South Africa: North West High Court, Mafikeng

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IMVUSA Trading 134CC and Another v Dr. Ruth Mompati Disctrict Municipality and Others (2628/08) [2008] ZANWHC 46 (20 November 2008)

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IN THE HIGH COURT OF SOUTH AFRICA BOPHUTHATSWANA PROVINCIAL DIVISION

CASE NO.: 2628/08

In the matter between:



IMVUSA TRADING 134CC 1ST APPLICANT

LEPHOLLETSE BUILDING CONSTRUCTION CC 2nd APPLICANT



and

DR RUTH S MOMPATI DISTRICT MUNICIPALITY 1st RESPONDENT

THE CHAIRPERSON: BID EVALUATION COMMITTEE 2nd RESPONDENT

THE CHAIRPERSON: BID ADJUDICATION COMMITTEE 3rd RESPONDENT

MOM BUILDING & DISTRIBUTORS CC 4th RESPONDENT

MAIKAEGO CONSTRUCTION CC 5th RESPONDENT


DATE OF HEARING : 13 NOVEMBER 2008

DATE OF JUDGMENT : 20 NOVEMBER 2008

FOR THE APPLICANTS ADV P ELLIS SC

FOR THE RESPONDENTS ADV SCHEEPERS

JUDGMENT

[1] On 17 November 2008 I dismissed an urgent application with costs. These are my reasons for making the order.



[2] The applicants, Imvusa Trading 134 CC and Lepholletse Building Construction CC seek, to review and set aside the award of a tender by the Dr Ruth S Mompati District Municipality to Mom Building and Distributors CC and Maikaego Construction CC, the fourth and fifth respondents (hereafter Mom and Co). The chairpersons of the Evaluation Committee and Bid Committees are cited as second and third respondents. The application is opposed by the first to third respondents. Mom and Co abide by the decision of this court.



[3] Invitations, with closing date 14 December 2007, were extended to interested parties to tender for the provision of water metered connections and precast toilets for 450 stands in Huhudi. This came to nothing. A second invitation for the completion of this work was re-advertised with closing date 11 April 2008. The applicants, a joint venture, tendered for the work as did the fourth and fifth respondents, also as a joint venture. The invitation required tenderers to provide a tax clearance certificate valid for a period of six month. Both rivals (and others) submitted such documents. However, that of the fifth respondent had expired on 20 February 2008. This certificate had been


used in the previous bid and had not been replaced. Prima facie it did not comply with the tender conditions.



[4] The engineers pointed this and another difficulty out. The other problem no longer features in this review. The Bid Evaluation Committee noted the defect and recommended that the tender be awarded to the applicants, who were ranked second.


[5] The Bid Committee, however, sent the documentation back for, inter alia, the verification of the fifth respondent's tax status. The Bid Committee permitted Mom and Co to replace the outdated certificate with a fresh one. It was submitted on 11 June 2008. The Bid Committee recommended that the tender be awarded to Mom and Co. The Municipality followed this advice and concluded a contract with them on 15 September 2008.



[6] The applicants complain that this conduct contravenes the requirements of section 217 of the Constitution of the Republic of South Africa of 1996. It is not fair, transparent, competitive, and cost effective. Mr Ellis SC, who appeared for the applicants, developed his submission in the following manner:


(a) A tender which is invalid in terms of the tender conditions may not even be considered by the Bid Committees. See Steenkamp N.O. v Provincial Tender Board, Eastern Cape 2006 (3) SA 151 (SCA) at par 54 and Metro Project CC & Another v Klerksdorp Local Municipality & Others 2004 (1) SA 16 (SCA) at par 15.

  1. The tender submitted by Mom & Co was fatally defective. It was not accompanied, as required by the tender conditions, by a valid tax clearance certificate, and the fact that they were allowed, subsequently, to supplement this fatal error, rendered the acceptance of the tender invalid.

  2. It was not an offer which complied with the tender conditions.

  3. The respondent attempted to dilute this requirement by arguing that Regulation 16 of the Regulation issued under the Preferential Procurement Policy Framework Act 5 of 2000 ("the PPPF Act"), only requires such a certificate to have been issued before contracting, i.e before acceptance of the tender. Such interpretation flies in the face of the express interpretation contained in the tender specification issued by the Municipality to prospective tenderers, and is indicative of an unfair, non-transparent and non-competitive process of dealing with tenders.


The approach which I take towards this review is the following:

  1. The tender process must be fair, transparent, competitive and cost effective. See section 117 of the Constitution;

  2. The tender board is permitted to condone some deficiencies. See Millennium Waste Management

(Pty) Ltd v Chairperson Tender Board: Limpopo Province and Others 2008 (2) ALL SA 145 (SCA) at para 58;

  1. Bona fide mistakes should not, on their own, disquality a tenderer. See Millennium Waste Management (supra) and Total Computer Services (Pty) Ltd v Municipal Manager, Potchefstroom Local Municipality and Others [2007] ZAGPHC 239; 2008 (4) SA 346 (T).

  2. Substance should prevail over form. See Minister of Social Development and Others v Phoenix Cash & Carry- Pmb CC 2007 (3) ALL SA 115 (SCA);

  3. A distinction should be drawn between a material factor and the evidence needed to prove that factor. See Minister of Social Development (supra);

  4. Attention must be paid to the entire set of facts in the context of the applicable legislation and the principles involved;

  5. The words "accepted tender" in the PPPF Act involves a consideration of the degree of compliance with the tender conditions. See Metro Projects CC and Another v Klerksdorp Local Municipality and Others 2004 (1) SA 16 (SCA) at par 15.

(h) The interest of all concerned and especially that of
the public must be taken into account.


It is a sound principle of public administration that those who do not contribute their lawful share to the fiscus are not permitted to benefit from public work by obtaining tenders from public organs at any level. This means that a tenderer's tax affairs should be entirely in order before the public organ concerned may award a tender to it.


[9] In order to determine whether the tenderer's tax affairs are in order, a public organ, depending upon the applicable legislation, may:

  1. require the tenderer to provide a tax clearance certificate valid for a certain period;

  2. require the tenderer to provide it with authority to make inquiries from South African Revenue Services (SARS) about the state of the taxes; or

  3. be authorised by law to inquire and SARS, which is under a general obligation not to divulge information about a taxpayer's affairs, be permitted to make that information available to the public organ.


[10] In this instance, the Municipality permitted Mom and Co to hand in a fresh tax clearance some months after the tender had closed.


[11] Mr Scheepers, who appeared for the first three respondents, contended that clause 43 of the Municipal Chain Management Policy dated 1 January 2006 ("the Policy") required the Municipality to make inquiries from SARS before awarding a tender of more than R15 000 to anyone. Therefore the condition in the tender invitation was in essence pro non scripto as it did not and could not substitute the Municipality's statutory duty to establish, before contacting, that the tenderer was in good standing with SARS.


The difficulty that faces this argument is that if the tender condition relating to provision of a tax clearance is treated as pro non scripto, then the tender awarded to Mom and Co may be invalid. The Municipality did not, itself, seek information from SARS and so did not fulfil an important obligation in terms of its Policy. The award of the tender cannot be defended on this basis.



What is the effect of the Municipality's failure to comply with paragraph 43 of its Policy? Clause 43 reads:



"Prohibition on awards to persons whose tax matters are not in order

  1. No award above R15 000 may be made in terms of this Policy to a person whose tax matters have not been declared by the South African Revenue Services to be in order.

  2. Before making an award to a person the accounting officer must first check with SARS whether that person's tax matters are in order.

  3. If SARS does not respond within 7 days such person's tax matters may for purposes of subparagraph (1) be presumed to be in order."

I have not been able to find any provision in the Local Government Municipal Finances Management Act 56 of 2003 which permits the framer of the Regulations or a policy to override section 4 (the secrecy provisions) of the Income Tax Act 58 of 1962. But it does not follow that clause 43 is invalid. The Municipality would have to obtain the tenderer's authority to make such inquiries. This is provided for by regulation 13 and clause 13 of the

Policy. However, no such authorization was supplied by the fifth respondent.


[15] However, the PPPF Act is applicable to the Municipality's tender process. Regulation 16 provides that a contract may not be awarded to a person who has failed to submit an original tax certificate from SARS. The invitation to tender quotes Regulation 16 and adds:





"This Tax Clearance Certificate must be submitted in the original with the tender that is before the closing time and date of the tender."



and



"Failure to submit an original and valid Tax Clearance Certificate, or certified copy thereof, will invalidate the tender."


[16] The fifth respondent's tax clearance certificates were at all material times in order. The fifth respondent's tax affairs were in order as at 20 February 2008. It is not disputed that the fifth respondent's tax affairs were also in order when the contract was signed. What was lacking, on the closing date of the tender, 11 April 2008, was proof of this. The Bid Committee called for proof. Proof was submitted in the form of a fresh, valid, tax clearance certificate. This corrected a bona fide mistake which the fifth respondent had made. The Bid Committee was entitled to condone the omission.

[17] In the result I am satisfied that the award of the tender to MOM & Co was fair, transparent and competitive.



[18] Consequently I dismissed the application with costs.

A A LANDMAN

JUDGE OF THE HIGH COURT


LANDMAN J:


ATTORNEYS:

FOR THE APPLICANTS SMIT & STANTON INC

FOR THE RESPONDENTS NIENABER & WISSING