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[2016] ZAGPPHC 579
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Nexus Forensic Services (Pty)Ltd v Chief Executive Officer of SASSA and Others (14708/2015) [2016] ZAGPPHC 579 (21 June 2016)
IN THE HIGH COURT
OF S
OUTH
AFRICA GAUTENG
DIVISION,
PRETORIA
Case
No. 14708/15
DATE:
21 JUNE 2016
In the matter
between:
NEXUS
FORENSIC
SERVICES
(PTY)
LTD
Applicant
and
THE
CHIEF
EXECUTIVE
OFFICER
OF SOUTH
SOCIAL
SECURITY
AGENCY
First Respondent
SOUTH
AFRICAN
SOCIAL
SECURITY
AGENCY
(SASSA)
Second Respondent
SAB&T
CHARTERED
ACCOUNTANTS INC.
t/a
NEXIA
SAB&T
Third Respondent
JUDGMENT
[1] In the Notice of Motion the
Applicant seeks an order that the award of tender no. SASSA 03/131A
to the Third Respondent (referred
to as NEXIA SAB&T) dated 25
October 2013 in terms of which NEXIA SAB&T have been appointed as
a service provider to conduct
forensic investigations for a period of
3 years be reviewed and set aside,
alternatively
that the decision of the First Respondent to award such
tender be declared void
ab
initio
and of no legal effect
further
alternatively
in
the event of the Court not declaring the award of the tender to be
set aside or void, that the First Respondent be directed to
award
such tender to the Applicant for the duration of the remainder of the
tender period pursuant to the provisions of Section
8(1)(c)(ii)(aa)
of PAJA. The Applicant is a private company that conducts forensic
services and whose tender bid was unsuccessful
as will be set out
more fully herein later.
[2]
The First and Second Respondents are respectively the Chief Executive
Officer of the South African Social Security Agency and
the South
African Social Security Agency (referred to herein later as SASSA)
which is a statutory body established in terms of
Section 2
of the
South African Social Security Agency Act 9 of 2004
and which was
established with the purpose of providing for the prospective
administration and payment of social security and the
provision of
services related thereto. The Third Respondent is a company that
conducts similar business as the Applicant, to which
the tender which
is the subject of the review in this application was awarded. Third
Respondent did not oppose the application
[3]
During or about July 2013, the Second
Respondent
i
nvited
bids from interested
parties under contract
no. SASSA:03/131A for the
appointment of a forensic
investigation services provider to assist the Second Respondent with
the investigation of fraudulent social
grants for a period of 3
years. The Applicant and the Third Respondent duly submitted tenders
and having complied with the procedural
requirements for the
submission of the tender, the Applicant received no further
notification from the Second Respondent. In the
Founding Affidavit
deposed to on behalf of the Applicant, it is alleged that the
Applicant received a phone call from a
"whistle
blower"
who disclosed that the Bid Adjudication Committee
("
BAG")
recommended the Applicant as the successful candidate for
the tender, but that a decision had been taken not to award the
tender
to the Applicant but in fact to the Third Respondent. The
Applicant then obtained internal documents of the Second Respondent
being
memoranda that were directed to the First Respondent by its
Supply Chain Management and its BAC. Copies of these documents were
annexed to the Applicant's Founding Affidavit and disclosed
inter
alia
the following:
[3.1]
On 10 October 2013 the BAC
expressed concern regarding the
fact
that
the
Bid
Evaluation
Committee
("BEC
'
)
recommended
that
the
second
highest
scoring
bidder
(Third
Respondent)
should
be awarded the tender;
[3.2]
The
BAC deemed the
reasons and motivation
provided by the
BEC report
as
not justifiabl
e to warrant
the Third Respondent
being recommended
for
the award of the
bid as this would
be
discretionary
and does not take into account the evaluation criteria;
[3.3] The BAC further expressed the
view that the appointment of the second highest scoring bidder
(Third Respondent) would not
be defendable in a court of law;
[3.4] The BAC recommended to First
Respondent that the Applicant should be appointed as the successful
bidder being the highest
points scoring bidder in terms of the
preferential procurement regulations;
[3.5] Subsequent to and notwithstanding these recommendations to the
First Respondent, the First Respondent decided that the
Third
Respondent should be awarded the tender.
[4] The recommendation by the Bid
Adjudication Committee dated 10 October 2013 contained the following
comment:
"
The
Bid
Adjudication
Committee
at
its
meeting
held
on Thursday
10 October
2013,
noted
with
great
concern
the following:
•
The Chairperson of the Bid Evaluation Committee
supported the
first
recommendation
to
the
Bid Adjudication
Committee
that
was
tabled
at the meeting held on 01 October
2013. The Chairperson however did not support
the
revised
recommendation
of the Bid
Evaluation
Committee
to
award
the
bid
to
the
second highest
scoring
bidder
(SAB&T Chartered Accountants
Inc. t/a NEXIA SAB&T)
based on National Treasury Implementation Guide : Preferential
Procurement Regulations 2011, paragraph
16 : Award of contracts,
which states the following: "A contract must be awarded to the
bidder who scored the highest total
number of points of the
preference point systems" and "in
exceptional
circumstances
a
contract
may,
on reasonable
and justifiable
grounds,
be
awarded
to
a
bidder that did
not score the highest number of points. The
reasons for such
a
decision must be approved
and recorded for audit purposes and must be defendable in
a
court
of
law."
•
The Bid Adjudication
Committee deemed
the reasons and
motivation
provided
on
paragraph
5.5
of
the
Bid
Evaluation
Committee's report
as not
justifiable
to warrant SAB&T
Chartered Accountants Inc. t/a NEXIA
SAB&T being
recommended
for
the work of this bid as
this would
be discretionary
and
does
not
take
into account the
evaluation criteria.
•
The
motivation
provided for
the
appointment
of
the second
highest
scoring
bidder
(SAB&T
Chartered
Accountants
Inc. t/a NEXIA
SAB&T)
would not be
defendable
in
a
court
of
law.
Based on the
report presented
at
its disposal, the Bid Adjudication Committee
recommended to
the
Chief Executive
Officer to appoint
Nexus Forensic
Services (Pfy) Ltd as the
successful
and
highest
scoring point
bidder
(99 points)
in
terms
of
preferential
procurement
regulations
to the amount of R71 876 094.13
VAT inclusive.
The
services prices
for year two
(2) and year three
(3) will be adjusted in line
with
the
consumer
price
index
as
determined
by
Statistics South
Africa (STATSSA)."
[5] At the bottom of this recommendation
the First Respondent, in her own handwriting, made the following
comment:
"After discussions with the
office of the Auditor-General. (sic) It was decided that SAB&T
Chartered Accountants Inc.
t/a NEXIA SAB& T be awarded this
tender. This company was functionally the highest and recommended by
the BEG."
This note by the First Respondent was
affixed to the recommendation of the BEC in her handwriting on the 25
October 2013. A letter
of award was delivered to the Third Respondent
on 25 October 2013, the effect of which was that the Third Respondent
was the successful
bidder and was awarded the contract.
[6] The Applicant thereafter, during
September 2014, assisted by attorneys, attempted to utilise the
provisions of the
Promotion of Access to Information Act, 2 of 2000
to request information from the Second Respondent and in particular
all records of the decision in respect of thesaid tender without
any
success. This prompted the Applicant to launch these proceedings.
First Respondent thereafter deposed to an affidavit setting
out the
course of events which prompted her to award the tender to the Third
Respondent, and a substantial record of documents
was filed relating
to the tender process.
[7] It is trite law that the procurement process by State Organs is
effected through a process of tender and acceptance, creating
a
contract. The tender process, for obvious reasons, is strictly
regulated by the Constitution, legislation envisaged by the
Constitution,
Regulations and National Treasury Guides. The present
legal framework, within which the tender process operates, is
summarised
as follows:
[7.1] Section 217 of the Constitution,
which deals with
"procurement',
provides for the
award of tenders in accordance with a system that is fair,
equitable, transparent, competitive and cost effective.
Section
217(3) of the Constitution provides for the prescription by National
Legislation of a framework within which a policy
must be implemented,
referred to in section 217(2) of the Constitution, which reads:
"217(2)
Sub-section (1)
does
not
prevent the Organs
of State
or
Institutions
referred
to
in
that
sub-section
from implementing
a
procurement
policy
providing for
-
(a)
Categories of preferences in the allocation of
contracts;
and
(b)
The
protection or advancement of persons, or
categories
of persons,
disadvantaged by unfair
discrimination
.
"
[7.2) The National Legislation envisaged by Section 217(3) of the
Constitution is the Preferential Procurement Policy Framework
Act 5
of 2000
("
PPPFA')
which allows for
a preferential procurement policy based on a points system. Section
2(1) of the PPPFA reads:
"2(1) An organ of state must
determine its preferential procurement policy and implement it
within the following framework:
(a)A preference points 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
(3)
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;
implementing
the
programmes
of
the Reconstruction and
Development
Programme as
published in
Government Gazette
no. 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."
[7.3]
The PPPFA therefore mandates that an Organ of State must
determine its preferential procurement policy and implement it
within
the framework of
inter alia
a preference point
system, that any specific goal for which a point may be awarded must
be clearly specified in the invitation
to submit a tender, that a
contract must be awarded to the tender who scores the highest
points, unless objective criteria in
addition to those contemplated
in paragraphs (d) and (e) justify the award to another tender, and
that the goals contemplated
in sub-section 1(1)(e) must be
measurable, quantifiable and monitored for compliance.
[7.4] The 2011 Procurement Regulations
prescribes
inter
alia
what should be contained in the invitation to submit a
tender, that the evaluation criteria in respect of functionality be
clearly
specified in the invitation to submit a tender,
(Regulation 4), and further prescribes a formula that must be used
to calculate
the points for a price in respect of tenders with a
determined Rand value, known as the
"9
0
1
10
preference
point
system
for
acquisition
of services
....."
(Regulation 6).
[7.5] In terms of Regulation 7 of the
2011 Procurement Regulations, a contract may only be awarded to a
tender that did not score
the highest total number of points,
"only
in accordance
with section
2(1)(f)
of
the
Act',
which is the PPPFA referred to in par. [7.2]
supra.
[7.6] The National Treasury
Implementation Guide: Preferential Procurement Regulation 2011,
paragraph 16 reads:
"A contract must be awarded to the
bidder who scored the highest total number of points of the
preference point system and
in exceptional
circumstances
a
contract
may,
on
reasonable
and justifiable
grounds,
be awarded
to
a
bidder that did
not score the
highest number of
points.
The
reasons for such
a
decision must be approved and
recorded for
audit
purposes and must
be defendable in
a
court of law."
[8] It is clear from the applicable legislation, regulations and
implementation guides by the National Treasury that the highest
scoring bidder in terms of a preferential points system should be
awarded the tender. Only in exceptional circumstances may a lower
scoring bidder be appointed and then only in accordance with the
provisions of Section 2(1
)(f)
of PPPFA which requires that objective criteria must justify
the award to another tender.
[9] It is further important to note that the applicable legislative
framework results in the following process:
[9.1] The invitation to submit a
tender, also known as
"the
terms
of
referenc
e
"
,
must contain
all the evaluation criteria for measuring functionality, the weight
of each criteria, the applicable values and the
minimum qualifying
score for functionality (Regulation 4(3) of the 2011 Procurement
Regulations).
[9.2] All competing bidders must be
evaluated on functionality and the criteria for measuring
functionality must be objective
(Regulations 4(2), 4(5) and (6) of
the 2011 Procurement Regulations). This is often referred to as the
"first phase"
or "qualification phase".
[9.3] A bidder must pass the threshold
score for functionality before it becomes eligible for evaluation
during the second phase
of the process, also known as
"the
award
phase".
During this
second phase points get awarded to tenderers in accordance with the
preference point system prescribed in terms of
Regulation 7 of the
2011 Procurement Regulations (Regulation 4(5) of the 2011
Procurement Regulations).
[9.4] The
"award''
of
the tender is made to the highest scoring bidder in the second
(award) phase (PPPFA Section 2(1
)(f)
unless objective criteria in addition to those contemplated in
section 2(1)(d) and (e) justify the award to another tenderer, and
this can only be in exceptional circumstances in which instances the
reasons must be approved and recorded for audit purposes.Vide:
par
[7.5]
and
[7.6]
supra
[1O] The aforesaid legislative framework
clearly designed a process in terms whereof competing bidders should
be evaluated by utilising
objective criteria in a fair, reasonable,
applicable and transparent manner and in terms whereof the personal
discretion of the
functionary awarding the tender be restricted as
far as possible, and to provide a means of measuring the rationale
behind the
award of a tender. In this regard see:
RHI
Joint
Venture
v
Minister
of
Roads
and
Public
Works, Eastern
Cape
&
Others (76
9
1
02)
[2003]
ZAECHC23
(
1
8
March 2003)
para
[25]
Westing House
Electric
Belguim
Societee Anonyme
v Eskom Holdings (SOC) Ltd
&
Another
(476
1
2015) [2015] ZASC 208
(9 December 2015)
par
[8]
[11] The issue of the
award of tenders has been the subject of numerous decisions and it is
now established law that considerations
extraneous to the tender
evaluation criteria set out in the invitation to bid (terms of
reference) utilised by an administrative
body in awarding the tender
renders the tender unlawful and procedurally unfair and that the
arbitrary use of measure to determine
the success or failure of a bid
is contrary to the functions required of a Bid Evaluation Committee.
Vide:
Westing
House
(supra),
para.
{34]
-
[37]
[12] Against the aforesaid background,
the tender process
in
casu
and the
reasoning of the First Respondent in awarding the tender to the Third
Respondent should be considered. The First Respondent
deposed to an
Answering Affidavit, the first part of which is not a
seriatim
answer to the allegations as set out by the Applicant
in the Founding Affidavit, but a comprehensive factual background
dealing
with the tender process. It is not necessary for purposes of
this judgment to repeat those facts as set out by the First
Respondent,
but I refer to the following relevant allegations namely:
[12.1] In paragraph 18 of the First Respondent's Opposing Affidavit
she states as follows:
"I need
to make
it quite clear
that in line
with the above provisions
I
and
not
the
BAG
was
the
final
decision
maker
in regard
to whom the final
award of the tender should go to.
The BAG only had
the power
to submit
a
recommendation
to me to make
a
final award.
As the
provisions
of the SGM
policy
quoted
above,
clearly
state,
I
am
not
bound
by
the recommendations
made by the BAG and I
am
entitled
to reject the
BAG's
recommendation."
Although this stance of the First Respondent may technically be
correct, it should be borne in mind that the BAC consists of
a
number of persons, who individually and collectively apply their
objective minds to the process, and then make a recommendation
to
the First Respondent. Common sense dictates that it will be only in
the most exceptional circumstances, and in terms of applicable
legislation and
regulations,
that the First Respondent would
l
awfully
exercise her power to award a tender contrary to a recommendation of
the
BAC.
[12.2]
A
total
number
of 26
bids were
received,
in respect
of which
eventually
only 3 bids
were found to meet the
technical evaluation criteria.
These bids were then in
fact the bids
which
were evaluated on
functionality as described in paragraph 9.1
supra.
[12.3] During this qualifying
phase the bid submitted by the Applicant scored 75.8 (the second
highest score) and the Third Respondent
scored 76 (the highest
score) therefore point 0.2 higher. The First Respondent annexed to
the Opposing Affidavit the BEC scoring
sheet which indicated that
the functional criteria utilised for purposes of the
"functionality
score"
consisted of the following items:
[i]
Company track record;
[ii]
Project
methodology;
[iii]
Project
plan;
[iv]
Team leader experience;
[v]
Qualifications
of
the
team
leader.
[12.4]
The terms of reference
(invitation to bid) defined each of these
functional
criteria and for
purposes
of this judgement
i
t
i
s
not necessary
to
repeat
each
of
those
definitions suffice
to
say
that
the functional criteria
was clearly uti
li
sed
in order to determine
the experience of the service provider,
whether the service provider had a so-called
"national
footprint
in
conducting
investigations"
(i.e. being able to conduct
such investigations throughout the company) and generally whether or
not the bidder would proverbially
"be able to do th
e
job
".
[12.5] It is significant to note that
on the criteria of
"company
track recordf'
Applicant and Third Respondent scored equally (40 points) on
project methodology the Applicant scored 18 whilst the Third
Respondent
scored 20, on project plan the Applicant scored 8 whilst
the Third Respondent scored 7.2, on team leader experience the
Applicant
scored 8 whilst the Third Respondent scored 6.4, and on
qualification of the team leader the Applicant scored 0 whilst the
Third
Respondent scored 2.4.
[12.6] During the
"aware!'
phase (Vide:
para.
[9.3]
and [9.4]
supra)
the
Applicant scored 99 whilst the Third Respondent scored 93.87. In
terms of the provisions of Section 2(1
)(f)
of PPPFA the tender should therefore have been awarded to the
Applicant, unless the First Respondent could justify the award to
another tenderer on objective criteria in addition to those
contemplated in paragraphs (d) and (e) of Section 2(1) of PPPFA.
[13] The First Respondent further
ventilated the issues referred to in paragraph [3.2] to paragraph [5]
supra,
and then provided the reasoning for her decision
to award the tender to the Third Respondent which reasons can be
summarised as
follows:
[13.1]
The
"main
reason"
for
her
support
(of
the
BEC
recommendation i.e.
that
the
tender should be
awarded to
the Third
Respondent) centred
around
the
i
mportance
of
finding
a service provider that
was technically capable of dealing with
the increasing
volume of
fraud cases
and
organised
syndicates operating
within SSA and which demonstrated a national footprint capacity.
[13.2]
The volume of fraud investigated cases increased drastically and
statistics in this regard was supplied by the First Respondent.
[13.3]
There was urgency in dealing with the volume of work with an
experienced and technically capable service provider that
would be
able to handle the work.
[14]
I
n
genera
l
,
the First Respondent by
repetition stressed the importance of the urgency of the task, the
technical abi
l
i
ty
of the service provider, the
service
provider's so-called
"national
footprint'
,
and
the
ability
of
the
service
provider to operate
within the
present
system
of the
Second
Respondent.
First Respondent further
explains at length
that
the Third
Respondent
was previously
contracted
to
the
Second Respondent, and on
the advice of
a certain Mrs
R Oggle, the Manager of
Fraud
Management
and
Compliance,
who
previously
cooperated
with
the
Third
Respondent,
it
was
decided
to
award
the
tender
to
the
Third
Respondent.
This, according to the First Respondent, constituted objective
criteria which entitled her to award the tender to the
Third
Respondent.
[15] The First Respondent further states
that she relied on the provisions of Section 2(1
)(f)
of the PPPFA as well as Clause 17.4 of the terms of reference
(bid invitation) of the Second Respondent which reads:
" The agency reserve the right
not to accept the lowest price quotation, as other criteria,
including the functionality and
preferences will be taken into
consideration, when bids are evaluated."
[16] In my opinion, the First Respondent's reliance on Clause 17.4 of
the terms of reference is ill founded and can be disposed
of
summarily. A
"catch all'
clause such as 17.4 of
the terms of reference cannot vitiate the applicable legislative
framework within which the procurement process
operates, and an Organ
of State is not entitled to enter into a contract of procurement
contrary to the legislative framework referred
to
supra.
[17] The next issue is whether or not
the First Respondent is entitled to rely on the provisions of Section
2(1
)(f)
of PPPFA on the
facts as alleged. It is clear from the facts that the first
Respondent utilised the functionality criteria (hereafter
referred to
as
"functionality" )
which were utilised during the
qualification phase again during the award phase stage of the
process. This was conceded by Counsel
acting on behalf of First and
Second Respondents during argument. The pertinent question to
be
addressed therefore
i
s
whether or not functionality may be taken into
consideration
(having
already
been taken
i
nto
consideration
during
the
qualification phase)
again during the award phase. Counsel for the First
and
Second
Respondents
submitted
that
the
First
Respondent
was
entitled
to
again
consider
functionality during
the
award
stage,
and
relied
upon judgments
of the
Eastern
Cape
High Court
as well
as the
Western
Cape High
Court
in
support
of the aforesaid submission.
Vide:
TSP
Building
&
Civils
(Pty)
Ltd
v East London
Industrial
Development
Zone
(Pty)
Ltd
2009 ZAEOGHC 7
(17
March 2009) Rainbow
Civils
CC
v
Minister
of Transport
and
Public Works,
Western
Cape
2013
ZAWCHC
23
(6
February
2013)
[18]
The
issue whether
or
not
functiona
l
ity
has a dual application
in
the
procurement
process
of
state
organs,
is a
contentious
i
ssue
and
the
l
aw
i
n
this
respect
is
not
settled.
I
n
this
regard,
see
the
informative
article
of Professor
Q.
Quinot
"The
Role
of
Quality In
the
Adjudication of
Public
Tenders"
PELJ
2014
(17)
3.
I
n
RH/
Joint
Venture v Minister
of
Roads and
Public
Works,
Eastern
Cape and Others
(769/02)
[2003] ZAECHC
23
(18
March
2003) in
para
[32]
the
l
earned
Judge
held
that the provisions of
section 2(1)(f) of
PPPFA
are clear
namely that the
objective
criteria
referred
to
therein
must
be
additional
criteria,
in
other
words
these
must be
criteria
over
and
above
those
which
have
already
received
consideration as
specific
goals
in
terms
of
section
2(1)(d)
and
(e) of PPPFA.
However, the reasoning for that interpretation does not appear from
the judgment.
[19] I disagree with the submission that the
TSP
Building
&
Civils
(Ply)
Ltd
decision relied upon by Counsel for First and Second
Respondents supports the argument in favour of the dual application
of functionality
for the following reasons:
[19.1] The Respondent company in that judgment who invited tenders,
was not an Organ of State under the provisions of PPPFA
as a result
of which it had a general duty to treat a tenderer fairly
(paragraphs [15] and [16] of the judgment).
[19.2] For the aforesaid reason, the
Court found that functionality could be used as an initial
threshold requirement and again
during the second part of an
assessment as the repetition is not unfair.
Vide:
para.
25,
26 and 27 of
the judgment
[19.3] In any event was the aforesaid
judgment delivered prior to the amendment of the relevant
regulations which caused an inconsistency
as set out in par [19] of
the judgment, as was pointed out by Prof. Quinot in the article
referred to
supra.
[19.4] In paragraph [23] of the judgment reference is made to
the argument of Mr. Gauntlett, who argued that PPPFA makes no
allowance
for functionality to be recognised in the award phase
(referred to in the judgment as ".... the determination of the
score
out of 90 points for price"). It is clear from the
judgment that this argument of Mr. Gauntlett was not dismissed by
the
learned Judge, but the matter was distinguished on the grounds as
set out in par. [19.1]
supra.
In my opinion, if anything, this part of the judgment
support the reasoning as set out in par [21] to [25]
infra.
[20] The rationale for the
Rainbow
Civils
judgment relied upon by Counsel for the First and
Second Respondents is found in paragraph [11O] of such judgment which
reads:
"I
consider
that the
Constitutional
imperative
that the
procurement
system
be
cost
effective, means
that
functionality must
necessarily
be
taken into
account
in
the adjudication
of competing
tenders
and
should
not be relegated
to
a
mere
qualifying
criterion. I
should
make
it
clear
that
I
do
not
intend
hereby
to
make any
pronouncements
on
the
method of
tender
evaluation
contemplated
in
the
procurement
regulations where
functionality is
scored
at
a
threshold
stage,
and
final
TEV points
are
scored
on the
basis
of
price
and
preference only.
The point
is
simply
that functionality
should not
be
ignored in
the
final
adjudication
between competing
tenders, and
should be taken
into account
within
the
parameters
of
the
Procurement
Act.
I
therefore
agree with Mr
Rosenberg's
submission
that
functionality
or capacity
is
a
relevant
consideration
and
an
objective
criterion
for
the purposes of
section
(2)(
1
)(f)
of the Procurement
Act."
I respectfully disagree with the learned
Judge's reasoning for the reasons as set out infra. It is, in my
opinion, clear from the
aforesaid judgment that the learned Judge did
not attempt to interpret and analyse the applicable legislative
framework and in
any event it is clearly stated that the learned
Judge did not intend to make any pronouncements on the method of
tender evaluation
contemplated in the procurement regulations where
functionality is scored at qualification stage and final TEV points
are scored
on the basis of price and preference only. These
dictae
in the judgement can therefore not elevate the
principle of the dual application of functionality as part of our
law.
[21]
I
n
my
opinion,
the
answer
as to
whether
or
not functional
i
ty
may
be applied
during the
qualification
as
well
as
the
award
phase
l
i
es
in a proper
i
nterpretation
of the
applicable
legislation
and
regulations.
I
n
terms of Regulation 8(5) made in
terms of Section 5 of
the PPPFA, the
conditions
of
tender may
stipulate
that
a
tenderer must
score
a
specified
minimum number
of
points for functional
i
ty
to qualify
for
further evaluation.
Regulation 8(6) mandates
that points
for
price in
respect
of
a
tender which has
scored the specified
number of points in Regulation 8.5 referred to
supra,
must be
establ
i
shed
separately and calculated in accordance
with
the
provisions
of
Regulations
3
and
4.This
clearly envisage
two
distinct
different phases,
using
different scoring
methodology, resulting in
a qualification phase and
an award phase as referred
to
in
par.[9]
supra.
[22] Section 2(1
)(f)
of PPPFA empowers a decision maker to consider objective
criteria
in
addition
to
those
contemplated in paragraphs (d) and (e) to justify the award to
another tenderer. In
casu,
section 2(1)(d) is irrelevant. Section 2(1)(e) mandates
the inclusion of specific goals for which a point may be awarded and
functionality
criteria is a mandatory inclusion in any invitation to
submit a tender (or terms of reference) in terms of Regulation 8 of
the
Regulations promulgated in terms of section 5 of PPPFA. It
therefore follows that section 2(1)(e) of PPPFA refers to all
criteria
stipulated in the terms of reference, including
functionality.
[23] By referring to objective criteria,
in addition to those contemplated in paragraph (e), the decision
maker is therefore enjoined
not to reconsider those criteria which
had already been considered, but additional objective factors, other
than those already
included in the terms of reference.
[24] In my opinion the words "in
addition to" in the context of section 2(1
)(f)
of PPPFA means "extra" or "over and above"
as held in the RHI decision referred to
supra.
The complete framework of the procurement process envisage
an investigation to determine firstly "who can do the job"
utilising functionality criteria and then awarding "the job"
to the lowest bidder. To empower the decision maker to utilise
functionality again during the award stage, would be contrary to the
provisions of regulations 8(5) and 8(6) read in conjunction
with
section 2(1
)(f).
[25)
To
hold otherwise would
in my opinion vitiate the
provisions
of section
217
of the Constitution, creating a system which is not fair,
unequitable,
not
transparent,
not
competitive
and
not cost effective, for the following
reasons:
[25.1)
The procurement process
i
s
designed to eliminate
possible
bidders who are
not able to "do the job",
and to award the tender
to
the
lowest
b
i
dder.
To
refer
back
to
initial
functiona
l
i
ty
criteria
used
for the qualification
phase, is irrelevant for the issue of price.
[25.2]
I
n
terms of the applicable regulations as set out
supra
the terms
of reference must contain
functional
i
ty
criteria which is measurable, the points awarded to each
i
tem,
and on these points a bidder qualifies. The award of the tender is
made
thereafter,
utilising
a
different points
for
price scoring system
(paragraph
[7)
supra).
A
bidder
therefore
does
not expect
to
be
scored
on
functiona
l
ity
at the qualification stage, and again during
the
award stage. This would result in a system where the decision
maker
arbitrarily
may
use
individual
functional
i
ty
criteria
during
the
award
stage,
without
the
bidder
knowing
what
value
will
be
placed
on such criteria during this "second round" of
consideration
of
functionality.
This
clearly results in a process
which
is not provided for in
the relevant regulations
and/or the
terms
of reference, and
i
s
unfair.
Vide:
All pay
Consolidated
Investment
Holdings
(Pty) Ltd
and
Others
v
Chief
Executive
Officer,
South
African
Social
Security Agency
and
Others
[2013] ZACC
42
para
[34]-[43].
[26]
Functionality
criteria
is
therefore
excluded
as
a
"objective
criteria
to
justify
the award to another tenderer"
as
envisaged in section 2(1
)(f)
of
PPPFA.
[27] In any event, the First
Respondent's reasoning justifying her reliance on Section 2(1
)(f)
is flawed, based on the applicable facts, for the following
reasons:
[27.1]
Where the decision of
the First Respondent to
award the tender
not
to
the
highest
score
bidder
in
terms
of
Section
2(1
)(f)
of
PPPFA is challenged,
the onus
is on the
First Respondent to
convince
the
Court
that
such
criteria
as
utilised
by
the
First
Respondent
is
objective,
justifiab
l
e
(in
a
legal
sense)
and
in
exceptional
circumstances.
(In
terms of National
Treasury
Directives).
[27.2]
The facts relied upon by the First Respondent is neither objective,
nor justifiable, nor exceptional for the reasons as
set out
hereunder.
[28]
The
lack of objectivity
lies therein that the
First
Respondent
relied on
the
advice
of
Mrs
Ogall
referred
to
supra. Her
advice, having
a
managerial relationship
with
the
Third Respondent, is
not
objective, and
is certainly not a
measurable or quantifiable
criteria. Having regard
to
the
difference in
scores obtained by
the
Applicant
and
the
Third
Respondent
respectively as set out
supra,
and an analysis of the scoring
on the respective functionality criteria, the Applicant and the Third
Respondent placed virtually
on an equal footing and the difference of
0.2 points in my opinion does not render the circumstances either
justifiabl e or exceptional.
[29] In the premises, I find that the
award of the tender to the Third Respondent by the First Respondent
was unlawful.
[30] It is common cause that the tender
in
casu
expires on 25 October 2016,
approximately four and a half months after the hearing of this
application. In the light thereof, Counsel
for First and Second
Respondents urged me to dismiss the application with costs, on the
basis that the matter has become moot.
[31] In terms of Section 172(1) of the
Constitution this Court is enjoined to declare that any law or
conduct that is inconsistent
with the Constitution is either invalid
or unlawful. On the strength of the judgment in
Chairperson,
Standing Tender
Committee
v
JFE
Sapelaa
Electronics
2008 (2)
SA 638
(SCA)
I was invited by Counsel acting on behalf of the
Applicant to declare that the tender
in
casu
is declared inconsistent with the applicable legislation, that
the award of the tender not be set aside, and that the First and
Second Respondents be ordered to pay the costs. In my opinion, this
is the correct order to make.
[32] I therefore make an order in the
following terms:
[1] The First Respondent's award of
tender no. SASSA03/131A to the Third Respondent is declared
inconsistent with the provisions
of Section 217(1) of the
Constitution and is hereby declared invalid in terms of Section
172(1) of the Constitution;
[2] The award of the tender is not set
aside;
[3] The First and Second Respondents
are ordered, jointly and severally, to pay the Applicant's costs of
the application, including
costs of two counsel.
P
A VAN
NIEKERK
ACTING
JUDGE OF THE HIGH COURT
Date heard:9 June 2016
Counsel
for Applicant: Adv. A Liversage
Attorney
for Applicant: Van Zyl le Roux Inc
Counsel
for Respondent: . Adv. N Cassim SC
Attorney
for Respondent:
State
Attorney, Pretoria
Judgement
Delivered: 21 June 2016