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[2015] ZAECELLC 16
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Blue Nightingale Trading 397 (Pty) Ltd t/a Siyenza Group v Amathole District Municipality (EL881/15, ECD1681/15) [2015] ZAECELLC 16; [2016] 1 All SA 721 (ELC); 2017 (1) SA 172 (ECG) (24 November 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE CIRCUIT COURT, EAST LONDON)
REPORTABLE
CASE NO. EL881/15
ECD 1681/15
In
the matter between:
BLUE
NIGHTINGALE TRADING 397
(PTY)
LTD t/a SIYENZA
GROUP
Applicant
and
AMATHOLE DISTRICT
MUNICIPALITY
Respondent
JUDGMENT
ALKEMA
J
The
issues:
[1]
This case concerns the interpretation of
Regulation 32
(1) of the
Municipal Supply Chain Management Regulations (the
Regulations)
promulgated by the Minister of Finance under section 168 of the Local
Government Municipal Finance Management Act
56 of 2003 (the LGMFMA),
which in turn will determine the validity of an agreement for the
procurement of services concluded on
12 September 2014 between the
parties to these proceedings (the Amathole Agreement). The
validity of the Amathole Agreement
in turn, is determinative of the
outcome of both the main and the counter applications in these
proceedings.
The
Facts:
[2]
The chronology of events culminating in these proceedings may be
summarized as follows.
[3]
The applicant conducts business as,
inter
alia
, a contractor and service provider to
local authorities under the name of the
Siyenza
Group
. The Respondent is the
Amathole
District Municipality
, a municipality
established in terms of the Municipal Structures Act, 117 of 1998 for
the district of East London, Eastern Cape.
[4]
The Municipal Infrastructure Support Agent (MISA) is a government
component of the Department of Cooperative Governance and
Traditional
Affairs, and as such an organ of State. On 19 March 2014 the
applicant and MISA concluded a service level agreement
(SLA) in terms
of which the applicant undertook the supply of all materials and the
installation of pre-fabricated toilet structures
for the utilization
in both dry and water borne systems in various areas within the
Northern Cape Province. The SLA was concluded
pursuant to a
lengthy tender process and there is no suggestion that any
irregularities occurred in such tender process.
The estimated
contract value of the SLA was R119. 228. 500,00. The duration
of the SLA was extended from time to time.
[5] On 8 April 2014 the respondent addressed
correspondence to MISA advising it that “…
Amathole
District Municipality (ADM) is in the process of implementing a
district wide sanitation backlog eradication programme
to selected
local municipalities within the district.”
[6]
The letter proceeds to say that “
It has
come to our attention that MISA is also implementing a similar
programme and has through a competitive bidding process appointed
contractors to implement its programme.”
This is obviously a reference to the SLA.
[7]
The letter then concludes with a request formulated as follows, and I
quote
verbatim:
“
In
line with the provisions of the Local Government Municipal Finance
Management Regulations (Regulation 32 read with Regulation
16 A6.6 of
the Public Finance Management Act Supply Chain Regulation ‘which
allows for an accounting officer of a municipality
to can
(sic)
procure goods or services using any contract
arranged by means of a competitive bidding process by any other organ
of state, subject
to the written approval of such organ of state and
the relevant contractor…”
(a)
ADM would therefore like to request MISA’s
permission to participate in the current contract between MISA and
any of the Contractors
implementing MISA sanitation programme;
(b)
ADM would also request MISA to
confirm in writing whether the recommended contract was procured
through a competitive bidding
process.
The
ADM would on receipt of MISA’s response engage directly with
the recommended contractor to negotiate the terms and conditions
including discounts to the municipality.
Your
responses and or approval in writing on the matter will be greatly
appreciated.”
[8]
On 11 April 2014 MISA advised the respondent that it has no objection
to its request.
[9]
The above correspondence resulted in the conclusion of the Amathole
Agreement of 12 September 2014 between the applicant and
respondent,
and which bears the heading: “
Confirmation
of Contractual Terms.
” The front page
of the agreement records that the agreement is “…
in
respect of the construction of Ventilated Improved Pit (VIP) latrines
as per to (sic) the DBSA/ADM Front Loading On Site Sanitation
Programme.”
[10]
Clause 1 of the agreement records that:
(a)
MISA has given its approval for respondent
“…
to participate in its contract
with the contractor in respect of a sanitation programme in the
Northern Cape, as contemplated in
Regulation 32
of the
Municipal
Supply Chain Management Regulations;”
(b
)
The respondent wishes to procure the applicant’s
services under the SLA “…
in
order to implement its On Site (VIP) Sanitation Programme;
(c)
The parties confirm the terms and conditions of the supply of such
services as set out in the Amathole
Agreement, “…
subject to the amendments and additions
documented below …”
[11]
I will later in this judgment return in more detail to the above
correspondence, the conclusion of the Amathole Agreement,
and the
amendments and additions recorded in the Amathole Agreement.
[12]
During June 2015 the applicant and MISA by mutual agreement
terminated their agreement (the SLA). The applicant thereafter
instituted arbitration proceedings against MISA for outstanding
payments under the SLA, which dispute is currently on arbitration.
It is common cause that clauses 66 to 68 and 70 and 71 of the SLA
make detailed provision for dispute resolution including mediation
and arbitration.
[13]
On 10 June 2015 the respondent purported to cancel the Amathole
Agreement with the applicant on the basis that by virtue of
the
cancellation of the SLA, the contractual basis of the Amathole
Agreement no longer exists. The applicant disputes the
validity
of the cancellation of the Amathole Agreement on the basis that the
Amathole Agreement is a separate and independent contract,
the
existence and continuation of which is not dependent on the Amathole
Agreement, but on its own terms and conditions.
[14] It
contends that because the Amathole Agreement incorporates certain
terms and conditions of the SLA, it does not mean that
its existence
is dependent on the continued existence of the SLA.
[15]
On 17 July 2015 the applicant requested respondent to consent to the
appointment of an arbitrator for purposes of resolving
the dispute
between them by arbitration. The respondent declined the
request and persisted with the view that the dispute
is not subject
to arbitration. This deadlock resulted in the applicant
instituting the main application, asking for the appointment
of Adv.
Phillips Daniels SC as arbitrator in terms of
section 12
(1) (a) of
the
Arbitration Act 42 of 1965
in the arbitration proceedings to be
instituted by the applicant against the respondent.
[16]
The stance taken by the respondent in its answering affidavit in the
main application is no longer that the cancellation of
the SLA
resulted in the simultaneous cancellation of the Amathole Agreement,
but that the Amathole Agreement is void
ab
initio
since
Regulation 32
had no application
to the facts of this case and could not legally spawn the Amathole
Agreement without due tender and procurement
processes being
followed. I mention, in passing, that it is common cause that
since
Regulation 32
had been invoked for the “
participation”
of the applicant under the SLA to provide the services under the
Amathole Agreement, no tender or procurement processes had been
followed in the appointment of the applicant under the Amathole
Agreement.
[17]
The respondent accordingly instituted a counter application asking
for the Amathole Agreement to be declared unlawful and void
ab
initio
on the basis that
Regulation 32
has
not been complied with.
[18]
The main application was instituted as a matter of urgency. The
respondent denies that the matter is urgent and asks
for the
dismissal of the main application on this ground alone. I am of
the strong prima facie view that the main application
is not urgent
and the usual rules should apply. However, in view of the
conclusion I have arrived at on the merits, I believe
to dismiss the
main application on the ground of absence of urgency alone will only
delay the finalization of these proceedings
unnecessarily. I
therefore propose to deal with the main application and with the
counter application on the merits.
The
Legislative Matrix:
[19]
Neither of the parties have referred me to any authority on the
meaning and interpretation of
Regulation 32
, and nor has my own
research revealed any authority on the subject. It follows that
the Regulations must be interpreted in
accordance with the usual
rules of interpretation. In particular, I believe
Regulation 32
calls for a contextual and purposive interpretation. It follows
that the point of departure is section 217 of the Constitution,
1996,
which reads as follows:
“
217
Procurement
(1)
When an organ of state in the national,
provincial or local sphere of government, or any other institution
identified in national
legislation, contracts for goods and services,
it must do so in accordance with a system which is fair, equitable,
transparent,
competitive and cost-effective.
(2)
Subsection (1) does not prevent the organs
of state or institutions referred to in that subsection from
implementing a procurement
policy providing for−
(a)
categories of preference in the allocation
of contracts; and
(b)
the protection or advancement of persons,
or categories of persons, disadvantaged by unfair discrimination.
(3)
National legislation must prescribe a
framework within which the policy referred to in subsection 2 must be
implemented.”
[20]
The procurement policy of an organ of state must therefore be
compliant with section 217 (1), and must be implemented within
the
framework prescribed by national legislation. The national
legislation contemplated by sub-section (3) are the
Preferential
Procurement Policy Framework Act
(PPPFA 5 of
2000) read with
Part 1, Chapter 11
(
Goods
and Services) (ss110-120)
of the LGMFMA
referred to in the first paragraph of this judgment.
[21]
Of particular relevance to this case is Part 1 of Chapter 11
(ss110-120) of the LGMFMA. Section 111 requires each
municipality
to have and implement a supply chain management policy
which gives effect to the provisions of Part 1 and therefore to
section
217 of the Constitution; section 112 requires that the supply
chain management policy must comply with the prescribed
framework
which covers a long range of supply chain management
processes, procedures and mechanisms relating to,
inter
alia
, tenders and bids; section 116 describes
the requirements of contract management; and section 119 describes
the competency levels
of officials involved in supply chain
management. The object and purpose of ss 110-120 (Part1) are
clearly to give effect
to the procurement process required by section
217 of the Constitution.
[22]
It is necessary to set out the relevant wording of section 110 of the
LGMFMA:
“
110
Application of this Part
(1)
This Part, subject to subsection (2),
applies to−
(a)
the procurement by a municipality or
municipal entity of goods and services;
(b)
the disposal by a municipality or
municipal entity of goods no longer needed;
(c)
the selection of contractors to
provide assistance in the provision of municipal services otherwise
than in circumstances
where Chapter 8 of the Municipal Systems Act
applies; and
(d)
the selection of external mechanisms
referred to in section 80(1)(b) of the Municipal Systems Act for the
provision of services
in circumstances contemplated in section 83 of
the Act.
(2)
This Part, except where specifically
provided otherwise, does not apply if a municipality or municipal
entity contracts with another
organ of state for−
(a)
the provision of goods or services to the
municipality or municipal entity;
(b)
the provision of a municipal service or
assistance in the provision of a municipal service; or
(c)
the procurement of goods and
services under a contract secured by that organ of state, provided
that the relevant supplier agreed
to such procurement.
(3)
The disposal of goods by a municipality or
municipal entity in terms of this Part must be read with sections 14
and 90.”
[23]
It follows from subsection (1) (a) read with sub-section (2) that,
unless subsection (2) applies, Part 1 of Chapter 11 of the
LGMFMA has
application to the respondent.
[24]
As stated earlier, the Minister of Finance promulgated Supply Chain
Management Regulations with which the supply chain management
policies of municipalities must comply. It is not disputed that
the respondent’s supply chain management policy complies
with
the Regulations.
[25]
Regulation 32 provides as follows:
“
Procurement
of Goods and Services under Contract Secured by other Organs of State
“
A
Supply Chain Management Policy may allow the accounting officer to
procure goods or services for the municipality or municipal
entity
under a contract secured by another organ of state, but only if−
(a)
The contract has been secured by that
other organ of state by means of a competitive bidding process
applicable to that organ of
state;
(b)
The municipality or municipal entity has
no reason to believe that such contract was not validly procured;
(c)
There are demonstrable discounts or
benefits for the municipality or municipal entity to do so; and
(d)
That that organ of state and the provider
have consented to such procurement in writing.”
[26]
It is now established, as a general principle, that Regulations must
be read subject to the empowering legislation. In
this regard
Kellaway
has the following to say in
Principles of the
Legal Interpretation of Statutes, Contracts and Wills,
E. A.
Kellaway
, P. 374-375
(footnotes and authorities omitted):
“
South
African courts have followed the English rule of interpretation and
have said that as a statute and a regulation made thereunder
shall
not be treated as a single piece of legislation, the regulation may
not be used as an aid to interpret a provision of the
statute.
In
Moodley v Minister of Education and
Culture
,
House
of Delegates
the appeal court stated
very specifically that even where a statute provides that the
regulations made under it are part of the
enactment, it must not be
treated as a unitary piece of legislation and the regulations shall
not be used as an aid to interpreting
any of the statutory
provisions, nor can the regulations be used to extend the meaning of
the enactment.
A
provision in a statute must be interpreted before the regulation is
considered, and if the regulation purports to vary the provision
as
so interpreted it is
ultra vires
and void. Also, the regulation cannot be used to cut down or
enlarge the meaning of a statutory provision.
On
the other hand, a regulation clearly stated and needing no
interpretation and not
ultra vires
must be read without reference to the reason why it was drafted and
effect must be given to its clear language.”
The
Interpretation of Section 110 of the LGMFMA and of Regulation 32.
[27]
In
Municipal Manager: Qaukeni v F V General Trading
2010 (1)
SA 356
(SCA) at para. 11 page 360 the Supreme Court of Appeal held:
“
In
considering the validity or otherwise of the written contract …it
is necessary to recall that s 217(1) of the Constitution,
couched in
peremptory terms, provided
inter alia
that an organ of State in the local sphere (such as a municipality)
which contracts for goods and services ‘
must
do so in accordance with a system which is fair, equitable,
competitive and cost-effective’ (my emphasis). This
constitutional
imperative is echoed in both the
Local Government:
Municipal Systems Act 32 of 2000
and the
Local Government: Municipal
Finance Management Act 56 of 2003
.”
[28]
The SCA per
Leach
AJA
(as he then was) in
Qaukeni
(
supra
)
para [16]
accordingly
held “
I therefore have no difficulty in
concluding that a procurement contract for municipal services
concluded in breach of the provisions
dealt with above which are
designed to ensure a transparent, cost-effective and competitive
tendering process in the public interest,
is invalid and will not be
enforced.”
[29]
The point of departure is accordingly the compliance with s217 of the
Constitution and with the PPPFA and Chapter 11 of the
LGMFA.
The ultimate enquiry is whether an organ of state which contracts for
goods and services, had done so in accordance
with a system which is
fair, equitable, transparent, competitive and cost-effective.
It follows that the exclusionary provisions
of section 110(2) of the
LGMFMA and of Regulation 32 must not only be restrictively
interpreted, but the exclusion of Part 1 under
Chapter 11 of the
LFMFA may not detract from or erode the constitutional
imperatives of fairness, equity, competiveness and
cost-effectiveness.
[30]
It cannot be gainsaid that a supply chain management policy which
complies with the framework prescribed by section 112 of
the LGMFMA
and with section 217 of the Constitution, is not only costly, but the
implementation is more often than not very time
consuming resulting
in a further escalation of costs and expenses. In order to
prevent these inescapable consequences, the
exclusionary provision
under section 110(2) has as its object and purpose, in my respectful
view, the prevention of unnecessary
duplication of costly and
time-consuming tender procedures and processes.
[31]
Thus, where an organ of state had procured goods or services under a
contract preceded by due processes in compliance with
the prescribed
supply chain management policy, then another organ of state which
requires the same goods or services, may contract
with the first
organ of state for the supply of such goods or services. Of
course, the supplier must agree to such procurement.
This
procedure removes the duplication of costs relating to bureaucratic
red-tape from the tender process, whilst retaining all
the elements
of the constitutional imperatives under section 217 of the
Constitution. It cannot be over-emphasized that the
enquiry
must always be whether the constitutional imperatives have been
compromised by the exemption; if so, it is unconstitutional,
if not,
the exemption is permissible under section 110(2).
[32]
I find the following example of an exemption under section 110(2)
read with Regulation 32 and advanced by Mr
Buchanan
SC, who
together with Mr
Beningfield
appeared for the respondent, to
be helpful and apt, and I quote from his written heads of argument:
“
The
usual example would be where an organ of state contracts, in
accordance with a Section 217 compliant process, with a supplier
to
supply say R5 Million Rand’s worth of A4 paper. If that
organ of state thereafter does not intend to utilize the
entire
consignment, it is permissible for another organ of state to, as it
were, ‘take up the slack’ in respect of
the remaining
portion of the same contract.”
[33]
I must add that the second organ of state will do so by procuring the
A4 paper under the contract between the first organ of
state and the
supplier, as required by section 110(2)(c).
[34]
The constitutionality of the exemption will always depend on the
facts of the particular case. For the exemption to operate
under section 110(2) of LGMFMA, I cannot conceive compliance with the
constitutional imperatives unless the goods or services procured
by
the second organ of state are the same as that required by the first
organ of state, and the contract price is the same.
If the
procurement by the second organ of state had withstood the scrutiny
of due process, there is no need to duplicate the same
process
provided the goods or services and the contract price remain the
same. If not, the procurement by the first organ
of state was
not subjected to the due procurement processes and supply management
policy, and the constitutional imperatives are
not met.
[35]
In my respectful view, the terms and conditions of a procurement
contract between the second organ of state and the supplier
which
complies with Chapter 11 of the LGMFMA (including section 116 thereof
which requires the contract to be in writing and stipulates
the
nature of the terms and conditions thereof and the management of the
contract) cannot be deleted or amended or compromised
in such a
manner as to render the contract with the first organ of state not
compliant with either Chapter 11 or with the constitutional
imperatives. If so, the exemption is unconstitutional.
[36]
It follows from the above that the supply chain management policy of
a municipality may cater for the exemption of Part 1 in
terms of
section 110 (2) of the LGMFMA, and Regulation 32 was clearly intended
to give force and effect to the exemption.
Regulation 32 thus
declares that a “…
Supply Chain
Management Policy may allow the accounting officer to procure goods
or services for the municipality … under
a contract secured by
another organ of state …,”
subject
to the stated requirements. The words “…
under
a contract secured by another organ of state …”
in
the Regulation can only refer to the “…
contract
with another organ of state …”
as
contemplated by section 110(2) of the empowering legislation
(LGMFMA).
[37]
Thus, since the Regulation cannot cut down the meaning of section 110
(2), it must be read, and the policy must be interpreted,
subject to
the requirements set under section 110(2)(a), (b) and (c) of LGMFMA.
On the ordinary grammatical meaning of the
words used in the section,
(a) refers to the situation where a municipality contracts with
another organ of state for the provision
of goods or services to such
municipality. In these instances the other organ of state
becomes the supplier who supplies
the municipality. This will
happen, for instance, where the other organ of state has an excess of
goods procured by it in
terms of its approved procurement policy and
tender processes, has no further use of such excess products, and now
provides the
municipality with such goods at the same price it has
procured same.
[37]
Sub-section 110(2)(b) relates to the provision of a municipal service
or assistance and is not relevant to the facts of this
case.
Sub-section (2)(c) on its ordinary literal meaning relates to a
contract by a municipality with another organ of state
for the
procurement of goods and services under a contract secured by that
organ of state, provided that the relevant supplier
agreed to such
procurement. In my respectful view, this can only refer to the
situation where the municipality, with the
consent of the supplier,
either becomes a party to the existing contract between the other
organ of state and the supplier; or
where the other organ of state
concludes a contract with the supplier for the benefit of a third
party, namely for the benefit
of the municipality, against payment by
the municipality of the approved contract price. In either
case, the material terms
and contract price of the contract already
secured by that organ of state remain binding, and thus remain
compliant with section
217 of the Constitution and with the
procurement policy of the other organ of state, and therefore with
LGMFMA.
[38]
Likewise, the requirements set out under paragraphs (a) to (d) of
Regulation 32(1) do not widen or enlarge the ambit of section
110(2)
of LGMFMA. Those requirements are fully compliant with section
217 of the Constitution, the PPPFA and the LGMFMA.
[39]
The requirement of a competitive bidding process under (a) is a
constitutional requirement under section 217 of the Constitution.
The requirement that the municipality (the respondent) had no reason
to believe that such contract (
in casu
the
SLA between MISA and the applicant) was not validly procured refers
to the belief that the contract duly complied with section
217 of the
Constitution, the PPPFA and the LGMFMA. The requirement that
there must be demonstrable discounts or benefits
for the municipality
concerned refers to the constitutional imperative of
cost-effectiveness and the unnecessary duplication of
costly and
time-consuming tender processes and procedures and site
establishment. The requirement that the other organ of
state
and the provider have consented to the procurement follows as a
matter of law and is a requirement under section 110(2)(c).
[40]
I therefore come to the conclusion that Regulation 32 simply gives
effect to the constitutional requirements under sections
217 of the
Constitution and the PPPFA and LGMFMA, and they all serve the same
purpose and cater for the same eventuality.
Regulation 32 is
neither ultra vires the LGMFMA, nor does it detract from or ad to
section 217 or LGMFMA.
Has
there been compliance with section 110(2)(c) and with Regulation 32?
[41]
The first requirement under section 110(2) is that the municipality –
in casu
the respondent
–must contract with another organ of state for the procurement
of such goods. Such other organ of state,
on the facts of this
case, is MISA. There is no allegation in applicant’s
founding affidavit that it contracted with
MISA, and nor is MISA
joined as a party to the proceedings. The applicant’s
case is rather that it contracted direct
with the supplier acting
under Regulation 32. There is a passing comment in paragraph 18
of the founding affidavit to the
following effect:
“
18.
That the respondent also advised the applicant that it approached
MISA for their consent for the procurement of the services
from the
applicant and that MISA had advised them that it had no objection
thereto.”
[42]
The allegations in paragraph 18 are clearly not evidence of a
contractual relationship between MISA and the respondent under
the
SLA, and nor is it the case of the applicant. As I said, the
applicant, in its founding affidavit, relies on its contract
with the
supplier. And this is not allowed under section 110(2).
The essential requirement for the exemption under
section 110(2) has
thus not been established.
[43]
Secondly, the procurement of the goods and services relied on by the
applicant is clearly not a procurement of those goods
and services
under the SLA as required by section 110(2)(c). The applicant’s
case in these proceedings is that it contracted
directly with the
respondent and such contract is distinct from and separate to the
SLA. It contends that the cancellation
of the SLA had no effect
on the validity of the Amathole Agreement. This contention
rests on a misconception of the meaning
of the words in section
110(2)(c) “
(for) … the
procurement of goods and services under a contract secured by that
other organ of state …”
Such
contract is the SLA and the section requires the procurement under
such contract, or at least under the terms of such contract.
When
the SLA was cancelled and/or the material terms thereof were amended,
the goods and services could no longer be procured
under the SLA or
under its terms and the exemption allowed under section 110(2)(c)
came to an end.
[44]
The material terms of the SLA were amended to such an extent that
they can no longer be said to constitute a procurement under
the SLA,
or under its terms. In this regard I refer to the following
amendments:
1.
The contract amount under the SLA was R119.228.500,00. Under
the Amathole Agreement
the contract amount was R631.835.837,00.
This amendment removes the constitutional imperative of a competitive
bidding process
in its entirety;
2.
In terms of the SLA, the applicant undertook the supply and
installation of prefabricated
toilet structures for the utilization
in both dry and water borne systems. In terms of the Amathole
Agreement, the applicant
undertook the supply and installation of
Ventilated Improved Pit (VIP) latrines as per the DBSA/ADM Front
Loading On Site Sanitation
Programme. Although similar, the
goods and services under the two contracts are not the same but
different. The goods
and services and the contract price under
the Amathole Agreement were therefore never subjected to a
transparent and equitable
tender process or procedure.
3.
In terms of clause 3.2.3 of the Amathole Agreement, the works include
an “
Incubator Programme”
which was not part of the
SLA.
4.
Clause 3.2.5 of the Amathole Agreement refers to various projects
being part of the works
to be performed which were not part of the
SLA.
5.
The duration of the two contracts is different.
[45]
I therefore come to the conclusion that the goods and services
contracted for under the Amathole Agreement are not for the
procurement of goods and services under the SLA or under its terms as
required by section 110(2)(c).
[46]
There is a final issue which calls for comment.
[47]
As said earlier, the object and purport of the exemption under
section 110(2)(c) and Regulation 32 is to prevent a costly and
time-consuming duplication of tender procedures whilst retaining the
constitutional imperatives under section 217 of the Constitution.
This is achieved by allowing an exemption if the procurement is in
respect of goods and services under another contract with another
organ of state, and which procurement by such other organ or state
had been subjected to the operation of the PPPFA and the LGMFMA
and
thus to the tender requirements prescribed by legislation to give
effect to section 217 of the Constitution.
[48]
The respondent’s attempts set out from para. 8 to 12 of this
judgment to invoke the exemption under the Regulation, and
the
applicant’s participation in these attempts, either show a
total misconception and misunderstanding of the scheme of
the
exemption, or a total disregard to its requirements. I refer only to
the following aspects of the case.
[49]
In its letter of 8 April 2014 addressed to MISA, the respondent
advises MISA that the Regulation allows an accounting officer
of a
municipality to procure goods or service “ …
using
any contract arranged by means of a competitive bidding process by
any organ of state…”
The
legislation does not allow anything of the sort.
[50]
Having obtained MISA’s permission to “
participate”
in the SLA, the respondent then concludes an
agreement direct with the service provider (the applicant) by
substituting itself in
the place of MISA as the contracting party
under SLA, and then proceeds to amend the material terms of the SLA
beyond recognition.
The end result is that, using
Regulation 32, the applicant and respondent have maneuvered
themselves in a contractual setting for
the procurement of goods and
services with a contract value in excess of R631m, without having
been subjected to any prescribed
legislative tender procedure or
process, and out of reach of the provisions of section 217 of the
Constitution and of the provisions
of PPPFA and LGMFMA. And
this is certainly not allowed by either Regulation 32 or by section
110 of LGMFMA.
[51]
It is clear from the correspondence referred to above and from the
contracts entered into, that neither of the parties had
any
understanding of the object and purport of Regulation 32 or of its
scheme of operation.
[52]
For the above reasons I am driven to the conclusion that neither
section 110(2) nor the Regulation apply to the facts of this
case,
and that the constitutional imperatives under section 217 of the
Constitution read with the PPPFA an LGMFMA have not been
met.
[53]
In the circumstances I make the following orders:
1)
The main application is dismissed;
2)
The counter application is upheld and the
agreement concluded between the parties on 12 September 2014
entitled
Confirmation of Contractual Terms
(annexure
“E” to the Applicant’s founding affidavit) is
hereby declared unconstitutional, invalid and unlawful,
and void
ab
initio
;
3)
The applicant is ordered to pay the costs of both the main
application and the counter application,
such costs to include the
costs consequent upon the employment of two counsel.
_______________________
ALKEMA
J
Heard
on
:
15 September 2015
Delivered
on
:
24 November 2015
Counsel
for Applicant :
M C Erasmus SC
with
W T B Ridgard
Instructed
by
:
Stirk Yazbek
Attorneys
Counsel
for Respondent:
R G Buchanan SC
with
P G Beningfield
Instructed
by
:
Smith Tabata Inc.