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[2015] ZAFSHC 32
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Sethakatshipa Business Enterprise and Others v Mangaung Metropolitan Municipality (A917/2014) [2015] ZAFSHC 32 (10 March 2015)
IN THE HIGH COURT OF
SOUTH AFRICA
FREE STATE DIVISION:
BLOEMFONTEIN
Application Number:
A917/2014
DATE: 10 MARCH 2015
In the matter between:-
SETHAKATSHIPA BUSINESS
ENTERPRISE
...............................................................
1st
Applicant
LEFCON
TRADING
.........................................................................................................
2nd
Applicant
KEHELELWE
CONSTRUCTION
..................................................................................
3rd
Applicant
E.T. MOSHOEU
TRANSPORT
........................................................................................
4th
Applicant
And
MANGAUNG METROPOLITAN
MUNICIPALITY
........................................................
Respondent
CORAM: MOCUMIE, J et LEKALE, J
JUDGMENT: LEKALE, J
HEARD ON: 9 FEBRUARY 2015
DELIVERED ON: 10 MARCH 2015
INTRODUCTION AND BACKGROUND
[1] On 8 January 2014 the respondent
published an invitation for tenders for emergency door to door
domestic refuse collection services
in the Bloemfontein, Botshabelo
and Thaba Nchu regions with 24 January 2014 as the closing date. The
applicants, who were already
contracted to the respondent as
providers of such services for a period of two years expiring on 12
June 2014, each submitted a
tender for the Bloemfontein region in
response to the invitation. They were, however, not successful in
their respective bids.
[2] The services required entail the
collection of domestic refuge bags from appropriate containers in
specified areas, transportation
of the same to designated areas as
and when required and submission of required reports on the work
done. As a minimum requirement
all tenderers were to submit proof
that they each own or have access to at least a three-ton truck. The
bids had to be in the
prescribed form, comply with prescribed
formalities, and be accompanied and supported by prescribed
documentation, such as original
tax clearance certificates and
original or certified copies of BBBEE status level verification
certificates.
[3] The tender contract furnished by
the respondent left the space provided for the price payable per
household blank and, further,
advised that bids would first serve
before the Supply Chain Management unit (SCM) for evaluation as to
whether they complied with
the prescribed SCM criteria. Tenders that
did not comply were to be disqualified.
[4] The applicants attended a
compulsory tender clarification meeting as required in the tender
contract where service providers
were, inter alia, advised about the
issues they needed to take into account when making their proposals.
The applicable evaluation
criteria was based on a 90/10 preference
point system with the price being allocated 90 points and 10
preference points being reserved
for BBBEE status as a specific goal
in terms of the Preferential Procurement Policy Framework Act 5 of
2000 (PPPFA).
[5] The first and third applicants got
disqualified at the first or assessment stage by the SCM unit and
could, as such, not
proceed to the evaluation stage because they were
allegedly non-responsive in that their respective bidding prices per
household
viz. R9.00 were substantially low. The second applicant
proceeded to the evaluation stage where it was scored 83.74
preference
points for its bidding price and 0 points for BBBEE status
after it was found to have declined to claim preference points for
such
specific goal, by submitting an uncertified copy of its BBBEE
status level verification certificate. It was, thus, outscored
by
other bidders. The fourth applicant’s bid, on its part, was
also disqualified at the first stage for being invalid in
that a
photo copy, as opposed to the original tax clearance certificate was
submitted.
[6] The Bid Evaluation Committee (BEC)
recommended that the respondent, through its City Manager or her
delegate, negotiate an average
price of R9.84 per unit with the 25
preferred service providers recommended for Bloemfontein region as no
acceptable price was
predetermined. The preferred bidders were
eventually appointed at R9.28 per household.
[7] On or about 4 July 2014 and before
the court could entertain their urgent plea for intervention
following a delay on the part
of the respondent to furnish reasons
and documents relative to their unsuccessful bids, the applicants
eventually secured the same.
[8] They each feel aggrieved by the
respondent’s decision not to award them the relevant tenders
and now approach us in terms
of Rule 53 of the Uniform Rules of
Court, read with the provisions of the Promotion of Administrative
Justice Act 3 of 2000 (PAJA)
for, inter alia, an order that:
“2. The respondent’s
failure to award the contract and place the applicants on its roster
for purposes of performing
emergency door-to-door waste collection
within the Mangaung Metropolitan Municipality, Bid no MMM/BID149:
2013/2014 be reviewed
and set aside.
3. In accordance with
section 8
of the
Promotion of Administrative Justice Act, 3 of 2000
, that the
respondent be ordered to place the applicants on the roster for the
provision of said services in the Mangaung Metropolitan
Municipal
area.
4. Alternatively to prayer 3, that the
respondent be ordered to reconsider the bids submitted by the
applicants for the provision
of the service mentioned directly
hereinabove.
5. That the respondent be ordered to
pay the cost of the application.”
[9] The respondent opposes the motion
and contends that it is not guilty of any irregularities contemplated
by PAJA in respect of
the relevant bids.
DISPUTE
[10] The parties are at variance on
whether or not the respondent’s decision not to award each
applicant the contract it tendered
for is tainted with reviewable
irregularity or irregularities, regard being had to the reasons
furnished for disqualifying 1st
, 3rd and 4th applicants’ bids
and for the score allocated to the 2nd applicant’s tender.
[11] In the event of the preceding
question being decided in the affirmative, the next enquiry is
whether or not it is just and
equitable to substitute the court’s
decision for that of the respondent as opposed to remitting the
matter to the respondent
for reconsideration, regard being had to,
inter alia, the fact that the successful bidders would not be
adversely affected by such
an order because they are not cited in the
present proceedings and the public, on its part, only stands to
benefit from applicants’
experience in rendering the relevant
services.
APPLICANT’S CONTENTIONS
[12] Mr Grobler for the applicants
submits that the fact that a price of R9.28 per unit was eventually
allocated as an average price
is consistent with the applicants’
case that at the compulsory tender meeting prospective service
providers were advised
that the price would not be determinative in
the award of tenders because the respondent would negotiate the price
payable for
each ad hoc instruction. The fact that the price was not
determined prior to the calling of tenders is not in line with the
regulations
under the PPPFA. He reiterates that in law it is an
irregularity to disqualify a bid on the basis that it is
unrealistically low
without first affording the bidder an opportunity
to explain the reason behind such a bid. In his view the eventual
awarding of
preference points for prices vitiates the entire process
because bidders were initially advised that prices were not to be
taken
into account. Such an exercise not only prejudiced first and
third applicants, but was also detrimental to the second applicant’s
bid, in that other bidders scored higher in that regard and
eventually outscored it according to him.
[13] The second applicant was scored 0
for BBBEE status level in circumstances where it was not in dispute
that it had the relevant
certificate as a level 3 contributor. The
reason for disqualifying it was, according to Mr Grobler, capricious
insofar as the
respondent did not apply its mind because it was aware
of the second applicant’s BBBEE status level from its previous
service
in the same position. Prospective bidders were not made
aware, in the invitation for tenders and other relevant documents,
that
failure to submit originals or certified copies shall, as
opposed to may, invalidate a bid. The use of “may” in
relation
to failure to comply with the relevant requirements obliged
the respondent to apply its mind before it disqualified the affected
bidders.
[14] The respondent, further, failed to
properly consider the fourth applicant’s tender and was wholly
irrational insofar
as its case is that the aim of the requirement
for original valid tax clearance certificate was only compliance with
a pre-existing
rule as opposed to determining whether or not a
tenderer’s tax affairs were in order. Failure to apply its
mind to the question
whether or not the tenderer’s tax affairs
are in order in the present matter is a reviewable irregularity in
his view.
[15] There, further, exists no document
or evidence according to him to show that functionality was, in
fact, considered and,
if so, how insofar as it was essential, for
evaluation of the bids, for the respondent to know if a bidder would
be able to function
if and when awarded the contract.
[16] The award of contracts in the
instant matter was unlawful and should be declared as such. A
substitution order, as opposed
to a remission order, is just and
equitable in the circumstances of the matter as it would afford the
applicants administrative
justice and would, further, advance
efficient and effective public administration.
RESPONDENT’S CONTENTIONS
[17] Mr Lechwano appearing for the
respondent, submits that the actions of the respondent in relation to
the impugned administrative
action, factually viewed, do not
constitute irregularity within the contemplation of PAJA. In his
view the fourth applicant only
has itself to blame for failing to
comply with the SCM policy requirements by submitting a copy of the
tax clearance certificate
as opposed to original valid tax clearance
certificate. The relevant policy and the tender invitation clearly
warned bidders that
failure to comply shall result in automatic
disqualification.
[18] The second applicant failed to
submit at least a certified copy of its BBBEE status level
verification certificate as required
by the PPPFA and SCM policy
according to him. The rationale for requiring originals or certified
copies of such a document is
to prevent fraud. Prospective tenderers
were cautioned in tender documentation that failure to submit the
required verification
certificate will be interpreted to mean that
preference points for BBBEE status level of contribution was not
being claimed. All
those who failed to comply were treated likewise.
[19] In the case of first and third
applicants the respondent, in his view, appears to have been
overzealous at the ‘gatekeeper’
first stage in that the
R9.00 bidding price submitted by the two applicants does not appear
to be very low so as to justify their
disqualification, regard being
had to the average price of R9.28 per unit given as an estimate.
[20] Functionality was considered as
part of the criteria for identification of service providers for
progression to the functional
evaluation stage.
[21] The court should, when it
considers a just and equitable remedy in the present matter, note
that the third applicant was listed
on the National Treasury’s
list of restricted service providers on or about 24 February 2014 at
the behest of the respondent’s
City Manager.
APPLICABLE LEGAL PRINCIPLES
[22] The parties are correctly and
effectively in agreement that the enquiry in a matter of the present
nature is firstly whether
or not, on the facts before the court,
there exists an irregularity. If an irregularity occurred, the next
enquiry is whether
or not same amounts to a ground of review under
PAJA regard being had to the materiality of the deviation from
applicable legal
requirements, where appropriate, by considering the
question of compliance against the purpose of the relevant legal
provision.
[See Allpay Consolidated Investment Holdings and Others v
Chief Executive Officer of South African Social Services Agency and
Others 2014 [1] BCLR 1 [CC] para 28].]
[23] It is a reviewable irregularity to
declare a bid as unrealistically low without affording the tenderer
any audience on the
matter according to case law. [See Glo Bul Roads
(Pty) Ltd v Premier North West Province and others case number
1620/11 (North
West High Court) and Road Mac Surface Pty Ltd v MEC
for the Department of Transport and Roads North West Province and
others
2006 ZANW HC 54].
[24] It is correct that according to
paragraph 16.2.16.2 (b) of the respondent’s SCM policy
“non-responsible”
tenders mean, inter alia, tenders with
a price that is very high or very low.
[25] The use of “may” in
the invitation to tender and in relation to tender requirements may,
generally and depending
on the context in which it is used, convey a
permissive and non-mandatory meaning consistent with bestowal of a
discretion. [See
Allpay Consolidated Investment Holdings and Others
v CEO, SASSA (supra) at para [63] with regard to the effect of the
use of “should”
in a circular prescribing the composition
of the bid evaluation committee].
[26] If and where bidders were made
aware thereof the respondent’s SCM policy and the tender
invitation “... read together
with constitutional and
legislative procurement provisions, constituted the legally binding
and enforceable framework within which
tenders had to be submitted,
evaluated and awarded.” [See Allpay Consolidated Investments
Holdings and Others v CEO, SASSA
(supra) para [38].
APPLICATION OF LEGAL PRINCIPLES AND
FINDINGS
[27] The parties are ad idem that the
City Manager, who deposed to the affidavit filed in opposition of the
present motion, did
not attend the compulsory tender clarification
meeting. It is, further, common cause between the parties that the
respondent’s
official, who chaired the relevant meeting, did
not file any affidavit in support of the respondent’s case. No
reason is
apparent ex facie opposing papers as to why evidence from
such an official is not and cannot be made available.
[28] The applicants are clear in their
deposition on what transpired at the relevant meeting i.e. that the
issue of pricing was
never hammered on as the most critical
requirement which was as fatal as it subsequently turned out. It is,
further, difficult
to accept that they are mistaken as to what was
communicated to attendees at such a meeting because they were
familiar with the
respondent’s workings and tendering processes
as they were, at that stage, rendering similar services to the
respondent.
The City Manager’s evidence in this regard is
simply not reliable and is rejected accordingly to the extent that it
is inconsistent
with the applicants’ version.
[29] The applicants’ version, on
the other hand, is accepted as being most probable, regard being had
to the fact that the
price was clearly not determined before tenders
could be called for or during the evaluation process but was, in
fact, negotiated
with successful bidders after adjudication stage of
the process and on a collective basis. As contended for the
applicants this
was clearly in contravention of
regulation 3(b)
of
Preferential Procurement Regulations of 2011 which requires an organ
of state, in the position of the respondent, to plan and
determine
the costs of the works prior to making an invitation for tenders. In
this regard the respondent committed an irregularity
and the question
is whether or not same was material so as to constitute a reviewable
irregularity in terms of PAJA.
[30] The purpose underlying the
requirement to determine the costs of services or goods to be
tendered beforehand appears to be
the need to ensure fairness to
participants in the bid process as well as a desire to obviate
corruption insofar as an objective
price is determined before and
without knowledge of the bids. Such a purpose is fundamental to a
tender process and failure to
comply with the same materially
undermines the process, in my view. The irregularity concerned is
therefore reviewable under PAJA.
[31] Even if I am wrong in the
preceding findings, I am persuaded by available case law that
fairness dictates that, before disqualifying
first and third
applicants’ tenders as non-responsive, the respondent was
supposed to have afforded them a hearing in line
with the rules of
natural justice. Failure to afford them audience is a material
irregularity and constitutes a reviewable irregularity
in terms of
Section 6(2) (c) of PAJA.
[32] Even if I am further wrong in the
aforegoing finding, we are satisfied, as Mr Lechwano correctly
concedes, that the bidding
price of R9.00 per household was not so
low as to render the two bids non-responsive. The parties are
correctly and effectively
in agreement that the difference between
the proposed R9.00 and the eventually determined or agreed price of
R9.28 per unit is
not unreasonably huge as to render the two bids
unreliable. In fact in our view such a bid was meritorious and stood
to benefit
the public by ensuring that it gets value for its money.
In this regard sight should not be lost of the fact that the relevant
bids came from service providers who were, at that stage, rendering
the same services to the respondent and who were, as such, familiar
with the costs attendant thereon.
[33] The fact that the estimated price
per household was left blank in the tender invitation lends credence
to the applicants’
view that the respondent appears to have
used pricing to disqualify bidders only to disregard, in the end, the
very same prices
that catapulted successful bidders to the podium by
determining a uniform price.
[34] It is, further, correct that there
is nothing ex facie the papers before us to show that bids were
evaluated for functionality.
The preceding notwithstanding the fact
that the minimum functional requirement was given in the invitation
as at least a three-ton
truck. The contention that functionality, as
an evaluation criterion, was applied is, thus, not expressly
supported by available
evidence. The fact that the Bid Bulletin
indicates “none” under functionality buttresses our
conviction that the three-ton
truck minimum requirement was intended
to sift and assess bids for acceptability and not for determination
or evaluation of functionality.
In my view the papers suggest that
tenders were most probably assessed for gate keeping purposes by
reference to a minimum functional
requirement of ownership or access
to at least a three-ton truck and the functionality evaluation task
ended there with no bid
being disqualified for failure to meet the
same. For the purposes of the instant matter functionality, as an
evaluation criterion,
was limited to that minimum requirement and
was, as such, most probably complied with.
[35] Submission of at least a certified
copy of BBBEE status level verification certificate was a bid
requirement. It is apparent
from the papers that all those who did
not submit the same effectively received no preference points
therefor. The requirement
for such a certificate was clearly in line
with regulation 10(2) of Preferential Procurement Regulations 2011,
read together with
instructions to bidders in the bid documentation.
There is, however, no evidence before us showing that such
information was,
in fact, specifically conveyed to bidders before
they could submit their bids. Be that as it may, we are persuaded
that the irregularity
relating to the price also affects the second
applicant because it was scored on a price it bid.
[36] It is true that the tender
invitation as published warned prospective bidders that failure to
comply with the requirements
relating to, inter alia, submission of
valid original tax clearance certificates may invalidate the bids.
The warning in question
further indicated that the respondent’s
SCM policy and
Preferential Procurement Policy Framework Act as
well
as its regulations shall be applied. In terms of
Regulation 14
of
PPPFA regulations no tender may be awarded to any person whose tax
matters have not been declared by the South African Revenue
Service
to be in order. Paragraph 24.2 of SCM policy, on its part, provides
in imperative terms that failure to submit a valid
original tax
clearance certificate shall result in automatic disqualification of
non-compliant bidders. While the Preferential
Procurement
regulations effectively grant organs of state, in the position of the
respondent, a discretion to award contracts to
bidders whose tax
affairs have not been declared to be in order by the SARS insofar as
Regulation 14
employs the permissive “may” in the
relevant context, the SCM policy is concerned about authenticity and
regulates
acceptance of tax clearance certificates submitted by
penalising non-compliance with automatic disqualification. The SCM
policy
is applicable and its peremptory provisions cannot be ignored.
Its relevant provisions were, however, not set out expressly in
the
bidding documents, while the tender invitation clearly stated that
failure to comply “may” invalidate the bid.
Read
together the two, to wit the relevant part of the invitation and the
SCM policy, are reasonably capable of confusing prospective
tenderers
insofar as they are mutually vague and contradictory. In my opinion
it would serve the tendering public better for the
respondent to
attend to promoting certainty in such documents by reconciling them.
[37] In my judgment, it is correct that
in the context of the relevant warning to tenderers, the use of the
word “may”
confers a discretion on the SCM unit and/or
Bid Evaluation Committee which had to be exercised judiciously and
not capriciously.
The disqualification of the fourth applicant was,
thus, irregular insofar as the criterion applied with regard to tax
clearance
certificates was unfair in that it was uncertain and the
decision taken thereon capricious. The requirement for fairness in
the
tendering process demands certainty in the applicable criteria
and promotes equality among tenderers by eliminating opportunity
for
corrupt practices with no room being left for different
interpretations of applicable evaluation criteria. [See Minister of
Social Development and Others v Phoenix Cash and Carry - PMB CC
2007
(3) ALL SA 115
(SCA) at para [2].]
[38] The decisions not to award the
contracts to the four applicants are reviewable under PAJA and fall
to be set aside.
RELIEF
[39] Mr Grobler submits that the award
of contracts to successful bidders was clearly unlawful and falls to
be declared as such.
He, however, submits that successful bidders
were deliberately left out of the instant proceedings because no
relief is sought
against them and considerations of fairness and the
interests of the public, which has been receiving services from them
since
June 2014 indicated against joining them. In his view it is
fair and equitable to substitute the respondent’s decisions
rather than to remit the matter because there is no suggestion that
the applicants will not be able to attend to the execution of
the
works successfully and such an order will not affect the rights of
the successful tenderers. The respondent will also not
be
detrimentally affected thereby in his submission.
[40] Mr Lechwano, on the other hand,
feels that a substitution order will not be fair and equitable in the
case of the third applicant
because it was listed on the National
Treasury’s list of restricted suppliers on or about 24 February
2014 at the instance
of the respondent’s City Manager for poor
performance of contracted work. He, however, correctly concedes that
there is
no evidence before the court that the third applicant is, in
fact, so listed by Treasury insofar as the only proof presented is
copy of a letter dispatched to Treasury by the City Manager.
[41]
Section 8
of PAJA empowers the
court to grant any order that is just and equitable, including, in
exceptional cases, an order substituting
the impugned administrative
action. The question as to whether or not there exists cause for not
remitting the matter for reconsideration
by the functionary is one of
fairness to the parties, regard being had to the entire context of
the case. [See Premier Province
of Mpumalanga and Another v
Executive Committee of the Association of Governing Bodies of State-
Aided Schools: Eastern Transvaal
[1998] ZACC 20
;
1999 (2) BCLR 151
(CC) para 51-51].
[42] In the opposing affidavit the City
Manager indicates that the third applicant was also disqualified for
being a listed supplier,
although same was never advanced as a reason
for the unfavourable decision taken against it. The issue did not
play a role when
the impugned decision was made and is, as such, not
part of the context of the facts of the present matter. It simply
has no role
whatsoever to play in the determination of a just and
equitable remedy in the circumstances.
[42] The question is whether or not
“upon a proper consideration of all the relevant facts, a court
is persuaded that a decision
to exercise a power should be left to
designated functionary” regard being had to established
principles and the constitutional
requirement for a lawful,
reasonable and procedurally fair administrative action. [See Gauteng
Gambling Board v Silverstar Development
2005 (4) SA 67
(SCA) para
[28] – [29].]
[43] It is true that just and equitable
remedies contemplated by PAJA are meant to “afford the
prejudiced party administrative
justice, to advance efficient and
effective public administration compelled by constitutional precepts
and at the broader level
to entrench the rule of law”. [See
Steenkamp NO v Provincial Tender Board, Eastern Cape
2007 (3) SA 121
(CC) Para [29].]
[44] The grounds advanced by Mr Grobler
in support of a substitution order seek, in my judgment, to highlight
how such an order
would not prejudice the successful bidders and the
respondent. They do not show why the default situation of remitting
the matter
to the designated functionary should not prevail.
[45] The facts of the present matter,
however, show that the relevant contracts are for three years and
that they have been running
since about June 2014. More than seven
months have now lapsed, leaving some 29 months on the contracts.
Time appears to be of
essence to the applicants who seek to benefit
from the contracts as they clearly point out in the papers when they
deal with urgency.
It is, further, correct, as pointed out for the
applicants, that the reason why only 25 contractors, as appointed,
can perform
the relevant contracts has not been furnished by the
respondent although it had ample opportunity to do so.. In my view,
there
prima facie appears to be no prejudice to the respondent if the
applicants are placed on the roster together with successful bidders
to perform the job on ad hoc basis, as and when they each get their
turn. On its part the respondent is not required to increase
the
budget allocated for the project in question. The successful bidders
are, however, likely to feel prejudiced, in my view,
if the list is
increased because they would each have to wait a bit longer for their
respective turns. This calls for a balancing
act between the
interests of such bidders and those of the applicants. The
applicants enjoy the same right to just administrative
action as
their successful counterparts and, on their part, the successful
bidders have been on the list since June 2014. In order
for the
applicants to obtain optimality in their success, as opposed to
securing a hollow victory, it is just and equitable for
their names
to be placed on the list of preferred service providers without any
delay. In my opinion exceptional circumstances
exist to justify
substitution as an order because the respondent has no discretion
left to exercise and the outcome is, thus, a
foregone conclusion. I
may also mention that remitting the matter to the respondent for
reconsideration would, in my view, serve
no conceivable purpose save
for delaying finalisation. The irregularities involved cannot
reasonably possibly be rectified so as
to afford the applicants
administrative action which is lawful, fair and equitable without
compromising uniformity in applicable
prices, among others.[ Grinaker
LTA LTD and Another v Tender Board (Mpumalanga) and others
[2002] 3
All SA 336
(T) para [86].] The applicants are entitled to their
costs.
ORDER
[46]In consequence an order in terms of
prayers 2, 3, 4 and 5 in the notice of motion is granted.
L. J. LEKALE, J
I concur.
B. C. MOCUMIE, J
On behalf of the applicants: Adv. S.
Grobler
Instructed by:
Lovius Block
BLOEMFONTEIN
On behalf of the respondent: Adv. A.
I. B. Lechwano
Instructed by: Maduba Attorneys
BLOEMFONTEIN