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[2018] ZASCA 50
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Overstrand Municipality v Water and Sanitation Services South Africa (Pty) Ltd (143/2017) [2018] ZASCA 50; [2018] 2 All SA 644 (SCA) (29 March 2018)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
no.: 143/2017
In
the matter between:
OVERSTRAND
MUNICIPALITY
APPELLANT
and
WATER
AND SANITATION SERVICES
SOUTH
AFRICA (PTY) LTD
RESPONDENT
Neutral
citation:
Overstrand
Municipality v Water and Sanitation Services South Africa (Pty) Ltd
(143/2017)
[2018] ZASCA
50
(29 March 2018)
Coram:
Navsa,
Leach and Mocumie JJA and Davis and Makgoka AJJA
Heard:
5 March
2018
Delivered:
29
March 2018
Summary:
Tender
evaluation and adjudication : challenges based, inter alia, on
s
6(2)
(b)
of the
Promotion of Administrative Justice Act 3 of 2000
: whether
acceptable tender in terms of
s 7
of the
Preferential Procurement
Policy Framework Act 5 of 2000
read with applicable regulation :
whether regulation dealing with minimum staffing of water works
endures despite repeal of a number
of statutes regulating the
provision of water to the public : savings provisions examined and
applied.
ORDER
On
appeal from:
Western
Cape Division of the High Court, Cape Town (Magona AJ sitting as
court of first instance):
1
The appeal is dismissed with costs, including the costs of two
counsel. The order of the court below is, however, amended to the
limited extent reflected below.
2
Paras 3, 4 and 5 of the order of the court below are set aside and
substituted as follows
‘
3 The decision is
remitted to the first respondent for a full new tender process
commencing with an RFQ to be started and completed;
4 In consequence of the
order in paragraph 1, the contract between the first and second
respondents is set aside; save that the
setting aside of the contract
is suspended until the tender is re-awarded or on the lapse of a
period of six months, whichever
is earlier.
5 The first respondent is
ordered to bear the applicant’s costs including the costs of
two counsel.’
3
The six month period of suspension referred to in the substituted
order is to commence running from the date of this judgment.
JUDGMENT
Navsa
JA (Leach and Mocumie JJA and Davis and Makgoka AJJA concurring):
[1]
This is an appeal, with the leave of this court, against an order of
the Western Cape Division of the High Court, Cape Town,
in terms of
which a decision of the appellant, the Overstrand Municipality (the
Municipality), ‘to award Tender No SC 1508/2014
for the
operation and maintenance of the [Municipality’s] bulk water
and sewerage infrastructure’ to the second respondent,
Veolia
Water Solutions and Technologies South Africa (Pty) Ltd (Veolia), was
reviewed and set aside. The court below, having set
aside the
decision, remitted the matter to the Municipality for
reconsideration. In addition the court made the following
consequential
orders:
‘
4.
In consequence of the order in paragraph 1, the contract between the
First and Second Respondents is, as a matter of law, set
aside; save
that the setting aside of the contract is suspended until the tender
is re-awarded or on the lapse of a period of two
months, whichever is
earlier.
5.
The First Respondent is ordered to bear the Applicant’s costs
including the costs of two counsel.’
The
background is set out hereafter.
[2]
The Municipality’s area of jurisdiction includes the villages
of Rooi-Els, Pringle Bay, Betty’s Bay, Kleinmond,
Hawston,
Onrus, Sandbaai, Hermanus, De Kelders, Gansbaai, Kleinbaai,
Franskraal, Pearly Beach, Buffeljagsbaai, Preekstoel, Stanford
and
Baardskeerdersbos. It is required to deliver bulk water services to
residents of these areas. To that end it established and
conducted
bulk water delivery and treatment works. In 2014 the Municipality
decided to outsource the operation and maintenance
of the works to
the private sector.
[3]
On 25 August 2014 the Municipality invited bidders, in a Request for
Qualification (RFQ), to express interest to be pre-qualified
in order
to compete for the award of a tender in relation to bulk water
service delivery and treatment. The RFQ was designed to
enable
scrutiny of the skills, capacity, experience and credentials of
interested parties. Upon completion of that process, four
interested
parties, that included the respondent, Water and Sanitation Services
South Africa (Pty) Ltd (WSSA), and Veolia, were
shortlisted. Those
who qualified were invited to submit bids in response to a Request
for Proposal (RFP), issued by the Municipality
on 3 December 2014.
[4]
Veolia, WSSA and one of the two remaining qualifying parties,
submitted bids. At this stage it is necessary to record some of
the
material requirements of the RFP. Clause 2.11 of Annexure B of the
RFP specifies:
‘
2.11
STAFFING
The
Operator shall at all times provide sufficient numbers of staff, with
sufficient experience and qualifications to meet or exceed
all the
requirements of the Contract. The minimum requirements for the
operation of the various classes of works are given in the
table
below but this does not include laboratory personnel. The Operator
needs to comply with the current legislated
Regulation 2834
requirements, or any new classification requirements from the
Department of Water & Sanitation, e.g. [Draft]
Regulation 17
,
which is expected to be promulgated soon.’
[5]
Regulation 2834
[1]
was
promulgated in terms of the Water Act 54 of 1956. It sets out the
minimum number of persons holding the operator classifications
prescribed in Schedule IV thereto, who
must
be
employed within a specific class of water works. This refers to what
everyone now understands to be ‘process controllers’.
The
RFP also required minimum levels of other key staff members with
attendant technical qualifications. The introductory sentence
to
clause 2.11.2 of the RFP reads as follows:
‘
In
addition to the correct Class of Process Controller and Supervisor
per Class of plant the Operator shall also provide the following
key
staff as an absolute minimum:.’
It
then goes on to set out the minimum staff requirements for those
positions, such as an overall manager, the head of maintenance,
etc.
I note that bidders were required to assimilate existing municipal
staff as part of its full staff complement.
[6]
Subsequent to a briefing session with bidders, on 16 January 2015,
the Municipality dispatched an e-mail to bidders which indicated
process controller vacancies within the municipal staffing structure
that would need to be filled to ensure compliance with applicable
legislation.
[7]
The bidding period expired on 30 January 2015 by which time the three
bidders, including Veolia and WSSA, had all submitted
their bids. The
Municipality, purportedly in accordance with the provisions of the
Overstrand Municipality Supply Chain Management
Policy, adopted in
terms of section 11 of The Local Government Municipal Financial
Management Act 56 of 2003, assisted by its technical
advisor
WorleyParsons RSA (Pty) Ltd (WorleyParsons), proceeded to evaluate
the bids.
[8]
On 17 February 2015 the Municipality addressed certain written
questions to the three bidders, requesting clarification on certain
issues. WSSA responded the next day. I shall, in due course, set out
the clarification sought and the relevant responses.
[9]
On 16 March 2015 the Municipality advised WSSA that Veolia was the
preferred bidder. It also advised that the award of the tender
to
Veolia was subject to the successful negotiation of the final terms
of a contract. In the event of that being unsuccessful WSSA
would be
invited to negotiate with the Municipality to conclude a contract. On
31 July 2016 WSSA was informed by the Municipality
that the tender
had been awarded to Veolia.
[10]
WSSA resorted to the provisions of the Promotion of Access to
Information Act 2 of 2000 (PAIA) to obtain the evaluative and
adjudicative material on which the award of the tender had been
based. The litigation that followed was based on the information
so
received, as well as on parts of the record of decision supplied
pursuant to Uniform Rule 53.
[11]
It was contended on behalf of WSSA that the material supplied by the
Municipality revealed that Veolia had
not
supplied its full costing of the necessary personnel to ensure
regulatory compliance. Thus, WSSA’s submission was that there
was no comparable pricing on which the competing bids could be
evaluated. That notwithstanding, the Municipality went on to score
the competing bids, having regard to the scoring system prescribed by
way of The Preferential Procurement Policy Framework Act
5 of 2000
(the Procurement Act) and the regulations thereunder. In terms of the
prescribed scoring system, maximum points are awarded
for the lowest
comparable prices and the others are then scored proportionally.
Furthermore, Broad-Based Black Economic Empowerment
(B-BBEE)
credentials are compared and scored.
[12]
Veolia had offered a global price of about R22 million for the first
year of the contract and WSSA had offered a global price
of
approximately R26,3 million. Veolia were thus awarded the maximum
score of 90. WSSA was awarded a score of 72.36 and came in
second
place. The final component of the scoring and its details are dealt
with later in this judgment at para 30. In its founding
affidavit
WSSA complained that the comparative scoring was unsustainable in the
absence of proper pricing of personnel by Veolia.
[13]
It was asserted on behalf of WSSA that it was evident from the
documentary material supplied by the Municipality, pursuant
to the
request in term of the provisions of PAIA, that a further amount of
approximately R4 million had to be added to Veolia’s
price for
the filling of posts to meet the minimum regulatory requirements.
That would approximate the amount bid by WSSA, albeit
with a slight
marginal difference in favour of Veolia. The score awarded to WSSA in
respect of its B-BBEE credentials was higher
and the end result, if
WSSA is correct on this aspect, would mean that the latter’s
score could ultimately have been the
higher.
[14]
In a supplementary affidavit, filed pursuant to a record provided in
terms of Uniform Rule 53, WSSA raised further factual
grounds of
review, including specifications relating to certain key personnel
necessary for regulatory and technical compliance
that Veolia
allegedly had not met. This additional ground of complaint was, in
essence, that Veolia’s bid was non-compliant
with the RFP. WSSA
also complained that Veolia had been allowed to alter its rates
subsequent to the bid being awarded, as evidenced
by the completed
contract. This, it was contended, was procedurally unfair. For all
these reasons, WSSA submitted it was entitled
to the orders of the
court below set out in para 1.
[15]
I turn to deal with the Municipality’s case. The Municipality
referred to WSSA’s amended notice of motion, in which
not only
the decision to select Veolia as the preferred bidder was attacked,
but also the decision to award the tender. It regarded
the attack on
the first decision as misconceived, in that it was merely preliminary
to the award of the tender subject to successful
negotiations. It
contended that the decision was not administrative action and
reviewable in terms of the Promotion of Administrative
Justice Act 3
of 2000 (PAJA). Even if it were administrative action, there had been
an undue delay in taking it on review, by which
time the negotiations
had been concluded and been given effect.
[16]
In any event, so the Municipality asserted, Veolia’s bid was
properly assessed and there had been no change in price
or rates in
the contract eventually concluded with Veolia. The bid, so it said,
was compliant with the RFP.
[17]
Insofar as the costing of personnel was concerned, more specifically
in relation to the absorption of municipal staff, the
Municipality
referred to a tender information meeting held on 10 December 2014, at
which the following was conveyed:
‘
The
Bidders must price as if all 53 employees will be taken over. There
is a schedule of own staff costs which the bidders must
complete with
the costs that they used in pricing the bid. This may be used when
the actual numbers change to adjust the price.’
At
that meeting the Municipality stated, in response to a question, that
a maximum of three years would be allowed within which
to have all
staff fully skilled, but that a skills development plan had to be
submitted within the first 3 months. In a further
information session
bidders were reminded that they were to assume that all 53 municipal
posts were to be transferred and that
the price for the 53 is to be
excluded from the bid price.
[18]
Veolia and WSSA had each supplied a staffing schedule. Veolia’s
amounted to R85 300 whilst WSSA’s amounted
to R241 730.00.
The letter seeking clarification from Veolia, foreshadowed in para 8
above, contained the following:
‘
2.
Staffing costs: Your suggestion that the full staff budget of
Overstrand Municipality be transferred to the Operator is not
acceptable; the budget only for staff actually transferring will be
added to this contract. Any shortfall in staff will have to
be
supplied by the Operator, and the cost adjustment for them will be
based on the schedule of staff costs supplied by the Operator.
Also
note that irrespective of staff organograms and other related
submissions in your bid, it will be and remain the responsibility
of
the Operator to supply all required staff as will be legally and
operationally required to operate the works at their tendered
rates.
The staff complement provided must ensure that the DWS regulatory
requirements per plans will be attained including the
impact of
Regulation 17. It is also assumed that your pricing allows for all
additional staff required including all support staff.
Please confirm
your acceptance of this interpretation.
3.
Schedule of staff costs: It appears that the costs supplied by you in
the schedule of staff costs are very low compared to the
market.
Please confirm that you are aware of that fact.
4.
Please indicate in detail in the table below the exact full-time
Human Resources that are included in your price that will be
allocated to this contract on a full time basis.’
[19]
Veolia responded as follows:
‘
We
remove our qualification that the full staff budget of the
Municipality is transferred to Veolia and accept that the Schedule
of
Employee costs will apply for the shortfall of staff that does not
transfer to Veolia.
That
current staff complement of 53 is sufficient for Veolia to provide
the service and this is the basis of our offer. Our offer
excludes
the cost to employ more than 53 staff to meet the impact of
Regulation 17. The Veolia offered mechanism is that additional
staff
(more than 53) is employed over several years in accordance with the
approved Annual Plan and available municipal budget
using the
Schedule of Employee Costs to determine the additional cost.’
In
addition, Veolia provided the following information:
‘
As
per our qualification, the rates provided are the Total Cost to
Company in our employment contracts and travel and overtime costs
are
not included in the schedule of staff costs. Please refer to below
table for typical staff cost where travel and overtime are
included.’
[20]
According to the Municipality, Veolia supplied full details of human
resources in its bid, indicating the precise number of
part-time and
full-time staff. They provided for eleven full time employees and
three part-time employees, in addition to the staff
to be taken over
from the Municipality. They indicated that the staff costs were
included in the submitted bid price.
[21]
Veolia had stated that, although they considered that full regulatory
compliance could be achieved with the 53 posts to be
transferred from
the Municipality, it had, nevertheless, made provision for the
aforementioned additional 14 staff members. WorleyParsons
reported on
Veolia’s staffing proposal as follows:
‘
It
appears that Veolia endeavoured in their submission to provide for
the Function to be performed with the smallest possible team
of
people, concentrating on improved efficiencies and operational
management. This approach is fully in line with the stated objective
of the municipality with this project namely to improve operational
efficiencies at a lower cost. The matter of if they will definitely
obtain regulatory compliance within the stated time on this basis
will have to be confirmed during the contract negotiation stage
should they be selected as preferred bidder.’
[22]
WSSA was afforded a similar opportunity to clarify its bid on these
issues. The Municipality stated, somewhat surprisingly,
in its
opposition to the relief claimed, that the need for clarification
arose because the RFP did not expressly request bidders
to specify
the details of their staff compliment. For present purposes it is not
necessary to deal with its response. The competitive
positions of
WSSA and Veolia is summarised as follows in para 37 of the
Municipality’s answering affidavit:
‘
The
observation regarding WSSA that has been emphasised above was
justified taking into account that ultimately Veolia proposed
to add
only 11 full-time employees and 3 part-time employees to the 53
municipal workers, whereas WSSA was proposing an additional
41
workers on top of the 53 municipal workers.’
[23]
WorleyParsons in the Bid Evaluation Report considered whether the
limited staff that Veolia intended to provide would meet
regulatory
requirements and stated the following:
‘
Veolia
stated that their aim would be to train the existing staff so as to
ensure regulatory compliance in the initial three year
period but
that they may need to negotiate in this period for additional money
to appoint more people should that be required.
(The RFP required
that regulatory compliance can be achieved over a period of three
years and that municipal staff .
. . must be trained to
achieve regulatory compliance where possible[.]) It is difficult to
quantify any cost implications at this
stage as it is not only a
matter of allowing for the cost of additional staff as some existing
staff should have the potential
to be trained up and then some
positions may become redundant as operational efficiency improves. It
must however be noted that
this is an area of concern and will need
special attention during the negotiations with the preferred bidder,
should that be Veolia.’
[24]
The maximum scoring for B-BBEE was 10 and for pricing was 90. Veolia
scored 90 for pricing and 0 for B-BBEE contribution. WSSA
scored
72.36 for pricing and 5 points for B-BBEE contribution; hence Veolia
was the successful bidder.
[25]
Ultimately, the Municipality asserted, ‘WSSA was 20% more
expensive than Veolia’. The Municipality said that one
explanation for the cost difference was the fixed charge which was
based on the clarification sought and provided. The Municipality
stated that both bids were, for the reasons set out above, treated as
firm bids.
[26]
Thereafter Veolia was selected as the preferred bidder with which
negotiations were to be entered into for the conclusion of
a
contract. This was to be conducted by the accounting officer in terms
of prevailing legislation and policy on behalf of the Municipality.
In this regard s 24(1) of the Overstrand Municipality Supply Chain
Management Policy provides, inter alia:
‘
Negotiations
with preferred bidders and communication with prospective providers
and bidders
1)
The Accounting Officer may negotiate the final terms of a contract
with bidders identified through a competitive bidding process
as
preferred bidders, provided that such negotiation –
a)
does not allow any preferred bidder a second or unfair opportunity;
b)
is not to the detriment of any other bidder; and
c)
does not lead to a higher price than the bid as submitted;
d)
does not lead to a lower price in respect of sale of land / goods.
2)
Minutes of such negotiations must be kept for record purposes and as
far as practical be made part of the final contract.’
[27]
The Municipality interpreted the Supply Chain Management Policy to
mean that until negotiations were successfully completed
there could
be no talk of the final award of the tender. This explains the
communications to WSSA, referred to in para 9 above.
[28]
The Municipality was adamant that during the negotiations, care was
taken that technical specifications and pricing remained
unaffected
and that the competitive nature of the bids was not impinged upon.
The final cost of the municipal staff to be absorbed,
which was not
included in the bid price, was negotiated after a due diligence
exercise. This was determined at about R13,2 million.
That amount
applied to all bidders and was thus neutral. The Municipality
insisted that Veolia’s price was properly assessed
against the
other competing bids and was found to be appropriate and relevant to
the scope and purpose of the services to be rendered.
The
Municipality was satisfied that the objectives of the tender would be
met; namely skills development and retention, assurance
of water
supply at the right quality and quantity, operations optimisation and
asset preservation.
[29]
The Municipality noted that an internal appeal process had not been
followed by WSSA, which chose, instead, to launch the litigation
culminating in the present appeal. According to the Municipality,
Veolia commenced with performance under the contract on 1 November
2015, when it assumed full authority for the functioning of the
works.
[30]
Veolia apparently added additional staff members, acquired assets and
procured the services of sub-contractors. It also constructed
an
office at Hermanus to enable it to provide the services to the public
within the Municipality’s area of jurisdiction.
It was
submitted on behalf of the Municipality that the tender could not now
be set aside, without serious disruption to the services
being
provided.
[31]
The court below (Magona AJ), held that there was no doubt that,
insofar as the evaluation of the bids and the award of the
tender was
concerned, the Municipality engaged in administrative action as
contemplated in PAJA. The court below found that the
Municipality
deviated from the regulatory framework that specified skills
thresholds and that Veolia’s bid was not in compliance
with the
RFP. It went on to conclude that the ‘Municipality’s
action in this regard was procedurally unfair as Veolia
did not
qualify as an acceptable tender as defined in the Procurement Act,
right from the start’. (Footnotes omitted.)
[32]
More specifically the court below held that regulation 2834 provided
for the number of qualified process controllers to operate
the works
and that there had been a shortfall in Veolia’s bid. It had
regard to the submission on behalf of the Municipality
that
compliance with the regulatory framework did not have to be met
immediately but could be achieved in 3 years. This did not
find
favour with the court below. The court below considered the report by
WorleyParsons that vacant municipal posts had to be
filled to ensure
regulatory compliance. It also took into account the explanation by
the Municipality that WorleyParsons had overlooked
the additional
staff for which Veolia had provided. The court concluded that the
additional staff did not fall within the personnel
prescribed by the
regulation, and went on to hold that it this was procedurally unfair.
[33]
The court below also held that, in the negotiating process Veolia had
been permitted to vary the terms of its bid, by adding
an additional
14 posts and absorbing the costs. It considered this unfair and
further rendered the award of the tender liable to
be set aside.
[34]
The court below did not consider that the implementation of the
negotiated contract between the Municipality and Veolia militated
against remitting the matter for consideration anew. It took the view
that the contract was one that extended to 15 years and that
remitting the matter for a re-run of the tender process was a just
and equitable remedy. It went on to make the orders set out
at the
commencement of this judgment. It is against those orders and the
conclusions on which they were based that the present
appeal is
directed. Veolia did not participate in the proceedings in the court
below nor in the present appeal. The disputants
were and are the
Municipality and WSSA.
[35]
Despite the asserted intricacies of the present dispute and the
various grounds of review on which WSSA’s claim for relief
in
the court below was based, the appeal turns on the primary question
of whether the bid by Veolia in all respects complied with
the
specifications of tender, the RFP. It has long been laid down and
accepted that the evaluation and award of a tender constitutes
an
administrative action.
[2]
The
primary challenge by WSSA is based on s 6(2)
(b)
of PAJA, which
provides:
‘
(2)
A court or tribunal has the power to judicially review an
administrative action if –
.
. .
(b)
a mandatory and material
procedure or condition prescribed by an empowering provision was not
complied with’.
[36]
Procurement of goods and services by an organ of state must be
carried out in terms of the principles set out in s 217(1) of
the
Constitution, which reads:
‘
(1)
When an organ of state in the national, provincial or local sphere of
government, or any other institution identified in national
legislation, contracts for goods or services, it must do so in
accordance with a system which is fair, equitable, transparent,
competitive and cost-effective.’
Section
217(3) of the Constitution reads:
‘
(3)
National legislation must prescribe a framework within which the
policy referred to in subsection (2) must be implemented.’
The
Procurement Act is legislation pursuant to s 217(3). It sets out a
framework for the implementation of a procurement policy.
Section 1
thereof defines ‘acceptable tender’ as follows:
‘“
acceptable
tender”
means any
tender which, in all respects, complies with the specifications and
conditions of tender set out in the tender document
. . .’
[37]
It will be recalled that the RFP, in clause 2.11, set out in para 4
above, specified the minimum staffing requirements particularly
as
relates to process controllers for the operation of the various
classes of the works. Regulation 2834 specifies in table form
the
minimum staffing requirements (particularly as relates to process
controllers) across various classes of works. At this stage
it is
necessary to have regard to section 7 of Regulation 2834, which
provides:
‘
7.
Employment of persons. – The owner of a water care work shall,
as from the date fixed in terms of section 12A (2) of the
Act, employ
for the operation of such work the minimum number of persons of the
classes prescribed in Schedule IV in respect of
the work concerned:
Provided that the Director-General may allow fewer persons or persons
with lower educational qualifications
to be employed for the
operation of any particular water care work for the period and
subject to the conditions determined by him,
if he is of opinion
that, in the particular circumstances, the attainment of the
objectives of these regulations will not be frustrated
by such
employment.’
[38]
In oral argument before us, counsel on behalf of both parties, were
uncertain about the legislative thread pertaining to the
continued
existence or otherwise of Regulation 2834.
[3]
Since Regulation 2834 is central to the bid specification and is
relied on by WSSA, as prescribing the minimum number of process
controllers, it is necessary to start with a consideration of whether
it continued in existence despite the repeal of related legislative
enactments.
[39]
As stated earlier, Regulation 2834 was promulgated in terms of s 26,
read with s 12A of the WA.
[4]
The Water Services Act 108 of 1997 (the WSA) repealed a number of
provisions of the WA, but not ss 26 and 12A. This must mean that
Regulation 2834 continued in existence as the statutory provisions in
terms of which it was promulgated remained intact. Section
84 of the
WSA, which is a savings provision, did not at that stage, in my view,
intrude upon the question of the validity of Regulation
2834. Section
84(6) reads as follows:
‘
Anything
done before the commencement of this Act by an organisation
contemplated in subsection (2) and any regulation made or condition
set under or in terms of any law repealed by subsection (1) remains
valid and is deemed to have been done, made or set under or
in terms
of the corresponding provision of this Act if –
(a)
it is capable of being done, made or
set under or in terms of this Act; and
(b)
it is not in conflict with the main
objects of this Act as set out in section 2.’
Simply
put, sections 26 and 12A of the WA, under which Regulation 2834 was
promulgated, remained in force and continued to be its
statutory
support.
[40]
The National Water Act 36 of 1998 (NWA), however, repealed the
remaining provisions of the WA, including sections 26 and 12A.
Section 163(4) of the NWA, which is a savings provision, provides:
‘
(4)
Any regulation made under a law repealed by this Act remains in force
and is considered to have been made under this Act –
(a)
to the extent that it is not
inconsistent with this Act; and
(b)
until it is repealed by the Minister
under this Act.’
Sections
2
(d)
and
(h)
of the NWA set out, inter alia, the
purposes of the NWA as follows:
‘
(d)
promoting the efficient,
sustainable and beneficial use of water in the public interest;
.
. .
(h)
reducing and preventing
pollution and degradation of water resources’.
[41]
Section 26 of the NWA enables the Minister to make regulations in
relation to a host of matters, including the following:
‘
26(1)
(e)
regulating the design, construction, installation, operation and
maintenance of any waterwork, where it is necessary or desirable
to
monitor any water use or to protect a water resource;
(f)
requiring qualifications
for and registration of persons authorised to design, construct,
install, operate and maintain any waterwork,
in order to protect the
public and to safeguard human life and property’.
Regulation
2834 was not specifically repealed by the Minister under the NWA and,
from what is set out above, is not inconsistent
therewith.
[42]
I disagree, for the reasons set out above, with the submission on
behalf of the Municipality, that the savings provision in
the NWA
applied before the WSA repealed the remaining provisions of the WA. I
also disagree with the further submission that, since
the WSA has
processes for the making of regulations that differ from the manner
in which regulations were made under the WA, Regulation
2834 would be
inconsistent therewith and that the savings provision as per s 163(4)
of that Act does not apply. These submissions
on behalf of the
Municipality were intended to support the argument that there was no
existing binding provision in terms of Regulation
2834 in relation to
minimum staffing of water works and their qualifications. Section 69
of the NWA provides for public participation
in relation to
regulations contemplated under the Act. That does not detract from
the fact that Regulation 2834 is not inconsistent
with the objects of
the NWA. Even if the savings provision in the NWA had applied before
the remaining sections of the WA were
repealed by the WSA. Regulation
2834 would be consistent with the objectives of the NWA and would
thus have continued in existence.
[43]
A further submission on behalf of the Municipality, in relation to
the continuing validity of Regulation 2834, was that the
NWA does not
confer on the Minister the power to prescribe national standards for
process controllers and water service works.
In this regard, it was
submitted that s 9 of the WSA is applicable and dictates how
standards ought to be dealt with rather than
through Regulation 2834.
Section 9 of the WSA provides, inter alia:
‘
(1)
The Minister may, from time to time, prescribe compulsory national
standards relating to–
(a)
the provision of water services;
.
. .
(d)
the nature, operation, sustainability,
operational efficiency and economic viability of water services;
(e)
requirements for persons who install
and operate water services works;
(f)
the construction and functioning of
water services works and consumer installations.’
I
fail to understand how, in the absence of a repeal of Regulation
2834, the Minister’s power to make other regulations, which
has
not yet been finally employed, detracts from the continuing validity
of Regulation 2834 on the basis set out above. In my view,
this is a
strained and desperate attempt to avoid the consequences of the bid
by Veolia being declared invalid.
[44]
I now turn to deal with the bid specification. The staffing
requirements of the RFP are set out in mandatory terms. The ‘minimum
[staffing] requirements for the operation of the various classes of
works’ are set out in the RFP, which must be read with
Regulation 2834, specifying the minimum number of process controllers
across various classes of works. The bid specification goes
on to
state that the ‘operator’ (the successful tenderer),
‘needs to comply with the current legislated Regulation
2834
requirements, or any new classification requirements from the
Department of Water and Sanitation, e.g. [Draft] Regulation
17, which
is expected to be promulgated soon’.
[45]
It is true that the Municipality assured bidders that the required
skills could be developed over a three-year period. That
could only
relate to ‘Draft’ Regulation 17, in respect of which
compliance could rightly be thought to be prospective.
The same does
not apply in relation to Regulation 2834. The purpose of Regulation
2834, in relation to water works, in line with
the empowering
statutes, was aimed at assurance of water supply at the right quality
and quantity as well as operations optimisation
and asset
preservation. The RFP, in terms, sought to achieve the same.
[46]
For reasons that will become apparent, it is not necessary to resolve
the apparent differences in the decisions of this court
in
Millennium
Waste Management (Pty) Ltd v Chairperson, Tender Board: Limpopo
Province & others
2008 (2) SA 481
(SCA) and
Dr J S Moroka
Municipality v Betram (Pty) Ltd & another
2014 (1) SA 545
(SCA). This court, in
Millennium
, said at para 17:
‘
[O]ur
law permits condonation of non-compliance with peremptory
requirements in cases where condonation is not incompatible with
public interest and if such condonation is granted by the body in
whose benefit the provision was enacted.’ (Citation omitted.)
Under
the heading ‘A flexible approach’, P Volmink described
the effect of the decision in
Moroka Municipality
, as follows:
‘
[A]dministrative
bodies do not enjoy a blanket discretion to condone non-compliance
with mandatory bid requirements in all instances.
Rather, they have
the power to condone non-compliance with mandatory provisions only
when they have been afforded the discretion
to do so in the RFP
document or some other enabling provision.’
[5]
[47]
Veolia’s bid did not make provision for the minimum number of
process controllers across all classes of works –
there was a
substantial shortfall. It was never the Municipality’s case
that the additional 14 members of staff Veolia intended
to employ
included the process controllers in question. It will be recalled
that the Municipality, advised by WorleyParsons, adopted
the attitude
that regulatory compliance could be achieved in the initial
three-year period. In this regard it might well have had
draft
regulation 17 in mind, but this caused it to be less mindful of
compliance with its own stated minimum staffing requirements,
more
particularly, in relation to process controllers and the provisions
of Regulation 2834.
[48]
WSSA accepted that, in terms of Regulation 2834, the Director-General
in the Department of Water and Sanitation could allow
fewer persons
or persons with lower educational qualifications to be employed for
the operation of any particular water care work,
subject to
conditions, if he/she is of the opinion that, in the particular
circumstances, the attainment of the objectives of these
regulations
would not be frustrated by such employment.
[6]
However, WSSA contended, taking into account that the
Director-General might be inclined to relax the numbers and
qualification
requirements, in that three of the water works were
automated and not likely to require full-time process controllers, it
would
still leave a shortfall of 12 process controllers. There was a
measure of disagreement concerning the actual shortfall of process
controllers, with the Municipality criticising WSSA for changing its
initial assertion that Veolia’s bid had a shortfall
of 11
process controllers, to later stating that there was a shortfall of
12 process controllers and further for not discounting
three process
controllers due to automated works. Whatever the difference, the
ineluctable conclusion is that there was a shortfall
of approximately
10 process controllers. The Municipality accepted that, in the event
that Regulation 2834 was to be strictly applied,
WSSA’s own bid
would fall short in relation to process controllers. There appears to
be some substance to that contention,
but it is not an issue we have
been called upon the address. It does, however, underscore the need
for the remittal for a bid process
to be started afresh with the
issue by the Municipality of an RFQ.
[49]
Regulation 2834 was in place and it required, in peremptory terms, as
did the RFP, a minimum required number of process controllers.
Thus,
Veolia’s bid did not meet this requirement. Nothing in the bid
specifications or the regulations nor in any other legislation
that I
am aware of affords the Municipality the power to condone
non-compliance with the mandatory and material requirements set
out
in the RFP, based as it is on Regulation 2834. Furthermore, as
explored and explained above, Regulation 2834 in setting the
minimum
requirements was aimed at protecting the public interest. Condoning
the material non-compliance in the present case would
be inimical to
that interest. The Municipality, in my view, was not as attentive, as
it should have been, to bid specifications
because it was impressed
by Veolia’s lower bid.
[50]
I am alert to the debate concerning the possible sufficiency of
substantial or adequate compliance with what, in conventional
terms,
is described as mandatory requirements. One should also guard against
invalidating a tender that contains minor deviations
that do not
materially alter or depart from the characteristics, terms,
conditions and other requirements set out in tender documents.
[7]
In the present case the non-compliance is not of a trivial or minor
nature. The tender by Veolia was not an ‘acceptable’
one
in terms of the Procurement Act, in that it did not ‘in all
respects’ comply with the specifications and conditions
set out
in the RFP. Thus, the challenge in terms of s 6(2)
(b)
of PAJA, namely that a ‘mandatory and material procedure or
condition prescribed by an empowering provision, was not complied
with’. In my view, for all the reasons set out above, WSSA has
made out a case for setting aside the decision by the Municipality
to
award the tender to Veolia and the consequent contract.
[51]
The bid was for a lengthy period of 15 years. It is in the public
interest, as well as in the interest of persons interested
in
providing the services required by the Municipality, as well as in
the interest of both Veolia and WSSA that the tender process
be
started anew, in line with the principles set out in s 217 of the
Constitution and in line with the provisions of the Procurement
Act.
[8]
The best course to
follow is the setting aside of the award of the tender to Veolia
coupled with a remittal for a full bid process
to be started anew
with an RFQ, without interrupting the operations at the works,
resulting in prejudice to the residents of the
areas referred to in
para 2 above. The Municipality is urged to finalise and not subvert a
full tender process within the time
limit attached to the order of
suspension made. In the event of further litigation, the Municipality
and its officials are forewarned
of likely costs and other
implications. The appeal is liable to be dismissed, save that the
order made by the court below, because
of the time-lapse and because
of considerations of fairness to bidders, the Municipality and the
public, is amended to the extent
reflected in the substituted order
that follows.
[52]
The following order is made:
1
The appeal is dismissed with costs, including the costs of two
counsel. The order of the court below is, however, amended to the
limited extent reflected below.
2
Paras 3, 4 and 5 of the order of the court below are set aside and
substituted as follows
‘
3
The decision is remitted to the first respondent for a full new
tender process commencing with an RFQ to be started and completed;
4
In consequence of the order in paragraph 1, the contract between the
first and second respondents is set aside; save that the
setting
aside of the contract is suspended until the tender is re-awarded or
on the lapse of a period of six months, whichever
is earlier.
5
The first respondent is ordered to bear the applicant’s costs
including the costs of two counsel.’
3
The six month period of suspension referred to in the substituted
order is to commence running from the date of this judgment.
_____________________________
M
S Navsa
Judge
of Appeal
Appearances:
For
the Appellant:
P Farlam SC (with him N Mangcu-Lockwood)
Instructed by:
Fairbridges Wertheim
Becker Attorneys, Cape Town
McIntyre & Van der
Post Attorneys, Bloemfontein
For
the Respondent:
A P Joubert SC (with him D Gintner)
Instructed by:
Werksmans Attorneys, Cape
Town
Honey Attorneys,
Bloemfontein
[1]
GNR. 2834 of 27 December 1985:
Regulations in terms of section 26 read in conjunction with section
12A of the Water Act, 1956
(Act 54 of 1956), for the erection,
enlargement, operation and registration of water care works.
[2]
See
Steenkamp
NO v Provincial Tender Board, Eastern
Cape
2007 (3) SA 121
(CC) para 21 and the authorities there cited.
[3]
Counsel were invited to make written
submissions on this question, which we received.
[4]
Section 26 of the WA enabled the
Minister to make regulations relating to the prevention of the
pollution of water. The Minister
was generally empowered to make
regulations on any matter which, in the Minister’s opinion,
was necessary or expedient
for the attainment of the objects of the
Act. Section 12A dealt with ‘Water care works’. Section
12A(2), which is
pertinent, reads as follows:
‘
No
person shall after a date fixe by the Minister by notice in the
Gazette
in
general or in respect of an area defined in the notice, use a water
care work unless the minimum number of persons with the
minimum
qualifications and experience prescribed by regulation under section
26 is employed for the operating thereof and that
work and those
persons have been registered in the manner prescribed by the said
regulation with the department, or otherwise
than in accordance with
any condition subject to which that work or those persons are so
registered.’
[5]
P Volmink, ‘Legal Consequences of Non Compliance with Bid
Requirements’ (2014) 1
African Public Procurement Law
Journal
41, 49. See also paras 16 and 18 of
Moroka
Municipality
.
[6]
See section 7 set out in para 44
above.
[7]
In this regard see C Hoexter
Administrative Law in South
Africa
2 ed (2012) at
292-295 and P Bolton ‘Disqualification for non-compliance with
public tender conditions’ (2014) 17(6)
Potchefstroom
Electronic Law Journal 2313, 2344.
[8]
See
Allpay
Consolidated Investment Holdings (Pty) Ltd & others v Chief
Executive Officer, South African Social Security Agency
& others
2014 (4) SA 179
(CC) at 32-33.