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[2017] ZAECGHC 45
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WDR Earthmoving Enterprises CC and Another v Joe Gqabi District Municipality and Others (CA298/2016) [2017] ZAECGHC 45 (13 March 2017)
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IN THE HIGH COURT OF SOUTH AFRICA
EASTERN CAPE DIVISION, GRAHAMSTOWN
Case no. CA298/2016
Date heard: 27/2/17
Date delivered: 13/3/17
Not reportable
In the matter between:
WDR EARTHMOVING ENTERPRISES CC First Appellant
COTTERRELL’S CONSTRUCTION CC Second Appellant
and
JOE GQABI DISTRICT MUNICIPALITY First Respondent
THE MUNICIPAL MANAGER:
JOE GQABI DISTRICT MUNICIPALITY Second Respondent
THE CHAIRPERSON OF THE BID ADJUDICATION
COMMITTEE: JOE GQABI DISTRICT MUNICIPALITY Third Respondent
AMADWALA TRADING 363 CC Fourth Respondent
JUDGMENT
PLASKET, J:
[1] The appellants, WDR Earthmoving Enterprises CC and Cotterrell’s Construction CC, (the JV) formed a joint venture partnership in order to bid for a tender published by the first respondent, the Joe Gqabi District Municipality (the Municipality) for the construction of an internal gravity sewer system in the hamlet of Jamestown in the north-eastern Cape. The JV tendered for the work. So did the fourth respondent, Amadwala Trading 363 CC (Amadwala). The tender was awarded to Amadwala and the JV took that decision on review. In the court below, Lowe J dismissed the JV’s application. The JV now appeals against Lowe J’s order and does so with his leave.
Background
[2] Despite the size of the record – described with some justification by the Municipal Manager of the Municipality as obese – the core, material facts are relatively simple. They are these.
[3] The JV submitted a tender in the amount of R10 376 681.96 for the specified work. Amadwala submitted a tender of R12 020 082.82, approximately R1 640 000 more than the JV’s bid.
[3] In the circumstances I shall outline below, the JV’s bid was excluded at the outset: it was found to be non-responsive because one of the partners had not furnished the Municipality with audited annual financial statements for the previous three years. Amadwala’s bid was found to be responsive and, it being the only responsive bidder, the tender was awarded to it.
[4] In its application before Lowe J, the JV accordingly sought an order reviewing and setting aside the decision to declare its tender unresponsive and to award the tender to Amadwala.
[5] The principal issue before Lowe J, and before us on appeal, is whether the Municipality committed a reviewable irregularity when it excluded the JV’s bid on account of Cotterrell’s Construction failing to furnish audited annual financial statements for the previous three years. Lowe J found that no reviewable irregularity had been established by the JV, as the applicable empowering provisions authorised the Municipality to disqualify bids that were not complete.
The legal framework
[6] Section 217 of the Constitution provides that when organs of state procure goods and services they must do so in accordance with a system that is ‘fair, equitable, transparent, competitive and cost-effective’. These principles are given effect to by a complex web of primary and subordinate legislation as well as supply chain management policies.[1] These instruments both empower organs of state in their procurement processes and place limits on their powers. Procurement processes, in order to be lawful and constitutionally compliant, must be undertaken in accordance with these provisions: compliance with them is legally required and they may not be disregarded.[2]
[7] Decisions by organs of state either to award or not to award tenders are administrative actions, as that term is defined in terms of s 1 of the Promotion of Administrative Justice Act 3 of 2000 (the PAJA). That being so, such decisions are reviewable in terms of s 6(1) of the PAJA if one or more of the grounds of review codified in s 6(2) are present.[3] Framed in the obverse, a decision-maker in a public procurement process is required by s 33(1) of the Constitution to act lawfully, reasonably and in a procedurally fair manner and if he or she does not, the impugned decision may be set aside.
[8] A court that is approached to review an administrative action does not have a free hand to interfere in the administrative process. Its powers are limited. As Lord Brightman stated in Chief Constable of the North Wales Police v Evans[4] ‘[j]udicial review is concerned, not with the decision, but with the decision-making process’. This was made clear by Innes CJ more than a century ago in Johannesburg Consolidated Investment Co Ltd v Johannesburg Town Council[5] when he said:
‘Whenever a public body has a duty imposed on it by statute, and disregards important provisions of the statute, or is guilty of gross irregularity or clear illegality in the performance of the duty, this Court may be asked to review the proceedings complained of and set aside or correct them.’
[9] Less than a decade later, after Union and the establishment of the Appellate Division, Innes ACJ, in Shidiack v Union Government (Minister of the Interior),[6] captured the limits of the review function of a superior court when he said that a court would be ‘unable to interfere with a due and honest exercise of discretion, even if it considered the decision inequitable or wrong’. The reason for this is simple: the legislature mandated and empowered administrators to administer, and not courts; and the role of the courts is limited to ensuring that administrators do not stray beyond the legal limits of their mandates.
[10] The passages I have cited from the Johannesburg Consolidated Investments case and the Shidiack case articulated the position when the review of administrative action was a common law jurisdiction of the superior courts. The principles stated still hold good now that the power to review administrative action is sourced in the Constitution and the PAJA:[7] the distinction between appeal and review, based as it is on the doctrine of the separation of powers, remains in place and remains fundamentally important. Administrative action may only be set aside by a court exercising its review powers if it is irregular. It may not be interfered with because it is a decision a judge considers to be wrong.
The tender documents and the dispute
[11] Of the various legislative instruments that applied to the tender, it is only necessary to consider two, the Tender Data issued by the Municipality and the Standard Conditions of Tender (SCT), which is annexure F of the CIDB Standard for Uniformity in Construction Procurement.[8] The two documents are connected in that the Tender Data amends and supplements the SCT for purposes of the tender under consideration.
[12] For this reason, the preamble to the Tender Data states that the Tender Data ‘shall have precedence in the interpretation of any ambiguity or inconsistency between it’ and the SCT. The SCT, in turn, makes the same statement.
[13] In terms of clause F.1.2 of the Tender Data, the tender documents issued by the Municipality include returnable documents and schedules. Clause F.1.3.2 states that the SCT, the Tender Data as well as the list of returnable documents and schedules ‘which are required for tender evaluation purposes shall form part of the Contract arising from the invitation to tender’. Clause F.2.14 states that tenderers are required to furnish information in, inter alia, the returnable schedules. It also obliges tenderers to accept ‘that failure on the part of the Tenderer to submit any one of the Returnable Documents listed in F.2.23 shall result in a tender offer being regarded as non-responsive’. Those documents include the returnable documents and schedules referred to in clause T.2.1 and T.2.2 of the SCT, as well as the document entitled ‘Declaration for Procurement above R10 million (MBD5)’.
[14] Clause F.2.18.1 of the Tender Data places an obligation on tenderers when the tender amount exceeds R10 million, inclusive of VAT, to provide, on written request, ‘audited annual financial statement (sic) for 3 years, or for the period since establishment if established during the last 3 years, if required by law to prepare annual financial statements for auditing’.
[15] Clause F.2.13.2 of the Tender Data imposes an obligation on tenderers to return ‘all volumes’ of the tender documents to the Municipality ‘after completion of the relevant sections of each volume in their entirety by writing in BLACK INK’.
[16] Clause F.3.8 of the SCT, which has not been amended by the Tender Data, sets out the test for non-responsiveness of bids. Clause F.3.8.1 allows the Municipality, before detailed evaluation of bids, to determine whether they comply with the SCT, have been ‘properly and fully computed and signed’ and are ‘responsive to the other requirements of the tender documents’.
[17] Clause F.3.8.2 then defines a responsive bid as follows:
‘A responsive tender is one that conforms to all of 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.’
This clause also empowers the Municipality to reject non-responsive tenders and not allow them ‘to be subsequently made responsive by correction or withdrawal of the non-conforming deviation or reservation’.
[18] Clause F.2.7 of the Tender Data provided that a compulsory site visit and clarification meeting would take place. That occurred on 19 September 2014. The minutes record that it was clarified that when a tenderer was a joint venture partnership, ‘each entity has to submit the relevant returnable documents and complete the relevant forms’.
[19] One of the returnable schedules that the JV was required to complete was document MBD5, the declaration when the tender is worth more than R10 million, inclusive of VAT. This document took the form of a questionnaire. It was completed by both parties that comprised the JV. The first question was whether the respondent was required by law to ‘prepare annual financial statements for auditing’. Both WDR Earthmoving and Cotterrell’s Construction answered this question in the affirmative. The form then required those who had answered in this way to submit those financial statements.
[20] It is common cause that WDR Earthmoving submitted audited annual financial statements for three years as required but Cotterrell’s Construction did not: it submitted audited annual financial statements for two years and what are described as ‘interim annual financial statements for a portion of the financial year being from 1 March 2013 to 31 January 2014’.
[21] After the JV had been informed that its bid had been unsuccessful, it sought reasons for this decision. A letter was duly received from the Municipality’s attorneys at the time. It stated:
‘We have had an opportunity to consider the further documentation and information received. Accordingly, we state as follows to your request, 20 April 2015.
2.1 The WDR/Cotterrell’s JV was considered non-responsive for its failure to submit all supplementary information in relation to Part T2: Returnable Documents, Section T2.2: Returnable Schedules; alternatively, the bid was not accepted because it was incomplete.
2.2 More particularly, the JV failed to submit audited financial statements for the past three years or since the date of establishment where established during the past three years, as required in terms of sub-paragraph 1.1 of 2C- Declaration for Procurement above R10 million (all applicable taxes included) (MBD 5).’
[22] More particularity was sought by the JV’s attorneys and a fuller explanation was furnished by the Municipality’s attorneys in a second letter. The relevant portion of this letter stated:
‘In amplification of the reasons provided under paragraph 2 of our letter, 28 April 2015, please see our response, below.
2.1 A bidder was required to have completed 2C- Declaration for Procurement above R10 million (all applicable taxes included) (MBD 5) as part of its submission.
2.2 The JV, when addressing the question, “Are you by law required to prepare annual financial statements for auditing?”, circled “Yes”.
2.3 If a bidder had answered yes, then it was required to submit “audited annual financial statements for the past three years or since the date of establishment if established during the past three years”. To this, the JV inserted “Included – see attached”.
2.4 Thereafter, the JV enclosed the following:
2.4.1 In respect of Cotterrell’s Construction CC: financial statements for 1 March 2013 to 31 January 2014; annual financial statements for the years ending 28 February 2013 and 29 February 2012; and
2.4.2 in respect of WDR Earthmoving Enterprises CC: financial statements for the years ending 28 February 2013, 29 February 2012 and 28 February 2011.
2.5 No audited annual financial statements were included for the JV.
2.6 Accordingly, the JV was considered non-responsive for its failure to submit all supplementary information, alternatively its bid was not accepted because it was incomplete.’
The issues
[23] Two principal issues arise for decision. The first concerns the regularity of the Municipality’s decision to exclude the bid of the JV. The second concerns the regularity of its decision to award the tender to Amadwala.
The regularity of the JV’s exclusion
[24] The first issue is whether the Municipality committed a reviewable irregularity by excluding the JV’s bid because of the failure of Cotterrell’s Construction to file audited annual financial statements for three years.
[25] It was argued by Mr Huisamen, who appeared for the JV, that no such obligation arises from the Tender Data. An obligation to furnish the information is contained in the SCT. There is thus a conflict between the SCT and the Tender Data. That being so, the Tender Data prevails.
[26] In my view, there are two fundamental difficulties with this argument. First, the requirement that tenderers state whether they are legally obligated to have audited annual financial statements and, if so, to provide them for a three year period arises not from the SCT or the Tender Data but from the Municipal Supply Chain Management Regulations[9] made by the Minister of Finance in terms of s 168 of the Local Government: Municipal Finance Management Act 56 of 2003. Regulation 21(d) provides:
‘A supply chain management policy must determine the criteria to which bid documentation for a competitive bidding process must comply, and state that in addition to regulation 13 the bid document must
. . .
(d) if the value of the transaction is expected to exceed R10 million (VAT included), require bidders to furnish –
(i) if the bidder is required by law to prepare annual financial statements for auditing, their audited financial statements –
(aa) for the past three years; or
(bb) since their establishment if established during the past three years.’
[27] From this it is clear that the Municipality had no choice: it was required to seek the information because the tender was for more than R10 million. For this reason, no doubt, MBD5 was part of the tender documents and was required to be completed by tenderers.
[28] Secondly, in any event, I am of the view that the JV’s argument is not correct.
Clause F.1.2 of the Tender Data provided that the tender documents issued by the Municipality include returnable documents and schedules. In terms of clause F.2.14 tenderers were required to furnish information in, inter alia, the returnable schedules. Tenderers also accepted, in terms of this clause, ‘that failure on the part of the Tenderer to submit any one of the Returnable Documents listed in F.2.23 shall result in a tender offer being regarded as non-responsive’. Those documents include the returnable documents and schedules referred to in clause T.2.1 and T.2.2 of the SCT, as well as the document entitled ‘Declaration for Procurement above R10 million (MBD5)’.
[29] Clause F.2.14 of the SCT required that every tenderer accepted that bids that ‘do not provide all the data or information requested completely and in the form required may be regarded by the employer as non-responsive’. Clause F.2.14 of the Tender Data adds to this. It requires a tenderer, in addition, to accept that failure on its part to ‘submit any one of the Returnable Documents listed in F.2.23 shall result in a tender offer being regarded as non-responsive’. As stated, clause F.2.23 of the Tender Data lists MBD5 specifically. On this basis, it appears to me that the Municipality was empowered to treat the JV’s bid as non-responsive on account of its failure to provide audited annual financial statements for three years. It had no power to permit the JV to deviate from the requirement once its partners had declared that they were legally obliged to prepare audited annual financial statements. If I am wrong in concluding that the mere failure to comply with the requirement disqualified the JV’s bid, I am in agreement with Lowe J in the court below that, in terms of clause F.3.8.2 of the SCT, the failure on the part of the JV was material when he held:[10]
‘The JV’s bid having been declared non-responsive, was a decision taken within the terms of the tender conditions as analysed above, the absence of a full set of audited statements from one of the partners being reasonably judged, a material deviation which would significantly change the employer’s risk in awarding the tender, the second applicant having bound itself to the statement that it was by law obliged to have audited financial statements. That only a small portion of the statements were omitted does not, in my view, change the position as the last month may well have contained material financial information, and moreover the last 11 months statements submitted were unaudited.’
[30] From the above, I am satisfied that Lowe J was correct in concluding that no reviewable irregularity had been established by the JV in respect of the Municipality’s decision to disqualify it from the tender process. It acted within the powers conferred on it by the applicable empowering provisions. In the result, the appeal must fail in respect of this issue.
The regularity of the award to Amadwala
[31] The JV not only sought to review the decision disqualifying it from the tender process but it also sought to review the decision to award the tender to Amadwala. The JV had alleged that Amadwala’s bid was non-responsive and should have been excluded, as its own had been. Amadwala and the Municipality denied that the bid was non-responsive.
[32] Lowe J held that a dispute of fact had arisen in relation to whether Amadwala’s bid was non-responsive but that the factual dispute had to be resolved in its favour (in terms of the Plascon-Evans rule[11]).
[33] In my view, a more direct route may be taken to reach the same result. The JV has no standing to challenge the award of the tender to Amadwala: once its bid was found to be non-responsive, it fell out of the race and it no longer had a legally protected interest in the outcome of the process. As Pillay J stated in Rodpaul Construction CC t/a Rods Construction v EThekwini Municipality & others[12] ‘only a compliant tenderer acquires the right to challenge an award’.
[34] Mr Huisamen argued that the JV’s standing to challenge the award to Amadwala arose from s 6(1) of the PAJA which states that ‘[a]ny person may institute proceedings in a court . . . for the judicial review of an administrative action’. This provision is merely a recognition that everyone has a right to just administrative action in terms of s 33 of the Constitution and that one way in which that right may be vindicated is by applying to review administrative action that is unlawful, unreasonable or procedurally unfair. It is followed by s 6(2) which states that a court has the power to judicially review administrative action if one or more of the listed grounds of review are present. Section 6(1) does not concern itself with standing. It is implicit in s 6(1) that it is only a person envisaged in s 38 of the Constitution who may approach a court to judicially review an administrative action. There is thus no merit in this argument.
[35] It follows that Lowe J’s conclusion on this point was correct and that the appeal must fail in respect of this issue too.
The order
[36] The appeal is dismissed with costs.
______________________
C Plasket
Judge of the High Court
I agree.
______________________
E Revelas
Judge of the High Court
I agree.
_______________________
SM Mbenenge
Judge of the High Court
APPEARANCES
For the appellants: J Huisamen SC instructed by Joubert Galpin Searle Inc, Port Elizabeth, and Huxtable Attorneys, Grahamstown
For the first, second and third respondents: S Grobler instructed by Peyper Attorneys, Bloemfontein, and Wheeldon, Rushmere and Cole, Grahamstown
For the fourth respondent: WA Van Aswegen instructed by Duncan and Rothman Attorneys, Kimberley, and Wheeldon, Rushmere and Cole, Grahamstown
[1] Joubert Galpin Searle Inc & others v Road Accident Fund & others 2014 (4) SA 148 (ECP) para 57.
[2] AllPay Consolidated Investment Holdings (Pty) Ltd & others v Chief Executive Officer, South African Social Security Agency & others 2014 (1) SA 604 (CC) para 40.
[3] Joubert Galpin Searle Inc (note 1) para 58.
[4] Chief Constable of the North Wales Police v Evans [1982] UKHL 10; [1982] 3 All ER 141 (HL) at 154d.
[5] Johannesburg Consolidated Investment Co Ltd v Johannesburg Town Council 1903 TS 111 at 115.
[6] Shidiack v Union Government (Minister of the Interior) 1912 AD 642 at 652.
[7] Pharmaceutical Manufacturers Association of SA & another: In re ex parte President of the Republic of South Africa & others [2000] ZACC 1; 2000 (2) SA 674 (CC) para 45; Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs & others [2004] ZACC 15; 2004 (4) SA 490 (CC) para 22.
[8] CIBD is the acronym for the Construction Industry Development Board, a body created by the Construction Industry Development Board Act 38 of 2000. The SCT was published in Government Gazette No. 33239, Board Notice 86 of 2010 of 29 May 2010.
[9] The regulations were promulgated in Government Notice 868 of 30 May 2005.
[10] Judgment para 73.
[11] Plascon-Evans Paints Ltd v Van Riebeeck Paints (Pty) Ltd [1984] ZASCA 51; 1984 (3) SA 623 (A) at 634E-I.
[12] Rodpaul Construction CC t/a Rods Construction v EThekwini Municipality & others KZD 2 June 2014 (case no. 10075/13) unreported, para 52.