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[2012] ZAECMHC 10
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Alexander Maintance and Electrical Services CC and Another v Nyandeni Local Municipality and Another (2896/11) [2012] ZAECMHC 10 (21 June 2012)
IN THE HIGH COURT OF SOUTH AFRICA
EASTERN CAPE HIGH COURT: MTHATHA
CASE NO: 2896/11
Heard on: 31/05/12
Delivered on: 21/06/12
In the matter between:
ALEXANDER MAINTENANCE AND
ELECTRICAL SERVICES CC
….....................................................
First
Applicant
SUPERFECTA TRADING 426 CC
….........................................
Second
Applicant
and
NYANDENI LOCAL MUNICIPALITY
…...................................
First
Respondent
QHAMA AND QHAWE CIVILS CC
…...................................
Second
Respondent
XESIBE CONSTRUCTION CC
…..............................................
Third
Respondent
_____________________________________________________________
JUDGMENT
____________________________________________________________
NHLANGULELA J:
[1] On 04 April 2011 Mageza AJ granted an order under
case No. 726/2011,
inter alia
, interdicting the first
respondent from taking any further steps in connection with the
tender contract (number MIG/EC2018/RST/10/11)
for the construction of
access road between Nothintsila and Mvilo localities. In this present
application a similar interdict is
sought against the second and
third respondents. It is not in dispute that the first respondent has
complied with the interdict.
As a result it did not become necessary
for the interdict as contained in Part A of the Notice of Motion in
this matter to be argued
when the matter served before me on 31 May
2012. A need for the interdict was conceded by the respondents.
Consequently, both parties
were content with addressing the Court
only on the relief as sought by the applicants that the decision of
the first respondent
awarding the tender to the second and third
respondents on 15 July 2011 be reviewed and set aside; and that, if
the applicants
are successful, the tender be awarded to it by the
Court. In the alternative, the applicants seek an order that the
award of the
tender contract be remitted back to the first respondent
for a fresh decision to be made.
[2] A historical background of this case is that in late
2010 the applicants advertised a public tender for the construction
of
a road between Nothintsila to Mvilo Access Road at the price of R5
676 652,80. The applicants, the second and third respondents,
as a
joint venture, as well as other interested contractors filed their
competing bids. On 14 January 2011, and after ten bidders
had been
considered, the first respondent awarded the contract to the second
and third respondents at R5 480 647,76. Aggrieved
by such outcome the
applicants applied for a review of that decision under Case No.
250/2011. On 18 February 2011, the application
served before Alkema J
who granted an order in the following terms:
“1. The decision of the municipal manager of the third
respondent (
Nyandeni Local Municipality
) to award the contract
to the first respondent be and is hereby reviewed and set aside.
2. The award of the contract is remitted back to the third respondent
(Nyandeni Local Municipality)
for a fresh decision.
3. The costs of the interdict and the costs of the review
applications be paid by the third respondent
(Nyandeni Local
Municipality).
[3] The first respondent was the third respondent in
Case No. 250/2011, the second and third respondents being first and
second
respondents respectively. When the matter served before me the
arguments advanced would fall on the meaning of the term: “the
award of the contract” which appears in paragraphs 1 and 2 of
the order by Alkema J. I will revert to this later on in this
judgment.
[4] It appears from the papers that pursuant to the
order of 18 February 2011 the first respondent (the respondent)
re-advertised
the tender contract in an apparent attempt to comply
with the order that the award of the contract should be remitted for
a fresh
decision. The advert provoked the bringing of a second
application for an interdict. Mageza AJ entertained that application
under
Case No. 726/2011 on 04 April 2011. He granted an order in the
following terms:
“1. The matter be and is hereby treated as urgent;
2. The decision of Respondent to call for re-tenders for the contract
for the construction of the Nothintsila to Mvilo Access Road,
which
invitation to re-tender was advertised in the Daily Dispatch on 16
March 2011 is hereby reviewed and set aside;
3. The Respondent is interdicted from taking any further steps in
connection with the contract for the construction of the Nothintsila
to Mvilo Access Road arising from the advertisement issued by the
Respondent and contained in the Daily Dispatch dated 16 March
2011;
4. Respondent is hereby directed to give effect to the Order of this
Court dated 18 February 2011 under case number 250/2011, that
is, to
make a fresh decision on the award of the contract.
5. Respondent is to pay the costs of this application.”
[5] Paragraph 4 of the order by Mageza AJ has a direct
bearing on the present application as well in that the respondent
was, in
essence, directed to comply with the earlier order that it
must make a fresh decision on the award of the contract, and without
involving new contractors.
[6] In this application the respondent re-considered the
contract on 15 July 2011 and again awarded it in favour of the second
and
third respondents (the respondents). As the unsuccessful parties,
the applicants bring this application on review as they are not
satisfied with the administrative procedures followed by the
respondent in awarding the contract to the respondents. The principal
complaint raised against the decision of the respondent is that the
contract is irregular to the extent that the respondent
erred
in considering a revised scope of the contract instead of an original
contract as earlier advertised and presented to it by ten
contractors
on 14 January 2011.
Mr Paterson SC
, counsel who appeared for
the applicants, argued that the consideration of a revised scope of
the contract constitutes non-compliance
with the order by Alkema J
and it is, consequently, liable to be reviewed and set aside. The
upshot of the argument is that the
respondent should have considered
the tender based on tender number MIG/EC2018/RST/10/11 as originally
advertised and adjudicated
upon on 14 January 2011 regardless of
performance of a portion thereof by the respondents.
[7] The applicants allege in the founding affidavit that
the respondents’ tender was not responsive as the requisite tax
certificate
submitted to the first respondent was not valid. They
also state that the first respondent
erred
in regarding their
tender as being not financially viable.
[8] The report compiled by the Adjudication Bid
Committee of the first respondent on 14 July 2011 and used to
evaluate the applicants’
bid forms the basis for review. It
shows that at a meeting of the tenderers and the respondent held on
15 April 2011 in the absence
of the applicants, the old rates quoted
in the original schedule of quantities had to be validated by
extension for 90 days starting
from 15 April 2011 and were used to
evaluate the tenders. The scope of work already performed by the
respondents prior to 18 February
2011 was quantified and deducted
from the original scope of work to ascertain the available budget and
new prices of tenders. Upon
evaluation those calculations left the
applicants with a higher tender price of R4 176 275,98 and lower
points at 81,95 as compared
with lower tender price at R3 878 343,00
and higher points at 94 for the respondents. Meanwhile the budget was
reduced from R5
676 652,80 to R4 074 390,09. The first respondent
then evaluated financial viability using a 5% variance requirement in
terms of
the Supply Chain Management (SCM) policy, for each tenderer
to ascertain if at the tender price as quoted each of them would be
able to complete the tender if appointed. It was found that the
applicants fell outside the 5% variation, and that the respondents
fell within the range of 5%. On these scores the committee concluded
that the respondents were successful bidders for the award
of the
tender, but subject to tax status verification with SARS within 7
days from 15 July 2011.
[9] The financial officer of the respondent had the
following to say with regard to the approach adopted by the
respondent in evaluating
the tender on 14 January 2011.
“9.7 The first respondent could not ignore the work already
completed by the second and third respondents and the fact that
payments were made and that only a portion of the original budget was
available. It was impossible to reconsider at the original
tenders
for the complete works and to appoint a tenderer at the original
price tendered. The reason being simple(sic) that a portion
of the
work had already been completed and only limited funds were available
to complete the project. If a tenderer was appointed
as the full
price tendered such entity would have had the advantage of 30% of the
contract already been completed without such
entity spending one
minute to complete the work.”
[10] In his submission towards the grant of review
Mr
Paterson
contended that the decision of the respondent was
affected by misdirections in that the first respondent
erred
in separating the portion of work performed by a successful tenderer
from the original scope of work because in terms of the order
of
Alkema J the performance of the tender contact was declared as
unlawful.
Mr Botma
, who appeared on behalf of the respondent,
submitted that on the authority of
Oudekraal And Others
2004
(6) SA 222
(SCA) at paras. [26] and [31] the consequences of part
performance of the tender should be regarded in law as lawful despite
the
order of unlawfulness.
[11] In my view the case of
Oudekraal, supra
,
does not support the respondent’s case. The following was said
by the Supreme Court of Appeal in
Oudekraal
at paragraphs 26
and 27:
“But the question that arises is what consequences follow from
the conclusion that the Administrator acted unlawfully. Is
the
permission that was granted by the Administrator simply to be
disregarded as if it had never existed? In other words, was the
Cape
Metropolitan Council entitled to disregard the Administrator’s
approval and all its consequences merely because it believed
that
they were invalid provided that its belief was correct? In our view,
it was not. Until the Administrator’s approval
(and thus also
the consequences of the approval) is set aside by a court in
proceedings for judicial review it exists in fact and
it has legal
consequences that cannot simply be overlooked. The proper functioning
of a modern State would be considerably compromised
if all
administrative acts could be given effect to or ignored depending
upon the view the subject takes of the validity of the
act in
question. No doubt it is for this reason that our law has always
recognized that even an unlawful administrative act is
capable of
producing legally valid consequences for so long as the unlawful act
is not set aside.
The apparent anomaly (that an unlawful act can produce legally
effective consequences) is sometimes attributed to the effect of
a
presumption that administrative acts are valid, which is explained as
follows by Lawrence Baxter
Administrative Law
at 355:
‘There exists an evidential presumption of validity expresses
by the maxim
omnia praesumuntur rite esse acta;
and until the
act in question is found to be unlawful by a court, there is no
certainty that it is. Hence it is sometimes argued
that unlawful
administrative acts are “voidable” because they have to
be annulled.’”
[12] In this case there was no lawful administrative
action, the decision of the respondent dated 14 January 2011, in
place on 15
July 2011 as the order of Alkema J had already declared
that the award of the tender on 14 January 2011 was unlawful.
Similarly,
there could not have been a lawful award of a tender to
the respondents after 18 February 2011. It was on this background
that
Mr Paterson
argued that the respondent had no reason to
take into account the portion of the tender contract performed by the
respondents when
the contract was considered afresh on 14 July 2011.
In so far as the “awarding of the contract” is concerned,
the administrative
action which was declared unlawful on 18 February
2011, the facts of this case are distinguishable from those is
Oudekraal
where the administrative action had not yet been
declared unlawful when the Supreme Court of Appeal had to decide the
fate of the
consequences of the administrative action. Consequently,
there is no legal basis for the argument that the first respondent
was
correct in excluding the scope of the tender which had been
performed by the respondents.
[13] The performed portion argument was approached by
Mr
Botma
in a different way. He submitted that it was in the
interest of fairness to all the tenderers and the respondent to
exclude the
scope of work that had already been performed from the
fresh evaluation of the tender on 14 July 2011. He sought to anchor
this
submission on the case of
Logbro Properties CC v Bedderson
N.O. And Others
2003 (2) SA 460
(SCA) at para. [17], where it was
stated that tenderers were not entitled to a perfect public tender
process in a situation where
an administrator in repairing a
previously botched process takes changed circumstances into account.
The facts in
Logbro Properties
were that in 1997 the High
Court ordered the provincial tender committees to reconsider certain
tenders that the appellant and others
had submitted in 1995 to buy
certain properties. The reason for the order was that although the
successful tenderer scored highest
points for selection, it had not
complied with tender conditions. On reconsideration of the tender
anew in 1997 the province’s
assets committee took into account
new factors and circumstances, including the increase in property
values since 1995. In my view
the case of
Logbro Properties
does not offer assistance to the first respondent because its facts
are distinguishable from those of the present case in that
when the
present matter served before Alkema J, it was never ordered that the
tender be reconsidered anew. In so far as the order
made by Alkema J
on 18 February 2011 stands unchallenged by the respondent, I am bound
to give effect to it. To that extent a distinction
must be clearly
drawn between an authorized consideration of increased property
values by the assets committee in
Logbro Properties
and an
unauthorized exclusion of the portion of work performed by the
respondents in this case.
[14] The complaint that the respondents had not proved
to the first respondent that their tax affairs were in order is
another ground
for review. This ground is valid if one has regard to
the fact that nowhere in the answering affidavit, delivered on 02
December
2011, is an attempt made to explain what steps were taken on
the matter since 15 July 2011 when a conditional award of the tender
in favour of the respondents was made.
[15] It is indeed true that the adoption of a wrong
approach by the respondent in the re-evaluation of the tender was
prejudicial
to the applicants.
Mr Paterson
contended that the
low scores which were allocated to the appellants ultimately placed
them out of the 5% (-5,23) range for financial
viability unfairly.
Yet the applicants had previously been assessed within range and on
the lowest tender price when compared with
the respondents, including
other 8 competing tenderers based on the grounds.
[16] I find that based on the reasons which I have
already given above the decision awarding the contract to the
respondents on
15 July 2011 is unlawful, and falls to be set aside.
But that is not the end of the matter as the expanded nature of the
relief
sought by the applicants enjoins the Court to consider whether
to award the contract to the applicants or that it be remitted back
to the respondent to adjudicate it afresh. This involves an exercise
of judicial discretion which is vested in the court of review
in
terms of
s8
of the
Promotion of Administrative Justice Act 3of 2000
.
The Constitutional Court stated appositely (per Froneman J) in the
case of
Bengwenyama Minerals (Pty) Ltd v And Others v Genorah
Resources (Pty) Ltd And Others
2011 (4) 113 (CC) at 146E as
follows:
“This ‘generous jurisdiction’ in terms of
s8
of
PAJA provides for a wide range of just and equitable remedies,
including declaratory orders, orders setting aside the administrative
action, orders directing the administrator to act in an appropriate
manner, and orders prohibiting him or her from acting in a
particular
manner.”
[17] The exercise of discretion is particularly apposite
here if one has regard to the submission by
Mr Botma
that
after all has been said and done the Court ought to make an award of
the tender in accordance with a system that is fair,
equitable,
transparent, competitive and cost effective within the meaning of s
217 of the Constitution, read with
s 2(1)
of the
Preferential
Procurement Policy Framework Act 5 of 2000
which provides that
contracts must be awarded to the tenderer who scores the highest
points unless objective criteria justify the
award to another
tenderer. See:
Moseme Road Construction CC And Other v King Civil
Engineering Contractors (Pty) Ltd And Another
2010 (4) SA 359
(SCA) at para. [2].
[18] I proceed to deal with the question whether the
tender contract should be awarded by the Court to the applicants or
be remitted
back to the respondent to consider it afresh. The answer
to this question lies in the separation of powers between the courts
and
administrative authorities, and the overriding need for the
courts to be sensitive to the interests legitimately pursued by
administrative
bodies and the practical and financial constraints
under which they operate as stated in
Logbro Properties, supra,
at
para. [12]. The test for substitution of the decision by courts for
that of the administrator was stated in
Johannesburg City Council
v Administrator, Transvaal and Another
1969 (2) SA 72
(T) at
76D-G as follows:
“1. The ordinary cause is to refer back because the
Court is slow to assume a discretion which has by
statute been entrusted to another tribunal or
functionary.
2. The Court will depart from the ordinary course in
these circumstances:
(i) Where the end result is in any event a foregone
conclusion and it would merely be a waste of time to order the
tribunal or functionary to reconsider the matter. This applies more
particulary where much time has already unjustifiably been lost by an
applicant to whom time is in the circumstances valuable,
and the
further delay which would be caused by the reference back is
significant in the context.
(ii) Where the tribunal or functionary has exhibited bias or
incompetence to such a degree that it would be unfair to require the
applicant to submit to the same jurisdiction again.”
This statement was confirmed by the Constitutional Court
in
Premier, Mpumalanga And Another v Executive Committee,
Association of State-Aided Schools, Eastern Transvaal
1999 (2) SA
91
(CC).
[19] It was argued by
Mr Paterson
that the award of the tender to the applicants will not
present difficulties for this Court if the decision of 14 July 2011
has
been set aside as the Court would have to focus on the tender of
14 January 2011 when the full scope of the tender was evaluated
by
the BEC and BAC of the first respondent. He contended that since the
respondents did not oppose the
merits
of the application on 18 February 2011 the Court is at
large to consider the tender without being restricted by the portion
of work
performed by the respondents. As to the proper approach to
the portion of work that has been performed counsel referred to the
case of
Chairperson Standing Committee And
Others v JFE
Sapela Electronics (Pty) Ltd
And Others
2008(2) SA 638 (SCA), where the
following was stated at 649I:
“The order of the court a
quo,
if implemented, is likely
not only to be disruptive but also to give rise to a host
of problems not only in relation to a new tender process
but also in relation to the work to be performed.”
[20] In this case, counsel contended that although the
award of the contract to the respondents has been set aside the
situation
in this case is different from that in
Sapela, supra,
in that no attempts were made by the first respondent to oppose the
granting of the orders in cases 250/11 and 72/11.
[21]
Mr Paterson
submitted further that the
problems often arising from a delay in the finalization of review
proceedings as referred to by Jafta
JA, as he was then, in
Millenium
Waste Management (Pty) Ltd v Chairperson, Tender Board, Limpompo
Province And Others
2008, (2) SA 481
(SCA) at 493D, paragraph
[34] do not exist in this case because the performance of the tender
stopped in February 2011 before the
order in case number 250/11 was
issued and the nature, extent and cost of that performance has since
been determined by the first
respondent. And further, the principle
which is articulated in the case of
Moseme, supra,
give
remedies to a successful tenderer with regard to the portion of the
tender performed pursuant to a declaration of invalidity
of the award
of the tender to it. There Harms DP stated as follows at 366H-367A,
para. [20]:
“The setting aside of a contract has a number of consequences.
The first contractor may not be able to claim under the revoked
contract and be left with an enrichment claim, and the employer may
not have a claim for defective workmanship.”
Mr Paterson
then contended that the consequences
in this case are two-fold: the respondents have no claim under the
revoked contract and they
are left with an enrichment claim. An
allegation by the respondent that the applicants would effectively
become entitled to the
whole contract price if the full scope of work
is awarded to the applicants is one of the problems arising. To this
Mr Paterson
argued that the problem disappears if regard is
had to the fact that one of the terms of the contract is that a
successful tenderer
can only be entitled to be paid for work
performed which has been properly approved by the engineer and
calculated on the basis
of the schedule of quantities.
[22] It was argued strenuously that the contract must be
awarded to applicants because when the respondent awarded the
contract
to the respondents in January 2011the tender price of the
applicants was the lowest and the applicants were financially viable
when their tenderers were assessed against the SCM policy of the
respondent, the respondent had to assume powers which were not
provided for in clauses 4(4) and 29(5) of the SCM policy and depart
from the recommendations of the BEC and BAC that the applicants
were
suitable for an award of the contract. The respondent appointed the
respondents unilaterally, and without referring the matter
back to
the committees as prescribed in
s 4(4)
and informing the
Auditor-General, the Provincial Treasury and the National Treasury of
the reasons for deviating from the recommendations
of the Committees
as it was required to do so in terms of s 114(1) of the Finance
Management Act 56 of 2003. Yet the respondents
did not disqualify to
compete in the tender by reason that they did not have a valid tax
clearance certificate at the time of evaluation
of the tenders.
[23] Having made a concession before Alkema J that the
respondents’ tax affairs were not in order the first respondent
had
the audacity to consider the same persons in the next tender
without a valid tax certificate, and proceeded to award them the
tender.
Having been told by the court on 18 February 2011 that the
whole contract should be reconsidered the respondent acted against
that
order by revising the scope of the tender for the benefit of the
respondents, and to the prejudice of the applicants. It was also
submitted that the first respondent did not seem to be grappling with
the manner in which discretion is exercised in assessing
tenderers
for financial viability. The respondent was happy to disqualify the
applicants on the basis that their scores fell outside
the engineer’s
5% variation range without considering all the objective factors
having a bearing on financial capacity of
the applicant.
[24] I do not agree entirely with the applicants on the
concerns they have raised in an attempt to persuade the Court to
award the
tender to them rather than referring it back for a fresh
consideration. I doubt that those concerns meet the threshold of
circumstances
as required for the Court to substitute its decision
for that of the respondent. I do not regard the award of the tender
to the
applicants as a foregone conclusion. They scored high points
on 14 January 2011 and lower points on 14 July 2011 but on both
occasions
were not appointed. The submission that they were failed
due to incompetence on the part of the municipal manager of the
respondent
would be too simplistic an explanation to be given because
the same committees of the respondent which had found that the
applicants
were financially viable on 14 January 2011 found against
them on 14 January 2011. And it seems to me that an assessment of a
tender
for financial viability is a tricky aspect of the tender
process which would invariably require an input from the appointed
site
engineer. Here I do not have such an input. Neither do I have
the input from the committees. I neither have the requisite
equipment,
experience, access to sources of relevant information, nor
the expertise to make the right decision. See:
Gauteng Gambling
Board v Silverstar Development Ltd and Others
2005 (4) SA 67
(SCA) at para. [19]. Added to that is the fact that the rates for
costing the items in the schedule of quantities should have changed
due to delay already incurred in the implementation of the project.
Vital information which is necessary for resumption of the
tender has
been lost. Updating of information which is necessary for a just
consideration of the tender seems to me to be inevitable
at this
stage. The obvious increase in the total budged costs cannot be
ignored regardless of who is to blame for the delay. This
Court
cannot verify the tax affairs of the respondents because they have
todate not filed a report from the SARS. With all these
limitations
on the capacity of the Court to decide the tender a remedy of
awarding the contract by the Court as envisaged in s
8(i)(c)(ii) of
the PAJA cannot be made available to the applicants. A referral back
seems to me to be the prudent and proper course,
and it is fair to
both parties in this case. However, a blanket referral will not be
helpful to the parties in my view. I deal
with this in the paragraph
that follows.
[25] The alternative remedy of a referral back is
provided for in s 8(1)(c)(i) of the PAJA. The subsection permits a
referral back
with or without directions. This Court is empowered to
fashion any conditions as called for by the circumstances of a case.
Mr Botma’s
opening submission was that the situation of
the parties might have been different had the court on 18 February
2011 given guidelines
on how the respondent should reconsider the
tender afresh. In my view this submission is not without substance.
Despite the limitations
alluded to, I am of the opinion that an
attempt by the Court to issue some directions which to it seems
necessary should useful
in removing unnecessary obstacles on the path
towards full implementation of the order that will be granted.
[26] Counsel for the parties are in agreement that the
costs of the application should follow the result. The costs incurred
on
08 December 2011 will be treated in the same way. The scale of
costs to be paid was left with the Court to decide. In my opinion
punitive costs are undesirable for these proceedings. The arguments
advanced on behalf of the respondent, which were very helpful
for the
decision of the case, highlight the technical challenges, which are
unenviable, that faced the first respondent. I did
not at any stage
of these proceedings habour a feeling that the respondent was
mala
fide
either in the manner in which it conducted itself in the
proceedings or in the manner in which it handled the tender at
administrative
level both on 14 January and 14 July 2011. Had the
respondent been
mala fide
in the manner in which it
interpreted the order of 18 February 2011 the second court would have
been in a best position to mark
its displeasure by ordering the
respondent to pay costs on a punitive scale.
[27] In the result the following order shall issue:
1. That the decision of the Municipal Manager of the first
respondent awarding tender contract number MIG/EC2018/RST/10/11 to
the
second and third respondents be and is hereby reviewed 1. That
the decision of the Municipal Manager of the
first respondent awarding tender contract number
MIG/EC2018/RST/10/11 to the second and third
respondents be and is hereby reviewed and set aside.
2. That the award of tender contract number
MIG/EC2018/RST/10/11 be and is hereby remitted
to first respondent for a fresh decision to be made
subject to the following directions:
2.1. That the first respondent be and is hereby
directed to reconsider the tender contract
aforesaid in its original and full scope of
works as if no part of it has been performed.
2.2. That the rates applied on the items of the
bills of quantities filed by the tenderers
towards consideration of the bids before 14
January 2011 be updated in accordance
with increase of the market prices.
3. That only those tenderers who qualified during the
first tender process on 14 January 2011 shall
participate in the reconsideration of the tender as
aforesaid.
4. That the costs of both the
interim
interdict and
review application, including costs incurred on 08
December 2011, be paid by the first respondent.
______________________________
Z.M. NHLANGULELA
JUDGE OF THE HIGH COURT
Counsel for the applicant: Adv. T. M. Paterson SC : Adv.
T.J.M. Paterson SC
Instructed by : Messrs Abdo & Abdo Attorneys
c/o X.M. Petse Attorneys
MTHATHA
Counsel for the respondent: Adv. D.S. Botma
Instructed by : Keightley Attorneys
MTHATHA
9