Metro Projects CC and Another v Klerksdorp Local Municipality and Others (602/2002) [2003] ZASCA 91; [2004] 1 All SA 504 (SCA) (22 September 2003)

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[2003] ZASCA 91
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Metro Projects CC and Another v Klerksdorp Local Municipality and Others (602/2002) [2003] ZASCA 91; [2004] 1 All SA 504 (SCA); 2004 (1) SA 16 (SCA) (22 September 2003)

THE SUPREME COURT OF APPEAL OF SOUTH
AFRICA
REPORTABLE
Case no: 602/2002
In
the matter between
METRO PROJECTS
CC FIRST APPELLANT
AFRICAN
UNITY DEVELOPERS CC SECOND APPELLANT
and
KLERKSDORP
LOCAL MUNICIPALITY FIRST RESPONDENT
and
ELEVEN
OTHERS
Coram: ZULMAN,
FARLAM, NUGENT, CONRADIE and HEHER JJA
Heard:
5
SEPTEMBER 2003
Delivered: 22 SEPTEMBER
2003
Summary: Fairness
in tender procedures mandated by Local Government Transition Act and
Promotion of Administrative Justice Act –
procedure unfair where
wrong information on which to base award of tender given to mayoral
committee
_____________________________________________________________________
JUDGMENT
__________________________________________________________________
CONRADIE
JA:
[1]
The
appellants and the second to twelfth respondents tendered for the
development of 1 333 stands in a township known as Jouberton
extension 10 which lies within the jurisdiction of the first
respondent, a local municipality established under the
Local
Government Municipal Structures Act 117 of 1998
. On review the court
a quo
declined to uphold a contention by the appellants that
the award of the tender to the ninth respondent ought to be set aside
but
granted them leave to appeal to this court against the dismissal
of their application. The appellants (associates in a joint venture)
and the first respondent are the only parties before us.
[2]
The
first respondent had been given a grant amounting to R18 400 by the
Provincial Government of the North West Province for the development
of each of the stands. In the invitation to tender prospective
offerors were told that, apart from providing certain developmental
services, they were expected to attend to the construction and
handover of a top-structure (a house) on each of the stands. Each
tenderer was required to furnish a price breakdown and description of
the products and services to be provided by it. Accordingly
each of
the tenderers included in its tender a plan stating the floor area of
the house it proposed to build.
[3]
The
city civil engineer employed by the first respondent, Mr Nicolas Els,
analysed the tenders. He submitted to the committee charged
with
deciding on them a recommendation in tabular form. It consisted of
three columns, each divided into two sections to cater for
two types
of stand. The three columns are headed 'Tendered indirect cost',
'Amount available for top-structure' and 'Building area
of
top-structure.' These, quite clearly, were important features of each
tender. After indirect costs had been taken into account,
it was
possible to determine how much of the R18 400 remained for the
construction of the top-structure. That figure was inserted
in the
second column. In the third column was inserted the floor area of the
top-structure which each tenderer offered to build with
the money
available to it after the other developmental expenses had been met.
[4]
Among
the tenderers that indicated the size of the structure they offered
to build was the ninth respondent. The plan submitted with
its tender
indicated that it proposed building a structure of 30.2 sq m. This
compared poorly with the other tenderers. Four of them,
including the
appellants, proposed a house of 37 sq m or larger. Except for one
other tenderer none proposed a house as small as
that of the ninth
respondent. Nevertheless, Els recommended that the ninth respondent’s
tender be accepted. In the column dedicated
to the provision of the
floor area he inserted the following comment: 'the house size and
layout to be discussed with community'.
This comment misrepresented
the content of the ninth respondent's tender. The ninth respondent
had not tendered on the basis that
the extent and layout of the top
structure would later be settled between it and 'the community': its
tender, like the others, included
the size of the dwelling it
proposed to build.
[5]
Although
he later declared that his omission to state the floor area was an
error, Els at first defended his decision not to include
this
information in the case of the ninth respondent by saying that in the
scheme of the invitation to tender the floor area was
not an
important element and anyway, by the time he compiled his schedule,
the ninth respondent had advised him that it would be
prepared to
increase the size of its tendered house. Els’s schedule, however,
did not disclose the post-tender offer to increase
the floor area. It
stated that the house size was to be ‘discussed’ with the
‘community’ and gave no indication of the extent
to which the
ninth respondent would be disposed to concede any eventual demands of
the community (whose bargaining power as a non-party
to the contract
would be limited) for a larger house.
[6]
Els’s
omission to state any sort of floor area in the schedule did not go
unobserved. The city treasurer noticed it and tersely
commented:
‘Although the tender from Remmogo Property Developers [the ninth
respondent] has the biggest amount available for the
top-structure,
they do not provide Council with an indication of the size of the
top-structure, which makes it a bit risky. It is
recommended that
this be clarified with the company in advance.’
[7]
Els’s
recommendation then went to the Local Economic Development Marketing
and Procurement Committee ('the LED Committee') presided
over by Ms
Riani de Wet. This committee resolved at a meeting held on 16 May
2001 to hold the matter in abeyance until ‘all relevant
information’ had been obtained. Without the 'relevant information'
having been obtained, the tender recommendation made its way
to the
mayoral committee, the next level decision maker. This body on 18
June 2001 refused to deal with the tender until the track
record of
the ninth respondent and the floor area which it was to build had
been ascertained. The requirements of the mayoral committee
were
communicated to Els by De Wet (who was also a member of that
committee).
[8]
The
obvious and honest answer to the mayoral committee's query would have
been to take the requested information from the ninth respondent’s
tender plan and advise the committee that the schedule had not shown
a floor area for the ninth respondent because it intended improving
on its tender offer. This was not done. Instead Els wrote a report to
the committee to which was attached not the 30,2 sq m tender
plan but
a plan for a house of 34,3 sq m. Els did not disclose to the
committee that this was not the ninth respondent’s tender
plan nor
did he reveal the provenance of the new plan. It had been ready since
9 May 2001, having been drawn a fortnight or so after
the close of
tenders on 20 April 2001 at a time when the floor areas proposed by
the other tenderers must have been known to the
ninth respondent.
[9]
The
deception of the mayoral committee did not end there. Either because
Els suppressed the information or because the ninth respondent
concealed it from Els the committee was also not made aware that the
ninth respondent could afford to produce an even bigger house,
one
that could compete with the best that was on offer. Also dated 9 May
2001, but delivered to Els at a later date, was a further
plan
proposing a top-structure of 38 sq m. For it to have served any
purpose at all the plan must have been delivered to him before
the
date on which the tender was awarded to the ninth respondent. The
papers do not explain what Els was supposed to do with the
plan but
he should, in the discharge of his fiduciary duty to the first
respondent, have disclosed it to the mayoral committee. In
the
absence of any explanation a probable inference is that it was a
contingency plan, drawn up at the same time as the 34,3 sq m
plan but
held back to see if the earlier more modest one would not suffice to
secure the tender.
[10]
The
first respondent’s justification for having accepted the late offer
is diffuse. Its first line of defence is that it was not
bound to
follow tender procedures, an untenable suggestion put up by Els (who,
as city engineer, should have known better) that was
not pursued by
the ninth respondent’s counsel. Its second line of defence was that
although it accepted that it was obliged to
have acted fairly it had
done so.
[11]
As
an organ of state in the local government sphere the first respondent
in awarding a tender is obliged to comply with
s 10G(5)(
a
) of
the
Local Government Transition Act 209 of 1993
read with s 217(1) of
the Constitution of the Republic of South Africa Act 108 of 1996.
These provisions mandate it to do so in accordance
with a system
which is fair, equitable, transparent, competitive and
cost-effective. The
Preferential Procurement Policy Framework Act 5
of 2000
requires organs of state to establish a procurement policy,
and also makes it obligatory for the first respondent, as an organ of
State in the local sphere, to follow a tender procedure for the
procurement of goods and services.
[12]
There
is another reason that the tender procedure of a local authority must
be fair. Invitations to tender by organs of State and
the awarding of
tenders where it is done in the exercise of public power is an
administrative process (see
Logbro Properties CC v Bedderson NO
and Others
2003 (2) SA 460
(SCA) at 465F-466C where the leading
cases are collected).
Section 3(2)(
a
) of the
Promotion of
Administrative Justice Act 3 of 2000
requires the process to be
lawful, procedurally fair and justifiable. But primarily, in the case
of a local authority, the process
must be fair because
s 10G
(5)(
a
)
of the
Local Government Transition Act 1993
requires it.
[13]
In
the
Logbro Properties
case
supra
at 466H-467C Cameron
JA referred to the ‘ever-flexible duty to act fairly’ that rested
on a provincial tender committee. Fairness
must be decided on the
circumstances of each case. It may in given circumstances be fair to
ask a tenderer to explain an ambiguity
in its tender; it may be fair
to allow a tenderer to correct an obvious mistake; it may,
particularly in a complex tender, be fair
to ask for clarification or
details required for its proper evaluation. Whatever is done may not
cause the process to lose the attribute
of fairness or, in the local
government sphere, the attributes of transparency, competitiveness
and cost-effectiveness.
[14]
Was
the tender process followed in the present case fair? A high-ranking
municipal official purported to give the ninth respondent
an
opportunity of augmenting its tender so that its offer might have a
better chance of acceptance by the decision-making body. The
augmented offer was at first concealed from and then represented to
the mayoral committee as having been the tender offer. It was
accepted on that basis. The deception stripped the tender process of
an essential element of fairness: the equal evaluation of tenders.
Where subterfuge and deceit subvert the essence of a tender process,
participation in it is prejudicial to every one of the competing
tenderers whether it stood a chance of winning the tender or not.
[15]
The appellants contended that there were several respects in which
the ninth respondent’s tender failed to comply with the tender
conditions. In the light of my conclusion it is unnecessary to
discuss what the effect of these imperfections on the validity of
its
tender might have been. The
Preferential Procurement Policy Framework
Act 5 of 2000
defines an ‘acceptable tender’ as one that ‘in
all respects complies with the specifications and conditions of
tender as set
out in the tender document’. There are degrees of
compliance with any standard and it is notoriously difficult to
assess whether
less than perfect compliance falls on one side or the
other of the validity divide. Whether or not there can in any
particular case
be said to have been compliance with ‘the
specifications and conditions of tender’ may not be an easy
question to answer. In
the present case there is no difficulty. The
offer put before the mayoral committee was not the one made in the
ninth respondent’s
tender. It was not one elicited by the
specifications and conditions of tender.
The
appeal succeeds with costs. The order of the court
a quo
is
replaced by an order reading -
‘
(a)
The award by the first respondent to the ninth respondent of tender
CCE9/2001 is set aside;
(b)
The first respondent is ordered to pay the costs of the application.’
___________________
J
H CONRADIE
JUDGE OF
APPEAL
ZULMAN JA )Concur
FARLAM JA )
NUGENT
JA )
HEHER
JA )