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[2015] ZAWCHC 4
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JK Structures CC and Another v City of Cape Town and Others (17480/2014) [2015] ZAWCHC 4 (28 January 2015)
Republic
of South Africa
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
no: 17480/2014
DATE:
28 JANUARY 2014
In
the matter between
:
JK
STRUCTURES CC
...................................................
First
Applicant
CARP
CIVILS CC
......................................................
Second
Applicant
V
THE
CITY OF CAPE TOWN
...................................
First
Respondent
TUBOSEAL
SERVICES CC
.................................
Second
Respondent
TT
INNOVATIONS CC
............................................
Third
Respondent
Court
:
Justice J Cloete
Heard
:
3 December 2014
Delivered
:
28 January 2015
JUDGMENT
CLOETE
J:
Introduction
[1]
The applicants (‘
JK
Structures’
and ‘
Carp
Civils’
) seek the review and
setting aside of the decisions of the first respondent (‘
the
City’
) to reject their tender
bids for a particular works category, namely pipe-cracking (also
known as pipe-bursting), of a term tender
for trenchless
rehabilitation of sewers (‘
the
tender’
). The City opposes the
relief sought. The second and third respondents, to whom the tender
was awarded, abide the decision of the
court. None of the eight
remaining unsuccessful tenderers have challenged the City’s
decisions.
[2]
It was agreed in an order granted on 8
October 2014 that the City would not implement the impugned tender
awards pending the further
hearing of the matter, and this agreement
was extended after argument pending delivery of judgment herein. The
applicants abandoned
the alternative relief sought for a referral to
cross-examination on certain limited issues.
Background
[3]
On 14 February 2014 the Director of Water
and Sanitation for the City called for tender bids in respect of the
tender, and made
the tender document available to all interested
parties. The tender document consists of two categories, namely
pipe-cracking (category
1) and cured-in-place lining (category 2).
Both applicants submitted a tender bid for pipe-cracking.
[4]
The closing date for the submission of
tender bids was 17 March 2014. The contract period for the
tender was two years with
an estimated value of R113.5 million.
It was what is known as a ‘
term
bid’
, the purpose being to
appoint a pool of bidders with a view to allocating dedicated work
projects to those in the pool for the
two year period in accordance
with the rates tendered by them (which rates are fixed for the first
year and are then subject to
contract price adjustments).
[5]
According to the City, the first step in
the tender process was for its designated officials to objectively
evaluate, on the basis
of the information contained in each set of
bid documents, whether the bidder concerned had the requisite
experience and capabilities
– the quality or functionality leg
of the bid evaluation.
[6]
Thereafter the second step was to compare
the various rates of those bidding (as applied to a ‘
typical
works project’
) in order to score
and rank them in accordance with their respective tender prices. (A
part of this scoring process also involved
allocating points for the
tenderers’ BBBEE status).
[7]
The functionality evaluation comprised two
evenly weighted components, namely human resources experience and
qualifications; and
company experience, each with a maximum possible
score of 15. The required minimum total score was 21, and had to be
achieved by
bidders in order to be considered for the second step of
the evaluation process.
[8]
The tender document also required tenderers
to complete schedules A and B and at least one of schedules C or D of
the schedule of
rates (the particular schedules being dependent on
the works category catered for, in this instance, pipe-cracking). The
rates
would be utilised for ranking tenderers, and they would be
bound by those rates in respect of particular works projects for
which
they later bid during the term of the tender (subject to price
adjustments in the second year).
[9]
A tender would be considered non-responsive
if the tenderer did not submit rates for all of the items listed in
the rates schedules.
Clause F.2.10.5 of the tender document
stipulated that a rate had to be inserted for each and every item in
the schedule of rates
for the works category tendered.
[10]
Although the previous tender had nine
successful tenderers, the one under scrutiny was ‘
intended’
to be awarded to a maximum of four tenderers per works category.
Clause F.3.11.3 stipulated that a panel of four contractors per
category would be appointed. The parties are
ad
idem
that this was a complex tender.
The City’s tender document itself runs to some 245 pages with
highly technical content.
[11]
Importantly:
11.1
Clause F.3.8.4 of the tender document provided that the City reserved
the right to accept a tender offer which did not, in
the City’s
opinion, materially and/or substantially deviate from the terms,
conditions and specifications of the tender document;
11.2
Clause F.3.10 placed an obligation on the City to obtain
clarification from a tenderer on any matter which could give rise
to
an ambiguity in a contract arising from a tender bid; and
11.3
Clause F.2.17 afforded the tenderer the opportunity to furnish
clarification to the City at the latter’s request
after
submission of the tender bid for purposes of the evaluation process;
and stipulated that ‘
this may
include providing a breakdown of rates or prices and correction of
arithmetical errors by the adjustment of certain rates
or item prices
(or both). No change in the competitive position of tenderers or
substance of the tender offer is sought, offered
or permitted’.
[12]
These clauses apply to all of the
requirements contained in the tender document, given that they are
not made subject to the criteria
for declaring or considering a
tender non-responsive (as provided in clause F.3.8.3).
[13]
Furthermore, clause F.3.8.2 provides that:
‘
F.3.8.2
A responsive tender is one that conforms to all the terms, conditions
and specifications of the tender documents without
material deviation
or qualification. A material deviation or qualification is one which,
in the Employer’s opinion, would:
(a)
detrimentally affect the scope, quality, or performance of the works,
services or supply identified in the Scope of Work.
(b)
significantly change the Employer’s or the tenderer’s
risks and responsibilities under the contract, or
(c)
affect the competitive position of other tenderers presenting
responsive tenders, if it were to be rectified.’
Errors
in tender documentation and completion thereof in response
[14]
The City’s initial tender document
contained certain errors, only two of which (relating to completion
of rates in the rates
schedules) are relevant to the present dispute.
[15]
Insofar as JK Structures is concerned, the
relevant portion of the initial tender document on page 118: Schedule
A read as follows:
Item No
Payment
Description
Unit
Rate
A310
(m) Excavator (20 t)
h
A320
(1) 0.5 t capacity
h
A330
(2) 1.0 t capacity
h
[16]
The City had not intended that line items
A320 and A330, which the bidder had to individually price, should
relate to a 20 ton excavator
(reflected as item (m)), but instead to
a light duty vehicle, which therefore required the insertion of a new
heading between line
items A310 and A320, namely ‘
(n)
Light Duty Vehicle’
.
[17]
It accordingly issued a notice on 7 March
2014, directing bidders to insert this heading. However it compounded
its error by
instructing them to insert it, not between line items
A310 and A320 but between line items A320 and A330. After the City
picked
up this further error, it issued another notice on 12 March
2014, directing bidders to insert the heading above line item A320.
It is not in dispute that JK Structures received both of these
notices.
[18]
The tender bid was signed by Mr John
Klopper on behalf of JK Structures on 14 March 2014. JK
Structures completed the relevant
portion of the schedule as follows:
Item No
Payment
Description
Unit
Rate
A310
(m) Excavator (20 t)
h
A320
(1) 0.5 t capacity
h
180
(N) LIGHT DUTY
VEHICLE
40
A330
(2) 1.0 t capacity
h
55
[19]
It accordingly followed the first
instruction issued by the City, but not the second. It did not insert
a rate opposite item A310
(for the 20 ton excavator), left the new
item (n) in the wrong place; and inserted a rate opposite the new
item (n).
[20]
According to JK Structures, what it meant
to convey was the following:
Item No
Payment
Description
Unit
Rate
A310
(m) Excavator (20 t)
180
(n) Light duty
vehicle:
A320
(1) 0.5 t capacity:
40
A330
(2) 1.0 t capacity:
55
[21]
Insofar as Carp Civils is concerned, the
relevant portion of the initial tender document on page 117: Schedule
A read as follows:
Item No
Payment
Description
Unit
Rate
A40
B.8.3.3
General
responsibilities and other fixed-charge obligations
Sum
A50
PSA 4.3
Testing carried out by
commercial laboratory
Prov Sum
A60
% Profit + attendance
for Item
A40
%
[22]
Line item A60 was incorrect because it
referred to line item A40, when it should have referred to line item
A50. The City points
out that as a matter of commercial common sense,
a contractor will not add a percentage profit mark-up in respect of
its own price
for rendering a service, because the profit margin is
already incorporated in that price. It is normally added on
disbursements,
expenses or charges of third parties incurred by the
contractor in rendering its services. Item A40 relates to the
contractor’s
own price, whereas item A50 relates to the
contractor’s third party expenses.
[23]
In completing the tender document, Carp
Civils left line item A60 blank. It thus did not provide any rate at
all. After the closing
date of the tender, when the City became aware
of its own error, it sent out a clarification letter on 3 June
2014, the relevant
portion of which read as follows:
‘
Clarification
No. 2
In
terms of Clause F.2.17 of the Standard Conditions of Tender, you are
hereby kindly requested to provide clarification.
1.
Item A60
The
intention of this item was for a profit and attendance percentage to
be tendered upon the provisional sum in Item A50. The description
however erroneously referred to Item A40.
Confirmation
is required as to which item the percentage you tendered refers to.
Please
indicate by ticking the appropriate box below.
A50
A40
[24]
On the same day Carp Civils ticked the box
next to item A50 and emailed this back to the City. However, it still
did not specify
any rate for line item A60.
Rejection
of the applicants’ tender bids
[25]
On 4 July 2014 the City’s Director:
Supply Chain Management notified the applicants of the decision of
its Bid Adjudication
Committee (‘
BAC’
),
namely that their tender bids had been unsuccessful. Reasons were
requested and subsequently provided in the form of a report
of the
Bid Evaluation Committee
(‘BEC’)
which had previously been submitted by it to the BAC and which bears
the date of 20 June 2014.
[26]
The reasons provided by the City for the
rejection of JK Structures’ tender bid were that:
26.1
It had failed to complete a fully priced schedule of rates as per
clause F.3.8.3 (F) of the tender document, because item A310
had not
been completed; and
26.2
It had failed to attain the minimum score of 21 points out of 30 for
functionality as per clauses F.2.1.1.3 and F.3.8 of the
tender
document. It had scored only 2 points, both relating to human
resources experience and qualifications. It had scored 0 points
for
company experience. This was apparently because it had provided CVs
which lacked the minimum information required; failed to
attach proof
of qualifications of key personnel; and failed to provide proof of
experience relating specifically to pipe-cracking.
[27]
Carp Civils was informed that its tender
had been rejected because it had failed to complete a fully priced
schedule of rates as
per clause F.3.8.3 (F) of the tender document,
in that it had failed to complete item A60.
[28]
Curiously, the reason provided to JK
Structures in respect of its “failure” to meet the
minimum score for functionality
is not reflected in the City’s
minutes of its Bid Evaluation Committee (‘
BEC’
)
of 15 May 2014 or 26 May 2014, which are contained in the
City’s record provided to the applicants in terms of
rule
53(1)(b). These pertain directly to the meetings of that committee
when it considered, evaluated and recommended which bids
should be
determined responsive or non-responsive by the BAC.
[29]
The minutes of 15 May 2014 reflect
that JK Structures’ tender bid was recommended non-responsive
only because it had
failed to complete a fully priced schedule of
rates. (A similar recordal was made in respect of Carp Civils). The
minutes of 26 May
2014 specifically draw a distinction between
those listed unsuccessful tenderers whose bids were rejected for
failing to achieve
the minimum score for functionality (in which JK
Structures does not appear) and those who failed to price for all
items (in which
JK Structures is listed along with Carp Civils and
one other tenderer).
[30]
This was raised with counsel during
argument because neither party had dealt with it in their papers. It
transpired that the applicants
had not picked this up, and had simply
approached the matter on the basis of the reasons which the City had
furnished in its report
of 20 June 2014. Counsel were given an
opportunity to double check the rule 53(1)(b) record in order to
ascertain whether
any other relevant minutes existed which might give
a contrary indication. They thereafter reported that no such minutes
exist.
The applicants adopted the position that JK Structures
should not now be prejudiced by having relied in good faith on the
non-functionality reason provided by the City. The City adopted the
position that the minutes and subsequent reasons ‘
should
be read together’
, although it
was not explained why this should be so.
[31]
The functionality score sheets pertaining
to JK Structures showing a cumulative score of only 2 points are
dated 23 April 2014,
and thus pre-date the minutes of the
meetings of the BEC of 15 and 26 May 2014. It is therefore fair
to assume that, when
the BEC held its deliberations, these score
sheets were available to it. In any event, members of the BEC itself
had previously
completed them. Furthermore, on the City’s own
version, a tenderer can only reach the second leg of the evaluation
process
(the scoring and ranking of rates) if it has met the minimum
criteria on the first leg (functionality). Accordingly, the only
reasonable
inference to be drawn is that, despite its earlier
internal scoring, the BEC thereafter recommended the rejection of JK
Structures’
tender bid on the non-pricing issue only. The
minutes of the BEC do not detail their deliberations, and it is not
the court’s
function to speculate on what may have transpired
during those meetings to cause the BEC to reach this conclusion.
Suffice it to
say however that the evidence does not suggest that JK
Structures lacked the necessary experience and it is accordingly not
a question
of foisting a wholly unqualified bidder onto the City (and
its rate payers). In this regard, the evidence is that JK Structures
has been active as civil engineering and trenchless pipelay and
rehabilitation contractors for 27 years; is a specialist in the
trenchless rehabilitation field using the pipe-cracking system; has
undertaken and successfully completed work for the City in
this and
other fields for the past 12 years; and for the past 3 years has
been the number one ranked contractor for all emergencies
on the
City’s sewer network. It is also wholly owned by
historically-disadvantaged individuals (HDIs).
[32]
Compounding the confusion on the
non-functionality issue, the report of the BEC dated 20 June 2014,
and which constitutes the City’s
reasons, reflects that the
functionality scoring of JK Structures by members of the BEC
was
applied by the BEC
when it recommended
that the tender bid be declared non-responsive. As previously stated,
its own records show that this was not
in fact the case. Furthermore,
the City’s legal representatives submitted that the BAC itself
‘
does not evaluate tenders and
does not have tender documents before it’
when making its decisions. It is thus safe to infer that the BAC
relied exclusively on the recommendations of the BEC (as contained
in
its report dated 20 June 2014) in declaring which tender bids were
responsive or non-responsive.
[33]
Having regard to the aforegoing, I have
concluded that it would be inappropriate, within the context of these
proceedings, to further
consider the applicants’
non-functionality attack in respect of JK Structures. This would
amount to delving into the determination
of what is in reality a
non-issue. What follows will thus focus only on the applicants’
attacks on the non-pricing issue.
[34]
Both applicants lodged internal appeals
against the City’s decisions, JK Structures on 29 July
2014 and Carp Civils
on 14 July 2014.
[35]
JK Structures raised what it considered to
be a glaring irregularity in the City’s analysis of its bid:
‘
Contrary
to the BEC report, J K Structures has submitted for all items on page
118. There are 26 items on this page and there are
26 rates which
makes the tender complete according to the requirements of R3.8.3 on
page 15 of the document. What the BEC should
have done is seek
clarity in accordance with F2.17 on page 13 of the document but
failed to do so – a corrupt practice.’
[36]
On 9 September 2014 the City’s appeal
authority informed JK Structures that its appeal was unsuccessful.
The reason provided
by the appeal authority was that there was no
obligation on it to have sought clarification or supporting
documentation from JK Structures.
It would have been improper
for the BEC to have requested JK Structures to “complete a
price” after the closing
of tenders. In this regard the appeal
authority relied on the decisions in
Bizstorm
51 CC t/a Global Force Security Services v Witzenberg Municipality
and Another
(13794/13)
[2014] ZAWCHC 83
and
Chairperson, Standing Tender
Committee v JFE Sapela Electronics (Pty) Ltd
2008
(2) SA 638
(SCA).
[37]
The basis for Carp Civils’ appeal was
that its tender had incorrectly been declared non-responsive on the
sole ground of its
failure to price item A60. Its appeal was
similarly dismissed. Although the written reasons of the appeal
authority were not included
in the papers, it appears that the same
reasoning as that in relation to JK Structures was applied.
Grounds
of review in respect of non-pricing issue
[38]
JK Structures contends that it was the
City’s own errors which led to confusion and to JK Structures’
consequent patent
error on the non-pricing issue. The City’s
failure to obtain clarification in circumstances where it was clear
that 26 rates
appeared on the same page as 26 line items, amounted to
an unwarranted adherence to a fixed principle.
[39]
Three other grounds were advanced by JK
Structures in its papers, namely bias on the part of certain City
officials, the failure
on the part of the City to afford it an oral
appeal hearing, and that the City’s appointment of only two
contractors per
works category was irrational and unreasonable. Of
these, the first two grounds were not pursued in argument. In
relation to the
third, I was informed that this only required
consideration if the applicants were not successful on any of the
grounds pursued.
[40]
Carp Civils, whilst aligning itself with
the grounds advanced by JK Structures, understandably focused on its
own non-pricing issue.
In essence, it contends that the City’s
failure to obtain clarity on item A60 in the particular
circumstances, and where
the City knew that Carp Civils had left it
blank, was irrational and unreasonable.
[41]
It contends that the City’s
clarification letter after closure of tender bids did not make
provision for any options other
than stipulating whether the tenderer
had intended to refer to item A40 or A50. It did not make allowance
for the fact that a tenderer
may have correctly appreciated that item
A60 was incorrect and therefore did not insert a rate at all. It did
not permit tenderers
to respond to the line item as corrected and to
thus insert a percentage in response to the corrected item at that
stage. Carp
Civils submits that, in so doing, the City unfairly
favoured those who had correctly guessed that the City had intended
to refer
to item A50 and unfairly disadvantaged any tenderer who had
not included a percentage in item A60 at all because of the City’s
own error.
[42]
It argues that the City identified that
Carp Civils had failed to complete item A60
before
it sent all tenderers the clarification letter. Notwithstanding the
City’s awareness that Carp Civils had not provided a
rate for
item A60 at all, it nevertheless sent the notification letter asking
for clarity on what Carp Civils meant in relation
to the non-existent
figure in item A60. In so doing, the City sent a notification to Carp
Civils that the City was aware was meaningless
and would serve no
purpose.
[43]
Carp Civils submits that a tenderer could
have done one of three things when presented with the error in item
A60:
43.1
First, guess what item A60 was supposed to refer to;
43.2
Second, insert an “incorrect” rate based on its own price
for item A40 (as the tender document invited bidders
to do). On the
City’s own version, however, this would have been absurd, given
that commercial common sense dictates that
the tenderers should have
known that item A60 could never have referred to item A40; or
43.3
Third, simply leave the item blank, which would be the case where the
bidder chose not to guess (option 1) and appreciated
that it did not
make sense to insert the incorrect rate with reference to item A40
(option 2).
[44]
Carp Civils maintains that it chose the
third option as it appreciated that item A60 could not have referred
to item A40. It argues
that, on the City’s own version, the
error was obvious. In the light of the obvious error, it made more
sense for item A60
to have been left blank than for it to have been
completed incorrectly with reference to item A40. The fact that other
tenderers
guessed correctly is not relevant to the fair bidding
process which must apply to all tenderers. Accordingly, contrary to
the City’s
assertions, its own error better explains a failure
to insert a rate than it does the insertion of an incorrect rate.
[45]
Carp Civils submits that the City was thus
required to have issued a comprehensible tender document and, where
it had made an error,
to take the necessary steps to ensure that no
bidder was prejudiced thereby. It patently failed to do so in respect
of the pricing
items of Carp Civils (and JK Structures). In so doing,
it rendered the bid unfair.
[46]
It is also contended that, as with the JK
Structures non-pricing issue, the City failed to appreciate the
discretion which it had,
in circumstances such as these, to ask a
tenderer to correct an obvious mistake, or call for clarification
where it would be fair
to do so, or, indeed, unfair not to do so.
This too amounted to an unwarranted adherence to a fixed principle.
The
City’s response to the grounds of review in respect of the
non-pricing issue
[47]
The City maintains that it duly followed a
process which was compliant with s 217 of the Constitution
(namely one which was
fair, equitable, transparent, competitive and
cost-effective). The applicants were unsuccessful because they did
not comply with
material requirements of the bid. Had the applicants’
complaints been addressed in the manner which they propose, this
would
have resulted in them receiving preferential treatment, thereby
exposing the City to review proceedings at the instance of those
who
had fully complied with all of the requirements of the bid.
[48]
As regards the JK Structures non-pricing
issue, the material deviation is contended to lie in the “strict
compliance”
requirement in the tender document. Strict
compliance is allegedly required for purposes of applying the term
tender to the specific
work to be allocated in the future.
[49]
The City submits that the explanation given
by JK Structures for failing to price line item A310 is a red
herring, because it nonetheless
left item A310 blank. Accordingly,
there was nothing on which the City could seek clarity, given that it
could not ask for clarity
on a blank line item.
[50]
The City argues that the same
considerations apply to the Carp Civils non-pricing issue. By later
ticking the box next to item A50
in the clarification letter, Carp
Civils confirmed that it had previously correctly understood that
item A60 in fact referred to
item A50 (instead of the erroneous
insertion by the City of item A40 in the original tender document).
It was not incumbent on
the City, but on Carp Civils itself, to have
checked its own tender bid so as to ensure that it had completed item
A60. Its failure
to do so resulted in a fatal omission in the tender
bid. To allow one tenderer to avoid or subvert this requirement in
circumstances
where others had “strictly complied” would
have been unfair, unreasonable and unlawful. Pursuant to the award of
the
tender, specific works projects will be allocated, ranging in
price from R100 000 (or even less) up to R4 million. It is
conceivable
that in the context of a smaller project, the pricing of
item A60 could make a significant difference in the ranking of
tenderers.
The City also contends that from time to time tenderers
deliberately leave certain rates blank in tender documents in order
to
renegotiate prices (to their own unfair advantage) at a later
stage. This is a further reason why the City rightly insisted on
strict completion of price schedules.
[51]
Insofar as the failure to appoint four
contractors is concerned, the City’s response is that although
it had expressed ‘
the intention’
to limit the pool of pipe-cracking contractors to four, this was
obviously subject to tenderers complying with the tender criteria.
No
firm undertakings or commitments were given that four contractors
would be appointed, come what may. As the tender process turned
out,
the City was indeed forced to reduce the pool to two contractors. The
City contends that this number would in any event be
adequate to
perform the available work.
Applicable
legal principles considered against the facts
[52]
It is convenient to start by considering
the two decisions upon which the City’s appeal authority relied
in dismissing the
applicants’ appeals on the non-pricing issue,
namely
Bizstorm
and
Sapela Electronics
(
supra
).
[53]
In
Bizstorm
one of the grounds of review related to the unsuccessful tenderer’s
failure to quote on a particular item in a pricing schedule.
The
judgment records that the schedule itself, which was contained in the
bid document, made it clear that bidders were required
to quote a
price for each and every item in the schedule, failing which a bid
would be considered non-responsive. The court did
not refer to any
clauses in that particular bid document such as those contained in
the one presently under scrutiny (i.e. clauses
F.3.8.4, F. 3.10,
F.2.17 or F.3.8.2). The applicant in that matter itself conceded that
it would be unacceptable to seek supplementary
information from
bidders. Furthermore, it had no answer for its failure to fully
complete the pricing schedule other than a bald
denial that it had
not done so. It is against that background that the court in
Bizstorm
found that:
‘
[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. … 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.’
[54]
In the present matter, and in the case of
JK Structures, it would simply have been a matter of moving three
prices up by a line,
with exactly the same result on the price
quoted. In relation to Carp Civils, it was the City which, in terms
of the discretion
conferred upon it in terms of clause F.2.17, called
for clarification
after
the closing date for submission of the tender bids. If its own error
was as obvious as the City contends, the question that arises
is why
it was considered necessary by the City to obtain any clarification
at all. The circumstances in which the City may call
for clarity
after submission of a bid could not have been intended by it to be
exhaustive, if regard is had to the wording in clause
F.2.17, namely
that ‘…
this
may
include providing a breakdown of rates or prices and correction of
arithmetical errors by the adjustment of certain rates or item
prices
(or both)…’
(my emphasis).
[55]
While it is so that clause F.2.17 also
stipulates that ‘
no change in the
competitive position of tenderers or substance of the tender offer is
sought, offered or permitted’
,
the clarification sought by the City was, in the case of Carp Civils,
in fact no clarification at all. There was no sense in the
City
asking Carp Civils to clarify whether it meant to refer to item A40
or item A50 when pricing item A60 in circumstances in
which the City
already knew that Carp Civils had failed to price item A60 at all.
Furthermore, the tender bid document does not
afford a tenderer the
opportunity, of its own accord, to raise a previous omission after
submission of a tender bid. The City blames
Carp Civils for not
having checked its tender bid document once clarification had been
sought; but does not explain how it would
have dealt with any price
which
at that stage
was inserted by Carp Civils as a result of the City clearing up its
own error.
[56]
In
Sapela
Electronics
the successful tenderer for
three separate contracts (‘
Nolitha’
)
had, in two instances, deliberately quoted nominal amounts for a
section of work, knowing that it would not have to perform that
work;
and in the third instance, agreed with the employer after submission
of its bid to reallocate amounts overtendered for two
items of work,
to items for which it had undertendered. At paras [14] – [15]
and [19] it was held that:
‘
[14]
The definition of “acceptable tender” in the Preferential
Act
[Preferential Procurement Policy
Framework Act 5 of 2000]
must be
construed against the background of the system envisaged by s 217(1)
of the Constitution, namely one which is “fair,
equitable,
transparent, competitive and effective”. In other words,
whether “the tender in all respects complies with
the
specifications and conditions of tender as set out in the contract
documents” must be judged against these values. Merely
because
each item is priced does not mean that there was proper compliance.
What the Preferential Act does not permit a tenderer
to do is in
effect omit from his tender a whole section of the work itemised in
the bill of schedules and required to be performed.
A tenderer who is
permitted to do this has an unfair advantage over competing tenderers
who base their tenders on the premise,
inherent in the tender
documents, that all the work itemised in the schedule of quantities
is to be performed. Whether work may
later be omitted is of no
consequence. What is imperative is that all tenderers tender for the
same thing. By tendering on the
basis that certain work will not be
required a tenderer is able to reduce his price to the detriment of
other tenderers, and almost
certainly also to the detriment of the
public purse since he is likely to load other items to the detriment
of the employer. Such
a tender offends each of the core values which
s 217(1) of the Constitution seeks to uphold. It would not be a
tender which is
“acceptable” within the meaning of the
Preferential Act.
[15]
It follows that in my view both Nolitha’s Drakenstein tender
and Worcester tender were unacceptable and should have been
rejected…
[19]
It is well established that a tender process implemented by an organ
of State is an “administrative action” within
the meaning
of the Promotion of Administrative Justice Act 3 of 2000 (PAJA). See
eg
Logbro Properties CC v Bedderson NO
and Others
2003 (2) SA 460
(SCA) ([2003]
1 All SA 424)
para 5 and the cases there cited. As observed by
Cameron JA “(t)his entitled the appellant…to a lawful
and procedurally
fair process”. What is fair administrative
process “depends on the circumstances of each case”
(s3(2)(
a
)
of PAJA). In
Metro Projects CC and
Another v Klerksdorp Local Municipality and Others
2004
(1) SA 16
(SCA) ([2004]
1 All SA 504)
para 13 Conradie JA said:
“
It
may in given circumstances be fair to ask a tenderer to explain an
ambiguity in its tender; it may be fair to allow a tenderer
to
correct an obvious mistake; it may, particularly in a complex tender,
be fair to ask for clarification or details required for
its proper
evaluation. Whatever is done may not cause the process to lose the
attribute of fairness or, in the local government
sphere, the
attributes of transparency, competitiveness and cost-effectiveness.”
In
the present case, what in effect occurred is that Nolitha’s
tender, with the latter’s written consent, was adjusted
by the
reallocation of an amount overquoted for one or, rather, two items,
to “most of the remaining maintenance items for
Installations A
to P” for which Nolitha had underquoted. The effect was
apparently to convert a tender from one regarded
by the engineer as
unbalanced and a financial risk to one which was acceptable. But the
offer made by Nolitha, as embodied in its
tender, was not the one
ultimately accepted. What was accepted was in truth an offer that was
made on 7 November 2003, some two
months after the closing date for
tenders. In my view this was enough to strip the tender process of
the element of fairness which
requires the equal evaluation of
tenders. It follows that the acceptance of the Nolitha tender and the
award of the contract were
correctly held by the court a quo to be
reviewable.’
[57]
In the present matter, on its own version,
it would not have been open to JK Structures to reallocate an
amount ‘
overtendered’
(i.e. line item A320) when, already at the internal appeal stage, it
had pointed out that there were 26 items and 26 rates on the
same
page. Insofar as Carp Civils is concerned, the insertion of a rate at
line item A60 after receipt of the City’s clarification
letter
might of course have affected the bidding process. But that is the
City’s problem, because it was occasioned by its
own error.
[58]
In the
AllPay
merits judgment (
AllPay
Consolidated Investment Holdings (Pty) Ltd and Others v Chief
Executive Officer, South African Social Security Agency, and
Others
2014 (1) SA 604
(CC) at para [22]) it was emphasised that the tender
process must itself be fair and lawful, independent of the outcome of
such
process.
[59]
At paras [28] and [30] it was held that:
‘
[28]
Under the Constitution there is no reason to conflate procedure and
merit. The proper approach is to establish, factually,
whether an
irregularity occurred. Then the irregularity must be legally
evaluated to determine whether it amounts to a ground of
review under
PAJA. This legal evaluation must, where appropriate, take into
account the materiality of any deviance from legal
requirements, by
linking the question of compliance to the purpose of the provision,
before concluding that a review ground under
PAJA has been
established…
[30]
Assessing the materiality of compliance with legal requirements in
our administrative law is, fortunately, an exercise unencumbered
by
excessive formality. It was not always so. Formal distinctions were
drawn between “mandatory” or “peremptory”
provisions on the one hand and “directory” ones on the
other, the former needing strict compliance on pain of non-validity,
and the latter only substantial compliance or even non-compliance.
That strict mechanical approach has been discarded. Although
a number
of factors need to be considered in this kind of enquiry, the central
element is to link the question of compliance to
the purpose of the
provision. In this court O’ Regan J succinctly put the question
in
ACDP v Electoral Commission
as
being
“
whether what the
applicant did constituted compliance with the statutory provisions
viewed in the light of their purpose”.
This is not the same as
asking whether compliance with the provisions will lead to a
different result.’
[60]
In
Beach Clean
Services South Africa CC v The City of Cape Town and 2 Others
(an
unreported judgment of Blignault J in this Division under case
no 24190/2012, delivered on 3 July 2013) the applicant’s
tender bid had been declared non-responsive for two reasons, the one
relevant for present purposes being that it had not tendered
any
prices for waste removal in respect of seven out of sixteen beaches.
The spaces provided for the insertion of these prices
were simply
left blank. It was the City’s position that the failure to
tender on all items per the pricing schedule constituted
a failure to
adhere to a material condition of the tender.
[61]
The court referred to the decisions in
Minister of Social Development and
Others v Phoenix Cash and Carry – Pmb CC
[2007]
3 All SA 115
(SCA);
Millennium Waste
Management (Pty) Ltd v Chairperson, Tender Board: Limpopo Province
2008 (2) SA 481
(SCA); and
National
Lotteries Board and Others v South African Education and Environment
Project
2012 (4) SA 504
(SCA); and
emphasised at para [45] that:
‘
[45]
The Supreme Court of Appeal confirmed in a number of recent decisions
that an organ of State should not adopt an overly formal
or technical
approach when considering whether tender conditions have been
complied with, even when they are couched in ostensibly
peremptory
language. It should apply a system which is “fair, equitable,
transparent, competitive and cost-effective”
as envisaged by
section 217(1) of the Constitution.’
[62]
Blignault J held at paras [49] –
[50]:
[49]
In my view the City’s officials erred by failing to adhere to
the principles laid down by the Supreme Court of Appeal
in the
judgments to which I referred above. They adopted a technical and
formalistic approach to applicant’s tender instead
of focusing
on the substance of the matter, namely the application of the
constitutional values referred to above. It would not
have been
difficult for the officials to direct queries to applicant in order
to clarify the issues in question. They do not concern
complicated
issues. The conditions of tender make provision for queries in regard
to items that were not clear…
[50]
…There is no allegation that the defects in its tender (if
there were indeed defects) were due to any
mala
fide
conduct on
[the
applicant’s]
part. No other
tenderer would have been prejudiced if applicant had been afforded an
opportunity to clarify the alleged defects.
Nor would the integrity
of the process have been implicated.’
[63]
Subject to the qualification hereunder, the
findings in
Beach Clean
apply
equally in the present matter. First, it cannot be disputed that the
errors made by both applicants had their source in the
City’s
own errors. Second, it was unduly formalistic of the City, and
amounted to an unwarranted adherence to a fixed principle,
to ignore
its own role in the confusion which it had engendered. Third, a
perfunctory perusal of page 118 of JK Structures’
tender
bid shows that 26 prices were quoted for 26 items, and that JK
Structures had made a patent error in failing to correctly
match
three prices quoted to three corresponding line items. In the case of
Carp Civils, what the City should have done was to
formulate its
clarification letter in such a way that actual clarity could have
been provided. Herein lies the qualification: other
tenderers might
have been prejudiced if Carp Civils was afforded the opportunity,
after closing date of the tender, to explain
its failure to insert a
rate. If so, this could have rendered the bid unfair. But in my view
the City cannot sweep its own responsibility
for this under the
carpet. It was incumbent upon the City to find a fair, equitable,
transparent, competitive and cost-effective
solution to the
procedural problem caused of its own making. The
AllPay
merits judgment has made it clear that the process itself must meet
the s 217 requirement, irrespective of the outcome. In
these
circumstances, I do not believe that it would be appropriate for this
court to endorse the City’s outright rejection
of Carp Civils’
tender bid.
[64]
I am thus compelled to conclude that the
City’s approach resulted in irregularities in relation to the
applicants’ non-pricing
of the items in question, and that such
irregularities were material.
Just
and equitable relief
[65]
In its amended notice of motion the
applicants’ main relief sought was twofold, namely to review
and set aside the City’s
decisions to reject the tender bids
submitted by the applicants; and to set aside the City’s
decision to award the tender
to the second and third respondents.
Coupled with this were orders sought to substitute the City’s
decisions by awarding
the tender to the applicants only;
alternatively, referring the matter back to the City for
re-adjudication.
[66]
During argument the applicants submitted
that if the court were to set aside the decision to reject the
applicants’ bids,
it would not be necessary to consider or
determine the relief sought in respect of the award to the second and
third respondents.
This is because: (a) it was the City’s
intention at the time of the tender process to appoint a pool of four
contractors
per category; (b) the two successful tenderers do not
oppose the relief sought and all of the other unsuccessful tenderers
have
not challenged the City’s decisions; and (c) this is a
term tender in which work will be allocated from the pool of
contractors
in accordance with the ranking of prices tendered. There
is merit in this approach. There are various steps in the tender
process.
This court cannot and should not anticipate the City’s
next step. All that this court can do is to halt the process, correct
the incorrect steps, and refer it back to the City to proceed.
[67]
I am in any event mindful that a court
‘
should be careful not to
attribute to itself superior wisdom’
(the well-known
Bato Star
decision, i.e.
[2004] ZACC 15
;
2004 (4) SA 490
(CC)). It is the City’s
designated officials, rather than this court, who are far better
qualified to re-evaluate pricing
in a tender bid and to conclude the
tender process.
Costs
[68]
The applicants have been substantially
successful and are therefore entitled to their costs, subject however
to the following qualifications.
On the one hand, the applicants did
not persist with some of the relief sought and thus caused wasted
costs to the City. On the
other hand, it cannot be ignored that the
City provided a reason for rejecting JK Structures’ bid which
was not supported
by its own internal records. This in turn resulted
in wasted costs to the applicants. In my view, and in order to avoid
any dispute
or confusion on taxation, the practical way to deal with
this is to simply regard the one set of wasted costs as neutralising
the
other.
Conclusion
[69]
Having found that the first respondent did
not in fact reject the first applicant’s tender bid on the
ground of non-functionality,
the following orders are made:
1. The City’s
decisions to reject both applicants’ tender bids due to a
failure to price for all rates items, are reviewed
and set aside.
2. The first
respondent’s Bid Evaluation Committee is ordered, within 14
calendar days from date hereof, to reconsider and
re-evaluate the
first applicant’s tender bid on the basis that line items A310
to A330 on page 118: Schedule A of its tender
bid document correspond
with what is reflected at paragraph [20] of this judgment, and to
furnish the first applicant with written
notification of the outcome
within seven (7) calendar days thereafter;
3. The second
applicant is granted the opportunity, within fourteen (14) calendar
days from date hereof, to explain its failure
to specifically price
line item A60 on page 117: Schedule A of its tender bid document
after receipt of the City’s clarification
letter dated 3 June
2014, by furnishing written reasons therefor to the Chairperson of
the Bid Evaluation Committee; and to inform
the City of the price
which it would have inserted had it been afforded the opportunity to
do so;
4. The first
respondent is ordered to reconsider and re-evaluate the second
applicant’s tender bid, only in relation to the
non-pricing
issue, within fourteen (14) calendar days of receipt of such written
reasons, and to provide the second applicant with
written
notification of the outcome within seven (7) calendar days
thereafter;
5.
The first respondent shall pay the costs of both applicants in this
application on the scale as between party and party, including
the
costs of two counsel where employed, and including all reserved costs
orders.
J
I CLOETE