G4S Cash Solutions (SA) (Pty) Ltd v South African Post Offices SOC Ltd and Another (40461/2020) [2020] ZAGPPHC 510 (15 September 2020)

REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, PRETORIA

(1) REPORTABLE: NO

(2) OF INTEREST TO OTHER JUDGES: NO

(3) REVISED: NO

CASE NO: 40461/2020

In the matter between:

G4S CASH SOLUTIONS (SA) (PTY) LTD

APPLICANT

and

SOUTH AFRICAN POST OFFICES SOC LTD

FIRST RESPONDENT

FIDELITY CASH SOLUTIONS (PTY) LTD

SECOND RESPONDENT

JUDGMENT

Van der Schyff J

[1] The applicant approached the Court on an urgent basis. The issue for determination in this matter is whether the Request for Proposals (“The RFP”) issued by the first respondent on 13 July 2020 should be reviewed and set aside. The relief is sought in terms of the relevant sections of the Promotion of Administrative Justice Act, No 3 of 2000 (“PAJA”), alternatively the principle of legality.

[2] The initial deadline for bids was 14 August 2020, but the first respondent subsequently extended the deadline to 28 August 2020. At the time when the application was heard the evaluation of bids was already underway and the award of the tender imminent. When arguments closed and just before judgment was reserved to be handed down early in next week, the first respondent informed the court that the tender was awarded. The completion of the tender process with full knowledge of this application being argued in court is to be frowned upon for it reeks of disrespect for the court’s processes.

The complaint

[3] The applicant submits that the RFP is unlawful for two main reasons –

a. The RFP is vague as to whether bidders must subcontract a portion of the tender. The first respondent’s subsequent attempts to clarify the RFP have exacerbated the confusion. The result is that it is unclear what the RFP requires in terms of subcontracting. The applicant, as a prospective bidder, is thus expected to ‘decipher unclear directions’. The lack of clarity defeats the objectives of fair and competitive procurement as contemplated under section 217 of the Constitution and renders the RFP unlawful;

b. The inclusion of subcontracting as an element of the RFP does not comply with the Preferential Procurement Regulations issued under the Preferential Procurement Policy Framework Act, No 5 of 2000 (“PPFA”), more particularly Regulations 3, 4, 6, 7 and 9.

Re: Urgency and mootness

[4] The first respondent contends that the matter is not urgent. The first respondent submits that the applicant is well acquainted with the tender terms that it now complains of and participated in previous tender processes under similar terms without complaint. In addition, it is submitted that the matter became moot because the date for the closing of the tender was 28 August 2020 and the applicant submitted a tender, hence, the matter became academic.

[5] The issue of urgency is often intertwined with the merits and always related to the time frame within which an applicant approaches the court for urgent relief. In casu the applicant seeks final relief. In order to determine whether the applicant’s decision to approach the court on an urgent basis was justified, the following are to be considered:

Applicant’s contentions re urgency:

a. The application is urgent because the closing date for bids was 28 August 2020 and the award of the tender is imminent;

b. The applicant will not obtain substantial redress in the ordinary course. The applicant’s complaints pertaining to the unlawfulness of the RFP attach to the RFP itself and taints the whole process envisaged by the RFP. The applicant cannot be expected to continue to participate in the very process it contends is unlawful and then review the award afterwards;

c. The mere publication of the RFP infringes not only the applicant’s rights but the right of other tenderers to a fair tender process.

d. Because the RFP is vague and contravenes the Preferential Procurement Regulations and the Preferential Policy Framework Act, No. 5 of 2000 (“PPFA”) the applicant is effectively prevented from preparing a competitive bid.

e. The appropriate redress for the infringement of the applicant’s right to a fair tender process is to stop the tender process and to have the RFP set aside.

f. The applicant cannot obtain that redress in the ordinary course because then the tender would already have been awarded. As stated, the tender was awarded while the matter was being argued in court.

g. The RFP was published on 13 July 2020 where after the applicant and second respondents engaged in a clarification process with the first respondent. They only received answers to their respective questions on 31 July 2020. Between 31 July 2020 and 14 August 2020 the applicant engaged in communicating with the first respondent in order to obtain clarity on the RFP and the subcontracting requirement. The first respondent extended the deadline for bids to 28 August 2020. Between 14 August 2020 and 17 August 2020 the parties engaged in without prejudice-discussions in a good faith attempt to avoid the need for urgent litigation. On 18 August 2020 the first respondent sent out a letter to all tenderers. The stated purpose of the letter was to “provide clarity”

on subcontracting, and to provide printouts from the National treasury database which it claimed constitutes a list of subcontractors under Regulation 8(3). The applicant launched its urgent application on 19 August 2020.

[6] I am of the view, that the first respondents blatant disregard and disrespect for court processes, as evinced by the consideration and subsequent granting of the tender before the finalisation of this application renders the application sufficiently urgent to be heard.

[7] The next issue that needs to be determined is whether the fact that the application was instituted before the tender process closed, heard on a date after the tender process closed, with the judgment to be delivered after the tender was awarded, renders the application academic and moot.

[8] Case law is clear - a vague tender violates section 217 of the Constitution. The Supreme Court of Appeal held in Minister of Social Development and Others v Phoenix Cash n Carry PmB CC [2007] 3 All SA (SCA) at paragraph 2:

“Without attempting a comprehensive survey of the circumstances which will offend against s 217(1) [of the Constitution] certain general observations are demonstrated as true by the fact of the present case -(1) A tender process which depends on uncertain criteria lends itself to exclusion of meritorious tenderers and is opposed to fairness among tenderers, and between tenderers and the public body which supposedly promotes the public weal;” [My emphasis].

[9] In Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others 2014 (1) BCLR 1 (CC) the Constitutional Court reiterated that vague tender documents are unlawful. Froneman J held:

“[87] Vagueness and uncertainty are grounds for review under section 6(2)(i) of PAJA. Certainty in legislation and administrative action has been linked to the rule of law. In New Clicks, this Court made the connection between the two and clarified where vagueness would fall as a ground for review in PAJA:

“It seems to have been assumed by the parties, and in my view correctly so, that vagueness is a ground for review under PAJA. Although vagueness is not specifically mentioned in PAJA as a ground for review, it is within the purview of section 6(2)(i) which includes as a ground for review, administrative action that is otherwise ‘unconstitutional or unlawful’. This Court has held that the doctrine of vagueness is based on the rule of law which is a foundational value of our Constitution. In Affordable Medicines this Court explained the doctrine in the following terms: ‘[L]aws must be written in a clear and accessible manner. What is required is reasonable certainty and not perfect lucidity. The doctrine of vagueness does not require absolute certainty of laws. The law must indicate with reasonable certainty to those who are bound by it what is required of them so that they may regulate their conduct accordingly’.”

[88] There is another, related concern with the clarity of administrative action: vagueness can render a procurement process, or an administrative action, procedurally unfair under section 6(2)(c) of PAJA. After all, an element of procedural fairness - which applies to the decision-making process - is that persons are entitled to know the case they must meet.”

[10] The Constitutional Court emphasised the role procedural requirements play in ensuring even treatment of all bidders. It explained that the purpose of a fair process is to ensure the best outcome. The two cannot be severed. If the process leading to the bid’s success was compromised, it cannot be known with certainty what course the process might have taken had procedural requirements been properly observed. The Constitutional Court held that “once a ground of review under PAJA has been established there is no room for shying away from it. Section 172(1)(a) of the Constitution requires the decision to be declared unlawful. The consequences of the declaration of unlawfulness must then be dealt with in a just and equitable order in terms of section 172(1)(b). Section 8 of PAJA gives detailed legislative content to the Constitution’s ‘just and equitable’ remedy.”

[11] As explained in Allpay (supra) at 27, “deviations from fair process may themselves all too often be symptoms of corruption or malfeasance in the process. In other words, an unfair process may betoken a deliberately skewed process. Hence insistence on compliance with process formalities has a three-fold purpose: (a) it ensures fairness to participants in the bid process; (b) it enhances the likelihood of efficiency and optimality in the outcome; and (c) it serves as a guardian against a process skewed by corrupt influences.”

[12] As a result, I am of the view that the fact that the tender has been awarded before this application is brought to finality, is of no cause and effect. This court is still empowered to establish factually, whether an irregularity has occurred in that the RFP is vague and/or contravenes the stated legislative framework.

Re: Vagueness

[13] The evaluation process of tenders is described in the RFP as taking place in five distinctive phases:

· Phase 1: “Gatekeeping criteria – Only bidders that have complied with the gatekeeping criteria will be eligible for further evaluation;

· Phase 2: Bid conditions

· Phase 3: Functionality

· Phase 4: Commercial – Price on (80/100) and BBBEE on (20/100) or Price on (90/100) and BBEE on (10/100)

· Phase 5: SAPO (first respondent) reserves the right to perform Due Diligence”

[14] Sub-contracting is not included under any of the components that constitute the evaluation criteria. Sub-contracting is added as a sixth component after the due diligence component is described:

“6. Sub-Contracting

Bidders are required to sub-contract a minimum of 40% with and EME or QSE suppliers that are at least 51% black owned.

Bidders must submit the following at the bidding stage:

ü a commitment letter confirming that they will meet this requirement

ü a scope of work to be subcontracted and

ü The rand value (minimum 40%) that will be subcontracted.

Note: Only service providers that are registered on National Treasury Central Supplier Database (CSD) must be subcontracted to. Suppliers must make use of EME or QSE that are 51% black owned and they must be registered on CSD.”

[15] Paragraph 6 above, is then repeated as paragraph 13 in the RFP.

[16] Annexure “G” to the RFP is a “Proposal questionnaire”. Paragraph 10 of this questionnaire also deals with the sub-contracting requirement. Bidders are required to tick either Yes or No, to indicate whether they complied with this requirement. In the event that they ticked yes, information is to be provided regarding the name and contact details of the sub-contractor, its percentage BEE Shareholding, the percentage of the scope of work to be sub-contracted, the contract value, and quality assurance system, if applicable.

[17] The sub-contracting requirement is again dealt with in Part 3 of the Schedule of Bids Document that contains the tender specification. This paragraph reads as follows:

“9. Sub-Contracting

Where feasible, bidders are required to sub-contract a minimum of 40% with an EME or QSE suppliers that are at least 51% black owned.

Note: Only service providers that are registered on National Treasury Central Supplier Database (CSD) must be subcontracted to. A list of such suppliers is obtainable at the CSD.”

[18] Part 4 of the RFP sets out the ‘returnable documents’ that bidders must complete and submit. Subcontracting features as item 17 on the checklist for returnable documents. Here it is stated “Bidders are required to sub-contract a minimum of 40% with an EME or QSE suppliers that are at least 51% black owned. Bidders must submit a commitment letter (at bidding stage) confirming that they will meet this requirement and submit a plan at contract stage indicating how this will be implemented within one month of the signing of the contract by both parties. Companies that are 100% black owned are exempted from this requirement.”

[19] The applicant engaged with the first respondent during the clarification process and submitted a spreadsheet with a list of questions to the first respondent on 23 July 2020. In this document the applicant stated its view that it is not feasible to sub-contract and requested the first respondent to confirm that bidders are exempted from this requirement. The first respondent answered that the “bidder must subcontract 40% of the services. Letter must state the value and services for subcontracting Agreement with values and scopes.”

[20] In a letter dated 4 August 2020 sent to the designated official representing the first respondent, the applicant stated:

“However, with reference to the requirement contained in paragraph 9 of the RFP we request further clarification. In that regard, paragraph 9 provides ‘where feasible, bidders are required to sub-contract a minimum of 40% with a EME or QSE suppliers that are at least 51% black owned’, and our understanding is that this requirement is rooted in regulation 9 of the Preferential Procurement regulations of 2017.

Both paragraph 9 of the RFP [and] Regulation 9 specifically record that this requirement can only be applicable ‘if feasible’ to so sub-contract. As such and having considered both the paragraph concerned and regulation 9, we note that the requirement of

subcontracting on the peremptory terms provided in this particular RFP and for the specific services required, is not feasible.

In that regard we also note that Regulation 9(3) requires that the Organ of State (in this case SAPO) ‘must make available the list of all suppliers registered on a data base approved by the National Treasury to provide the required goods or services in respect of the applicable designated groups mentioned in sub-regulation (2) from which the tenderer must select a supplier.

As such we urgently require from SAPO the list of EME and QSE suppliers that provide the goods and services specified in RFP19/20/75 (being service providers that can provide a cash supply, processing and distributing solutions for the South African Post Office

nationally).”

[21] The first respondent answered on the same day and informed the applicant that it can identify “their own EME’s or QSE’s that they can subcontract as long as suppliers are registered on CSD”.

[22] The applicant also attached a copy of the second respondent’s questions to the first respondent and the latter’s answers thereto. From this document it is evident that bidders were required to deliver the subcontracting agreements with the Rand value

with the RFP.

[23] On the 7TH August 2020, the applicant’s attorney directed a letter to the first respondent dealing with the sub-contracting requirement. In this letter it is stated that: in several places the RFP appears to require of bidders to sub-contract in the terms already stated above, while other provisions of the RFP contradict the peremptory tone of these requirements in that it is stated that ‘where feasible’ bidders are required to sub-contract; the lack of clarity that ensues renders the entire tender process unfair and unlawful; in addition, the nature of the services to be rendered, including specialised armoured delivery vehicles, the geography and logistics involved in the service and the complex infrastructure renders it not feasible to sub-contract. In addition, the first respondent was taken to task for not providing a list of EME’s or QSE’s that can provide the required services. The applicant sought clarity on whether the first respondent would condone a bidder’s failure to comply with the sub-contracting requirement.

[24] The first respondent answered the applicant on 8 August 2020. It explained that the Board of Directors resolved that a minimum of 40% of the value of goods or services that are procured by the first respondent must be subcontracted to EMEs or QSEs. It is therefore required of bidders to comply with the requirement. The first respondent regards the bidders as experts understanding the service better than the first respondent and thus in a better position to assess the scope of the required services that can be subcontracted and the rand value or percentage thereof. Where it is not possible to subcontract 40% as stipulated in the RFP document, bidders can advise what percentage or rand value it is possible to subcontract. Non-compliance with the sub-contract requirement needs to be properly motivated.

[25] The applicant, in reply, reiterated its view that it is not clear from the RFP whether sub-contracting is a requirement of the tender, whether the RFP requires bidders to sub-contract any part of the services that are subject to the tender, whether bidders will be disqualified if they do not intend to, or propose to sub-contract any part of the services, whether bidders will be awarded fewer points , or otherwise penalised if they do not meet the sub-contracting requirement, whether bidders will be awarded more

points if they do meet the sub-contracting requirements.

[26] On 11 August 2020 the first respondent replied and stated that the RFP is explicit on the disqualifying criteria which are indicated, and that sub-contracting is not listed in the gate keeping criteria. As a result, no bidder will be disqualified for non-compliance. The applicant’s attention was drawn to a tender which it submitted for providing similar services in the Western Cape under similar tender conditions where the applicant was awarded the tender although it only subcontracted 2.3% of the scope of the work. Although subcontracting is a requirement, the first respondent explained, it is not part of the evaluation criteria and therefor will not be evaluated. “No bidder will have preference above the other if they subcontract. The evaluation criteria to be used in this tender is published with the RFP document.”

[27] In its answering affidavit the first respondent explains that the procurement of external services is executed in accordance with the South African Post Office and Subsidiaries Procurement Policy (“SSPP”) and its Supply Chain Management Policy (“SCMP”). The first respondent’s main argument is that in view of the legislative framework within which it functions, it has no choice but to include a sub-contracting provision in its RFPs. The first respondent, in its answering affidavit, reiterates the position as set out by its employees in communication to the applicant:

“It [the SCMP] is aimed at developing and incorporating the sub-contracting condition as a gatekeeping requirement to all tenders

at an appropriate point in time [in] future. But, at this point in time, it is not imposed as a gatekeeping or functionality requirement

seeking to disqualify potential bidders. It is discretionary where it may not be feasible. There is also no preferential point allocation relating to subcontracting if this were the case, the PPPFA regulations would have prescribed and regulated same. This can clearly be gleaned from the content of the RFP read with the PPPFA regulations and the SCMP.”

[28] A tender requirement is either compulsory or not. To coach it in peremptory terms in one part of the RFP but allow the determination of its applicability and/or the extent of its applicability to the bidder’s discretion in another part of the RFP, does not promote legal certainty. To leave the decision as to whether it is feasible or not to meet a requirement stated in an RFP to the bidders’ discretion is not tenable. In order to ensure that comparable tenders are submitted, the applicable criteria should

be clear and unequivocal. If it was the first respondent’s position that the bidder must subcontract but that the discretion as to which component(s) or elements of the services are feasible to subcontract is left to the bidder, it should have stated so clearly.

[29] The first respondent explained that the legal procurement framework within which it operates obliges it to include subcontracting requirement in its RFPs. It is then difficult to understand how non-compliance with a requirement primarily couched in peremptory terms in an RFP cannot lead to a bidder’s tender being disqualified. It is likewise inconceivable that compliance, partial compliance, or non-compliance with such a requirement will have no effect in the final allocation of a tender. In casu the vagueness surrounding the subcontracting requirement has a direct effect on the transparency of the process and renders it difficult to ensure that comparable tenders are presented to the body adjudging the tenders. It thus directly affects the fairness of the process.

[30] One would have expected that the subcontracting requirement would be accounted for within the preference-point system. Froneman J explained in Allpay (supra) at paragraph 48 that: “The Procurement Act provides that an organ of state must determine its preferential procurement policy within a preference-point system which may include ‘contracting with persons, or categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender or disability’.”

[31] The first respondent’s approach to dealing with the subcontracting requirement does not only prejudice potential and actual bidders, but it does not promote economic transformation in order to enable meaningful participation of black people in the economy, the core reason for having to include this requirement in the RFP. The first respondent clearly regards the subcontracting requirement as a vinaigrette that a diner may or may not add to a salad, but which is, to its defence, on the table.

[32] The first respondent cannot simultaneously sit on two chairs. It cannot appease the legislature by including the sub-contracting requirement as a farce of promoting BBBEE by informing potential bidders that they will not be penalised for not meeting the requirement. Sub-contracting a minimum of 40% of the goods or services rendered to EMEs or QSEs should either be a gatekeeping criteria, or quantifiable in Phase 3 of the tender evaluation where the 90/10 price/B-BBEE evaluation is done, or not required in the RFP at all.

[33] The sub-contracting requirement as set out in the RFP documents is vague. No clarity is provided as to how the first respondent will deal with this requirement in evaluating the tenders or what the effect of compliance, partial compliance or non-compliance is. The first respondent does not even attempt to explain how subcontracting will be compared between bids. This vagueness taints the validity of the tender process and the RFP needs to be set aside for this reason alone.

[34] The first respondent’s argument that the applicant previously participated in tender processes under similar conditions without complaint is not a legal argument that carries any weight.

Re: Non-compliance with the PPPFA and the Preferential Procurement Regulations (“PPR”)

[35] The applicant submits that regulation 9 of the PPR requires (i) that subcontracting must be feasible, (ii) that the relevant organ of state must decide whether subcontracting is feasible and is not permitted to leave it to each tenderer to decide whether it is feasible; and (iii) where it decided that subcontracting is feasible and required, it must compile and make available a list of suitable subcontractors. This list must be tender-specific, and the organ of state must take rational and meaningful steps to satisfy itself that the subcontractors on the list are capable of performing the services envisaged by the particular tender in question. The organ of state can therefore not provide the bidder with a “copy-and-paste” printout from a generic database.

[36] In casu,- the applicant submits, the first respondent did not indicate that any tender-specific feasibility assessment was done, prior to its board of directors decreeing that subcontracting should apply to all tenders. The first respondent then outsourced the feasibility

determination to each tenderer and published the RFP without attaching any list of “suppliers registered on a database approved by the National treasury to provide the required goods of services in respect of the applicable designated groups mentioned in sub-regulation (2) from which the tenderer must select a supplier” – as is required in terms of regulation 9(3).”

[37] The first respondent’s approach is that since the bidders are the experts in the field, they would know where it is feasible to subcontract. The first respondent can thus not be prescriptive as to the specific ‘component’ of work that the bidder should subcontract. As I understand their argument, and as it was interpreted and applied by the second respondent who filed a notice to abide by the court’s decision but filed an affidavit in an attempt to clarify certain issues, the first respondent left it to the bidders to decide which component of goods or services associated with the core business associated with the tender they wanted to subcontract. It would e.g. be possible to subcontract the mechanical maintenance of the vehicles being used, administrative

services, IT services, office management etc. to the value of the contract stipulated in the RFP. The sub-contracting requirement does not necessarily require involving a subcontractor functioning alongside the bidder in executing the core business associated with the tender, it requires subcontracting of a minimum value of the contract. Empowerment can take place on many levels. This is the reason for providing the general databases of all suppliers registered on the required database.

[38] I do not agree with the applicant’s interpretation that Regulation 9(3) requires tenderers to choose subcontractors form a specially curated list. The core requirement is that suppliers must be registered on the database approved by the National Treasury. The scope of required goods or services that are subcontracted can be left to the discretion and ingenuity of potential bidders. A transparent and fair procurement system does not exclude elements that would ensure a competitive procurement system. Fair competition in the procurement system ensures that the best quality of services is procured at the best possible prices in the public interest.

[39] I do agree with the applicants, however, that it was not sufficient or in line with the spirit of Regulation 9 to provide potential bidders with the list of suppliers registered on the database approved by National Treasury a mere seven working days before the tender closes.

Joinder

[40] The first respondent’s submission that the applicant should have joined National Treasury as a party to the proceedings has no merit. The applicant does not take issue with subcontracting as a requirement per se, but with the manner in which the subcontracting requirement has been dealt with in this specific RFP.

Second respondent’s position

[41] The second respondent filed a notice to abide by the court’s decision accompanied by an explanatory affidavit. The second respondent requested the court in argument, that in the event that the court is inclined to set aside the RFP, it should prevent the possibility of an indeterminate delay in the tender process that would automatically lead to an indeterminate extension of the applicant’s current contract with the first respondent.

[42] I am of the view, however, that in light of the order granted in this matter, the decision as to when a new RFP is to be published is one that lies within the exercise of executive authority by the first respondent as an organ of state. The Supreme Court of Appeal held in City of Tshwane Metropolitan Municipality and Others v Nambiti Technologies (Pty) Ltd 2016 (2) SA 494 (SCA) at paragraph 43, that “A decision as to the procurement of goods and services by and organ of State is one that lies within the heartland of the exercise of executive authority by that organ of State.” The doctrine of the separation of powers applies and court should not prescribe the period within which the first respondent is to re-publish an RFP.

ORDER

In view of the above the following order is made:

1. The application is heard as an urgent application in terms of Rule 6(12) of the Uniform Rules of Court and the forms, service and time periods prescribed by the Uniform Rules of Court are dispensed with.

2. The first respondent’s Request for Proposals (“RFP”) dated 13 July 2020 (Reference number RFP 19/20/75) and the first respondent’s decision to publish the RFP are reviewed, declared unlawful and set aside.

3. The first respondent is to pay the applicant’s costs, including the costs consequent on the employment of two counsel.

E van der Schyff

Judge of the High Court, Gauteng, Pretoria

Counsel for the applicants:

Adv G M Goedhart SC

With

Adv J Mitchell

Instructed by:

Edward Nathan Sonnenbergs Inc

Counsel for the first respondent:

Adv E A Lourens

Instructed by:

Madhlopa & Thenga Inc

Counsel for the first respondent:

Adv N Ferreira

With

Adv E Broster

Instructed by:

Blake Bester De Wet & Jordaan Attorneys

Date of the hearing:

9 September 2020

Delivered:

15 September 2020