THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

JUDGMENT

Not reportable
Case No: 837/2015

In the matter between:

HEAD OF DEPARTMENT, MPUMALANGA
DEPARTMENT OF EDUCATION

APPELLANT

and

VALOZONE 268 CC

FIRST RESPONDENT
SAMOLLO TRADING (PTY) LTD

SECOND RESPONDENT
SIYAKHANYA BUSINESS ENTERPRISES CC
THIRD RESPONDENT
ICONIC VENTURES (PTY) LTD

FOURTH RESPONDENT
IBHOKO TRANSPORT & TRADING (PTY) LTD
FIFTH RESPONDENT
AN YENDE CC

SIXTH RESPONDENT
ASITHUTHUKENI BUSINESS
ENTERPRISES CC

SEVENTH RESPONDENT
MAIPO TRADING CC

EIGHTH RESPONDENT

Neutral citation:  Head of Department, Mpumalanga Department of
Education v Valozone 268 CC (837/2015) [2017] ZASCA 30 (29 March 2017)

Coram:
Maya AP, Bosielo and Van der Merwe JJA and Schoeman

and Fourie AJJA

Heard:
4 November 2016

Delivered:
29 March 2017

Summary:
Administrative law: review of decision to cancel and re-advertise
public tender: decision not authorised by regulation 8(4) of the Preferential
Procurement Regulations, 2011 and irrational: decision correctly set aside.

______________________________________________________________

ORDER
______________________________________________________________

On appeal from: Gauteng Division of the High Court, Pretoria (Kubushi J
sitting as court of first instance):
1 The appeal is dismissed with costs, including the costs of two counsel.
2 Paragraphs 2 and 3 of the order of the court a quo are deleted and
substituted with the following:
‘The respondent is ordered to consider and adjudicate all qualifying bids in
terms of the evaluation methodology prescribed in paragraph 9 of the bid
document, within 30 (thirty) days of the granting of this order.’
______________________________________________________________

JUDGMENT
______________________________________________________________

Van der Merwe JA (Maya AP and Bosielo JA and Schoeman and Fourie
AJJA concurring):

[1] During August 2013, the appellant, the Head of the Department of
Education of the Mpumalanga Province, invited bids by way of publication of a
tender document with number EDU/069/13/MP (the tender). The tender
envisaged the implementation and management of the National School
Nutrition Programme. The main purpose of the tender was to ensure that
‘needy school learners from the disadvantaged and deprived communities
(being the target population) receive a nutritious supplementary meal per day’.
In terms of the tender, successful tenderers would be appointed as service
providers in terms of three year contracts, with the option, upon satisfactory
service, to extend the duration thereof for another two years. The obligations
of the service providers would be to operate warehouses and to supply bulk
dried food and fresh vegetables and fruit to schools in eight municipalities in
Mpumalanga. Separate service providers would be appointed for each
municipality.

[2] The tender closed on 11 September 2013 at 12h00. It was
contemplated that the tender would be implemented when the schools
opened in January 2014. Unfortunately this did not materialise. As will appear
from the extended history of the matter set out below, the principal issue in
the appeal is whether the court a quo (Kubushi J in the Gauteng Division of
the High Court, Pretoria) correctly reviewed and set aside the decision taken
by the appellant on 23 June 2014, to cancel and re-advertise the tender.

[3] The respondents timeously submitted bids to be awarded parts of the
tender. The first to seventh respondents were unsuccessful. The tender was
awarded to seventeen tenderers, including the eighth respondent. The first to
seventh respondents consequently applied in the Gauteng Division, Pretoria
for the review and setting aside of the award of the tender. They cited, inter
alia, the appellant and the seventeen successful tenderers as respondents in
that application. They relied on several irregularities in respect of the award of
the tender. These included that some of the successful tenderers failed to
submit documents that were compulsory in terms of the tender; that the
tender was awarded to a tenderer that had been finally deregistered; that
during the evaluation of the bids, points were incorrectly allocated to the first
to seventh respondents and to the successful tenderers and that the
tenderers were not treated fairly or equally, in that a condition of the tender
was subsequently imposed and in any event not consistently applied. None of
the respondents in that application filed answering affidavits.

[4] In a judgment dated 26 May 2014, Janse van Nieuwenhuizen J
reviewed and set aside the award of the tender. She also ordered the
following:
‘4.
The bid is remitted to the fourth respondent for reconsideration, who is
ordered and directed to consider and adjudicate upon the bid, having due regard to
this judgment, within 1 (one) month of the granting of this order.
5.
The status quo in respect of the implementation of the bid is maintained until
the fourth respondent has reconsidered and re-adjudicated upon the bid.’
The appellant was the fourth respondent in that application. The effect of para
5 of the order was that pending the reconsideration of the tender, it would be

implemented by the seventeen tenderers, despite the setting aside of the
award of the tender to them. No reasons were given for this part of the order.

[5] After consideration of the judgment, the appellant, on 2 June 2014,
called for all the bids submitted in respect of the tender, for purposes of
reconsideration of the tender. The appellant appointed a bid evaluation
committee (BEC) on 17 June 2014 and a bid adjudication committee (BAC)
on 18 June 2014 to assist her for this purpose.

[6] The tender obliged tenderers to submit seven ‘compulsory returnable
documents’. These included a valid tax clearance certificate, proof of value
added tax (VAT) registration or a declaration that the bidder is not registered
for VAT and cannot charge VAT, as well as company registration documents.
The tender clearly stated that failure to submit any of the compulsory
documents would lead to disqualification of the bid. (Regulation 14 of the
Preferential Procurement Regulations, GN R502, GG 34350, 6 June 2011
made in terms of s 5 of the Preferential Procurement Policy Framework Act 5
of 2000 (the regulations) provides that no tender may be awarded to any
person whose tax matters have not been declared by the South African
Revenue Service to be in order.)

[7] Therefore the first step in the adjudication of the bids would be to
determine which bidders submitted all the compulsory documents and thus
qualified to be evaluated in terms of the tender. The tender provided for
evaluation of bids by the BEC in two phases. The first phase consisted of
evaluation of functionality. During this phase points would be allocated to
each bidder in respect of the categories ‘appropriateness of the business plan’
and ‘capacity to deliver on relevant project’. Only bidders that scored 70
points or more for functionality could proceed to the next phase, that is, points
allocation for price (90) and equity ownership (10). The tender would then be
awarded per municipality in accordance with the Preferential Procurement
Policy Framework Act, that is, to the tenderer who scored the highest points,
unless objective criteria justified the award to another tenderer.

[8] The BEC commenced its reconsideration of the tender on 18 June
2014 and submitted its report to the BAC on 22 June 2014. It noted that
although a bid certificate prepared by the provincial supply chain management
unit (the unit) stated that 1116 bid documents had been received, 1099 bids
were received by the BEC. The BEC scrutinised the 1099 bid documents. It
concluded that 575 bids had to be disqualified and that two bids were
irrelevant, as they related to another tender. Notably, four of the seventeen
previously successful bids were disqualified. Thus, 522 bids qualified for
evaluation. The BEC did not, however, evaluate the qualifying bids in terms of
the tender. The BEC observed that three bid documents mentioned in the bid
certificate of the unit were not allocated bid numbers. The BEC did not state
whether these bids qualified for evaluation or not. It further observed that in
respect of two bids, the bid documents were not stamped by the unit at all.
Both these bids qualified for evaluation. In respect of a further twelve bids, the
bid documents were not stamped by the unit on each page. Six of these bids
qualified for evaluation and six did not.

[9] The BEC expressed the view that bid documents may have been
tampered with and that if this proved to be correct it could lead to further
unnecessary litigation. It resolved not to continue with the evaluation process
in terms of the tender. It recommended to the BAC that the latter consider re-
advertising the tender.

[10] In its memorandum to the appellant dated 23 June 2014, the BAC
recommended that the tender be re-advertised in order to avoid further
litigation. The BAC further recommended that the seventeen previously
successful tenderers be contracted on a month to month basis to execute the
tender pending the re-advertising and fresh award thereof.

[11] The appellant accepted the recommendations of the BAC. In terms of a
written decision dated 23 June 2014 (the decision) the appellant resolved:
‘DECISION
7.
In conclusion, the Tender for the Appointment of service provider/s to
manage, operate warehouses and supply bulk  foodstuffs, fresh vegetables and fruits

to schools participating in the National Nutrition Programme with identified CRDP
areas for a period of (3) three years, with the option to extend for another (2) two
years is to be re-advertised.
8.
Furthermore, in order not to disrupt the programme, the current 17 service
providers shall be contracted on a month to month basis until the appointment of a
new Service Provider or Providers.’

[12] The first to seventh respondents were dissatisfied with the decision and
instituted proceedings to have it reviewed and set aside. They relied on three
main grounds, namely:
(i)
that the order of Janse van Nieuwenhuizen J obliged the appellant to
adjudicate and award the tender and did not permit the re-advertising thereof;
(ii)
that the decision was invalid  for non-compliance with regulation 8(4) of
the regulations; and
(iii)
that the decision was irrational.

[13] The eighth respondent obtained leave to join the application as an
applicant. Although it initially prayed for different (and unsustainable) relief,
the eighth respondent made common cause with the first to seventh
respondents at the hearing of the application. At the hearing the fourth
respondent also abandoned its claim for relief, on the basis that it too did not
submit a qualifying bid.

[14] The court a quo found for the respondents on all three grounds. It
reviewed and set aside the decision. It also made the following orders:
‘2.
The respondent is ordered to consider and adjudicate applicants 1 to 3 and 5
to 8’s bids in terms of the evaluation methodology prescribed in paragraph 9 of the
bid  document, within 15 (fifteen) days of the granting of this order.
3.
The respondent is ordered to provide the applicants with a written report
within 20 (twenty) days of the granting of this order, on the outcome of the evaluation
process, with specific reference to:
(a)
the valuation criteria used for measuring functionality of the applicants’
respective bids;
(b)
the weight which was attached to each criterion;
(c)
the applicable values that were utilised when scoring each criterion;

(d)
the score for functionality obtained by each individual applicant;
(e)
the points scored by those applicants, who scored the minimum threshold of
70% for functionality, in respect of price and equity ownership.’
Kubushi J granted the appellant leave to appeal to this court.

[15] I am unable to agree with the court a quo’s interpretation of the order of
Janse van Nieuwenhuizen J. In her judgment Janse van Nieuwenhuizen J
dealt with the grounds of review of the award of the tender that led to the
remittal of the tender to the appellant. The judgment rightly did not deal with
the manner in which the reconsideration should take place. In the context of
the judgment the order did no more than to place an obligation on the
appellant to reconsider the tender with due regard to the judgment. The
judgment and order did not purport to exclude any legitimate options available
to the appellant upon reconsideration. Nor could they, having regard to the
principle of separation of powers. If the reconsideration indicated, for instance,
that no acceptable bids were received, the appellant would surely not be
obliged to nevertheless award the tender. I therefore conclude that the order
of 26 May 2014 did not oblige the appellant to award the tender.

[16] It is, however, a requirement of a fair, equitable and transparent
procurement system in terms of s 217 of the Constitution that a tender
properly issued, may not be cancelled without good reason. In this regard
regulation 8(4) of the regulations provides:
‘An organ of state may, prior to the award of a tender, cancel a tender if-
(a)
due to changed circumstances, there is no longer a need for the services,
works or goods requested; or
(b)
funds are no longer available to cover the total envisaged expenditure; or
(c)
no acceptable tenders are received.’
The tender could only be cancelled if one of the grounds stipulated in
regulation 8(4) existed. See Trencon Construction (Pty) Ltd v Industrial
Development Corporation of South Africa Ltd & another 2015 (5) SA 245
(CC); [2015] ZACC 22 paras 68-69.

[17] There is no doubt that the decision constituted a cancellation of the
tender. This was expressly recognised by the appellant. The appellant did not
state that due to changed circumstances there was no longer a need for the
services envisaged by the tender nor that funds were no longer available to
cover that expenditure. The resolution to re-advertise the tender in itself
demonstrated that these grounds for cancellation did not exist. There were
522 acceptable bids. The only justification for the cancellation proffered by the
appellant was the fear of possible litigation, and the costs thereof, that could
follow on a fresh award of the tender. That is not a ground for cancellation
stipulated in regulation 8(4). Regulation 8(4)(b) clearly refers to the total
expenditure envisaged in respect of the implementation of the tender itself.
Thus, the appellant was not empowered to cancel (and re-advertise) the
tender.

[18] I agree that the decision was in any event irrational within the meaning
of s 6(2)(f)(ii) of the Promotion of Administrative Justice Act 3 of 2000.
According to the BEC, there were possible irregularities in respect of some
thirty odd bids out of approximately 1100 bids. Some of these bids were in
any event disqualified. On the face of it, the possible irregularities may be
attributable to minor administrative failings. Only the first to seventh
respondents came forward to challenge the award of the tender. The
seventeen successful tenderers did not oppose that challenge and thus
accepted that the award of the tender should be reconsidered. There is no
evidence of any threat of litigation should a fresh award of the tender be
made. Such a threat would in any event be premature.

[19] The implementation of the tender was intended to serve the desperate
needs of poor children. The 522 qualifying bids could clearly be evaluated
properly and expeditiously. The fear of possible litigation following on an
award of the tender after proper evaluation of the qualifying bids, appears to
me to be illusory and wholly unjustified. In my view the decision to cancel the
tender for fear of possible litigation, was not rationally connected to the
purpose of the powers of the appellant or the information before the appellant.
What made matters worse, was that in terms of the decision, the tender was

awarded for the interim period on a month to month basis to, inter alia, four
bidders that had been disqualified by the BEC.

[20] It follows that the court a quo correctly set aside the decision and that
the appeal must be dismissed. In my view, however, paras 2 and 3 of the
order of the court a quo cannot stand. In terms of para 2 the appellant was
ordered to consider and adjudicate only the bids of the first to third and fifth to
eighth respondents. Clearly all qualifying bids should be considered for the
award of the tender. Paragraph 2 should also be adjusted in respect of the
time within which it should be complied with. There is no legal basis for a
report to the respondents in terms of para 3 of the order, as counsel for the
respondents fairly conceded, and it should be deleted.

[21] For these reasons the following order is issued:
1 The appeal is dismissed with costs, including the costs of two counsel.
2 Paragraphs 2 and 3 of the order of the court a quo are deleted and
substituted with the following:
‘The respondent is ordered to consider and adjudicate all qualifying bids in
terms of the evaluation methodology prescribed in paragraph 9 of the bid
document, within 30 (thirty) days of the granting of this order.’

__________________
C H G van der Merwe
Judge of Appeal

Appearances

For the Appellant:

G Shakoane SC (with him
K M Mokotedi)
Instructed by:
Adendorff Attorneys, Nelspruit
Lovius Block Attorneys, Bloemfontein

For the First to Seventh Respondent:    A Vorster (with him R C de Alcantara)

Instructed by:

Hugo & Ngwenya Incorporated,
Pretoria
Phatshoane Henney Attorneys,
Bloemfontein

For the Eighth Respondent:
P L Uys (with him S G Webster and

C J Mkhavelo)

Instructed by: C J Mkhavele Inc,

Pretoria

Honey Attorneys, Bloemfontein