THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Reportable

Case No: 642/2013

In the matter between:

THE INDUSTRIAL DEVELOPMENT
CORPORATION OF SOUTH AFRICA LIMITED

Appellant

and

TRENCON CONSTRUCTION (PTY) LIMITED               First Respondent
BASIL READ (PTY) LIMITED                                        Second Respondent

Neutral citation: IDC v Trencon Construction (642/13)[2014] ZASCA 163 (1
October 2014)

Coram:
LEWIS, MAYA, TSHIQI JJA and SCHOEMAN and
FOURIE AJJA

Heard:
4 September 2014
Delivered:
1 October 2014

Summary:
Tender procedures – evaluation of tenders – decision not to award
tender to first respondent influenced by a material error of law –
decision correctly reviewed and set aside – no exceptional
circumstances shown to warrant substitution order in terms of s
8(1)(c)(ii)(aa) of the Promotion of Administrative Justice Act 3 of
2000.

________________________________________________________________

ORDER

On appeal from: North Gauteng High Court, Pretoria (Mothle J sitting as
court of first instance)

1 The appeal is upheld to the limited extent set out below with each party to pay
its own costs.
2 Paragraph 1 of the order of the court below is deleted and replaced with the
following:
„The decision of the first respondent to declare the tender submission of the
applicant non-responsive and to award the tender T27/07/12: Tender Enquiry
for the Principal Building Contract for the IDC Head Office External Upgrade
Sandton, Johannesburg to the second respondent is reviewed and set aside. The
matter is remitted to the IDC‟s Executive Management Committee for
reconsideration in terms of s 8(1)(c)(i) of the Promotion of Administrative
Justice Act 3 of 2000.‟

JUDGMENT

Maya JA:
(Lewis, Tshiqi JJA and Schoeman and Fourie AJJA
concurring)

[1] This is an appeal against the judgment of the North Gauteng High Court,
Pretoria (Mothle J). The high court reviewed and set aside the decision of the
appellant (IDC) to award a tender for the external upgrade of its head office in
Sandton, Johannesburg (the Works) to the second respondent, Basil Read (Pty)

Limited (Basil Read) and substituted it with an order that the tender be awarded
to Trencon Construction (Pty) Limited (Trencon). The appeal is with the leave
of the court below.

[2] The background facts are common cause. On 18 May 2012 IDC invited
prospective building contractors to submit proposals (the RFP) to prequalify for
the tender. The tender process would be conducted in two phases. The first
phase involved the request for and screening of the contractors‟ profiles based
on their technical ability, management experience, personnel capabilities,
financial standing and litigation history. Shortlisted contractors would be
eligible to participate in the second phase which concerned the bidding itself. In
this leg, their tender submissions would be evaluated on the basis of price and
preferences in a staggered process conducted at different stages by IDC‟s bid
evaluation committee (the BEC), procurement department, procurement
committee (the PC) and, finally, IDC‟s executive committee (Exco). These
committees would be assisted in this process by Snow Consultants Incorporated
(Snow), an independent firm of experts engaged by IDC as its principal agent to
conduct the tender evaluation process.

[3] The RFP provided various rules and conditions which, subject to IDC‟s
Procurement Policy, would govern the process. Among these were clauses 2.6
which stated that IDC did not bind itself to accept any of the applications
submitted nor to continue with the tender process; 2.7 in terms of which
applications received after the stipulated closing date, „Monday 04 June 2012 at
12:00 noon‟, would not be evaluated or assessed; 2.9 which entitled IDC at its
sole discretion to disqualify any application or applicant that failed to conform
to the RFP rules and conditions and the instructions in the official invitation;
and 2.15.2 in terms of which IDC reserved the right to reject or accept any
application and/or cancel the RFP process and reject all applications.

[4] Trencon and other bidding contractors submitted their RFP timeously.
Basil Read submitted 14 minutes after closing time. IDC‟s procurement
manager and member of the PC considered that the Guidelines of IDC, which
allowed the acceptance of late bids received on the closing date if it was in
IDC‟s interest to do so, empowered it to condone the transgression and accepted
the late RFP. Subsequently, Snow recommended Trencon, Basil Read and five
other contractors to proceed to the second phase. On 12 July 2012 IDC issued a
tender invitation to the shortlisted contractors which fixed the site handover date
as 6 September 2012.

[5] Trencon duly submitted its tender which offered a total price of
R133 508 788, the lowest of the bid prices.  It stated that its price would „remain
fixed and firm for the planned duration of the contract provided the Works start
as per the date indicated in the tender document‟. Thereafter, the tenderers were
requested to advise on their conditions should site handover occur on 1 October
2012, which was a date later than that contemplated in the conditions of tender.
Trencon responded that in that case it would charge an additional monthly 0,6
per cent escalation in the sum of R315 000 excluding VAT. Basil Read on the
other hand indicated that its price would remain firm despite the proposed
change.

[6] Trencon scored the highest points on price and BEE rating, which were
relevant considerations in the evaluation. The BEC recommended its revised bid
subject to a number of conditions relating, inter alia, to arithmetical errors
allegedly made by Trencon in respect of certain items and the quantity
surveyor‟s interpretation of the bill of quantities. During September 2012 a
meeting of the PC considered the recommendation of the appointment of
Trencon as the preferred tenderer. Consequently, it recommended Trencon‟s

appointment to Exco for approval subject to several conditions which included a
request for clarity on the total estimated price and the additional cost for site
handover after 1 October 2012. One of the issues raised in the recommendation
was a view that the additional cost relating to the changed site handover date,
which would now possibly shift to 1 November 2012, constituted a
contravention of „IDC‟s conditions of tender (tender validity period and fixed
price) … and thus potentially posed an audit challenge regarding compliance
with internal processes‟. The PC‟s view was that Trencon‟s additional charge
had no basis as the new site handover date fell within the tender validity period
of 120 days prescribed in the tender document, which would lapse only on 4
December 2012.

[7] Prior to Exco‟s meeting on 19 September 2012, a confidential legal
opinion was obtained on this issue and the PC‟s other concerns. It was
subsequently submitted to Exco together with the PC‟s recommendation in a
comprehensive board pack. The opinion expressed a view that Trencon‟s bid
was not firm and fixed and would likely attract a challenge by the other bidders
if accepted. After its deliberations, Exco resolved that (a) the Trencon bid was
not fixed and valid for 120 days; (b) after the closing date Trencon amended its
initial price which rendered the bid non-responsive1 and invalid as it
contravened the tender conditions. Exco then declined to award the tender to
Trencon and decided to appoint Basil Read.

[8] It is this decision that Trencon challenged in the court below. It
contended that Exco‟s decision that its bid was invalid was influenced by a

1 Clause F.3.8.2 of the Standard Conditions of Tender (SCT), in annexure “F” of the CIDB Standard for
Uniformity in Construction Procurement in Board Notice 12 of 2009, Government Gazette No 31823 of 30
January 2009, defines a responsive tender as one „that conforms to all terms, conditions and specifications of the
tender documents without material deviation or qualification … which … would … detrimentally affect the
scope, quality, or performance of the works, services or supply identified in the Scope of Work … significantly
change the Employer‟s or tenderer‟s risks and responsibilities under the contract, or … affect the competitive
position of other tenderers presenting responsive tenders, if it were to be rectified.‟

material error of law. This was so, it was argued, because Exco misunderstood
the provisions of the tender documents in relation to the adjustment of the
contract price. According to Trencon, the SCT and the JBCC Series 2000
Principal Building Agreement,2 which also applied to the tender, prohibited the
adjustment of the bid price as a result of costs in labour, plant and material but
allowed price adjustment resulting from delays in site handover, which IDC also
conceded. All that Trencon did, it was contended, was to undertake to keep its
price fixed for the duration of the contract provided the work started on the date
specified in the tender document. And there was no evidence in any event that it
changed its bid price at any time as it merely responded to a speculative
question about a possible shift of the site handover date.

[9] Trencon further argued that Exco committed a material procedural
irregularity by considering Basil Read‟s late RFP because clause 19.3.2 of the
Procurement Policy, which in its view superseded the Procurement Procedure
Guidelines relied upon, allows condonation only where no bid or acceptable bid
has been received. It also imputed bias to IDC officials and its lawyers which
the court below correctly dismissed as baseless.

[10] The court below found merit in these contentions. It held that the decision
to award the tender to Basil Read, which scored lower points than Trencon and
was not recommended by the tender evaluators, had to be reviewed and set
aside on two separate and distinct grounds: Exco  (a) committed an error of
law in declaring Trencon‟s bid non-responsive and (b) acted in a manner that
was procedurally unfair, as contemplated in s 6 of the Promotion of
Administrative Justice Act 3 of 2000 (PAJA),3 by accepting, evaluating and

2 Published by the Joint Building Contracts Committee Inc.
3 Section 6(2)(c) and (d) of PAJA respectively empower „a court or tribunal … to judicially review an
administrative action if the action was procedurally unfair [or] the action was materially influenced by an error
of law‟.

assessing Basil Read‟s late RFP at the initial stage of the tender evaluation
process. Having thus found, the court below refused to cancel the tender process
and order it to start afresh or remit the matter to IDC for reconsideration. In its
view, IDC had shown no reason why the tender should not be awarded to
Trencon when the decision was a foregone conclusion considering the
recommendations which favoured Trencon. The court below concluded that it
would be just and equitable to award the tender to Trencon itself as delaying the
implementation of the project would prejudice not only Trencon but IDC and
National Treasury too in view of the substantial public funds involved.

[11] On appeal before us, the issues concerned only the correctness of the
finding of the court below that Basil Read‟s tender should have been
disqualified and the substitution order. IDC did not challenge the finding that
Exco committed an error of law in declaring Trencon‟s bid non-responsive.
Instead it was conceded on its behalf that Exco could properly have awarded the
tender to Trencon and that its decision was therefore reviewable in that regard.
It merely argued that the court below erred in finding that Basil Read‟s tender
was disqualified because the degree of its submission‟s lateness was immaterial,
caused no prejudice and ought to have been condoned. It also contended that the
court below wrongly granted the remedy of substitution on the facts of this case.

[12] It is established that the starting point for an evaluation of the proper
approach to an assessment of the constitutional validity of outcomes under the
state procurement process is s 217 of the Constitution.4 The section requires an
organ of state in the national, provincial or local sphere, when contracting for
goods or services, to do so in accordance with a system which is fair, equitable,

4 AllPay Consolidated Investment Holdings (Pty) Ltd and others v Chief Executive Officer of the South African
Social Security Agency and others (Corruption Watch and another as amici curiae) 2014 (4) SA 179 (CC) para
32; Steenkamp NO v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC) para 33; Millenium Waste
Management (Pty) v Chairperson, Tender Board: Limpopo Province and others 2008 (2) SA 481 (SCA) para 4.

transparent, competitive and cost-effective.5 The national legislation prescribing
the framework within which procurement policy must be implemented includes
the Preferential Procurement Policy Framework Act 5 of 2000 (the Procurement
Act) and the Preferential Procurement Regulations.6 A decision to award a
tender constitutes administrative action so the provisions of PAJA, from which
a cause of action for the judicial review of administrative action arises, apply to
the process.7

[13] In line with these prescripts, IDC‟s Procurement Policy states among its
objectives, in clause 5, the aim „to ensure a fair, equitable, transparent,
competitive and cost-effective procurement process … and to achieve value for
money in all procurement activities‟.  Clause 3.6.1 expressly requires IDC to
apply the Procurement Act and its regulations.

[14] It seems to me that IDC‟s concession was proper. Section 2(f) of the
Procurement Act provides that „a contract must be awarded to the tenderer who
scores the highest points, unless objective criteria … justify the award to
another tenderer.‟ Clause F.3.11.3(d) of the SCT similarly enjoins the
„employer‟, IDC, to „recommend the tenderer with the highest number of tender
evaluation points for the award of the contract, unless there are compelling and
justifiable reasons not to do so.‟ Trencon scored the most points in respect of all
the relevant tender evaluation criteria both before and after making adjustments
for any delay that may have beset the site handover as contemplated in the
Procurement Act. It was recommended as the preferred tenderer above Basil
Read at all the stages of the rigorous evaluation process. Although various
concerns were raised in connection with Trencon‟s tender, the only reason

5 Subsection (1).
6 Published in Government Gazette 34350 of 8 June 2011, issued in terms of s 5 of the Procurement Act.
7 AllPay fn 4 para 41; Minister of Health and another v New Clicks South Africa (Pty) Ltd 2006 (2) SA 311
(CC) paras 95-97; Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and others 2004 (4) SA 490
(CC) paras 25-26.

ultimately given by Exco for the award of the tender to Basil Read is the one
disavowed by IDC itself; that Trencon‟s „rates and prices were not fixed for the
duration of the contract and its tender offer was not valid for 120 days‟.

[15] As indicated above, Trencon declared at the outset that its price would
remain firm for the entire contract period if the works started on the scheduled
date. This elicited no objection from IDC. Its contention that a price adjustment
resulting from a site handover delay, such as it proposed, was permissible was
conceded. Apart from this failed reason, there are no apparent objective criteria
or compelling reasons justifying Exco‟s decision that Trencon‟s bid was non-
responsive and invalid. To my mind, once it is accepted that Exco erroneously
excluded Trencon from the tender process and that its decision therefore
constitutes a reviewable error, as was conceded, it must follow that Exco could
not have lawfully awarded the tender to another bidder. Any attempt to do so
would, of necessity, have resulted in another reviewable error. Whether or not
Basil Read‟s late RFP was responsive is wholly irrelevant and cannot sustain
the appeal.

[16] But there remains the question concerning the correctness of the
substitution remedy granted by the court below in terms of s 8 of PAJA. The
section provides a wide range of „just and equitable‟ remedies following upon a
declaration of unlawful administrative action in proceedings for judicial review
in terms of s 6(1) of PAJA. These remedies are meant „to afford the prejudiced
party administrative justice, to advance efficient and effective public
administration compelled by constitutional precepts and at a broader level, to
entrench the rule of law.‟8 There are no hard and fast rules in determining a just
and equitable remedy. Depending on the circumstances of each case, the court

8 Steenkamp NO fn 4 para 29; see also Bengwenyama Mineral (Pty)Ltd and others v Genorah Resources(Pty)
Ltd and others 2011 (4) SA 113 (CC) paras 83-84.

will be guided by the „kind of challenge presented … the interests involved and
the extent or materiality of the breach of the … administrative right to just
administrative action in each particular case‟9 in balancing the competing
interests of the parties.

[17] The power of a court provided in s 8(1)(c)(ii)(aa) of PAJA to substitute or
vary administrative action or to correct a defect resulting from an administrative
action is extraordinary. It is exercised sparingly, in exceptional circumstances.
In Gauteng Gambling Board v Silverstar Development this court described
„exceptional‟ as follows:10
„Since the normal rule of common law is that an administrative organ on which a power is
conferred is the appropriate entity to exercise that power, a case is exceptional when, upon a
proper consideration of all the relevant facts, a court is persuaded that a decision to exercise a
power should not be left to the designated functionary. How that conclusion is to be reached
is not statutorily ordained and will depend on established principles informed by the
constitutional imperative that administrative action must be lawful, reasonable and
procedurally fair.‟

[18] With these principles in mind, it is clear that the court below erred in
substituting its own decision in the circumstances of this case. It overlooked the
fact that IDC was not obliged to award the tender to the lowest bidder or at all.
The award of the tender could not be a foregone conclusion in the
circumstances. Furthermore, the court does not appear to have balanced the
substitution remedy against the requirements of the separation of powers and
failed to exercise judicial deference.11 As was pointed out in Gauteng Gambling
Board:12
An administrative functionary that is vested by statute with the power to consider and
approve or reject an application is generally best equipped by the variety of its composition,

9 Bengwenyama para 85.
10 Gauteng Gambling Board v Silverstar Development 2005 (4) SA 67 (SCA) paras 28-29.
11 Logbro Properties CC v Bedderson NO and others 2003 (2) SA 460 para 21.
12 Ibid para 29.

by experience, and its access to sources of relevant information and expertise to make the
right decision. The court typically has none of these advantages and is required to recognise
its own limitations. See Minister of Environmental Affairs and Tourism and Others v
Phambili Fisheries (Pty) Ltd; Minister of Environmental Affairs and Tourism and Others v
Bato Star Fishing (Pty) Ltd 2003 (6) SA 407 (SCA) at paras [47]-[50]; and Bato Star Fishing
(Pty) Ltd v Minister of Environmental Affairs and others 2004 (4) SA 490 (CC) at paras [46]-
[49]. That is why remittal is almost always the prudent course.‟

[19] There is additional practical difficulty which would challenge the
implementation of the substitution order. Over two years have elapsed since the
beginning of the tender process. The information upon which the tenders were
evaluated is obviously dated. The order does not accommodate unavoidable
supervening circumstances such as price increases that have to be taken into
account.13

[20] No exceptional circumstances exist here to justify the order of
substitution. This is a proper case to refer back to the administrator for its
reconsideration. In light of IDC‟s built-in discretion to forego the tender process
should it so wish, it does not seem appropriate to impose any conditions for the
remittal.  The appeal must accordingly succeed in this respect. The parties have
each enjoyed success on appeal. Each party therefore should pay its own cost.

[21] In the result the following order is made:
1 The appeal is upheld to the limited extent set out below with each party to pay
its own costs.
2 Paragraph 1 of the order of the court below is deleted and replaced with the
following:
„The decision of the first respondent to declare the tender submission of the
applicant non-responsive and to award the tender T27/07/12: Tender Enquiry

13 Logbro paras 19-21.

for the Principal Building Contract for the IDC Head Office External Upgrade
Sandton, Johannesburg to the second respondent is reviewed and set aside. The
matter is remitted to the IDC‟s Executive Management Committee for
reconsideration in terms of s 8(1)(c)(i) of the Promotion of Administrative
Justice Act 3 of 2000.‟

__________________________
MML Maya
JUDGE OF APPEAL

APPEARANCES:

For Appellant:

GJ Marcus SC (M Sikhakhane)

Instructed by:

Edward Nathan Sonnenbergs, Sandton

Webbers, Bloemfontein

For Respondent:

A Nelson SC

Instructed by:

Joubert Galpin Searle, Port Elizabeth

Honey & Partners Inc, Bloemfontein
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:
The Registrar, Supreme Court of Appeal
Date:
1 September 2014
Status:
Immediate

Please note that the media summary is intended for the benefit of the media and does not
form part of the judgment of the Supreme Court of Appeal.

THE INDUSTRIAL DEVELOPMENT CORPORATION OF SOUTH AFRICA
LIMITED  v  TRENCON CONSTRUCTION (PTY) LIMITED & ANOTHER
(642/13)[2014]

The Supreme Court of Appeal (SCA) today partially upheld an appeal and set aside the
order of the court below.

This appeal is against the judgment of the North Gauteng High Court, Pretoria which
reviewed and set aside the decision of the appellant’s Executive Committee to award a
tender for the external upgrade of its head office in Sandton, Johannesburg, to the second
respondent Basil Read (Pty) Limited (Basil Read) and substituted it with an order that the
tender be awarded to the first respondent Trencon Construction (Pty) Limited (Trencon).

The Executive Committee declined to award the tender to Trencon, which had scored the
most points in the evaluation process and was recommended by the tender evaluators, on
the basis that its bid was non-responsive and invalid, because (a) it was not fixed and valid
for 120 days; and (b) after the closing date Trencon amended its initial price and added an
amount as a result of the postponement of the site handover date in breach of the tender
conditions. It consequently awarded the tender to Basil Read. was influenced by a material
error of law.

The court below overturned reviewed and set aside this decision on the grounds that (a) the
Executive Committee committed an error of law in declaring Trencon’s bid non-
responsive because the latter was entitled to adjust its price in the circumstances; and (b) it
had acted in a manner that was procedurally unfair, as contemplated in s 6 of the
Promotion of Administrative Justice Act 3 of 2000 (PAJA),  by accepting, evaluating and

assessing Basil Read’s bid which was filed late, in breach of its Procurement Policy.
Having thus found, the court below held that IDC had shown no reason why the tender
should not be awarded to Trencon when the decision was a foregone conclusion
considering the recommendations which favoured Trencon. The court below concluded
that it would be just and equitable to award the tender to Trencon itself as delaying the
implementation of the project would prejudice not only Trencon but the appellant and
National Treasury too in view of the substantial public funds involved.

On appeal before the SCA, IDC did not challenge the finding that Exco committed an error
of law in declaring Trencon’s bid non-responsive. It merely argued that the court below
erred in finding that Basil Read’s tender was disqualified because the degree of its
submission’s lateness was trifling, caused no prejudice and ought to have been condoned.
It also contended that the court below wrongly granted the remedy of substitution on the
facts of this case.

The SCA found that there were no apparent objective criteria or compelling reasons
justifying the executive committee’s decision that Trencon’s bid was non-responsive. And
once it was accepted that the executive committee erroneously excluded Trencon from the
tender process and that its decision therefore constituted a reviewable error, as was
conceded by IDC, it had to follow that the executive committee could not have lawfully
awarded the tender to another bidder. Any attempt to do so would, of necessity, have
resulted in another reviewable error. The question whether or not Basil Read’s late
proposal was responsive was wholly irrelevant. On this aspect the appeal failed. But the
SCA then held that no exceptional circumstances existed to justify the order of substitution
as required by s 8(1)(c)(ii)(aa) of PAJA and that this is a proper case to exercise judicial
deference and refer back to the administrator for its reconsideration. The appeal was
accordingly upheld in this respect.