1
FORM A
FILING SHEET FOR EASTERN CAPE JUDGMENT
ECJ no : 147
PARTIES:
INTERTRADE TWO (PTY) LTD APPELLANT
And
THE MEC FOR ROADS & PUBLIC WORKS,
EASTERN CAPE 1 ST RESPONDENT
THE PREMIER OF THE EASTERN CAPE 2 ND RESPONDENT
REFERENCE NUMBERS -
• Registrar: 1790/04
• Magistrate:
• High Court: CISKEI DIVISION
HEARD: 29/3/07
DATE DELIVERED: 31/5/07
JUDGE(S): PLASKET, J
LEGAL REPRESENTATIVES -
Appearances
• for the State/Applicant(s)/Appellant(s):
• for the accused/respondent(s):
Instructing attorneys:
• Applicant(s)/Appellant(s):
• Respondent(s):
CASE INFORMATION -
• Nature of proceedings :
• Topic:
• Keywords:
2
IN THE HIGH COURT OF SOUTH AFRICA
(CISKEI DIVISION)
CASE NO: 1790/04
DATE HEARD:29/3/07
DATE DELIVERED:31/5/07
REPORTABLE
In the matter between:
INTERTRADE TWO (PTY) LTD APPELLANT
and
THE MEC FOR ROADS & PUBLIC WORKS,
EASTERN CAPE 1 ST RESPONDENT
THE PREMIER OF THE EASTERN CAPE 2 ND RESPONDENT
The appellant had tendered for certain contracts. It was common cause
that no final decision had been t aken. Two issues arose for decision on
appeal. First, it was contended that because no estimates were done
prior to the opening of tenders, as they should have been in terms of
regulation 11(1) of the regulations made in term s of the Preferential
Procurement Policy Framework Act 5 of 2000, the entire tender process
was a nullity and the appellant was ther efore not entitled to any relief on
this basis. It was held that comp liance with regulation 11(1) was not
mandatory and consequently that the tender process was not vitiated on
this account. This issue having been d ecided in favour of the appellant,
the second issue was whether the appr opriate remedy fo r the failure to
take a final decision on the tenders was an order awarding the tenders,
or some of them, to the appellant , or an order directing the first
respondent to take a decision. It was held that the tender process,
3
particularly the evaluation of the tende rs, had been flawed and that this
precluded the court from substituting its decision for that of the first
respondent, even if exceptional circumstances were held to be present.
It was ordered that the evaluations be done again by a consultant from a
firm other than the one that evaluate d the tenders initially and that a
final decision had to be taken wi thin a stated period of time.
Accordingly, the appeal succeeded with costs.
______________________________________________________________
JUDGMENT
PLASKET, J:
[A] INTRODUCTION
[1] The South African Constitution is based on a set of founding values that
include the rule of law and constitutional supremacy1 as well as accountability,
responsiveness and openness. 2 These democratic val ues are given specific
content by, inter alia, a fundamental right of access to ‘any information held by
the State’3 and a fundamental right to just ad ministrative action comprising of
rights to lawful, reasonable and procedurally fair administrative action, as well
as to reasons for adverse administrative action.4
[2] The importance of these fundament al rights in the present appeal is
illustrated graphically by the judgment of Maya AJA in MEC for Roads and
Public Works, Eastern Cape and another v Intertrade Two (Pty) Ltd 5, an
appeal by the present respondents against an order directing them to furnish
information to the present appellant conc erning the tender process that is in
1 Section 1(c).
2 Section 1(d).
3 Section 32(1)(a). This right is given effect to by the Promotion of Access to Information Act 2
of 2000. (Note that s 32(1)(b) extends the right to informatio n held by private persons or
bodies if the information is ‘required for the exercise or protection of any rights’.)
4 Section 33(1) and (2). These rights are given e ffect to by the Promotion of Administrative
Justice Act 3 of 2000.
5 2005 (5) SA 1 (SCA).
4
issue in this matter. Having held that the technical defences raised by the
present respondents had no merit, Maya AJA proceeded to state:6
‘There is another issue that r equires comment. The appellants’
resistance to Intertrade’s reques t for documentation on technical
grounds was, in my opinion, most reprehensible. Important issues are
at stake here. Intertrade seeks to establish the truth about an
extraordinarily extended tender proc ess to exercise and protect its
rights. The appellants knew what documents it required from the
outset. They did not raise any impedi ment which would prevent them
from producing the documents. Neither did they deny that they had the
documents in their possession. Their response is rendered more
deplorable by the report cont ained in the department’s own
correspondence which shows that, whilst they were embarking on
delaying tactics at the taxpayer’s expense, sick and vulnerable citizens
were suffering and children were dying in poorly maintained hospitals
as a direct result of their failure to comply with their constitutional
obligations.’
[3] This appeal does not concern, directly at any rate, the right of access to
information although the appellant has complained that all the information that
it sought has not been provided.
7 The main focus of this case is the right to
just administrative action in the tenderi ng process. (It is by now trite that
tendering decisions by organs of State constitute administrative action as
contemplated by s 33 of the Consti tution and as defined in s 1 of the
Promotion of Administrative Justice Act 3 of 2000 – the PAJA. 8) It was in the
6 Para 20.
7 The most obvious instance of the withholding of information concerns a document that
emanated from the Director-General of the Pr ovincial Government which is bizarrely (and
inappropriately) marked ‘Top Secrete’ (sic). While most of the document was provided, one
inappropriately) marked ‘Top Secrete’ (sic). While most of the document was provided, one
page – no doubt the most important to the appellant – has not been furnished and no
explanation or apology has been tendered. The appellant’s protestations have simply been
met with a wall of silence, a response that ill-behoves an organ of State that is under
constitutional duties to ‘respect, protect, promot e and fulfil the rights in the Bill of Rights’.
(Constitution, s 7(2).)
8 See Transnet Ltd v Goodman Brothers (Pty) Ltd 2001 (1) SA 853 (SCA), para 39 of the
judgment of Olivier JA and paras 7-9 of the judgment of Schutz JA; Logbro Properties CC v
Bedderson NO and others 2003 (2) SA 460 (SCA), para 14; Metro Projects CC and another v
Klerksdorp Local Municipality and others 2004 (1) SA 16 (SCA), para 12; Steenkamp NO v
Provincial Tender Board, Eastern Cape 2006 (3) SA 151 (SCA), paras 11-12.
5
context of tendering that Olivier JA, in Transnet Ltd v Goodman Brothers (Pty)
Ltd9 emphasised the importance of administr ative justice when he held that
‘[t]he right to equal treatment pervades th e whole field of administrative law,
where the opportunity for nepotism and unfa ir discrimination lurks in every
dark corner’.
[4] A further set of constitutional imperatives comes into play in this case: s
195(1) of the Constitution provides that the public administration ‘must be
governed by the democratic values and principles enshrined in the
Constitution’ including, inter alia, the promotion of the ‘efficient, economic and
effective use of resources’, the impartial, fair, equitable and unbiased
provision of services, accountability in public administrati on and the fostering
of transparency. Finally, it is important to bear in mind that, in terms of s 237
of the Constitution, ‘[a]ll constitutional obligations must be performed diligently
and without delay’.
[B] THE FACTS
[5] The facts are, by and large, not in dispute. What follows is a summary of
the more important facts. 10 They make disturbing reading and tend to show
that many of those invo lved in what can only be described as a fiasco were
grossly incompetent and displayed a shocking, unacceptable degree of
indifference to the plight of those whose health and well-being was, and
continues to be, put at risk at 36 provincial hospitals and clinics in four districts
of the Eastern Cape. All in all, the conduc t of the administration in this matter
displays an alarming degree of ineptitude, a lack of appreciation of what is
required, a lack of judgment, rationalit y and common sense, and a disturbing
contempt for the Constitution and for the people of the province that the
Constitution seeks to protect from abuses of public power. In fairness to the
first respondent, it must be said that much of the blame can be laid at the door
of the Provincial Tender Board, which no longer exists.
of the Provincial Tender Board, which no longer exists.
9 2001 (1) SA 853 (SCA), para 42.
10 The facts are set out clearly and succinctly in Maya AJA’s judgment in the access to
information appeal. See paras 3-6. Subsequent to the appeal, however, further papers were
filed in this aspect of the case, the review of the failure to decide on the tenders.
6
[6] The appellant – to whom I shall refe r from now on as Intertrade -- is the
corporate successor to an entity know n as YBB CC, which traded as King
Enterprises and Car Electricians. It had, in 1997, successfully tendered for
two contracts in terms of which it wa s to undertake preventative maintenance
and repairs of plant and equipment at a number of the Provincial
Government’s hospitals. The contracts were to run until the end of March
1999 but YBB was requested by the Provincial Government to extend the
contract, at the prevailing rates, for another year. It agreed to do so.
[7] During this period fresh tenders were invited for the contracts. YBB was
the only tenderer but the tenders were not awarded as a decision was
apparently taken to combine the two cont racts and invite new tenders for the
single contract. The Provincial Govern ment requested Intertrade, which had
by now stepped into the shoes of YBB, to extend the contracts, again at the
prevailing rates, for yet another year (ending at the end of March 2001).
Intertrade agreed to do so. Tenders were again invited for one combined
contract for the hospitals. Intertrade’s tender was the lowest but a decision
was taken not to award the tender. Inst ead, a decision was taken to split the
contract into an electrical compo nent and a mechanical component and to
invite tenders once more.
[8] Intertrade agreed, on request, to continue with its preventative
maintenance and repair work at its or iginal rates until the end of January
2002. Once again, tenders were invited for the electrical and mechanical
contracts. It was reco mmended that the contracts be awarded to Intertrade
but the Provincial Tender Board decid ed that the tenders should not be
awarded because the splitting of the cont racts along the lines of electrical
work and mechanical work was not cost -effective. It was decided instead to
combine the contracts again and invite tenders yet again. Intertrade was
combine the contracts again and invite tenders yet again. Intertrade was
asked to extend its 1997 contract for a further per iod until the end of March
2003. It agreed to do so, on the basis of escalated rates.
7
[9] This time, when the combined contra cts were put out to tender, Intertrade
was the only tenderer but this still did not avail it as the Provincial Tender
Board decided not to award the tender, despite the favourable
recommendation of the Head of the Depar tment of Roads and Public Works.
Instead, the Provincial Tender Board di rected the Department to ‘draw up a
rephrased specificatio n in order to accommodate ot her service providers to
tender for the components which are contained in the tender, and re-
advertise’.
[10] It was now decided to split the contracts differently and call for new
tenders. They were to be split between a mechanical and electrical
component, on the one hand, and a kitchen and laundry component, on the
other. When Intertrade was asked once more to extend its contracts until 1
April 2003, it refused to do so.
[11] In September 2003, the Provinci al Government, through its consulting
engineers, Lukhozi Consulting Engineers (Pty) Ltd, issued four requests for
tenders in respect of the hospitals. This time the tenders were split into the
following: tender PTB5- 02/03-1893ME, which was for mechanical and
electrical work for the hospitals in the Alfred Nzo and OR Tambo districts;
tender PTB5-02/03-1894ME, which was for mechanical and electrical work for
the hospitals in the Chris Hani and Uk hahlamba districts; tender PTB5-02/03-
1893LK, which was for laun dry and kitchen repairs a nd maintenance for the
hospitals in the Alfred Nzo and OR Ta mbo districts; and tender PTB5-02/03-
1894LK, which was for laun dry and kitchen repairs a nd maintenance for the
hospitals in the Chris Hani and Ukhahlamba districts.
[12] Intertrade tendered for all four of the contracts. It was the only tenderer
for the two mechanical and electrical contracts and one of two tenderers for
the laundry and kitchen contracts. Despite various recommendations having
been made, it is common cause that no final decision has been taken in
been made, it is common cause that no final decision has been taken in
respect of the four tenders. In tw o of the tenders – the mechanical and
electrical tenders -- Intertade was the only tenderer, although its prices in both
were significantly higher than the prices that were arrived at by the engineer
8
who evaluated the tenders. In the remaining two tenders – the kitchen and
laundry tenders – Intertrade’s prices we re higher than thos e tendered by two
apparently related close corporations that had tendered for one tender each.
Intertade’s prices were also higher than the evaluated prices.
[13] Intertrade brought the failure to decide on review. Its application was
dismissed in the court below and it is against that judgment that it now
appeals. The judge in the court below he ld that the ‘process was fatally
flawed’ because of a failure to co mpile estimates prior to opening the
tenders11 but does not appear to have decided t he application on this basis.
Instead, although he accepted t hat no decision had been taken, 12 he
dismissed the application on the basis that the respondents’ explanation as to
why no decision was taken was acceptable. 13 This explains the costs order
that he made, namely that the ‘respondent is ordered to pay the applicant’s
costs of the application up until the date of the filin g of the respondents’
answering affidavits’.14
[14] In my view, the judgment must be interfered with. The court below
accepted that no decision had been taken. While that state of affairs exists,
the administrative process is incomplete and hangs in limbo. It is a reviewable
irregularity for an administrative decision-maker to fail to take a decision when
he or she has been empowered to do so. 15 A duty rests on the first
respondent to decide on the tenders, and he must do so.
[15] The issues that arise in this appea l are first, whether a failure on the part
of the first respondent’s department to compile estimates prior to the opening
of the tenders is fatally defective to t he tender process and, secondly, if it is
not, whether the appropriate relief for t he failure to decide on the tenders is a
11 Judgment, paras 30 and 36.
12 Judgment, para 33.
13 Judgment, paras 34-36.
14 Judgment, para 2 of the order.
12 Judgment, para 33.
13 Judgment, paras 34-36.
14 Judgment, para 2 of the order.
15 Julius v Lord Bishop of Oxford (1880) 5 AC 214 (HC), 225; Cape Furniture Workers’ Union
v McGregor NO 1930 TPD 682, 686; Mahambehlala v MEC for Welfare, Eastern Cape and
another 2002 (1) SA 342 (SE), 352H-353D; Mbanga v MEC for Welfare, Eastern Cape and
another 2002 (1) SA 359 (SE), 368E-H; Ntame v MEC for Social Development, Eastern Cape
and two similar cases 2005 (6) SA 248 (SE), para 36.
9
remittal to the first respondent or an or der that, where Intertrade is the only
tenderer, the tenders must be awarded to it and the remaining two be remitted
to the first respondent for a final decision to be taken.
[16] When the process under challenge commenced, the power to enter into
contracts on behalf of the Provincial Government wa s vested exclusively in
the Provincial Tender Board. 16 That is no longer the case: the Provincial
Tender Board Repeal Act (Eastern C ape) 6 of 2004 (EC) repealed the
Provincial Tender Board Act (Eastern Ca pe) 2 of 1994 (EC), thus abolishing
the Provincial Tender Board, and vest s the power to contract for the
procurement of goods and services in the various government departments
and other provincial public entities. The first respond ent is therefore now the
organ of State vested with t he power to decide on the tenders in issue in this
appeal.
[17] Before proceeding to deal with the legal issues, it is necessary to say
something more about the lamentable state of affairs in the hospitals that are
the subject matter of what seems to be a never-ending tender process. It is
not disputed that preventative maint enance at these hospitals stopped being
done at the end of March 2003 and is still not being done: the maintenance of
mechanical, electrical, laundry and ki tchen equipment has only been done –
often by Intertrade – on an ad hoc basis when plant and machinery breaks
down. This crisis management type of approach has, on the respondent’s own
documents, led to deaths. A Problem Report Form of the Department of
Roads and Public Works dated 9 July 2003 in respect of an electrical circuit
breaker in the maternity ward of Sain t Patrick’s Hospital states: ‘Circuit
breaker is tripping at nursery which l ed to deaths of three kids. This is a
matter of urgency.’ Despite this, the Pr ovincial Government has failed to
address the problem meaningfully and wit h the urgency that the deaths of
address the problem meaningfully and wit h the urgency that the deaths of
children should engender in a caring ad ministration. It was this lack of
concern for the people of the province who had to endure treatment at
16 Eastern Cape Provincial Government v Contractprops 25 (Pty) Ltd 2001 (4) SA 142 (SCA),
paras 7-9.
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hospitals with failing plant and equipment that drew the ire of Maya AJA in the
access to information appeal.
[C] THE ISSUES
(a) Prior Estimates
[18] As stated above, the first issue to be decided is whether the failure on the
part of the first respondent ’s department, through its co nsulting engineers, to
compile estimates of the tenders prior to the opening of the tenders is fatal to
the tender process. If it is, it robs In tertrade of any right to compel the first
respondent to take decisions on the four tenders because no valid tender
process exists.
[19] The facts in relation to this poin t are as follows. According to Mr Malcolm
Boucher, a director of Intertrade, and who deposed to its founding affidavit, he
provided estimates because the departmental official in charge of opening the
tenders ascertained that the consulting engineers had not done so. It is not
contended by Mr Kemp, who appeared for Inte rtrade, that this amounts to the
making of proper estimates.
[20] Mr Steven Kleyn, a director of Lukhozi Consulting Engineers (Pty) Ltd,
and who evaluated the tenders for the Prov incial Government, admitted that
he was telephoned about the estimates but stated that he did not provide
them as it was ‘the client’s function to give estimates to tenderers, if they so
wish’. Although he stated that prior esti mates were drafted, he never attached
any to his affidavit, none form part of th e rule 53 record and none were
provided to Intertrade by the respondents as a result of its successful access
to information appeal. Only one estimate was provided by Kleyn and that
appears to have been compiled after the event.
[21] On the basis of the above, it c an be accepted that no prior estimates
were made in respect of the four tenders. This is certainly accepted by
11
Intertrade and the point has been taken by Mr Buchanan, who appeared with
Mr Notshe for the respondents, that this is fatal to Intertrade’s case.
[22] Regulation 11(1) of the regulations made in terms of the Preferential
Procurement Policy Framewor k Act 5 of 2000 provides that, prior to inviting
tenders, an organ of St ate ‘must’ plan properly for and, ‘as far as possible,
accurately estimate the costs of, the pr ovision of services or goods for which
an invitation for tenders is to be made’.
[23] Whether regulation 11(1) postulates a ‘mandatory and material procedure
or condition’ (in the language of s 6(2 )(b) of the PAJA), the non-compliance
with which is fatal to the validity of the administrative action concerned is a
matter of statutory interpretation. In par t, at least, it involves an enquiry into
whether the use of the word ‘must’ was intended to place a mandatory duty on
organs of State to comply with the regulation – on pain of their further steps
being invalid -- or whether compliance is merely directory.
[24] In Weenen Transitional Loca l Council v Van Dyk 17 the provision under
scrutiny used the word ‘shall’ to im pose certain duties on a local authority
before it assessed rates on immovable property. The court was required to
determine whether a failure to have complied rendered the determination of
the rates invalid. Combrink J held:18
‘The language employed in s 166 is manifestly mandatory where the
local authority is instru cted that it “shall” assess the rates for a given
financial year in accordance with t he provisions of s 105(1) and that,
after the public inspection period had elapsed, it “shall” publish the two
prescribed notices in t he prescribed manner. Equally categorical is the
declaration in the succeeding s 167( 1) that the rates “shall” become
due and payable one m onth after the publication of the first of the said
notices and “shall” be paid on or before the final date set forth in such
notices and “shall” be paid on or before the final date set forth in such
notice. To be sure, the use of the verb “shall” by the lawmaker in
prescribing the steps to be taken by a local authority in terms of s 166
17 2000 (3) SA 435 (N).
18 At 445D-G.
12
is an indication, even a strong one ( Messenger of the Magistrate's
Court, Durban v Pillay 1952 (3) SA 678 (A) at 683), that the injunction
is peremptory, but by the same token our case law literally bristles with
decisions in which that verb had, in the light of other exegetic
considerations, been assigned a directory import. Accordingly it
remains a matter of construction whether in casu the lawmaker
intended the verb “shall” to be read as “a categorical imperative” (per
Van den Heever JA in Messenger of the Magistrate's Court, Durban v
Pillay (supra)) or “a mere director y verb” (per Van Winsen AJA in
Maharaj v Rampersad (supra)). To that end I adopt the approach
suggested by Van Winsen AJA in the Maharaj case at 644D-E, namely
to consider the object and im portance of the provision under
consideration. That exercise mu st obviously be undertaken with due
regard to the enactment as a whole.’
[25] The starting point in the search for the meaning that the legislator
intended when promulgating the regulations ought to be a common sense one
which Baxter captures with his usual clarity. He states:19
‘Administrative action based on formal or procedural defects is not
always invalid. Technicality in the law is not an end in itself. Legal
validity is concerned not merely with technical but also with substantial
correctness. Substance should not a lways be sacrificed to form; in
special circumstances greater good might be achieved by overlooking
technical defects.’
[26] The methodology for the search fo r the true meaning of words such as
‘shall’ and ‘must’, on the on e hand, and words such as ‘may’, on the other,
was guided by Wessels JA in Sutter v Scheepers20 who adopted a four-point
rule-of-thumb approach in the following terms:21
‘(1) If a provision is couched in a negative form it is to be regarded as a
peremptory rather than as a directory mandate. …
19 Baxter Administrative Law Cape Town, Juta and Co: 1984, 446.
19 Baxter Administrative Law Cape Town, Juta and Co: 1984, 446.
20 1932 AD 165.
21 At 173-174. See too Hoexter The New Constitutional and Administrative Law (Vol 2:
Administrative Law) Cape Town, Juta and Co: 2002, 139-141.
13
(2) If a provision is couched in positive language and there is no
sanction added in case the requisites are not carried out, then the
presumption is in favour of an int ention to make the provision only
directory. …
(3) If, when we consider the scope and objects of a provision, we find
that its terms would, if strictly carried out, lead to injustice and even
fraud, and if there is no explicit statement that the act is to be void if the
conditions are not complied with, or if no sanction is added, then the
presumption is rather in favour of the provision being directory.
(4) The history of the legislation will also afford a clue in some cases.’
[27] The process of determining whether non-compliance with a procedure or
condition brings in its train nullity is not a mechanical proce ss. That it is a
nuanced and often difficult interpretive exercise is made clear by Combrink J
in the Weenen Transitional Local Council case. He noted a recognition on the
part of judges ‘that the validity of actions in purported compliance of a
statutory injunction c annot be determined by a mere label such as
“peremptory” or “directory” without proper regard bein g had to the intention of
the legislator derived from the enactment as a whole’.22
[28] It will be noted that regulation 11(1) is couched in the positive – an ‘organ
of State must’ – rather than in the neg ative -- ‘no organ of State may proceed
with a tender unless …’. This, on the strength of Sutter v Scheepers may be
taken as an indication t hat the injunction is not ma ndatory. Secondly, apart
from being couched in the positive, no sanction has been prescribed for non-
compliance. This too, according to Wessels JA in Sutter v Scheepers is
indicative of the provision being direct ory rather than mandat ory. Thirdly, it
appears to me that an interpretation of the regulation that makes compliance
with it mandatory, with non-co mpliance axiomatically resu lting in invalidity of
with it mandatory, with non-co mpliance axiomatically resu lting in invalidity of
the process, would render the public procurement process unworkable, would
often result in unfairness, woul d encourage unscrupulous conduct and would
22 Supra (note 17) at 444C-D.
14
without justification elevate form over substance. These factors support an
interpretation of the regulation that it is directory rather than mandatory.
[29] An interpretation t hat regulation 11(1) is ma ndatory would render public
procurement unworkable because it would focus attenti on, and blow out of all
proportion, an internal managem ent tool that is intend ed to be a fairly rough
and ready guide to the reas onable cost of the prov ision of the goods or
services involved. The process by wh ich estimates were arrived at would
become the focus of challenges to tender ing decisions because, in the event
of the estimates not having been done at all, or havi ng been done badly or
inadequately or inaccurately, the entire process may then fail, not because the
result was unfair, irrati onal or otherwise reviewable but because a step that
was required to be taken at an early st age, and that may be entirely irrelevant
at the end of the process, had not been properly completed. Apart from
making the tender process unworkable, such an interpretation of regulation
11(1) would elevate formalistic i-dotti ng and t-crossing to a disproportional
importance in relation to issues of substance.
[30] Such an interpretation would often result in unf airness because it could
have the effect of an objectively fa ir, rational and otherwise unimpeachable
tender being set aside at the instance of an unsuccessful tenderer because a
bureaucrat failed to do his or her job pr operly at an early stage in the process
even though this failure may not have had an impact on the eventual decision.
Worse still, it could result in organs of State opportuni stically using defects in
their internal management to resile from contracts that are in reality
unimpeachable simply because they no l onger want to abide by their terms.
The defects in the process may, after all, only be known to the organ of State
which may use it as the ultimate trump card when the need arises. It can, I
which may use it as the ultimate trump card when the need arises. It can, I
believe, be assumed that an interpretation that could encourage or even allow
such unscrupulous conduct was probably no t intended by the legislator, and
ought to be avoided.
[31] The regulations of which regulation 11(1) is a part are intended to provide
the procedure for the implementation of the Preferential Procurement Policy
15
Framework Act. The Act and t he regulations are part of a public procurement
system that has been ‘elevated to the status of constitutional principle’ 23 and
is required by s 217(1) of the Constitu tion to be ‘fair, equitable, transparent,
competitive and cost-effective’. Regula tion 11(1) is a small part of the
machinery that is designed to achieve re sults that meet the constitutional
standard. In the end result, however, t he entire public proc urement process
that is the subject of challenge mu st pass the test of s 217(1) of the
Constitution.
[32] Regulation 11 as a whole is int ended to place an obligation on those who
manage tender processes to plan them pro perly so the public purse is used
cost-effectively and so that the result will be fair, rational and otherwise
constitutional. Despite the importance of estimates as a management tool for
the rational evaluation of tenders, it is possible for a tender process that has
not been done in compliance with regulat ion 11(1) nonetheless to be fair and
rational. In this sense, it cannot be said that, from a practical point of view,
compliance with regulation 11(1) is an absolute imperative for a tender
process that meets the constitutional st andard and, in my view this could not
have been intended by the maker of the regulations.
[33] For the above reasons, I conclude that non-complianc e with regulation
11(1) does not have the effect that the entire tender process has been
vitiated: Intertrade is still, in other word s, entitled to a decision. It is to that
issue that I now turn.
(b) The Failure to Decide
[34] It is common cause that no final decision has been taken in respect of the
tenders, despite the effluxion of a more than reasonable time for a decision to
be taken. This means that there can be no dispute that Intertrade is entitled to
relief: s 6(2)(g), together with s 6(3)(a) of the PAJA, provide t hat the failure to
23 Penfold and Reyburn ‘Public Procurement’ in Woolman, Roux, Klaaren, Stein and
Chaskalson Constitutional Law of South Africa (2 ed) (Vol 1) Cape Town, Juta and Co: 2006,
25-1.
16
take a decision within a reasonable ti me is a ground of review and hence an
infringement of the fundamental right to just administrative action. Once that is
accepted, the only remaining issue is wh at is the appropriate remedy that
should be awarded.
[35] It was argued by Mr Kemp that the court should simply substitute its
decision for that of the decision-maker and award the mechanical and
electrical tenders to Intertrade, whil e the laundry and ki tchen tenders should
be referred back to the first respondent fo r a final decision to be taken. Given
the track record of the Provincial Gove rnment in this tender process, that
robust option has its attractions. Mr Buchanan, on the other hand, argued that
the court is not able, as a matter of law, to substitute its decision because the
remedial section of the PAJA that applies to failures to decide, namely s 8(2),
does not contemplate substitution as a remedy: it is only in the case of a
decision having been taken and then being set aside that, in terms of s
8(1)(c)(ii)(aa), a court may ‘in except ional circumstances’ take the decision
rather than remit it to t he administrative decision-maker. In the second place,
Mr Buchanan has argued that even if the court was entitled to take the
decision as a matter of law, it does not have the necessary information
available to it to do so, the circumstanc es are not exceptional and it would not
be able to take a fair and rational decision.
[36] Mr Kemp has submitted, in my vi ew correctly, that the tender process in
this case was shot through wit h irregularities. The first such irregularity is the
absence of prior estimates. While I have stated that the absence of prior
estimates does not in itself vitiate t he process, it does have an impact on the
remedy in this case: there is no rough bench mark, determined prior to the
opening of tenders, by which a decision-maker can be guided as to what may
or may not be a reasonable tender. That problem may be overcome by proper
or may not be a reasonable tender. That problem may be overcome by proper
evaluations of the tenders. In this case, however, the tenders were not
properly evaluated.
[37] A number of inconsistencies and mistakes in the evaluation of the tenders
have been highlighted by Mr B oucher in his replying a ffidavit. For instance, in
17
the ME1893 tender, Mr Kleyn determined a provisional am ount of R300
000.00 for building repairs and maintenanc e. Despite this being a set and
immutable figure for all tenderers, when Mr Kleyn evaluated the tenders he
used a figure of R200 000.00.
[38] Secondly, in his supplementary affidavit, Mr Boucher pointed out that in
the LK1893 tender (in which Mr Kley n recommended that Zululand Steam CC
be awarded the tender) that ‘whilst the applicant did so, Zululand Steam failed
to allow for time-related costs over t he 36 month period of the contract
resulting in a discrepancy of some R3 m on this item between the respective
bidders’. Mr Kleyn’s accepted this to be correct but said that this ‘does not
mean however that the cost related thereto were not included in other rates’
and that ‘although Zululand Steam, in ma ny instances, allowed far less in
respect of time-related costs an allowance has indeed been made in most
cases’. To this Mr Boucher has replied as follows:
‘The contention that the costs of time-related items were included in
rates other than the ones which have a time component is simply
startling. It is unsurprising that respondents do not give any actual
example hereof. It simply demonstr ates that these tenders were not
properly compiled or evaluated. If a tenderer deflates a rate for his
time-related items and artificially inflates certain of his other rates, there
is an obvious danger to t he client if the quantity of the latter items is
greater than expected. Engineers are or dinarily watchful of this and do
not allow the practice.’
[39] Thirdly, Mr Boucher has pointed out that, in the tender of Eastern Cape
Steam CC (LK1894), the t enderer omitted prices for 438 items, which
comprised 26.45 percent of the tota l number of items and about seven
percent of the total contract price. The fact that these prices were omitted is
not in dispute and the point that Mr Boucher makes is that the tender rules
not in dispute and the point that Mr Boucher makes is that the tender rules
have been ignored in that a significant number of items were not priced by the
tenderer and this was ignor ed by Mr Kleyn. He deals too with Mr Kleyn’s
statement that the applicant did not price certain items in their tenders by
stating:
18
‘This riposte indicates just how little trouble the other Steam tenderers
and Kleyn put into preparing their tenders, estimates and the
evaluation of tenders. The reason is a simple one – th e equipment in
question does not have or utilise such spares or items for which no
price has been provided. If a certai n piece of equipment does not have
a radiator, you do not price for a radiator or radiator hose for that item –
if an item is not air-cooled, you do not price for a fan or a fan belt. By
way of an example, I refer the c ourt to page 263 of the applicant’s
ME1893 tender … . There are no prices for the removal of the radiator,
re-coring it, the removal of the water pump and the like because a
Lister Diesel Engine TS3 does not have a radiator (some of the others
have). I would have thought that Kleyn would know why no figures
were put in by the applicant. What is quite perplexing is what Steam
priced for.’
[40] Finally, Mr Boucher has highlight ed a number of blat antly inappropriate
costs in Mr Kleyn’s estimate of th e ME1893 tender, which was made after the
tenders were opened and which corre sponded exactly to his tender
evaluation, and thus form ed the basis of his conclusion that the applicant’s
tender was high. These include, in the firs t place, an unrealistically low figure
for monthly contractual commitments, which include ‘telephone and cell phone
charges, water, electricity, computers, photocopies, cameras (to photograph
service items) and rental of premises to house at least four service vehicles,
offices etc’. Mr Kleyn provided for a monthly amount of R1 666.00 for these
costs, an amount which is self-evidently inadequate. In the se cond place, the
depreciation of vehicles and equipment that he provided for was so low that
Mr Boucher summed up the effect by sayi ng that ‘Kleyn considered that the
four vehicles worth about R1 000 000.00 will be worth R940 000.00 after three
years and after each travelling 100 000 kms over some of the worst roads in
years and after each travelling 100 000 kms over some of the worst roads in
South Africa’. Thirdly, the amount he allowed for su pervisory administration
and stores staff meant t hat the gross salaries of supervisory staff,
administrative staff and stores staff w ould, on average, be about R2 500.00
per month. Fourthly, Mr Boucher made th e point that, while the applicant had
set its travel rate per kilometre at R5.00, a figure that had been considered by
19
Mr Kleyn to be fair and reasonable w hen he evaluated t he applicant’s 2002
tender, he set the rate in his evaluation at R3.50.
[41] These inaccuracies, mistakes and inconsistencies are evident from the
papers. It is not correct to categorise them as disputes of fact that either
cannot be resolved on the papers or ought to be resolved in favour of the
respondents, on the normal principles: Mr Boucher’s averments concerning
Mr Kleyn’s methodology are conclusion s that he has drawn from the
answering affidavits, the evaluations an d other documentation. This court is
able to draw conclusions as to the propr iety, consistency and rationality of Mr
Kleyn’s evaluations. It is evident from what has been set out above that the
evaluations of the tenders were flawed.
[42] In the light of the view I take of the appropriate remedy to be awarded, it
is not strictly speaking necessary to deal with Mr Buchanan’s argument that
the court has no power to take the decis ion that the admini strative decision-
maker ought to have taken, in circumst ances where, as in this case, no
decision has been taken. Suffice it to say that I am not convinced that the
argument is sound that the remedies listed in s 8(2) c onstitute a closed list.
That argument appears to overlook t he open-ended scheme of the remedies
contemplated for breaches of the right to just administrative action: a court
may, in terms of both s 8(1) and s 8(2) ‘grant any order that is just and
equitable’ and the orders contemplated may include those that are listed. I
see no reason why a failure to decide an application for a licence or permit,
for instance, may not, in an appropr iate case, be remedied by an order
granting the licence or permit where its grant is a foregone conclusion and no
purpose would be served in referring t he matter back to the administrative
decision-maker: a failure to decide ma y sometimes amount to a constructive
refusal.24
refusal.24
24 See, for instance, Pharmaceutical Society of South Africa and others v Tshabalala-
Msimang and another NNO; New Clicks South Af rica (Pty) Ltd v Minister of Health and
another 2005 (3) SA 238 (SCA), para 38 in which the delay in deciding an application for
leave to appeal was held to be ‘so unreasonable in fact that it could only be interpreted as a
refusal of leave’.
20
[43] It is not necessary to decide the issue because it is simply not possible
for this court to take the decision to award the mechanical and electrical
tenders to Intertrade, much as I sympathi se with it for the shameful treatment
it has had to endure at the hands of so me functionaries in the Provincial
Government over a protra cted period of time. The av ailability of proper and
adequate information and the institutional co mpetence of the court to take the
decision for the administrative decisio n-maker are necessary prerequisites
that must be present, apart from ‘exceptional circumstances’, before a court
can legitimately assume an administrative decision-making function. This, it
seems to me, is a minimum requirement of rational decision-making, a
fundamental requirement of the rule of law. 25 In this case, because of the
absence of proper estimates, because of the flaws in the evaluations of the
tenders and because of the unknown consequences on the tenders of the
inexcusable passage of time, both prer equisites are absent. If this court was
to award the tenders to Intertrade, it w ould act arbitrarily and in conflict with
the rule of law because it would not have a rational basis for concluding that
the award of the tenders would be ‘fair, equitable, transparent, competitive
and cost-effective’, as required by s 217(1) of the Constitution.
[44] I am acutely aware that the appellant wil l, no doubt, feel that it has been
robbed of the prize to which it considers itself entitled. After all, it is not to
blame for the way in which the t ender process has been handled. I
understand that, but wider in terests and principles are involved. Courts, like
any other institutions that exercise public power in terms of the Constitution,
are duty-bound to act in terms of the rule of law and its principle of legality.26
25 Pharmaceutical Manufacturers As sociation of SA and another: In re ex parte President of
25 Pharmaceutical Manufacturers As sociation of SA and another: In re ex parte President of
the Republic of South Africa and others 2000 (2) SA 674 (CC); 2000 (3) BCLR 241 (CC),
paras 85-86.
26 See in this regard, S v Mabena and another 2007 (1) SACR 482 (SCA), para 2 in which
Nugent JA held: ‘The Constitution proclaims t he existence of a State that is founded on the
rule of law. Under such a regime legitimate State authority exists only within the confines of
the law, as it is embodied in the Constitution that created it, and the purported exercise of
such authority other than in accordance with law is a nullity. That is the cardinal tenet of the
rule of law. It admits of no exception in relation to the judicial authority of the State. Far from
conferring authority to disregard the law the Cons titution is the imperative for justice to be
done in accordance with law. As in the case of other State authority, the exercise of judicial
authority otherwise than according to law is simply invalid.’
21
[45] Courts are, furthermore, duty-bound to respect the separ ation of powers,
an important pillar of the Constitution.27 Indeed, administrative law is, itself, an
incident of the s eparation of powers, a point m ade in the following terms by
Chaskalson P in the Pharmaceutical Manufacturers case:28
‘Whilst there is no bright line between public and private law,
administrative law, which forms the core of public law, occupies a
special place in our jurisprudence. It is an incident of the separation of
powers under which courts regulate and control the exercise of public
power by the other branches of gover nment. It is built on constitutional
principles which define the author ity of each branch of government,
their inter-relationship and the boundaries between them.’
[46] These constitutional principles mean that courts, when considering the
validity of administrative ac tion, must be wary of in truding, even with the best
of motives, without justification into the terrain that is reserved for the
administrative branch of government.29 These restraints on the powers of the
courts are universal in democratic so cieties such as ours and necessarily
mean that there are limits on the powers of the c ourts to repair damage that
has been caused by a breakdown in the administrative process. This case is
an ironic example of that: if the Provincial Govern ment had done a better job
of administering the tender process there might have been more information
available to this court, it might we ll have been concluded that exceptional
circumstances were present and it might then have been possible to have
taken a decision to award the tenders to the appellant.
27 South African Association of Personal Injury Lawyers v Heath and others 2001 (1) SA 883
(CC); 2001 (1) BCLR 77 (CC), paras 21-26.
28 Supra (note 25), para 45.
29 See generally Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and others
29 See generally Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and others
2004 (4) SA 490 (CC); 2004 (7) BCLR 687 (CC), paras 46-48. In Bato Star the doctrine of
deference was discussed in the context of review for reasonableness. O’Regan J located the
doctrine of deference, which she preferred to r egard as institutional respect, squarely within
the doctrine of the separation of powers. For instance, at para 48, she held: ‘In treating the
decisions of administrative agencies with the appropriate respect, a Court is recognising the
proper role of the Executive within the Consti tution. In doing so a Court should be careful not
to attribute to itself superior wisdom in rela tion to matters entrusted to other branches of
government.’ See too Foodcorp (Pty) Ltd v Deputy Di rector-General, Department of
Environmental Affairs and Tourism: Bran ch Marine and Coastal Management and others
2006 (2) SA 199 (C), 211G.
22
[47] That, however, is in the realms of speculation. All that this court can do is
to order that the process be complet ed. It appears to me, however, that a
convincing case has been made out by the appellant that t he evaluations of
the tenders were flawed. If the end result of the process is to be ‘fair,
equitable, transparent, competitive and cost-effective’, the evaluations must
be done again by a person other than Mr Kl eyn or a member of his firm. The
respondents will be ordered to appoint such a consultant, and to do so within
a specified period. Once that has happened and the consulta nt has, also
within a specified period, evaluated the tenders, the first re spondent will be in
a position to take a decision, in accor dance with the statutor y provisions that
empower him, that will complete the tender process.
[D] THE RESULT
[48] For the reasons set out above, the following order is made.
1. The appeal is allowed with costs.
2. The order of the court below is set aside and altered to read as
follows:
2.1 The first respondent is directed to appoint, within two weeks
of the date of this order, an independent consultant who is not
an employee of, or has an interest in, Lukhozi Consulting
Engineers (Pty) Ltd who shall evaluate the tenders for the
following contracts: tender PT B5-02/03-1893ME for mechanical
and electrical work for provincial hospitals and clinics in the
Alfred Nzo and OR Tambo districts; tender PTB5-02/03-1894ME
for mechanical and electrical work for provincial hospitals and
clinics in the Chris Hani and Ukhahlamba districts; tender PTB5-
02/03-1893LK for laundry and ki tchen repairs and maintenance
for provincial hospitals and cl inics in the Alfred Nzo and OR
Tambo districts; and tender PTB5-02/03-1894LK for laundry and
kitchen repairs and maintenance for the hospitals in the Chris
Hani and Ukhahlamba districts.
2.2 The consultant thus appoi nted shall evaluate the tenders
and make a recommendation to t he first respondent within two
23
months of the date of his or her appointment by the first
respondent in terms of paragraph 2.1 above.
2.3 The first respondent is directed to decide on the above
mentioned tenders within one month of receiving the
recommendation mentioned in paragraph 2.2 above.
2.4 The respondents are directed to pay the applicant’s costs.
_____________________
C. PLASKET
JUDGE OF THE HIGH COURT
I agree.
________________________
E. REVELAS
JUDGE OF THE HIGH COURT
I agree.
_______________________
L. KEMP
ACTING JUDGE OF THE HIGH COURT