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IN THE HIGH COURTS OF SOUTH AFRICA

KWAZULU-NATAL LOCAL DIVISION,

DURBAN

CASE NO: 10075/13

In the matter between:

RODPAUL CONSTRUCTION CC..................................................................................APPLICANT

t/a RODS CONSTRUCTION

and

ETHEKWINI MUNICIPALITY..................................................................... FIRST RESPONDENT

LIVIERO BUILDING (PTY) LTD............................................................. SECOND RESPONDENT

MINISTER OF FINANCE..............................................................................THIRD RESPONDENT

THE NATIONAL TREASURY..................................................................FOURTH RESPONDENT

JUDGMENT

Date of hearing: 02 May 2014

Date judgment delivered: 2 June 2014

D. PILLAY J

Introduction

[1] The applicant, Rodpaul Construction CC trading as Rods Construction submitted its Broad–Basic Black Economic Empowerment B-BBEE (B-BBEE) Certificate (the Certificate) after the time for tendering for certain construction work expired but before the Bid Evaluation Committee (BEC) and the Bid Adjudication Committee (BAC) considered the bids. Rodpaul now seeks to set aside the award of the tender to the second respondent, Liviero Building (Pty) Ltd. Liviero abides the decision of the court. The first respondent, EThekwini Municipality opposes the application. Rodpaul seeks no relief against the third and fourth respondents namely, the Minister of Finance and the National Treasury (collectively referred to as the Treasury) after they delivered opposing affidavits.

The Facts

[2] Chronologically, the facts are as follows: On 9 November 2012 EThekwini called for tenderers to submit bids for the project: ‘Ward 26: Jeff Taylor Crescent: Phase 1: Additions to the control centre for EThekwini Electricity’. The Invitation to Tender advertised the closing time for receiving tenders as 11h00 on 7 December 2012.[1] Notes to Tenderers[2] explained various rules, requirements and conditions attaching to the tender.

[3] On 13 November 2012 Rodpaul submitted its tender without its Certificate as required in the Notice to Tender. Instead, it attached a letter from DRG Siyaya, a B-BBEE verification service advising that it was in the process of conducting an evaluation. The tenders closed on 7 December 2012. Between 24 and 28 January 2013 EThekwini’s Department of Architecture prepared its report for the BEC. On 28 January 2013 Rodpaul submitted a new Certificate valid for one year from 28 January 2013. The report to the BEC was received by the Tenders Audited Section on 28 February 2013. Excluded from the report was Rodpaul’s Certificate.

[4] Without its Certificate Rodpaul scored 90 points. With their Certificates Liviero scored 93.60 and another tenderer scored 93.25. Thus Rodpaul ranked third out of five responsive tenders.[3] The tenders were valid until 1 February 2013 which implies some urgency initially. However they were extended to 30 April 2013.[4] On 11 March 2013 EThekwini’s BEC evaluated the tenders and resolved to support the tender from Liviero.[5] On 18 March 2013 the BAC approved the BEC’s resolution.

[5] Rodpaul lodged an appeal against the decision of the BAC. Following a hearing on 19 June 2013 the appeal committee allowed it to an opportunity to  deliver written argument on 25 July 2013. Notwithstanding two requests for a determination of the appeal none was forthcoming. After hearing on 5 September 2013 that Liviero had been awarded the tender contract Rodpaul enquired further only to discover that the determination had been made in August 2013. EThekwini had overlooked its duty to serve Rodpaul with the determination. Rodpaul obtained a stay of the execution of the contract.

Submissions for Rodpaul

[6] EThekwini’s explanation and reasons for not awarding the tender to Rodpaul communicated to the latter’s attorneys by letter dated 30 May 2013 stated:

‘Firstly, Note 9, Page (/NT) 3, of the General Notes to Tenderers did specify that Tender evaluation would be based on Broad-Based Black Empowerment Act (Act 53 of 2003) together with the Preferential Procurement Policy Framework Act (Act 5 of 2000) and the Preferential Procurement Regulations under Government Gazette of 8^th June 2011. Accordingly, based on the PPR of 2011 the 90/10 preference point system was applied.

Note 7, Page (/NT) 2, of the General Notes to Tenderers specified that Tenderers must submit the following with the tender:

· Preference Points Claim Form (MBD 6.1) in terms of the PP Regs, 2011 (Tender document Annexure 6)

· B-BBEE Verification Certificate

Rods construction failed to submit a B-BBEE Verification Certificate with the tender as was a specific requirement, they merely submitted a letter indicating that their points were being evaluated. Failure by the Tenderer to submit a B-BBEE Verification Certificate together with the tender, was interpreted to mean that preference points for B-BBEE status level of contribution are not claimed, in accordance with Note 7, NT2, and Form MBD 6.1.

We can therefore confirm the reason for non-award in single terms as:

- The applicant (Rods Construction) whilst the lowest qualifying tender was not the most responsive tender.

- The reason for this is that Rod’s Construction received zero points for preference, as they failed to submit a B-BBEE Verification Certificate with the tender.’ (sic)

[7] Rodpaul criticises EThekwini because it does not record in its reasons that its letter also stated that its B-BBEE analysis ‘was likely to be concluded during 2012’. Additionally, it takes issue with the following reason advanced in EThekwini’s answering affidavit:

‘(T)he legislative requirement for the submission of a B-BBEE Certificate  was made a condition for tender.’[6]

Rodpaul inferred from this that EThekwini interpreted the tender conditions to be prescribed as a legal obligation from which there was no escape.[7] Based on this inference and in anticipation of its constitutional challenge to the validity of reg 10(3) of the Preferential Procurement Regulations 2001 (PPR) published under Government Gazette 8 June 2011 it sought to join Treasury.

[8] In its joinder application Rodpaul clarified its position further. Regulation 10(2) [8]  did not impose a time for submitting a Certificate; therefore reg 10.2 allowed an organ of state a discretion to receive a Certificate after the closing date in order to achieve the purposes of s 217 of the Constitution of the Republic of South Africa, 1996 (the Constitution).[9] Regulation 10(3) [10] was unconstitutional in so far as it treated the Implementation Guide as a peremptory obligation countenancing no deviation or discretion.[11] EThekwini’s real reason for rejecting the bid was its interpretation of clause 4.1 of the Implementation Guide. Clause 4.1 of the Implementation Guide[12] was invalid in so far as it conflicted with reg 10(2) by requiring that Certificate to be submitted with the bid. As a subordinate instrument the Implementation Guide could not prescribe a time for submitting the Certificate as it would lead to inconsistency and usurpation of the Minister’s powers.[13] The Implementation Guide was non-binding for various other reasons.[14]

[9] Therefore reg 10(3) of the PPR and clause 4.1 of the Implementation Guide were inconsistent with the Constitution and therefore invalid.[15] EThekwini had a discretion to condone non-compliance with the regulations and any implementation guide if they infringed upon imperatives imposed by s 217 of the Constitution.[16] EThekwini’s interpretation of the regulations conflicted with s 217 because it was unfair, not transparent, not cost-effective and it failed to advance the interests of previously disadvantaged individuals.[17]

[10] Rodpaul’s case is not about seeking and failing in an application for condonation for delivering its Certificate late. On the contrary, its stance is that it was entitled to submit a copy of the Certificate at any time before the BEC and BAC considered the bids. Without a legislative imperative prescribing a time for submitting a Certificate EThekwini was not entitled to disregard its Certificate. Instead, the BEC and BAC had a duty to consider its Certificate, allow objections or call for clarification.[18] They had to apply s 33 and 217 of the Constitution, and cases such as Minister of Social Development and Others v Phoenix Cash and Carry – PMB CC [2007] 3 All SA 115 (SCA) para 2. So it was submitted for Rodpaul in support of its constitutional challenge.

[11] However, once Treasury presented its interpretation of the Implementation Guide in its answering affidavit Rodpaul abandoned its constitutional challenge. Treasury’s interpretation of clause 4.1 of the Implementing Guide was just that: a practical non-binding guide or user manual^[19]  to facilitate the process and comply with the regulations. It was not intended to exclude late submissions under all circumstances, irrespective of the explanation for a belated submission of a Certificate.^[20] Treasury did not consider the guide as having legal status; it did not substitute legislation; it was not to be used for legal interpretation; and therefore publication was unnecessary.^[21] This was clarified in clause 2.6 of Treasury Circular dated 1 December 2011 to explain the status, purpose and use of the Guide.^[22] On finding support for its contentions in Treasury’s interpretation of the Guide Rodpaul abandoned its joinder application. Besides, the rest of Treasury’s affidavit is far from favourable to its cause.

[12] Whatever interpretation the parties may hold, the text of the Notice to Tender and the other instruments is a matter for judicial interpretation. Treasury’s characterisation of the Implementation Guide is consistent with the text. However, it remains to be decided whether the requirement in the Notice to Tender was peremptory in the context.

[13] Rodpaul submits that EThekwini violated the Promotion of Administrative Justice Act 3 of 2000 (PAJA) in the following respects:

a) Section 6(2)(d): EThekwini committed a material error of law in giving the reasons that it did for rejecting Rodpaul’s bid. Allegedly, EThekwini misinterpreted the submission of a Certificate with the tender documents by the closing date as a prerequisite for a valid tender. Accordingly, EThekwini assumed that it had no discretion to consider the Certificate when it was filed after the tender closing date.[23]

b) Section 6(2)(e)(iii): EThekwini failed to consider relevant facts.

c) Section 6(2)(f)(ii)(cc): The BAC delivered a decision that was not rationally connected to the information before it.

d) Section 6(2)(f)(iii)(dd): The BAC’s decision is not rationally connected to the reasons given for it.

The last three submissions turn on the fact that the functionary who submitted the report to the BEC and BAC excluded Rodpaul’s Certificate. Consequently, the decision of the BAC was allegedly unjustifiable.

Submissions for EThekwini

[14] In contrast to Rodpaul which concentrated its challenge on the reasoning of the BAC, EThekwini focuses on the process. It rests its case on the import of the stipulations regarding the Certificate in the Notes to Tenderers. Rodpaul did not submit its bid with its tender. Its Certificate had expired on 11 July 2012. The certificate that Rodpaul supplied on 28 January 2013 was neither original nor valid at the closing date of the tender. It was effective from 28 January 2013 to 27 January 2014. The failure to submit an original, valid Certificate with the tender documents rendered Rodpaul’s bid ‘non-compliant’. It is against principles and unfair to render a non-compliant bid compliant. So it was contended for EThekwini.

Analysis

[15] Rodpaul accepts the onus of proving its right to the remedy it claims. Foundational to this onus is the duty upon Rodpaul to prove that it submitted a tender compliant in all respects with the Notice to Tender. Furthermore, as it sought to claim preferential procurement points it bore the onus of proving that it had also complied with the requirement of submitting a compliant Certificate with its tender.

[16] The BEC and BAC did evaluate Rodpaul’s bid. Only its Certificate was not evaluated. This is evident from the fact that the BEC and BAC scored its bid to rank third without the Certificate. Whether Rodpaul’s filing of the Certificate after the closing date and before the BEC and BAC considered the tenders amounts to compliance with the requirements of a valid Certificate raises three questions:

a) Is the requirement of filing an original Certificate with the tender prescribed by legislation and therefore peremptory?

b) Did the BAC have a duty in terms of ss 33 and 217 of the Constitution to accept Rodpaul’s Certificate?

c) Do the reasons given by the BAC and the appeal chairman justify their decisions to reject Rodpaul’s bid?

Legal Principles

[17] Procurement law originates in s 217 of the Constitution which is where my analysis begins.[24] Additionally, a scaffold of five statutes,[25] three regulations,[26] EThekwini’s Targeted Procurement Policy,[27] Implementing Guides and Notes to Tender underpin the constitutional right and obligation to ensure that tenders are ‘fair, equitable, transparent, competitive and cost effective’.[28] These five criteria must be considered cumulatively and weighed against each other if necessary. The first three criteria are absolute safeguards, unyielding to the latter two criteria. This is so because public procurement is notoriously prone to corruption. Assuming that Rodpaul’s bid would have been the most competitive and cost effective bid because it was R5m less than Liverio’s bid, Rodpaul must also prove that the other three criteria would have been met if its bid had succeeded.

[18] Equality as fairness and equity also underpin international law, Canadian and English law precisely because of public procurement’s predisposition towards corruption. Taking my cue from s 39(1)(b) of the Constitution I turn to international law. Research commissioned by Transparency International proffer guidelines that commend the use of standardised[29] bidding and procurement documents for predictability and systematic treatment of all bids. The guidelines caution that using non-standard bidding documents opens the door to manipulation and opaque decision-making.[30] Deviation from standard bidding documents and bids submitted and accepted after the submission deadline are red flags or indicators of potential manipulation.[31] It urges public authorities to apply good procurement principles of integrity, transparency, accountability, fairness and efficiency to all decision making on public investments and purchases to minimise corruption and maximise the economic, financial, social, environmental and political benefits of public procurement. [32] On equality, the guidelines provide:

‘(S)tandards and specifications must be nondiscriminatory;… there should be equal treatment of all in terms of deadlines, confidentiality, and so on.’ [33]

[19] The UNICITRAL Model Law On Procurement echoes similar guidance to states. One of the requirements in an open tendering system is a single stage of tendering with fixed date and time for submission of tenders.[34] Tenders must be presented in the manner, at the place and by the deadline specified in the solicitation documents. [35] Response to a request for clarification of tender requirements must be communicated to all suppliers or contractors who were provided with solicitation documents. [36]

[20] In the European Union, the Protocol Amending the Agreement on Government Procurement recognizes that

‘the integrity and predictability of government procurement systems are integral to the efficient and effective management of public resources, the performance of the Parties' economies …’[37]

It also recognizes

‘the importance of transparent measures regarding government procurement, of carrying out procurements in a transparent and impartial manner and of avoiding conflicts of interest and corrupt practices, in accordance with applicable international instruments, such as the United Nations Convention Against Corruption.’ [38]

[21] Taking my cue from s 39(1)(c) of the Constitution I turn to foreign law. Whereas administrative law governs public procurement in South Africa[39] contract law applies in Canada.[40] Two contracts are concluded. Contract A governs the tendering process. It comes into existence between the bidder and the party offering the tender. If the offeror deviates from the evaluation criteria a tenderer can launch a challenge on the grounds of breach of contract. Contract A is effective only if the bid is compliant. [41] Contract B is the ultimate contract resulting from the award of the tender. [42] It provides the terms and conditions under which goods and services are to be supplied. It is concluded once a compliant bid is accepted.

[22] Express and implied obligations arise once a bid is submitted.[43] Various appellate courts have implied a contractual term into Contract A to treat all bidders fairly and equally,[44]  unless expressly agreed otherwise in the call for tenders or by way of a privilege clause. [45] This principle seeks to protect and promote the integrity of the bidding process.[46] Unlike other contracts that come into existence by negotiation, procurement contracts arise from competition. The Supreme Court of Canada insightfully observes that bidders would not submit bids

‘unless it was understood by those involved that all bidders would be treated fairly and equally.  This implication has a certain degree of obviousness to it to the extent that the parties, if questioned, would clearly agree that this obligation had been assumed.  Implying an obligation to treat all bidders fairly and equally is consistent with the goal of protecting and promoting the integrity of the bidding process, and benefits all participants involved.  Without this implied term, tenderers, whose fate could be predetermined by some undisclosed standards, would either incur significant expenses in preparing futile bids or ultimately avoid participating in the tender process.[47]

[23] Another illuminating feature of Canadian law is that only compliant tenders have any legal remedy for breach of the process by the offeror. The test for compliance is either strict or substantial.[48] Strict compliance applies if the language in a tender commands it. E.g.

‘If any unit price is omitted by the bidder, then the bid shall be considered incomplete and automatically rejected.’[49]

[24] Imprecise language invokes the substantial compliance test.[50] A tender that allowed the offeror a ‘separate right to waive irregularities in the tender form if such irregularities were of a minor or technical nature’[51] was held to be compliant, even though four pages of the form were omitted.

[25] Non-compliance with a requirement that the corporate seal as proof of signing authority affixed to the tender package was held not be a matter of mere formality but an issue of contractual capacity. Furthermore, the authority took great pains to draft a clear, precise and comprehensive clause dealing with the formalities of execution so as to avoid any dispute as to the tender’s capacity to contract.[52]

[26] English law introduces the principle of proportionality.[53] This principle means that [54]  the burdens imposed by the exercise of the power must not be disproportionate to the object to be achieved.^[55] Exercising discretionary powers necessarily involves an assessment of the judgment of the contracting authority. The court must respect and not intervene in the judgment unless it is unjustifiable  [56] or disproportionate.

[27] The application of the principles of proportionality, fairness and equality to the facts in J B Leadbitter & Co Limited v Devon County Council are instructive. The Invitation to Tender (ITT) specified 12 noon on 16 January 2009 as the fixed deadline for the submission of tenders electronically to a secure portal. Because of a power failure Devon CC extended the deadline for all tenderers to 15.00 on the same day. At 14.45 the claimant realised that in error it had not submitted its case studies. Immediately it attempted unsuccessfully to submit them to the secure portal. Before the deadline expired the claimant alerted the principal procurement officer but to no avail. Eventually it emailed the case studies, in the form finalised at 10.28 on that day.[57] Devon CC rejected the claimant's tender on the grounds that a complete tender, including the case studies, had not been submitted by the deadline. [58] 

[28] The Chancery Division opined that the claimant was seeking special treatment. [59] It found that fairness to all tenderers, as well as equal treatment and transparency, required that the key features of a single submission with no provision for changes to submitted tenders had to be observed. [60]

[29] Acknowledging that there may be circumstances where proportionality would, exceptionally, require the acceptance of the late submission of the whole or significant portions of a tender, there was no requirement to do so, particularly where it results from a fault on the part of the tenderer. The court refused to impose on Devon CC a duty to investigate whether the facts that the claimant relied on were indeed exceptional. [61]

[30] The court accepted that the position of the claimant may be considered stronger than that of many tenderers who were simply late. The claimant had completed the case studies in good time before the deadline; the failure to attach the case studies to the rest of its tender was an unintended technical error; the rest of the tender was submitted in time; therefore no issue of unequal treatment need arise with the acceptance of the case studies. [62] Nonetheless, the court concluded that Devon CC was ‘within the margin of discretion’[63] to reject the claimant's tender and was not acting disproportionately in doing so. [64]  The court distinguished the claimant’s case from that of another tenderer on the grounds that firstly the latter’s submission was delayed by circumstances beyond its control when there was a power failure. Furthermore, the deadline was extended before it expired for all tenderers and the claimant amongst others took advantage to review its bid.

[31] Internationally acclaimed academic Sue Arrowsmith opines:

'Another practice required by the fair treatment concept is that of rejecting bids which are not responsive to the specifications, or do not comply with other mandatory requirements of the tender call. If this is not done other bidders may be unfairly prejudiced by their own reliance on the terms as originally set out.'[65]

South African Case Law

[32] Rodpaul strives to persuade the court that its bid would have been competitive and cost effective; therefore EThekwini should have evaluated its Certificate. Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer South African Social Society 2014 (1) SA 604 (CC) helpfully clarifies that the test for irregularities is independent of the outcome of the tender process.[66] It discards the reverse analysis of the inevitability of an outcome conferring validity upon the administrative action preceding it. Allpay jettisons the converse ‘no difference’ or ‘no effect’[67] approach to procurement law; process does matter. Allpay pronounces on the first three criteria in s 217. Even treatment of all bidders and complying with procedural formalities ensures fairness to participants in the bid process, enhances efficiency, optimises the outcome and guards against corruption.[68]

[33] To evaluate whether a deviance from legal requirements is reviewable under PAJA, its materiality must be assessed against the purpose of the requirement[69] and not whether compliance would lead to a different result. Legal requirements are material. Dispensing with them at whim undermines equal treatment, transparency and efficiency under the Constitution.[70] Administrators may depart from procedures if it is reasonable and justifiable to do so. But the process change must be procedurally fair, reasonable and justifiable.[71] Irregularities in process that affect the outcome have the capacity to affect legal rights.[72]

[34] All the principles enunciated in Allpay find endorsement in international and foreign law and in academic opinion. Differences emerge in the application of the principles to particular facts not only between but also within jurisdictions, our own included, as the cases show. In overturning the SCA, the Constitutional Court (CC) held in Allpay the failure to submit separate bids to be non-material because the administrator was able to assess whether the bidder could provide the services to each province.

[35] In several decisions, the Supreme Court of Appeal emphasises that for fairness tenders must be evaluated equally. ^[73] Contractors should be treated equally.[74] A tender which is adjusted during the process resulting in the bid that is accepted being different from one that was tendered initially is unfair. [75] It is imperative that all tenderers tender for the same thing.[76] Converting a tender initially considered as ‘unbalanced and a financial risk to one which was acceptable’ stripped the tender process of fairness.[77]

[36] The SCA strives for consistency by strengthening the hand of administrative authorities that observe the principle of legality. In Betram (Dr JS Moroka Municipality and Others v Betram (Pty) Limited [2014] JOL 31209 (SCA) the appellant municipality disqualified a tender supported by a copy of a tax clearance certificate when the invitation to tender called for an original certificate. The invitation had stipulated that a failure to submit the required documents would ‘render a tender liable to rejection.’[78] The SCA reiterated[79] that as a general principle an administrative authority has no inherent power to condone a failure to comply with a peremptory requirement.[80] As it was not an ‘acceptable tender’ in terms of the PPPF Act 5 of 200 it did not pass the threshold to qualify for consideration.[81]

[37] A tax clearance certificate is a minimum qualifying requirement that echoes loudly throughout the statutes and regulations on procurement.[82] The argument that a tender that does not comply with the requirements should not be disqualified for reasons of public policy was rejected on the basis that it offends the principle of legality, itself a ground of public policy.[83] In so holding Betram overruled Millennium to the extent that the latter held that a failure to comply with peremptory requirements may be condoned by a municipal functionary in the public interest.[84] Millennium remains good law in so far as devising a remedy goes. Allpay applied it to that extent. [85]

[38] Importantly, Betram directs that it is for the administrative authority not the court to decide what should be prerequisites for a valid tender and what the consequences should be for a failure to comply with such prerequisites in order to qualify as an ‘acceptable’ tender under the PPPF Act unless the conditions are immaterial, unreasonable or unconstitutional.[86] Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Others [2004] ZACC 15; 2004 (4) SA 490 (CC) made this all too clear.

[39] South African National Roads Agency v Toll Collect Consortium 2013 (6) SA 356 (SCA) (Sanral) gave content to the requirement of transparency in tender processes. Procurement must take place in public view and not by way of back door deals.[87] Furthermore, once the tender is awarded in an open and public fashion it is not open to a ‘disappointed tenderer to find some ground for reversing the outcome or commencing the process anew’.[88]

[40] In Metro Projects CC and Another v Klerksdorp Local Municipality and Others 2004 (1) SA 16 (SCA) the SCA acknowledged that in given circumstances it may be fair to ask a tenderer to explain an ambiguity in its tender and allow it to correct an obvious mistake or call for clarification or details to enable a proper evaluation of a bid. However, ‘whatever is done may not cause a process to lose the attribute of fairness or, in the local government sphere, attributes of transparency, competitiveness and cost effectiveness.[89]

[41] Turning to the cases specifically relied on by Rodpaul, in Minister of Social Development and Others v Phoenix Cash & Carry – PMB CC [2007] All SA 115 (SCA) at para 1 the SCA urged that public tender processes be interpreted and applied without undue reliance on form. It acknowledged that the award for public tenders is ‘notoriously subject to influence and manipulation’.[90] Unlike in Phoenix Cash & Carry in which the tender requirements were found to be too vague to satisfy the requirements of administrative fairness,[91] the stipulation in this case that the Certificate had to be submitted with the tender document was clear. So too were the consequences of failing to submit a certificate. There were also ‘disquieting features’[92] in Phoenix Cash & Carry; for instance, the tender was awarded to a close corporation that was incorporated only after the closing date of the tender.[93] Nothing disquieting emerged in awarding the bid to Liviero.

[42] Rodpaul relied on Azcon Projects CC v National Minister Department of Public Works, Mthatha and Another [2011] JOL 27630 (ECM) to persuade the court that it should not treat the timing of the submission of a Certificate as peremptory. Azcon posted a valid tax certificate to the first respondent department a day after the closing day for bids. Neither its certificate nor the explanation for the delay in submitting it came to the attention of the BEC. The sole reason for excluding Azcon’s bid from the tender process was its failure to submit its tax certificate with its tender documents.[94] In Azcon the court considered itself bound by Millennium Waste Management (Pty) Ltd v Chairperson, Tender Board, Limpopo Province and Others 2008 (2) SA 481 (SCA) to condone ‘innocent omissions and/or bona fide errors’ in the bid process.[95] As stated above, Betram has since declared that Millennium ‘should be regarded as incorrect’.[96]

[43] Azcon is also distinguishable on the facts of this case.[97] In Azcon the tender notice did not stipulate that the tax certificate had to be lodged by the closing date. [98] The text of the invitation to tender is decisive. Furthermore, the tax certificate that was submitted proved that Azcon was tax compliant at the relevant date. Moreover, SARS was apparently responsible for the delay; therefore the delay was beyond Azcon’s control. The judgment does not discuss why Azcon, which had the same amount of time as all other bidders to procure its certificate, delayed from 5 November 2010 when the bid was issued until 23 November 2010 to apply for a certificate, when the closing date for all bids was 2 December 2010. Significantly, the court found that the bid process had been ‘manipulated’.[99] 

[44] In this case the Notice to Tender specified that the Certificate had to be lodged with the tender document. The Certificate that Rodpaul relies on did not prove that it was compliant at all material times, in particular at the closing date of the tender. Rodpaul does not suggest any ‘manipulation’ of the process.

[45] As stated above, submission of a tax certificate is compulsory as it qualifies a bid as ‘acceptable’. Non-submission disqualified the bid altogether. In this case non-submission of a valid Certificate by the closing date did not disqualify the entire bid but automatically reduced the scoring by ten points.

[46] The importance of the duty of an administrative authority to issue clear deadlines for the submission of all requirements for an acceptable bid becomes apparent in Azcon. Usually, the decision of an administrative authority is challenged on the basis of the information before it. If the information is not before the authority, its decision cannot be faulted for not taking into account what it did not have in the first place.[100] Such decision as it makes is fortified if the information was omitted from its deliberations through no fault of its own. Azcon’s explanation for the delay was not before the department; it emerged for the first time in the review. [101] By not specifying the date for submission of the tax certificate the department assumed for itself the obligation of ensuring that the BAC had all the documents submitted after the closing date but before the BAC deliberated on the bids.

[47] Azcon does not discuss whether there was an internal appeal. If there had been an appeal it could have cured the procedural flaw. In this case there was an appeal when Rodpaul had a full opportunity to advance its case. The decision of the appeal authority is discussed below. This court may interfere in the appeal only if the decision is unreasonable or unjustifiable.[102] All considered, Azcon does not assist Rodpaul.

[48] In Imvusa Trading 134 CC and Another v Dr Ruth Mompathi District Municipality & Others case no. 2628/08 BP the Municipality permitted the successful bidder to submit a fresh tax clearance certificate some months after the tender had closed because the initial tax clearance submitted had expired on 20 February 2008. The expired certificate had been submitted in an earlier tender for the same services.[103] The court condoned the omission. This case too does not assist Rodpaul. The difference turns on having a valid certificate at the material time. In any event the correctness of the judgment is questionable in the light of SCA authority above that BAC’s do not have authority to condone non-compliance.

[49] Turning to the cases EThekwini relies on, in Vodacom (Pty) Ltd and Another v Nelson Mandela Bay Municipality and Others 2012 (3) SA 240 (ECP) at paras 4-5 the court refused to sanction a tender that allowed bidders to supply omissions to complete parts of obligatory questionnaires after the closing date for tender. To challenge an administrative decision substantively a complainant must show that the decision is one that no reasonable decision-maker could reach.[104] This is the test I am bound to apply.

[50] The failure to submit a correct Certificate was also an issue in Rainbow Civils CC v Minister of Transport and Public Works 21158/2012 delivered 6 February 2012 at para 7. Safaz, the successful tenderer had submitted a Certificate that complied with the Codes of Good Practice for Black Economic Empowerment[105] instead of the Construction Sector Charter Code.[106] The Western Cape High Court found that the Certificate was peremptory. The Notice to Tender in that case contained a similar warning as in this case namely, that the failure to submit a Certificate would be ‘interpreted to mean that preference points for B-BBEE status were not claimed’ and that bidders ‘must submit their original and valid B-BBEE status level verification certificate’. The decision maker in that case had not been aware of the defect in the Certificate; therefore the issue of condonation did not arise.[107] In passing, the court doubted that the

‘the Preference Document afforded the Decision Maker any discretion to condone non-compliance with the requirements regarding the Verification Certificate. And had the Decision Maker been aware of the defect and afforded Safaz an opportunity to augment its tender by submitting the prescribed Verification Certificate, such conduct might well have founded a complaint that all tenders were not being treated equally.’[108]

[51] To summarise the principles from the above authorities, fairness, equity and transparency stand out universally as uncompromising qualities of public procurement. This is so because the process is a competition for the most cost effective bid in the public interest. Whether strict or substantial compliance is required is a matter of interpreting the tender requirements. Consequently, procuring authorities have a public duty to ensure that the text of their invitations to tender is clear and precise, indicating expressly whether requirements are peremptory or directory. As far as possible, documentation and processes should be standardised to cultivate procedural certainty and minimise recourse to the discretion of the administrative authority.   Ultimately, it’s the discretion of the authority not the court as to what the prerequisites for a valid tender should be. The clearer the invitation to tender the better the prospects of the process being fair and adhered to; and the less the chances are of challenges by losing and non-compliant bidders. Even less are the chances of a court interfering in the authority’s decision.

[52] Furthermore, only a compliant tenderer acquires the right to challenge an award. At best a non-compliant tenderer may appeal to the authority before expiry of the tender notice to waive strict compliance. The authority has no obligation but a discretion exercised reasonably to grant a waiver of strict compliance, provided that in doing so it upholds the five core constitutional prescripts for public procurement. Any step in the process that slips from the public eye to become a back door deal strips the bid of transparency.

[53] A waiver is not a right granted on the mere asking. At most it is an indulgence granted when good cause is shown. A non-compliant bidder has no right to insist that the authority investigate its grounds for claiming a waiver. Furthermore, a non-compliant bid cannot be rendered compliant merely because it would be the most competitive and cost effective bid. Ultimately, the decision to award or not award a bid must be reasonable, justifiable, proportionate, within the margin of discretion of the decision-maker or meet the  ‘reasonable equilibrium’ test in Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Others [2004] ZACC 15; 2004 (4) SA 490 (CC) para 54. Unless the integrity of public procurement is preserved, bidders will not be willing to incur the costs and inconveniences of participating.

Application of law to facts

[54] The Notice to Tender specifies the following:

‘The tender shall not be regarded as complete or bona fide and will be disqualified should the following not be submitted with the tender:

· The Fully Completed and Signed Tender Form

The following further documentation must be submitted with the tender:

· Preference Points Claim Form (MBD 6.1) in terms of the PP Regs, 2011

· B-BBEE Verification Certificate

Failure by the Tenderer to fill in and/or sign this Preference Points Claim Form (MBD 6.1) and submit a B-BBEE Verification Certificate together with the tender,  shall be interpreted to mean that preference points for a B-BBEE status level of contribution are not claimed.

Tenderers must submit the following documents for tender evaluation:

· …

· Current Tax Clearance Certificate from SARS…

Failure to do so by the time the Evaluation Committee sits will deem the tender unresponsive.’ [109]

[55] Note 9 stipulated that the 90/10 preference point system would apply meaning that up to ten preference points would be allocated for a tenderer’s B-BBEE rating. Clearly the Notice to Tender distinguished between three types of documents each attracting different consequences for non-compliance. Non-compliance relating to the Certificate would result in no preference points being awarded. Unlike non-compliance with the tender form, non-compliance with the requirements for a Certificate would not disqualify the bid or render it unresponsive as would be the case for non-compliance with a valid tax clearance certificate.[110]

[56] Rodpaul does not challenge the reasonableness of the conditions of tender. Regulation 10(2) requires an original Certificate to be submitted. It contends that the requirement of an original Certificate is formal and not substantive. Furthermore, EThekwini did not take up its offer to submit an original Certificate after it emailed its Certificate. In any event its emailed Certificate was a ‘data message’ as defined in s 14 of the Electronic Communications and Transaction Act 14 of 2002.[111] I agree with counsel for Rodpaul that the emailed Certificate satisfies the requirement of submitting an original.

[57] Rodpaul’s contention was not that EThekwini did not have the authority to set a date for the submission of the certificate but that any date it did set was not prescribed by legislation. Therefore such date as it did set did not require strict compliance.

[58] Neither the legislation nor the guides and policies cited above prescribe when the Certificate must be submitted. Equally none of these instruments prescribe that an invitation to tender should stipulate a time when tenders should be submitted. The short answer to the first question posed above is ‘no’, the submission of an original Certificate with the tender form was not prescribed by legislation and therefore not peremptory on that ground.

[59] Stipulating a time for submission is such an obvious and elementary requirement for fair competition that it requires no legislative prescription. Evaluating a bid for which no time for submission is prescribed would be prone to uncertainty, manipulation and corruption. Furthermore, an invitation to tender must set out clear conditions. Specifying a date provides such clarity. By setting the ground rules for the competition an organ of state provides a predictable process applicable to all competitors equally.

[60] Rodpaul’s letter was not a request for a waiver with notice to all other bidders. Nor did it seek clarification of the consequences of non-compliance with the deadline. Rodpaul simply assumed that it could change the rules of the competition unilaterally for its own convenience and expected EThekwini would fall in line.

[61] As it turns out the Certificate was issued a month later on 28 January 2013. How he knew that the BAC had not decided the when he submitted his Certificate is not explained. The bid might well have been determined before he had submitted his Certificate. It is remarkable that he was able to submit on the very day that the reports were submitted to the BEC. Rodpaul’s expired Certificate was superior to Liviero’s. Its new Certificate attracted an overall score of 86.80, a significant improvement from the expired Certificate which totalled 67.93[112] However, to achieve this improved score Rodpaul increased its donations to social and civil causes, reorganised itself to focus on ordering products from suppliers that had higher B-BBEE ratings and increased its focus on contracting with emerging subcontractors.[113]

[62] Rodpaul does not indicate whether it took any of these steps after the closing date of the tender. This was an important fact to place on record before the BEC and BAC in order to prove that it did not sneak an advantage over other bidders. In other words it had to persuade the BEC and BAC that they would not be acting unfairly or discriminating against other bidders if they were to wave strict compliance with the notice to tender. As Treasury pointed out, other bidders might have improved their B-BBEE ratings if given the extended time to include their social responsibility donations over the festive period.

[63] Consequently, even though the time for submitting Certificates is not prescribed it requires strict compliance because to waive compliance, would violate the requirements of s 217 of the Constitution. The answer to the second question is ‘no’. EThekwini did not have a duty in terms of ss 33 and 217 of the Constitution to exercise its discretion to accept and consider Rodpaul’s Certificate.

[64] I turn to the last question to determine whether the decisions of the BAC and the appeal meet the criteria of reasonableness, etc, expatiated above. I agree with counsel for Rodpaul on principle that an authority is not allowed to bolster its initial reasons subsequently. Its initial reasons are operative on review.[114]  

[65] In its initial reasons quoted above EThekwini did not refer to any legislative requirements underpinning its reasons for rejecting Rodpaul’s bid. However, such reasons as it did advance wholly sustain its decision. In its further reasons given in its answering affidavit, EThekwini refers to ‘legislative requirement’. It was correct to do so because reg 10(2) and (3) not only prescribe the requirements for a Certificate but also that preference can only be given if a valid Certificate is submitted. Accordingly, I interpret the reference to ‘legislative requirement’ in being a condition of tender to mean no more than EThekwini saying that it obliged to implement the regulations by accepting only a valid Certificate.  Counsel seeks to imply that EThekwini assumed that it had no discretion to accept a Certificate submitted after the closing date and this alleged misinterpretation of the law was the real reason for rejecting the Certificate. Respectfully, I disagree with this inference. EThekwini’s appeal decision quoted below shows that it understood that it had a discretion but chose not to exercise it in favour of Rodpaul.  Rodpaul’s assertion that EThekwini ‘thought’ that it had no discretion and that its ‘real’ reason was a mistake of law is unfounded.[115]

[66] I also respectfully disagree with Rodpaul that the initial reasons given for the BAC’s decision quoted above are factually incorrect merely because it omits to record that Rodpaul had submitted a letter indicating that it was in the process of conducting a B-BBEE analysis that ‘was likely to conclude during December 2012’.[116] In giving reasons for its decisions EThekwini was entitled to include only facts that informed its decision.

[67] Rodpaul relies on the following extract from the decision of the chairman of the appeal to contend that the appeal decision was incorrect and reviewable.[117]

‘If this bidder is allowed to re submit their BBBEE verification certificate after tender closing then the transparency in the whole process is gone, equitable treatment of all bidders is ignored all together. I have requested the Appellant to provide me with any Authority substantiating the late filling of the BBBEE certificate obviously all of these six bidders can be given an opportunity after the closing date to submit a better BBBEE certificate in order for them to improve their points. If the certificate has expired after the closing date I would have understood, but Appellant’s one expired six months prior to the closing date. This argument will just open a can of worms and unmanageable flood gates which will defeat the whole process of qualification by respective tenderers. The representatives of the First Respondent hit the nail on the head when first they say that an expired BBBEE Verification Certificate does not have any value and that the BBBEE Verification Certificate differs from the tax Certificate in that A Tax Clearance Certificate is a non material submission in that it does not affect the tender scoring.’

[68] In respectful disagreement with Rodpaul I see nothing incorrect or in conflict with decisions of the High Courts in the above quotation. The extract demonstrates that the chairman understood the risk of compromising the integrity of the process if Rodpaul was allowed to submit its Certificate after the closing date of the tender. He was open to persuasion to do so on production of legal authority. In that event he would have given all six bidders a chance to improve their points. Crucial to the decision was that the Certificate that Rodpaul had allegedly submitted with its tender had expired six months before the closing date. Correctly the chairman concluded that such a Certificate could not have any value in the scoring of the tender.

[69] I do not have to decide whether the situation would have been different if the Certificate was accompanied by an application for condonation setting out full reasons for Rodpaul’s non-compliance, because that is not Rodpaul’s case. Contrary to Rodpaul’s contentions [118] the BEC and BAC did consider Rodpaul’s bid and assess its risk but without the Certificate. EThekwini’s reasons for its rejecting the bid and confirmation of its decision on appeal are reasonable, justifiable and unassailable on any of the grounds alleged by Rodpaul.

[70] In conclusion, in this case I see a genuine attempt by an authority to standardise its processes to instil clarity and predictability, and to create an efficient bureaucracy for public procurement one that would run itself with minimum recourse to the exercise of discretion. An efficient bureaucracy is the hallmark of good administration. As a bureaucrat Ryan Malcolm’s function was to submit documents that complied with the notice to tender. He had no discretion to do otherwise. He cannot be faulted. After all he simply applied the rules fairly, equitably and transparently.

[71] The application is dismissed with costs.

Appearances

Counsel for the applicants : A.M Annandale SC,

with her P.J Wallis

Applicants’ attorneys : Cox Yeats Attorneys

21 Richefond Circle, Ridgeside

Office Park, Umhlanga Ridge,

Durban 4320

Ref: P.Barnard/tm/32 R074005

Tel: 031 536 8500

Counsel for the 1^st

Respondents : T.G Madonsela

1^st Respondents’ attorneys : S.D Moloi & Associates

39 Holmpark PI Durban North

Durban 4051

Ref: Ms S Ngoma

Tel: 031 563 3112

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