THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

REPORTABLE
Case no:   602/2002

In the matter between
METRO PROJECTS CC

FIRST APPELLANT

AFRICAN UNITY DEVELOPERS CC

SECOND APPELLANT

and

KLERKSDORP LOCAL MUNICIPALITY

FIRST RESPONDENT

and

ELEVEN OTHERS

Coram:
ZULMAN, FARLAM, NUGENT, CONRADIE and HEHER JJA

Heard:
5 SEPTEMBER 2003

Delivered: 22 SEPTEMBER 2003

Summary: Fairness in tender procedures mandated by Local Government
Transition Act and Promotion of Administrative Justice Act –
procedure unfair where wrong information on which to base award
of tender given to mayoral committee

____________________________________________________________________
_

JUDGMENT
__________________________________________________________________

CONRADIE JA:
[1] The appellants and the second to twelfth respondents tendered for the
development of 1 333 stands in a township known as Jouberton extension 10 which
lies within the jurisdiction of the first respondent, a local municipality established
under the Local Government Municipal Structures Act 117 of 1998.  On review the
court a quo declined to uphold a contention by the appellants that the award of the
tender to the ninth respondent ought to be set aside but granted them leave to appeal
to this court against the dismissal of their application. The appellants (associates in a
joint venture) and the first respondent are the only parties before us.
[2] The first respondent had been given a grant amounting to R18 400 by the
Provincial Government of the North West Province for the development of each of
the stands.   In the invitation to tender prospective offerors were told that, apart from
providing certain developmental services, they were expected to attend to the
construction and handover of a top-structure (a house) on each of the stands. Each

tenderer was required to furnish a price breakdown and description of the products
and services to be provided by it. Accordingly each of the tenderers included in its
tender a plan stating the floor area of the house it proposed to build.
[3] The city civil engineer employed by the first respondent, Mr Nicolas Els,
analysed the tenders. He submitted to the committee charged with deciding on them a
recommendation in tabular form. It consisted of three columns, each divided into two
sections to cater for two types of stand. The three columns are headed 'Tendered
indirect cost', 'Amount available for top-structure' and 'Building area of top-structure.'
These, quite clearly, were important features of each tender. After indirect costs had
been taken into account, it was possible to determine how much of the R18 400
remained for the construction of the top-structure. That figure was inserted in the
second column. In the third column was inserted the floor area of the top-structure
which each tenderer offered to build with the money available to it after the other
developmental expenses had been met.

[4] Among the tenderers that indicated the size of the structure they offered to
build was the ninth respondent. The plan submitted with its tender indicated that it
proposed building a structure of 30.2 sq m. This compared poorly with the other
tenderers. Four of them, including the appellants, proposed a house of 37 sq m or
larger. Except for one other tenderer none proposed a house as small as that of the
ninth respondent. Nevertheless, Els recommended that the ninth respondent’s tender
be accepted. In the column dedicated to the provision of the floor area he inserted the
following comment: 'the house size and layout to be discussed with community'. This
comment misrepresented the content of the ninth respondent's tender. The ninth
respondent had not tendered on the basis that the extent and layout of the top structure
would later be settled between it and 'the community': its tender, like the others,
included the size of the dwelling it proposed to build.
[5] Although he later declared that his omission to state the floor area was an error,
Els at first defended his decision not to include this information in the case of the

ninth respondent by saying that in the scheme of the invitation to tender the floor
area was not an important element and anyway, by the time he compiled his schedule,
the ninth respondent had advised him that it would be prepared to increase the size of
its tendered house. Els’s schedule, however, did not disclose the post-tender offer to
increase the floor area. It stated that the house size was to be ‘discussed’ with the
‘community’ and gave no indication of the extent to which the ninth respondent
would be disposed to concede any eventual demands of the community (whose
bargaining power as a non-party to the contract would be limited) for a larger house.
[6] Els’s omission to state any sort of floor area in the schedule did not go
unobserved. The city treasurer noticed it and tersely commented: ‘Although the
tender from Remmogo Property Developers [the ninth respondent] has the biggest
amount available for the top-structure, they do not provide Council with an indication
of the size of the top-structure, which makes it a bit risky. It is recommended that this
be clarified with the company in advance.’

[7] Els’s recommendation then went to the Local Economic Development
Marketing and Procurement Committee ('the LED Committee') presided over by Ms
Riani de Wet. This committee resolved at a meeting held on 16 May 2001 to hold the
matter in abeyance until ‘all relevant information’ had been obtained. Without the
'relevant information' having been obtained, the tender recommendation made its way
to the mayoral committee, the next level decision maker. This body on 18 June 2001
refused to deal with the tender until the track record of the ninth respondent and the
floor area which it was to build had been ascertained. The requirements of the
mayoral committee were communicated to Els by De Wet (who was also a member of
that committee).
[8] The obvious and honest answer to the mayoral committee's query would have
been to take the requested information from  the ninth respondent’s tender plan and
advise the committee that the schedule had not shown a floor area for the ninth
respondent because it intended improving on its tender offer. This was not done.

Instead Els wrote a report to the committee to which was attached not the 30,2 sq m
tender plan but a plan for a house of 34,3 sq m.  Els did not disclose to the committee
that this was not the ninth respondent’s tender plan nor did he reveal the provenance
of the new plan. It had been ready since 9 May 2001, having been drawn a fortnight
or so after the close of  tenders on 20 April 2001 at a time when the floor areas
proposed by the other tenderers must have been known to the ninth respondent.
[9] The deception of the mayoral committee did not end there. Either because Els
suppressed the information or because the ninth respondent concealed it from Els the
committee was also not made aware that the ninth respondent could afford to produce
an even bigger house, one that could compete with the best that was on offer. Also
dated 9 May 2001, but delivered to Els at a later date, was a further plan proposing a
top-structure of 38 sq m. For it to have served any purpose at all the plan must have
been delivered to him before the date on which the tender was awarded to the ninth
respondent. The papers do not explain what Els was supposed to do with the plan but

he should, in the discharge of his fiduciary duty to the first respondent, have
disclosed it to the mayoral committee. In the absence of any explanation a probable
inference is that it was a contingency plan, drawn up at the same time as the 34,3 sq m
plan but held back to see if the earlier more modest one would not suffice to secure
the tender.
[10] The first respondent’s justification for having accepted the late offer is diffuse.
Its first line of defence is that it was not bound to follow tender procedures, an
untenable suggestion put up by Els (who, as city engineer, should have known better)
that was not pursued by the ninth respondent’s counsel. Its second line of defence was
that although it accepted that it was obliged to have acted fairly it had done so.
[11] As an organ of state in the local government sphere the first respondent in
awarding a tender is obliged to comply with s 10G(5)(a) of the Local Government
Transition Act 209 of 1993 read with s 217(1) of the Constitution of the Republic of
South Africa Act 108 of 1996. These provisions mandate it to do so in accordance

with a system which is fair, equitable, transparent, competitive and cost-effective.
The Preferential Procurement Policy Framework Act 5 of 2000 requires organs of
state to establish a procurement policy, and also makes it obligatory for the first
respondent, as an organ of State in the local sphere, to follow a tender procedure for
the procurement of goods and services.
[12] There is another reason that the tender procedure of a local authority must be
fair. Invitations to tender by organs of State and the awarding of tenders where it is
done in the exercise of public power is an administrative process (see Logbro
Properties CC v Bedderson NO and Others 2003 (2) SA 460 (SCA) at 465F-466C
where the leading cases are collected). Section 3(2)(a) of the Promotion of
Administrative Justice Act 3 of 2000 requires the process to be lawful, procedurally
fair and justifiable. But primarily, in the case of a local authority, the process must be
fair because s 10G (5)(a) of the Local Government Transition Act 1993 requires it.
[13] In the Logbro Properties case supra at 466H-467C Cameron JA referred to

the ‘ever-flexible duty to act fairly’ that rested on a provincial tender committee.
Fairness must be decided on the circumstances of each case.  It may in given
circumstances be fair to ask a tenderer to explain an ambiguity in its tender; it may be
fair to allow a tenderer to correct an obvious mistake; it may, particularly in a
complex tender, be fair to ask for clarification or details required for its proper
evaluation. Whatever is done may not cause the process to lose the attribute of
fairness or, in the local government sphere, the attributes of transparency,
competitiveness and cost-effectiveness.
[14] Was the tender process followed in the present case fair? A high-ranking
municipal official purported to give the ninth respondent an opportunity of
augmenting its tender so that its offer might have a better chance of acceptance by the
decision-making body. The augmented offer was at first concealed from and then
represented to the mayoral committee as having been the tender offer. It was accepted
on that basis.  The deception stripped the tender process of an essential element of

fairness: the equal evaluation of tenders. Where subterfuge and deceit subvert the
essence of a tender process, participation in it is prejudicial to every one of the
competing tenderers whether it stood a chance of winning the tender or not.
[15]  The appellants contended that there were several respects in which the ninth
respondent’s tender failed to comply with the tender conditions. In the light of my
conclusion it is unnecessary to discuss what the effect of these imperfections on the
validity of its tender might have been. The Preferential Procurement Policy
Framework Act 5 of 2000 defines an ‘acceptable tender’ as one that ‘in all respects
complies with the specifications and conditions of tender as set out in the tender
document’. There are degrees of compliance with any standard and it is notoriously
difficult to assess whether less than perfect compliance falls on one side or the other
of the validity divide.  Whether or not there can in any particular case be said to have
been compliance with ‘the specifications and conditions of tender’ may not be an easy
question to answer. In the present case there is no difficulty. The offer put before the

mayoral committee was not the one made in the ninth respondent’s tender. It was
not one elicited by the specifications and conditions of tender.
The appeal succeeds with costs. The order of the court a quo is replaced by an order
reading -
‘(a) The award by the first respondent to the ninth respondent of tender
CCE9/2001 is set aside;
(b) The first respondent is ordered to pay the costs of the application.’

___________________

J H CONRADIE

JUDGE OF APPEAL

ZULMAN JA
)Concur
FARLAM JA
)
NUGENT JA
)

HEHER JA
)