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[2016] ZAGPPHC 1114
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B Braun Medical (Pty) Ltd v Director General: National Treasury and Others (73363/2015) [2016] ZAGPPHC 1114 (3 November 2016)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
CASE
NO: 73363/2015
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
REVISED.DATE:
03/11/2016
B
BRAUN MEDICAL (PTY)
LTD APPLICANT
AND
THE
DIRECTOR GENERAL: NATIONAL TREASURY
1st RESPONDENT
ENDOMED
MEDICAL AND SURGICAL SUPPLIES CC 2nd
RESPONDENT
MULTISURE
(PTY)
L
TD
3rd
RESPONDEN
T
JUDGMENT
THOBANE
AJ,
Introduction
[1] This
is an application for the review and setting aside of a decision by
the first respondent to accept a tender bid by the
second and third
respondents, for the supply and delivery of ambulance rescue and
emergency equipment and accessories to the State
for the period 1
March 2015 to 28 February 2017. Details thereof follow below.
[2] The
application is brought in terms of section 7 of the Promotion of
Administrative Justice Act, 3 of 2000, (PAJA). Applicant's
contention
is that the decision to award the tender constitutes administrative
action as contemplated in section 1(i) of
PAJA.
[3] The
following is sought in the Notice of Motion;
"1.
The decision by the first respondent to award the following
aspects
of the tender "RT4-2015ME: The supply and delivery of Ambulance
Rescue and Emergency Equipment and Accessories
to the
State for the period 1 March 2015 to February 2017" to the
second and third respondents as follows:
1.1.
T
o
the
second
respondent the
supply
and
delivery
of safety
IV catheters
single
use disposable, 14 to 24 gauge
(item
No: RT4-05-120(A)-ME,
RT4-05-121(A) ME,
RT4-05-122(A)-ME,
RT4-05-123(A)-ME,
RT4-05-124(A)-ME
and RT4-05-125(A)-ME);
1.2.
To the third respondent
the supply
and
delivery
of
non-safety
IV catheters single use disposable, 14 to 24 gauge
(item No: RT4-05120(B)-ME, RT4-05-121 (B)-ME, RT4-05-122(8)-ME,
RT405-123(8)-ME, RT4-05-124(8)-ME and RT4-05-125(8)-ME); ("the
awards'') and claims an order in the following terms:
(i)
a
declaration
that
the
awards
by
the
first
respondent
to the
second and
third
respondents are
invalid
and
are to be
set
aside;
(ii)
costs
of
the
application
in
the
event
of
any
opposition thereto
by
the party
or parties
so
opposing;
(iii)
further
or
alternative
relief
"
The
Parties
[4]
4.1. The applicant is a company registered and
incorporated with
limited liability in accordance with
the company laws of the Republic of South Africa with its principal
place of business at 253
Aintree Road, Hoogland, Extension 4,
Northriding, Gauteng Province.
4.2.
The first respondent is the Director General: National Treasury,
established in terms of section
5 of the Public Finance Management
Act Act, 1 of 1999, Pretoria, Gauteng Province;
4.3.
The second respondent Endomed Medical and Surgical Supplies CC, a
close corporation registered
and incorporated in accordance with the
Close Corporation Act 69 of 1984 with registration number:
1997/048492/23 with its registered
address as Unit 10, Boulders
Business Park Wiltshire Road, Mariann Ridge, Durban;
4.4.
The third respondent is Multisurge (Pty) Ltd, a profit private
company registered and incorporated
with limited liability in
accordance with the company laws of the Republic of South Africa with
registration number: 2014/170364/07
with registered address at Unit 1
Wadeville Industrial Village, 6 Crocker Road, Wadeville Extension 6,
Gauteng.
[5] The
applicant attacks the decision to award the tender from numerous
angles;
5.1.
that it was taken 1n circumstances where a mandatory and material
procedure or condition
prescribed by the empowering provision
was not complied with as contemplated in section 6(2) (b);
5.2.
that it was taken for a reason not authorized by the empowering
provision as contemplated in
section 6(2)(e)(i);
5.3.
that it was ta ken in circumstances in which relevant considerations
were not considered as contemplated
in section 6(2)(e)(iii);
5.4.
that it was taken arbitrarily as contemplated in section 6(2)(e)(vi);
5.5.
that it is otherwise unconstitutional or unlawful as contemplated in
section 6(2)(i) of PAJA.
[6] The
application is opposed by the first respondent.
Background
[7] The
following necessary background facts which are undisputed, place
the matter into better perspective;
7.1.
On 29 August 2014 the National Treasury by way of advertisement
invited tender bids for the supply
and delivery of Ambulance Rescue
and Emergency Equipment and Accessories to the State for the period 1
March 2015 to 28 February
2017. The closing date for the bids was 30
September 2014.
7.2.
The first respondent received positive response from various
companies. The applicant was one
of the companies that submitted its
bid timeously. Its bid was submitted on 22 September 2014.
7.3.
In the weeks that followed, particularly on 24 to 27 November 2014,
the first respondent through
its Bid Evaluation Committee met to
adjudicate over the tender. According to the first respondent the
bids were adjudicated in
accordance the
Preferential Procurement
Policy Framework Act, 5 of 2000
as well as the Special Conditions of
Contract for purposes of verifying the bidder's B-BBEE status.
7.4.
On 23 to 24 February 2015 a recommendation was made by the Bid
Evaluation Committee to award
the bid to the second and the third
respondents. Flowing from the recommendation, a memorandum was
prepared and tabled to the Bid
Adjudication Committee.
7.5.
The results of the bid were subsequently published. The applicant
then caused a letter to be
written to National Treasury, at first
enquiring if all the tender specifications were taken into
consideration when the decision
to award the tender was made. In
responding to the enquiries, first respondent stated that the
evaluation was in accordance with
the Special Conditions of Contract
and further that the highest scorer had complied with all the
criteria of the bid.
7.6.
On 1 June 2015 the legal representative of the applicant launched a
formal request for
information in terms of PAIA. The main thrust of
the request was to establish if the tender bids by the second and
third respondents
met certain criteria in particular, whether certain
medical equipment that had been tendered for by the second and third
respondent
had US, FDA certification or approval.
7.7.
When there was no positive feedback and after the applicant had been
requested to and had obliged
by paying the requisite fees, applicant
launched an internal appeal. As these proceedings were time barred,
the applicant then
launched current proceedings.
Issue
[8] The
tender related to the supply of safety and non-safety IV catheters.
In its reading and interpretation of the bid request,
applicant
understood it to mean the catheters must be approved for use on
humans by the United States Food and Drug Administration,
(US, FDA).
The contention by the applicant is that the products supplied by the
second and third respondent only had European Conformity
(CE)
certification, whereas their products were compliant and carried or
had US, FDA certification, therefore that the first
applicant
deviated from the peremptory requirements of the bid.
[9] On
its part the first respondent contends that there was no
deviation from the peremptory requirements and that
in so far as
quality is concerned what was required was certification form any of
the listed accredited or recognized institutions
and that the CE was
one such institution or body. The first respondent goes further to
state, in the alternative, that in
the event of
a deviation, such deviation was not
material.
[10] The
issues to be determined therefore can be summarized as follows;
10.1.
Was it a peremptory requirement of the bid that the
catheters be approved for use on humans by the
US, FDA;
10.2.
Did the second and third respondents comply with the requirements;
10.3.
Was there a deviation from the peremptory bid specifications, and if
there was, was such deviation material.
Discussion
[11] The
applicant relies in the main on what the tender request listed as
requirements in respect of the catheters. The Special
Conditions of
Contract provided that the bids and contract from the tender would be
subject to Treasury Regulations published in
terms of the Public
Finance Management Act, Act 1 of 1999. The Special Conditions of
Contract in relation to quality stated thus;
"23.
QUALITY
21.1.
Where specific specifications and/or standards are applicable on
materials and supplies, the quality of products shall not
be less
than the requirements of the latest edition of such specifications
and/or standards.
21.2.
……………………………
21.3.
Where specifications and/or standards eg. SABS, SANS, EU, ADA,
CKS, BP, BPC, USP, USNE, EP, ISO or DIN, are applicable
on ,ate rials
and supplies, the quality of products shall not be less than the
requirements of the latest edition of such specifications
and/or
standards.”
[12]
Clause 32.1 of the Special Conditions of Contract reads as follows;
"32.1.
It is a condition of bid that equipment which requires safety
standard testing must meet, comply with and be certified
by an
accredited or recognized institution. A valid certified copy of the
documentation in respect of certification must be submitted
with the
bid by closing dat and time of bid. Failure to submit the
certificates for the relevant items will invalidate the bid.
Examples
of these institutions are as follows; .........
…………
…………”
[13] What
is clear from the above is that General Conditions of Contract
issued by treasury are to be read with the
Special Conditions of
Contract. What is further clear, and that much is stated in Clause 1
of Section A of the Special Conditions
of Contract, is that in the
event of a conflict between the two, the Special Conditions of
Contract will prevail. It is not any
of the litigants' contention
that there was a conflict in this bid, between the General Conditions
and the Special Conditions of
Contract. Nor is the contention about
whether or not the quality requirements of the products were in terms
of the latest edition
of specifications and/or standards. The
contention is that the catheters needed to be approved by the US, FDA
as safe for use on
humans. The applicant makes the point that where
specific approval or certification is required, that much is stated
in the Special
Conditions of Contract.
[14] The
item specific specification for the catheters are listed in page 186
of the paginated papers. Item
9
and
10
of the
specifications read respectively as follows;
"9.
Must have US, FDA approval for use on humans.
10.
Quality certificates must be attached as part of the bid document."
In its
bid, the applicant complied with both
9
and
10
in that in
the bid prepared and submitted to the first respondent, applicant
submitted certificates to show that the catheters
it tendered to
supply were approved for use on humans by the US, FDA. The first
respondent does not dispute that the second and
third respondents did
not provide US, FDA certification in the stead they supplied CE
certification. While CE is an accredited
or recognized institution
for purposes of quality standards, along with US, FDA, it was not the
accredited or recognized institution
for purposes of the catheters.
The US, FDA was. It seems self evident that if it had been the
intention of the drafters of
the Special Conditions of Contract to
convey that any accredited or recognized institution would, for
purposes of quality assurance,
suffice, they would have stated so in
the Special Conditions of Contract. While not taking issue with CE
approval or certification,
the contention that it was sufficient for
purposes of the bid is unsustainable. It is simply not what was
required, at least on
a clear reading of the Special Conditions of
Contract.
[15] In
Steenkamp
NO
v
Provincial
Tender
Board,
Eastern
Cape
the
Court
2007
(3)
SA
121 (CC),
at para [33] the following observation is stated;
"Section
217 of the Constitution is the source of the powers and function of a
government tender board. It lays down that an
organ
of
State
in
any
of
the
three
spheres
of
government, if
authorized by law may
contract for goods
and services
on
behalf
of government.
However,
the tendering
system it devises must
be fair,
equitable,
transparent,
competitive
and
cost-effective.
This requirement
must be understood together
with
the constitutional precepts on
administrative
justice
in
sec
33
and
the
basic values governing
public
administration
in
s
195(1).
"
[16] In
Chairperson: Standing
Tender
Committee and Others v
JFE Sapela
Electronics
(Pty)
Ltd and
Others
[2005]
4
All
SA
478
(SCA)
the Supreme Court of Appeal held that;
"The
definition
of
'acceptable
tender"
in
the
Preferential
Act
must be
construed
against
the
background
of
the
system
envisaged
by section
217(1)
of
the
Constitution,
namely
one
which
is 'fair, equitable,
transparent,
competitive
and
cost
effective'.
In
other
words,
whether "the
tender
in
all
respects
complies
with
the specifications
and conditions set out in the
contract documents" must
be judged against
these
values.
"
[17] I
find that US, FDA approval for the catheters was a specific condition
of tender and that the bid of the second and third
respondents did
not meet such specification. It follows that awarding of the tender
to the second and third respondent falls to
be set aside.
[18] The
first respondent proffered an alternative contention, namely,
that even if the court were to find that
there was a deviation
from the peremptory requirements of the bid,
that such a deviation
was not
material. First respondent makes a further point to the
effect that the purpose for requiring certification
of the products
tendered for was to ensure that they are safe for use on humans, and
that the applicant does not contend
otherwise and further
that the applicant does not dispute that the body that issued the
certificate, EC, was an accredited body.
[19] The
following passage from
Premier, Free State
and
Others v Firechem,
Free
State (Pty) Ltd
2000 (4) SA
413
(SCA)
where the Supreme Court of Appeal was
dealing with the award of a tender which fell outside the applicable
legal framework, forms
the basis for my view that there ought to be
transparency, fairness and equal treatment of bids;
"One
of the
requirements
. . .
is that
the body adjudging tenders
be
presented
with
comparable
offers
in
order
that
its members
should
be able
to
compare.
Another
is that a tender should speak for
itself.
Its
real import may not be
tucked
away,
apart
from
its
terms.
Yet
another
requirement is that competitors
should be treated equally, in the
sense
that
they
should
all
be
entitled
to
tender
for
the
same
thing.
Competitiveness is not served by only one
or
some of
the tenderers knowing
what
is the true subject of tender.
. . .
That
would
deprive
the
public
of
the
benefit
of
an
open competitive process."
[20] In
AllPay
Consolidated
Investment
Holdings
(Pty)
Ltd
and
Others
v Chief
Executive
Officer,
South African
Social
Security Agency,
and Others
2014
(1)
SA
604
(CC)
at
para [22] it was emphasized that the tender process must
itself be fair and lawful,
independent
of the outcome of such process. At para [27] it was held
that;
"[27]
In other words, an unfair process may betoken a deliberately skewed
process. Hence insistence on compliance with process
formalities has
a three-fold purpose:
(a)
it
ensures
fairness
to
participants
in
the
bid
process;
(b)
it enhances
the
likelihood
of efficiency
and
optimality
in
the outcome; and (c)
it
serves as
a
guardian against
a
process skewed
by
corrupt
influences."
[21] Part
of a transparent, fair and equitable process entails the potential
bidders knowing beforehand if there will be a deviation
and the
extent thereof. Bolton in
The
Law
of Government
Procurement
in South Africa
at 182 states:
"Tenderers
prepare their tenders based on the specifications laid down in a call
for tenders. As a general rule, therefore,
an organ of state should
not be allowed to make changes to tender specifications after a call
for tenders has been advertised.
It is in the interests of fairness
and transparency (and also competitiveness) for organs of state to
abide by the tender specifications
initially provided."
The
learned author continues:
"To
depart
from
tender
specifications
in
any
event
gives
one tenderer an unfair advantage over the
other
tenderers, who will have
relied
on
the
standard
practice
in
submitting
their
own tenders,
the
amount
of
which
will
be
based
on
the
actual
tender s
pecifications."
(My emphasis).
I refrain
from expressing an opinion about whether or not acquisition of US,
FDA, approval is much more costly than CE certification.
For purposes
of this application it is sufficient to state that while both bodies
are accredited, if a product sourced from one
approved body is more
expensive than one sourced from the other, then there would be an
obvious impact on the tender pricing. A
bidder that sourced the less
costly product would be unfairly advantaged in the pricing if scoring
is to have regard to a less
costly product.
[22]
There are several decisions from the Supreme Court of Appeal which
emphasize that for fairness tenders must be evaluated equally.
I have
referred to these above. See
(Chairperson,
Standing Tender Committee and Others v
JFE Sapela
Electronics
2008
(2)
SA
638
SCA
para 19). Contractors should be treated equally.
(See
Premier Free
State,
and
Others
v
Firechem
Free
State
(Pty)
Ltd
2000
(4)
SA 413
SCA
para 30). The following dicta from
Rodpaul
Construction
CC t/a
Rods
Construction
v
Ethekwini
Municipality
and
Others (10075
1
13) [2014]
ZAKZDHC
18
(2
June
2014),
in my view best sums up the approach and the legal position;
"To
summarise the principles from the above authorities, fairness, equity
and transparency stand out universally as uncompromising
qualities of
public procurement. This is so because the process is a competition
for the most cost effective bid in the public
interest. Whether
strict or substantial compliance is required is a matter of
interpreting the tender requirements. Consequently,
procuring
authorities have a public duty to ensure that the text of their
invitations to tender is clear and precise, indicating
expressly
whether requirements are peremptory or directory. As far as possible,
documentation and processes should be standardised
to cultivate
procedural certainty and minimise recourse to the discretion of the
administrative authority. Ultimately, it's the
discretion of the
authority not the court as to what the prerequisites for a valid
tender should be. The clearer the invitation
to tender the better the
prospects of the process being fair and adhered to; and the less the
chances are of challenges by losing
and non-compliant bidders. Even
less are the chances of a court interfering in the authority's
decision."
[23] I am
compelled to conclude that the awarding of the tender to the
second and third respondents is invalid and falls to
be set aside. To
the extent that the first respondent contends that the deviation was
not material, it is my considered view, in
light of the above
decisions, that the deviation was material in that it disadvantaged
other tenderers, particularly the applicant.
As a result, the
deviation brought about an unfair evaluation process.
Remedy
[24] I
would be remiss if I do not comment about the remedy and the time
lines. Right from the onset this matter was going to be
under time
pressures. This is so because the contracts that were awarded were
for a period of two years. Although the applicant
did not waste time
in instituting current proceedings, it was always going to be
difficult, in this Division of the High Court,
to have the matter
heard expeditiously. The practical difficulty is that as at the
hearing of this review application, the contracts
had only six months
left to run. Despite those time lines, an illegality can not be
allowed to stand. Justice however, is an imperative
that must be seen
through. In this regard I am reminded by what was said in
Steenkamp,
supra,
by Moseneke DCJ;
"It
goes
without saying that every improper
performance
of
an administrative
function
would
implicate the
Constitution and entitle
the
aggrieved
party
to appropriate
relief.
In
each
case
the remedy must fit
the
injury.
The
remedy must
be
fair
to
those affected
by
it
and
yet vindicate
effectively the
right violated.
It must
be
just and
equitable
in
the
light
of
the
facts,
the
implicated constitutional principles,
if any, and the controlling law.
It is
nonetheless appropriate to
note
that
ordinarily
a
breach
of
administrative justice attracts
public-law
remedies
and
not private-law
remedies.
The purpose
of
a
public-law remedy
is
to pre-empt
or correct
or reverse
an improper
administrative function.
. . .
Ultimately the
purpose
of
a
public remedy is
to
afford
the
prejudiced
party
administrative justice,
to
advance
efficient
and
effective
public
administration compelled
by constitutional precepts
and at
a
broader level, to
entrench the rule
of law."
[25] The
order I propose to make, I believe will strike a balance between the
interests of the public, the administrative body,
the unsuccessful
tenderer and the successful tenderers.
[26] I
therefore make the following order;
1.
The decision by the first respondent to award the following aspects
of the tender "RT4-2015ME: The supply and delivery of
Ambulance
Rescue and Emergency Equipment and Accessories to
the State for the period 1 March 2015 to February
2017" to the
second and third respondents as follows:
1.1.
To the second respondent the supply and delivery of
safety IV catheters single use
disposable, 14 to 24 gauge
(item No: RT4-05-120(A)-ME, RT4-05-121(A)
ME, RT4-05-122(A)-ME, RT4-05-123(A)-ME,
RT4-05-124(A)-ME and
RT4-05-125(A)-ME);
1.2.
To the third respondent the supply and delivery of non-safety IV
catheters single use disposable,
14 to 24 gauge
(item No: RT4-05120(B)-ME, RT4-05-121 (B)-ME, RT4-05-122(B)-ME,
RT405-123(B)-ME, RT4-05-124(B)-ME
and RT4-05-125(B)-ME);
("the award") is reviewed and set aside;
2.
The order of invalidity in 1 above, is suspended for a period of four
weeks whereafter it will take effect;
3.
The first respondent is directed to pay the costs of this application
which cost are to include costs consequent upon the employment
of two
counsel, where applicable.
________________________
SA
THOBANE ACTING
JUDGE
OF THE
HIGH COURT
Date of
hearing
: 24th August 2016
Date of
judgment
:3rd November 2016
Applicant's
Counsel
: Adv. Mundell, SC
First
respondent's Counsel : Adv.
Notshe, SC