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[2018] ZAECBHC 12
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State Information Technology Agency (Pty) Ltd v Premier, Eastern Cape Provincial Government and Others (250/2018) [2018] ZAECBHC 12 (23 October 2018)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE DIVISION, Bhisho)
CASE
NO: 250/2018
Matter
heard on: 23/08/2018
Judgment
delivered on: 23/10/2018
In
the matter between:
STATE
INFORMATION TECHNOLOGY AGENCY
(PTY)
LTD
Applicant
And
PREMIER,
EASTERN CAPE PROVINCIAL
First
Respondent
GOVERNMENT
LIQUID
TELECOMMUNICATIONS SOUTH AFRICA
Second
Respondent
MINISTER
OF TELECOMMUNICATIONS AND
Third
Respondent
POSTAL
SERVICES
MINISTER
OF FINANCE
Fourth
Respondent
JUDGMENT
SMITH,
J
[1]
The State
Information Technology Agency (Pty) Ltd ("SITA") seeks an
order reviewing and setting aside a contract for the
roll-out of
broadband services awarded by the Eastern Cape Provincial Government
to Liquid Telecommunications South Africa (Pty)
Ltd) ("Liquid
Telecoms") on 11 October 2017.
[2]
It is common
cause that the contract was not awarded to Liquid Telecoms pursuant
to competitive bidding system, but purportedly
in terms of Treasury
Regulation 16A6.6 which allows an accounting officer of a department
to participate in a contract concluded
by another organ of state
pursuant to a fair, transparent, and competitive bidding process. The
only requirement being that the
approvals of the relevant organ of
state and the service provider must be obtained.
[3]
SITA was
established in terms of the State Information Technology Agency Act,
No. 88 of 1998 ("the SITA Act"), and its
primary purpose is
to provide information technology services to other organs of state.
The Premier of the Eastern Cape is the
first respondent. Liquid
Telecoms is the second respondent and the successor-in-title to
Neotel (pty) Ltd ("Neotel"),
the service provider who was
appointed by SITA pursuant to an open bidding process to provide
broadband services to the Western
Cape during May 2014. The other two
respondents namely, The Minister of Telecommunications and Postal
Services and the Minister
of Finance, did not oppose the application.
[4]
The procurement process which resulted in Neotel's appointment was
undertaken by SITA acting as
agent for the Western Cape Government.
SITA and Neotel thereafter concluded a Service Level Agreement in
terms of which the latter
would provide broadband and related
information technology goods and services to the Western Cape
Government.
[5]
Since the
issue as to which organ of state was required to approve the Eastern
Cape Government's participation in the Western Cape
contract is an
important one in the context of the case, it is perhaps crucial that
I mention a few of the important features of
the Service Level
Agreement. They are,
inter
alia
that:
a)
SITA and the
Neotel were the only parties to the contract;
b)
the services
provided for in the contract were stipulated to be rendered to SITA;
c)
SITA was
authorised to agree to a contract value ;
d)
SITA was
responsible for ensuring the due and proper execution of the works;
e)
SITA bore the
contractual obligation to compensate Neotel for services rendered;
and
f)
Neotel was not
allowed to sub-contract any portion of the works without the prior
written consent of SITA.
[6]
There are
numerous other features of the Service Level Agreement which clearly
indicate that SITA was the main implementing agent
on behalf of the
Western Cape Government and that all aspects relating to the
execution of the works were within its control.
[7]
During
February 2016 the Eastern Cape Government wrote to SITA requesting it
to provide broadband connectivity services to 560 schools
in the
Eastern Cape. SITA was subsequently also requested by the former to
provide various government buildings with broadband
connectivity.
There thereafter followed a series of meetings and extensive
correspondence between the provincial government and
SITA in respect
of the farmer's request for the roll-out of broadband services.
[8]
It appears
that the Eastern Cape Government was not happy with what it perceived
to be a lack of urgency on the part of SITA, and
during November 2016
it commenced with a process intended to result in its participation
in the Western Cape agreement in terms
or Treasury Regulation 16A6.6.
[9]
The Eastern
Cape Government has set out the history of its negotiations with SITA
in great detail in its answering papers. This
was obviously done in
support of its contention that the latter was either unable to
perform the services, or simply not committed
to ensure that the
roll-out of broadband connectivity was undertaken expeditiously.
Exactly whose fault it was that they could
not reach agreement in
this regard is in my view not germane to the issue which falls for
decision in this matter, namely whether
the Eastern Cape Government
duly obtained the approvals required for its valid participation in
the Western Cape contract
[10]
The Eastern Cape Government's contentions in this regards are that:
a)
since SITA was
only acting as the implementing agent for the Western Cape Government
in concluding the Service Level Agreement with
Neotel, the agreement
was essentially one between the latter and Neotel, and the approval
of SITA was accordingly not required
;
b)
it was advised
by the Western Cape Government on 21 November 2016 that the latter
had no objection to its participation in the contract,
but had
referred it to SITA and Liquid Telecoms as "the main parties to
the Master Service Agreement ";
c)
on 21 August
2017 the Eastern Cape Government wrote to SITA seeking its approval
to amend the Western Cape agreement so as to allow
the formers
participation in terms of Treasury Regulation 16A6.6;
d)
on 18
September 2017 SITA approved the participation of the Eastern Cape
Government's participation in the Western Cape contract
for a number
of sites, stipulating that the remainder of the sites should be
serviced pursuant to an open tender process;
e)
based on this
implicit approval, the Eastern Cape Government informed the National
Treasury on 20 September 2017 of its decision
to participate in the
Western Cape contract; and
f)
the Eastern
Cape Government subsequently appointed Liquid Telecoms in terms of
Treasury Regulation 16A6.6 to roll out broadband
services to 2700
sites in the Eastern Cape.
[11]
Before I
consider the merits of these contentions, I must first deal with a
number of preliminary points raised by the respondents.
They are the
following:
a)
SITA has no
locus
standito
bring
the proceedings;
b)
SITA has
unduly delayed in bringing the application; and
c)
SITA has
failed to comply with the provisions of the Intergovernmental
Framework Relations Act, No.13 of 2005 ("the Framework
Act"),
and the Court is thus precluded from deciding the matter.
[12]
I do not think
that any of these points can be upheld. In terms of the SITA Act, a
department that wishes to procure a service contemplated
by that Act
must acquire such service from SITA. If SITA is unable to provide the
service, the department must acquire the service
through SITA.
[13]
Although the
SITA Act does not contemplate that SITA is entitled to award tenders
or conclude contracts on behalf of departments,
it is SITA that must
facilitate the acquisition of technology services by government
departments.
(SAAB
Grintek Defence v South African Police Service and others
{2016]
3 All SA 669
(SCA).
[14]
The SITA Act
is nevertheless unambiguous regarding the role of SITA where a
government department wishes to acquire technological
services, and
Treasury Regulation 16A 6.3 (e) provides that contracts relating to
information technology must be procured in terms
of the SITA Act and
Regulations. There can accordingly be little doubt about SITA's
standing to challenge any attempt by a government
department to
acquire technological information services without its involvement
and in contravention of the SITA Act. Thus it
matters not whether the
Eastern Cape Government attempted to acquire the services pursuant to
an open tender process or by "piggybacking"
on an existing
contract concluded by another organ of state: it is precluded by the
provisions of the SITA Act from doing so other
than through SITA. I
am accordingly of the view that SITA does have the necessary
locus
standi
to
bring these proceedings.
[15]
I also do not think that the undue delay point is a good one. The
Eastern Cape Government informed SITA of
its decision to appoint
Liquid Telecoms on 11 October 2017. The application was launched on
12 March 2018, some five months after
the impugned decision was
taken. In my view this is not an unreasonable delay in the context of
the case. It is common cause that
SITA was not idle during this
period. It has, for example, attempted to secure the intervention of
the National Treasury which
culminated in a meeting between the
parties during December 2017. And during February 2018, SITA
attempted to persuade the office
of the Auditor-general to
investigate the matter. The respondents were in any event not able to
show that they have suffered any
prejudice in the conduct of their
defences as a result of the five months' delay. I am accordingly of
the view that the delay was
not unreasonable.
[16]
The respondents' argument regarding SITA's alleged failure to comply
with the provisions of the Framework
Act is founded on the assertion
that the latter's failure to declare a formal dispute and attempt to
settle the dispute in terms
of section 41 of that Act, precludes the
Court from exercising its discretion to decide the matter.
[17]
While it is so
that the legal proceedings in this matter were instituted without a
formal dispute being declared in terms of section
41 of the Framework
Act, the Court has a discretion to overlook non-compliance with the
Act. In
Merafong
City v Anglogold Ashanti
2017
(2) SA 211
(CC), at par 64, Cameron J said the following in this
regard: "So although the principle of inter-governmental
cooperation
negates recourse to court of law until every avenue has
been exhausted, when this point has been reached, the constitution
may
require responsible governmental citizens to take recourse to the
Law''. And in
City
of Cape Town v Premier Western Cape and others
2008
(6) SA 345
(CPD) Swain J said that the provisions of the Framework
Act must be interpreted consistently with sections 41 (3) and (4) of
the
Constitution, which vest in Courts a discretion to decide
disputes between organs of state even if all other remedies have not
been exhausted. (See also:
Minister
of
Police
and Others v Premier of the Western Cape and others,
2014
(1) SA 1
(CC).
[18]
There can be
little doubt that SITA has made every effort to settle the matter
without the need to resort to legal proceedings.
What was clear,
however, was that the Eastern Cape Government was adamant that it was
entitled to participate in the Western Cape
contract without SITA's
approval. By the time that SITA had become aware of Liquid Telecoms'
appointment, the horse had already
bolted, since the Eastern Cape
Government had by then already created contractual obligations
vis-a-vis a private company, which
could not be undone without
judicial pronouncement.
[19]
I am
accordingly satisfied that I do have a discretion to hear the matter
and that in the circumstances it is appropriate that I
decide the
dispute between the parties.
[20]
I now revert
to what I consider to be the crux of the matter, namely whether the
Eastern Cape Government obtained the approval of
the relevant organ
of state to participate in the Western Cape contract in terms of
Treasury Regulation 16A6.6. That regulation
provides as follows: "The
accounting officer or accounting authority may, on behalf of the
department, constitutional institution
or public entity, participate
in any other contract arranged by means of a competitive bidding
process by any organ of state, subject
to the written approval of
such organ of state and the relevant contract.”
[21]
The
Director-General of the Western Cape Government responded as follows
to the request by the Eastern Cape Government for permission
to
participate in the contract: "I have no objection to the
proposal that the Eastern Cape Provincial Government utilize
cooperative procurement. I must however point out that the contract
owner for RFB 1161/2013 is the State Information Agency (SITA)
as the
main parties to the Master Services Agreement are SITA and Neotel
(Pty) Ltd. The WCG have entered into a Back-to-Back agreement
with
SITA, and it is this agreement which serves as the Service Level
Agreement for the Broadband Service which have procured."
[22]
The letter
further states that "it would therefore be necessary for ECBG to
approach SITA with this request". This assertion
by the
Director-General of the ·Western Cape Government was both
factually and legally correct. It is apparent from the
provisions of
the contract, and in particular those to which I have referred to
above, that the contracting parties to the Western
Cape agreement
were SITA and Neotel. There can thus be little doubt that the
relevant organ of state from which the Eastern Cape
Government was
required to obtain approval for participation in that contract was
SITA, and not the Western Cape Government. In
the event, the Western
Cape Government's declaration that it had no objection to the Eastern
Cape Government's participation in
that contract can by no stretch of
the imagination be construed to amount to consent as required by
Treasury Regulation 16A6.6.
The Western Cape Government having been
of the view that it was SITA and not itself that contracted with
Neotel, the relevant functionaries
of the Western Cape Government
could not have properly exercised their minds regarding the granting
of approval as required by
the Treasury Regulation. The Western Cape
Government's statement to the effect that it had no objection to the
Eastern Cape's participation
was thus based on its understanding that
it did not have authority to grant such approval.
[23]
The communication from SITA which the Eastern Cape government
contends constituted approval for its participation
in the Western
Cape contract was written by the Chief Executive Officer of SITA, Dr
Mohapi, and addressed to the Director-General
of the Eastern Cape
Government, namely Ms Mapina Mthembu. The relevant portions of
that letter read as follows:
"2.
This is once more a sincere attempt to provide the best professional
advice to the ECPG connectivity
programme on the
basis
of the
information available to SITA.
3.
We reconfirm
our commitment to provide the most cost effective and efficient
solution to the ECPG as enjoined by the general principles
of good
governance and SITA legislative mandate in particular.
4.
From this
commitment, we wish to reiterate what we have proposed to the ECPG on
the 26
th
of July 201?(clause 5 of SITA proposal -Attached hereto) with some
slight modification on the approach for non-connected sites
as
provided here below:
a.
All currently
SITA managed sites through Telkom SITA MSA be executed as proposed in
clause 4 of SITA Proposal. Please note that
there are stringent
contractual obligations on these sites as such this execution could
not be deviated to for the period of the
SITA TELKOM MSA validity.
b.
All
non-connected sites be executed through a combination of RFB 1161 and
Open bidding process.
c.
A desktop
analysis in cooperative procurement on RFB 1161 shows an indication
and a possibility of connecting 450 to 500 sites in
6 municipalities
(spread at minimum of 40 (10mbs} sites per municipality. This
indication is subject to confirmation of design
and cost ratification
by a service provider.
5.
SITA proposes
that the Eastern Cape Provincial Government connectivity programme
should proceed on the basis of paragraph 4 above
and that a
confirmation and tasking letter be made to SITA five (5) working days
in order to meet the intended timelines."
[24]
Mr
Mphaga
SC, who appeared for SITA, has correctly argued that
the above mentioned letter could at best for the Eastern Cape
Government be
construed as conditional approval for participation in
the Western Cape contract. The first condition being that the
participation
in that contract can only be in respect of 450 to 500
sites (in 6 municipalities) and the second that "a confirmation
and
tasking letter be made available to SITA within five working
days". It is common cause that neither of those conditions have
been complied with. On the contrary, the Eastern Cape Government has
proceeded with the implementation of 2700 sites, which is
an even
greater number of sites than those serviced through the Western Cape
contract.
[25]
On a reasonable interpretation of Treasury Regulation 16A6.6, the
unequivocal written approvals of the relevant
organ of state and the
service provider are required for valid participation in a contract
procured by another organ of state through
an open tender process.
While it is conceivable that the written approval may be conditional,
the organ of state seeking to participate
in the contract can only do
so once those conditions had been complied with. The Eastern Cape
Government appeared to have adopted
the attitude that SITA was not
entitled to put conditions to its approval. It has accordingly
impermissibly ignored those conditions,
construed the letter as
amounting to implicit consent, and appointed Liquid Telecoms on its
own terms.
[26]
The arguments advanced on behalf the respondents to the effect that
SITA was not entitled to make its approval
subject to conditions;
that those conditions were accordingly
pro non scripto;
and
that what remained was the implicit consent of SITA, are
fundamentally flawed. Even if SITA were indeed not entitled to make
its approval conditional, it would simply mean that it never intended
to give unqualified approval as contended for by the Eastern
Cape
Government. The letter can thus not be construed as constituting
approval for participation in the Western Cape contract for
the
roll-out of broadband services to 2700 sites. l am accordingly of the
view that it is manifest that the Eastern Cape Government
did not
obtain the written approval of SITA to participate in the Western
Cape contract in terms of Treasury Regulation 16A6.6,
and that the
decision to appoint Liquid Telecoms to provide the broadband services
is consequently reviewable.
[27]
Counsel for the respondents have urged me, in the event of a finding
that the decision to appoint Liquid
Telecoms is reviewable, to
exercise my discretion in terms of section 8 of the Promotion of
Administrative Justice Act, No. 3 of
2000 ("PAJA"), either
to postpone the declaration of invalidity on certain conditions or to
grant another just and equitable
remedy so as to ameliorate the
deleterious consequences that would flow from the abrupt cessation of
the services.
[28]
Mr
Mphaga
has conceded that it may well be appropriate for me
to exercise my discretion in terms of PAJA to grant some other just
and equitable
relief. It is common cause that the roll-out of
broadband internet connectivity will have many advantages for the
people of the
Eastern Cape. The positive consequences that the
provision of high speed internet connectivity to government
departments will have
for service delivery are self-evident. So also
are the numerous benefits that will flow from the provision of such
services to
schools, hospitals and clinics throughout the province.
It will,
inter alia,
allow educators as well as learners easy
access to digitised information and enable distant tutoring to
learners in remote rural
areas in subjects such as mathematics and
science, where expertise is notoriously Jacking. The advantages of
high-speed internet
connectivity for medical institutions are also
self-evident. The telemedicine facilities enabled by such
connectivity will ensure
that patients in remote areas have access to
timeous diagnosis by specialists, as well as facilitating proper
record keeping and
filing. It is a matter of public knowledge that
most Eastern Cape hospitals are presently still relying on archaic
methods of record
keeping and filing systems which have hampered
their ability effectively to defend medical negligent claims. The
availability of
a digitised filing system will thus not only enable
the department to manage its substantial contingent liability in
respect of
medical negligence claims, but also enhance accountability
on the part of medical personnel.
[29]
There has not
been any suggestion of corruption in the allocation of the contract
and it appears that the services rendered by Liquid
Telecoms may well
be reasonable and cost effective. I am accordingly of the view that
simply setting aside the contract may well
have deleterious
consequences for the citizens of the Eastern Cape and will probably
result in unnecessary waste of public funds.
It is common cause that
Liquid Telecoms has already made significant progress with the
planning and implementation of the project.
In these circumstances I
am constrained seriously to consider whether it would be appropriate
for me to exercise my discretion
in terms of section 8 of PAJA to
grant some other just and equitable remedy.
[30]
I am, however,
not satisfied that this issue has been properly ventilated in Court,
and have accordingly, at the hearing of the
matter, indicated to
counsel that in the event of a finding that the decision to appoint
Liquid Telecoms is reviewable, I would
allow them further opportunity
to submit written heads of argument regarding the issue of a just and
equitable remedy. I shall
deal with any other outstanding issues, if
any, including those relating to an appropriate costs order, in my
final pronouncement
after I have had opportunity to consider the
parties' additional heads of argument.
[31]
In the result
the parties are ordered to file additional heads of argument
regarding the issue of a just and equitable remedy by
the following
dates:
a)
the applicant on or before 2 November 2018; and
b)
the first and second respondents on or before 16 November 2018.
J.E
SMITH
JUDGE
OF THE HIGH COURT
Heard:
On the 23/08/2018
Delivered:
23/10/2018
Appearance
for the Applicant:
Adv.
M. Mphaga SC with HN Moloto
Instructed
by:
Mncedisi
Ndlovu & Sedumedi Inc.
C/o
Squire Smith & Laurie Inc.
44
Taylor Street
King
William's Town
For
the First Respondent:
Adv.
SP Rosenberg SC with M Adhikari
Instructed
by:
Webber
Wentzel
75
Alexandra Road
King
William's Town
For
the Second Respondent:
Wasserman
SC with S Tshikila
Instructed
by :
Cliffe
Dekker Hofmeyr Inc.