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[2017] ZAFSHC 50
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ZZZ Building Construction and Security Services v Goldfields Tvet College and Another (A83/2016) [2017] ZAFSHC 50 (16 March 2017)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE
DIVISION,
BLOEMFONTEIN
Review
No.: A83/2016
In
the review between:-
ZZZ
BUILDING CONSTRUCTION & SECURITY
SERVICES
Applicant
and
GOLDFIELDS
TVET
COLLEGE
1
st
Respondent
ICEBERG
TRADING 735
CC
2
nd
Respondent
CORAM:
MUSI,
AJP
et
VAN ZYL, J
DELIVERED
ON:
6
FEBRUARY 2017
JUDGMENT
BY:
MUSI,
AJP
DELIVERED
ON:
16
MARCH 2017
[1]
This is a review application in terms of Rule 53 of the Uniform
Rules. The applicant sought the following order:
1.
That the
decision of the first respondent to award the tender to the second
respondent be reviewed and set aside.
2.
That any
contract pursuant to the award of the tender be declared to be of no
force and effect and be set aside.
3.
That the
applicant be declared to be the successful bidder and that the first
respondent be directed to enter into contract with
the applicant.
4.
That the
first respondent be ordered to furnish the applicant with written
reasons for deviating to award the tender to the applicant
as the
recommended bidder in terms of section 33 of the Constitution of the
Republic of South Africa, 1996 (the Constitution) and
section 5 (1)
of PAJA.
5.
That the
1
st
respondents pay the costs of this application unless the 2
nd
respondent opposes in which event the 2
nd
respondent be ordered to be liable for the applicant’s costs
jointly and severally with the 1
st
respondent the one paying the other to be absolved…”
[2]
The applicant is aggrieved that the 1
st
respondent (College) granted a tender for security services to the
2
nd
respondent. During the latter part of 2015 the College invited
interested parties to submit tenders for security services at its
central offices, Tosa and Welkom campuses. Many companies responded
to the invitation. The adjudication committee of the College
met on 2
December 2015 in order to adjudicate on the companies that responded
to the invitation. Some companies quoted more than
the College’s
budget allowed for security services. All the companies that were
above budget were disqualified. After this
process of elimination
only 5 companies qualified for consideration. The applicant and the
2
nd
respondent were part of the companies that qualified for
consideration. However the adjudication committee found some
discrepancies
in the documents of both the applicant and the 2
nd
respondent. In respect of the applicant the adjudication committee
found that ID copies and the
qualifications
of
support
staff were not certified. The 2
nd
respondent’s documents were found to be lacking because COIDA,
ID copies of support staff and insurance (Public Liability
Documents)
were not certified. The adjudication committee resolved not to
adjudicate the security services tender after it found
that none of
the remaining five companies met all the strict tender requirements.
It resolved to start the process afresh because
there was no
qualifying company.
[3]
On 14 January 2016, the acting principal of the College, Mr MPW
Pinkoane, wrote a memorandum to Ms CB Bovungana, wherein he
stated
the following:
“
Adjudication
committee has recommended that the tender for security services be
re-advertised, however noting the process of re-advertising
and the
financial implications attached thereto, and also that the same
companies will re-apply, I therefore duly request that
the (sic) hold
the Evaluation Committee meeting and do the following:
·
Recall all
submitted bids/tenders that were within budget to be re-evaluated.
·
Evaluation
Committee have a meeting with bidders to give them an opportunity to
certify documents that were not certified, update
all relevant
documents, and re-submit for evaluation.
·
Bidders
prices should not be changed.
Kindly expedite the
matter so that a new security company is appointed on the 01 March
2016 (sic).”
[4]
On 28 January 2016 the evaluation committee met with representatives
of the five companies that qualified. During this meeting
the bidders
were given back their tender documents, after it was explained to
them that the purpose of the meeting was to point
out that their
documents were not in order and to give them an opportunity to
rectify their documents. They were informed that
the due date for the
resubmission of the tender documents would be 4 February 2016 at
10:00.
[5]
The Bid Evaluation Committee met on 9 February 2016 to
inter
alia
evaluate the security services tender. Three of the five companies
were disqualified for various reasons. The applicant and the
2
nd
respondent were the only companies left in respect of this tender.
The 2
nd
respondent quoted R1 545 600 while the applicant quoted R1 680
000. A functionality test in terms of the Preferential Procurement
Policy Framework Act 5 of 2000 (PPPFA) was done on both companies.
The 2
nd
respondent scored hundred points whilst the applicant scored 92.7
points. The Bid Evaluation Committee resolved as follows:
“Iceberg Trading 735 recommended as per PPPFA point system and
functionality test done from the previous amount of evaluation”.
It therefore recommended that the 2
nd
respondent be given the tender.
[6]
On 10 February 2016 the Bid Adjudication Committee met in order to
adjudicate the bids. The Bid Adjudication Committee considered
the
tender documents of the five companies that initially qualified. The
adjudication committee confirmed the disqualification
of the three
companies that were disqualified by the evaluation committee. It
considered the documents of the 2
nd
respondent and found that the 2
nd
respondent’s tax clearance certificate expired in December 2015
and that the 2
nd
respondent attached a letter from its auditors stating that it is
still waiting for a new tax clearance certificate.
It
resolved as follows:
“
The auditor’s
letter is not a tax clearance certificate.
The tax clearance
certificate is the only valid document to be taken.
No company should be
given a tender if it does not have a valid tax clearance certificate
according to the guidelines from treasury.
The adjudication
committee resolved that Iceberg trading 735 be disqualified based on
the reasons mentioned above.”
[7]
The Bid Adjudication Committee recommended that the applicant be
given the tender and that a report be given to the principal
of the
College. On 23 February 2016 Mr Leteane, wrote a submission
requesting approval from the acting principal to appoint the
applicant to supply security services to the College. The
recommendation of Mr Leteane was supported and approved by Mrs Smith.
The acting principal rejected the recommendation and stated the
following:
“
Iceberg Trading
735 is approved. The company’s expired in December 2015 and
they are awaiting the updated (sic). ZZZ Security
guards complained
to the College about various issues. The letter of complained is
attached (sic).”
[8]
It is clear from the letter of complaint that only 2 employees lodged
various complaints against the applicant. They
inter
alia
complained about the late payment of their salaries, salaries which
were not paid in full, unfair dismissal of employees and intimidation
of employees, employees who do not receive their monthly pay slips,
lack of communication between employees and their employer
and the
fact that employees do not have employment contracts. The computer
generated date stamp clearly shows that the letter relating
to these
complaints was written on the 9 September 2014.
[9]
The applicant was not happy with the state of affairs and approached
its attorneys in order to get the relevant documentation
from the
College. After its attorneys perused the relevant documentation they
wrote a letter, dated 15 March 2016, to the acting
principal
requesting to be informed what procedure, if any, was used during the
deviation from the Bid Adjudication Committee’s
recommendation
and the reasons for the deviation. No reasons were forthcoming. On 23
March 2016 the applicant’s attorneys
again
wrote to the
acting
principal requesting reasons for the deviation and the procedure that
was followed during the deviation. On 29 March 2016
the acting
principal responded as follows:
“
Kindly note that
the Supply Chain Management Policy of the College empowers the
Accounting Officer (College Principal) to award
a bid other than the
one recommended by the Bid Adjudication Committee and the policy does
not specify any procedure to be followed
when deviating from but
Adjudication Committee’s recommendation (sic).”
[10]
Mr Majaphage, on behalf of the applicant, submitted that the tender
was given to the 2
nd
respondent in a manner that was unlawful and procedurally unfair. He
contended firstly that the tax clearance certificate of the
2
nd
respondent had already expired at the time that the tender documents
were submitted on 5 February 2016. Secondly that there was
no
rational reason why the recommendation of the Bid Adjudication
Committee was not followed by the acting principal of the College.
Thirdly that the acting principal was supposed to at least inform the
applicant that he was going to consider the complaints lodged
against
it in 2014 in deciding whether to accept or reject the recommendation
of the Bid Adjudication Committee.
[11]
Mr Reinders, on behalf of the 1
st
respondent, submitted that the tax clearance certificate of the 2
nd
respondent was in order during December 2015 when it responded to the
invitation. He submitted that the acting principal acted
lawfully
when he considered that the tax clearance certificate of the 2
nd
respondent was in order when the tender closed. He was however
constrained to concede that the reason relating to the complaints
was
irrational.
[12]
The issue to be decided in this matter is whether the contract was
awarded lawfully to the 2
nd
respondent.
[13]
Procurement by the state is regulated by the Constitution and other
legal instruments. Section 217 of the Constitution
of the
Republic of South Africa, 1996 reads as follows:
“
(1)
When an organ of state in the national, provincial or local sphere of
government, or any other institution identified
in national
legislation, contracts for goods or services, it must do so in
accordance with a system which is fair, equitable, transparent,
competitive and cost-effective.
(2) Subsection (1)
does not prevent the organs of state or institutions referred to in
that subsection from implementing
a procurement policy providing for-
(a)
categories
of preference in the allocation of contracts; and
(b)
the
protection or advancement of persons, or categories of persons,
disadvantaged by unfair discrimination.
(3) National
legislation must prescribe a framework within which the policy
referred to in subsection (2) must be implemented.”
[14]
The PPPFA sets out the framework within which the procurement policy
and services must be implemented by an organ of state.
The
procurement policy of the 1
st
respondent is also of importance because it sets out the manner in
which it should procure goods and services.
[15]
In terms of section 33 of the Constitution everyone has the right to
administrative action that is lawful, reasonable and procedurally
fair. PAJA was enacted to give effect to the right to just
administrative action. Section 6 of PAJA reads follows:
“
(1)
Any person may institute proceedings in a court or a tribunal for the
judicial review of an administrative action.
(2) A court or
tribunal has the power to judicially review an administrative action
if-
(a)
the
administrator who took it-
(i) was
not authorised to do so by the empowering provision;
(ii)
acted under a delegation of power which was not authorised by the
empowering provision; or
(iii) was
biased or reasonably suspected of bias;
(b)
a
mandatory and material procedure or condition prescribed by an
empowering provision was not complied with;
(c)
the
action was procedurally unfair;
(d)
the
action was materially influenced by an error of law;
(e)
the
action was taken-
(i) for
a reason not authorised by the empowering provision;
(ii)
for an ulterior purpose or motive;
(iii) because
irrelevant considerations were taken into account or relevant
considerations were not considered;
(iv) because
of the unauthorised or unwarranted dictates of another person or
body;
(v) in bad
faith; or
(vi)
arbitrarily or capriciously;
(f)
the
action itself-
(i)
contravenes a law or is not authorised by the empowering provision;
or
(ii) is
not rationally connected to-
(aa)
the
purpose for which it was taken;
(bb)
the
purpose of the empowering provision;
(cc)
the
information before the administrator; or
(dd)
the
reasons given for it by the administrator;
(g)
the
action concerned consists of a failure to take a decision;
(h)
the
exercise of the power or the performance of the function authorised
by the empowering provision, in pursuance of which the administrative
action was purportedly taken, is so unreasonable that no reasonable
person could have so exercised the power or performed the function;
or
(i)
the
action is otherwise unconstitutional or unlawful.
(3) If any
person relies on the ground of review referred to in subsection (2)
(g)
, he or she may in respect of a failure to take a decision,
where-
(a)
(i)
an administrator has a duty to take a decision;
(ii)
there is no law that prescribes a period within which the
administrator is required to take that decision;
and
(iii) the
administrator has failed to take that decision,
institute proceedings in
a court or tribunal for judicial review of the failure to take the
decision on the ground that there has
been unreasonable delay in
taking the decision; or
(b)
(i) an
administrator has a duty to take a decision;
(ii) a
law prescribes a period within which the administrator is required to
take that decision; and
(iii) the
administrator has failed to take that decision before the expiration
of that period, institute proceedings
in a court or tribunal for
judicial review of the failure to take the decision within that
period on the ground that the administrator
has a duty to take the
decision notwithstanding the expiration of that period.”
[16]
In terms of clause 4.14 of the applicant’s Supply Chain
Management Policy, the following documents must form part of
a bid
invitation:
·
Invitation
to bid.
·
Original
tax clearance certificate or letter of arrangement from SARS.
[17]
In terms of clause 4.13 of the Supply Chain Management Policy the
Accounting Officer may decide to award a bid to a person
other than
the one recommended by the Bid Adjudication Committee. When he or she
decides to deviate reasons for the deviation should
be recorded and
should be made available for audit purposes. The reasons must be
justifiable and defendable in a court of law.
[18]
It is common cause that the Bid Adjudication Committee decided to
recommend that the applicant should be appointed to deliver
the
security service. The Accounting Officer who is the principal of the
applicant decided to deviate from the recommendation.
The crucial
question is therefore whether there are any justifiable and
defendable reasons for the deviation.
[19]
When the Bid Adjudication Committee decided not to recommend the 2
nd
respondent it stated the following:
·
Auditor’s
letter could not replace a tax clearance.
·
Tax
clearance certificate is the only valid document.
·
No company
should be given a tender without a valid tax clearance.
[20]
It is undisputed that at the time that the Bid Adjudication Committee
made its recommendation the 2
nd
respondent did not have a valid tax clearance certificate. The letter
by the 2
nd
respondent’s auditors was also not an arrangement with SARS.
The Bid Adjudication Committee was therefore aware that the
2
nd
respondent is waiting for a new tax clearance certificate. Armed with
that knowledge it still decided not to recommend the 2
nd
respondent. The reason given by the Accounting Officer that the
company is still awaiting its tax clearance certificate is something
that was considered by the Adjudication Committee.
[21]
The second reason given for the deviation is, to say the least,
strange. The Accounting Officer took into consideration complaints
that were leveled against the applicant during 2014 by two security
officials who were employed by the applicant. He did so without
informing the applicant that he intends considering those complaints
as part of the question whether to approve the recommendation
of the
adjudication committee. The complaints could have emanated from two
disgruntled employees who might have had an axe to grind
with the
applicant. The Accounting Officer of the 1
st
respondent took the complaints as gospel and held that against the
applicant without following any due process. The
audi
alteram partem
principle which is an incident of the rule of law ensures fairness
because the other side is given the opportunity to state his
or her
case and thereby refute allegations that are made against him or her
without any foundation. The applicant was not given
the opportunity
to state its version to the Accounting Officer. A prejudicial
decision was taken without regard to the rule of
law.
[22]
The policy of the College makes it plain that reasons for any
deviation should be given and that such reasons must be justifiable
in a court of law. The reasons in this case, as was correctly
conceded, cannot be classified as justifiable. The administrative
action of the Accounting Officer was therefore unlawful and
irrational.
[23]
When important decisions are based on irrational reasons or taken
contrary to the express prescripts of a policy or the law
it taints
the entire decision-making process. It gives rise to the perception
that the decision-maker took the decision for ulterior
reasons or
that the decision-maker is corrupt. In this country we read at least
once a week about tenders that were allegedly granted
unlawfully. Our
courts are also inundated with applications to set aside tenders
granted or contracts entered into after a public
procurement process.
It is therefore of utmost importance that persons, such as the
Accounting Officer in this matter, who are
reposed with the power to
take such decisions should be very circumspect and act lawfully.
Although there is no allegation of corruption
in this matter, the
decision of the Accounting Officer was unfair, unlawful and
irrational and the resultant contract null and
void.
[24]
Security services are essential at public institutions like the
College. It would be placed in harm’s way if it is left
without
security services. The best remedy which is just under the
circumstances would be to make an order for the seamless legalization
of the situation.
[25]
We have considered granting the contract to the applicant but decided
against it because the entire documents were not placed
before us.
The bid invitation was not put before us. We do not know the duration
of the contract. We do not know whether the applicant
is still in a
position to supply the services. We are in any case not satisfied
that this is an exceptional case for us to substitute
the
administrative action. Paragraph four of the notice of motion has
been complied with. A just and equitable order would be for
the first
respondent to reconsider its decision in light of this judgment and
the information that was before the Bid Adjudication
Committee and
other relevant information.
[26]
I make the following order.
(i)
The decision of the first respondent to award the tender for security
services to the second respondent
is set aside.
(ii)
The resultant contract entered into between the first and second
respondents is declared null and void
and set aside.
(iii) The
matter is remitted to the first respondent to reconsider its decision
within 14 days of the date of this
order. The decision should be
implemented within 30 days of the date of this order. Pending the
implementation of the decision
the second respondent may provide
security services in terms of the contract in (ii) above.
(iv) The
first respondent is ordered to pay the applicant’s costs.
______________
C.J.
MUSI, AJP
I
agree.
______________
C.
VAN ZYL, J
On
behalf of Applicant
Mr G.K. Majaphage
Instructed by:
Machaka Attorneys
BLOEMFONTEIN
On
behalf of the 1
st
Respondent:
Adv S.J. Reinders
Instructed by:
Rosendorff Reitz Barry
BLOEMFONTEIN
On
behalf of the 2
nd
Respondent:
Mr O.D. Molatedi
Instructed by:
Ngwane & Associates
Attorneys
BLOEMFONTEIN