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[2014] ZAWCHC 83
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Bizstorm 51 CC T/A Global Force Security Services v Witzenberg Municipality and Another (13794/13) [2014] ZAWCHC 83 (30 May 2014)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
no: 13794/13
DATE:
30 MAY 2014
In the
application of:
BIZSTORM 51 CC
t/a GLOBAL FORCE
SECURITY
SERVICES
..................................................................................................
Applicant
And
WITZENBERG
MUNICIPALITY
..................................................................
First
Respondent
VENUS
SECURITY SOLUTIONS (PTY)
LTD
.........................................
Second
Respondent
JUDGMENT:
FRIDAY 30 MAY
2014
Schippers J:
[1]
In July 2013 the first respondent,
Witzenberg Municipality (“the Municipality”), awarded Bid
No 08/2/10/117 to provide
security services at various municipal
sites for a period of two years with effect from 1 July 2013 to 30
June 2015 (“the
tender”), to the second respondent.
This is an application to review and set aside that decision.
[2]
In its original notice of motion the
applicant sought an order that the tender be remitted to the
Municipality for re-adjudication,
with certain directions to ensure
that all bidders were given an opportunity to resubmit or supplement
their bids. However,
in the supplementary notice of motion the
applicant seeks an order that the decision awarding the tender to the
second respondent
be substituted with an award of the tender to the
applicant; and an order directing the Municipality to enter into a
contract with
the applicant for the security services described in
the tender.
[3]
The Municipality and the second respondent
oppose the application.
[4]
The basic facts are these. The
closing date of the tender was 18 June 2013. Twelve bids were
submitted. These
were opened on 24 June 2013. That day or
shortly thereafter, the prices of the various bids submitted were
made known.
The Municipality’s Bid Evaluation Committee
(BEC) found that only two bids were responsive, namely that of the
second respondent
and an entity known as Royal Security CC.
[5]
On 22 July 2013 the Municipality informed
the second respondent that the tender had been awarded to it.
On the same day the
applicant was informed that its bid was
unsuccessful. The applicant noted an appeal against the award
of the tender in terms
of s 62 of the Local Government: Municipal
Systems Act 32 of 2000 (“the Systems Act”), and requested
copies of all
internal memoranda and recommendations relating to the
decision to award the tender.
[6]
On 26 July 2013 the applicant received a
copy of the report by the Bid Adjudication Committee (BAC).
However, it did not receive
the report by the BEC, a scoring sheet
setting out the prices of the various bids and other relevant
documentation. These
were provided on 1 August 2013.
[7]
On 12 August 2013 the applicant submitted a
formal appeal under s 62 of the Systems Act. Its grounds of
appeal were that the
Municipality: failed to exercise its
discretion in a manner that was fair and reasonable; did not conduct
the tender process
fairly; advantaged at least one bidder over others
by giving it an opportunity to supplement its bid; and focused on
form rather
than substance.
[8]
By the time that this application was
heard, the applicant’s internal appeal had not been decided.
The Municipality
has taken the point that the applicant has not
exhausted an internal remedy as contemplated in s 7(2) of the
Promotion of Administrative
Justice Act 3 of 2000 (PAJA), and that
the application therefore should be dismissed. However, in view
of the conclusion
to which I have come, it is not necessary to decide
the point.
[9]
The grounds of review contained in the
founding papers, some of which tend to overlap, may be summarised as
follows. The Municipality’s
decision to allow some
bidders to supplement their bids without allowing others to do the
same, is procedurally unfair in terms
of s 6(2)(c) PAJA. The
applicant’s bid was declared non-responsive because it did not
submit proof of public liability
insurance in the sum of at least R5
million. However, the Municipality allowed other bidders to
supplement their bids.
The Municipality disregarded a relevant
consideration as contemplated in s 6(2)(e)(iii) of PAJA, namely
that the applicant
had met the requirement for public liability
insurance in the sum of R5 million. Alternatively, the
Municipality acted arbitrarily
and capriciously as contemplated in s
6(2)(e)(iv) of PAJA, by failing to exercise its discretion to ask for
clarification or information
concerning the applicant’s public
liability insurance. The Municipality performed its functions
and exercised its powers
in a way that no reasonable decision-maker
could have done, and therefore its decision falls to be set aside in
terms of s 6(2)(h)
of PAJA. Finally, the Municipality acted
contrary to a mandatory and material procedure or condition
prescribed by an empowering
provision.
[10]
The grounds upon which the applicant seeks
an order that the Municipality’s decision be substituted by an
award of the tender
by this court, are these. If the
applicant’s bid had been considered, it would have been
successful and there is no
point in remitting the matter to the
Municipality. The court is in as good a position as the
Municipality to make a decision
to award the tender, as it does not
involve any policy-laden, budgetary, or polycentric issues.
[11]
Before dealing with the review grounds, it
is necessary to outline the relevant statutory and regulatory
provisions.
The
statutory and regulatory provisions
[12]
Section
111 of the Local Government: Municipal Finance Management Act 56 of
2003 (“the MFMA”), requires a municipality
to have and
implement a supply chain management policy which gives effect to Part
1 of Chapter 11 of the MFMA dealing with inter
alia, the procurement
of goods and services. Section 112(1) provides that the supply
chain management policy must be fair,
equitable, transparent,
competitive and cost-effective and comply with the prescribed
regulatory framework, which must cover at
least the following:
open and transparent pre-qualification processes for bids;
[1]
competitive bidding processes in which only pre-qualified persons may
participate;
[2]
bid
documentation and invitations for contracts;
[3]
and procedures for opening, registering, evaluating and approving
bids.
[4]
[13]
The first respondent’s Supply Chain
Management Policy (SCMP) was implemented on 1 July 2012.
Paragraph 26 of the SCMP
makes it clear that bids must be submitted
in accordance with the directives in the bid documents. The
invitation to bid
forms part of the bid documents.
[14]
Paragraph 27(4) of the SCMP provides that
the Manager: Supply Chain Management may, in compliance with
paragraph 63 of the policy,
grant a reasonable opportunity to a
bidder who made an innocent error or omission in a bid document to
correct such error or omission,
provided that such opportunity should
not unduly prejudice any of the other bidders.
[15]
In terms of paragraph 63 of the SCMP, the
accounting officer of the Municipality is empowered to condone
non-compliance with peremptory
requirements of bids in cases where
condonation is not incompatible with the public interest, and
promotes the values of fairness,
competitiveness and
cost-effectiveness listed in s 217 of the Constitution.
[16]
Paragraph 3.1 of the terms of reference in
the bid documents reads as follows:
“
PRE-QUALIFICATION
CRITERIA
3.1
Bidders must be registered with the Security Officers Board in terms
of Art (
sic
) 10(1) and 10(2) of the Act on Security Officers
1987 (Act 92 of 1987) as amended and must comply with the minimum
training standards
in terms of Regulation 23 of the said Act with
regards to handling of cash in transit, firearms and access control.
Bidders
are required to supply the following documentary proof:
a)
Proof of registration;
b)
Latest valid certificate of good standing;
c)
Fire arm licenses; and
d)
ICASA Licenses
3.2
Bidders must have Public Liability Insurance cover of at least
R5 000 000.00 (five
million rand). Proof thereof must
be submitted with the bid
.”
[17]
The first page of the bid documents states
that the proposal and all other documents of the submission must be
attached to the bid
(paragraph 3). This requirement is repeated
in paragraph 11 of the invitation to bid, which states that failure
to comply
with the conditions of the invitation may result in the bid
being disqualified. The criteria in determining whether a bid
is responsive are set out inter alia as follows:
“
RESPONSIVENESS
CRITERIA
No bid will be
considered by Witzenberg Municipality unless it meets the following
responsiveness criteria (for the bid to be considered
the responsive,
the bid must meet the following requirements):
…
d)
The official bid document must be completed in indelible ink. Where
information
requested does not apply to the bidder and the space is
left blank, it will be deemed to be not applicable.
e)
All requested relevant and/or additional documentation such as
Compliance Certificates,
professional registration, artisan
qualification, etc must be submitted with the bid document.
”
[18]
The pricing schedule contained in the bid
documents reads inter alia as follows:
“
BIDDERS
MUST QUOTE ON ALL ITEMS IN THE PRICING SCHEDULE AS LISTED BELOW.
IF NOT THE BID WILL BE CONSIDERED TO BE NON-RESPONSIVE
.”
Review grounds
[19]
The applicant contends that the
Municipality firstly, acted procedurally unfairly when it decided
that the applicant’s bid
was non-responsive, because it did not
submit proof of public liability insurance in the sum of at least R5
million. The
applicant says that it should have been given an
opportunity to supplement its bid, as happened in the case Waaksaam
Sekuriteits
Dienste t/a AC Security (“Waaksaam”), which
was allowed to supplement its bid by providing proof of public
liability
cover. Then it is said that it is common practice and
reasonable for a security company tendering on a contract which
requires
insurance cover greater than that held by the company, to
submit a letter stating that the company can obtain the necessary
cover
if it gets the tender. What usually happens, the
applicant says, is that the bidder submits a letter by its insurer,
as the
applicant did in this case, stating that sufficient cover is
available on request.
[20]
This challenge to the impugned decision is
unsustainable. The tender was for the rendering of security
services which includes
the use of firearms and the exercise of
access control, at some 14 municipal sites. Bidders were
required to submit proof
of public liability insurance cover of at
least R5 million. The applicant did not comply with this
requirement.
The confirmation of security liability insurance
attached to its bid states that the applicant has general public
liability cover
in the sum of R1 million and cover for security risks
also for R1 million; and that the limit of indemnity may be increased
to
R5 million at the insured’s request. Such a request
would have to be made to the insurance company concerned and may
or
may not be approved. As stated in the answering affidavit filed on
behalf of the Municipality, the insurance criteria were not
based on
what a bidder might be able to do in the future: it had to comply
with the requirements of the bid documents at the date
of the
submission of its bid.
[21]
The circumstances under which Waaksaam was
allowed to furnish proof of public liability insurance have been
fully explained and
do not detract from the fairness of the
evaluation process, to the contrary. The Municipality’s
answering affidavit
states that it previously adopted a policy in
terms of which it demanded strict compliance with pre-qualification
criteria of tenders.
However, such a rigid approach had adverse
effects and resulted in eminently qualified bidders being excluded
from tenders in cases
where a document was omitted from a bid due to
an oversight. The Municipality therefore adopted a more
flexible approach
so as to ensure a more comprehensive and inclusive
tender process. Waaksaam was in possession of public liability
insurance
but omitted to include the document evidencing this in its
bid. It was given an opportunity to correct the omission.
The certificate of insurance which Waaksaam furnished showed that it
did not have public liability insurance cover of R5 million.
Its cover was limited to R2 million. Its bid – like the
applicant’s - was found to be non-responsive. The
bid
submitted by Blue Spirit Trading 61 CC t/a Future Security Services
was likewise found to be non-responsive because it did
not have
public liability insurance cover of at least R5 million.
[22]
It
is trite that the duty to act fairly is a flexible concept to be
decided on the circumstances of each case. It may be fair
to
ask a bidder to explain an ambiguity in its bid, to correct an
obvious mistake or in a complex tender, to ask for clarification
in
order to properly evaluate the tender. But whatever is done
must not cause the process to lose the attributes of fairness,
transparency, competitiveness or cost-effectiveness.
[5]
In this case the unchallenged evidence is that every bidder who could
not furnish proof of public liability insurance cover
of at least R5
million, was found to be non-responsive. Not a single bidder
who provided proof of public liability insurance
cover of less than
R5 million, was given an opportunity to increase that cover.
[23]
Consequently, the applicant’s
challenge to the impugned decision on the grounds of procedural
unfairness must fail.
So too, its challenge on the grounds that
the Municipality disregarded a relevant consideration; that it acted
arbitrarily and
capriciously; and that the decision is one which a
reasonable decision-maker could not have reached.
[24]
Apart from this, the applicant’s
tender was non-responsive in other material respects. This
issue is considered next.
The
applicant’s tender was non-responsive in other respects
[25]
The applicant did not quote on item H3 of
the pricing schedule – to patrol premises on public holidays
(24 hours) and when
offices are closed at a storm water depot in
Ceres. The pricing schedule in the bid documents makes it clear
that bidders
must quote on all items listed in the schedule ie for
each and every service to be provided, failing which a bid will be
considered
to be non-responsive.
[26]
The
reason for considering such a bid non-responsive is not far to seek.
The Municipality’s answering affidavit
states that
all bids are opened simultaneously and the prices of the various
bidders made known. If a bidder which did not
quote a price on
any service to be provided is allowed to do so after the closing date
of a tender, it could adjust its tender
price to below that of the
lowest bidder. That is the very antithesis of a tender
process. It would strip the process
of the attributes of
fairness, transparency and competitiveness contemplated in s 217(1)
of the Constitution and 112(1) of the
MFMA.
[6]
In fact, the applicant itself concedes that it is unacceptable to
seek supplementary information from bidders, particularly
if this
would allow them to adjust their price or other crucial aspects of
their tender. This, the applicant says, is antithetical
to
fairness as a bidder would be allowed to adjust its bid, knowing how
its competitors had bid.
[27]
Save for a bald denial, the applicant has
no answer to its failure to comply with the pricing schedule.
[28]
There is a further reason why the
applicant’s bid is non-responsive - it failed to furnish a
valid certificate of good standing
issued by the Security Officer’s
Board, or more correctly, by its successor, the Private Security
Industry Regulatory Authority
(PSIRA), as required in terms of the
bid documents. The PSIRA certificate attached to the
applicant’s bid was issued
on 28 February 2013 and expired on
29 May 2013 - prior to the closing date of the tender. The
applicant has likewise not
answered these facts.
[29]
There can be no question that the failure
to furnish a valid PSIRA certificate would render a bid fatally
non-responsive.
Section 20 of the Private Security Industry
Regulation Act 56 of 2001 (“the Security Industry Regulation
Act”) provides
that no person (which includes a close
corporation) may in any manner render a security service for
remuneration, reward, fee or
benefit unless such a person is
registered as a security service provider under the Act. In
terms of s 38(3) of the Security
Industry Regulation Act, any person
who contravenes or fails to comply with s 20(1) is guilty of an
offence and on a first conviction,
may be sentenced to a fine or
imprisonment for a period not exceeding five years or to both a fine
and such imprisonment.
[30]
The
applicant has not furnished any explanation for this fatal defect in
its bid either. Instead, the replying affidavit states
that the
Municipality has provided additional reasons to those furnished when
it declared the applicant’s bid non-responsive.
The
applicant argues that its bid was declared non-responsive for one
reason only - its failure to furnish proof of public liability
insurance of R5 million. Therefore, so the argument runs, this
application must be decided on that reason alone and it is
not open
to the Municipality to introduce new reasons. For this argument
the applicant relies on
National
Lotteries
[7]
and
Jicama
,
[8]
in which this court (per Cleaver J) cited with approval the following
dictum in
R
v Westminster City Council
:
[9]
“…
The
cases emphasise that the purpose of reasons is to inform the parties
why they have won or lost and enable them to assess whether
they have
any ground for challenging an adverse decision. To permit wholesale
amendment or reversal of the stated reasons is inimical
to this
purpose. Moreover, not only does it encourage a sloppy approach
by the decision-maker, but it gives rise to potential
practical
difficulties. In the present case it was not, but in many cases
it might be, suggested that the alleged true reasons
were in fact
second thoughts designed to remedy an otherwise fatal error exposed
by the judicial review proceedings. That
would lead to
applications to cross-examine and possibly for further discovery,
both of which are, while permissible in judicial
review proceedings,
generally regarded as inappropriate. Hearings would be made longer
and more expensive.”
[31]
But
the applicant is mistaken. First, the Supreme Court of Appeal
in
National
Lotteries
expressly refrained from deciding the question whether the failure to
give reasons for an administrative decision (which includes
proper or
adequate reasons) can be validated by different reasons given
afterwards.
[10]
Second, the
facts in
Jicama
are distinguishable. Third, a court is bound by the principle
of legality: regardless of the reason given for finding the
applicant’s bid non-responsive, this court cannot make an order
contrary to the requirements of the tender, or which has
the effect
of permitting a contravention of the law.
[32]
The
applicant in
Jicama
was awarded a tender to collect arrear municipal service council
levies and to attend to the registration of levy payers.
Subsequently the West Coast District Municipality decided to
re-advertise the tender, allegedly because the requirement of
functionality
had not been stipulated therein. The court held
that a binding agreement came into force upon acceptance of the
tender; that
the applicant came to court to deal with the stated
reason for the cancellation of the tender; and that it was not open
to the
municipality to supplement the basis on which its decision was
taken.
[11]
By contrast,
the undisputed evidence in this case is that once the Municipality
determines that a bid is non-responsive,
a further audit of the bid
is not done because that would serve no purpose. The
Municipality’s answering affidavit
states that the applicant
would in any event not have been awarded the tender because it did
not complete the pricing schedule,
and it failed to furnish a valid
PSIRA certificate.
[33]
It can hardly be suggested that the
Municipality’s stance is an afterthought or that it constitutes
an amendment or reversal
of the Muncipality’s reason for not
awarding the tender to the applicant. The facts point the other
way. The
bid submitted by Paarl AC Rottweiler Security (Pty)
Ltd was found to be non-responsive because it did not quote on all
the items
in the pricing schedule. Similarly, the bids of EM
Scholtz Enterprises t/a Ceres Alarms and Guarding, Shaloti General
Trading
t/a Shaloti Security Services, Dee Dee Safety & Security
Services and Diamond Force Security CC, were all declared
non-responsive
because these bidders did not furnish certificates of
registration with the PSIRA.
[34]
The
Constitutional Court has held that it is a fundamental principle of
the rule of law that the exercise of public power is only
legitimate
where lawful. To the extent that the rule of law expresses this
principle of legality, it is generally understood
to be a fundamental
principle of constitutional law. The Legislature and Executive
are constrained by the principle that
they may exercise no power and
perform no function beyond that conferred upon them by law.
[12]
The rule of law admits of no exception in relation to the judicial
authority of the State. The exercise of judicial
authority
otherwise than according to law is invalid.
[13]
[35]
In its supplemented notice of motion the
applicant asks for an order substituting the Municipality’s
decision with the award
of the tender to the applicant; and an order
directing the Municipality to conclude a contract with the applicant
for the rendering
of the relevant security services. In this
regard the applicant submits that the result is a foregone
conclusion: the tender
would have been awarded to the applicant but
for its inadequate public liability insurance cover; and any further
delay would cause
it unjustifiable prejudice.
[36]
These
submissions have no foundation. The tender cannot be awarded to
the applicant simply because it does not comply with
the requirements
set out in the bid documents. It does not have the requisite
public liability insurance cover; it has not
completed the pricing
schedule; and it has not furnished a valid certificate of
registration issued by the PSIRA, as contemplated
in the Security
Industry Regulation Act. An award of the tender to the
applicant in these circumstances would not be in accordance
with law
and thus violate the principle of legality. Secondly, an award
of the tender to the applicant could never be just
and equitable as
contemplated in s 8(1) of PAJA. Thirdly, a reviewing court may
substitute its decision for that of a designated
functionary only in
an exceptional case as envisaged in s 8(1)(c)(ii) of PAJA: when upon
a proper consideration of all the relevant
facts, the court is
persuaded that a decision to exercise a power should not be left to
the functionary.
[14]
In
my view, this is not such a case.
[37]
Finally,
the facts show that the bid submitted by the second respondent was
properly completed, contained all the relevant information
and met
the criteria set out in the bid documents. The
Municipality’s decision to award the tender to the second
respondent is thus reasonable and not reviewable.
[15]
[38]
I make the following order:
(1)
The application
to
review and set aside the first respondent’s decision to award
the tender to the second respondent is dismissed.
(2)
The applicant is directed to pay the
costs of the first and second respondents.
SCHIPPERS
J
[1]
Section
112(1)(e).
[2]
Section
112(1)(f).
[3]
Section
112(1)(g).
[4]
Section
112(1)(h).
[5]
Metro
Projects and Another CC v Klerksdorp Municipality and Others
2004 (1) SA 16
(SCA) para 13.
[6]
Section
217 of the Constitution reads:
"
Procurement
– (1) When an organ of state in the national, provincial or
local sphere of government, or any other institution identified
in
national legislation, contracts for goods or services, it must do so
in accordance with a system which is fair, equitable,
transparent,
competitive and cost-effective."
[7]
National
Lotteries Board and Others v South African Education and Environment
Project
2012 (4) SA 504 (SCA)
[8]
Jicama
17 (Pty) Ltd v West Coast District Municipality
2006 (1) SA 116 (C).
[9]
R
v Westminster City Council, Ex Parte Ermakov
[1996] 2 All ER 302
(CA) at 316c-d.
[10]
National
Lotteries
n 7 para 27.
[11]
Jicama
n 8 at 121B-F.
[12]
Fedsure
Life Assurance Ltd and Others v Greater Johannesburg Transitional
Metropolitan Council and Others
[1998] ZACC 17
;
1999 (1) SA 374
(CC) para 58.
[13]
S
v Mabena and Another
2007 (1) SACR 482
(SCA) para 2.
[14]
Gauteng
Gambling Board v Silverstar Development Ltd and Others
2005 (4) SA 67
(A) para 28.
[15]
Bato
Star Fishing (Pty) Ltd v Minister of Environmental Affairs and
Others
[2004] ZACC 15
;
2004 (4) SA 490
(CC) para 44.