THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case No 385/2009

In the matter between:

MOSEME ROAD CONSTRUCTION CC

First Appellant

LONEROCK CONSTRUCTION (PTY) LTD

Second Appellant

THE MEC FOR THE DEPARTMENT OF PUBLIC
TRANSPORT, ROADS AND WORKS OF THE
GAUTENG PROVINCIAL GOVERNMENT

Third Appellant

and

KING CIVIL ENGINEERING CONTRACTORS
(PTY) LTD

First Respondent

LUDONGA CONSTRUCTION CC

Second Respondent

Neutral citation: Moseme Road Construction CC v King Civil Engineering CC
(385/2009) [2010] ZASCA 13 (15 March 2010)

Coram:
Harms DP, Nugent, Cloete and Lewis JJA and Theron AJA

Heard:
26 February 2010

Delivered:
15 March 2010

Summary: Tender award – setting aside – award of contract by court to
unsuccessful tenderer – inappropriate in the circumstances.

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from:  The South Gauteng High Court (Johannesburg) (Jajbhay J sitting
as court of first instance):
1 The appeal is upheld with costs.
2 The order of the court below is set aside and replaced with an order dismissing the
application with costs and making no order on the counter-application.
___________________________________________________________________

JUDGMENT
___________________________________________________________________

HARMS DP (NUGENT, CLOETE and LEWIS JJA concurring):

[1] This appeal concerns the award of a government tender. These awards often
give rise to public concern – and they are a fruitful source of litigation. Courts
(including this court) are swamped with unsuccessful tenderers that seek to have the
award of contracts set aside and for the contracts to be awarded to them. The
grounds on which these applications are based are many. Sometimes the award has
been tainted with fraud or corruption, but more often it is the result of negligence or
incompetence or the failure to comply with one of the myriad rules and regulations
that apply to tenders. Sometimes the successful tenderer is to be blamed for the
problem but then there are cases where he is innocent. Many cases are bedevilled
by delay, whether in launching the application (and also because the facts were not
readily available or easily ascertainable) or because of delays and suspensions
inherent in the appeal procedure. If the applicant succeeds the contract may have to
be stopped in its tracks with possibly devastating consequences for government or
the successful tenderer or both. Conversely, if the works are allowed to be
completed, the tenderer that should have been awarded the tender would unjustly
be deprived of the benefits of the contract. There are also cases where the final
judgment issues only after completion of the contract. It is not necessary to

adumbrate further. Tendering has become a risky business and courts are often
placed in an invidious position in exercising their administrative law discretion – a
discretion that may be academic in a particular case, leaving a wronged tenderer
without any effective remedy.1

[2] The award of government tenders is governed by s 217(1) of the Constitution.
Awards must be made in accordance with a system that is fair, equitable,
transparent, competitive and cost-effective. But a procurement system may provide
for categories of preference and for the advancement of categories of persons (s
217(2)). National legislation must prescribe the framework for the implementation of
any preferential policy (s 217(3)). This is done by the Preferential Procurement
Policy Framework Act 5 of 2000. It provides that organs of state must determine
their preferential procurement policy based on a points system. The importance of
the points system is that contracts must be awarded to the tenderer who scores the
highest points unless objective criteria justify the award to another tenderer (s
2(1)(f)).

[3] The Construction Industry Development Board Act 38 of 2000 provides for a
national register of contractors. Contractors are categorized ‘in a manner that
facilitates public sector procurement and promotes contractor development’ (s
16(1)). Contractors registered in a particular category are in terms of the regulations
under this Act considered to be capable of undertaking a contract in a particular
range of tender values.2

[4] The essential facts are these. The Gauteng Department of Public Transport,
Roads and Works invited tenders for the construction of a section of Beyers Naudé
Drive into a dual carriageway. (The Department is represented in this case by the
responsible MEC, the third appellant.) The advertised tender invitation specified the
classification of tenderers who could tender. It was 8CE PE or 9CE, signifying civil

1 Compare Sebenza Kahle Trade CC v Emalahleni Local Municipal Council [2003] 2 All SA 340 (T);
Intertrade Two (Pty) Ltd v The MEC for Road and Public Works & another 2007 (6) SA 442, [2008] 1
All SA 142 (Ck).
2 Regulations in terms of the Construction Industry Development Board Act GG 26427, 9 June 2004,
as often amended.

engineering contractors considered capable of performing contracts having a value
in excess of R100m. The present respondents, who eventually submitted a joint
venture tender, did not qualify in terms of the advertisement. (I shall refer to the joint
venture as ‘King’.) The first and second appellants, another joint venture and,
eventually the successful tenderer (to whom I shall refer as Moseme) did qualify. At
the obligatory site meeting that preceded the tender award those present were
informed in response to a question put on behalf of King that parties with a lower
classification (8CE or 7CE PE – for contracts with a tender value of less than
R100m) could also tender. An addendum to the tender documents issued
subsequently was to the same effect. King fell within the lower group and tendered.
The tenders received went through an evaluation process. King’s tender, having
scored the highest points, was recommended in the technical evaluation report
prepared by the Department’s engineer; in the standard submissions prepared by
the project manager; and in the minutes of the functional sourcing team.

[5] At the final assessment the Departmental Acquisition Council disqualified
King’s tender ‘on the rule of unfair competition’ and awarded the contract to
Moseme. According to its minutes it would have been unfair to those 8CE and 7CE
PE contractors who had been unaware of the change, which would have permitted
them to tender, to award it to King without a notice in the media. King’s tender was
accordingly disqualified in spite of the amendment of the tender documents because
it was not in accordance with the advertisement.  In other words, King’s tender was
disqualified because of an error by the Department. The error was, unbeknown to
King, that the information given at the site meeting was wrong and that the
Department had failed to change the tender documents.

[6] Dissatisfied, King launched an application for an urgent interim interdict,
which was dismissed on the ground of balance of convenience. Undeterred, King
launched the present proceedings as a matter of urgency, seeking the review of the
decision to award the contract to Moseme, and its setting aside. Additionally, King
asked that the court should award the contract to it since its tender was for the
lowest price, had scored the highest points, and was recommended during the
evaluation process. Moseme adopted a somewhat ambivalent attitude: it did not
oppose the review but only the prayer for the award of the contract to King, and by

way of counter-application Moseme sought an order declaring that the contract was
to remain extant in spite of the review. The Department, however, opposed King’s
application in all its aspects.

[7] The grounds for review were many, all attacking the award to Moseme while
the real complaint was the disqualification of King. It was for instance said that the
award to Moseme was unlawful because it had not scored the most points; and that
the award was materially influenced by an error of law, was made on the basis of
irrelevant considerations, or arbitrarily or capriciously.

[8] The high court (Jajbhay J) granted the relief sought by King. In relation to the
review he found that the decision was taken arbitrarily; that the matter had not been
considered properly; and that the Department had taken irrelevant considerations
into account. I am prepared to accept for purposes of this judgment that the fact that
there may have been 8CE and 7CE PE contractors who could have tendered but
had failed to do so because they were unaware of the changed classification was
not a ground for disqualifying King’s tender. One would have thought that if the
Council had concerns about those contractors it would have been a simple matter
either to advertise or to revert to the higher classification by issuing another
addendum or informing the tenderers of the decision.

[9] Having found that the award was reviewable, the court below held, without
more, that it was just and equitable to set the decision aside. It then proceeded to
consider whether to remit the matter to the Council for reconsideration or to award
the contract to King because it was an exceptional case under PAJA.3 It adopted the
latter option on both a legal and a factual basis. The legal ground was that since
King had scored the highest points and had submitted the lowest tender it was a
foregone conclusion that the Department was obliged in law to award the contract to
King, and that it would have been a waste of time to remit the matter for
reconsideration.

3 Promotion of Administrative Justice Act 3 of 2000 s 8(1)(c).

[10] The court, in exercising its discretion, added the factual consideration that it
was not impracticable to set aside the decision because, although the work had
begun, it was a ‘re-measurable’ contract which meant that King would not be paid for
something it had not done and, presumably, that Moseme would be paid for the work
it had completed.

[11] In assessing whether or not the court had erred it is necessary to refer to the
Oudekraal judgment where this court said the following:4
‘It will be apparent from that analysis that the substantive validity or invalidity of an
administrative act will seldom have relevance in isolation of the consequences that it is said
to have produced – the validity of the administrative act might be relevant in relation to some
consequences, or even in relation to some persons, and not in relation to others – and for
that reason it will generally be inappropriate for a court to pronounce by way of declaration
upon the validity or invalidity of such an act in isolation of particular consequences that are
said to have been produced.’

[12] A declaration of invalidity of the tender award in this case can also not be
considered in isolation. One has to consider the possible consequences. Only two
possibilities were canvassed: the one favoured by the high court, namely setting
aside the award and awarding the contract to King; and the one proposed by
Moseme and the Department, which was to leave the contract extant. Acceptance of
the latter alternative would make the review academic. Consequently, it is only
necessary to decide whether as a matter of law the Council was obliged to award
the contract to King and, if not, whether it was appropriate for the court below to
have  done so.

[13] King, in support of the court’s legal finding, relied on s 2(1)(f) of the
Preferential Procurement Policy Framework Act: contracts must be awarded to the
tenderer who scores the highest points unless objective criteria justify the award to
another tenderer. The first problem with the submission is that it fails to take into
account the fact that the invitation to tender stated that tenders were to be awarded
on the basis of the principle that work will be distributed amongst contractors or

4 Oudekraal Estates (Pty) Ltd v City of Cape Town & others 2004 (6) SA 222 (SCA); [2004] 3 All SA 1
(SCA) para 38.

entities that have not previously been awarded contracts. This aspect was not
considered by the Council – something it would have had to consider if it came to an
assessment of King’s tender vis-à-vis that of Moseme.

[14] More importantly, the submission ignores the preferential system introduced
by the regulations under the Construction Industry Development Board Act. The
scheme of things under r 25 is this: In soliciting a tender the employer must stipulate
that only tender offers by contractors who are registered in the category of
registration required in terms of r 25(3) may be evaluated in relation to that contract.
To qualify for evaluation, the contractor grading designation must describe the
nature of the works (in this case it is CE for civil engineering); and it must be based
on the estimated tender value. On the evidence the estimated tender value at the
time of the advertisement and thereafter exceeded R100m and, accordingly, the
tender invitation had to refer to the higher classification, which it did. The regulation
states further that on receipt of tender offers the employer must determine the final
lowest category of registration required for their evaluation and that a tender offer
received from a contractor who does not then qualify must be rejected. According to
the adjusted tender amounts (including that of King) the tender fell within the higher
classification (they varied between R107m and R137m). This means, as I
understand the regulations, that King’s tender had to be disqualified at that stage –
irrespective of what the advertisement or tender documents had said – unless the
employer exercised its discretion under reg 25(7A) to award the tender in prescribed
circumstances to someone who has tendered outside his range. Whether the
Council could or should have exercised its discretion is not the question. The fact is
that King was not as a matter of law entitled to the contract and that the court below
erred on this aspect.

[15] Something has to be said about the court’s approach to the ease with which it
considered it possible to replace Moseme with King, an approach supported on
appeal on behalf of King. It is useful to begin with a reference to Sapela.5 The high
court had found, and this court confirmed, that the award of the tender was ‘tainted’.

5 Chairperson: Standing Tender Committee & others v JFE Sapela Electronics (Pty) Ltd & others
2008 (2) SA 638 (SCA); [2005] 4 All SA 487 (SCA).

The high court had set the award aside and referred the matter back to the tender
body. But an appeal was lodged, which suspended the order, and the high court
refused to uplift the suspension. This court had to consider whether the high court
was correct in setting aside the contract and concluded that the high court had erred
because, at the time the application was heard in the high court, the contract had
been performed in part and the order, if implemented, would not only have been
disruptive but would also have given rise to a host of problems not only in relation to
a new tender process and also in relation to the work to be performed (para 27). The
judgment in Sapela concluded (para 29):
‘In my view, the circumstances of the present case as outlined above, are such that it falls
within the category of those cases where by reason of the effluxion of time (and intervening
events) an invalid administrative act must be permitted to stand. While the court a quo
correctly found that the award of each of the three tenders was invalid when made, it
appears not to have appreciated that it had a discretion to decline to set aside those
awards.’
In other words, ‘considerations of pragmatism and practicality’ were relevant in the
exercise of the discretion (para 28).

[16] The facts in Eskom Holdings were different, as was the result.6 The contract
involved ad hoc removal of material and its subsequent processing and sale. It was
not an indivisible contract such as an engineering contract. The high court awarded
the contract to the innocent tenderer. The order was suspended pending the appeal.
When the appeal was heard the contract had just three months to run. Relying on
Sapela, the argument was that it was impracticable at that stage to terminate the
contract and award it to the innocent tenderer. This Court found that it was not
impracticable in view of the nature of the particular contract (para 16).

[17] Two further comments should be made. The first is that the successful
tenderer in Eskom Holdings was, at least in part, to blame for the tainted award
because its tender was flawed (at para 14). That is not the position here. The
second comment flows from an argument by Moseme that the contract was now
near completion and that, because of the intervening facts, the order below should

6 Eskom Holdings Ltd & another v New Reclamation Group (Pty) Ltd [2009] ZASCA 8; 2009 (4) SA
628 (SCA).

be set aside. There is a conceptual problem with the submission. The issue on
appeal is whether the order granted by the court below was correct at the time it
issued. Supervening events cannot affect the answer although they might
conceivably affect enforceability on the ground of supervening impossibility.

[18] Then there is Millennium Waste.7 This court said (at para 22):
‘This guideline involves a process of striking a balance between the applicant’s interests, on
the one hand, and the interests of the respondents, on the other. It is impermissible for the
court to confine itself, as the court below did, to the interests of the one side only.’
That contract, which was divisible, related to the provision of services, and this court
did not, on finding a defect in the award, set the contract aside but crafted an order
with care to suit the occasion.

[19] The judgment in Millennium Waste pointed out that the difficulty that is
presented by invalid administrative acts is that they have often been acted upon by
the time they are brought under review (at para 23):
‘That difficulty is particularly acute when a decision is taken to accept a tender. A decision to
accept a tender is almost always acted upon immediately by the conclusion of a contract
with the tenderer, and that is often immediately followed by further contracts concluded by
the tenderer in executing the contract. To set aside the decision to accept the tender, with
the effect that the contract is rendered void from the outset, can have catastrophic
consequences for an innocent tenderer, and adverse consequences for the public at large in
whose interests the administrative body or official purported to act.’

[20] Against that background I proceed to consider the appropriateness of the
learned judge’s premise that it was not impracticable to set aside the decision
because, although the work had begun, it was a ‘re-measurable’ contract which
meant that King would not be paid for something it had not done and, presumably,
that Moseme would be paid for the work it had completed. I believe that the high
court did not consider fully the implications of the order in the context of a contract
that has to be measured.8 First, each tenderer will weight and price different items

7 Millennium Waste Management (Pty) Ltd v Chairperson of the Tender Board: Limpopo Province &
others  [2007] ZASCA 165; [2008] 2 All SA 145; 2008 (5) BCLR 508; 2008 (2) SA 481 (SCA).
8 Compare Darson Construction (Pty) Ltd v City of Cape Town 2007 (4) SA 488 (C),
[2007] 1 All SA 393 (C).

differently. Any particular costed item will as a matter of course differ from tender to
tender. Then there are items, such as preliminaries and establishment, which in
themselves provide no value for the employer and for which each contractor would
in principle be entitled. But it goes further. The setting aside of a contract has a
number of consequences. The first contractor may not be able to claim under the
revoked contract and be left with an enrichment claim, and the employer may not
have a claim for defective workmanship. The second contractor may even have a
claim for damages against the employer in respect of loss of profit on the executed
part of the contract because it has now become contractually entitled to the whole
contract.

[21] These problems may not be of any consequence in the case of corruption or
fraud or where the successful tenderer was complicit in the irregularity.9 But, as said,
that is not the case. The learned judge, in reaching his conclusion, failed to have any
regard to the position of the innocent Moseme. He also did not consider the degree
of the irregularity. He assumed incorrectly that King was entitled to the contract and
he underestimated the adverse consequences of the order. I therefore conclude that
he erred in the exercise of his discretion. This means that King, in spite of the
imperfect administrative process, is not entitled to any relief. Not every slip in the
administration of tenders is necessarily to be visited by judicial sanction.

[22] It follows that the appeal must be upheld with costs. Costs of two counsel
cannot be justified. The order as granted in favour of King has to be set aside.
Moseme’s counter-application that the contract should have remained extant, which
was dismissed, consequently becomes academic. It was in any event unnecessary
and did not cause any additional costs.

[23] The following order issues:
1 The appeal is upheld with costs.
2 The order of the court below is set aside and replaced with an order dismissing the
application with costs, and making no order on the counter-application.

9 Millennium Waste para 26 and compare Minister of Finance & others v Gore NO 2007 (1) SA 111
(SCA); [2007] 1 All SA 309 (SCA).

__________________
L T C Harms
Deputy President

THERON AJA:

[24] I have had the benefit of reading the judgment of my colleague, Harms DP. I
concur with the reasoning and the order in respect of the merits, but I do not agree
with the costs order.

[25] The legislative framework for aggrieved parties to protect their rights in
relation to tender procurement has been comprehensively set out by Harms DP.
However, as this case demonstrates, it is often extremely difficult for aggrieved
parties, such as King, to enforce their rights in our courts. The practical difficulties
faced by an aggrieved tenderer were recognised by this court in Millennium Waste10
where Jafta JA said the following:
‘In conclusion there is one further matter that needs to be mentioned. It appears that in
some cases applicants for review approach the High Court promptly for relief but their cases
are not expeditiously heard and as a result by the time the matter is finally determined,
practical problems militating against the setting-aside of the challenged decision would have
arisen.  Consequently the scope of granting an effective relief to vindicate the infringed
rights becomes drastically reduced.  It may help if the High Court, to the extent possible,
gives priority to these matters.’

10  Millennium Waste Management (Pty) Ltd v Chairperson, Tender Board: Limpopo Province & others 2008 (2)
SA 481 (SCA) para 34.

In appropriate circumstances, a court should be innovative and use its discretion as
a tool ‘for avoiding or minimising injustice’.11 Courts should not shy away from
carefully fashioning orders which meet the demands of justice and equity. In terms of
s 8 of the Promotion of Administrative Justice Act 3 of 2000 a court, in proceedings
for judicial review, is empowered to grant ‘any order that is just and equitable’.

[26] King was entitled to participate in a procurement process that was fair,
equitable, transparent, competitive and cost-effective.12 I accept, as does Harms DP,
for purposes of this judgment, that it was the Department’s negligence and
unjustified disqualification of King’s tender that resulted in the latter approaching the
high court for relief. King approached the court expeditiously in order to protect a
legitimate interest but it has not, in my view, received effective protection or relief. I
am further of the view that there are special circumstances, as was found by Scott
JA in Sapela Electronics,13 why the Department should pay King’s, as well as
Moseme’s, costs in the court below.

_____________________

L Theron
Acting Judge of Appeal

11 Oudekraal Estates (Pty) Ltd v City of Cape Town & others 2004 (6) SA 222 (SCA) para 36.
12 Section 217(1) of the Constitution.
13 Chairperson, Standing Tender Committee & others v JFE Sapela Electronics (Pty) Ltd & others [2005] ZASCA
90, 2008 (2) SA 638 (SCA), [2005] 4 All SA 487 (SCA) para 30.

APPEARANCES:

FIRST & SECOND APPELLANT:

J G Wasserman SC

Instructed by Van der Meer &

Schoonbee Attorneys, Bedfordview

Lovius Block Attorneys,

Bloemfontein
THIRD APPELLANT:

M G Khoza SC

A P S Nxumalo

Instructed by: The State Attorney,

Johannesburg

The State Attorney, Bloemfontein
FIRST AND SECOND RESPONDENTS:
S du Toit SC

Q G Leech

Instructed by Earle Friedman &

Associates, Johannesburg

Claude Reid Incorporated

Bloemfontein