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[2021] ZAGPPHC 415
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Rail Refurb CC v South African National Roads Agency SOC Limited and Others (24377/2020) [2021] ZAGPPHC 415 (18 June 2021)
IN THE HIGH COURT OF
SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
Case
No: 24377/2020
NOT
REPORTABLE
NOT
OF INTEREST TO OTHER JUDGES
REVISED
In
the matter between:
RAIL
REFURB
CC
APPLICANT
and
SOUTH AFRICAN NATIONAL
ROADS
AGENCY
SOC LIMITED
FIRST
RESPONDENT
VEA ROAD MAINTENANCE &
CIVILS
(PTY) LIMITED
SECOND RESPONDENT
RAINBOW
CIVILS CC
THIRD
RESPONDENT
JUDGMENT
TOLMAY
J
INTRODUCTION
[1]
This is a review application in which the applicant (Rail Refurb)
seeks
an order reviewing and setting aside the award of two contracts
awarded by the first respondent (SANRAL) being X003-030-2019/1 and
X003-032-2019/1 (the contracts) to the second (VEA) and third
(Rainbow) respondents respectively. SANRAL and VEA oppose the
application.
[2]
On 24 June 2020 urgent interim relief was granted pending the
finalization
of the review application, which interdicted the
implementation of the contract, save for certain emergency road
maintenance activities.
This interim order was subsequently
varied on 6 November 2020 to allow for additional emergency road
maintenance after SANRAL brought
an urgent application.
[3]
This Court had to determine Part B of the application and the parties
were in agreement that the three-year period of the contract will
commence after finalization of this matter.
[4]
Rail Refurb complained that SANRAL unlawfully awarded the contracts
to
VEA and Rainbow, in circumstances where Rail Refurb offered a
significantly superior offer. It was also pointed out that the
contracts were awarded in circumstances where SANRAL had proposed a
round table meeting, but failed to do so. It was common
cause
that the round table meeting did not take place.
[5]
The first issue to be determined was whether Rail Refurb was denied a
hearing on the rebalancing of pricing rates and whether the award of
the contracts was procedurally unfair for that reason.
The
second issue to be determined was whether the refusal by SANRAL to
evaluate the bids submitted by Rail Refurb for pricing and
preference
was irrational. The third question that must be determined was
whether, if the award was set aside, whether the
Court should proceed
to award the contracts to Rail Refurb, or whether it should be
referred back to SANRAL for reconsideration.
This Court also
had to determine who should pay the costs of this application and the
two urgent applications, as those costs were
reserved.
[6]
It was common cause that during the course of the evaluation of
tenders,
Rail Refurb was promised a meeting by the Procurement
Manager for SANRAL’s Southern Region, Andile Ngxoza (Mr.
Ngxoza), who
recommended it in an email dated 11 February 2020.
SANRAL however contended that Mr. Ngxoza was not on the Bid
Evaluation
Committee (BEC) and accordingly was not authorized to give
the undertaking for a round table meeting. SANRAL unilaterally
abandoned the meeting and while Rail Refurb was waiting for the
proposed meeting to take place, SANRAL rejected Rail Refurb’s
bids as “non-responsive” and disqualified it from the
evaluation. It was submitted on Rail Refurb’s behalf
that
this in itself was fatal to SANRAL’s decision (the impugned
decision) and constituted a reviewable irregularity.
[7]
It was further pointed out that another ground for reviewing and
setting
aside the impugned decision was that Rail Refurb’s
pricing model, which SANRAL claimed was irrational, had been accepted
as both rational and the best tender and the best bid by SANRAL in a
similar road maintenance tender based on the same pricing model.
It was argued that the pricing model was either objectively
irrational and justified disqualification, or it was not. It
was argued that the aforesaid rendered the decision by SANRAL
irrational and constituted a reviewable irregularity.
[8]
Rail Refurb obtained the opinion of an expert in quantity surveying,
engineering
and construction who found the pricing model to be
rational. SANRAL did not provide an expert opinion to counter
the opinion
of Rail Refurb’s expert.
[9]
It was
furthermore argued on behalf of Rail Refurb that SANRAL’s
reliance on hidden benchmarks or market related prices was
impermissible and in contravention of the Tender Conditions,
Preferential Procurement Regulations 2017 to the Preferential
Procurement
Policy Framework Act
[1]
(PPPFA) and National Treasury Guidelines.
[10]
SANRAL was made aware of the alleged irregularity and illegality of
its process on 10 May
2020 and Rail Refurb sought to engage with
SANRAL to ensure that the impugned decision and tender projects were
not implemented.
It sought SANRAL’s engagement on an
expedited timeline of the review proceedings. SANRAL however
dismissed the aforesaid
request and commenced with site handovers and
implementation of the contracts on 1 June 2020. This then led
to the first
urgent application. Rail Refurb furthermore
contended that despite SANRAL’s undertaking to supply the Rule
53 record
by 19 June 2020, it took seven weeks for SANRAL to provide
the full record, which resulted in a delay and a hearing of the
review
only during 2021.
THE
MERITS
[11]
Rail Refurb submitted tenders in accordance
with SANRAL’s invitations during November 2019. Included
in its tender submission,
in compliance with Pricing Data of the
Tender Data, Rail Refurb submitted rates for the stipulated Bill of
Quantities (BOQ) for
each project. This included certain R1
rates that were subsidised by rates elsewhere in the BOQ.
[12]
It was common cause that Rail Refurb’s
bid was the lowest for each tender. It was R14 065 325.70
lower than
VEA’s successful bid for Tender 030, and it was
R4 202 676.50 lower that Rainbow’s successful bid for
Tender
031.
[13]
During January and early February 2020,
following Rail Refurb’s bid submission, SANRAL’s agent,
Q&A Consulting,
corresponded with Rail Refurb requesting it to
rebalance and/or explain certain rates in the BOQ which were
considered either “
unduly high
”
or “
unduly low
”.
SANRAL did not inform Rail Refurb of what it considered to be the
“
market related
”
prices against which these were measured. Rail Refurb did
rebalance certain rates and provided these to SANRAL on
3 February
2020. During the course of its correspondence, Rail Refurb made
the remark that the rates were balanced through
cross-subsidisation
and so were not unrealistic when considered holistically and that
Clause C22.8 of the Tender document permitted
cross-subsidisation of
rates.
[14]
Rail Refurb stated that it carefully
considered the Conditions of Tender and both it and any
subcontractors would be able to work
profitability from the BOQ.
It was remarked that SANRAL appeared to require alignment of prices
to a predetermined benchmark
of “
market
related
” prices rather than with
achieving the lowest profitable tender price.
[15]
It was furthermore stated by Rail Refurb
that the purported imbalance in rates was a result of an imbalance of
items within SANRAL’s
own BOQ. Rail Refurb advised that
it would be happy to explain the interaction between the rates and
allay any concerns SANRAL
might have had.
[16]
On 6 and 7 February 2020, SANRAL’s
Regional Bid Evaluation Committee for the Southern Region (the RBEC)
met to consider its
recommendation of preferred tenders for Tender
030 and Tender 031. In respect of Tender 030, the RBEC
determined Rail Refurb’s
total price was unrealistically low,
in addition to containing rates that were “
unduly
high
” and “
unduly
low
”. Rail Refurb argued
that the Tender Data provided no stipulation as to what SANRAL would
consider to be a “
realistic
”
total price.
[17]
After this Rail Refurb was not given a
further opportunity to rebalance or explain its rates. VEA’s
rates were also
determined to be “
unduly
high
” and “
unduly
low
”, while its overall price was
considered to be “
realistic
”.
The RBEC decided to provide VEA with a further opportunity to
rebalance its rates.
[18]
In respect of Tender 031, the RBEC
determined that Rail Refurb presented “
unduly
high
” and “
unduly
low
” rates. Its overall
tender price was, however, considered to be realistic. The RBEC
decided to provide Rail Refurb
with a further opportunity to
rebalance its rates.
[19]
It transpired that a key concern in the
RBEC meeting was the belief that the Conditions of Tender prevented
sub-contractors from
increasing an individual rate by more than 25%.
This, Rail Refurb argued, was an important feature of the
decision-making
process because the record demonstrated that it was
on the basis of this belief that the members concluded that
sub-contractors
would be prejudiced by what it considered to be Rail
Refurb’s unduly low rates. Rail Refurb argued that the
belief
was factually mistaken.
[20]
During the course of the meeting the RBEC
attempted to contact both VEA and Rail Refurb telephonically.
They were not successful
in contacting Rail Refurb, but were able to
have a phone-call with VEA to discuss the rates in its BOQ and the
need to rebalance.
While SANRAL provided both VEA and Rail
Refurb an opportunity to further rebalance their rates to “
market
related
” rates, SANRAL did not
provide guidelines as to what it considered to be “
market
related
”. This failing was
raised by a RBEC member in the meetings. Rail Refurb responded
to SANRAL’s request to
rebalance by seeking an opportunity to
further explain how its pricing model worked to the advantage of both
it and SANRAL.
[21]
Following the last communication, on 11
February 2020, Mr. Ngxoza wrote to Rail Refurb, copying in the RBEC
Chairperson, and proposed
a roundtable discussion between the
parties. Rail Refurb accepted this invitation and awaited the
meeting. However,
no meeting took place. The following
day, 12 February 2020, the RBEC Chairperson recommended that Rail
Refurb’s bids
be rejected for both tenders on the basis that
they presented “
unrealistic
financial offers
”. The
recommendation made no mention of the proposed round table discussion
and Rail Refurb’s acceptance of this
proposal.
[22]
The RBEC’s recommendation to reject
Rail Refurb’s bids as non-responsive due to being “
unacceptable
financial offers
” was opposed by
Mr. Ngxoza in the Regional Bid Adjudication Committee (RBAC)
meeting. His objection was based on the
point that reliance on
“
market related
”
benchmarks, which were hidden from the tenders, was in contravention
of Regulation 11(2) of the Preferential Procurement
Regulations.
Mr. Ngxoza’s reservation was recorded in the RBAC memorandum.
Despite this, the recommendations
to award Tender 030 to VEA
and Tender 031 to Rainbow were approved on 19 March 2020.
[23]
In preparing its review application Rail
Refurb sought the expert opinion of Mr. Dave Mark Buchanan Stuart
(Mr. Stuart). Mr.
Stuart is a qualified Quantity Surveyor and a
corporate member of the Association of South African Quantity
Surveyors. According
to his affidavit he has over 35 years’
experience in the measurement and valuation of work for engineering,
mining and construction
contracts. The expert’s opinion
was that Rail Refurb’s pricing model was economically and
rationally based on
accepted industry standards and overall, Rail
Refurb’s pricing model was realistic. Neither SANRAL nor
VEA submitted
expert reports to counter the conclusions contained in
Mr. Stuart’s report. It therefore stood as the only
expert analysis
before this Court regarding whether or not Rail
Refurb’s pricing mode was indeed irrational, as SANRAL
concluded.
[24]
SANRAL expressed the opinion that the
expert misconceived the re-measurable road maintenance contracts as
being fixed term construction
contracts. On this basis, SANRAL
contended that the expert’s entire analysis should be ignored,
as his opinion was inapposite.
It must however be noted that
SANRAL’s view was not based on a contradictory expert opinion
and could as a result carry little
weight in assisting the Court.
SANRAL’s assertion therefore was not based on evidence, but was
merely an opinion of
the decision makers. It followed that
SANRAL’s objection to the expert opinion could not be
accepted. The fact
is that SANRAL’s objection should be
rejected because SANRAL provided no support for its assumption beyond
pointing to the
report’s reference to a dictionary meaning of
“
a tender
”.
The expert had access to all the tender documents and was thus
aware of the nature of the contracts when formulating
his opinion.
Mr. Stuart confirmed this in his affidavit. The expert’s
opinion could therefore not cogently be
disputed unless the
considered opinion of another independent expert was provided.
[25]
The proper approach to disputes of fact in
motion proceedings is trite:
“…
an
applicant who seeks final relief on motion must, in the event of
conflict, accept the version set up by his opponent unless the
latter’s allegations are, in the opinion of the court, not such
as to raise a real, genuine or bona fide dispute of fact
or are so
far-fetched or clearly untenable that the court is justified in
rejecting them merely on the papers”.
[2]
[26]
In the circumstances the opinion of the
independent expert must be accepted by the Court, as no allegations
have been advanced to
gainsay it. Therefore, SANRAL’s
defence, namely that Rail Refurb’s pricing model was
objectively irrational,
cannot be upheld.
GROUNDS
FOR REVIEW
[27]
Rail Refurb raised three grounds for review. The first was
SANRAL’s unilateral
decision not to attend to the round table
discussion. The second was SANRAL’s alleged incorrect
assessment of the pricing
model as an unacceptable financial offer,
including SANRAL’s rejection of the pricing model, which had
already been found
in another instance to be objectively realistic.
The third was SANRAL’s decision to disqualify Rail Refurb
according
to a benchmark that allegedly violated the Conditions of
Tender.
[28]
It is trite
that SANRAL’s decision was required to be objectively rational,
reasonable and fair.
[3]
As far as the failure to follow through on the promise of a round
table conference, it transpired that SANRAL decided not
to proceed
with this undertaking unilaterally and without informing Rail Refurb
of it and awarded the contracts to the successful
tenders.
SANRAL argued that the proposed round table was unnecessary as Rail
Refurb had refused to rebalance its rates to
meet SANRAL’s
approval. Rail Refurb denied this allegation and pointed out
that it was also legally irrelevant because
procedural irregularity
is always fatal, even if it would have made no difference to the
outcome.
[4]
[29]
The
Conditions of Tender, it is trite, constitutes components of the
binding framework against which the legality of a decision
will be
evaluated.
[5]
According to clause 5.10 of the Conditions of Tender, SANRAL,
as the Employer, shall “
[o]btain
clarification from a tenderer on any matter that could give rise to
ambiguity in a contract arising from the tender offer
”.
However, SANRAL failed to do this.
[30]
SANRAL
failed to clarify issues that it admitted arose from Rail Refurb’s
pricing model. This invalidated the impugned
decision on the
basis of material non-compliance with a mandatory tender
condition.
[6]
In acting in this manner, SANRAL failed to comply with what the
Conditions of Tender promised and when a public authority
fails to do
so it fails to discharge its duty fairly.
[7]
[31]
SANRAL had previously claimed that the
clarification was “
dealt with
”
through a series of correspondence. However, this did not
happen and it was contradicted by the fact that SANRAL’s
proposal for the meeting followed after, and as a result of, the
series of correspondence.
[32]
SANRAL’s
main objection to Rail Refurb’s bids was the use of
unrealistically low rates. Rail Refurb argued that
it is a
reviewable irregularity to declare a bid as unrealistically low
without affording the tenderer any audience on the matter.
[8]
[33]
I
n
addition to SANRAL’s breach of mandatory tender conditions, the
impugned decision was procedurally unfair. Our courts
have
concluded that similar failures to SANRAL’s are fatal to the
validity of similar decisions, taking into account that
procedural
fairness is determined on a case by case basis.
[9]
[34]
In
the case of
Metro
Projects CC and Another v Klerksdorp Local Municipality and
Others
,
[10]
the
Supreme Court of Appeal (SCA) held that:
“
Fairness
must be decided on the circumstances of each case. It may in given
circumstances be fair to ask a tenderer to explain an
ambiguity in
its tender; it may be fair to allow a tenderer to correct an obvious
mistake; it may, particularly in a complex tender,
be fair to ask for
clarification or details required for its proper evaluation. Whatever
is done may not cause the process to lose
the attribute of fairness
or, in the local government sphere, the attributes of transparency,
competitiveness and cost-effectiveness.”
[11]
[35]
In
the case of
Road
Mac Surfacing (Pty) Ltd v MEC for the Department of Transport and
Roads North West Province and Others
,
Raubex
(Pty) Ltd v MEC for the Department of Transport and Roads, North-West
Province and Others,
the following of relevance was stated:
[12]
“
Although
I agree with Landman J that the Department’s officials
committed a procedural error by not inviting Road Mac Surfacing
for
an interview before rejecting its tender proposal, I am of the view
that such failure on the part of the Department constituted
a
procedural unfairness in that Road Mac Surfacing have not had the
opportunity to explain why its tender price was too low and
may even
have persuaded the Department to reconsider its tender together with
the others.”
[13]
[36]
In this instance SANRAL furthermore unilaterally abandoned
discussions and Rail Refurb
did not have the opportunity to explain
its rates.
[37]
SANRAL is
legally bound by the reasons given in its letters of 17 April 2020
and 5 May 2020.
[14]
SANRAL did not raise the objection to Mr. Ngxoza’s authority in
these letters and that Mr. Ngxoza was not acting or
could not act on
behalf of SANRAL for a round table meeting. It is trite that
the decision maker is bound by the reasons
given for its decision and
may not deviate from those, as the duty to give reasons for an
administrative decision is a central
element of the constitutional
duty to act fairly. The failure to give proper reasons should
ordinarily render the decision
reviewable for reasons given at a
later stage are not the true reasons for the decision, but “an
ex post facto rationalization
for a bad decision.”
[15]
[38]
It must be taken into account that Mr. Ngxoza was included in all
requests from, and responses
to the technical sub-committee, and
SANRAL’s belated attempt to distance itself from Mr. Ngxoza’s
invitation to a round
table meeting was without any substance and
must be rejected.
[39]
Regarding the possible prejudice to sub-contractors as a result of
the pricing model followed,
Rail Refurb argued that in the Northern
region it was asked to submit a contract Participation Goal plan (CPG
plan) to show that
sub-contractors would be accommodated in its
pricing model. Therefore, it was argued, there was no cogent
reason why SANRAL
could not have done the same here. Unfortunately,
SANRAL did not explain this aspect on the papers. It is
untenable
and irrational and unfair that the same party could accept
the same pricing model in another instance, but reject it under
similar
circumstances.
[40]
SANRAL acknowledged
that the high and low
rates were explained by cross-subsidization. The
cross-subsidization occurred across complimentary
and corresponding
rates. Importantly, cross-subsidization was provided for in
clause C 2.1.8 of the Tender Document
and
its rationality accorded with the expert’s opinion.
[41]
“
Unduly high
”
and “
unduly low
”
were defined in the Standard Conditions of Tender. Despite
SANRAL’s claim, unduly high and unduly low rates
were not
defined by a specific deviation of ‘20% to 25% from a market
average’. It was argued by Counsel on behalf
of Rail
Refurb that the Conditions of Tender defined the standards to be
applied as follows:
(i)
A rate is only unduly low if it compromised
the ability of a tenderer to complete the contract; and
(ii)
A rate was only unduly high if it exposed
SANRAL to disproportionate increases in construction costs, in
certain circumstances.
[42]
As a matter of pleading, it was argued, it
was insufficient for SANRAL to claim that a mere deviation from
market related averages
would result in either of the above
scenarios, without substantiation. The expert report made it
clear that neither one of
these two situations would arise.
[43]
SANRAL stated that:
(i)
“
Generally, a rate which is more than
20% or 25% (depending on the employer and/or evaluator) higher or
lower than the average, it
is considered to be unbalanced and it is
investigated further.”
(ii)
“
Generally, rates are considered
unduly high or low if they differ by more than 25% from the average
quoted for an item. If quoted
rates are absurdly outside a market
related range, it is considered to be non-responsive. When a bidder
refuses to rebalance its
rates or to resubmit a bid that is market
related, it continues to be non-responsive.”
[44]
If
SANRAL applied the standard of ‘20% to 25%’, of what
SANRAL itself deemed to be the “market average”
without
disclosing to Rail Refurb what it considered “the market
average” would be, this would result in SANRAL’s
decision
being declared invalid and unlawful because the evaluation process
applied by SANRAL had the result that the true import
of the tender
that Rail Refurb bid for, and the evaluation process, was not
disclosed to Rail Refurb. I
t
is trite that a tender is required to ‘speak for itself’.
[16]
[45]
Rail Refurbish further argued that SANRAL’s definition of an
“unbalanced rate”
does not appear in the Conditions of
Tender.
[46]
SANRAL stated that “
the
reason for the decision to award the Tender 030 to VEA Road is set
out in the minutes of the RBEC meeting of 6 and 7 February
2020. It
was because VEA Road had indicated its willingness to further balance
their rates.
” And that, “
The
committee phoned VEA Road during the meeting. It confirmed that it
was willing to do so. On 10 February 2020, the response from
VEA Road
was deliberated on and found to yield rebalanced rates
.”
[47]
SANRAL stated that other bidders, like VEA,
were asked to rebalance their rates to present realistic, market
related prices for
items that were priced very low or very high.
According to SANRAL other bidders (like VEA) rebalanced the
pricing rates in
their bids to address this problem. It was
stated by SANRAL that this enabled the RBEC to evaluate their pricing
realistically
and in a way that is related to “going rates in
the market.”
[48]
However, a perusal of the papers revealed
that even after the rebalancing, on 9 February 2020, VEA’s
rebalanced rates continued
to have multiple rates which fell below
SANRAL’s determination of a ‘market related average’.
It is this
‘market related average’, as is admitted
by SANRAL, that disqualified Rail Refurb’s personal final
evaluation
process.
[49]
An
annexure to the Expert Report recorded all the rebalanced rates that
VEA provided that varied from the ‘market related
average’.
SANRAL’s attention was drawn to this. This allegation was
not addressed by SANRAL in the supplementary
answering affidavit,
beyond a bare denial. In terms of the so-called
Plascon-Evan’s
rule,
it is trite that the bold denial stood accordingly to be
rejected.
[17]
[50]
On SANRAL’s own version not only
would these rates provided by VEA pose a risk to sub-contractors, but
they constituted unduly
low rates. SANRAL’s rejection of
Rail Refurb’s bids for Tenders 030 and 031, on exactly this
basis, must therefore
be irrational and procedurally irregular and
unfair. SANRAL could not lawfully apply one rule to Rail
Refurb, and apply a
different standard to another tenderer.
[51]
It would furthermore seem that SANRAL did
not have regard to Rail Refurb’s rebalanced rates. The
figures referred to
by SANRAL did not accord with the numbers
indicated by Q&A Consulting to be at issue following Rail
Refurb’s submission
of its rebalanced rates. It was
unclear from where they were derived. It would seem that SANRAL
had taken its decision
without having regard to Rail Refurb’s
rebalanced rates. SANRAL relied on Rail Refurb’s alleged
rate of excavating
hard and soft material. These rates were
taken from Rail Refurb’s original BOQ and not from Rail
Refurb’s rebalanced
BOQ, which it submitted on 3 February 2020.
SANRAL ought to have considered the latter BOQ, if its
decisions were to be held
to be valid for procedural rationality and
procedural fairness.
[52]
SANRAL
claimed that Rail Refurb’s rates continued to include
abnormally high rates for item M630.01. However, in Rail
Refurb’s rebalanced BOQ there were no abnormally high rates for
M630.01. Rail Refurb addressed SANRAL’s concern
regarding
initial high payments a number of times in correspondence with Mr. de
Klerk from Q&A Consulting and explained that
all high initial
payments had been balanced out. SANRAL’s supplementary
answer further supported Rail Refurb’s
claim that SANRAL failed
to consider Rail Refurb’s rebalanced BOQ. It would then
seem that SANRAL based their decision
on the incorrect pricing
Schedule. This constituted a further reason why the impugned
decision should be set aside.
T
he
decision was based on an “
error
of fact
”,
on an objectively verifiable and uncontentious basis,
[18]
and/or for non-compliance with the Conditions of Tender.
It
is thus reviewable in terms of sections 6(2)(e)(iii) of the Promotion
of Administrative Justice Act
[19]
(PAJA) and the principle of legality.
[53]
Rail
Refurb argued that SANRAL misapplied N030.04
[20]
of the Tender Data to its prejudice. It argued that the
provision did not refer to the individual rates tendered, but to
the
package of work. This package, it was argued, would incorporate
a combination of rates and therefore viability for sub-letting
is not
determined by the individual rate, but by the package of rates to be
sub-contracted. SANRAL conceded that its evaluating
committee
must consider the package value. It seemed however that SANRAL
considered only whether an individual rate was realistic
and not
whether the package of rates which applied to a piece of work was
realistic.
[54]
Based
on the aforesaid the decision was procedurally irrational and unfair
and is as a result reviewable in terms of section 6(2)(c)
of PAJA.
It
is trite that the impugned decision will be unlawful in the event
that it can be shown to be irrational seeing that
rationality
is a minimum threshold requirement applicable to the exercise of all
public power. It requires a court to examine
the means selected
by the decision-maker and whether the means are rationally related to
the objective sought to be achieved.
[21]
[55]
It
is furthermore trite that the process must be rational in its
entirety, that is both the process and the decision must be
rational.
[22]
The inconsistency in respect of SANRAL’s handling of “
unduly
low rates
”
is accordingly evidence of irrationality. The decision was
therefore procedurally irrational and irregular and is
thus
reviewable in terms of section 6(2)(f)(ii)(bb),(cc), and (dd) of PAJA
and the principle of legality.
[56]
The
Conditions of Tender constituted “
the
legally binding and enforceable framework within which tenders
...[must] be submitted, evaluated and awarded
”.
[23]
This is the yardstick against which SANRAL’s reasons for the
decision must be measured.
[57]
The Conditions of Tender at A.5.11.7
states:
“
A
professional estimate or the average price tendered can be used as an
indicator (benchmark of market prices) of this, but not
as an
absolute criterion on which a tender offer is overlooked”
[58]
This accords with the National Treasury
Circular of 10 May 2005, which states inter alia that:
“
Deviation
by more than a predetermined percentage from the cost estimate of the
project / commodity cannot be regarded as a justifiable
reason for
the rejection of a bid…”
[59]
In addition, Regulation 11(2) of the Preferential Procurement
Regulations 2017 states that
“if an organ of state intends to
apply objective criteria in terms of section 2(1)(f) of the Act, the
organ of state must
stipulate the objective criteria in the tender
documents”. Mr. Ngxoza clearly understood the regulation
to apply and
he pertinently raised concern over the fact that SANRAL
was applying benchmark/market related rates without indicating what
rates
they required to be met.
[60]
Despite the above prescripts, SANRAL
required Rail Refurb to align its rates with their predetermined
benchmark of market prices
as a “
critical
”
and an inflexible criterion. Whether or not SANRAL chose to
refer to it as “
benchmark
”,
that was what was sought. And it was ultimately the basis on
which Rail Refurb’s bids were rejected.
[61]
The
use of a benchmark was not limited to the individual rates but also
applied to the overall tender value. In respect of
Tender 030,
SANRAL averred that it required a total price of at least R50 and R60
million to be eligible for consideration. SANRAL
pointed to the
RBEC recommendation as justification. SANRAL did not point to
any requirement of a minimum total price within
the Tender Data
provided to the tenderers. SANRAL impermissibly applied a
benchmark to reject bids and kept this benchmark
hidden from
tenderers. This alone, as is well-established, vitiates the
validity of SANRAL’s decision.
[24]
[62]
The decision was therefore taken for a
reason not authorised by the empowering provision and is thus
reviewable in terms of section
6(2)(e)(i) of PAJA and the principle
of legality.
[63]
In light of all of the above, SANRAL
clearly did not follow a legally sound process when evaluating and
rejecting Rail Refurb’s
bids. Its decision is irregular
and invalid for all of the above reasons.
[64]
It
was submitted that if SANRAL’s decision is found to be invalid,
it must be declared unlawful.
[25]
The appropriate remedy is for this Court to review and set aside
SANRAL’s decision. This is the default position
in our
law.
[26]
[65]
The
question of what is just and equitable should be informed by the
circumstances of each case.
[27]
In this instance VEA will not suffer any significant prejudice as
they were timeously informed of the dispute and the work
done was
done under a court order.
[28]
Furthermore unrecoverable losses caused by tenders being set aside is
a reality of the tender environment.
[29]
[66]
As a result, the decision should be
declared invalid and set aside.
SUBSTITUTION
[67]
Rail
Refurb wanted the Court not only to review and set aside the award
but to grant the contracts to it. This Court has a
broad
discretion in relation to the remedy to be granted to Rail Refurb.
PAJA empowers a court to weigh the factors set out
in section 8 and
to determine what remedy to afford.
[30]
A court may do the same in respect of established grounds of review
under the principle of legality.
[68]
Section 8(1)
(c)
(ii)
(aa)
of PAJA provides, amongst the number of remedies in proceedings for
judicial review, that, ‘The court or tribunal, in proceedings
for judicial review in terms of s 6(1), may grant any order that is
just and equitable, including orders, setting aside the
administrative
action and, in exceptional cases, substituting or
varying the administrative action or correcting a defect resulting
from the administrative
action’. Section 172 of the
Constitution gives a court an identical discretionary remit for
remedial purposes.
[69]
The
SCA in
Umso
Construction
(Pty)
Ltd v Member of the Executive Council of the Government of the
Province of the Eastern Cape Responsible for Roads and Transport
and
Others
,
[31]
described the court’s position as follows:
“
There
are two primary questions that must be answered namely: first,
whether a court is in as good a position as the department
to enable
it to make the order; and secondly, whether or not the decision of an
administrator can be said to be a foregone conclusion,
for example,
that a party, in this case, Umso, would have been the successful
tenderer.
[32]
These factors
must be considered cumulatively with other relevant factors such as
bias or the incompetence of the administrator.
Ultimately, it is a
question of fairness and equitability.”
[70]
Due to the complexities of the evaluation
of the competing tenders, this Court is in my view not in as good a
position as SANRAL
to make an appropriate decision. Seeing that
Rail Refurb has been doing other work for SANRAL, one cannot infer
that SANRAL’s
decision will be a foregone conclusion.
Furthermore, the rights of the other tenderers must also be taken
into account and
it will not be just and equitable to deny them the
opportunity to make new submissions. Hopefully SANRAL will
consider the
findings in this judgment when making its decision.
In my view there exists no special circumstances which would allow
this
Court to award the contracts to Rail Refurb.
COSTS
[71]
The costs of both urgent applications were
reserved. In the light of SANRAL’s attitude to not delay
the award, Rail
Refurb had no choice but to bring the urgent
application for interim relief. Furthermore, Rail Refurb was
substantially successful
and should be awarded the costs of the
urgent application of June 2020.
[72]
Regarding the November 2020 variation
application where SANRAL was successful, Rail Refurb complained that
the variation was a result
of SANRAL’s dilatory approach and
complained that SANRAL did not engage with Rail Refurb to prevent the
application.
However, Rail Refurb opposed the application.
In my view the only fair award pertaining to costs relating to this
application
should be that each party should pay its own costs.
[73]
Regarding this application, due to the fact
that Rail Refurb was successful, it is entitled to the costs of the
application.
ORDER
[74]
The following order is made:
1.
The decision of the first respondent to
award Contract SANRAL X003-030-2019/1 to the second respondent and
Contract SANRAL X003-031-2019/1
to the third respondent is reviewed
and set aside.
2.
The first and second respondents are
ordered jointly and severally, the one paying the other to be
absolved, to pay the applicant’s
costs of the urgent
application brought during June 2020.
3.
Each party is to pay its own costs
pertaining to the urgent application brought during November 2020.
4.
The first and second respondents are
ordered to pay the costs of this application jointly and severally
the one paying the other
to be absolved.
5.
All costs will include the costs of two
counsel.
6.
The matter is remitted to the first
respondent for reconsideration with due consideration to the findings
of the Court.
RG TOLMAY
JUDGE OF THE HIGH
COURT
GAUTENG
DIVISION OF THE HIGH COURT, PRETORIA
Delivered:
This judgment was prepared and authored by the Judge whose name is
reflected and is handed down electronically
by circulation to the
Parties/their legal representatives by email and by uploading it to
the electronic file of this matter on
CaseLines. The date for
hand-down is deemed to be 18 JUNE 2021.
APPEARANCES
Counsel for
Applicant:
ADV. M D STUBBS
ADV. I
KENTRIDGE
Instructed
by:
ZIMRI ATTORNEYS
Counsel for
Respondent:
ADV. TJ BRUIDENRS (SC)
ADV. K
HARDY
Instructed
by:
SALIJEE GOVENDER VAN DER
MERWE
INC
Date of
hearing:
8 FEBRUARY 2021
Date
of judgment:
18
JUNE 2021
[1]
5
of 2000.
[2]
See
Wightman
t/a JW Construction v Headfour (Pty) Ltd and Another
[2008] ZASCA 6
;
2008 (3) SA 371
(SCA) at paras 12–13 and
Plascon-Evans
Paints Ltd v Van Riekbeeck Paints
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634E-635C.
[3]
South
African Broadcasting Corporation Soc Ltd and Others v Democratic
Alliance and Others
2016 (2) SA 522
(SCA) at para 59 and
Democratic
Alliance v South African Broadcasting Corporation SOC Ltd and Others
[2015] ZAWCHC 182
(WCC) at para 36.
[4]
Banking
Insurance Finance & Allied Workers Unions & Another v Mutual
& Federal Insurance Co Ltd
(2006) 27 ILJ 600 (LAC) at para 33.
[5]
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) SA 604
(CC) (
Allpay
1
) at
para 38.
[6]
Ibid
at
paras 28 – 30.
[7]
See
Chairpersons’
Association v Minister of Arts and Culture and Others
2007
(5) SA 236
(SCA) at para 45.
[8]
See
Sethakatshipa
Business Enterprise and Others v Mangaung Metropolitan Municipality
[2015] ZAFSHC 32
at para 23 and
Road
Mac Surfacing Pty Ltd v MEC for the Department of Transport and
Roads, North-West Province and Others, Raubex (Pty) Ltd v
MEC for
the Department of Transport and Roads, North-West Province and
Others
[2006] ZANWHC 54
at paras 53 – 59.
[9]
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs and
Tourism and Others
[2004] ZACC 15
;
2004 (4) SA 490
(CC) at para 45.
[10]
[2004]
1 All SA 504 (SCA).
[11]
Ibid
at para 13.
[12]
[2006]
ZANWHC 54.
[13]
Ibid
at para 58.
[14]
See
Freedom
Under Law (RF) NPC v National Director of Public Prosecutions and
Others
2018 (1) SACR 436
(GP) at para 46;
National
Lotteries Board v South African Education and Environment Project
2012
(4) SA 504
(SCA) (
National
Lotteries
)
at
para 27
and
Minister
of Defence and Military Veterans v Motau and Others
2014 (5) SA 69
(CC). See also
Mobile
Telephone Networks (Pty) Ltd v Chairperson of the Independent
Communications Authority of South Africa and Others
and
Vodacom
(Pty) Ltd v Chairperson of the Independent Communications Authority
of South Africa and Others
[2014] 3 All SA 171
(GJ) at paras 94 and 97.
[15]
National
Lotteries
supra
at
para 27.
[16]
See
Premier
of the Free State Provincial Government and Others v Firechem Free
State (Pty) Ltd
2000 (4) SA 413
(SCA)
at
para 30
and
Buffalo
City Metropolitan Municipality v Asla Construction (Pty) Limited
2019 (4) SA 331
(CC) at para 89.
[17]
Plascon-Evans
Paints Ltd v Van Riekbeeck Paints
[1984] ZASCA 51
;
1984 (3) SA 623
(A) at 634E-635C.
[18]
See
Dumani
v Nair and Another
2013 (2) SA 274
(SCA) at paras 31 and 32.
[19]
3
of 2000.
[20]
M030.04 of the Tender Data reads:
“
If
the highest point scoring subcontractors tendered package values
(excl. P&G) is higher than 25% above that of the main
contractors value for the package the Contractor will be allowed to
negotiate the subcontractor’s tendered amount downwards
up to
but not less than 25% above that of his own package value […]
Payment
out of the lump sum shall be made on a pro rata
basis to cover the difference in the package values between that of
the Main Contractor
and his subcontractors until the lump sum is
depleted […]”
[21]
Pharmaceutical
Manufacturers Association of South Africa and Another: In re Ex
parte President of the Republic of South Africa
and Others
[2000] ZACC 1
;
2000
(2) SA 674
(CC) at para 90;
Democratic
Alliance v President of the Republic of South Africa and Others
2013
(1) SA 248
(CC)
(
Democratic
Alliance
)
at
para 32 and
Minister
of Home Affairs and Others v Scalabrini Centre, Cape Town and Others
2013
(6) SA 421
(SCA) at paras 65 – 69.
[22]
Democratic
Alliance
supra
at
para 34.
[23]
Allpay
1
supra
at
para 38.
[24]
See
Premier
of the Free State Provincial Government and Others v Firechem Free
State (Pty) Ltd
2000
(4) SA 413
at
para 30.
Also
see
Buffalo
City Metropolitan Municipality v Asla Construction (Pty) Limited
2019
(4) SA 331
(CC) at para 89.
[25]
Bengwenyama
Minerals (Pty) Ltd and Others v Genorah Resources (Pty) Ltd and
Others
2011 (4) SA 113
(CC) at para 84.
[26]
Allpay
Consolidated Investment Holdings (Pty) Ltd v Chief Executive
Officer, South African Social Security Agency
2014 (4) SA 179
(CC) (
Allpay
2
)
at paras 29 – 33.
[27]
Millennium
Waste Management (Pty) Ltd v Chairperson of the Tender Board:
Limpopo Province and Others
2008 (2) SA 481
(SCA) at para 22.
[28]
Bengwenyama
Minerals (Pty) Ltd and Others v Genorah Resources (Pty) Ltd and
Others
2011 (4) SA 113
(CC) at para 84.
[29]
Steenkamp
NO v Provincial Tender Board, Eastern Cape
2007 (3) SA 121
(CC) at para 56.
[30]
Aquila
Steel (S Africa) (Pty) Limited v Minister of Mineral Resources and
Others
2019
(3) SA 621
(CC) at para 108.
[31]
[2016] JOL 36065
(SCA) at para 28 citing
Trencon
Construction (Pty) Ltd v Industrial Development Corporation of South
Africa Ltd & Another
2015
(5) SA 245
(CC) at para 47.
[32]
Trencon
Construction (Pty) Ltd v Industrial Development Corporation of South
Africa Ltd & Another
2015
(5) SA 245
(CC) at para 49.