Brief Summary

Tender — Administrative action — Award of tender — Applicants sought an interim interdict to prevent the first respondent from allowing the second and third respondents to proceed with a construction contract pending review of the tender award decision — Applicants’ tender was disqualified despite being the lowest and highest-scoring tender due to a misinterpretation of eligibility criteria — Court found that the applicants established urgency and a prima facie right to relief, considering the requirements for an interim interdict, including the balance of convenience and potential irreparable harm.

Comprehensive Summary

Summary of Judgment

1. Introduction

The matter concerned an urgent application for an interim interdict. The applicants sought temporary relief pending the final determination of intended review proceedings in which they would seek to have the award of a provincial road-construction tender reviewed and set aside.

The parties were King Civil Engineering Contractors (Pty) Ltd and Ludonga Construction CC (as applicants, operating as a joint venture tenderer) on the one hand, and the Member of the Executive Council for the Department of Public Transport, Roads and Works of the Gauteng Provincial Government (the first respondent, an organ of state responsible for the tender process) together with Moseme Road Construction CC and Lonerock Construction (Pty) Ltd (the second and third respondents, as the successful tenderers) on the other hand.

Procedurally, the applicants moved on an urgent basis because they contended they only became aware of the reasons for the disqualification of their tender on 17 March 2009, issued the application on 24 March 2009, and it was heard on 31 March 2009. The interim interdict was sought to halt further performance under Contract No. 1514/10/2008 pending review proceedings aimed at setting aside the award decision.

The general subject-matter of the dispute was public procurement in the context of a government road construction tender, specifically the lawfulness and fairness of disqualifying the applicants’ tender and awarding the contract to other tenderers, and whether the circumstances justified interim relief restraining performance under an already-concluded public contract.

2. Material Facts

The court recorded that the material facts were largely common cause or undisputed.

On or about 14 November 2008, the Gauteng Department of Public Transport, Roads and Works published a Tender Notice and Invitation to Tender in the media for the construction of Beyers Naudé Drive to a dual carriageway between Peter Road and Juice Road. The published notice described evaluation criteria including a CIDB grading requirement expressed as “CIBD level 8CE PE or 9CE 90:10 point system”, together with a points breakdown allocating points for price, functionality, and preference/RDP goals.

At the relevant time, CIDB grading operated as a prerequisite for contractors tendering for state work. The court accepted as common cause that a contractor’s grading related to matters such as capital, turnover, and technical ability, and that level 9CE was the highest category. The first applicant was graded 8CE, while the second and third respondents were graded 9CE. The dispute emerged against the background that, in ordinary circumstances, 8CE contractors would not tender for contracts exceeding R100 million, subject to an exception for 8CE PE contractors.

The first applicant obtained the tender documents on 17 November 2008. The tender documents, incorporating a Tender Notice and Invitation to Tender, differed from the media publication: they referred to a “CIBD level 8CE or 9CE 90:10 point system”, rather than “8CE PE or 9CE”. At a compulsory site meeting on 21 November 2008, the first applicant’s managing director queried whether an 8CE contractor qualified to bid and was informed that contractors with 8CE or higher were eligible. An addendum issued on 2 December 2008 indicated that only contractors registered as 8CE or 7CE PE or higher should tender.

The applicants formed a joint venture and submitted a tender. The Department received seven tenders. The tender evaluation undertaken by consultants recommended that the contract be awarded to the applicants: their tender was the lowest acceptable tender amount and scored the highest points (tendered at R112,074,252.34, scoring 82.8 points). However, when the matter served before the Department’s Departmental Acquisition Council (DAC), the DAC took a different view, disqualified the applicants’ tender, and awarded the contract to the second and third respondents (tendered at R116,280,366.64, scoring 77.49 points). The second and third respondents’ 9CE grading matched the grading requirement as it appeared in the media advertisement. The acceptance of their tender was confirmed by letter dated 9 February 2009, with a contract period of 87 weeks, and the contract was concluded on 18 February 2009.

The first respondent’s evidence (through the DAC chairperson and the Director of Supply Chain Management) explained that the project had initially been budgeted at about R100 million, but that Supply Chain Management considered it could exceed that figure and therefore changed the published grading requirement to 8CE PE or 9CE. The tender documents ought to have been amended to reflect the published requirement, but this was inadvertently not done. The published grading requirement was treated as a minimum qualifying criterion serving to inform prospective tenderers whether they qualified to tender.

In consequence, the DAC regarded acceptance of the applicants’ 8CE tender as unfair to other 8CE contractors who were excluded by the published advertisement and may not have attended the site meeting (and thus would not have known of the later, lower stated criterion). The DAC described the award to the applicants, in those circumstances, as implicating unfair competition, and disqualified their tender for that reason.

As to the position at the time of the urgent application, it was common cause that the roadworks were urgent, with an 18-month completion timeline and an indication that a major section needed to be completed before the 2010 World Cup. It was also undisputed that performance under the contract had already materially commenced: employees had been employed or relocated, site establishment and preliminary earthworks had begun, and further contracts had been concluded in execution of the main contract. The second and third respondents were described as “innocent tenderers”, and the court accepted that the undisputed facts supported that characterisation.

3. Legal Issues

The central legal question was whether the applicants had satisfied the requirements for an interim interdict restraining further performance under the tender contract pending the institution and finalisation of review proceedings aimed at setting aside the award decision.

This required the court to determine, on the papers and within the constraints applicable to interim relief, whether the applicants had established a prima facie right (even if open to some doubt), whether there was a well-grounded apprehension of irreparable harm, whether there was no other satisfactory remedy, and whether the balance of convenience favoured interim relief.

The dispute primarily concerned the application of law to fact and the court’s value judgment/discretion inherent in interim relief, particularly in weighing competing prejudice and evaluating whether the tender process retained the constitutional attribute of fairness. While there were elements of contestation as to the implications of the discrepancy between the published invitation and the tender documents/addendum/site-meeting statements, the court treated the relevant factual foundation as largely undisputed and focused on the legal consequences for interim relief.

4. Court’s Reasoning

The court began by confirming that urgency was established, given the applicants’ asserted date of knowledge of the reasons for disqualification and the prompt launching and enrolment of the application.

The court then set out the governing principles for interim interdicts. It relied on Eriksen Motors (Welkom) Ltd v Protea Motors, Warrenton, and Another 1973 (3) SA 685 (A) (with reference to Setlogelo v Setlogelo 1914 AD 221) for the proposition that interim interdicts are an extraordinary remedy within the court’s discretion, requiring a prima facie right (open to some doubt), apprehension of irreparable harm, absence of other remedy, and a balance-of-convenience enquiry. It also adopted the approach to disputes of fact and prima facie right from Webster v Mitchell 1948 (1) SA 1186 (W) as qualified in Gool v Minister of Justice and Another 1955 (2) SA 682 (C).

Against that framework, the court situated the dispute within the constitutional and administrative-law context of public procurement. It held that the first respondent, as an organ of state, was bound by section 217 of the Constitution to procure through a process that is fair, equitable, transparent, competitive and cost-effective. Tender processes constituted administrative action and were therefore subject to section 33 of the Constitution and the Promotion of Administrative Justice Act 3 of 2000 (PAJA), together with the principle of legality, as reflected in the cited authorities.

The applicants’ case depended substantially on the Preferential Procurement Policy Framework Act 5 of 2000 (PPPFA) and the notion of an “acceptable tender”, contending that their tender complied with the tender document specifications, scored the highest points, and was the lowest acceptable tender, so that disqualification and award to a lower-scoring tenderer was unlawful or unreasonable. The applicants further characterised the DAC’s disqualification as unreasonable, arbitrary, and legally erroneous, and not rationally connected to the information before it.

The court considered the first respondent’s explanation for the disqualification. It accepted that the published tender invitation in the media stipulated a minimum grading of 8CE PE or 9CE and thus excluded other 8CE contractors. The DAC’s view was that awarding the tender to an 8CE contractor (the first applicant) would be unfair to those excluded contractors, particularly those who did not attend the site meeting and therefore would not have been aware of an alleged “lowering” of the qualifying criterion. The court aligned this with the constitutional requirement of fairness, referring to authority emphasising the centrality of fair process in tender adjudication and stating that acceptance of the applicants’ tender would have caused the tender process to lose the attribute of fairness.

In evaluating the applicants’ prospects, the court did not finally decide the merits of the intended review. It accepted that it might ultimately be held in review proceedings that fairness required the tender process to be started afresh when the irregularities became apparent. For purposes of interim relief, it was therefore prepared to accept that the applicants had established a prima facie right.

However, the court emphasised that the applicants’ prima facie right was open to some doubt. It noted the respondents’ reliance on the rationality threshold for the exercise of public power (as articulated in Pharmaceutical Manufacturers Association of South Africa: In re Ex parte President of the Republic of South Africa 2000 (2) SA 614 (CC)) and recorded that the decision to disqualify and award to the second and third respondents appeared to be founded on reasonable and justifiable grounds and was objectively rational, albeit ultimately a matter for determination in the review proceedings. It also considered that the applicants’ managing director had been aware of the discrepancy between the published criteria and the tender documents, which explained his question at the site meeting; and it recorded that the Department’s assertion that the official at the site meeting lacked authority to lawfully lower the qualification criterion after advertisement was not disputed.

The court then addressed the remaining interim interdict requirements. It accepted, without deciding, that the applicants had met the requirements of no other satisfactory remedy and an actual or well-grounded apprehension of irreparable loss if interim relief were refused.

The decisive consideration was the balance of convenience, assessed in light of the interdict principles and the remedial framework under section 8 of PAJA, which requires relief that is just and equitable. The court stressed the practical consequences of halting performance: the contract period and urgency of the works, the potential duration of review and possible appeal proceedings, and the fact that the contract had already been concluded and acted upon, with substantial mobilisation and commencement of works by the second and third respondents, who were treated as innocent tenderers on the undisputed facts.

In contrast, the prejudice asserted by the applicants—equipment earmarked and personnel being held available—was weighed against the fact that they had never been awarded the contract, and that they remained free to institute review proceedings regardless of whether the interim interdict was granted. The court also noted that the reviewing court would be empowered to craft just and equitable relief in all the circumstances, referencing the then-recent authority dealing with PAJA remedies in a tender context.

Having weighed these considerations, the court concluded that the balance of convenience did not support granting interim relief.

5. Outcome and Relief

The application for an interim interdict was dismissed.

The applicants were ordered to pay the first respondent’s costs, jointly and severally, including the costs of two counsel, one being senior counsel.

The applicants were also ordered to pay the second and third respondents’ costs, jointly and severally.

Cases Cited

Eriksen Motors (Welkom) Ltd v Protea Motors, Warrenton, and Another 1973 (3) SA 685 (A)

Setlogelo v Setlogelo 1914 AD 221

Webster v Mitchell 1948 (1) SA 1186 (W)

Gool v Minister of Justice and Another 1955 (2) SA 682 (C)

Logbro Properties CC v Bedderson NO and Others 2003 (2) SA 460 (SCA)

Millenium Waste Management v Chairperson, Tender Board 2008 (2) SA 481 (SCA)

Chairperson, STC and Others v JFE Sapela Electronics (Pty) Ltd and Others 2008 (2) SA 638 (SCA)

Minister of health and Another NO v New Clicks South Africa (Pty) Ltd 2006 (2) SA 311 (CC)

Affordable Medicines Trust and Others v Minister of Health and others [2005] ZACC 3; 2006 (3) SA 247 (CC)

The New Reclamation Group (Pty) Ltd v Eskom Holdings Ltd & Kwanda Ferro-Alloy African Resources (Pty) Ltd (WLD Case No. 07/27391, delivered on 14 May 2008) (unreported)

Metro Projects CC and Another v Klerksdorp Local Municipality and Others 2004 (1) SA 16 (SCA)

Pharmaceutical Manufacturers Association of South Africa: In re Ex parte President of the Republic of South Africa 2000 (2) SA 614 (CC)

Eskom Holdings Ltd v The New Reclamation Group (Pty) Ltd (358/08) [2009] ZASCA 8 (13 March 2009)

Legislation Cited

Constitution of the Republic of South Africa 108 of 1996, section 217; section 33

Promotion of Administrative Justice Act 3 of 2000

Preferential Procurement Policy Framework Act 5 of 2000

Preferential Procurement Regulations, 2001, regulations 4(4), 8(8), and 8(9)

Construction Industry Development Board Act 28 of 2000

Black Economic Empowerment Act, No 53 of 2003

Employment Equity Act, No 55 of 1988 (as referenced in the tender notice)

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that the applicants established urgency and, for purposes of interim relief, demonstrated a prima facie right, but that this right was open to some doubt given the apparent rational and fairness-based basis for the DAC’s disqualification decision and the surrounding procurement context.

The court accepted, without deciding, that the applicants satisfied the requirements of a lack of other satisfactory remedy and a well-grounded apprehension of irreparable harm. However, the court held that the balance of convenience did not favour interim relief, particularly because the contract had already been concluded and substantially implemented, the project was urgent, the successful tenderers were treated as innocent tenderers on the undisputed facts, and the applicants retained the ability to pursue review relief with the reviewing court empowered to craft just and equitable relief under PAJA.

Accordingly, the interim interdict was refused and the application dismissed with adverse costs orders against the applicants.

LEGAL PRINCIPLES

The judgment applied the orthodox requirements for an interim interdict pending final relief, namely a prima facie right (even if open to some doubt), a well-grounded apprehension of irreparable harm, the absence of another satisfactory remedy, and a discretionary assessment of the balance of convenience, with these considerations being interrelated and evaluated holistically.

In determining whether a prima facie right was established on motion papers where disputes might arise, the judgment applied the approach that the court considers the applicant’s version together with those respondent facts that cannot be disputed, and then assesses whether the applicant should obtain final relief at trial/review on those facts, recognising that serious doubt may justify refusing interim relief.

The judgment reaffirmed that public procurement by an organ of state is constrained by constitutional procurement standards, including the requirement of fairness under section 217, and that tender adjudication constitutes administrative action subject to PAJA and legality review.

The judgment applied the principle that the exercise of public power must satisfy a minimum threshold of rationality, and that a court may not substitute its preference for that of the empowered decision-maker where the decision is objectively rational, while recognising that the ultimate legality of the decision is a matter for review proceedings.

In considering interim relief affecting an ongoing tender contract, the judgment treated practical implementation, urgency of public works, and the position of “innocent tenderers” as central to the balance of convenience, and situated that assessment alongside PAJA’s remedial requirement that any order be just and equitable in the circumstances.

King Civil Engineering Contractors (Pty) Ltd and Another v Member of the Executive Council for the Department of Public Transport, Roads and Works of the Gauteng Provincial Government and Others (2009/12600) [2009] ZAGPJHC 102 (2 April 2009)