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[2014] ZAWCHC 51
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City of Cape Town v Aurecon South Africa (Pty) Ltd (5663/13) [2014] ZAWCHC 51 (14 April 2014)
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
CASE
NO: 5663/13
DATE:
14 APRIL 2014
In the matter
between:
CITY OF CAPE
TOWN
.......................................................................................
Applicant
And
AURECON SOUTH
AFRICA (PTY)
LTD
.....................................................
Respondent
JUDGMENT
DELIVERED ON 14
APRIL 2014
YEKISO, J
[1] By way of a
notice of motion issued out of this court, the City of Cape Town
(“the City”) has launched an application
for the judicial
review of its own decision taken on 31 October 2012 to award a tender
known as Tender Number 459C/2010/11: Provision
of Professional
Services: Decommissioning of Athlone Power Station (“the
Tender”) to the respondent. The application
is brought
pursuant to the provisions of the
Promotion of Administrative Justice
Act, 3 of 2000
.
[2] It is
contended on behalf of the City that the decision to award the tender
to the respondent falls to be reviewed and set
aside on several
grounds, these being that a mandatory and material procedure or
condition prescribed by the relevant empowering
legislation was not
complied with; that the decision was taken pursuant to a procedure
that was unfair; that the decision was materially
influenced by an
error of law; that irrelevant considerations were taken into account
and relevant considerations were not taken
into account in the taking
of the decision; and that the decision is otherwise unlawful or
unconstitutional as contemplated in
section 6(2)(b)
;
section 6(2)(c)
;
section 6(2)(d)
;
section 6(2)(e)(iii)
; and
section 6(2)(i)
of the
Promotion of Administrative Justice Act.
[3
] The City also
seeks an order, in the event of an order referred to in paragraph [1]
of this judgment being granted, that any
contract that may have come
into existence between the City and the respondent as a result of the
award, be declared void ab initio;
alternatively, that any such
contract be set aside coupled with a further order directing the
respondent to pay the costs of this
application in the event of the
respondent opposing the relief sought.
[4] The City
further seeks an order condoning its failure to adhere to the 180-day
period imposed by
section 7
of the
Promotion of Administrative
Justice Act for
the institution of these review proceedings. This is
because the decision to award the tender to the respondent was taken
on 31
October 2011 and the 180-day period for the institution of
proceedings for judicial review referred to in
section 7(1)
of the
Promotion of Administrative Justice Act has lapsed prior to the
institution of these proceedings. The extension of the
180-day
period is required in terms of
section 9(1)
of the
Promotion of
Administrative Justice Act. Section
9(1) of the
Promotion of
Administrative Justice Act provides
that the period of 180 days
referred to in
section 7
may be extended by a court on application by
the person or author of the administrative action concerned.
[5] The
respondent opposes the relief sought on various grounds. The
respondent has simultaneously instituted a counter-application
in
which it seeks a declaratory order that it was not, and still is not
precluded, in terms of paragraph 95 of the City’s
Supply Chain
Management Policy; the Supply Chain Management Regulations made in
terms of section 168 of the Local Government: Municipal
Finance
Management Act, 56 of 2003 (“MFMA”) or for any other
reason, from bidding for the tender or for any other tender
pertaining to the decommissioning of the Athlone Power Station which
is based on the draft scope of work prepared by the joint
venture
between Aurecon Engineering International (Pty) Ltd and ODA (Pty)
Ltd. Similarly, the City opposes the relief sought in
the
counter-application.
[6] Initially
the respondent, in its answering affidavit, disputed the applicant’s
locus standi; authority to institute
these proceedings; and to the
admission of certain hearsay evidence emanating from of the founding
affidavit. However, when the
matter came before me, I was informed
that the authority of the deponent to the applicant’s founding
affidavit to institute
these proceedings on behalf of the City, is no
longer disputed, nor will it be necessary for me to exercise any
discretion in regard
to the admission of hearsay evidence, the
parties having agreed that at least some of the hearsay evidence on
which the City, as
well as the respondent, seek to rely be admitted
into evidence.
[7] However, in
as far as the Ernst & Young report is concerned, on which the
City’s application is largely based,
the contents thereof are
very much in dispute. It is contended on behalf of the respondent
that there is no agreement between the
parties as to the probative
value of the hearsay evidence relied on by the City emanating from
the Ernst & Young report, nor
is it conceded that such evidence
supports the contentions advanced on behalf of the City.
THE PARTIES
[8] The
applicant is the City of Cape Town (“the City”), a
metropolitan municipality as defined in
section 1
of the
Local
Government: Municipal Structures Act, 117 of 1998
, with its principal
place of business situate at the office of the City Manager, Civic
Centre, Hertzog Boulevard, Cape Town.
[9] The
respondent is Aurecon South Africa (Pty) Ltd, registration number
1977/003711/07, a limited liability company, duly
incorporated in
accordance with the company laws of the Republic of South Africa,
with its principal place of business situate
at Aurecon Centre,
Lynnwood Bridge Office Park, 4 Daventry Street, Lynnwood Manor,
Pretoria. The respondent has a regional office
in Cape Town situate
at Aurecon Centre, Century Falls, Century Boulevard, Century City,
Cape Town.
THE DECISION
[10] The
decision sought to be reviewed and set aside was taken by the City’s
Bid Adjudication Committee on 31 October
2011. The decision, which
is in the form of a resolution, reads as follows:
“RESOLVED that
for the reason set out in the report the tender offer submitted by
Aurecon South Africa for tender number 459C/2010/11:
Provision of
Professional Services: Decommissioning of Athlone Power Station in
the amount of R9,748,973-50 (excluding VAT) be
accepted subject to
the conclusion of the
section 33
(MFMA) process.”
[11] The
provisions of
section 33
of Municipal Finance Management Act regulate
the conclusion of contracts which impose financial obligations on a
municipality beyond
a financial year. They do not pertain to a
consideration of any irregularities in the procurement process. It
is contended on
behalf of the City that the award of the tender by
the City’s Bid Adjudication Committee on 31 October 2011, was
accordingly
a final award, but, pending the fulfilment of the section
33 requirements, no contract had as yet been concluded between the
City
and the respondent.
LEGISLATIVE
FRAMEWORK
[12] The
procurement of services by organs of state is regulated by the
provisions of section 217 of the Constitution of the
Republic of
South Africa, 1996 (“the Constitution”). The section
provides in sub-section (1) thereof that procurement
processes must
be done in accordance with a system that is fair, equitable,
transparent, competitive and cost effective. Section
217(1) of the
Constitution provides as follows:
“(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 the system which is fair, equitable,
transparent,
competitive and cost effective.”
[13] Section
217(2), in turn, makes provision for implementation of procurement
policies by organs of state or institutions.
It provides that organs
of state or institutions may implement procurement policies providing
for categories of preference in the
allocation of contracts; and the
protection or advancement of persons, or categories of persons
disadvantaged by unfair discrimination.
Section 217(3), by way of
conclusion, provides that national legislation must prescribe a
framework within which the policies referred
to in sub-section (2) in
section 217 must be implemented.
[14] The
legislation underlying the system and the implementation of
procurement policies referred to in section 217(2) of the
Constitution includes the
Preferential Procurement Policy Framework
Act, 5 of 2000
as well as regulations promulgated thereunder. The
regulations that applied at the time of the tender process which is
the subject
of these proceedings are those that were promulgated in
Government Notice R725 of 10 August 2001 published in Government
Gazette
No 22549. Those regulations have since been repealed and have
been substituted by new regulations promulgated under Government
Notice R502 of 8 June 2011.
[15] The
Municipal Finance Management Act referred to in paragraph 5 of this
judgment provides, in section 112 thereof, that
the Supply Chain
Management Policy of a municipal entity must be fair, equitable,
transparent, competitive and cost effective.
It thus underscores the
provisions of section 217(1) of the Constitution.
[16] There also
is reference to the MFMA Circular Nr 53 dated 3 September 2010 issued
by the National Treasury applicable to
all new bid invitations issued
on or after 15 September 2010. The circular is intended to be used as
a guideline when functionality
is included as a criterion in the
evaluation of bids. The National Treasury issues such circulars from
time to time but the one
dated 3 September 2010 has to be read in
conjunction with the National Treasury’s document dated October
2005 under the title
“SUPPLY CHAIN MANAGEMENT: GUIDE FOR
ACCOUNTING OFFICERS OF MUNICIPALITIES & MUNICIPAL ENTITIES”.
There also is
reference, both on the basis of evidence tendered and
in the parties’ submissions to the City’s Supply Chain
Management
Policy which regulates the consideration of the award of
the tenders.
THE FACTS
[17] During 2008
a tender for the performance of a high level pre-feasibility study in
respect of the redevelopment of the site
on which the defunct Athlone
Power Station is situated was awarded to the joint venture comprising
one of the respondent’s
wholly owned subsidiaries, Aurecon
Engineering International (Pty) Ltd and ODA (Pty) Ltd. The scope of
the joint venture included
an obligation to assist the City’s
Electricity Services Directorate with a compilation of the scope of
work for the decommissioning
of the Power Station. A draft scope of
work was duly prepared by the joint venture in conjunction with the
City’s Electrical
Services Department during the early part of
2010.
[18] Around the
time when the first draft scope of work was circulated, the
possibility of the joint venture’s brief being
expanded to
include the compilation of the tender documents for the
decommissioning of the power station was mooted by City officials.
A
Mr Jones, from the City’s Electricity Services was one of the
persons within the department who was involved in the discussion
with
regards to the possibility of expanding the joint venture’s
brief to include the compilation of the decommissioning
tender
documents under the re-development study contract. After a debate
between these officials, it was, however, decided that
the joint
venture’s assistance in the compilation of the tender document
would not be required.
[19] During an
informal meeting which took place in the office of the City’s
Electricity Services Department on 1 April
2010 with a view to
discussing an early version of the draft scope of work produced by
the joint venture, the joint venture’s
project manager, a Mr
Jonathan Webb, was informed by Mr John Davidson, the City’s
Head of Electricity Generation, that as
long as “Aurecon”
did not provide any input concerning the structure of preference and
was not represented on the City’s
Bid Valuation or Bid
Adjudication Committees, there would not be “a conflict of
interest” which would prevent it from
tendering for the
decommissioning of the power station.
[20] In
September 2010 the respondent produced a draft scope of work relating
to the provision of professional consultancy services
for the
decommissioning of the Athlone Power Station site. The draft scope of
work was submitted by the respondent obviously in
the knowledge that
it would in due course be made available to the Bid Specification
Committee. The provision of this information
was necessary for the
Electricity Department to be informed of the required end state to
allign the process with the objectives
of the Spatial Planning
Department as determined in the pre-feasibility studies. The bid
documentation relating to the tender which
is the subject of these
proceedings, was prepared by the Bid Specification Committee and
incorporates the respondent’s said
scope of work.
[21] Once joint
venture’s pre-feasibility study was completed, tender
documents, which ultimately became known as tender
number
266C/2010/11, were prepared. The tender called for proposals for the
Provision of Professional Services: Decommissioning
of Athlone Power
Station and was issued on 11 February 2011. Tenders were invited to
tender for the decommissioning of the Power
Station. The respondent
duly submitted its tender. Significant post site meetings queries
arose in respect of the tender document
which culminated in a
decision being taken to cancel this tender. A revised tender
document was drafted to address the concerns
raised during the first
tender process. The revised tender document was re-issued under
Tender Number 459C/2010/11 which, according
to the document, was
advertised on 13 May 2011. Respondent again tendered for the
project.
[22] On the
closing date after due process, the tender submission documents were
forwarded to the City’s Supply Chain
Management at which point,
a Ms Jenny Park, the Supply Chain Practitioner for this particular
project, together with her team,
conducted a preliminary evaluation
of the tender submissions. The preliminary evaluation included the
schedule of pricing and
the status of each tender submission, which
also included the historically disadvantaged individual component of
the process.
[23] The
respondent’s second tender was submitted on 15 June 2011. In
its tender it offered to provide the professional
services associated
with the decommissioning of the Power Station at a price of
R11,113,829-39 inclusive of VAT. The City also
received five other
tenders in response to its second invitation to tender. Some of the
tender prices exceeded that offered by
the respondent and some were
lower. The tenders received by the City were duly analysed and
considered by its Bid Evaluation Committee.
Having found all tenders
except the respondent’s to be non-responsive for failing to
comply with the eligibility criteria
in respect of “key
personnel” as prescribed in the tender data, the Bid Evaluation
Committee submitted a report to
the City’s Bid Adjudication
Committee on 25 October 2011, in which it recommended that the
respondent’s tender, being
the only responsive one, be
accepted. The Bid Evaluation Committee’s recommendation was
endorsed by the City’s Bid
Adjudication Committee which, on 31
October 2011, resolved that the respondent’s tender be
accepted, subject to the conclusion
of the “Section 33 (MFMA)
process”.
[24] On 4
November 2011 the respondent received a letter from the office of the
City’s Director: Supply Chain Management
in which the
respondent was informed as follows:
“The Supply
Chain Management: Bid Adjudication Committee of the City of Cape
Town, on 31 October 2011, considered your offer
for the
abovementioned tender. I have the pleasure of advising you that your
tender was accepted in the amount of R9,748,973-15
(excluding VAT),
from date of commencement of contract until a date to be determined
during the section 33 (MFMA) process.”
[25] The
respondent was furthermore informed, in the same letter of 4 November
2011, that the award of the tender was subject
to a 21 day appeal
period and that the respondent would be notified once that period had
elapsed whether or not any appeals had
been lodged against the award.
In the same letter the respondent was further informed that no
rights would accrue until appeals,
if any, would have been finalised.
Finally, it was brought to the respondent’s attention that the
contract in question is
described as a long term contract in terms of
section 33 of the Municipal Finance Management Act and that, in view
thereof, the
implementation of the contract would have to be approved
by the Council of the City of Cape Town.
[26] On 8
November 2011 the respondent received yet a further letter from the
office of City’s Director, Supply Chain
Management. The
respondent was informed in that letter that an appeal had been lodged
against the award of the tender to the respondent
and that the appeal
was in the process of being resolved. The author of the letter
undertook to advise the respondent of the outcome
of the appeal “and
the commencement date of the contract” once the appeal had been
resolved.
[27] On 17
January 2012 the respondent received two further letters from the
City’s Supply Chain Management Director’s
office. In the
first letter the respondent was informed that the appeal against the
award of the tender had been “resolved”
and that the
respondent would be contacted by the project manager for the
implementation of the project. In the second letter the
respondent
was informed that “the commencement of the contract is subject
to the conclusion of the section 33 of the Municipal
Finance
Management Act (MFMA No 56 of 2003) process, as indicated in our
letter dated 4 November 2011”. The author of the
letter added
that the respondent would be notified in due course once this process
has been completed.
[28] No further
communication was addressed to the respondent subsequent ot the two
letters of 17 January 2012. It appears
that a matter of the approval
of the tender awarded to the respondent was one of the items on the
agenda of the Municipal Council
Meeting held on 29 August 2012. It
appears that at that meeting, concerns were raised by certain council
members about the regularity
of the award of the tender to the
respondent arising from the fact that the respondent had been
permitted to tender for the contract
despite the respondent having
been involved in the drafting of the applicable scope of work.
Deliberations of the council meeting
relating to this item were
widely reported in the media. It was also reported that the mayor had
appointed auditors, Ernst &
Young, to conduct an investigation
into the matter.
[29] The Ernst &
Young report was received by the City on 22 October 2012. It
contained findings of numerous “irregularities”
which had
allegedly been committed by the City’s Bid Evaluation Committee
and the Supply Chain Management department.
[30] The
respondent was informed of Ernst & Young’s main findings in
a letter dated 23 November 2012 addressed to
the respondent by the
then Acting City Manager. In the letter, reference was made to the
Bid Adjudication Committee’s resolution
of 31 October 2011 to
award the tender to the respondent and to the fact that the section
33 MFMA process had not yet been complied
with for reasons set out in
the letter. The respondent was also informed, in the same letter,
that following the decision of the
Bid Adjudication Committee the
City had received various complaints relating to the irregularity of
the tender process and the
award of the tender to the respondent.
The respondent was thereupon invited to make representations to show
cause why the City
Manager should not invalidate and set aside the
award by the Bid Adjudicating Committee on 31 October 2011 of Tender
Number 459C/201/11
and the resultant contract, to it.
[31] The letter
by the Acting City Manager referred to in the preceding paragraph
reads as follows in paragraph 11 thereof :
“11. I am
further of the view that, in as much as the lineage of the final
scope of work that formed part of the bid specification
for Tender
459C/2010/11 can be traced directly to the draft scope of work
prepared by Aurecon in 2009, that it is precluded, in
terms of clause
95 of the SCM policy and regulation 27(4) of the SCM regulations,
from bidding, both for Tender 459C/2010/11, and
for any future tender
that is based on the draft scope of work prepared by it in 2009.”
[32] In
paragraph 12 thereof the letter proceeds as follows:
“12. Aurecon
is required to deal, in its aforesaid representations, also with the
question of why I should not find that it
was at all times precluded
from tendering for Tender 459C/2010/11, by virtue of the provisions
of clause 95 of the SCM policy and
regulation 27(4) of the SCM
regulations, and that it remains precluded in the event that any
future tender for the decommissioning
of the Athlone Power Station is
based upon the draft scope of work prepared by it in 2009.”
[33] From the
content of the aforementioned letter, it is evident that the City
Manager’s main concern was the possible
contravention of clause
95 of the Supply Chain Management Policy and regulation 27 (4) of the
Supply Chain Management Regulation,
apart from other “irregularities”
referred to in the report produced by Ernst & Young.
[34] On 27
November 2012, the respondent requested the City to provide it with
copies of the Ernst & Young report as well
as other relevant
documentation referred to in the City’s letter of 23 November
2012 in terms of the provisions of the Promotion
of Access to
Information Act. In the same letter the respondent requested a
reasonable opportunity to make representations as requested.
On 19
December 2012 the records requested by the respondent, inclusive of
the Ernst & Young report and annexures thereto, were
provided to
the respondent’s attorneys, Weavind & Weavind. On 31
January 2013 the respondent submitted representations
to the
applicant in which it dealt with the issues alluded to in the Acting
City Manager’s letter of 23 November 2012. No
further
communication was addressed to the respondent by the City other than
being informed that the City had resolved to bring
a review
application out of this court.
ALLEGED
IRREGULARITIES
[35] Following
upon the production of the Ernst & Young report, and based on the
report produced by Ernst & Young, the
City officials identified
several irregularities on the basis of which, a view was formed that
review proceedings be instituted
to review the City’s own
decision in awarding Tender 459C/2010/11 to the respondent.
[36] The
following irregularities were identified:
[36.1.] The lineage
of the final scope of work that formed part of the bid specification
for Tender 266C/2010/11 and, subsequently,
for the tender that was
awarded to the respondent, being Tender 459C/2010/11, can be traced
directly to the draft scope of work
prepared by the respondent in
2010. This, the City contends, is a contravention of clause 95 of the
Supply Chain Management Policy
as well as Regulation 27(4) of the
Supply Chain Management Regulations;
[36.2.] Several
internal City email communications regarding the pending Power
Station tender were either communicated to the respondent
or copied
to the respondent;
[36.3.] The Bid
Evaluation Committee did not always meet as a collective to evaluate
the functional scoring in respect of the tender.
It is contended on
behalf of the City that members of the Bid Evaluation Committee in
the persons of Mr Davidson, Mr Van Rooy
and Ms Park should have met
and scored the functionality of the bidders together. It is
contended on behalf of the City that this
irregularity compromises
the validity of any decision taken during the tender process;
[36.4.] The rules of
order were not adhered to as Mr Eybers, who was not an authorised
member of the Bid Evaluation Committee, participated
in the scoring;
[36.5.] The Bid
Evaluation Committee meeting of 5 August 2011 was not properly
constituted;
[36.6.] The
respondent’s non-responsive tender with regard to the
withdrawal of the qualification contemplated in schedule
15 of the
tender document was allowed resulting in the non-responsive bid
subsequently becoming responsive in contravention of
clause F.3.8.2
of the Standard Conditions of Tender;
[36.7.] The
respondent’s failure to submit audited financial statements on
the written request of the Bid Evaluation Committee
in terms of
clause 214.1 of the Supply Chain Management Policy rendered its bid
non-responsive on 2 September 2011. This, so it
is contended on
behalf of the City, should have precluded the respondent from further
inclusion in the tender evaluation process;
[36.8.] The members
of the Bid Evaluation Committee continued to evaluate the
respondent’s bid after the bid validity period
had expired.
It is thus contended on behalf of the City that the validity period
of respondent’s bid was irregularly extended
in contravention
of clause 140 of the Supply Chain Management Policy.
[36.9.] The report
of the Bid Evaluation Committee to the Bid Adjudication Committee
contained material errors on the basis of which
the Bid Adjudication
Committee would have reached a different conclusion had it been aware
of the correct facts and circumstances.
[37] It is on the
basis of the aforementioned alleged transgressions that it is
contended on behalf of the City that the respondent
was afforded an
unfair advantage over the other bidders who took part in the
procurement process. This, so it is contended on
behalf of the City,
constitute a basis on which the procurement process falls to be
reviewed and set aside on the grounds set out
in section 6(2)(b);
section 6(2)(c); section 6(2)(d); section 6(2)(e)(iii); and
section
6(2)(i)
of the
Promotion of Administrative Justice Act.
PREPARATION
OF
THE DRAFT SCOPE OF WORK
[38] In paragraph
[17] of this judgment I referred to a tender which was awarded to a
joint venture comprising one of the respondent’s
wholly owned
subsidiaries and ODA (Pty) Ltd for the performance of a high level
pre-feasibility study on the re-development of
the site on which the
Athlone Power Station is situated and the resultant draft scope of
work arising from that process. Because
of the respondent’s
involvement in that project, through its wholly owned subsidiary, it
is contended on behalf of the City,
that it (the respondent) is
precluded from bidding in Tender 459C/2010/11 in terms of the
provisions of clause 95 of the Supply
Chain Management Policy, read
with Regulation 27(4) of the Supply Chain Management Regulations.
This perceived preclusion of the
respondent to bid in the subsequent
tender ultimately became the basis of the respondent’s
counter-application in these proceedings.
[39] In its
notice of counter-application the respondent seeks an order that it
was not, and still is not precluded, in terms
of paragraph 95 of the
City’s Supply Chain Management Policy, the Supply Chain
Management Regulations made in terms of
section 168
of the
Local
Government: Municipal Finance Management Act, 2003
or for any other
reason, from bidding for the City’s Tender 459C/2010/11 or for
any other tender pertaining the decommissioning
of the Athlone Power
Station which is based on the draft scope of work prepared by the
joint venture between Aurecon Engineering
International (Pty) Ltd and
ODA (Pty) Ltd.
[40] In response
to the relief sought in the counter-application, it is submitted on
behalf of the City that the bid documentation
relating to the tender
which is the subject of these proceedings incorporates the scope of
work which was prepared by the respondent
and approved by the Bid
Specification Committee. A point is being made in the City’s
submissions that while the draft scope
of work and the final scope of
work are not identical, significant portions thereof are identical.
The submission goes further
to point out that, indeed, an examination
of the two documents indicates that the draft scope of work was
incorporated almost in
its entirety into the final scope of work
prepared by the Bid Specification Committee.
[41] It is
submitted on behalf of the City that, on a proper interpretation of
the relevant provisions, in order to prove a contravention
of clause
95 of the Supply Chain Management Policy and Regulation 27(4) of the
Supply Chain Management Regulations, it is not necessary
to show that
a tenderer actively participated in the actual proceedings of the Bid
Specification Committee or actively attempted
to influence the design
or content of the specification, or even that the tenderer intended
or hoped to influence the outcome of
the tender process, or that the
outcome was indeed so influenced. It is thus submitted that the
ambit of clause 95 of the Supply
Chain Management Policy is wide
enough that it need merely be shown that the tenderer was “involved
with” the Bid Specification
Committee in the context of the
evidence tendered in these proceedings, especially in the light of
the objectives set out in the
Constitution, the Municipal Finance
Management Act, the Supply Chain Management Regulations and the
Supply Chain Management Policy,
the objective being to ensure
transparency and fairness.
[42] The
submission finally concludes that not only should the procurement
processes contemplated in the Constitution, the Municipal
Finance
Management Act, the Supply Chain Management Regulations and the
Supply Chain Management Policy be fair and equitable in
that no undue
advantage or preference should be given to any party, they must also
be seen to be fair and equitable. To allow a
party to bid for a
contract, the specification for which were to a significant extent
determined by the same party, clearly does
not fulfil the
requirements of fairness.
[43] Because the
respondent was allowed to tender in circumstances where it was
involved in the preparation of the draft scope
of work a significant
portion of which became part of the bid specification, caused the
respondent to enjoy an unfair advantage
over other bidders in that
the respondent had been placed in possession of pertinent information
relating to the tender prior to
the formal initiation thereof. This,
so it is submitted on behalf of the City, renders the tender process
unfair and constitutes
a ground of review contemplated in
section
6(2)(c)
of the
Promotion of Administrative Justice Act.
THE
RESPONDENT’S
SUBMISSIONS
[44] In response
to the City’s submissions, it is contended on behalf of the
respondent that, for a proper interpretation
of clause 95 of the
Supply Chain Management Policy, read together with Regulation 27(4)
of the Supply Chain Management Regulations,
there are two questions
that need to be answered, these being whether the City’s
interpretation of clause 95 and Regulation
27(4) is correct; and if
it is correct, whether the Bid Adjudication Committee’s
decision is reviewable for that reason,
even if the Bid Adjudication
Committee or the City’s Bid Evaluation Committee reasonably
believed clause 95 and Regulation
27(4) not to have been contravened.
[45] In support
of this approach, the respondent places reliance on the “doctrine
of deference” and a discussion
of that doctrine in Hoexter:
Administrative Law in South Africa, Second Edition at pp147 -155. The
discussion, in the aforementioned
work, refers to two standards of
review based in Canadian law, these being reasonableness and
correctness. The submission goes
further to point out that which of
the two standards of review will apply in any given set of
circumstances will depend on a variety
of factors.
[46] In support
of that proposition the respondent relies on a Canadian authority in
the form of Pushpanathan v Canada (Minister
of Citizenship &
Immigration)
[1998] 1 SCR 982
(Can) in which it was found by the
Supreme Court of Canada that one of the most important factors in
determining whether the appropriate
standard of review is correctness
or reasonableness, is the expertise of the tribunal or administrator
in question. If a tribunal
has been constituted on the basis of a
particular expertise with respect to achieving the aims of an Act,
whether because of the
specialised knowledge of the decision-makers,
special procedures or non-traditional means of implementing the Act,
then a greater
degree of deference will be accorded.
[47] Similarly,
where the purposes of the statute and of the decision-maker are
conceived not primarily in terms of establishing
rights as between
parties, or as entitlements, but rather as a balancing between
different constituencies, then the appropriateness
of court
supervision diminishes. The submission goes further to point out that
even pure questions of law may be granted a wide
degree of deference
where a pragmatic and functional analysis suggest that such deference
is the legislative intention.
[48] With
regards to the application of the deference doctrine in South African
law a reference is made to observations by Corbett
CJ in Hira v
Booysen
1992 SA 4
96 A at 93A-94A in support of a contention that the
doctrine of deference to tribunals constituted on the basis of
specialised
knowledge is consistent with South African law. If Hira v
Booysen is still good law in South Africa, so the submission goes, it
must follow that an incorrect, as opposed to unreasonable,
application of clause 95 of the Supply Chain Management Policy and
Regulation 27(4) of the Supply Chain Management Regulations will not
necessarily result in reviewability. It all depends on the
legislative intent. Based on this approach, and in establishing the
legislative intent a contextual, as opposed to a literal approach,
in
the interpretation of clause 95 and Regulation 27(4), has to be
applied.
[49] If
“correctness”, so the submission goes, is the applicable
standard of review, then the Supply Chain Management
Policy and the
Regulation promulgated incidental thereto must be interpreted
according to the rules applicable to written legal
instruments in
general, such as legislation and written contracts. One of those
rules is that such instruments are to be interpreted
in the context
of the document as a whole, since “context is everything”.
[50] Based on
the approach as set out in the preceding paragraphs it is then
contended on behalf of the respondent that in the
instance of this
matter the Bid Evaluation Committee derived its powers from the
Supply Chain Management Policy and the Supply
Chain Management
Regulations. Accordingly, the legislative intent must, first and
foremost, be searched for in those regulatory
instruments. In an
endeavour to search such legislative intent one has to navigate the
entire regulations, ranging from Regulation
2(1) which provides that
each municipality must, in terms of section 111 of the Municipal
Finance Management Act, have and implement
a Supply Chain Management
Policy that complies with the requirements of that regulatory
environment; Regulation 2(3) which provides
that no municipality may
act otherwise than in accordance with its Supply Chain Management
Policy when procuring goods or services;
the use of treasury
guidelines in the preparation of a draft Supply Chain Management
Policy;
[51] Regulation
4(1)(a) provides that the council of a municipality must delegate
such additional powers and duties to the accounting
officer as needed
to enable the accounting officer to discharge the Supply Chain
Management responsibilities conferred on it (the
accounting officer)
in terms of the Municipal Finance Management Act and the Supply Chain
Management Policy of the municipality;
the provision for
sub-delegation of Supply Chain Management powers and duties,
including those powers delegated to the accounting
officer in terms
of Regulation 4(1); the establishment of a Supply Chain Management
unit to implement its Supply Chain Management
Policy in terms of
Regulation 7(1); Regulation 8 which provides for the training of
officials involved in implementing a supply
chain management policy
in accordance with any treasury guidelines on supply chain management
training.
[52] Part II of
Chapter 2 of the Supply Chain Management Regulations provides for
certain requirements with which a municipality’s
supply chain
management policy has to comply in respect of acquisition management.
Regulation 26(1) provides that a supply chain
management policy must
provide for a committee system for competitive bids consisting of at
least a bid specification committee;
a bid evaluation committee; and
a bid adjudication committee, members whereof have to be appointed by
the accounting officer taking
into account section 117 of the
Municipal Finance Management Act and for the attendance or oversight
process by a neutral or independent
observer appointed by the
accounting officer, when this is appropriate, in ensuring fairness
and promoting transparency.
[53] Finally,
there is a reference made, in the course of this navigation, to
Regulation 27(1) which provides for the duties
and the
responsibilities of the Bid Specification Committee for each
procurement of goods and services; Regulation 27(3) which
regulates
the composition of the Bid Specification Committee which, where
appropriate, may include external specialist advisors;
and Regulation
27(4) which provides that no person, advisor or corporate entity
involved with the Bid Specification Committee,
or director of such
corporate entity, may bid for any resulting contracts.
[54] Based on
what is contended to be a contextual approach in interpreting the
relevant regulations, it is contend on behalf
of the respondent that
the structure of the relevant legislative instruments, that is the
Supply Chain Management Policy and the
Regulations, suggests an
intention to establish municipal procurement systems where
municipalities enjoy a great deal of autonomy,
not only in the
adoption, but also in the implementation of its own procurement
practices and policies.
[55] Based on
this approach, it is further contended on behalf of the respondent
that it is evident from the way the regulations
are structured that
it was left to the City’s Supply Chain Management Department
and the practitioners employed by it to
implement the Supply Chain
Management Policy, which necessarily require them to interpret and
apply the provisions thereof where
necessary.
[56] The
contention boils down thereto that the implementation of the supply
chain management policy, including its interpretation,
was assigned
to a group of well-trained administrators expected to be well-versed
in procurement systems in general and the supply
chain management, in
particular. All of this, so it is contended, is strongly indicative
of a legislative intent that the interpretation
and application of
the supply chain management policy should be deferred to the Supply
Chain Evaluation and Adjudication Committee
and can only be
interfered with where they have acted unreasonably. Finally, it is
contended that, in the present instance, the
Bid Specification
Committee, including its Supply Chain Management practitioner member
in the person of Ms Park, clearly did not
consider the respondent to
be a person, advisor or corporate entity involved with the Bid
Specification Committee as contemplated
in Regulation 27(4) of the
Supply Chain Management Regulations and clause 95 of the Supply Chain
Management Policy. It is thus
contended that in the circumstances of
this matter it cannot be said that they acted unreasonably in not
disqualifying the respondent’s
tender for that reason. I do
not agree.
[57] An
interpretation of a clause or regulation which lends credence to an
admission of a tenderer to a procurement process
the significant
portion of which can be traced back to that tenderer is, in my view,
inconsistent with the value underpinning fairness
and reasonableness.
That approach would be entirely inconsistent with a proper concern
for refusal to tolerate corruption and
maladministration.
[58] There is
undisputed evidence that the bid documentation relating to the tender
which is the subject of these proceedings
incorporates the scope of
work which was prepared by the respondent and ultimately approved by
the Bid Specification Committee.
That draft scope of work and the
final scope of work, though not identical, the significant portions
thereof are identical. As
a matter of fact, the draft scope of work
was incorporated almost in its entirety into the final scope of work
prepared by the
Bid Specification Committee.
[59] As is
correctly pointed out in the City’s submissions, it is not
necessary to show that a tenderer actively participated
in the actual
proceedings of the Bid Specification Committee, or actively attempted
to influence the design or content of the specification
or even that
the tenderer intended or hoped to influence the outcome of the tender
process, or that the resultant outcome was indeed
so influenced. In
my view, the ambit of clause 95 of the Supply Chain Management Policy
and Regulation 27(4) of the Supply Chain
Management Regulations is
wide enough that it need merely be shown that the tenderer (the
respondent in the instance of this matter),
as appears to be the
cased on the basis of the evidence presented in these proceedings,
more especially in the light of the objectives
set out in section
217(1) of the Constitution; clause 95 of the Supply Chain Management
Policy; and Regulation 27(4) of the Supply
Chain Management
Regulations, was afforded an unfair advantage over the other bidders
who took part in the procurement process.
All the values espoused in
all the aforementioned legal instruments underpin a process which
ought not only be fair, equitable,
transparent, competitive and cost
effective, but to be seen as such.
[60] As has
already been pointed out in paragraph [42] of this judgment, to allow
a party to bid for a contract, the specifications
of which are to a
significant extent determined by the same party, is clearly
inconsistent with the values underpinning fairness.
Whilst members
of the Bid Specification Committee and the Bid Evaluation Committee
may have bona fide believed that allowing the
respondent to
participate in the procurement process does not violate clause 95 and
Regulation 27(4), such an approach, in my view,
is not only
incorrect, wholly unreasonable but also inconsistent with the value
underpinning fairness.
[61] In reaching
the conclusion I did in the preceding paragraph, I am mindful of the
evidence of Mr Hans Peter Silbernagl,
an experienced independent
consulting engineer, about the existing norms and practice in the
industry. Mr Silbernagl points out
that if the City’s
interpretation of clause 95 of the Supply Chain Management Policy and
Regulation 27(4) of the Supply Chain
Management Regulations, is not
accepted, it will result in unnecessary and wasteful expenditure
which will not be in the best interest
of organs of state and tax
payers. Mr Silbernagl points out in his evidence that instead of
discouraging engineers with intimate
knowledge of a particular
project because of their prior involvement therewith from tendering
for subsequent related projects,
they should be encouraged to put
such knowledge to good use.
[62] What Mr
Silbernagl points out may well be so but, in matters of this nature,
where participation in a procurement process
is regulated by specific
legislative measures, such legislative measures ought to be complied
with. Any other approach, no matter
how well-intentioned that
approach may be, will be inconsistent with the principle of legality.
[63] In the
circumstances, I accordingly find that the respondent, because of its
prior involvement in the preparation of the
draft scope of works, is
precluded, and remains precluded, in terms of the clause 95 of the
Supply Chain Management Policy and
Regulation 27(4) of the Supply
Chain Management Regulations, from tendering for the contract. The
fact that the respondent was
allowed to bid and that its bid was not
rejected at the outset, rendered the procurement process unfair and
constitutes a ground
for review in terms of
section 6(2)(c)
of the
Promotion of Administrative Justice Act.
IRREGULARITIES
[64] In
paragraph [36] of this judgment I identified several alleged
irregularities which, according to the City, were committed
during
the evaluation process and, on the basis of which, according to the
contention of the City, the procurement process ought
to be reviewed
and set aside. These relate to members of the Bid Evaluation
Committee not having met as a collective to evaluate
the functional
scoring in respect of the tender; the alleged violation of the Rules
of Order in allowing a person who is not a
member of the Bid
Evaluation Committee to participate in functional scoring; a meeting
of 5 August 2011 not having been properly
constituted, amongst other
irregularities complained of.
[65] In
paragraph [37] I make the point that it is the City’s
contention that such irregularities constitute a basis on
which the
procurement process falls to be reviewed and set aside on one, more
or all those grounds set out in
section 6(2)(b)
;
section 6(2)(c)
;
section 6(2)(d)
;
section 6(2)(e)(iii)
; and
section 6(2
)(i) of the
Promotion of Administrative Justice Act. Arising
from these alleged
irregularities, it is contended on behalf of the City that the award
of the tender to the respondent failed
to comply with the relevant
applicable legislation and procurement policies and, on that basis,
falls to be reviewed and set aside.
[66] The
respondent, on the other hand, whilst not disputing that the
irregularities complained of did occur in the evaluation
process,
nonetheless adopts the position that the irregularities complained of
by the City are inconsequential and would not have
made a difference
to the outcome of the tender evaluation process even if such
irregularities did occur, relying on such authority
as All Pay
Consolidated Investment Holdings (Pty) Ltd & Others v The Chief
Executive Officer of the South African Social Security
Agency &
Others
2013 (4) SA 557
(SCA) and, in particular, the observations by
Nugent JA in paragraph [21] at 562E-H where Nugent JA observed:
“There will be
few cases of any moment in which flaws in the process of public
procurement cannot be found, particularly where
it is scrutinised
intensely with the objective of doing so. But a fair process does
not demand perfection and not every flaw is
fatal. It was submitted
that the process of procurement has value in itself, which must lead
to invalidity if the process is flawed
irrespective of whether the
flaw has consequences, and extracts from various cases were cited to
support that proposition. …
I have pointed out that the public
interest has a role to play in cases of this kind. It would be
gravely prejudicial to the public
interest if the law was to
invalidate public contracts for inconsequential irregularities.”
[67] In All Pay
Consolidated Investment Holdings (Pty) Ltd v CEO, SA Social Security
Agency
2014 BCLR 1
(CC) the Constitutional Court disagreed with the
approach adopted by the Supreme Court of Appeal. The Constitutional
Court pointed
out that the suggestion that “inconsequential
irregularities” are of no moment conflated the test for
irregularities
and their import; hence, an assessment of the fairness
and the lawfulness of the procurement process must be independent of
the
outcome of the tender process. Rather, the materiality of
compliance with legal requirements depends on the extent to which the
purpose of the requirements is attained.
[68] Arising
from the Constitutional Court’s judgment in All Pay, supra, it
is contended on behalf of the City that the
approach adopted by the
Supreme Court of Appeal to the irregularities, as there were in the
matter before it, was detrimental to
important aspects of the
procurement process. Firstly, it undermined the role procedural
requirements play in ensuring even treatment
of all bidders.
Secondly, it overlooked that the purpose of a fair process was to
ensure the best outcome – the two could
not be served. On the
approach of the Supreme Court of Appeal, procedural requirements were
not considered on their own merit,
but instead through the lens of
the final outcome. Thus, it is contended that this approach conflated
the different and separate
questions of unlawfulness and remedy. If
the process leading to the bids’ success was compromised, it
cannot be known with
certainty what course the process might have
taken had procedural requirements been properly observed. I am in
agreement with
these submissions.
[69] In my view,
the approach of the Supreme Court of Appeal to non-compliance with
the procedural requirements, as the Constitutional
Court held, may
lend itself to an undesirable outcome in that deviations from fair
processes may themselves all too often be symptoms
of corruptions and
malfeasance in the process. Thus, insistence on compliance with
process formalities, so the Constitutional
Court held, has a
three-fold purpose: (a) it ensures fairness to participants in the
bid process; (b) it enhances the likelihood
of efficiency and
optimality in the outcome; and (c) it serves as a guard against a
process skewed by corrupt influences.
[70] Thus, the
submission by the respondent, on the basis of the judgment of the
Supreme Court of Appeal in All Pay, and other
authorities relied on,
that adherence to a prescribed procedure is a means to an end and not
an end in itself; and that not every
departure from a procedure will
be visited with invalidity or reviewability, cannot not be sustained
in the circumstances of this
matter. It therefore follows, in my
view, due regard had to the approach adopted by the Constitutional
Court in All Pay, the City’s
award of the tender to the
respondent, in the light of irregularities that had since been
discovered following upon the Ernst &
Young report, falls to be
reviewed and set aside.
[71] In the
light of the conclusion I arrived at in the preceding paragraph it is
not indeed necessary for me to deal with the
rest of the other
irregularities referred to in the evidence. Similarly, it is not
necessary for me to deal with the rest of the
defences raised in the
respondent’s submissions, inclusive of the defence of estoppel.
In as far as the defence of estoppel
is concerned, this defence can,
in the circumstances of this matter, not be sustained as same would
effectively result in the confirmation
of an illegality.
THE DECISION OF
THE BID ADJUDICATION COMMITTEE
[72] On 25
October 2011 the Bid Evaluation Committee submitted ts report to the
Bid Adjudication Committee for adjudication
and, possibly, adoption.
The Bid Adjudication Committee convened on 31 October 2011 and
resolved that the tender be awarded to
the respondent subject to the
conclusion of the process in terms of section 33 of the Municipal
Finance Management Act.
[73] As has been
shown elsewhere in this judgment, the report could not have been
compliant with all the necessary formalities
and several
irregularities discovered since the Ernst & Young report became
available. It, therefore, follows that whatever
defects there could
have been in the evaluation process were not drawn to the attention
of the Bid Adjudication Committee. Where
minor defects in the
adjudication process are drawn to the Bid Adjudication Committee’s
attention, such defects may, in appropriate
circumstances, be
accepted as minor breaches, which may be condoned by the City Manager
in terms of clause 296 of the Supply Chain
Management Policy. The
problem in the instance of this matter is that no defects had been
drawn to the Bid Adjudication Committee’s
attention by way of
the Bid Evaluation Committee report. As the Bid Adjudication
Committee was not aware of deviations when it
awarded the tender, it
could not have waived any rights as regards the rejection of the
tender as the respondent would seek to
make a point in its
submissions. It, therefore, follows that the Bid Adjudication
Committee, in considering the award of the tender
in the light of
such non-compliance, failed to take relevant considerations into
account. Such conduct falls to be reviewed and
set aside in terms of
section 6(2)(e)(iii)
of the
Promotion of Administrative Justice Act.
CONDONATION
[74] In its
notice of motion the City seeks, in so far as it may be necessary, an
order condoning its failure to adhere to the
180-day period imposed
by
section 7
of the
Promotion of Administrative Justice Act for
the
institution of review proceedings. The decision to award the tender
to the respondent was taken on 31 October 2011 and 180-day
period for
the institution of proceedings for judicial review referred to in
section 7(1)
of the
Promotion of Administrative Justice Act thus
elapsed prior to the institution of these proceedings. Accordingly,
in its application for condonation, the City requires an extension
of
the 180-day period in terms of
section 9(1)
of the Promotion of
Administrative Justice Act.
[75] The Ernst &
Young report which revealed the extent of irregularities that took
place in the course of the procurement
process was made available to
the City on 22 October 2012. It was as a result of irregularities
revealed in the Ernst & Young
report that the City became aware
of such irregularities and decided to institute these proceedings.
It was, therefore, only on
22 October 2012 that the City learnt what
the full extent of the “reasons” for the award of the
tender and the 180-day
period contemplated in
section 7(1)(b)
of the
Promotion of Administrative Justice Act only
started to run from that
date. These proceedings were instituted on 16 April 2013, thus
within the 180-day period imposed by
section 7
of the
Promotion of
Administrative Justice Act.
CONCLUSION
[76] In
paragraph 13 of the founding affidavit, the deponent of the affidavit
on behalf of the City makes it clear that not
one of the
irregularities referred to in the founding affidavit entails any
fraudulent, dishonest or corrupt conduct on the part
of the City, any
of its officials or of the respondent. It, therefore, follows that
the findings made, and any conclusions of law
made in the course of
this judgment, should not be construed as a reflection either on the
part of the City, its officials or the
respondent.
[77] In
paragraph [63] of this judgment I concluded that the respondent,
because of its prior involvement in the preparation
of the draft
scope of works, is precluded, and remains precluded, in terms of
clause 95 of the Supply Chain Management Policy and
Regulation 27(4)
of the Supply Chain Management Regulations, from tendering for the
contract. Similarly, in paragraph [70] I concluded
that, due regard
had to the approach of the Constitutional Court in All Pay, the
City’s award of the tender to the respondent,
in the light of
irregularities that had since been discovered following upon the
Ernst & Young report, falls to be reviewed
and set aside. In
paragraph [73] I concluded that the Bid Adjudication Committee, in
considering the award of the tender in the
light of non-compliance
with the relevant formalities, failed to take relevant considerations
into account and that such conduct
falls to be reviewed and set aside
in terms of
section 6(2)(e)(iii)
of the
Promotion of Administrative
Justice Act. In
the light of those conclusions, it follows that the
relief sought by the City in terms of paragraph 2 and paragraph 2A of
its notice
of motion, duly amended, ought to be granted and the
counter-application be dismissed.
[78] In the
result, the following order is made:
[78.1.] It is
ordered that the award dated 31 October 2012 by the City’s
Supply Chain Management’s Bid Adjudication
Committee of Tender
459C/2010/11: Provision of Professional Services: Decommissioning of
Athlone Power Station, be and is hereby
set aside.
[78.2.] It is hereby
ordered that any contract that may have come into existence between
the City and the respondent as a result
of the award referred to in
the preceding paragraph be and is hereby set aside.
[78.3.] The
respondent’s counter application is dismissed with costs.
[78.4.] The
respondent is ordered to pay the City’s costs on a party and
party scale, duly taxed or as agreed, and which order
shall include
costs consequent upon employment of two counsel.
[78.5.] The
respondent’s counter application is dismissed with costs, duly
taxed or as agreed and which costs order shall
include costs
consequent upon employment of two counsel.
N J Yekiso
High Court Judge
CASE NO: 5663/13
– CITY OF CAPE TOWN v AURECON SOUTH AFRICA (PTY) LTD
14 APRIL 2014 –
YEKISO J
[78.1.] It is
ordered that the award dated 31 October 2012 by the City’s
Supply Chain Management’s Bid Adjudication
Committee of Tender
459C/2010/11: Provision of Professional Services: Decommissioning of
Athlone Power Station, be and is hereby
set aside.
[78.2.] It is hereby
ordered that any contract that may have come into existence between
the City and the respondent as a result
of the award referred to in
the preceding paragraph be and is hereby set aside.
[78.3.] The
respondent’s counter application is dismissed with costs.
[78.4.] The
respondent is ordered to pay the City’s costs on a party and
party scale, duly taxed or as agreed, and which order
shall include
costs consequent upon employment of two counsel.
[78.5.] The
respondent’s counter application is dismissed with costs, duly
taxed or as agreed and which costs order shall
include costs
consequent upon employment of two counsel.