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[2017] ZASCA 30
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Head of Department, Mpumalanga Department of Education v Valozone 268 CC and Others (837/2015) [2017] ZASCA 30 (29 March 2017)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not reportable
Case
No: 837/2015
In
the matter between:
HEAD
OF DEPARTMENT, MPUMALANGA
DEPARTMENT
OF
EDUCATION
APPELLANT
and
VALOZONE
268
CC FIRST
RESPONDENT
SAMOLLO
TRADING (PTY)
LTD SECOND
RESPONDENT
SIYAKHANYA
BUSINESS ENTERPRISES CC THIRD
RESPONDENT
ICONIC
VENTURES (PTY)
LTD FOURTH
RESPONDENT
IBHOKO
TRANSPORT & TRADING (PTY) LTD FIFTH
RESPONDENT
AN
YENDE
CC SIXTH
RESPONDENT
ASITHUTHUKENI
BUSINESS
ENTERPRISES
CC SEVENTH
RESPONDENT
MAIPO
TRADING
CC EIGHTH
RESPONDENT
Neutral
citation:
Head
of Department, Mpumalanga Department of
Education
v Valozone 268 CC
(837/2015)
[2017] ZASCA 30
(29 March 2017)
Coram:
Maya
AP, Bosielo and Van der Merwe JJA and Schoeman and Fourie AJJA
Heard:
4 November 2016
Delivered:
29 March 2017
Summary:
Administrative law:
review of decision to cancel and re-advertise public tender: decision
not authorised by regulation 8(4) of the
Preferential Procurement
Regulations, 2011 and irrational: decision correctly set aside.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Kubushi J
sitting as court of first
instance):
1 The appeal is dismissed
with costs, including the costs of two counsel.
2 Paragraphs 2 and 3 of
the order of the court a quo are deleted and substituted with the
following:
‘
The
respondent is ordered to consider and adjudicate all qualifying bids
in terms of the evaluation methodology prescribed in paragraph
9 of
the bid document, within 30 (thirty) days of the granting of this
order.’
JUDGMENT
Van
der Merwe JA (Maya AP and Bosielo JA and Schoeman and Fourie AJJA
concurring):
[1]
During August 2013, the appellant, the Head of the Department of
Education of the Mpumalanga Province, invited bids by way of
publication of a tender document with number EDU/069/13/MP (the
tender). The tender envisaged the implementation and management
of
the National School Nutrition Programme. The main purpose of the
tender was to ensure that ‘needy school learners from
the
disadvantaged and deprived communities (being the target population)
receive a nutritious supplementary meal per day’.
In terms of
the tender, successful tenderers would be appointed as service
providers in terms of three year contracts, with the
option, upon
satisfactory service, to extend the duration thereof for another two
years. The obligations of the service providers
would be to operate
warehouses and to supply bulk dried food and fresh vegetables and
fruit to schools in eight municipalities
in Mpumalanga. Separate
service providers would be appointed for each municipality.
[2]
The tender closed on 11 September 2013 at 12h00. It was contemplated
that the tender would be implemented when the schools opened
in
January 2014. Unfortunately this did not materialise. As will appear
from the extended history of the matter set out below,
the principal
issue in the appeal is whether the court a quo (Kubushi J in the
Gauteng Division of the High Court, Pretoria) correctly
reviewed and
set aside the decision taken by the appellant on 23 June 2014, to
cancel and re-advertise the tender.
[3]
The respondents timeously submitted bids to be awarded parts of the
tender. The first to seventh respondents were unsuccessful.
The
tender was awarded to seventeen tenderers, including the eighth
respondent. The first to seventh respondents consequently applied
in
the Gauteng Division, Pretoria for the review and setting aside of
the award of the tender. They cited, inter alia, the appellant
and
the seventeen successful tenderers as respondents in that
application. They relied on several irregularities in respect of
the
award of the tender. These included that some of the successful
tenderers failed to submit documents that were compulsory in
terms of
the tender; that the tender was awarded to a tenderer that had been
finally deregistered; that during the evaluation of
the bids, points
were incorrectly allocated to the first to seventh respondents and to
the successful tenderers and that the tenderers
were not treated
fairly or equally, in that a condition of the tender was subsequently
imposed and in any event not consistently
applied. None of the
respondents in that application filed answering affidavits.
[4] In a judgment dated
26 May 2014, Janse van Nieuwenhuizen J reviewed and set aside the
award of the tender. She also ordered
the following:
‘
4.
The bid is remitted to the fourth respondent for reconsideration, who
is ordered and directed to consider and adjudicate upon
the bid,
having due regard to this judgment, within 1 (one) month of the
granting of this order.
5.
The status
quo
in respect of the implementation of the bid is
maintained until the fourth respondent has reconsidered and
re-adjudicated upon
the bid.’
The
appellant was the fourth respondent in that application. The effect
of para 5 of the order was that pending the reconsideration
of the
tender, it would be implemented by the seventeen tenderers, despite
the setting aside of the award of the tender to them.
No reasons were
given for this part of the order.
[5]
After consideration of the judgment, the appellant, on 2 June 2014,
called for all the bids submitted in respect of the tender,
for
purposes of reconsideration of the tender. The appellant appointed a
bid evaluation committee (BEC) on 17 June 2014 and a bid
adjudication
committee (BAC) on 18 June 2014 to assist her for this purpose.
[6] The tender obliged
tenderers to submit seven ‘compulsory returnable documents’.
These included a valid tax clearance
certificate, proof of value
added tax (VAT) registration or a declaration that the bidder is not
registered for VAT and cannot
charge VAT, as well as company
registration documents. The tender clearly stated that failure to
submit any of the compulsory documents
would lead to disqualification
of the bid. (Regulation 14 of the Preferential Procurement
Regulations, GN R502,
GG
34350, 6 June 2011 made in terms of
s 5 of the Preferential Procurement Policy Framework Act 5 of
2000 (the regulations) provides
that no tender may be awarded to any
person whose tax matters have not been declared by the South African
Revenue Service to be
in order.)
[7]
Therefore the first step in the adjudication of the bids would be to
determine which bidders submitted all the compulsory documents
and
thus qualified to be evaluated in terms of the tender. The tender
provided for evaluation of bids by the BEC in two phases.
The first
phase consisted of evaluation of functionality. During this phase
points would be allocated to each bidder in respect
of the categories
‘appropriateness of the business plan’ and ‘capacity
to deliver on relevant project’.
Only bidders that scored 70
points or more for functionality could proceed to the next phase,
that is, points allocation for price
(90) and equity ownership (10).
The tender would then be awarded per municipality in accordance with
the
Preferential Procurement Policy Framework Act, that
is, to the
tenderer who scored the highest points, unless objective criteria
justified the award to another tenderer.
[8]
The BEC commenced its reconsideration of the tender on 18 June 2014
and submitted its report to the BAC on 22 June 2014. It
noted that
although a bid certificate prepared by the provincial supply chain
management unit (the unit) stated that 1116 bid documents
had been
received, 1099 bids were received by the BEC. The BEC scrutinised the
1099 bid documents. It concluded that 575 bids had
to be disqualified
and that two bids were irrelevant, as they related to another tender.
Notably, four of the seventeen previously
successful bids were
disqualified. Thus, 522 bids qualified for evaluation. The BEC did
not, however, evaluate the qualifying bids
in terms of the tender.
The BEC observed that three bid documents mentioned in the bid
certificate of the unit were not allocated
bid numbers. The BEC did
not state whether these bids qualified for evaluation or not. It
further observed that in respect of two
bids, the bid documents were
not stamped by the unit at all. Both these bids qualified for
evaluation. In respect of a further
twelve bids, the bid documents
were not stamped by the unit on each page. Six of these bids
qualified for evaluation and six did
not.
[9]
The BEC expressed the view that bid documents may have been tampered
with and that if this proved to be correct it could lead
to further
unnecessary litigation. It resolved not to continue with the
evaluation process in terms of the tender. It recommended
to the BAC
that the latter consider re-advertising the tender.
[10]
In its memorandum to the appellant dated 23 June 2014, the BAC
recommended that the tender be re-advertised in order to avoid
further litigation. The BAC further recommended that the seventeen
previously successful tenderers be contracted on a month to
month
basis to execute the tender pending the re-advertising and fresh
award thereof.
[11] The appellant
accepted the recommendations of the BAC. In terms of a written
decision dated 23 June 2014 (the decision) the
appellant resolved:
‘
DECISION
7.
In conclusion, the Tender for the Appointment of service provider/s
to manage, operate warehouses and supply bulk foodstuffs,
fresh
vegetables and fruits to schools participating in the National
Nutrition Programme with identified CRDP areas for a period
of (3)
three years, with the option to extend for another (2) two years is
to be re-advertised.
8.
Furthermore, in order not to disrupt the programme, the current 17
service providers shall be contracted on a month to month
basis until
the appointment of a new Service Provider or Providers.’
[12] The first to seventh
respondents were dissatisfied with the decision and instituted
proceedings to have it reviewed and set
aside. They relied on three
main grounds, namely:
(i) that the order of
Janse van Nieuwenhuizen J obliged the appellant to adjudicate and
award the tender and did not permit the
re-advertising thereof;
(ii) that the decision
was invalid for non-compliance with
regulation 8(4)
of the
regulations; and
(iii)
that the decision was irrational.
[13]
The eighth respondent obtained leave to join the application as an
applicant. Although it initially prayed for different (and
unsustainable) relief, the eighth respondent made common cause with
the first to seventh respondents at the hearing of the application.
At the hearing the fourth respondent also abandoned its claim for
relief, on the basis that it too did not submit a qualifying
bid.
[14] The court a quo
found for the respondents on all three grounds. It reviewed and set
aside the decision. It also made the following
orders:
‘
2.
The respondent is ordered to consider and adjudicate applicants 1 to
3 and 5 to 8’s bids in terms of the evaluation methodology
prescribed in paragraph 9 of the bid document, within 15
(fifteen) days of the granting of this order.
3.
The respondent is ordered to provide the applicants with a written
report within 20 (twenty) days of the granting of this order,
on the
outcome of the evaluation process, with specific reference to:
(a)
the valuation criteria used for measuring functionality of the
applicants’ respective bids;
(b)
the weight which was attached to each criterion;
(c)
the applicable values that were utilised when scoring each criterion;
(d)
the score for functionality obtained by each individual applicant;
(e)
the points scored by those applicants, who scored the minimum
threshold of 70% for functionality, in respect of price and equity
ownership.’
Kubushi
J granted the appellant leave to appeal to this court.
[15]
I am unable to agree with the court a quo’s interpretation of
the order of Janse van Nieuwenhuizen J. In her judgment
Janse van
Nieuwenhuizen J dealt with the grounds of review of the award of the
tender that led to the remittal of the tender to
the appellant. The
judgment rightly did not deal with the manner in which the
reconsideration should take place. In the context
of the judgment the
order did no more than to place an obligation on the appellant to
reconsider the tender with due regard to
the judgment. The judgment
and order did not purport to exclude any legitimate options available
to the appellant upon reconsideration.
Nor could they, having regard
to the principle of separation of powers. If the reconsideration
indicated, for instance, that no
acceptable bids were received, the
appellant would surely not be obliged to nevertheless award the
tender. I therefore conclude
that the order of 26 May 2014 did not
oblige the appellant to award the tender.
[16] It is, however, a
requirement of a fair, equitable and transparent procurement system
in terms of s 217 of the Constitution
that a tender properly
issued, may not be cancelled without good reason. In this regard
regulation 8(4) of the regulations provides:
‘
An
organ of state may, prior to the award of a tender, cancel a tender
if-
(a)
due to changed circumstances, there is no longer a need for the
services, works or goods requested; or
(b)
funds are no longer available to cover the total envisaged
expenditure; or
(c)
no acceptable tenders are received.’
The
tender could only be cancelled if one of the grounds stipulated in
regulation 8(4) existed. See
Trencon Construction (Pty) Ltd v
Industrial Development Corporation of South Africa Ltd & another
2015 (5) SA 245
(CC);
[2015] ZACC 22
paras 68-69.
[17]
There is no doubt that the decision constituted a cancellation of the
tender. This was expressly recognised by the appellant.
The appellant
did not state that due to changed circumstances there was no longer a
need for the services envisaged by the tender
nor that funds were no
longer available to cover that expenditure. The resolution to
re-advertise the tender in itself demonstrated
that these grounds for
cancellation did not exist. There were 522 acceptable bids. The only
justification for the cancellation
proffered by the appellant was the
fear of possible litigation, and the costs thereof, that could follow
on a fresh award of the
tender. That is not a ground for cancellation
stipulated in regulation 8(4). Regulation 8(4)(b) clearly refers to
the total expenditure
envisaged in respect of the implementation of
the tender itself. Thus, the appellant was not empowered to cancel
(and re-advertise)
the tender.
[18]
I agree that the decision was in any event irrational within the
meaning of
s 6(2)
(f)
(ii) of the
Promotion of
Administrative Justice Act 3 of 2000
. According to the BEC, there
were possible irregularities in respect of some thirty odd bids out
of approximately 1100 bids. Some
of these bids were in any event
disqualified. On the face of it, the possible irregularities may be
attributable to minor administrative
failings. Only the first to
seventh respondents came forward to challenge the award of the
tender. The seventeen successful tenderers
did not oppose that
challenge and thus accepted that the award of the tender should be
reconsidered. There is no evidence of any
threat of litigation should
a fresh award of the tender be made. Such a threat would in any event
be premature.
[19]
The implementation of the tender was intended to serve the desperate
needs of poor children. The 522 qualifying bids could
clearly be
evaluated properly and expeditiously. The fear of possible litigation
following on an award of the tender after proper
evaluation of the
qualifying bids, appears to me to be illusory and wholly unjustified.
In my view the decision to cancel the tender
for fear of possible
litigation, was not rationally connected to the purpose of the powers
of the appellant or the information
before the appellant. What made
matters worse, was that in terms of the decision, the tender was
awarded for the interim period
on a month to month basis to, inter
alia, four bidders that had been disqualified by the BEC.
[20]
It follows that the court a quo correctly set aside the decision and
that the appeal must be dismissed. In my view, however,
paras 2 and 3
of the order of the court a quo cannot stand. In terms of para 2 the
appellant was ordered to consider and adjudicate
only the bids of the
first to third and fifth to eighth respondents. Clearly all
qualifying bids should be considered for the award
of the tender.
Paragraph 2 should also be adjusted in respect of the time within
which it should be complied with. There is no
legal basis for a
report to the respondents in terms of para 3 of the order, as counsel
for the respondents fairly conceded, and
it should be deleted.
[21] For these reasons
the following order is issued:
1 The appeal is dismissed
with costs, including the costs of two counsel.
2 Paragraphs 2 and 3 of
the order of the court a quo are deleted and substituted with the
following:
‘
The
respondent is ordered to consider and adjudicate all qualifying bids
in terms of the evaluation methodology prescribed in paragraph
9 of
the bid document, within 30 (thirty) days of the granting of this
order.’
__________________
C H G van der Merwe
Judge
of Appeal
Appearances
For
the Appellant: G Shakoane SC (with him
K
M Mokotedi)
Instructed
by: Adendorff Attorneys, Nelspruit
Lovius
Block Attorneys, Bloemfontein
For the First to Seventh
Respondent: A Vorster (with him R C de Alcantara)
Instructed
by: Hugo & Ngwenya Incorporated, Pretoria
Phatshoane
Henney Attorneys, Bloemfontein
For
the Eighth Respondent: P L Uys (with him S G Webster and
C
J Mkhavelo)
Instructed
by: C J Mkhavele Inc, Pretoria
Honey
Attorneys, Bloemfontein