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[2013] ZAGPPHC 224
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Stefanutti Stocks Civils, a Division of Stefanutti Stocks (Pty) Ltd v Trans Caledon Tunnel Authority and Another (26111/2012) [2013] ZAGPPHC 224 (19 July 2013)
NOT
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT,
PRETORIA
[REPUBLIC OF SOUTH AFRICA]
CASE
NUMBER: 26111/2012
DATE:
19/07/2013
In
the matter between:
STEFANUTTI
STOCKS CIVILS, A DIVISION
OF
…...........................................
FIRST
APPLICANT
STEFANUTTI
STOCKS (PTY) LIMITED
CYCAD
PIPELINES (PTY)
LIMITED
..............................................................
SECOND
APPLICANT
STEFANUTTI
STOCKS CIVILS, CYCAD
OLIFANTS
........................................
THIRD
APPLICANT
RIVER
JOINT VENTURE
And
TRANS
CALEDON TUNNEL
AUTHORITY
.....................................................
FIRST
RESPONDENT
BASIL
READ (PTY)
LIMITE
D......................................................................
SECOND
RESPONDENT
JUDGMENT
MAVUNDLA,
J.
[1]
The applicant is aggrieved about the fact that, the first respondent
on the 16 February 2012 awarded a tender under Contract
Number TCTA
-05 -002 (hereinafter referred to as “the tender”) to the
second respondent for the construction of a bulk
steel water pipeline
in Limpopo province, which is part of a larger project to provide
water services to underserviced areas in
Limpopo. The applicant is
also aggrieved about the fact that the first respondent found the
entity Big Five to be the reserve bidder.
[2]
The third applicant (which is a joint venture between the first and
second applicants), the second respondent, Group Five, WCE
Joint
Venture and Rumdel Joint Venture entities pre-qualified for the
tender.
[3]
As indicated herein above, the second respondent was the bid winner.
The entity called Group Five was declared by the first
respondent to
be “the standby” party, in case negotiations with the
first respondent were unsuccessful.
[4]
The applicant seeks to have:
(i)
The decision of the first respondent reviewed and set aside and;
(ii)
the contract concluded between the first respondent and the second
respondent pursuant to the award of the tender to the second
respondent cancelled; and
(iii)
the tender awarded to the third applicant alternatively directing
that the entire tender process commences afresh;
(iv)
the costs of this application be paid by the respondents who oppose
the application.
[5]
As indicated herein above, the second respondent was the bid winner.
An entity called Group Five was declared by the first respondent
to
be the “standby” party, in case negotiations with the
first respondent were unsuccessful. Both these parties have
chosen
not to get involved in the present litigation. In respect of Group
Five, this is so because, although it was not cited as
a party in the
matter, the first respondent had earlier successfully taken a point
in limine of non-joinder of Group Five being
an interested party.
This court upheld the point in limine and ordered that the papers
should be served upon Group Five. The papers
have since been served
upon Group Five, which nonetheless chose to abide by the court order.
[6]
The applicants seek to have the decision awarding the tender to the
second respondent reviewed on the following grounds:
6.1
The third applicant ought not to have been disqualified from the
tender process for failure to have met the minimum requirement
relating to internship programmes, mentorship programmes and
preferential procurement targets;
6.2
the applicant ought not to have been disqualified from the tender
process on the basis that it materially qualified its tender;
1.1
the applicant ought not to have been disqualified from the tender
process for failure to submit certain particulars of its Bills
of
Quantities for option 2.B; for amending its Bills of Quantities for
option 2.B after tender closing; for failing to meet the
minimum
mandatory requirements relating to Skills Development and for
materially qualifying its tender in several respects.
1.2
Group Five as the reserve bidder (and the only other responsive
bidder) ought to have been disqualified from the tender adjudication
process for failure to submit letter of Intent (“Letter of
Intent) for security in the amount of R100 million and for having
executed the compulsory components of contingency, contract price
adjustment and VAT from its original tender.
1.3
The first respondent afforded undue preference to Group Five and the
second respondent during the adjudication process as a
result of
which the third applicant was treated unfairly;
1.4
the third applicant has a reasonable suspicion that the first
respondent was bias in favour of the second respondent.
7.
The applicants contended that in the circumstances the decision to
award the tender to the second respondent ought to be reviewed
and
set aside on one or more of the following grounds:
7.1
There is a reasonable suspicion of bias in favour of second
respondent, relying on section 6(2) (a)(iii) of PAJA;
7.2
The action was procedurally unfair, relying on section 6(2)(c) of
PAJA;
7.3
The mandatory and material conclusions of the tender were not
complied with, relying on s 6(2) (b)(g) of PAJA;
7.4
The action was influenced by a material error of the law, relying on
s6 (2) (d) of PAJA;
7.5
The action was taken arbitrarily and capriciously, relying on s6 (2)
(e)(vi) of PAJA;
7.6
The decision was not rationally connected to the information before
the first respondent, relying on s s6 (2) (f) (ii) of PAJA.
[8]
The applicant is criticising the decision of the first respondent in
awarding the tender to the second respondent on the ground
that the
decision was biased and irrational. It is contended that, looking
individually or collectively at the grounds the decision
is assailed
upon, it becomes glaring that the first respondent was biased and
bent over backward to accommodate the second respondent
instead of
disqualifying its tender application when it should have, but
proceeded to award it the tender.
[9]
It was further submitted that the approach in assessments of the
tender documents submitted by the second respondent and those
submitted by the applicant differed markedly and raises a reasonable
perception of bias. It is contended that whereas the applicant
provided detailed information in its tender documents, the second
respondent had not. It was further submitted that the bias of
the
first respondent is reflected by the very fact that in the case of
the second respondent, the approach was to afford the latter
an
opportunity.
[10]
The opposition of these proceedings by the first respondent was
highly criticised by and on behalf of the applicant. In my
view, the
first respondent, whose decision it is sought to have reviewed, is
expected, as the responsible authority in the award
of tenders, and
obliged to defend its decision which is being assailed for whatever
reason. The extent and degree of its opposing
any court application
which seeks to reverse its decision, is nothing to raise eyebrows
about, nor cause to draw adverse conclusions
thereof.
[11]
The applicant who brought these proceedings bears the onus to
demonstrate on a balance of probabilities that the decision in
awarding the tender to the second respondent and its finding that Big
Five be the standby party was tainted by irregularity or
illegality
warranting the award to be set aside. Mere suspicion of bias does not
at all assist the applicant in the absence of
demonstrable evidence
evincing such bias. In casu I have not been persuaded that there was
any such bias calculated to disadvantage
the applicant and to enhance
the second applicant’s interest or that of Big Five.
[12]
In the matter of Moseme Road Construction CC and Others v King Civil
Engineering Contractors (Pty) Ltd and Another
1
the Supreme Court of Appeal held that: “[2] The award of
government tenders is governed by s217 (1) of the Constitution.
Awards must be made in accordance with a system that is fair,
equitable, transparent, competitive and costs-effective. But a
procurement
system may provide for categories of preference and for
the advancement of categories of persons (s 217 2)). National
legislation
must prescribe a framework for the implementation of any
preferential policy (s217(3) ).This is done by the Preferential
Procurement
Policy Framework Act 5 of 2000. It provides that organs
of State must determine their preferential procurement policy based
on
a points system. The importance of the points system is that
contracts must be awarded to the tenderer who scores the highest
points
unless objective criteria justify the award to another
tenderer (s2(1)(f).” This as much was met by the first
respondent.
[13]
It bears mentioning that the colossus and significant nature of the
tender in casu was well chronicled in the heads of argument
of the
applicant as set out herein below. The tender involved herein is of
significant importance and when completed, would most
definitely
bring great relief to various communities in a wide region. The
tender is for the construction of a welded steel bulk
water pipeline
between the De Hoop Dam and Steelport in Limpopo Province, and part
of the Olifants River Water Resources Development
Project (“ORWRDP-2”
or “the project”) located within the catchment area of
the Olifants River, Steelpoort
River and Sand River. The project is
divided into several phases:
13.1
Phase 2A involves the construction of the De Hoop Dam
which
is currently being undertaken but has not been completed and has a
proposed timeline June 2007 to March 2013;
13.2
Phase 2B involved the construction of the pipeline from Flag Boshielo
Dam to Pruissen near Mokopane and includes the construction
of a pump
station at the Flag Boshielo Dam, two additional pump stations en
route and a terminal reservoir at Pruissen and has
a proposed
timeline of January 2014 to December 2015; 9.1 Phase 2C involves the
construction of a pipeline from the De Hop Dam
to Steelpoort and has
a proposed timeline January 2012 to December 2013;
9.2
Phase 2D involves the construction of a pipeline from Steelpoort to
Groothoek and includes the construction of a terminal reservoir
at
Groothoek; also has a proposed timeline January 2012 to December
2013;
9.3
Phase 2E involves the construction of a pipeline from the Mooihoek to
the Havercraft Junction and has a proposed timeline January
2014 to
December 2015;
9.4
Phase 2F involves the construction of a pipeline from Havercraft
Junction to Olifantspoort and includes surge pressure structures
the
and has a proposed timeline January 2014 to December 2015;
9.5
Phase G will be at a later stage for augmentation once project
completed
9.6
Phase 2H involves the incorporation of the existing Lebalelo
infrastructure into the project, and includes cross connections
with
the adjacent new pipes which have been
constructed
during Phase 2C and 2D to be incorporated in 2013.
[14]
It is common cause that on 9 June 2004 the Cabinet decided to proceed
with the project in terms of the Memorandum to Cabinet
No. 2 of 2004.
The project was included in the Government’s Programme of
Action for 2006 in pursuit of achieving the goals
for supplying basic
water services to support the growth and development strategy,
particularly mining, of the Limpopo Province,
to facilitate
investment in the mining sector with associated growth opportunities
in support of the accelerated and shared growth
initiative of South
Africa whilst providing an anchor project for the development of the
mining industry.
[15]
It was submitted on behalf of the first applicant that the review is
an exercise in futility because: it is not just and equitable,
in the
circumstances, to set aside the award of the tender to the second
applicant. The project is far advanced to justify either
a fresh
tender process or introduction of a new contractor in the form of the
applicant. To do so, would invariably result in the
delay of the
project with concomitant astronomical costs, and prejudice the first
applicant, either in having to pay for escalated
costs for steel, and
or double payment for the new contractors and the incurred costs of
the second applicant and potential loss.
The delay would be
prejudicial to the affected communities who are without water
services.
[16]
The question of setting aside is a matter of the discretion of the
Court
2
.
The Court should have regard to the circumstances of the case and the
importance of the project not only to the parties involved
in the
dispute but the overall best interest of the public. Where there is
credible evidence of fraud, dishonesty and corruption
in the
procurement of the tender or the award thereof, setting aside of the
tender should follow; vide South African Post Office
v De Lacy and
Another.
3
A careful scrutiny of the voluminous documents that were placed
before this court does not reveal any corrupt or dishonest conduct
on
the part of any of the role players in casu, which conduct could have
justified a setting aside of the award.
[17]
The project is geared, in my view, in accelerating the eradication of
the legacy of apartheid manifesting itself in vast rural
areas
occupied by the majority of the populace, which is still without
water infrastructure and sanitation. It is geared in eventually
improving the quality of life of the wretched communities that do not
enjoy a better quality of life as a result of the lack of
access to
the basic necessities of life,
4
including water which is a constitutionally entrenched commodity.
5
This as much was conceded by the applicant
6
.
In my view, the premium of accelerating the attainment of the ethos
encapsulated in the Preamble and the Bill of Rights is fundamental
and we dare not delay these because of warring commercial interests,
some of which do not necessarily advance Black Economic and
Skills
development, if not to perpetuate the inequality of pre-1994.
[18]
Setting aside would, in my view, delay this project and have
catastrophic financial consequences to the first respondent in
having
to start the tender process de novo. The applicant has conceded that
the project is far advanced.
7
This as much can also be gleaned from the photographs attached to the
supplementary affidavit of the respondent
8
.
Huge amounts running into several hundred millions have already been
expended, so far; vide Millennium Waste Management (Pty)
v
Chairperson, Tender Board: Limpopo Province and Others v King Civil
Engineering Contractors (Pty) Ltd and Another
9
What further militates against setting aside is the potential
escalated costs of completing the entire project, this as much was
conceded by the applicant in its replying affidavit at paginated page
1698 Para 136. 1. This was recognised by Fabricius J in the
urgent
application brought by the applicant against the first respondent in
casu (annexure CP2 P102 para 10). I am of the view
that setting aside
of this project would not be in the best interest of the public; vide
Millennium Waste Management (Pty) Ltd
v Chairperson of the Tender
Board; Limpopo Province and Others;
10
Minister of Environmental Affairs & Tourism v Phambili
Fisheries
11
;
Allpay Consolidated Investment v CEO, SA Social Security.
12
[19]
The applicant further contended that in the event this Court were to
set aside the award of the tender to the second respondent,
and the
finding of Big Five as “standby” then the court should
award the tender to the applicant. In my view, this
submission cannot
prevail for the reason that it is not the function of the Courts to
grant orders which fall within the competency
and expertise of a
particular board, in casu, the first respondent; vide Darson
Construction (Pty) Ltd v City of Cape Town,
13
Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and
Others.
14
[20]
I am of the view that this application should fail only on the
aforesaid basis, without the need to traverse the rest of the
other
points raised by the parties.
[21]
Assuming that I am wrong in the above stated views and conclusion,
which is not conceded, I am of the view that the application
should
still fail on the merits for a singular reason, namely failure to
meet the skill’s developmental threshold, as was
required by
the tender.
[22]
In my view, through the process of tenders, it is also a means by the
Government of ensuring that there is a genuine and meaningful
skills
transfer and development among the formerly disenfranchised and
disadvantaged communities. I am of the view, that those
who seek to
procure financial benefits through the tender process, but found
lacking in meeting the skills transfer and development
requirements,
the Courts should not readily come to their rescue, when their
tenders are rejected for that reason, as in casu.
The consideration
of whether the skills transfer and development requirement has been
met is also a discretionary consideration
in the hands of the
administrative officer and cannot be interfered with on review.
15
Where there is comparison, then the qualitative value aspect should
take precedent.
[23]
The applicant’s tender was found to be non-responsive in
various respects
16
.
Its proposed type of internship, to provide welders, plumber general
construction and electricians; bursaries schemes for FET
College and
or Universities of Technology that offer Civil Engineering were found
not to be mentorship driven. Indeed, the applicant’s
internship
was not advancing their intended recipients to be registered as
professionals. The applicant also did not indicate that
it would
remunerate these candidates. The applicant merely offered to provide
practical training to students registered at FET
College and or
Universities of Technology that offer Civil Engineering as a subject.
The applicant’s tender in this regard
was found by the first
respondent not to be responsive. The applicant’s tender was
also found was also found to be non- responsive
for the reason that
it allocated less percentages than the minimum percentages required
in various aspects, inter alia, in respect
of black women owned
enterprise (BWOE); black women owned local enterprise (BWOLE).
17
[24]
On the other hand the second respondent and Group Five in respect of
the skills development requirement did not pitch their
bar low, but
higher in that they indicated that they were to provide University
Engineers graduates. It needs no stretch of imagination
that engineer
graduates compared to Techno- college students are qualitatively and
preferentially better than the latter. In my
view, the applicant’s
commitment to genuine skills transfer and development of the formerly
disenfranchised communities oft
referred to as formerly
disadvantaged, falls short, to say the least. The decision of the
first respondent that the applicant’s
tender was non-responsive
as indicated herein above is a value judgment, which cannot be offset
by this Court.
18
I am therefore of the view that the applicant’s tender was
correctly found to be non- responsive and it had, only on this
ground
to fail. Consequently, in my view, the application for review, must
for the above reasons fail.
[25]
In the result the application is dismissed with costs including the
costs of two counsels.
N.M.MAVUNDLA
Date
of Hearing: 25-28/02/2013
Date
of Judgment:19 / 07 / 2013
APPLICANTS’
ATTORNEYS: DU TOIT MCDONALD INC
APPLICANTS’
ADVOCATE : MR. P. DANIELS SC, with
APPLICANTS’ADVOCATE
:
ADV T. PRINSLOO (Ms.)
1ST
RESPONDENT’S ATT : RUDOLPH, BERNSTEIN &
ASSASSOCIATES
1ST
RESPONDENT’S ADV : MR. RAFIK BHANA SC, with
ADV.
I. GOODMAN (Ms)
1
2010
(4) SA 359 (SCA) at 361F-H.
2
Oudekraal
Estates (Pty) Ltd
v
City
of Cape Town and Others 2004 (6) SA 222 (SCA) at 246B-D(para
[36];Bengwenyama Minerals (Pty) Ltd and Others
v
Genorah Resources 9Pty) Ltd and Others 2011 (4) SA 113
(CC) at para 84-85.
3
2009
(5) SA 255 (SCA) at 260G-I para [14].
4
Vide
Mazibuko v City of Johannesburg 2010 (4) SA 1 (SCA) at 4C et 20B
5
S27(l)(b)
of The Constitution of the Republic of South Africa, Act 108 of
1996.
6
Vide,
inter alia,
paginated
page
1673
para
87.1
of
the replying affidavit.
7
Vide
paginated page 60 para 139 of the founding affidavit.
8
Vide paginated pages 1783-1804.
9
2010
(4) SA 359 (SCA) at para 21.
10
2008 (2) SA 481 (SCA) at 490C-D.
[also reported at [2008] 2 ALLSA 145 (SCA)—Ed],
11
2003
(6) SA 407 at 430[46]-[53]- H.
12
2013
(2) ALL SA 501 (SCA) at 506.
13
2007
(4) SA 488 (CPD ) at 503B-D.
14
2004
(4) SA 490 (CC)
at
para
46-50.
15
Vide
Hira and Another v Booysen and Another
1992 (4) SA 69 (A) at 93-94 read with
SA
Defence and AID Fund V Minister of Justice
1967 (1) SA 31 (C) at 34-35.
16
Paginated
page 1525—1526.
17
Paginated
pagel525.
18
Vide
Darson Construction (Pty) Ltd
v
City of Cape Town (supra).