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[2013] ZAGPPHC 196
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Magasana Construction CC v City of Tshwane Metropolitan Municipality and Others (8895/2013) [2013] ZAGPPHC 196 (12 July 2013)
NOT
REPORTABLE
IN THE NORTH GAUTENG HIGH COURT,
PRETORIA
(REPUBLIC
OF SOUTH AFRICA)
CASE
No. 8895/2013
DATE:12
July 2013
In
the matter between
MAGASANA
CONSTRUCTION
CC
.....................................................................................
Applicant
and
CITY
OF TSHWANE METROPOLITAN MUNICIPALITY
…....................................
First Respondent
REKHUDITSE
CONSTRUCTION AND CLEANING
SERVICE
CC
.........................................................................................................
Second
Respondent
QUEENS
BUILDING CONSTRUCTION
CC
..........................................................
Three
Respondent
MATUKANE
CONSTRUCTION CC
…..................................................................
Fourth
Respondent
MAWAJA
MANAGEMENT & DEVELOPMENT
PROJECTS
CC
..........................................................................................................
Fifth Respondent
BANKUNA
ENGINEERING & CONSTRUCTION
CC
.............................................
Sixth
Respondent
MOTHEI
CONSULTING ENGINEERS
CC
..........................................................
Seventh
Respondent
SPLISH
SPLASH CONSTRUCTION
CC
…..........................................................
Eighth
Respondent
JUDGMENT
Van der Byl AJ:- Introduction
[1]
This is an application, in addition to a punitive order of costs and
incidental relief, for a final order in terms of Part
B of the Notice
of Motion -
(a)
reviewing and setting aside the decisions of the Municipality’s
Bid Evaluation Committee, the Municipality’s Bid
Adjudication
Committee and the Municipal Manager;
(b)
declaring any agreement that may have been concluded between the
Municipality and the Second to the Eighth Respondents to be
invalid;
(c)
remitting the adjudication of tender CB100/2012 to the various
Municipal Committees and officials for reconsideration.
[2]]
On 1 March 2013 when this matter was enrolled for hearing of Part A
of the Notice of Motion, an order was granted by agreement
between
the parties in terms of which, inter alia, the First Respondent
agreed not to give effect to the execution of Tender CB100/2012
pending the finalization of Part B of the Notice of Motion and the
question of costs of Part A, as well as the appearances on 28
February 2013 and 1 March 2013, was reserved.
[3]
The application is not opposed by the Second to Eighth Respondents.
[4]
It is common cause -
(a)
that the Applicant and, inter alia, the Second to Eighth Respondents
submitted bids on Tender CB100/2012 (“the tender3’)
for
the Maintenance, Rehabilitation, Upgrading and Installation of Storm
water Systems, Repairs to Paved Surfaces in Regions 3,
4, 5, 6 and 7,
if and when required for a three year period;
(b)
that the Applicant’s bid was, after, due to some errors made by
the Applicant in its tender, having been corrected or
adjusted by
officers of the First Respondent from R5 553 077,50, for a total
amount of R5 833 077,50 per region;
(c)
that the tender -
(i)
in respect of Region 3 was awarded to the Second Respondent at a
total tender amount of R7 281 434;
(ii)
in respect of Region 4 was awarded to the Third Respondent at a
total tender amount of R7 442 204;
(iii)
in respect of Region 5 was awarded to the Eighth Respondent at a
total of R8 324 103;
(iv)
in respect of Region 6 was awarded to the joint venture of the Fourth
and Fifth Respondents at a total tender amount of R9
706 870;
(v)
in respect of Region 7 was awarded to the Sixth Respondent at a total
tender amount of R9 839 634,85.
[5]
As provided in regulation 26 of the regulations made under the Local
Government: Municipal Finance Management Act, 2003 (Act
56 of 2003),
the process of evaluation and adjudication of bids involves at least
three steps -
(a)
firstly, an evaluation of bids by a bid evaluation committee with the
duty, as the name indicates, to evaluate all bids submitted
on a
tender invitation;
(b)
secondly, a bid adjudication committee to adjudicate the evaluation
made by the bid evaluation committee and to submit a report
with
recommendations to the municipal manager;
(c)
thirdly, a final decision by the municipal manager.
[6]
Both the Bid Evaluation Committee and the Bid Adjudication Committee
recommended, and the Municipal Manager approved, that the
Applicant
be eliminated or disqualified because -
(a)
the Applicant’s bid displayed an “unbalancing of prices"
(record pp. 67 and 68,
(b)
the overall value of the Applicant’s tender was beneath a
pre-determined threshold (record pp. 67 and 68, Annexure A1);
(c)
it imposed a unilateral condition in form RDE 2 (record p. 319) to
the effect that it will not be held “responsible for
damages to
any cables if are (sic) not marked on drawings" of the
Municipality (record p. 67, Annexure A1).
[7]
The decision to eliminate or disqualify the Applicant is now
challenged in this application on the basis, as contended in the
heads of argument filed on behalf of the Applicant and elaborated
upon in argument, that the decision infringed its right to a
fair and
just administrative process.
[8]
The Applicant’s challenge is based on what is contained in a
report of the various committees submitted to, and approved
by, the
Municipal Manager (record pp. 50 to 79D, Annexure A1).
[9]
The report of the Bid Committee (record p. 52) in so far as it
relates to Tender 4, being the Applicant’s tender, reads
as
follows:-
“
Tender
4 of Magasana Construction tender very low for the items in the bill
of quantities for Region 3, 4, 5, 6 and 7
1.
B001.02 (LI) Locating existing services
2.
B002.04.01 Dumpy level
3.
B002.04.02 Tachometer
4.
B002.04.03 Survey assistant
Item
Description
Qty
Unit
Tenderer’ s rate
Preliminary and general
charges
001.01
01 Fixed charges
-
Amount
R0.00
B001.02
(L1) Locating existing
services
12
Per month
R0.00
B002.04
Provision of survey
equipment and assistants
B002.04.01
Dumpy level
5
day
R0.00
B002.04.02
Tachometer
5
day
R0.00
B002.04.03
Survey assistant
10
per person/day
R0.00
Item
B001.02 (LI): Locating of existing services
The
bidder put a R0.00 rate and this resulting in unbalancing of rate
(Pricing instruction Part C2.2 page C2.1.3). Failure to price
the
above item transfer the risk to the City Council as the tender did
not price for locating of existing service. The item is
critical as
the overall works entails construction (digging excavation),
maintenance and refurbishment of infrastructure and services.
The
tender further stated in the form RDE 2 (p. 319 of the record)
(Proposed amendments page 33 of 33 : Part T2) that (sic) won’t
be responsible for damage o f services if the services are not in the
plan and this statement impose the hsk to the City Council,
as this
item according to Tshwane standard and specifications states that
this item includes searching for services and supply
or hire and use
of specialized
detecting
equipment and drawing up the services found, this means that the
contractor is responsible for locating the services which
are not
indicated or supplied on the drawings.
Tender
4 Magasana Construction has tendered too low for the following items
in the bill of quantities for region (sic) 3, 4, 5,
6 and 7
1.
B001.04.05 Provision of personal protective clothing an equipment
2.
B505.09.02 Interlocking precast concrete block pitching
Quotations
have been obtained to motivate the low pricing in the bill of
quantities of tender 4 that of Magasana Construction see
table below
and Annexure B
Item
Description
Qty
Unit
Tenderer’s rate
Safety
&
Overall
house
B001.04.05
Provision of personal
protective clothing and equipment
1800
per
worker
per
month
R2.00
R592,42
The
prices obtained by this section for evaluation purposes are for the
materials needed for supplier of Armorfiex 180 only. The
transport
and installation cost still need to be taken into account.
Item
Description
Qty
Unit
Tenderer’s rate
Technicrete
505.09.02
Interlocking precast concrete
block pitching: Armorfiex 180 or similar
2000
m2
R20.00
R138.00
Conclusion
These
prices are reason for the dismissal of the tender 4 because the
tender has unbalancing of prices that will impose the risk
to the
municipality and also the amounts tendered are below the market
purchase price of the materials as per attached quotation
received
from various suppliers and the tender will not be able to do work
that form crucial part of the tender.
It
is therefore recommended that this tender be disqualified".
[10]
These considerations must in my view be seen against the background
of a bill of quantities prepared and updated from time
to time by the
First Respondent (pp. 2326 to 2378 of the record of the proceedings).
[11]
The bill of quantities is a document which is regularly from time to
time updated due regard being had to expansions of townships
taking
also into consideration inflation.
[12]
In this regard the evidence shows -
(a)
that the First Respondent from time to time embarks on a process of
supply market analysis which is a technique used to identify
market
characteristics for specific goods or services so as to develop
effective procurement strategies;
(b)
that the supply market analysis also helps to manage risk by
identifying and analysing how favourable the supply market is and
the
probability of supply market failure;
(c)
that for this purpose engineering consultants were appointed to draw
up bills of quantities to determine the lowest possible
value of the
works and the highest possible value of the works;
(d)
that any entity that submits a tender below the lowest threshold or
in excess of the highest threshold is as a general policy
automatically disqualified.
[13]
This policy has at all times been followed in order to avoid the
following problems once a contractor has been appointed -
(a)
that a contractor cannot complete the works due to cash flow problems
because where the contractor is to provide goods and render
services
at a rate which is not financially sustainable;
(b)
that a contractor delivers substandard goods and services to increase
his profit margin;
(c)
that the contractor compromises on labour costs to compensate for the
low profit margin on other aspects of the works which
may lead to
labour unrest;
(d)
that if a contractor cannot comply with the terms of the agreement
which often leads to the cancellation of the agreement and
the
procurement process will have to start afresh to appoint a
replacement.
[14]
The market analysis pegged the value of this contract at an average
of R8 838 575 per region (pp. 2340 to 2378 of Record of
Proceedings)
which is for obvious reasons not beforehand made known to prospective
tenderers.
[15]
Because of this value of the contract it is in terms of the
Construction Industry Development Regulations, 2004, rated, as
is
apparent from the tender documents (record p. 247), as a tender
falling under Category 6CE which means that no contractor
not
falling under that rating is entitled to tender Moseme Road
Construction CC v King Civil Engineering Contractors (Pty) Ltd
2010
(4) SA 359
(SCA) at 361H, para [3]).
[16]
Although not accepted as a hard and fast rule the First Respondent
accepted the CIDB value range, being a value between R6
500 000 and
R13 000 000 as the range within which it was prepared, as a tool or
yardstick, to consider all tenders received.
[17]
The following appears from this bill of quantities in relation to the
disputed items, namely -
(a)
Item B001.02 - (L1) Locating existing services - R1 500 per month
(total R18 000 per month) as opposed to the R0.00 rate quoted
by the
Applicant;
(b)
Item B002.04.01 - Dumpy level - R50 per day (total R250 per day) as
opposed to the R0.00 rate quoted by the Applicant;
(c)
Item B002.04.02 - Tachometer R50 per day (total R250 per day) as
opposed to the R0.00 rate quoted by the Applicant;
(d)
Item B002.04.03 - Survey assistants R50 per day (total R500 per day)
as opposed to the R0.00 rate quoted by the Applicant;
(e)
Item B001.04.05 - Provision of personal protective clothing and
equipment R540 per worker per month (Total R972 000 per month)
as
opposed to the R2.00 rate quoted by the Applicant;
(f)
Item 505.09.02 - Interlocking precast concrete block pitching:
Armorflex R320 per m2 day (total R640 000) as opposed to the
R20.00
rate quoted by the Applicant.
Applicant’s case
[18]
Notwithstanding voluminous and various sets of papers and annexures,
consisting of a record of some 4 081 pages, filed in this
matter in
which numerous allegations are made criticising the basis for the
decision as set out in the report quoted above, it
would appear, as
is apparent from the heads of argument filed on behalf of the
Applicant and elaborated upon during argument, that
the Applicant’s
case is based, generally, on the contention that the disqualification
of its tender violated its right to
procedural fairness and,
particularly, on two grounds and, perhaps, a third ground, on which
the Applicant was disqualified.
[19]
These grounds in effect relate to -
(a)
firstly, the contention that the Applicant imposed a unilateral
condition in form RDE 2 (record p. 319) to the effect that it
will
not be held “responsible for damages to any cables if are (sic)
not marked on drawings” of the Municipality
(record
p. 67, Annexure A1);
(b)
secondly, the contention that the Applicant’s bid displayed an
“unbalancing of prices" (record pp. 67 and 68,
Annexure
A1);
(c)
thirdly, the contention that the overall value of the Applicant’s
tender was beneath a pre-determined threshold (record
pp. 67 and 68,
Annexure A1).
[20]
I deal seriatim with each of these grounds.
Firstly,
the alleged imposition of a unilateral condition in Form RDE2
[21]
This issue in actual fact goes hand in hand with the First
Respondent’s objection
against
the Applicant’s indication of a R0,00 rate in, particularly,
item B001.02 (LI) in
respect
of "locating of existing services" (record p. 355).
[22]
On this issue the Applicant -
(a)
on the one hand, contended that it had no intention of charging the
First Respondent anything for such services because, regard
being had
to paragraph 001.02 of the Standard Specifications of the tender
(quoted below), it, having previously been the successful
tenderer in
regions 1 and 2, already had the necessary detecting equipment; and
(b)
on the other hand, relied on paragraph 3.2 of the pricing
instructions contained in the Tender documents (record p. 132) which
reads as follows:
“
A
price or rate is to be entered against each item of the Bill of
Quantities, whether the quantities are stated or not.
An
item against which no price is entered or where a word or phrase such
as ‘included’ or ‘provided elsewhere
’ will
be accepted as a rate of nil (R0.00) having been entered against such
items and covered by the other prices or rates
in the Schedule (my
underlining).
Any
work executed to which such a pay item applies, shall be measured
under the appropriate items in the Bill of Quantities and
valued at a
rate of (R0.00). The rate of nil shall be valid irrespective of any
change in the quantities during the execution of
the contract.”.
[23]
Relying, particularly, on the words “and covered by the other
prices or rates in the Schedule", in the paragraph
the
contention is that the disqualification on the ground that the line
item is priced for “RO.OO" is incorrect and
could not have
been done.
[24]
Furthermore, reliance is also placed on paragraph 001.02 of the
Standard Specifications of the tender relating to “locating
of
existing services” (record p. 202) which reads as follows:
“
001.02 Locating existing
services Lump sum
The
tendered lump sum shall include full compensation for the supply or
hiring of specialized detecting equipment, for the use of
such
equipment and for drawing up plans of the located services as
specified. Alternatively an approved specialist firm may be
employed
to carry out the work”.
[25]
In relation specifically to the unilateral imposed condition, it is
submitted by the
Applicant
-
(a)
that the First Respondent is, relying on clause 35.1 of the contract
data (record p. 114), obliged to take out insurance for
“those
eventualities"',
(b)
that any services not indicated in the plans would be illegal;
(c)
that neither the insurer nor the First Respondent will be bound to
pay for damage to such services.
[26]
I fail to see how the First Respondent’s refusal to accept the
unilaterally imposed condition by the Applicant indemnifying
itself
against damages caused in the exercise of its contractually imposed
duty to search for existing services, can be held to
be an
infringement of the Applicant’s right to procedural fairness.
[27]
Similarly, I fail to see on exactly what the Applicant’s
reliance on paragraph 3.2 of the pricing instructions contained
in
the Tender documents that a tenderer is entitled to enter in respect
of an item a zero rate if a rate is covered by the other
prices or
rates in the tender is based.
[28]
I have two difficulties with this submission.
[29]
Firstly, the words in this paragraph relied upon are in my view read
out of context. In my opinion the words relied upon cannot
be read in
isolation. Those words
obviously
relate to items against which no price is entered in cases where a
word or phrase such as ‘included" or ‘provided
elsewhere' appears. It is only in those cases that a zero rate will
be accepted, but only if the price or rate covered by other
prices or
rates in the Schedule. It is obvious from the tender document that no
words or phrases, such as, “included’
or “provided
elsewhere" are included in any of the items where the Applicant
elected to insert zero rates.
[30]
Secondly, and in any event, there is no indication in the Applicant’s
tender document that a price for the locating of
existing services
has been included elsewhere in the tender document and counsel who
appeared on behalf of the Applicant was also
unable to show me where
such a rate could have been inserted.
[31]
Instead an attempt was made to persuade me, as I have already
indicated, to accept that the Applicant intended not to charge
the
First Respondent any price for its duty to locate existing services.
[32]
According to the First Respondent -
(a)
a successful contractor was in terms of the tender and associated
documents required to search, in the execution of the contract
requiring on an “if and when" basis maintenance,
rehabilitation, upgrading and installation of stormwater systems and
repairs to paved surfaces, for existing services (such as, eg.,
electricity, sanitation, Telkom, Escom, Rand Water cables and pipes,
etc) using specialized detecting equipment and was to do so whether
or not such services
are
shown on any drawings (and also, having located such services, to
draw up plans of the services so located);
(b)
that the Applicant made no provision for costs associated with
locating of such services and instead sought to indemnify itself
from
any liability which may arise as a result of damage to such services
which are not contained in any drawings;
(c)
that only if prices are included as requested that the prices
included in the First Respondent’s updated bill of quantities
can be assessed with reference to the supply market analysis so as to
establish whether the amount so included is in accordance
with market
tariffs.
[33]
The First Respondent’s approach in this regard does not in my
view constitute any procedural unfairness.
[34]
The First Respondent’s requirements in this regard applied
equally to all tenderers, and it would seem, on face value,
that at
least the successful tenderers all complied with these requirements.
[35]
I can see no reason why the Applicant would be entitled to a
different treatment.
[36]
Various other submissions were made by counsel on both sides on this
and the other issues and I mean no disrespect to any of
them by not
referring to those submissions in any detail, but will do so should
the occasion arise.
[37]
In this regard I can, inter alia, refer to the following -
(a)
the First Respondent’s contention that the Applicant’s
unilateral indemnification against damages caused in the
process of
excavation of existing services after having located such services,
would nullify the First Respondent’s standard
way leave
indemnity;
(b)
the Applicant’s contention that the First Respondent is in any
event, regard being had to clause 35.1 of the contract
data, covered
by its insurance against such damages;
(c)
the Applicant’s contention that services in respect of which no
drawings exist must be regarded as being illegal so that
neither the
Applicant nor the First Respondent can be held liable for damages to
any such services.
[38]
I am for these reasons unpersuaded that it has been shown that the
First
Respondent
in awarding the tender, in any way acted procedurally unfair to the
Applicant.
[39]
This brings me to the Applicant’s following ground for its
contention that its rights
to
procedural fairness were infringed.
Secondly, the alleged overall value of
the Applicant’s tender
[40]
This ground of review relates to the First Respondent’s
reliance on its updated bill of quantities and the respective
thresholds based on a CIDB rating according to which the Applicant’s
overall tender for R5 833 077,50 per region is lower
than the lowest
threshold of R6 500 000.
[41]
This approach by the First Respondent is challenged on at least two
grounds, namely -
(a)
that the approach is contrary to instructions of the National and
Provincial Treasuries contained in Circular 29 from the National
Treasury dated 31 January 2006 (record p. 663, Annexure R1); and
(b)
that in any event, relying on regulation 2 of the CIDB regulations,
if VAT is added to the Applicant’s tender amount,
the tender
amount exceeds that threshold.
[42]
I am not persuaded that any of these grounds render the First
Respondent’s approach in this matter as procedurally unfair.
[43]
As far as I could determine the circular referred to which purports
to refer to the
Local Government: Municipal Finance Management Act,
2003
, does not have the force of law in that its issue has been
authorized by any provision of that Act. In terms of that Act
municipalities
are required to ensure that their supply chain
management is fair, equitable, transparent, competitive and
cost-effective. The
circular does not discourage
the
determination by way a bill of quantities, updated from time to time,
to identify market characteristics for specific goods
and services
and to, in so doing, develop an effective procurement strategy. As I
have already indicated, referring to the judgment
in the Moseme Road
Construction case, supra, the
Construction Industry Development Board
Act, 2000
, provides for a national register of contractors so as to
categorize contractors in a manner that facilitates public sector
procurement
and promotes contractor development, I cannot imagine
that the circular in question envisaged a situation to detract from
the provisions
of that Act. It would in any event appear not to have
been the intention to use the threshold range determined in terms of
the
CIDB regulations as a disqualification as such. As already
indicated the First Respondent merely used that threshold as a tool
or guide to determine whether a contract worth on average R8,8
million can be duly executed by a tenderer that tendered almost R3
million below that average. This is a guideline applied to all
tenderers and I cannot see how it can be held that the First
Respondent,
in having done that, acted procedurally unfair towards
the Applicant.
[44]
I am also unpersuaded that the Applicant’s reliance on
regulation 2 of the CIDB regulations can find any application
in this
matter. The regulation reads as follows:
“
The
rand value, tender value, tendered price, contract value or project
value, wherever it appears in these Regulations, includes
value added
tax levied under the Value-Added Tax Act, 1991 (Act 89 of 1991). (My
underlining)
If
regard is had to the underlined words, the regulation was designed
for purposes of those regulations and I can see no reason
why it
should find application in the tender
in
this matter. As a matter of fact in terms of the tender tender prices
are to be provided excluding VAT and there is no basis
on which VAT
can now be added to the tender price as that would not be a true
reflection of the tender price.
[45]
It is in my view apparent from the papers that the First Respondent
was not prepared to consider a tender of which the overall
tender
price was, regard being had to its own market price analysis,
patently too low which in my view is obviously a fair consideration
applied across the board to all tenderers.
[46]
I am accordingly not persuaded that the Applicant's application can
succeed on this ground.
[47]
This brings me to the third an last attack on the First Respondent’s
decision.
Thirdly, the alleged “unbalancing
of prices”, being the shifting of part of the cost of work for
one element of the
work to another element of the work.
[48]
As I have already indicated, the Applicant inserted in respect of the
following rates reflected in the First Respondent’s
bill of
quantities a zero rate in the tender -
(a)
Item B001.02 - (L1) Locating existing services - R1 500 per month
(total R18 000 per month) as opposed to the R0.00 rate quoted
by the
Applicant;
(b)
Item B002.04.01 - Dumpy level - R50 per day (total R250 per day) as
opposed
to
the R0.00 rate quoted by the Applicant;
(c)
Item B002.04.02 - Tachometer R50 per day (total R250 per day) as
opposed to the R0.00 rate quoted by the Applicant;
(d)
Item B002.04.03 - Survey assistants two at R50 per day (total R500
per day) as opposed to the R0.00 rate quoted by the Applicant;
(e)
Item B001.04.05 - Provision of personal protective clothing and
equipment 1800 at R540 per worker per month (Total R972 000
per
month) as opposed to the R2.00 rate quoted by the Applicant;
(f)
Item 505.09.02 - Interlocking precast concrete block pitching:
Armourflex 2 000 at R320 per m2 day (total R640 000) as opposed
to
the R20.00 rate quoted by the Applicant.
[49]
The question was raised and argued whether this state of affairs
constituted
what
is called an unbalancing of prices.
[50]
It would appear that an unbalancing of a bid is the shifting of part
of the cost of
work
for one element of the work to another element of the work.
[51]
On behalf of the First Respondent it was submitted that in public
sector contracts
an
unbalanced bid is objectionable and significantly problematic so as
to warrant the
rejection
of the bid because it -
(a)
constitutes an advance payment;
(b)
may not ultimately prove to be the best offer;
(c)
is detrimental to the concepts of competitive bidding.
[52]
Furthermore, so it was contended, the degree to which an unbalancing
of a bid is accomplished is either mathematically unbalanced
or
materially unbalanced.
[53]
A mathematically unbalanced bid seems to be one in which each bid
item or breakdown of scheduled values in a lump sum contract
fails to
carry its proportionate share of the overhead and profit in addition
to the necessary costs for the item which results
in understated
prices for some items and enhanced or overstated prices for others.
An example of such enhanced or overstated prices
is what is called
"front end loading” wherein activities scheduled to be
performed early in the project have values
encumbered with an
excessive proportion of planned overhead costs and anticipated
profit. If excess funds are paid at an early
stage of the contract
the potential exists for an inadequate amount to properly complete
the project and protect the municipality’s
interests. It can
also give rise to a further problem to the effect that it will be
difficult to establish a cost basis for equitable
adjustments when
contract quantities or work is changed.
[54]
A materially unbalanced bid is one shifting not only a
disproportionate amount of overhead and profit, but also some portion
of the actual cost of elements of work.
[55]
In applying these considerations to this matter, the contention is
that the understatement of a price significantly less than
the actual
cost of that work will give rise to an overstatement of prices for
other aspects of the work or that where no price
is stated in respect
of certain work it will give rise to a later complaint by a
contractor that it can not be fairly compensated
for the understated
line items of work it had performed and in so doing creates a
potential for disputes and claims for increased
costs.
[56]
I was unable to find any South African authorities on this issue (and
I was also not referred to any such authorities), but
I was in
argument on behalf of the Applicant referred to what appears to be a
Staff report submitted by the Auditor General to
an audit committee
of the City of Toronto entitled “Improving the Procurement
Process - Unbalanced Bids”. At p. 2 of
the report the following
is stated:
“
There
are a number of reasons why a bidder may unbalance its prices in a
bid including the likelihood of receiving large payments
at the
beginning of a contract (front end loading). Secondly, a bidder may
submit an unbalanced bid in order to maximise his profits.
The bidder
is able to do this by overpricing bid items he believes will be used
in greater quantities than estimated in the tender
bid document and
underpricing items he believes will be used in significant lesser
quantities".
The
report then goes on and shows by way of two hypothetical examples as
to how one contractor can be awarded a contract on having
submitted a
lower overall bid, but, because of having made an unbalanced bid in
having front loaded the first stage of the
bid,
in actual fact its original bid is higher than the other bidder whose
bid was properly balanced over the two stages of the
bid.
[57]
Counsel who appeared on behalf of the Applicant was at great pains to
demonstrate that the Applicant’s tender, in so
far as it quoted
zero rates in respect of the various items to which I have already
referred to, did not have the effect of an
unbalancing of prices as
is evident from the Toronto report.
[58]
I am not persuaded that this address the real problems the First
Respondent experienced in this regard.
[59]
The First Respondent’s difficulties in relation to the quotes
inserted in respect of the respective are in principle
the following
-
(a)
tenderers were directed to price all items in the absence of which
incomplete sections will not be considered (para 3.9 offender
documents, record p. 353);
(b)
if all items are not priced or priced at a reasonable rate it may
give rise to a situation where either substandard equipment
may be
utilized or no proper protective clothing will be provided to workers
or the contractor will simply not be able to do the
work or somewhere
along the line other items may be loaded to make up for any loss of
profits.
[60]
I am for these reasons unable to hold that the Applicant was in any
way been
treated
unfairly.
[61]
As a matter of fact I am satisfied that the First Respondent’s
considerations are reasonable and that there were rational
reasons
for having acted as it did.
[62]
This brings me to the question of costs.
Costs
[63]
The Applicant seeks, whatever the outcome of this application, an
order of costs, including the costs reserved on 1 March 2013,
against
the First Respondent on the scale as between attorney and client.
[64]
The order so sought is based on some indignation expressed by the
deponent to the First Respondent’s first answering
affidavit in
which she indicated that the documents annexed to the Applicant’s
founding affidavit are documents to which
only the Bid Adjudication
Committee, the Executive Committee and the City Manager have had
access at the time the urgent application
was launched. Not even any
of the successful tenderers or even she herself, as Executive
Director: Transport and Roads have had
any sight to any of the
documents.
[65]
It is from this state of affairs that the deponent seems to have
drawn an inference that the Applicant could have obtained
the
documents "in a corrupt or fraudulent mannerJ'.
[66]
In its replying affidavit the Applicant explains that the “contract
management, supply chain management department received
the
resolution from the City Manager’s office on 4 February 2013
and the Applicant was informed on the same date that its
tender was
not successful, whereupon, the relevant documentation was “obtained
legally, validly and through the proper process".
[67]
In a supporting affidavit filed by the Applicant’s attorney of
record he on 8 February 2013 attended at the offices of
the First
Respondent to obtain a copy of the minutes and resolution of the
various committees where he approached Ms. Trix Azenha
who holds the
position of Chief Accountant in the First Respondent’s Contract
Management Department. She, however, informed
him that she was not
authorized to provide him with the requested documents and referred
him to the Executive Director, Mr. Mahobane.
In view thereof that he
had no appointment with Mr. Mahobane he waited for him outside his
office for about two hours. At some
stage a certain Mr. Graham Gumbo
approached him and asked him whether he could assist. Having
explained that he required copies
of the relevant documents, he was,
after Mr. Gumbo made a few telephonic enquiries, requested to submit
a letter on Monday, 11
February 2013 describing the documents he
needed which he did. He was, thereupon taken back to Ms. Azenha where
he was, after having
paid the costs to make copies, provided with the
documentation.
[68]
Having read the papers I am satisfied that the deponent was truly and
honestly not aware of the decision taken before the Applicant
launched its application and that it was unnecessary to have
expressed her suspicions in such derogatory terms.
[69]
However, having also taken note of various allegations made by the
deponents to the Applicant’s papers which can equally
be
regarded as scandalous, I think this is a matter where the pot is
calling the kettle black.
[69]
In my view this is a matter where the costs should follow the
result.
Order
[70]
In all the circumstances, and for the reasons given, I make the
following orders:-
1.
THAT the application be dismissed.
2.
THAT the Applicant be ordered to pay the First Respondent’s
costs, including ^he costs resen/eii on 1 March 2013.
P
C VAN DER BYL
ACTING
JUDGE OF THE HIGH COURT
ON
BEHALF OF THE APPLICANT: ADV M SNYMAN
On
the instructions of: FRIEDLAND HART SOLOMON & NICOLSON
4-301
Monument Office Park 79 Steenbok Avenue PRETORIA
Ref
: Mr Brauer/Mr Bowles/GM/294198
Tel
: 012 424 0200
ON
BEHALF OF FIRST RESPONDENT: ADV A VORSTER
On
the instructions of: HUGO & NGWENYA INC
102
Central Towers
286
Pretorius Street
PRETORIA
Ref:
Mr Hugo/MP/zlr/ts392
Tel
: 012 665 2997/8
DATE
OF HEARING: 28 May 2013
JUDGMENT
DELIVERED ON: 12 Ju|y 2013