Brief Summary

Tender — Review of tender award — Application to review and set aside tender awarded to Mamlambo Construction — Heydricks Civils contending that the tender should be awarded to it — Amatola Water conceding to set aside the award but opposing the award to Heydricks Civils — Delay in launching review proceedings — Court finding that review was not launched later than 180 days from the conclusion of the internal appeal process — Award process not compliant with established criteria, leading to the conclusion that the tender award was invalid.

Comprehensive Summary

Summary of Judgment

1. Introduction

The matter concerned an application in the Eastern Cape High Court, East London Circuit Local Division, for the judicial review and setting aside of a public tender award made by the first respondent, Amatola Water Board, to the second respondent, Mamlambo Construction CC. The applicant, Heydricks Civils CC, additionally sought an order substituting the impugned administrative decision so that the tender would be awarded to it.

The first respondent delivered a conditional counter-application. It supported the setting aside of the award to the second respondent, but opposed substitution in favour of the applicant and contended instead that the matter should be remitted to Amatola Water for a fresh adjudication and award. The second and third respondents did not participate on the merits and filed notices to abide the court’s decision.

The dispute arose from a procurement process relating to the construction of a 10ML post-tensioned, reinforced concrete water reservoir at Misty Mount within the King Sabata Dalindyebo Local Municipality. The review implicated both PAJA-based review grounds advanced by the applicant and a legality-based challenge aligned with Amatola Water’s counter-application, with the remedy stage focusing on whether the court should substitute the decision or remit it for reconsideration by the administrator.

2. Material Facts

Amatola Water, a state entity responsible for bulk water supply and related infrastructure, invited bids on 28 September 2015 for the construction of the Misty Mount reservoir, with bids closing on 30 October 2015. The reservoir formed part of a larger set of 14 projects which Amatola Water decided would be undertaken within the same bidding process. Among the stated bid requirements were a CIDB contractor grading of 7CE, or for emerging enterprises 6CE, and an objective criterion requiring at least 51% black ownership.

The bid evaluation system used by Amatola Water involved a Bid Evaluation Committee (BEC) and a Bid Award Committee (BAC). The BEC process proceeded in stages: eliminating non-responsive tenders, scoring responsive tenders for price and preference points under the Preferential Procurement Policy Framework Act 5 of 2000, and applying objective criteria to identify the most suitable tenderer. The BEC would then recommend a bidder to the BAC, which would consider the recommendation and conduct an additional risk assessment against a set of factors.

Twenty-four bids were received, including bids from Heydricks Civils and Mamlambo Construction. For reasons not disclosed in the judgment, the BEC only met to evaluate bids on 15 March 2016. At that meeting, both Heydricks Civils and Mamlambo Construction were found non-responsive because their CIDB gradings were suspended at the time. The BEC recommended a third party, WK Construction, as preferred bidder. On 15 April 2016, the BAC remitted the matter to the BEC because WK Construction did not meet the 51% black ownership requirement.

Thereafter, the process became irregular and poorly documented. The BEC’s detailed deliberations after the remittal were not available because the minutes were missing, but it appeared to recommend another third party, Xesibe Construction, after revising the risk threshold from 6% to 20% to widen the scope of bids under consideration. On 10 May 2016, the BAC supported this recommendation subject to satisfaction regarding Xesibe’s prior work quality.

On 24 June 2016, the BAC met to “finally conclude” appointments and considered the financial stability of recommended tenderers across the series of projects. At that late stage, and on the instruction of Amatola Water’s former CEO, the objective criteria were retracted with immediate effect, and the BAC referred appointments back to the BEC. Subsequently, for undisclosed reasons, the risk assessment approach shifted again, reverting to a 6% threshold, with the effect that only Mamlambo Construction and WK Construction were said to qualify. Again, the BEC’s minutes were unavailable, and this reconstruction was derived from BAC minutes.

On 15 September 2016, the BAC concluded that Xesibe Construction lacked financial capacity to execute more than one project at a time. A revised evaluation report was presented which included Mamlambo Construction as a responsive tenderer, reversing the earlier non-responsiveness finding from March 2016. No reason for this reversal was provided. The BAC referred the appointment decision to the former CEO. Mamlambo Construction was thereafter appointed in a letter dated 3 February 2017, but only dispatched and received on 26 July 2017. The judgment records that neither the BEC nor the BAC recommended Mamlambo Construction, and that despite efforts by the current CEO, the reason for that appointment could not be established.

A point in limine was raised by Amatola Water that Heydricks Civils delayed unreasonably in launching review proceedings. The court, however, relied on the chronology showing that Heydricks Civils lodged an internal challenge shortly after being informed its bid was unsuccessful. The judgment records that the award decision was taken on 16 May 2016, that Heydricks Civils sought further information on 19 May 2016, and that it lodged an “appeal” (styled as an objection) on 23 May 2016, followed by reasons/grounds provided on 25 May 2016. Subsequent correspondence persisted in seeking documents to amplify the grounds, and the applicant ultimately launched an application on 28 November 2017 initially aimed at document production and convening of the internal appeal. During litigation, the parties agreed to a draft order regulating conduct of proceedings, including that Heydricks Civils would no longer prosecute the internal appeal, Amatola Water would provide the requested documents, and the applicant could amend its application to pursue a review.

3. Legal Issues

The central legal questions were whether the tender award to Mamlambo Construction constituted unlawful administrative action (for purposes of a PAJA review) and/or was invalid under the principle of legality, given that the award did not follow Amatola Water’s own bid adjudication procedures and lacked a traceable recommendation by the designated committees.

A preliminary legal issue was whether the review was instituted without unreasonable delay as required by section 7(1) of PAJA, including whether the calculation of the 180-day period should be assessed with reference to the status and conclusion of the internal appeal/objection process and the parties’ subsequent litigation agreement about abandoning that internal remedy.

A further issue concerned the proper remedy under section 8(1)(c)(ii)(aa) of PAJA, namely whether there were exceptional circumstances justifying substitution of the administrative decision (awarding the tender to the applicant), or whether the matter should be remitted to Amatola Water for a de novo adjudication.

These questions primarily involved the application of law to fact. The delay enquiry required a mixed assessment of procedural chronology against statutory standards and constitutional review principles. The remedy enquiry required an evaluative judgment about institutional competence, fairness, and the suitability of remittal versus substitution in light of the procurement record and the lapse of time.

4. Court’s Reasoning

On the delay point, the court applied section 7(1) of PAJA, together with the understanding (drawn from the cited authority) that when a delay exceeds 180 days, a court must consider whether extension is justified in the interests of justice, and that the delay assessment under PAJA and under legality review both turn on whether the delay was unreasonable, albeit with PAJA’s stipulated 180-day period as a key differentiator.

On the facts, the court found that Heydricks Civils acted promptly after being informed its bid was unsuccessful by lodging an internal challenge within days. The court accepted that describing the internal step as an “objection” rather than an “appeal” was, in the circumstances, a matter of semantics, and treated it as an internal remedy process that remained pending for an extended period while the applicant sought documents to support the appeal. The court regarded the subsequent draft order (in which the parties agreed that the applicant would no longer prosecute the internal appeal) as concluding the appeal process for purposes of calculating the 180-day period. On that basis, the court held that the review was not instituted outside the PAJA period reckoned from conclusion of the internal remedy as agreed, and it rejected the contention that there was unreasonable delay.

On the merits of the tender award, the court reasoned that the procurement chronology demonstrated that the award to Mamlambo Construction was not made in accordance with Amatola Water’s own procedures, because neither the BEC nor the BAC recommended Mamlambo Construction. The process was characterised by missing minutes, shifting application of objective criteria and risk thresholds, and a final appointment by the former CEO for reasons that could not be established. The court held that these were substantial and material flaws rendering the award unlawful and invalid. Because both the applicant’s PAJA review and Amatola Water’s legality review rested on the same factual irregularities, the court regarded it as self-evident that the award had to be set aside on either basis.

In considering the remedy, the court applied section 8 of PAJA and the approach to substitution described in Trencon Construction (Pty) Ltd v Industrial Development Corporation of South Africa Ltd and Another 2015 (5) SA 245 (CC). The court treated substitution as permissible only in exceptional circumstances, assessed through what is just and equitable. It referred to factors that may justify refusing to remit a decision back to an administrator (including waste of time, prejudice caused by further delay, or demonstrated bias/incompetence), and emphasised the Trencon requirements that the court must be in as good a position as the administrator and that the outcome must effectively be a foregone conclusion.

The court rejected substitution in this case. It accepted that Amatola Water appeared to have changed materially since the flawed process, noting the appointment of a new CEO and the counter-application seeking to set aside the award as part of a corrective effort. The court emphasised that bid adjudication entails a value judgment by administrators with relevant skills and expertise, and held that it was not in as good a position as the administrator to evaluate bids. The court also considered that Heydricks Civils had been excluded early due to the non-responsiveness finding, meaning the record did not support a conclusion that it was a foregone conclusion that Heydricks would necessarily have been appointed. The court further noted that other eligible bidders were similarly affected and that a de novo process should consider all bids unless exceptional circumstances existed.

The applicant’s reliance on Groenewald NO and Others v MS Developments (Cape) (Pty) Ltd 2010 (5) SA 82 (SCA) was rejected as distinguishable. The court explained that Groenewald concerned a municipal internal appeal under section 62(1) of the Municipal Systems Act 32 of 2000, whereas the present matter was a judicial review where the entire evaluation was found invalid and had to start afresh. The absence of other bidders from the review proceedings was therefore not treated as a reason to exclude them from a renewed tender evaluation.

Finally, the court considered the passage of time since the award decision of 16 May 2016, reasoning that such delay could materially affect pricing and operational conditions. This supported the conclusion that it would not be fair and just for the court to substitute the decision after such an interval.

On costs, the court accepted Amatola Water’s tender to pay costs up to the filing of the applicant’s supplementary affidavit, reasoning that it was fair because the applicant was substantially successful in securing the setting aside of the award. The court ordered that each party bear its own costs incurred after that point.

5. Outcome and Relief

The court declared Amatola Water’s decision to award the tender for the construction of the 10ML reservoir at Misty Mount under project reference AW2015/16/17 to be unlawful and invalid ab initio, and therefore of no force or effect.

The matter was remitted to Amatola Water for adjudication of all bids received, to commence de novo before the Bid Evaluation Committee and the Bid Award Committee. The court refused the applicant’s request that the tender be awarded to it by substitution.

Amatola Water was ordered to pay the applicant’s costs up to the date of the filing of the applicant’s supplementary affidavit, and each party was ordered to pay its own costs incurred thereafter.

Cases Cited

Buffalo City Metropolitan Municipality v Asla Construction (Pty) Ltd 2019 (6) BCLR 661 (CC); 2019 (4) SA 331 (CC).

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

Groenewald NO and Others v MS Developments (Cape) (Pty) Ltd 2010 (5) SA 82 (SCA).

Legislation Cited

Promotion of Administrative Justice Act 3 of 2000.

Preferential Procurement Policy Framework Act 5 of 2000.

Local Government: Municipal Systems Act 32 of 2000.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that the tender award to Mamlambo Construction CC was unlawful and invalid because it was not made in accordance with Amatola Water’s established bid adjudication procedures and was unsupported by a recommendation from either the Bid Evaluation Committee or the Bid Award Committee. The procurement process was materially flawed, including unexplained reversals of responsiveness findings, missing minutes, and late-stage changes to objective criteria and risk assessment thresholds, culminating in an appointment by the former CEO for reasons that could not be established.

The court further held that the review was not defeated by unreasonable delay under section 7(1) of PAJA, because the applicant had promptly pursued an internal appeal/objection process and the 180-day period was properly calculated from the conclusion of that internal process as reflected in the parties’ litigation agreement.

On remedy, the court held that substitution was not justified on the facts and that it was just and equitable to remit the matter for a fresh de novo adjudication by Amatola Water under its current administration, taking into account the need for administrative expertise, the presence of other affected bidders, and the time elapsed since the original award.

LEGAL PRINCIPLES

A review under section 7(1) of PAJA must be instituted without unreasonable delay and within 180 days of the relevant triggering date, including, where applicable, the conclusion of internal remedies. The assessment of delay focuses on reasonableness, with the 180-day period playing a distinctive role in PAJA compared to legality review.

A public tender award is unlawful and invalid where it is made contrary to the procuring entity’s prescribed evaluation and award procedures, particularly where the designated evaluation and award committees do not recommend the ultimately appointed tenderer and the decision-making trail cannot be properly established.

Under section 8(1)(c)(ii)(aa) of PAJA, substitution is an exceptional remedy assessed through what is just and equitable. The court must consider, consistently with Trencon Construction (Pty) Ltd v Industrial Development Corporation of South Africa Ltd and Another 2015 (5) SA 245 (CC), whether the court is in as good a position as the administrator to make the decision and whether the outcome is effectively a foregone conclusion. Where bid adjudication involves administrative value judgments requiring expertise, and where the process must be restarted with multiple bidders potentially affected, remittal will generally be preferred in accordance with separation of powers considerations.

Where the passage of time may materially affect pricing and execution conditions, that delay may weigh against judicial substitution and in favour of remittal as the just and equitable remedy.

Heydricks Civils CC v Amatola Water Board and Others (EL1450/2017) [2019] ZAECELLC 26 (22 August 2019)