---

NORTH WEST HIGH COURT, MAFIKENG

CASE NO. 272/2011

In the matter between:

SIVIVANE CONSTRUCTION CC .........................................................1^ST APPLICANT

EMISANG CONSTRUCTION & PROJECTS CC ..................................2^ND APPLICANT

TOTWANE ISMAEL LEGOE .................................................................3^RD APPLICANT

and

RAMOTSHERE MOILOA LOCAL MUNICIPALITY .............................1^ST RESPONDENT

BAKGATLA ENTREPRENEUR SERVICES & KHETWAYO

CONSTRUCTION CC .....................................................................2^ND RESPONDENT

____________________________________________________________________________

JUDGMENT

____________________________________________________________________________

GUTTA J.

[1] This application was launched in two parts. Part A was an urgent application. On 17 February 2011, the Court granted the applicants the following relief:

1.1. The applicants’ application for interim relief and the review application set out in Part B of this notice of motion are heard as ones of urgency and the usual forms and time periods stipulated in the rules of Court are dispensed with;

1.2. That the applicants are hereby exempted in terms of section 7(2)(c) of the Promotion of Access to Information Act No. 3 of 2000 from exhausting the internal remedies provided in Section 62 of the Local Government: Municipal Systems Act No. 32 of 2000 and are granted leave to proceed with this application;

1.3. That pending the final outcome of the review application referred to in Part B of this notice of motion:

1.3.1. The second respondent is hereby interdicted and restrained from proceeding with the execution and/or doing any work at all in terms of and/or relating to and/or connected with contract number RMLM/02/2010 for the upgrading of the Motlhaba Bridge and internal roads (the contract);

1.3.2. The first respondent is hereby interdicted and restrained from making any payments at all to the second respondent, and/or any sub-contractor of the second respondent and/or for the direct and/or indirect benefit of the second respondent in terms of and/or related to, and/or connected with contract number RMLM/02/2010 for the upgrading of the Motlhaba Bridge and internal roads (the contract);

1.4. The interdicts and restraints in paragraphs 1.3.1 and 1.3.2 shall operate as interim interdicts and orders pending the final outcome of the review of the award of the contract by the first respondent to the second respondent as more fully set out in Part B of this notice of motion;

1.5. The costs of this application will be costs in the cause of the review application referred to in Part B of this notice of motion.

[2] In Part B, which is the matter that I am seized with, the applicants applied for the following relief:

2.1. The first and second respondents are called upon to show cause why the decision of the first respondent to award contract number RMLM/02/2010 for the upgrading of the Motlhaba Bridge and internal roads (the contract) to the second respondent should not be reviewed and set aside.

[3] The application was only opposed by the first respondent.

[4] The applicants filed a supplementary notice of motion on 03 March 2011, wherein they sought the following:

4.1. The applicants now seek the correction of the decision of the first respondent to award the aforesaid contract to the second respondent to the effect that the contract be awarded to the first applicant and the second applicant; and

4.2. Alternatively, that the decision be remitted back to the first respondent for the award of the contract to the first applicant and the second applicant (in accordance with the first respondent’s bid evaluation committee’s recommendation); and

4.3. Further alternatively, that the decision be remitted back to the first respondent for the award of the contract in accordance with the requirements of the legislation which accords preference to the lowest tender and for the highest number of targeted procurement points; and

4.4. That the targeted procurement points awarded to the first applicant and the second applicant be increased to nine points and the targeted procurement points awarded to the second respondent be decreased to six points;

4.5 A court order on the scale as between attorney and own client.

[5] A brief summary of the facts are set out hereunder.

[6] On 29 October 2010 an advertisement was placed in the Sowetan and City Press newspapers by the first respondent, inviting tenders for the upgrading of the Motlhaba Internal roads and bridge (culvert bridge).

[7] The first and second applicants, who had formed a joint venture, submitted their tender .

[8] The following facts appear to be common cause:

8.1. that the applicants’ tender was the lowest and the applicants scored the highest points, namely, 90 points. The first respondent conceded that there was an error in the calculation of the points;

8.2. the price quoted by the first and second applicants was R8 136 866.79, the next lowest price was R8 400 216.04 quoted by Emisang Construction JV and the third lowest was the price quoted by the second respondent, namely, R8 649 793.86;

8.3. the first and second applicants had the required CIDB grading. They also had previous experience in construction and road works;

8.4. the tender evaluation committee recommended the first and second applicants;

8.5. the Bid Adjudication Committee (“the bid committee”) found that the consultants were concentrating on the lowest price and not previous experience in projects of this magnitude;

8.6. the bid committee, in their report to the Municipal Manager, recommended the third respondent for the following reasons:

a) the company is based in the province;

b) they met all the requirements;

c) they achieved a reasonable bid price of R7 637 167.37;

d) they have a previous track record in relevant projects;

e) local businesses will be sub-contracted;

f) they have good financial standing, as confirmed in their previous experience with the municipality and have the ability to complete the project within the stipulated timeframe as per assessment made.

8.7. on 10 January 2011, the bid committee recommended the appointment of the third respondent for construction of the Motlhaba Bridge and Internal roads;

8.8. on 01 February 2011, the Municipal Manager approved the recommendation of the bid committee.

[9] The first respondent, in their answering affidavit, raised the following points in limine, namely:

9.1. non-compliance with Section 2(1)(e) of the Preferential Procurement Policy Framework Act No. 5 of 2000 (“PPPFA”);

9.2. non-joinder of other tenderers;

9.3. non-compliance with Section 3 of the Constitution.

[10] The first respondent, in filing their answering affidavit, submitted that “should this court find that the entire process is contaminated by this omission (non-compliance with Section 2(1)(e) of the PPPFA), application will be made by the first respondent in a counter-application for the review and setting aside of the entire process”.

[11] The first respondent filed a conditional counter-application simultaneously with the opposing affidavit, wherein the first respondent prayed for the entire tender process to be reviewed and set aside and tendered to pay the costs of the counter-application in the event that there was no opposition.

[12] The first point in limine and the counter-application are dealt with herein below.

[13] It is necessary to consider the applicable legislation in determining this issue.

[14] The PPPFA gives effect to Section 217(3) of the Constitution of the Republic of South Africa 1996, by providing a framework for the implementation of the procurement policy contemplated in Section 217(2) of the Constitution and to provide for matters connected therewith.

[15] In terms of Section 217 of the Constitution:

“(1) When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective;

(2) Subsection (1) does not prevent the organs of state or institutions referred to in that subsection from implementing a procurement policy providing for―

(a) categories of preference in the allocation of contracts; and

(b) the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination.

(3) National legislation must prescribe a framework within the policy referred to in subsection (2) must be implemented.”

[16] In terms of Section 2(1)(d) of the PPPFA, the specific goals may include:

16.1. contracting with persons, or categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender or disability;

16.2. implementing the programmes of the Reconstruction and Development Programme as published in Government Gazette No. 16085, dated 23 November 1994.

[17] Section 2(1)(e) of the PPPFA stipulates that any specific goals for which a point may be awarded must be clearly specified in the invitation to submit a tender.

[18] Section 2(1)(f) of the PPPFA, which provides that “the contract must be awarded to the tenderer who scores the highest points, unless objective criteria in addition to those contemplated in paragraph (d) and (e) justify the award to another tenderer”.

[19] Regulation 16A6.3(b) of the Public Finance Management Act of 2003 (“PFMA”) provides that tender documentation include evaluation and adjudication criteria, including the criterion prescribed in terms of the PPPFA and the Broad Based Black Economic Empowerment Act.

[20] Regulation 16A6.3(c) of the PFMA provides that bids ‘must’ be advertised in at least the Government Tender Bulletin.

[21] In terms of Section 112 of the Municipal Finance Management Act 56 of 2003, a municipality’s supply chain management programme must, inter alia, be fair, equitable, transparent, competitive and cost effective and comply with a prescribed regulatory framework for municipal supply chain management.

[22] Mr Danzfuss, on behalf of the first respondent, also referred the Court to the provisions of the Municipal Supply Chain Management Regulations in Government Gazette, dated 30 May 2005. Paragraph 22 reads as follows:

“22. (1) A supply chain management policy must determine the procedure for the invitation of competitive bids, and must stipulate ―

(a) that any invitation to prospective providers to submit bids must be by means of a public advertisement in newspapers commonly circulating locally, the website of the municipality or municipal entity or any other appropriate ways (which may include an advertisement in the Government Tender Bulletin); and

(b) the information a public advertisement must contain, which must include ―

(i) the closure date for the submission of bids, which may not be less than 30 days in the case of transactions over R10 million (VAT included), or which are of a long term nature, or 14 days in any other case, from the date on which the advertisement is placed in a newspaper, subject to subregulation (2); and

(ii) a statement that bids may only be submitted on the bid document provided by the municipality or municipal entity.”

[23] Mr Eiser, on behalf of the applicant, submitted that this Court must consider the PPPFA and its regulations and not the Supply Chain Management regulations. That the Act says nothing about an invitation and the regulations cannot override the Act.

[24] The Supply Chain Management regulations are the regulations to the Local Government Municipal Finance Management Act No. 56 of 2003, which provides for secure and sustainable management of the financial affairs of the municipality. Accordingly, the regulations apply to the first respondent and cannot be ignored.

[25] It is common cause that in both the copy of the invitation to tender which forms part of the tender documents as well as the copy of the invitation that appeared in the press that no mention is made of any specific goals, nor is any mention made of the quantity of points to be awarded for each specific goal.

[26] Mr Danzfuss referred the Court to the text, Bolton, The Law of Government Procurement in South Africa, Lexis Nexis at 184 where the author stated that “the pre-disclosure of tender evaluation and tender adjudication criteria enables contractors to make informed decisions as to whether or not they are in a position to tender and enables all contractors to prepare and submit a responsive tender”. It also ensures that organs of state do not apply the criteria that are unknown to contractors and facilitates the monitoring of the procurement process. See Grinaker LTA & Another vs Tender Board (Mpumalanga) & Others [2002] 3 ALL SA 336 (T).

[27] I am in agreement with the above sentiments and I am of the view that tenderers who do not have any knowledge of the adjudication criteria will be prejudiced as they would be blindly tendering in circumstances where they may not meet the criteria applied in the selection process.

[28] The construction industry is extremely competitive and to allow for a process which is both fair and transparent, there should be compliance with the PPPFA and the regulations.

[29] The word ‘must’ in Section 2(1)(e) is peremptory and not directory when applying the test set out in Sutter v Scheepers 1932 AD 165 at 173–174 and if regard is had to the intention of the legislature in enacting the PPPFA.

[30] The importance of empowerment is stressed and understood to be the reason why the PPPFA makes provision for specific goals in Section 2(1)(d) which must be clearly specified in the invitation to tender.

[31] Specific goals in Sections 2(d) and 2(e) paragraph 2(f) of the PPPFA contemplate objective criteria over and above those contemplated in paragraphs (d) and (e). The criteria contemplated in paragraphs (d) and (e) would, if the specific goal is clearly specified in the invitation to submit a tender, be the basis for the award of a maximum of ten points. If the goals were not included in the invitation to tender, this could lead to abuse and possible manipulation by officials responsible for adjudication of the tenders. See Grinaker v Tender Board Mpumalanga [2002] supra at 354 [60].

[32] Mr Eiser, on behalf of the applicants, at the commencement of the proceedings made certain admissions, namely:

32.1 The requirements of Section 2(1)(e) of the PPPFA is peremptory;

32.2. The advertisement does not comply with the requirements of Section 2(1)(e) of the Act;

32.3. That should the Court decide that it is an invitation to tender, then the whole process becomes a nullity.

[33] Mr Eiser submitted that the newspaper advertisement is not an invitation to tender, and that no tenderer can make an informed decision from the newspaper advertisement. The newspaper advertisement is an invitation to attend a meeting. He submitted that it is the substance and not the form that is of significance and that the tender document is the invitation to tender and that Section 2(1)(e) does not apply.

[34] Mr Danzfuss, on behalf of the first respondent, submitted that the applicant has made important concessions, namely, they concede that the entire process is contaminated and the consequence is that the applicant’s application cannot be upheld and the only issue left is the issue of costs.

[35] Mr Danzfuss submitted that the advertisement is an invitation to tender. The document refers to a pre-tender meeting, which is the normal procedure.

[36] Mr Danzfuss submitted that this is an extra ordinary situation where the organ of state, in its counter-application, approaches the Court to nullify the process. He referred to the Supreme Court of Appeal’s decision of Municipal Manager: Qaukeni Local Municipality & Another v FV General Trading CC 2010 (1) SA 356, wherein it was held that the organ of state is obliged to approach the Court to review a decision to award a contract if it finds a breach of prescribed procurement procedures.

[37] On careful reading of the advertisement, the following is noted:

37.1. the advertisement bears the heading in block format of “CONTRACT NO: PMU/2010 TENDER NOTICE AND INVITATION TO TENDER FOR THE UPGRADING OF MOTLHABA INTERNAL ROADS AND BRIDGE (BOX CULVERTS)”;

37.2. the first sentence of the advertisement reads, “Ramotshere Moiloa Local Municipality hereby invites tenders for the upgrading for the Motlhaba Internal roads and bridge (Box culverts)”;

37.3. the advertisement provides a closure date and information on the collection of the tender documents, which must be sealed and placed in a tender box.

[38] The advertisement, in my view, constitutes a public advertisement in a newspaper inviting prospective tenderers to submit their bids.

[39] I am of the view that one cannot accept the submission made by Mr Eiser that the tender document is the invitation to tender, as it is clear that the invitation must be by means of public advertisement in a newspaper and that the said invitation to tender does not comply with Section 2(1)(e) of the PPPFA as the specific goals were not included in the invitation to tender.

[40] The applicant conceded that should this Court find that the advertisement does constitute an invitation to tender, then the whole process becomes a nullity as the specific goals were not specified. Accordingly, I am of the view that failure to specify the goals in the invitation to tender renders the tender process null and void. Therefore the counter-application should be granted.

[41] What remains for me to determine is the issue of costs.

COSTS

[42] Mr Eiser submitted that although the applicants’ papers were issued on 10 February 2011, the first respondent only delivered its answering affidavit on 17 March 2011 and the applicants responded on 24 March 2011. He submitted that the fault lies solely with the first respondent, who must pay all the costs for non-compliance with Section 2(1)(e) of the PPPFA.

[43] Mr Danzfuss correctly submitted that the applicant did not, in his replying affidavit nor in his heads of argument, state that the advertisement did not contain any reference to goal points and that the advertisement is not an invitation to tender. He submitted that the applicant, in his replying affidavit, alleged that the advertisement was an invitation to tender and that the applicant cannot withdraw an admission from the bar.

[44] Mr Danzfuss contended that had the applicant made the concession before that is either in the replying affidavit or the heads of argument, then the first respondent would have paid the costs.

[45] For this reason, he submitted, that the applicant must dismiss the main application with costs and allow the counter-application with costs of two counsel.

[46] Mr Eiser submitted that the first respondent only tendered costs of the counter-application and that they should accordingly bear the consequences. He also submitted that the costs of two counsel was not warranted as it is not a complex matter and asked for costs on an attorney and client scale.

[47] Turning to the costs of both the application and the counter-application, I am of the view that the costs could have been avoided if:

47.1. the first respondent had followed the correct procedure from the outset, in terms of Section 2 of the PPPFA;

47.2. the first respondent tendered not only the costs of the counter-application, but costs of the entire application;

47.3. the applicant made the concession which it did in its replying affidavit instead of persisting with the allegation that the advertisement did not constitute an invitation to tender.

[48] Blame can be attributed to both parties for costs incurred in the application.

[49] Having said that, the conduct of the applicants’ legal representative in litigating bears special reference. The applicant, in his founding affidavit, alleges that “the invitation to tender for the contract was issued by the first respondent on the 29^th October 2010” and in the replying affidavit that:

“ . . . the advertisement in the press of the invitation to tender did not contain any reference to the goal points, and it is also admitted that section 2(1)(e) of the PPPFA states the invitation should have contained the number of goal points and how many would be available for what categories.”

[50] The applicant, in the replying affidavit, alleged that “on a proper interpretation of the PPPFA notwithstanding the first respondent’s failure to comply with Section 2(1)(e) this does not invalidate the tender. If the legislature had intended non-compliance to result in invalidations it would have said so”.

[51] As stated supra, the concession that the advertisement does not constitute an invitation to tender was only made in Court on the day of the hearing.

[52] This Court frowns upon the manner in which the applicants’ legal representative shamelessly attempted to withdraw an admission made under oath from the bar without applying for leave from the Court to file a supplementary affidavit wherein the applicant withdraws the admission and provides the Court with a satisfactory explanation for the said withdrawal.

[53] Notwithstanding my comments supra, in exercising my discretion when awarding costs, I am of the view that because both parties can shoulder responsibility herein, each party should bear its own costs in the application and the applicant should bear the costs in counter-application.

[54] I am further of the view that applications of this nature are complex and costs of two counsel are justified.

[55] For reasons stated supra, neither the remaining points in limine nor the merits of the application require any consideration.

[56] In the result, the following order is made:

a) The application is dismissed with costs, each party is to pay their own costs;

b) The counter-application is granted, the applicant is to pay the first respondent’s costs, including the costs of two counsel.

_________________

N. GUTTA

JUDGE OF THE HIGH COURT

APPEARANCES

DATE OF HEARING : 07 APRIL 2011

DATE OF JUDGMENT : 05 MAY 2011

COUNSEL FOR APPLICANTS : ADV H.S. EISER

COUNSEL FOR 1^ST RESPONDENT : ADV F.W.A DANZFUSS SC (with him ADV J.G. GILLILAND)

ATTORNEYS FOR APPLICANTS : MINCHIN & KELLY INC.

(Instructed by EISER & KANTOR ATTORNEYS)

ATTORNEYS FOR 1^ST RESPONDENT : VAN ROOYEN TLHAPI WESSELS

(Instructed by COULSON & JACOBSZ ATTORNEYS)

---