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[2016] ZAGPPHC 206
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Sekhukhune District Municipality v Bo-Mamohlala Projects CC and Others (60186/15, 60185/15, 60180/15) [2016] ZAGPPHC 206 (10 February 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
In the matter
between:
SEKHUKHUNE
DISTRICT
MUNICIPALITY
..............................................................
APPLICANT
And
BO-MAMOHLALA
PROJECTS
CC
.........................................................................
RESPONDENTS
CASNAN CIVILS CC
KINGKI ELECTRICAL
& DGCV JV
ETERNITY STAR
INVESTMENTS 231 CC
HTE CONSTRUCTION
CC
KGALEMO
CONSTRUCTION CC
KHULANI TRADING
ENTERPRISES
CC
...........................................................
CASE
N0.60186/15
KSB PUMPS AND
VALUES (PTY) (LTD)
LEBAKA
CONSTRUCTION (PTY) (LTD)
MADIPADI
CONSTRUCTION CC
MASHAIPANE
GENERAL CONSTRUCTIN JA
KINGKI ELECTRICAL
CONTRACTORS DGDC JV
........................................
CASE
N0.60185/15
MOTHAKGE PHADIMA
CONSTRUCTION AND SANITARY WORK & WHITE HAZY BUILDING CONSTRUCTION
JV
..........................................................................
CASE
N0.60180/15
Coram: HUGHES J
DATE: 10 FEBRUARY
2016
JUDGMENT
HUGHES J
[1] Initially, this
application was launched on a semi-urgent basis and urgency was an
issue for the respondents who opposed the
application. The issue of
urgency was later abandoned by the respondents. In this application
the applicant seeks an order to review
and set aside fifteen tenders
awarded to the fifteen respondents during February 2015 as the
awarded tenders are unlawful.
[2] The case made
out by the applicant attacking the internal procedure followed by the
applicant, in respect of all fifteen respondents,
covers the same
aspects and as such I propose to deal with this issue collectively.
This means that there will only be one finding
made in respect of the
internal procedure adopted by the applicant in respect of all fifteen
respondents. The second aspect which
is the external process
involving the submissions of the respondents’ tenders who have
opposed this application will be dealt
with on an individual basis.
[3] I set out the
back ground briefly. During 2014, the applicant received a
conditional municipal grant for the development of
water supply
infrastructure in the Sekhukhune District. This grant enabled the
applicant to launch an infrastructure development
initiative which
involved the delivery of water supply to the Sekhukhune District An
invitation to tender in respect of tender
number SK8/3/1/16/2014/15
was made. The fifteen respondents were successful and were awarded
the tender in February 2015.
[4] The applicant
contends that it conducted an investigation and it came to light that
the tender award to the respondent’s
was irregular and
unlawful. The applicant now seeks to review and set aside the tenders
granted; alternatively refer the bids submitted
by the respondent’s
back to the various procurement committees for reconsideration.
[5] The applicant
places reliance on section 217 of the Constitution in order to have
its own decision reviewed. The applicant argues
that the tender
evaluation and adjudication proceedings were riddled with
irregularities and as such they are obliged, in the interest
of
justice, to seek an order declaring the process as invalid and
unlawful. Section 217 of the Constitution obliges organs of the
state
to ensure that they contract for goods or services “in
accordance with a system which is fair, equitable, transparent,
competitive and cost-effective”
[6] The applicant
submits that its case is premised on the factual findings by Mr
Mogashoa the General Manager: Regulatory &
Compliance Services.
After the investigation was conducted into the alleged improprieties
in the awarding of the tenders, Mr Mogashoa,
duly instructed by the
Municipal Manager, was tasked to compile a report in terms of section
38 (1) (b) of the Local Government:
Municipal Finance Act 56 of 2003
read with clause 50 (1) (b) of the Sekhukhune District Municipality:
Supply Chain Management Policy.
These factual findings are contained
in this report.
[7] His findings are
found at paragraph 6.1 of his report. In short he found the
following: that every member of the Bid Evaluating
Committee (BEC)
did not evaluate each tender for responsiveness, functionality and
price as is required; that the Bid Adjudication
Committee (BAC)
members adjudicated only some of the tenders recommended by the BEC’s
recommendations; he concluded that
the BAC was not properly
constituted; that there was inconsistent application of the
evaluation criteria in the assessment of the
bids; and that the
members of both committees had not exercise due diligence.
[8] Adv. Cilliers
SC, representing two of the respondents’ raised three points in
limine. The first dealt with the reliance
of the applicant on hearsay
evidence which was cured by the applicant as it filed the necessary
confirmatory affidavits by those
concerned and thus, I will not deal
with this aspect.
[9] The second point
in limine, relates to the evidence of Mr Mogashoa amounting to
opinion evidence. This evidence counsel argued
was relevant if it was
of assistance to the court and irrelevant if it was not. In these
circumstances this evidence should be
held to be irrelevant and
struck off, as reference was had of documents and interviews of
individuals whose identity was not disclosed.
Further, that the
discussions with those interviewed in the investigation were not
revealed.
[10] The failure to
place all the evidence, relied upon by Mr Mogashoa in compiling his
report, before the court makes it impossible
for the court to
evaluate the veracity of the facts relied upon by Mr Mogashoa, so
Adv. Cilliers argument goes.
[11] The evidence
upon which the applicant’s case is based on, that is the
findings of M Mogashoa, is inadmissible and thus
the
Hollington-Hewthome rule would be applicable was the last point
raised by Adv. Cilliers.
[12] During the
course of the argument, and correctly conceded by Adv. Cilliers, it
became apparent that the hearsay and Hollington-
Hewthome points in
limine were moot. As these points are moot I do not propose to deal
with them.
[13] Adv. Swart SC,
for the applicant, pointed out that the point raised, as regards the
opinion evidence, could not be sustained
as the applicant did not
place reliance on the opinion of Mr Mogashoa, but rather reliance was
place on the factual findings emanating
from the report.
[14] Counsel further
argued that these factual findings are corroborated by supporting
evidence of the affidavits, score sheets
and extracts from the bids
submitted by the respondent’s. It was further argued, that in
any event, the substance of the
evidence adduced by applicant had not
been denied by the respondent’s.
[15] I will deal
with the outstanding points in limine simultaneously with the main
defences raised by the defendant’s. The
respondent’s
contends that the grounds upon which the review is sought do not make
out a prima facie case.
[16] These internal
procedural grounds of review relied upon by the applicant which are
applicable to all respondents are:
(a) A joint
evaluation was not conducted by the BEC and BAC;
(b) The BAC was not
properly constituted;
(c) Some respondents
ought to have, by law, submitted audited financials. However, as the
wrong criteria was applied, some of the
bidders were disqualified and
in doing so the committee acted arbitrarily; and
(d) Lastly, the
Municipal Manager failed to apply her mind when the recommendations
were made to her.
[17] The applicant
submitted that a joint evaluation did not take place and this is
corroborated by direct evidence of the members
of the BEC whom
submitted affidavit’s to this effect. Each BEC member was to
examine each tender that was submitted for responsiveness.
Once this
was achieved, they then examine the bidder for functionality. If,
successful on both counts then the bidder was referred
to the BAC,
who verified the recommendations made by the BEC.
[18] In this
instance the members of the BEC confirmed in their reports, to Mr
Mogashoa, that they did not evaluated each bidder
for functionality.
This situation was perpetuated with the BAC not examining all those
recommended by the BEC. All the members
of the BAC adjudicated on
every BEC recommendation.
[19] The applicant
made reference to the case of Schierhout v Union Government
1919 AD
30
at para [44] and Minister of Health v New Clicks SA (Pty) Ltd and
Others
2006 (2) SA 311
(CC) at para [171]:
“[171] The
Schierhout line of cases was concerned with adjudication. Whilst it
is ordinarily
necessary for bodies
appointed to deal with such matters to be properly constituted at ail
times throughout the adjudication process,11421
the same does not
necessarily apply to a committee such as the Pricing Committee whose
work would involve research, the gathering
of information and the
making of enquiries before making its recommendations. In this regard
I agree with the following comment
of Corbett JA in S v NaudG:1^
“[l]t must be
conceded that a commission is, in general, the master of its own
procedures. Within the bare framework provided
by the Act and such
modifications and regulations as may have been made by the State
President in terms of sec 1(1) of the Act,
it is free to determine
how it shall function.
There is no doubt
that a commission, particularly where it consists of a substantial
number of persons,
may operate without
every member participating personally in every activity. Were it
otherwise, a commission would be hamstrung
from the start." ^
In each case what
will be required will depend on the interpretation of the empowering
legislation and relevant regulations, prescribing
how a commission
should function.”
[20] The approach to
be followed in this exercise has recently been formulated by the
Constitutional Court as follows in All Pay
Consolidated v Chief
Executive Officer; SASSA
2014 (1) SA 604
para 24 & 38 to 40:
“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 PAJA, 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 has been established. ... 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.”
[21] In this
instance I was referred to the Supply Chain Management Policy for
Sekhukhune District Municipality 2013/2014 (the Policy),
clause 30,
by the applicant. This clause sets out the relevant committee’s
to be established to consider competitive bids.
These committees are,
BEC, BAC and Quotation adjudication committee.
[22] The Policy at
clause 33(1) (a)-(e) sets out how the BEC is to evaluate the bids.
Clause 33(1) (b) of the Policy states that
the committee must
‘evaluate each bidder’s ability to execute the
contractThe applicant’s contention is that
this did not take
place at all and confirmation of this was supplied by the BEC members
in their reports to the Municipal Manager.
The applicant argued that
this corroborated their stance that the prescribed procedure in terms
of the Policy was not followed.
[23] In my view,
this is where the requirements of each member examining each bid for
responsiveness and functionality come into
play. On the evidence
before me, at least one of the BEC committee members, Luthando
Mashiya, states as follows: ‘neither
myself\ nor any of the
other members of BEC, considered each and every bid prior to taking
of decisions...our modus operandi was
for each member to evaluate a
bid and finalise it This resulted in awards having been made where
some committee members, in each
instance, never had regard to the bid
that received the award, and also resulted in the disqualification of
bidders where some
members, in each instance, never had eyes on the
bids that disqualifiedThis was corroborated by the other members in
reports to
the Municipal Manager.
[24] This on its own
is contrary to the prescript of the Policy which dictates the process
of evaluating each the bidder’s
ability. It is evident to me
that the process adopted by the BEC did not comply with the Policy
and thus did not comply section
217 of the Constitution which obliges
organs of state to contract for goods or services ‘in
accordance with a system which
is fair, equitable, transparent,
competitive and cost-effective.
[25] The quorum
composition, a majority of the bid committee, is regulated by clause
32 of the Policy. A majority is made up of
those members physically
present to make up the quorum and the decision taken by the majority
and the meeting where is a quorum,
that results in a valid and
binding act of the committee.
[26] According to
members of the BEC they individually attending to a bid and they did
not individually attend to each and every
bid. This does not conform
to that required in clause 33(1) (b) of the Policy. In addition, the
decision taken by the BEC members
individually as regards the bids
they individually accessed will not constitute a quorum and as such
the act of the BEC will not
result in one that is valid and binding.
Thus the decision of one member does not constitute a majority of the
committee to form
a quorum. Yet another contravention of section 217
and this goes even further, in my view, as it clearly resulted in
some bidders
being excluded over others.
[27] There is also
the issue of the BAC having not been properly constituted as is
required by clause 34(2) of the Policy. This
clause states that the
BAC must be made up of at least four senior managers. At least, one
of which is a ‘senior supply chain
management practitioner who
is an official of the municipality’.
[28] The applicant
argued that it is undisputed that Mr Malilula, a Procurement Officer,
who sat on the BAC, was not a senior supply
chain management
practitioner as is required by clause 34(2) of the Policy. To this
end the BAC was not properly constituted. From
the use of the word
‘must’ in this clause it can be said that the composition
of the BAC is peremptory.
[29] The requirement
of the audited annual financial statement is regulated by clause
25(d) (i) of the Policy. If the value of the
bid transaction is
expected to exceed R5 million, if by law a bidder is obliged to
prepare annual financial statements, then the
Policy requires that
that bidder submit it annual financial statements for the past three
years or if established during the past
three years.
[30] According to
the applicant the BEC in these circumstances was obliged to establish
if each bidder was required by law to submit
the audited annual
financials. This failure to consider this requirement in line with
clause 25(d) (i) also results in a contravention
of section 217. To
this end the failure to submit these audited annual financial
statements resulted in some bidders being disqualified
when they were
not required in law to submit these financials. This in my view
amounts to arbitrary decision making and as such
resulted in bidders
being disqualified unlawfully.
[31] Applicant’s
counsel relied on what he terms as unlawful decisions having been
taken by the various committees and as
such the applicant’s
obligation to comply with section 217 of the Constitution
necessitates declaring these irregularities
as unlawful. This
declaration necessitated this application to secure judicial
oversight that had occurred in the evaluation and
the adjudication of
the bids submitted.
[32] It is clear
from the discussion above that the irregularities are such that they
the deviation there from is not justifiable,
reasonable and resulted
in the process being procedurally unfair to all the bidders who
submitted bids and not only the respondents.
In the circumstance of
this case I find that the best cause would be that the entire process
commences de novo.
[33] As I stated
above, if the applicant was too be successful in proving that the
internal process that it followed falls to be
review, this finding
would not necessitate that I examine the individual external process
of the respondents.
[34] The costs are
to follow the result. The respondents, Khulani Trading Enterprise CC,
Mothakge Phadima Construction and Sanitary
Works and White Hazy
Building Construction, and Kinki Electrical Contractor and DGDC JV,
who opposed this application, are to pay
the costs of this
application on a party and party scale such to include the employment
of senior counsel, jointly and severally
the one paying the other to
be absolved.
[35] Consequently
the following order is made:
[35.1] The tender
process pertaining to tender number SK8/3/1/16/2014/15 is duly
declared unlawful and set aside. The fifteen awards
in respect of
such tender (SK8/3/1/16/2014/15), to all the respondents, are hereby
set aside and it is ordered that the tender
be re-advertised and
recommence the procurement process with immediate effect.
[35.2] The
respondents, Khulani Trading Enterprise CC, Mothakge Phadima
Construction and Sanitary Works and White Hazy Building
Construction,
and Kinki Electrical Contractor and DGDC JV, who opposed this
application, are to pay the costs of this application
on a party and
party scale such to include the employment of senior counsel, jointly
and severally the one paying the other to
be absolved.
W. -Hughes Jubge
of the High Court
Counsel for
Applicant: B H SWART SC and S G GOUW Instructed by: VERVEEN ATTORNEYS
(Ref: A L Maree / V98)
Telephone no. 012
3460049
Counsel for
Respondents: P G CILLIERS SC and J H ROELOFSE MOTHAKGE PHADIMA
CONSTRUCTION AND SANITARY WORKS AND WHITE HAZY BUILDING
CONSTRUCTIONS
Case no. 60180/15 and KHULANI TRADING ENTERPRISES CC Case no.
60186/15
Instructed by: K
T MOKOENA ATTORNEYS (Ref: MR T MOKOENA)
Telephone no. 086
1111 898
Counsel for
Respondent: M HUGO
KINGKI ELECTRICAL
CONTRACTORS AND DGDC JV Case no. 60185/15 Instructed by:
Telephone no. 082
6377325 / 012 1110413