘Contract
objectives’:
‘
1.1.2.
Procure and establish a Panel of a maximum of six (6) Accredited
Health Risk Managers from which an individual department could
contract a Health Risk Manager with due consideration to time and
cost efficiency, with effect from 1 January 2022. The contracts in
both instances will be for a period of 36 months.’
[49]
And the following appears under the sub-heading,
‘Background’:
‘
2.4.
In summary, the decentralisation model entails the appointment of the
Panel of Accredited Health Risk
Managers by the DPSA through a single
bid process. The appointment to the Panel is concluded with a panel
contract entered into
between the DPSA and the preferred Health Risk
Managers. Departments within the identified implementation areas
subsequently through
a selection interview, select a Health Risk
Manager of choice from the Panel of Accredited Health Risk Managers.
Departments shall
during the selection interviews consider, among
others, the Health Risk Manager’s capacity, implementation
areas already
contracted or having been selected with a view to
secure a contract.
2.5.
The selection interviews shall not be a repeat of a tender process.
The selection interview shall
take into account these terms of
reference. The respective implementation areas may develop their own
selection interview questionnaire.
In conducting the selection
process, implementation areas shall take into account whether a
Health Risk Manager have been selected
in other implementation areas.
The DPSA shall provide implementation areas with technical assistance
during the preparations for
and conducting of the selection
interviews. Therefore, the DPSA will participate in the selection
interviews, but will not participate
in the implementation areas
final decisions.’
[
sic
]
[50]
For the sake of completeness, it is necessary to
include the salient portions of the contract concluded between the
DPSA and a successful
panel appointee. These state, under the
heading, ‘Recordal’, that:
‘
3.1
It is recorded that the purpose of this contract is to–
3.1.1
appoint the Health Risk Manager to the panel of accredited Health
Risk Managers;
3.1.2
regulate the relationship between the DPSA and the Health Risk
Manager appointed
to the panel referred to in clause 3.1.1;
3.1.3
describe and regulate the consultancy service to be rendered by the
Health
Risk Manager appointed to the panel referred to in clause
3.1.1;
3.1.4
describe and regulate the roles and responsibilities of the Health
Risk Manager
in relation to the consultancy service; and
3.1.5
describe and regulate the uniform norms and standards relevant to the
Employer
[9]
in the
context of the consultancy service described and regulated in this
contract. Therefore, references to the Employer must therefore
be
interpreted and understood in this context.
3.2
With effect from the date of signature, the DPSA appoints the
Health
Risk Manager as part of the panel of accredited Health Risk Managers.
3.3
The Employer shall select and contract a Health Risk Manager
from the
panel to–
3.3.1
assess and provide advice and recommendations with regard to
applications
for short- or long-term temporary incapacity leave and
applications for ill-health retirement including specialist and
allied professional
referrals;
3.3.2
provide systems, processes, administrative capacity and medical
expertise
in relation to incapacity leave and ill-health retirement
assessments;
3.3.3
maintain an electronic database in relation to the applications
submitted
and assessed for incapacity leave and ill-health
retirement; and
3.3.4
provide regular reports to the DPSA and the Employer as required in
terms
of this agreement.
3.4
The Employer may base its selection on interviews with all
or
selected Health Risk Managers on the panel. The interviews shall take
place on the request of the Employer only.
3.5
The Health Risk Manager offers the services referred to in
3.3 above
and in particular has the necessary medical, occupational health and
related expertise and infrastructure, systems and
administrative
facilities and capabilities to enable the DPSA and the Employer to
achieve its objectives as per the requirements
of PILIR.
3.6
The DPSA has agreed to appoint the Health Risk Manager, and
the
Health Risk Manager has accepted the appointment on the terms and
conditions set out in this agreement, provided that the provisions
contained in this contract will become applicable after the Health
Risk Manager is appointed by a department.’
[51]
The RFP clearly indicates that the appointment of
a Health Risk Manager to the panel was no guarantee of its subsequent
selection
by a department. It would first be required to undergo an
interview process. The same information was repeated in the contract
that a successful Health Risk Manager was required to conclude with
the DPSA. There can be no dispute that the Applicant participated
in
the tender with its eyes wide open.
[52]
The difficulty arises, however, with regard to how
a department selects a Health Risk Manager. The RFP merely states
that the department
must consider,
amongst
other things
, the capacity of the
Health Risk Manager and the implementation areas to which it had
already been appointed or which had been
earmarked for the Health
Risk Manager. It is not clear how capacity would be assessed; it is
not clear, at all, what other criteria
would be applied. A department
was required to take into account the ‘terms of reference’
(presumably the RFP) but
it is not clear what these were
specifically. Disconcertingly, the department was entitled to develop
its own ‘interview
questionnaire’ but what could or
should be contained therein is not indicated.
[53]
As it turned out, the DPSA provided Health Risk
Managers with an interview questionnaire prior to the interview. The
questionnaire
indicated the areas to be covered in the presentation:
background and history, general issues, health risk management
experience,
capabilities, the implementation and application of
PILIR, ability, and the overall impression of the presentation. In
addition,
it listed possible questions that could be posed but
emphasised that that the departments were not limited thereto.
Accordingly,
it can be argued that the questionnaire ameliorated the
lack of clarity that characterised the RFP.
[54]
But it is from thereon that the interview process
began to fall short of the specific standards of fairness and
transparency. Each
Health Risk Manager was required to convey, within
less than an hour, the advantages and benefits of the services to be
provided.
This was to be assessed by representatives of the various
departments who were not involved in the DPSA’s evaluation and
adjudication of the original bids. The only material available to the
above officials was what the Health Risk Manager communicated
verbally or by means of slides or a video presentation. Moreover, the
officials had no means by which to verify the submissions
made during
the virtual meeting. To put it bluntly, the departments selected the
Health Risk Manager to deal with the health risk
issues pertaining to
the workforce for the Eastern Cape Provincial Government, over a
period of 36 months, entirely on the basis
of a 30- minute sales
pitch.
[55]
The minutes of the meeting, such as are available,
illustrate the arbitrary manner in which the selection was made and
the overall
absence of objective criteria used in reaching a
decision. The relevant portions thereof are reflected below, under
the heading,
‘Discussions and decision’:
‘
The
meeting as led by Ms N Ntantiso discussed and decided as follows:
·
The DPSA gave the meeting a picture of how many
contracts were awarded, nationally, amongst the four service
providers to have a
clear picture of the workload before a decision
is made.
·
The meeting decided not to use the above as a
method of selecting the service provider
but
looked at the value presented
by each
service provider.
·
All four service providers are not new in the
Health Risk Management space.
·
The meeting attendees were allowed to state their
case about which service provider
stood
out from the rest
.
·
…
·
The meeting DECIDED that Alexander Forbes should
get the contract as they were an
outstanding
presenter
[sic] in terms of product
offering.
·
…’
[Emphasis added.]
[56]
From the above, it is evident that the officials
considered the ‘value added’ by each service provider.
The concept
is not explained. Furthermore, the officials were
unmistakeably influenced by the superior presentation and overall
communication
skills of the Alexander Forbes delegates; there is
little, if anything, from the minutes to indicate that the decision
was made
on the basis of the content of the interview questionnaire
or any other set of objective criteria.
[57]
The transcription of the minutes, admitted as
evidence under cover of the supplementary affidavit of Dr Baard,
serves to exacerbate
the shortcomings described above. After the
DPSA’s representative, Mr Van der Westhuizen, had indicated the
national distribution
of Health Risk Manager appointments across the
various implementation areas, the following was recorded:
‘
CHAIRMAN
:
Chair?
[10]
MS KOSANA
: Yes, Mr
Rexe.
CHAIRMAN
:
Sorry, Chair. I do not know if we keep on recording. Will the service
providers not have access to our decisions? Can I propose
that we
stop recording or DPSA can guide us because if for instance we
continue recording they can listen to our discussions at
a later
stage, you know, after the meeting. Can DPSA… [indistinct]?
MS
KOSANA
: Des, what is your proposal?
CHAIRMAN
:
I was going to propose that we stop the recording. However, we are
continuing with the minute taking.
MS
KOSANA
: I also think so and then we can
continue to take notes.
CHAIRMAN
:
Thank you.’
[58]
The State Respondents explain that the recording
was stopped to prevent potential service providers from gaining
access to the deliberations
before the outcome had been communicated
to the provincial leadership and so as to facilitate robust
discussion amongst the officials.
The explanation is unconvincing and
of little assistance. If anything, then it merely perpetuates the
impression that the decision
to appoint Alexander Forbes was entirely
arbitrary.
[59]
To compound the problems associated with the
selection, neither the Department of Health nor the Department of
Education participated
in the actual selection of the successful
Health Risk Manager. It is not disputed that the departments,
combined, employed 86.69%
of the total workforce in the Eastern Cape
Provincial Government, and accounted for 84.62% of the incapacity
leave cases and 87.28%
of the ill health retirement cases for the
period, 2016-2021. Their share of fees payable to the Health Risk
Manager for the period
in question constituted 86.47% of the total.
On the face of it, their lack of representation during the interview
process, at that
stage, would have prevented the officials present
from having arrived at a fully informed decision.
Treasury
regulation 16A6.6
[60]
The State Respondents rely on regulation 16A6.6 to
assert that there was no need for a repeat of the tender process by
the time
that the Health Risk Managers made their presentations. The
DPSA had already completed the necessary evaluation and adjudication
of the bids, in accordance with the principles of fairness,
equitability, transparency, competitiveness, and cost-effectiveness.
What remained was simply the selection of the service provider for
the Eastern Cape, to be done at the discretion of the various
departments involved.
[61]
In
Blue
Nightingale Trading 397 (Pty) Ltd t/a Siyenza Group v Amathole
District Municipality
[2016]
1 All SA 721
(ELC), the court considered the interpretation of
regulation 32
of the
Municipal Supply Chain Management
Regulations,
[11]
which
provides for the same procurement mechanism as appears in
regulation
16A6.6.
The empowering statutory provision for
regulation 32
is
section 110(2) of the Local Government: Municipal Finance Management
Act 56 of 2003 (‘MFMA’). The provision in question
stipulates that Part 1 of Chapter 11 of the MFMA, dealing with supply
chain management, does not apply where a municipality or
municipal
entity procures goods and services under a contract secured by
another organ of state. The court held as follows:
‘
[29]
The point of departure is, accordingly, the compliance with
section
217 of the Constitution and with the PPPFA and Chapter 11 of the
LGMFA.
[12]
The ultimate
enquiry is whether an organ of state which contracts for goods and
services, had done so in accordance with a system
which is fair,
equitable, transparent, competitive and cost-effective. It follows
that the exclusionary provisions of section 110(2)
of the LGMFA and
of regulation 32 must not only be restrictively interpreted, but the
exclusion of Part 1 under Chapter 11 of the
LGMFA may not detract
from or erode the constitutional imperatives of fairness, equity,
competitiveness and cost-effectiveness.
[30] It cannot be
gainsaid that a supply chain management policy which complies with
the framework prescribed by section 112 of
the LGMFMA and with
section 217 of the Constitution, is not only costly, but the
implementation is more often than not very time-consuming
resulting
in further escalation of costs and expenses. In order to prevent
these inescapable consequences, the exclusionary provision
under
section 110(2) has as its object and purpose, in my respectful view,
the prevention of unnecessary duplication of costly
and
time-consuming tender procedures and processes.
[31] Thus, where an organ
of state had procured goods or services under a contract preceded by
due processes in compliance with
the prescribed supply chain
management policy, then another organ of state which requires the
same goods or services, may contract
with the first organ of state
for the supply of such goods or services. Of course, the suppler must
agree to such procurement.
This procedure removes the duplication of
costs relating to bureaucratic red-tape from the tender process,
whilst retaining all
the elements of the constitutional imperatives
under section 217 of the Constitution. It cannot be over-emphasised
that the enquiry
must always be whether the constitutional
imperatives have been compromised by the exemption; if so, it is
unconstitutional, if
not, the exemption is permissible under section
110(2).’
[62]
The
restrictive interpretation to be given to regulation 32 and the
overriding importance of the specific standards contained in
section
217(1) of the Constitution are evident in later case law that
directly concerns regulation 16A6.6. In
Excellerate
Services (Pty) Ltd v Umgeni Water and others
[2020]
JOL 47756
(KZP), the court viewed regulation 16A6.6 as a deviation
from the obligations created in terms of section 217 of the
Constitution.
Consequently, there had to be a recognisable basis for
the deviation, rooted in law. Moreover, the deviation had to be
narrowly
and strictly applied.
[13]
[63]
The facts of this matter lend themselves to the
application of regulation 16A6.6. Here, the departments participated
in a contract
secured by the DPSA in terms of a competitive bidding
process; it is common cause that such procurement was unproblematic.
However,
the subsequent manner in which the departments selected
Health Risk Managers fell short of the section 217(1) principles. As
demonstrated
earlier, the interview process was neither fair nor
transparent.
[64]
Whereas the procurement mechanism created under
regulation 16A6.6 is designed to allow an organ of state to avoid the
costs and
delays associated with a tender process based on
competitive bidding, the section 217(1) principles still apply.
Fairness, equitability,
transparency, competitiveness and
cost-effectiveness must infuse and permeate the procurement of the
goods or services required,
from start to finish.
[65]
Consequently, the court is satisfied that the
Applicant has established that its right to just administrative
action has been infringed.
Whether such right is capable of
protection for purposes of Part A of the application is an issue to
which further attention will
be given the paragraphs that follow
later.
Doctrine
of election
[66]
At this point, it is necessary to pause and
mention the argument made by Alexander Forbes to the effect that the
doctrine of election
applies in relation to the interview process. In
other words, through its conduct, the Applicant indicated that it
accepted the
department’s selection and cannot challenge it
ex
post facto
. The common law principles
of waiver ad estoppel apply.
[67]
For reasons that will become apparent, it is not
necessary for the court to make any determination in this regard,
save to remark
that it appears that the Applicant’s knowledge
of the manner in which the selection of Alexander Forbes was carried
out was
only acquired well after the date of the virtual meeting, 22
December 2021. At worst for the Applicant, its full appreciation of
the circumstances that accompanied the interview process seems to
have coincided with its handover of employee files and associated
documentation to Alexander Forbes.
[68]
Moreover,
it is doubtful whether a party within the present context can waive
its right to just administrative action without an
express and
unequivocal assertion to that effect.
[14]
The
remaining requirements for interim relief
[69]
The Applicant must demonstrate that there exists a
reasonable apprehension of irreparable and imminent harm to its
rights if an
interdict is not granted. To that effect, it asserts
that it would be constrained to retrench a significant number of its
employees.
This may be so in the short term but may not be so in the
event that the Applicant is successful with regard to Part B.
Furthermore,
any harm sustained by the Applicant may be ameliorated
to some extent by its possible appointment to the North West. It
would be
an exaggeration to describe it as irreparable. Companies
contract and expand in unison with the ebb and flow of their business
fortunes; too little evidence has been presented by the Applicant
with regard to the nature, extent and probable impact of possible
retrenchments.
[70]
Similarly, its allegations in relation to possible
reputational damage and questions that could be raised about its
commercial viability
are vague and unsubstantiated. If anything, then
reputational harm has already been done inasmuch as the impression
has been created
that the Applicant failed to mitigate adequately
against the business risks associated with its major dependence on
the Eastern
Cape contract.
[71]
It is also necessary for the Applicant to show
that the balance of convenience favours the granting of the
interdict. Besides the
fact that the implementation of the
departments’ decision commenced on 1 January 2022, entailing
Alexander Forbes’s
allocation of staff, equipping of local
offices, and proper acceptance and management of a substantial number
of employee files,
the weakness in the Applicant’s position is
exposed when the consequences of granting interim relief are properly
considered.
The provision of health risk management services will be
held in suspension, pending the outcome of Part B.
[72]
The Applicant proposed, in reply, that it be
permitted to continue to render risk management services to the
Eastern Cape, alternatively
that the work be distributed equitably
between the Applicant and Alexander Forbes. In addition to the lack
of a convincing legal
basis upon which the court can accept the
Applicant’s proposal, the possibility still remains that the
Applicant may not
be successful with regard to Part B, entailing
further disruption when responsibility for provision of the services
changes hands
yet again.
[73]
The
stronger the prospects of success in Part B, the less need for the
balance of convenience to favour the Applicant.
[15]
Nevertheless, the suspension of the implementation of the appointment
of Alexander Forbes would not only prejudice, potentially,
the
interests of a significant number of employees in the Eastern Cape
but would also present a risk of the abuse of incapacity
leave and
ill health retirement, potentially hampering public administration in
general.
[74]
To
complete the requirements for interim relief, the Applicant must
demonstrate that it has no other remedy. In that regard, it
argues
(correctly) that it would have no claim for damages.
[16]
However, the review proceedings contemplated in Part B remain
available to the Applicant.
Relief
and order to be made
[75]
Returning to the requirement of a
prima
facie
right, the court is persuaded
that the Applicant has proved the infringement of its right to just
administrative action. Whether
this enables it to overcome the first
requirement for interim relief must still be decided.
[76]
In
OUTA,
the
Constitutional Court dealt with the merits of interdicting the South
African National Roads Agency Ltd (‘SANRAL’)
from
proceeding with its ‘e-tolling’ system, designed to
finance the upgrading of the road network in Gauteng. The
court
considered the traditional requirements for interim relief and held,
at [50], that
‘
[u]nder
the
Setlogelo
test
the
prima
facie
right
a claimant must establish is not merely the right to approach a court
in order to review an administrative decision. It is
a right to
which, if not protected by an interdict, irreparable harm would
ensue. An interdict is meant to prevent future conduct
and not
decisions already made. Quite apart from the right to review and to
set aside impugned decisions, the applicants should
have demonstrated
a
prima
facie
right
that is threatened by an impending or imminent irreparable harm. The
right to review the impugned decisions did not require
any
preservation
pendente
lite
.’
[77]
The Applicant’s right to just administrative
action remains intact; it does not call for further protection,
pending the review
proceedings envisaged under Part B of the
application. The decision to appoint Alexander Forbes has already
been implemented. Consequently,
the court is not convinced that the
Applicant has satisfied the requirements for interim relief.
[78]
With regard to costs, there is no apparent reason
why the determination thereof should be postponed until the
conclusion of Part
B. The State Respondents and Alexander Forbes have
incurred substantial expenses for purposes of their successful
opposition to
the relief sought in terms of Part A and ought to be
compensated accordingly.
[79]
In the circumstances, it is ordered that:
(a)
the application for interim relief in terms of
Part A is refused; and
(b)
the Applicant is liable for the costs of the State
Respondents and Alexander Forbes in relation to the proceedings under
Part A,
including the costs of two counsel where so employed.
JGA
LAING
JUDGE
OF THE HIGH COURT
APPERANCE
Counsel for the
applicant:
Adv Buchanan SC, instructed
by Whitesides Attorneys, Makhanda.
Counsel for the 1
st
to 4
th
and 8
th
to 17
th
Respondents:
Adv Rorke SC, instructed by Huxtable Attorneys,
Makhanda.
Counsel for the 5
th
respondent:
Adv Mullins SC, instructed by Netteltons Attorneys, Makhanda.
Date
of hearing:
04 March 2022
Date
of delivery of judgment:
17 May 2022
[1]
The
Applicant explains that the DPSA has divided national departments
into four clusters, approximately equal to each other in
number of
employees.
[2]
The
definition specifically excluded the South African Police Services
(‘SAPS’).
[3]
The
Applicant notes that only Metropolitan Health Risk Management (Pty)
Ltd received no work. It can advance no reason for why
this was so.
[4]
The
allocation was presumably done with reference to the number of
employees or ‘PILIR lives’ (as the Applicant terms
it)
for each implementation area.
[5]
Referred
to as
OUTA
for
purposes of the judgment.
[6]
Section
33(1) of PAJA provides that everyone has the right to administrative
action that is lawful, reasonable and procedurally
fair.
[7]
Section
217(1) of the Constitution.
[8]
See
Part 1 of Chapter 11 to the
Local Government: Municipal Finance
Management Act 56 of 2003
, to be read with the
Municipal Supply
Chain Management Regulations, published
in terms of GN 868 of 30 May
2005.
[9]
The
‘Employer’ is defined in sub-clause 2.1.17 as ‘all
National and Provincial Departments excluding the South
African
Police Services.’
[10]
From
the State Respondents’ answering papers, it seems that a Mr
Sivuyile Rexe initially chaired the meeting, after which
Ms Ntantiso
assumed the role, at the commencement of the decision-making
process. This does not correspond with the transcription,
but
nothing turns on it.
[11]
See n
8,
supra
.
[12]
The
abbreviations refer to the
Preferential Procurement Policy Framework
Act 5 of 2000
and the MFMA, referred to earlier.
[13]
At
[57].
[14]
See
Mohamed
and another v President of the RSA and others
[2001] ZACC 18
;
2001
(7) BCLR 685
(CC), at [61] – [67], where the court discussed
whether or not a foreign national could be deemed to have consented
to
his deportation or extradition to the United States in
circumstances where the prosecuting authority intended to press
capital
charges.
[15]
This
is a well-established principle, as apparent from
Olympic
Passenger Services (Pty) Ltd v Ramlagan
1957
(2) SA 382
(D), at 383D-G;
Eriksen
Motors (Welkom) Ltd v Protea Motors, Warrenton
1973
(3) SA 685
(A), at 691F-G; and the discussion, in general, in DE van
Loggerenberg et al
Erasmus:
Superior Court Practice
(Jutatstat,
RS 15, 2020), at D6-20-1.
[16]
The
authority for this is
Steenkamp
NO v Provincial Tender Board of the Eastern Cape
2007
(3) SA 121
(CC), at [55].