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[2017] ZAFSHC 216
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Jorian Construction CC v Letsemeng Local Municipality and Others (1954/2017) [2017] ZAFSHC 216 (24 August 2017)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 1954/2017
In
the matter between:
JORIAN
CONSTRUCTION
CC
Applicant
and
LETSEMENG
LOCAL
MUNICIPALITY
First
Respondent
MAKOMOTO
STONE (PTY) LTD
Second
Respondent
ZALISILE
MSEBENZI
CIVILS
Third
Respondent
CORAM:
RAMPAI,
J et SNELLENBURG, AJ
HEARD
ON:
12 JUNE 2017
DELIVERED
ON:
24 AUGUST 2017
JUDGMENT
BY:
SNELLENBURG, AJ
[1]
The applicant (Jorian Construction CC) seeks a threefold relief. In
the first place, the applicant seeks to have the first respondent's
decision in favour of the third respondent for upgrading of the water
treatment works at Oppermansgronde reviewed. In the second
place the
applicant seeks to have the subsequent contract concluded between the
first and the third respondent pursuant to the
farmer's acceptance of
the latter's tender bid set aside. In the third place the applicant
seeks to have a judicial substitution
order alternatively a remission
of the matter to the first respondent with the directive that the
tender bids be re-evaluated.
[2]
The background against which the application stands to be evaluated
can be summarised as follows:
2.1
The applicant, the third respondent and twelve other parties
submitted bids in response
to the invitation of the first respondent,
Letsemeng Local Municipality, for the upgrading of the water
treatment works at the
Oppermansgronde. The water project was
technically described as BID LETS/2016/WATER/038: UPGRADING OF WATER
TREATMENT WORKS AT
OPPERMANSGRONDE. The tenders were invited on 15
January 2017 and the closing date for submission of bids was 2
February 2017. renderers
also had to attend a compulsory tender
briefing / site inspection which took place on 19 January 2017.
2.2
The project that forms the subject- matter of the tender forms part
of the first respondent's
plans to address water shortages in the
Oppermansgronde and Koffiefontein communities. It therefore relates
to the execution by
the first respondent of its constitutional
obligations to the affected communities. The project essentially
comprises of the construction
of a SMI additional raw water
storage reservoir and connector pipework (the Works).
2.3
The first respondent appointed Messrs Mat Engineers & Project
Managers to supply professional
engineering services and
to assist with the implementation of the Works.
2.4
During the beginning of April 2017 the applicant became aware
that its bid had been
unsuccessful and that the tender had been
awarded to a rival bidder. It then caused a letter, dated 3 April
2017, to be addressed
to the municipal manager of the first
respondent. The aim of the letter was to record the applicant's
dissatisfaction about the
first respondent's failure to advise the
applicant of the outcome of the bids evaluation; to let the first
respondent know that,
although the applicant had not been informed of
the outcome of the bids evaluation, it had since become aware that
the contract
was awarded to Zalisile Service (sic) which was
apparently supposed to refer to the third respondent, Zalisile
Msebenzi Civils;
to request an undertaking that the
execution of the contract work be stayed pending the resolution of
the dispute through
the court processes; to demand in terms of
section 5 Act No. 3 of 2000 that reasons be supplied for the decision
not to award the
tender to the applicant and to request to be
furnished with copies of the following documents: the minutes
of the meeting
of the Bid Evaluation Committee, its evaluation report
and its recommendations as well as the minutes of the Bid
Adjudication Committee,
its report and its recommendations.
2.5
The first respondent replied through its municipal manager on 5 April
2017. He supplied
written reasons for the decision. I will deal with
those reasons below. He also furnished the applicant with two
documents, namely
the consulting engineer's tender evaluation report
which was issued on 13 February 2017 and the minutes of the Bid
Evaluation Committee
meeting held on 13 March 2017. The minutes of
the meeting of the Bid Evaluation Committee for the evaluation of
tender forms, the
first document of the report and its
recommendations to the Bid Adjudication Committee for appointment of
a bidder to the project
are contained in paragraph 4.5.The bidder
recommended for appointment was Makomota Stone {the second
respondent), according to
the recommendation in the minutes of the
Bid Evaluation Committee.
2.6
Notwithstanding its request, the applicant received no undertaking
from the first respondent.
As a result, the applicant then approached
the court on urgent basis for an immediate interdictory relief,
pending the finalisation
of the review of the first respondent's
decision, to prevent the implementation of the first respondent's
decision whereby the
tender contract was awarded to Makomota Stone
(who was joined in the application as the second respondent) and to
review the first
respondent's decision to award the tender to the
second respondent.
2.7
In its answering affidavit, the first respondent denied the
applicant's allegation that
the tender was awarded to the second
respondent. Accordingly the first respondent asserted that the relief
sought by the applicant
was legally untenable. This led to the
joinder of the third respondent and the filing of a supplementary
affidavit by the applicant
to amplify its case against the first and
the third respondents. In its supplementary affidavit, the applicant
abandoned any relief
previously sought against the second respondent.
That effectively signalled the end of the second respondent's
participation in
the proceedings.
2.8
Whilst the first respondent took issue with the procedure employed by
the applicant for
the third respondent's joinder, the third
respondent, however, filed a notice to abide regarding the interdict
proceedings. It
also filed a notice to
abide in the main review application.
The first
respondent contended that the applicant should have
withdrawn its current application and issued a fresh application. In
the light
of the further conduct of the matter, the objection has
fallen by the wayside.
2.9
The upshot was an order granted on 25 May 2017 to regulate the
further conduct of the matter.
It appears that the court indicated
that the parties should agree to the time periods for the further
conduct of the review on
truncated basis. It is apposite to quote the
court order that was subsequently made:
“
1.
The First Respondent will file a
supplementary opposing
affidavit by Monday, 29 May 2017.
2.
The Applicant will reply to that affidavit, if necessary, by 2 June
2017.
3.
The Applicant will file heads of argument by 6 June 2017.
4.
The First Respondent will file heads of argument by 8 June 2017.
5.
The matter is enrolled for hearing on Monday, 12 June 2017”
2.10
The applicant joins issue with the extent of the first respondent's
supplementary answering
affidavit and complains that the first
respondent's further supplementary affidavit canvassed matters which
fall outside the ambit
of merely answering to the allegations
contained in paragraphs 8 and 12 of its supplementary affidavit. The
court order is silent
regarding a limitation of the ambit of the
supplementary opposing affidavit, but the applicant and the third
respondent both reference
a direction by the court that the third
respondent is required to respond to the allegations in paragraphs 8
and 12 of the applicant's
supplementary affidavit.
2.11
By agreement, the matter would be adjudicated merely on the papers
before court, which
would obviously include the further affidavits
and any annexures. The complete record of proceedings, including the
tender documents,
were thus by agreement between the parties not
filed, contrary to the normal requirements of Rule 53.
[3]
It is convenient to first dispose of the preliminary issue regarding
the admissibility of the content of the supplementary answering
affidavit. It will be recalled that the applicant contends that the
first respondent was at liberty to deal specifically with the
allegations contained in paragraphs 8 and 12 only of its
supplementary affidavit and that the answering affidavit goes much
further
beyond those parameters.
[4]
The relevant parts of paragraphs 8 and 12 of the applicant's
supplementary affidavit read:
"8.
I was rather surprised by this revelation [that the contract was
awarded to the third respondent], simply because Zalisile
also could
not have received the contract.
12.1
Jorian must have outscored Zalisile as well. It submitted a bid of
around R1 300 000.00 (one million three hundred thousand
rand)
cheaper than the Zalisile bid. Of course if the Jorian bid was
properly adjudicated, it would have outscored Zalisile as
well."
The
applicant continues to criticise the evaluation procedure followed by
the Bid Evaluation Committee and the Bid Adjudication
Committee.
[5]
In my view the answering affidavit in its entirety is admissible and
should be taken into consideration. The gist of the
allegations
in paragraphs 8 and 12 was to the effect that the applicant should
have been awarded the tender instead of the third
respondent and that
if the applicant's bid was properly adjudicated it would have
outscored Zalisile. The first respondent was
in my view fully
entitled to present its case in the supplementary answering affidavit
in the manner it did. It would be manifestly
unfair to the first
respondent to expect it to answer the allegations without affording
it the opportunity to contextualise its
case. I am in any event not
convinced that the content of the answering affidavit can be said to
fall outside the ambit of answering
the allegations in paragraphs 8
and 12 of the supplementary affidavit.
[6]
If there were any merits in the complaint it is in the interest of
justice in this matter to have regard to the evidence in
the
supplementary answering affidavit. In the applicant's heads of
argument the applicant
inter alia
seeks a directive as part of
its alternative relief that the matter should be remitted to the
first respondent for re-evaluation.
If the process is vitiated
because it is found not be fair and lawful and the 'remedy stage'
becomes
relevant,
the "further consideration’s dealt with by the first
respondent in its supplementary answering affidavit should
also be
considered before any order is made in that event.
[7]
The dispute revolves around the question of fairness and lawfulness
of the procurement process. It is by now well established
that a
tender process initiated by an organ of state is
an
administrative action as envisaged by the statute, PAJA
[1]
, and
that
the participants (tenderers) are entitled to a lawful and
procedurally fair process. It is equally well established that the
executive in all spheres are constrained by the principle of
legality, in other words they may not exercise any power or perform
any function not authorised by empowering legislation.
[8]
The applicant's evidence in its affidavits reveals that it assails
the decision to award the tender to the third respondent,
and not to
it, on the following grounds:
8.1
The disqualification of the applicant's bid in want of supplying a
municipal account or
valid lease agreement constitutes a reviewable
irregularity as the same was supplied;
8.2
The second reason advanced, namely that the applicant's bid "did
not meet all the requirements of being awarded the tender from
technical report, ext", is vague and seeks to justify the
unlawful decision by
ex post facto
seeking possible grounds to
justify the decision to discard the applicant's bid. The reasons
clearly stated that the applicant's
bid did not pass through
functionality stage of evaluation;
8.3
If the court finds that other reasons may be considered the risk
assessment by the consulting
engineers was flawed for the following
reasons:
8.3.1
The consulting engineers found that the applicant's bid had a 27%
variance from the estimate. The bidders were not informed
to include
a 10% contingency item in the bill of quantities. If the 10%
contingency is not taken into consideration the applicant's
bid would
be within 10% to 20% of the estimate. The bid would not be high risk,
but medium risk and could not be rejected because
it was high risk;
8.3.2
A responsive and functional tender cannot be discarded as being too
low without affording the tenderer at issue (sic)
an opportunity of
explaining its tender price. The applicant was never afforded an
opportunity to explain its bid. Had the applicant
been afforded an
opportunity to explain its bid
it
could have laid to rest any
fears regarding the prices it submitted;
8.3.3
The consulting engineers did not express an opinion on any specific
item in the applicant's Bill of Quantities, but
looked at the
globular amount without reference to specific works at issue. This is
irrational and arbitrary;
8.3.4
The use of a predetermined percentage is unlawful because it offends
against the National Treasury's practice notice
(which is dealt with
below) which prohibit (sic) the disqualification of responsive
tenders on this basis;
8.3.5
The CIDB Regulations require redetermination of the estimate after
all the bids have been submitted to determine what
the true 'market
value' of the contract and estimate of the works are. The
redetermination is also necessary to determine the range
of all the
tenderers' CIDB grading whereafter the average is determined which is
considered with the consulting engineers estimate
and the
redetermination must be done;
8.4
The first respondent's Supply Chain Management Policy (SCPM] does not
contain any structured
manner in which the risk assessment must be
done with reference to any specific criterion or criteria. The
empowering provision
or document does not authorise the risk
assessment in a certain way;
8.5
The applicant must have outscored the third respondent if the bids
were property adjudicated;
8.6
The third respondent should not have advanced to the awarding of
points stage. The Bid Adjudication
Committee simply discarded the bid
evaluation committee's findings without dealing with the third
respondent's functionality;
8.7
There is no indication in the Bid Adjudication Committee's report
that it investigated the
functionality of the third respondent;
8.8
It is entirety unclear why the members of the bid adjudication
committee took cognisance
and finally came to a conclusion of the
fact that the applicant substantially delayed completion of the
previous project and that
the delay was the applicant's fault. It is
not uncommon for delays in projects and a final completion
certificate was issued to
the applicant and the contract was in fact
extended and the additional work done;
8.9
The risk analysis does not form part of the objective criteria
provided for in section 2
of the Preferential Procurement Policy
Framework Act of any justifiable reason why the highest points scorer
cannot receive the
tender;
8.10
The first respondent performed 2 functionality exercises;
8.11
In the event that the court allows the evidence regarding the alleged
expenditure already incurred
in connection with the project, which
the applicant claims falls outside the ambit of what the first
respondent was allowed to
answer to, then the first respondent failed
to append the progress reports to substantiate its contentions; there
is no reflected
expenditure; there is no evidence regarding what the
value of the works were when the court interdicted further
construction and
no explanation as to the exact nature of the work
thus far performed.
Those
then were grounds the applicant relied upon for the relief sought.
[9]
The applicant abandoned its reliance on the objection based on the
contention that the third respondent was irregularly advanced
to the
scoring stage. The concession was fairly made. The applicant also
conceded during argument that its Bill of Quantities provided
for a
10% contingency.
[10]
The first respondent contends that it awarded the contract in full
compliance with the required tender process legislation
and
objectively awarded the tender. It contended that there was no
substance in any of the grounds the applicant relied upon for
the
relief sought.
[11]
The applicable test for the proper legal approach to determine the
existence and legal effect of proven irregularities in a
tender
process was articulated in the leading judgment in the matter of
Allpay Consolidated Investment Holdings (Pty) Ltd and Others v
Chief Executive Officer, South African Social Security Agency, and
Others
2014 (1) SA 604
(CC) [Allpay] by Froneman, J speaking on
behalf of a unanimous court:
[28]
Under the Constitution there is no reason to conflate procedure and
merit. The proper approach is to establish, factually,
whether an
irregularity occurred. Then the irregularity must
be
legally evaluated to determine whether it amounts to a
ground
of
review
under PAJ
A
[2]
.
This
legal evaluation must, where appropriate,
take into account
the
materiality
of any deviance from legal requirements, by linking the question of
compliance to the purpose of the provision, before
concluding that a
review ground under PAJA has been established.
[29]
Once
that is done, the potential practical difficulties that may flow from
declaring
the
administrative
action
constitutionally
invalid
must
be
dealt
with under the just and equitable remedies provided for by the
Constitution and PAJA. Indeed, it may often be inequitable
to require
the re-running of the flawed tender process if it can be confidently
predicted that
the
result
will
be
the
same.
[3]
[30]
Assessing the materiality of compliance with legal requirements in
our administrative law is, fortunatel
y
,
an exercise unencumbered by excessive formality. It was not
always so. Formal distinctions were drawn between "mandatory"
or "peremptory" provisions on the one hand and "directory"
ones on the other, the former needing strict compliance
on pain
of non-validity, and the latter only
substantial compliance or even non-compliance.
[4]
That strict mechanical approach has been discarde
d
[5]
.
Although
a number of factors need to be
considered
in
this
kind of enquiry, the central element is to link the question of
compliance to the purpose of the provision. In this Court O'Regan
J
succinctly
put
the
question
in
ACDP
v
Electoral
Commission
as
being "whether what the applicant did constituted compliance
with the statutory provisions viewed in the light of
their
purpose"
[6]
.
This is not the same as asking whether compliance with the provisions
will lead to a different result."
[12]
The
starting point for an evaluation of the proper approach to an
assessment of the constitutional validity of the outcome under
a
State procurement process is necessarily
s
217
of the Constitution
[7]
:
"(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."
[13]
The national legislation was enacted in the form of the
Preferential
Procurement Policy Framework Act 5 of 2000
[Procurement
Act].
It is beneficial to revisit s 2:
“
(1)
An organ of state must determine its preferential
procurement policy and implement it within the
following framework:
(a)
A preference point system must be followed;
(b)(i)
for contracts with a Rand value above a prescribed amount a maximum
of 10 points may
be allocated for specific goals as contemplated in
paragraph (d) provided that the lowest acceptable tender scores 90
points for
price;
(ii)
for contracts with a Rand value equal to or below a prescribed
amount a maximum of 20 points
may
be allocated for specific goals as
contemplated in paragraph (d) provided that the lowest acceptable
tender scores 80 points for price;
(c)
any other acceptable tenders which are higher in price must score
fewer points, on a pro
rata basis, calculated on their tender prices
in relation to the lowest acceptable tender, in accordance with a
prescribed formula;
(d)
the specific goals may include-
(i)
contracting with persons, or categories of persons. historically
disadvantaged by unfair
discrimination on the basis of race, gender
or disability;
(ii)
implementing the programmes of the Reconstruction and Development
Programme
as published in Government Gazette 16085 dated 23 November
1994;
(e)
any specific goal for which a point may be awarded, must be clearly
specified in the invitation
to submit a tender;
(f)
the contract must be awarded to the tenderer who scores the highest
points, unless objective
criteria in addition to those contemplated
in paragraphs (d) and (e) justify the award to another tenderer; and
(g)
any contract awarded on account of false information furnished by the
tenderer in order
to secure preference in terms of this Act, may be
cancelled at the sole discretion of the organ of state without
prejudice to any
other remedies the organ of state may have.
(2)
Any goals contemplated in subsection 1(e) must be measurable,
quantifiable and monitored
for compliance."
[14]
The provisions of s 2(1)(f) are clear and unambiguous. The contract
must be awarded to the responsive tenderer who scores the
highest
points, unless objective criteria in addition to those contemplated
in s 2(1)(d) and (e) justify the award to another tenderer.
[15]
An unsuccessful tenderer has the right to obtain the information
which the tenderer reasonably requires in order to enable
him to
determine whether his right to lawful administrative action has been
violated. Without reasons he might be without remedy.
See
Transnet
Ltd v Goodman Brothers (Pty) Ltd
[2000] ZASCA 151
;
2001 (1) SA 853
(SCA). As
consequence the organ of state must furnish the reasons for its
decisions on request. See
Steenkamp NO v Provincial Tender Board,
Eastern Cape
2007 (3) SA 121
(CC) para 34.
[16]
The organ of state is bound to the reasons supplied for the
administrative decision. It may not supplement or change the reasons
in its answering affidavit. In the matter of
Jicama 17 (Pty) Ltd v
West Coast District Municipality
2006 (1) SA 116
(C) para
11
et
seq [Jicama] Cleaver, J eloquently explained why the
decision maker is bound to the reasons supplied and will not be
allowed to
supplement the reasons in its answering affidavit ex post
facto:
"[11]
. .. it is not open to the first respondent to raise the other
defences raised for the first time in its answering papers.
The
applicant has come to court in order to deal with the reason which
was conveyed to it as being the basis on which the decision
to
cancel the tender had been made. The reason why
the
first respondent should not now
be
allowed
to supplement the basis on which its previous decision was taken is
eloquently set out in a judgment of the Court
of
Appeal
in
R
v Westminster City
Council,
Ex
parte
Ermakov
[8]
viz:
'(2)
The court can and, in appropriate cases, should admit evidence to
elucidate or, exceptionally, correct or add to the reasons;
but
should, consistently with Steyn LJ's observations in Ex p Graham, be
very cautious about doing so. I have in mind cases where,
for
example, an error has been made in transcription or expression, or a
word or words inadvertently omitted, or where the language
used may
be in some way lacking in clarity. These examples are not intended to
be exhaustive, but rather to reflect my view that
the function of
such evidence should generally be elucidation not fundamental
alteration, confirmation not contradiction. Certainly
there seems to
me to be no warrant for receiving and relying on as validating the
decision evidence - as in this case - which indicates
that the real
reasons were wholly different from the stated reasons. It is not in
my view permissible to say, merely because the
applicant does not
feel able to challenge the bona tides of the decision-maker's
explanation as to the real reasons, that the applicant
is therefore
not prejudiced and the evidence as to the real reasons can be relied
upon. This is because, first, I do not accept
that it is necessarily
the case that in that situation he is not prejudiced; and, secondly,
because, in this class of case, I do
not consider that it is
necessary for the applicant to show prejudice before he can obtain
relief. Section 64 requires a decision
and at the same time reasons;
and if no reasons (which is the reality of a case such as the
present) or wholly deficient reasons
are given, he is prima facie
entitled to have the decision quashed as unlawful.
(3)
There are, I consider, good policy reasons why this should be so. The
cases emphasise that the purpose of reasons is to
inform the parties
why they have won or lost and enable them to assess whether they have
any ground for challenging an adverse
decision. To permit wholesale
amendment or reversal of the stated reasons is inimical to this
purpose. Moreover, not only does
it encourage a sloppy approach by
the decision-maker, but it gives rise to potential practical
difficulties. In the present case
it was not, but in many cases it
might be, suggested that the alleged true reasons were in fact second
thoughts designed to remedy
an otherwise fatal error exposed by the
judicial review proceedings. That would lead to application to
cross-examine and possibly
for further discovery, both of which are,
while permissible in judicial review proceedings, generally regarded
as inappropriate.
Hearings would be made longer and more expensive.'
[12]
Another reason the first respondent should not be allowed to
supplement the reasons for its decision by reasons which were
clearly
taken ex post facto is that if it was allowed to do so, it would in
effect be converting the applicant's application for
review, which is
being brought on narrow grounds, into a full scale review of its
own decision. This would be palpably unfair
and in any event would be
defective for the tender documents of the other tenderers are not
before the Court."
The
dictum in
Jicama
was endorsed and applied by the Supreme Court
of Appeal in the matter of
National Lotteries Board and Others v
South African Education and Environment Project
2012 (4) SA 504
(SCA) [National Lotteries]. Cachalia JA's remarks in paras 26 and 27,
on behalf of the unanimous Court, are instructive:
“
[26]
The question here is not whether
there were other reasons
in the
record that justified the board's decision, but whether it could give
reasons other than those it gave initially
for refusing the
application.
[27]
The duty to give reasons for an administrative decision is a central
element of the constitutional duty to
act
fairly. And the failure to give reasons, which includes proper or
adequate reasons, should ordinarily render the disputed decision
reviewable. In England the courts have said that such a decision
would
ordinarily be
void
and
cannot
be
validated
by
different
reasons given afterwards - even if they show that the original
decision may have been justified.
[9]
For in truth the later reasons are not the true reasons for the
decision,
but
rather
an
ex
post
facto
rationalisation
of
a
bad
decision.
Whether or not our law also demands the same approach as the English
courts do is not a matter I need strictly decide.”
[17]
The
reasons serve several purposes which include to inform the affected
party of the reasons why it took the decision and also why
the
decision-maker thinks that the administrative act is justified.
[10]
[18]
It is convenient to identify the reasons initially advanced by the
first respondent for its decision not to award the tender
to the
applicant.
[19]
The first respondent's written reasons for the decision not to award
the tender to the applicant, given on 5 April 2017, in
relevant parts
read:
"Your
company did not meet all the requirements of being awarded the tender
from the technical report, Bid evaluation and Bid
adjudication
reports and also didn't meet some requirements of the advert being
municipal account or valid Lease agreement, as
a result the company
did not pass through functionality stage of evaluation. The
Municipality would also like to bring it to the
attention of the
company that low prices do not guarantee award of a tender as
stipulated on an advert."
[20]
In the answering affidavit the first respondent explains that the
written reasons,
"must
be understood to convey the message that the technical
recommendations from Mat Engineers did not favour the appointment
of
the Applicant."
The
deponent on behalf of the first respondent further explains that he
regrets the wording confirming that the tender did not comply
with
some of the advertised criteria, as this seemed to have referred to
responsiveness of the tender, which the applicant's tender
was, but
that it did not meet the functionality requirements of the first
respondent.
[21]
The reasons advanced by the municipal manager in the supplementary
answering affidavit for the decision not to award the tender
to the
applicant can be summarised as follows:
21.1
Mat Engineers identified the applicant as "high risk" to
complete the project;
21.2
Due
to previous performance of the applicant for the first respondent on
a project for the upgrading of streets in Bolokanong, Petrusburg,
contract number BOV/LET/2013/01, which project was completed late,
behind the stipulated project period, the BAC
[11]
decided not to recommend the
applicant.
[22]
The reasons advanced by the municipal manager in the answering
affidavit for the recommendation of the third respondent are:
22.1
the third respondent had previous experience with work on similar
projects; and-
22.2
the third respondent completed projects before in first respondent's
jurisdiction within the scheduled time
and according to the required
specifications.
[23]
In my view the first respondent is attempting to justify its
decision
ex post facto
by supplementing the reasons
initially given in its answering affidavit.
[24]
The first respondent furnished conflicting reasons for the decision
but the decision taken could not be justified on the strength
of the
given reasons. Once the applicant's tender was found not to be
responsive it was not eligible to advance to the next round.
The
administrator clearly relied on the non-responsiveness of the tender.
If it were not so, the first respondent, as public administrative
organ, would not have included such a consideration or finding among
the reasons it furnished for its decision. This puts pay to
the first
respondent's attempt to explain how the reasons should be understood.
The reasons make perfect sense insofar as the decision
was based on
the fact that the applicant's tender was found to be non-responsive.
If the first respondent, in addition relied on
objective grounds, the
same would not only be in conflict with the non-responsiveness of the
tender {because that would be the
end of the matter as far as
evaluation is concerned) but the first respondent would obviously
have stated so clearly and lucidly
in the given reasons. It did not.
[25]
The
point of departure is to establish, factually, whether an
irregularity occurred in the process which amounts to a ground
of
review under PAJA. In doing so we are confined to review the
procedure adopted
by
functionary
in
arriving
at
his
decision.
[12]
[26]
It is common cause that the applicant's tender was responsive and
should have advanced to the next round. It appears also from
the
record.
[27]
In relying on this clearly erroneous ground a reviewable irregularity
occurred in the process which is reviewable under PAJA.
[28]
The review must therefore succeed on this score.
[29]
The second stage of the enquiry relates to what would be a just and
equitable remedy in declaring the administrative action
constitutionally invalid. As the court explained in
Allpay,
it
may often be inequitable to require the re-running of the flawed
tender process if it can be confidently predicted that the result
will be the
same.
[13]
[30]
The applicant argues that the matter should not be remitted to the
first respondent because, as it reckons, it is a foregone
conclusion
that the tender would, at any rate, ultimately be awarded to itself.
On the contrary, the first respondent prays that
the matter should be
remitted to it for re-evaluation in the event that the review is
successful. In its opinion, the outcome of
the process of re
evaluation is not as simply predictable as the applicant makes it out
to be. The first respondent seeks
no relief for a substantial order
by means of a counter application.
[31]
It is necessary to determine whether the outcome of a re
evaluation of the tenders would indeed be as predictable as the
applicant claims or what remedy will be just and equitable in the
circumstances.
[32]
The first respondent's reasons, as advanced in its answering
affidavit, show that it relies on two main grounds for the contention
that the applicant should not necessarily be successful. The grounds
are that:
32.1
Mat Engineers identified the applicant as "high risk" to
complete the project;
32.2
Due to previous performance of the applicant for the first respondent
on a project for the upgrading of streets
in Bolokanang, Petrusburg,
contract number BOV/LET/2013/01, which project was completed late,
after the expiry of the stipulated
project period, the BAC decided
not to recommend the applicant.
The
applicant, on the other hand, argues that the first respondent is not
entitled to take into account these considerations of
their past
dealings in the evaluation of the present tenders. The applicant, as
stated, also seeks a directive in the event of
the remittance of the
matter to the first respondent for re-evaluation, namely that the
first respondent is not entitled to apply
a price deviation to
conduct a risk analysis. It is therefore necessary to consider the
grounds referenced in sub-paragraphs 32.1
and 32.2.
[33]
An analysis of the answering affidavit shows that the following facts
are not in dispute:
33.1
that the applicant tendered the lowest bid in the
amount of R3
643 634.94 for completion of the project;
33.2
2 that Mofomo Construction had the second
lowest (corrected) tender
amount, namely R4 766 867.82;
33.3
that the third respondent's bid, in the corrected tender amount of
R4
816 780.71, was the third lowest;
33.4
that the applicant scored 99 points which was the highest score of
all the tender bids evaluated;
33.5
that both the third respondent and Mofomo Construction jointly scored
the second highest
number of tender evaluation points, to wit 71;
33.6
that the applicant's bid is responsive in that the required
documents, including the municipal
property rates and taxes account,
were submitted and it was the lowest in scoring; and
33.7
that Mat Engineers determined a pre-tender estimate for the
construction of the works in
the amount of R5 020 721.31 including a
10°/o contingency and value-added tax at the applicable rate.
This was used to apply
the price risk analysis. I will deal with the
issue below, but it will suffice to state that, in my view, the
applicant cannot
convincingly dispute the manner in which the first
respondent conducted the price risk analysis.
34.
The first respondent, however, also contends that the following
further considerations are relevant:
34.1
that the tender was awarded to the third respondent on 31 March 2017;
that the third respondent had already commenced with the works; that
it had already mobilised machinery, tools and equipment; that
it had
already established itself on the site; that it had already cleared
it to execute the contract; that it had already hired
plant and that
it had already appointed skilled as well as unskilled labour;
34.2
that the expenses already incurred amount to R1 400 000.00 and that
the
contract had created 14 local employment opportunities by the
time the interdict was granted;
34.3
that the funds provided for projects, including this project, may be
lost if the project is not completed within the financial year as the
funds allocated are included in the budget for the specific
financial
year; and
34.4
that water is a basic human right and that dire situation of water
supply
to the Oppermansgronde and Koffiefontein communities is
undeniable.
[35]
The first respondent intends to evaluate the tenders in the event
that the matter is remitted by:
35.
applying a risk analysis using a predetermined price deviation
percentage;
35.2
having regard to the applicant's past performance in respect of
previous contracts which it had awarded to the applicant and
any one
of the above mentioned grounds which will result in the bid, and thus
the contract, not being awarded to the applicant
who has scored the
highest points. The real issue is whether the first respondent will
act in a procedurally fair manner if it
does so. If it may not
rely on those considerations the outcome is indeed predictable, ergo
the bid must be awarded to the
applicant.
[36]
A further consideration arises if the first respondent may apply the
above mentioned criteria when evaluating the tenders.
If the first
respondent is justified to have regard to either of the
aforementioned considerations the question arises whether
the first
respondent must afford the applicant (it should rather be all
tenderers if the process is to be transparent and fair)
an
opportunity to explain its tender price and to address the concerns
regarding the past performance.
[37]
As stated above, the applicant contended in its founding papers that
the first respondent's calculation was also mathematically
incorrect
as the bidders were not informed or required to make provision for a
10% contingency. The applicant conceded that its
bill of quantities
indeed provided for a 10% contingency. This disposes of the argument
that the bidders were not required or notified
to include a 10%
contingency in their bids.
[38]
As stated above, the contract must be awarded to the tenderer who
scores the highest points (in
casu
the applicant), unless
objective criteria in addition to those contemplated in paragraphs
(d) and (e) justify the award to another
tenderer.
[39]
The first respondent relies on the application of objective criteria
in addition to those contemplated in subsections 2(1)(e)
and (f) of
the Procurement Act.
[40]
As stated, the applicant argues that it is a foregone conclusion that
the bid would be awarded to it and consequently that
the contract be
awarded to it because its bid must receive the highest score for the
lowest price. The applicant, in the alternative,
contends that the
court must issue a directive to preclude the first respondent from
applying the disqualification percentage if
it should be directed by
this court to re-evaluate the tender bids.
[41]
Reliance by the first respondent on the applicant's past performance
can be disposed of first without much ado, in my view.
According
to the first respondent1s SCMP bidders
are required to supply particulars of
any contracts awarded to them
during the past five years, including particulars of any material
non-compliance or dispute concerning
the execution of such contract
as part of the functionality assessment. Due to the manner in which
the proceedings were conducted,
the court is not privy to the
applicant's tender document. Suffice it to say that the first
respondent did not complain of any
false information in the
applicant's tender.
[42]
As
far
as
objective
criteria is
concerned
the first two requirements to qualify as objective criteria, namely
(i) being objective in the sense that it
can
be
ascertained
objectively and
(ii)
its
existence
or
worth does not depend on someone's subjective opinion, cannot on
the facts of this matter
be
satisfied.
[14]
The criteria
would
obviously
bear on the third requirement, namely some degree of rationality and
relevance to the tender or project, but that does
not suffice on its
own.
[43]
The applicant has not been registered by the first respondent as a
defaulter. The applicant also states that the contract in
question
was extended and scope of work expanded after the initial scope of
work was completed which is at odds with the allegation
that its past
performance was not satisfactory.
[44]
In my view, on the facts of this matter, the applicant's past
performance cannot be found to be a justifiable ground not to
award
the bid and contract to it as other objective criteria.
[45]
Regarding the application of the price risk analysis, the first
respondent explained that this is done based on variance of
the
tender offer from the engineer's estimate. A tender amount 20% below
or above the engineer's estimate is considered to be high
risk.
Tender amounts between 10% to 20% below or above the engineer's
estimate is considered to be medium risk and tender amounts
less than
10% below or above the engineer's estimate is considered to be low
risk. The price variation was determined in collaboration
with the
first respondent. A price risk assessment is a common practice in
evaluation of tender offers to protect state organs
from
under-bidding of costs by tenderers simply to make their bids appear
more attractive and to complete the works with the ulterior
motive of
increasing the costs later on through additional claims. The risk
analysis is applied in the same manner across the board
to all
responsive tenders.
[46]
Firstly the applicant argues that the National Treasury Practice Note
SCM 2 of 2006 prohibits the use of cost estimates as
bench mark in
its supply chain management to disregard tenders due to predetermined
percentage variation from price estimates of
the costs of projects
because it is not justifiable. Secondly it argues that it is settled
law that a tender cannot be assessed
for functionality on undisclosed
or subjective criteria. Reliance for the contention is placed on
Westinghouse Electric Belgium
SA v
Eskom Holdings (SOC) Ltd
2016
(3) SA 1
(SCA}. Thirdly the applicant argues that the first
respondent did not include price viability as a functionality
criterion. As
result the first respondent was precluded from applying
its rule to disqualify the applicant
[47]
The National Treasury Practice Note SCM 2 of 2006 provides as
follows:
"1.2.1
It has also come to the fore that departments/institutions are
incorrectly evaluating bids by using estimates
as a benchmark to
regard bids as unacceptable or non-responsive.
1.2.2
The PPPFA prescribes that the lowest acceptable bid must receive 80
or 90 points for price. A bid is regarded
as acceptable if:
(a)
it complies in all respect with the specification and conditions of
the bid;
(b)
the bidder completed and signed all the prescribed bid forms to
enable the principle (sic) to evaluate the submitted bid;
(c)
the bidder submitted the required tax clearance certificate and other
clearance/registration forms as prescribed
by various acts and/or in
the bid documentation; and
(d)
the bidder has the necessary capacity and ability to execute the
contract.
1.2.3
Bids should only be evaluated in accordance with the evaluation
criteria stipulated in the bid documentation.
When any bid is passed
over and regarded as non-responsive, the reasons for passing over
such bid must be defendable in a court
of law. Examples in this
regard may include negative banking reports, non-submission of tax
clearance certificates, not having
the necessary capacity and/or
capability and being listed on the Register for Tender Defaulters.
1.2.4
Deviation by more than a predetermined percentage from the cost
estimates of the project/commodity
cannot be regarded as a
justifiable reason for the rejection of a bid and has, therefore not
been approved by the National Treasury
as an evaluation norm or
criteria."
[48]
In
casu
the first respondent's
Supply
Chain Management Policy [SCMP]
stipulates
that the first respondent must take
into
account any
Treasury
guidelines
on
bid
documentation.
[15]
[49]
In my view reliance on the National Treasury practice note is
misplaced. The practice note does not state that a percentage
deviation from predetermined costs estimates may not be used by an
organ of state, in a price risk assessment or analysis. The
note
simply states that a tender may not be rejected outright or found to
be non-responsive because it deviates more than a predetermined
percentage from the cost estimates of the project or commodities. The
first respondent's affidavit shows clearly that the tender
will not
be found to be non-responsive or rejected outright because the tender
amount deviates more than a predetermined percentage
from the cost
estimate of the project. In my view this blanket prohibition does not
apply to the facts at hand. Price deviation
to analyse risk, as
proposed by the first respondent in this matter, has been
countenanced by courts in this and other Divisions.
Obviously each
case is determined on its own facts, but this puts pay to the
interpretation proffered by the applicant.
[50]
Ultimately the matter boils down to this: if the first respondent is
justified to use the price risk analysis and to rescore
and re-rank
the tenders, then the outcome advocated by the applicant is not a
pre-cast fact.
[51]
The applicant contends that this matter must be distinguished on the
facts from the judgment in the matter of
Q Civils (Pty) Ltd v
Mangaung Metropolitan Municipality and Another
2016
(ZAFSHC) 159 (A48/2016), a judgment on review in this Division where
the court held that the disqualification of Q Civils (Pty)
Ltd
because their price was below 15% deviation from the engineer's price
and average price submitted - the application of a so-called
price
envelope - was justifiable.
[52]
So-called price envelopes are widely used by organs of state
to analyse risk as appears from the various unreported judgments
referred
to in the
Q Civils
judgment
supra.
[53]
The applicant argues that the Q Civils judgment
(infra)
is
distinguishable from the facts in this matter because the tenderers
had knowledge of the fact that the price deviation criteria
would be
used and the organ of state's SCMP provided for it.
[54]
In
Q Civils
supra,
Daffue, J, with whom Jordaan, J
concurred held after consideration of the leading judgments that
objective criteria need not necessarily
be disclosed in tender
documents and tenderers need not be made aware of the intention to
apply objective criteria. This appears
to me to be the broad
consensus in the judgments dealing with the matter, some of which are
referred to in the
Q Civils
judgment. As stated, the applicant
argued that the judgment was distinguishable because in that matter
all the tenderers were aware
from the outset that a price deviation
would be applied and the price deviation was authorised in the organ
of state's SCMP.
[55]
It is correct that Daffue, J distinguished the facts of that matter
from the
Westinghouse
judgment on the basis that "all
bidders knew from the outset that a too low or too high bid, or put
otherwise, a bid substantially
below or higher than that of other
bidders, will be disqualified". But of equal force is his
finding in para 53 of the judgment
later that "I also find, in
line with para [22} of that judgment it was not required to disclose
the 15% deviation in the
invitation to bid, even on the basis that Q
Civils or any of the other bidders were unaware of this criterium."
I agree.
[56]
As was the case in the
Q Civils
judgment
supra,
in this
matter the tender document also provided that the lowest tender
(amount) does not guarantee that the tender will be awarded.
The
Standard Conditions of Tender also in T1.3 provides that the tenderer
with the highest number of points may not necessarily
be recommended,
as was indeed the case.
[57]
In my view the deviation figure of 20% as determined and accepted by
the first respondent in conjunction with the appointed
consultant is
an objective yardstick or criterion. The evaluation of the bids and
the application of a deviation criterion to
determine
risk will not result in a process which is not "undertaken by
means that are explicable and clear and by standards
that do not
permit individual bias and preference to intrude." See:
South
African National Roads
Agency Ltd v Toll Collect Consortium
2013
(6) SA 356
(SCA) at para [20). The price deviation is an objective
factor that qualifies as an objective criterion for purposes of s
2(
1)(f)
of Procurement Act.
[58]
The 20% deviation figure if applied will be unbiased, objective and
not arbitrary. No evidence showing the contrary has been
put up by
the applicant. The applicant in
casu
argued that the precast
deviation is arbitrary. I do not agree and there is in fact no
evidence to support such an allegation. I
also do not agree that the
deviation criteria is dependent on the subjective opinion of
somebody.
[59]
The first respondent applied the deviation in an objective manner to
all responsive tenders to analyse the risk. If it does
so there can
be no complaint of it being dependent on someone's subjective
opinion.
[60]
I therefore find that the first respondent would be justified to
apply the 20% deviation to analyse risk as objective criteria.
It
satisfies all three the requirements of objective criteria, namely
(i) being objective in the sense that it can be ascertained
objectively; (ii) its existence or worth does not depend on someone's
subjective opinion and (iii) it bears some degree of rationality
and
relevance to the tender or project. It would be justified not to
recommend the tenderer with the highest points based on the
outcome
of the application of the objective criteria.
[61]
It needs to be mentioned that this matter resorts under the
Preferential Procurement Regulations 2011. Those regulations
find application to any tenders which were invited before 1 April
2017. As from 1 April 2017 all tenders will be subject to the
Preferential Procurement Regulations, 2017 which determine in section
11(2) that an organ of state will henceforth need to stipulate
any
objective criteria it intends to apply in the tender document.
[62]
I would, therefore, decline to issue the directive prayed for by the
applicant.
[63]
The applicant argued that the first respondent was compelled to
afford it an opportunity to explain its prices for specific
items in
the event that it may apply a price deviation to analyse risk. In my
view the first respondent is not obliged to afford
the tenderers an
opportunity to explain the pricing. This does not mean that it may
not do so. The first respondent should exercise
a discretion when
re-evaluating the tenders. If it does follow this route it must treat
all the tenderers equally and fairly. I
am not prepared to make a
finding that the first respondent is compelled in the circumstances
to afford bidders an opportunity
to explain their pricing. See also Q
Civils
supra.
[64]
Lastly, on the first respondent's version the funds may no longer be
available if the contract was not finalised in the current
financial
year. Suffice it to say, that was no longer possible already when the
matter was argued. The allegation regarding the
availability of the
funds is however merely that, an allegation. No evidence to
substantiate the allegation was proffered. In the
absence of evidence
to substantiate the allegation it does not pass muster. The fact of
the matter is simply that the first respondent
did not substantiate
the allegation and in consequence it carries no evidentiary weight.
This issue can, therefore, not be determinative.
[65]
The applicant sought relief in prayer 5 to the effect that the court
must order the re-evaluation
and
award of the contract
11in accordance with a lawful process".
This was meant to
relate to the application of the deviation criteria. I have already
held that the application of the deviation
criteria will not be
unlawful. The first respondent must evaluate and award the contract
in terms of a fair and lawful administrative
process. It is
constitutionally obliged to do so. The first respondent
did not object to the relief in
the event that the application is not
being dismissed outright and did not seek any
relief other than the
dismissal of the application. Had it sought
specific relief it may have had an effect on the order, but it
did not. Instead
it argued that the matter should rather be
remitted.
[66]
The application succeeds to the extent that the award of the tender
should be reviewed and set aside. The matter should be
remitted in
the circumstances for re-evaluation.
[67]
The applicant did not seek any costs pertaining to part B of its
notice of motion, namely these review proceedings. The
first
respondent argued that the application be dismissed with costs or
remitted. Although the applicant did not claim costs in
the notice of
motion, it is nonetheless entitled to an appropriate cost order in
the light of the opposition by the respondent.
See
Naidoo and Another v Matlala NO and Others
2012 (1) SA
143
(GNP) at 157 and
Afrisun Mpumalanga (Pty)
Ltd v Kunene NO and Others
1999
(2) SA 599
(T) at 633.
[68]
Accordingly,
IT IS ORDERED
THAT:
[68.1]
The first respondenfs decision to exclude the applicant's bid from
further and proper evaluation in the assessment process
of awarding
Bid LETS/2016/WATER/038: UPGRADING OF WATER TREATMENT WORKS AT
OPPERMANSGRONDE, was irregular and it is consequently
reviewed and
set aside;
[68.2]
The first respondent's decision to ultimately award Bid
LETS/2016/WATER/038: UPGRADING OF WATER TREATMENT WORKS
AT OPPERMANSGRONDE to the third respondent, ZALISILE MSEBENZI
CIVILS, is reviewed and set aside;
[68.3]
Any Service Level Agreement concluded between the first respondent
and the third respondent relative to the assailed decision
is struck
down in accordance with
section 8
of the
Promotion of Administrative
Justice Act, 3 of 2000
;
[68.4]
The matter is remitted to the first respondent for reconsideration in
terms of
s 8(1)(c)(i)
of the
Promotion of Administrative Justice Act
3 of 2000
.
[68.5]
The first respondent is directed to pay the costs of the application.
______________________
N.
SNELLENBURG, AJ
I
concur,
______________________
M.H.
RAMPAI, J
On
behalf of the applicant:
Adv S Grabler
Instructed by:
Gous & Vertue
Attorneys
BLOEMFONTEIN
On
behalf of the respondent:
Adv W J Groenewald
Instructed by:
Machacka Attorneys
BLOEMFONTEIN
[1]
Promotion of Administrative
Justice
Act. 3
of
200
0
,
'PAJ
A
'
as
it
is
commonly
referred to.
[2]
The
Promotion of Administrative Justice Act
>.
3
of 2000.
[3]
Millennium
Waste Management (Pty) Ltd v Chairperson of the Tender Board:
Limpopo Province and Others
2008
(2) SA 481
(SCA) (Millennium Waste) at paras 28-32.
[4]
Hoexter
Administrative Law in South Africa 2 ed
(Juta
and Co Ltd, Cape Town 2012) at 48-50 and 292-5.
[5]
Compare
Maharaj
and Others v Rampersad
1964
(4) SA
466
(AD).
See also
Weenen
Transitional Local Council v Van Oyk
2002
(4) SA
653
(SCA) at para 13.
[6]
African Christian Democratic Party v Electoral
Commission 2006 (3) SA 305 (CC)
[2006] ZACC 1
; ;
2006
(5)
BCLR 579
(CC)
(ACDPv
Electoral
Commission)
at para 25.
[7]
Allpay. supra para 32.
[8]
[1996] 2 All ER 302
(CA) at 315h- 316d.
[9]
Wade
&
Forsyth,
Administrative
Law
10
ed
at
441-2.
[10]
Commissioner,
South African Police Service, and Others v Maimela and Another
2003 (5) SA480 (T).
[11]
Bid Ajudication Committee.
[12]
Minister
of Environmental Affairs and Tourism and Others v Phambill Fisheries
(Pty) Ltd; Minister of Environmental Affairs and
Tourism and Others
v Bato Star Fishing (Pty)
Ltd
2003
(6)
SA
407
(SCA).
[13]
Millennium
Waste Management (Pty) Ltd v Chairperson of the Tender Board:
Limpopo Province and Others
2008
(2) SA 481
(SCA) (MillenniumWaste) at paras 28-32.
[14]
Pelatona
Projects
(Pty)
Ltd
v
Phokwane
Municipality
and
14
Others
unreported
NCO
judgment
under case 691/04, para [31];
Q
Civils (Pty) Ltd v Mangaung Metropolitan Municipality and Another
2016
(ZAFSHC)
159
(A48/2016).
[15]
Clause 21(a)(ii) of the SCMP.