Intsimbi Industrial Manufacturing CC and Others v Municipality Manager of the Nelson Mandela Metropolitan Municipality and Others (1961/2012) [2015] ZAECPEHC 64 (13 November 2015)

IN THE HIGH COURT OF SOUTH AFRICA

(EASTERN CAPE LOCAL DIVISION – PORT ELIZABETH)

CASE NO.: 1961/2012

DATE: 13 NOVEMBER 2015

In the matter between:

INTSIMBI INDUSTRIAL MANUFACTURING CC.......................................................1st Applicant

FLAGT ELECTIC CC.......................................................................................................2nd Applicant

THE INTSIMBI FLAGT JOINT VENTURE..................................................................3rd Applicant

And

THE MUNICIPAL MANAGER OF THE NELSON

MANDELA METROPOLITAN MUNICIPALITY.......................................................1st Respondent

THE BID ADJUDICATION COMMITTEEOF THE

NELSON MANDELA BAY METROPOLITAN

MUNICIPALITY.............................................................................................................2nd Respondent

THE NELSON MANDELA BAY METROPOLITAN

MUNICIPALITY.............................................................................................................3rd Respondent

DELACOM CC................................................................................................................4th Respondent

SDM MANUFACTURING CC.......................................................................................5th Respondent

JUDGMENT

BESHE, J:

[1] Applicants approached this court for an order:

(a) Interdicting first to third respondents from proceeding to consider or award tenders for Contract No. SCM 109/2012-2013, (second tender) that closed on 31 May 2012 prior to considering the third applicant’s tender in respect of Contract No. SCM 109/2011-2012 that closed on 10 November 2011. (second tender).

(b) Directing that first to third respondents consider the third applicant’s tender in respect of Contract No. SCM 109/2011-2012 that closed on 10 November 2011.

(c) That first to third respondents pay the cost of the application.

[2] First Applicant is INTSIMBI INDUSTRIAL MANUFACTURING CC, a close corporation duly registered in terms of the laws of the Republic of South Africa with registered address at 20SA.

[3] Second Applicant is FLAGT ELECTRIC CC, a close corporation duly registered in terms of the laws of the Republic of South Africa with registered address at 9 Nico Swart Crescent, Humansdorp, within the area of jurisdiction of the Honourable Court.

[4] Third Applicant is a Joint Venture between the First and Second Applicants which tendered for a contract with the Nelson Mandela Bay Municipality in respect of second tender, the details of which will be set out hereinunder.

[5] The First Respondent is the MUNICIPAL MANAGER OF THE NELSON MANDELA BAY METROPOLITAN MUNICIPALITY in his capacity as such as per address Plein House, Market Square, Port Elizabeth.

[6] The Second Respondent is the BID ADJUDICATION COMMITTEE OF THE NELSON MANDELA BAY METROPOLITAN MUNICIPALITY, an adjudication committee which considers tenders to be awarded by the Third Applicant, the NELSON MANDELA BAY METROPOLITAN MUNICIPALITY as per address Plein House, Market Square, Port Elizabeth.

[7] The Third Respondent is the NELSON MANDELA BAY METROPOLITAN MUNICIPALITY, a local authority duly instituted as such with legal

personality with address at Plein House, Market Square, Port Elizabeth.

[8] The Fourth Respondent is DELACOM CC, a close corporation duly registered in terms of the laws of the Republic of South Africa with registered address at 86 Uitenhage Road, Sydenham, Port Elizabeth.

[9] The Fifth Respondent is SDM MANUFACTURING CC, a close corporation duly registered in terms of the laws of the Republic of South Africa with registered address at 58 Fifth Avenue, Newton Park, Port Elizabeth.

[10] It is common cause between the parties that first and second applicants have throughout the years, been contracted to the third

respondent for general maintenance, routine maintenance and planned maintenance of various waste water treatment works and pump stations within the municipal area. This after having successfully tendered for such contracts.

[11] It is common cause that third respondent invited tenders in respect of SCM 109/2011-2012. The closing date for submission of tenders was the 10 November 2011. The work that was to be undertaken was Mechanical Maintenance Services. The first tender.

[12] For purposes of tendering for the abovementioned contract first and second applicants formed a joint venture and accordingly submitted a tender as such for the contract. Fourth respondent also submitted a tender for the contract in question whilst fifth respondent did not.

[13] The tender document stipulated that “All tenderers must be registered on the Municipality’s supplier’s database through Quadrem (previously Tradeworld). The Municipality reserves the right to consider the tenders of tenderers not registered on the Nelson Mandela Bay Municipality’s supplier’s database. Please phone Quadrem at 0861 225577 to register, if not yet registered.”

[14] It is common cause that at the time of submission of the tender in question, third applicant was not registered with Tradeworld.

According to Ms Carol Lise Reyneke (Reyneke), who is a member of first applicant and who deposed to the founding affidavit, she applied to Tradeworld for registration of the CV (third respondent) prior to 25 October 2011. First and second applicants were however individually registered on the Nelson Mandela Bay Municipality supplier’s database at that stage.

[15] At paragraph 35 of the founding affidavit Reyneke states as follows:

“Both me and Mr Gary Du Toit who represented the Second Applicant, were of the opinion that as the First and Second Applicants were individually registered by Tradeworld as appears from annexures “CLR4” and “CLR5” hereto, it was not necessary to register a Joint Venture. Purely for the sake of completeness, I applied for registration of the Joint Venture. As will appear from what is set out hereinafter, it was actually not necessary to register the Joint Venture at Tradeworld separately.”

[16] None of the tenderers for this contract were awarded the contract.

[17] It is also common cause that third respondent subsequently issued a tender for mechanical maintenance services – Bid numbered SCM 109/2012-2013 with its closing date being the 31 May 2012.

[18] Due to the fact that the applicants had not received any feedback regarding the initial tender an enquiry in this regard was addressed to third respondent. The applicants were advised that third applicant’s tender was not considered by the Bid Adjudication

Committee of the third respondent because its tender was made non-responsive on the basis that the Joint Venture was verified as

not being on the Nelson Mandela Bay Municipality (third respondent’s) database. Tenders were submitted by the first and second applicants in respect of the latter tender. It is common cause that tenders in respect of the second tender were opened on the 31 May 2012.

[19] Applicants contend that if the tenders that were opened in May 2012 are considered, they will be at a disadvantage because fourth and fifth respondents, knowing what amounts were tendered in respect of first tender, submitted tenders that were lower than those of first and second applicants. Applicants further contend that the disqualification on third applicant’s tender violated third applicant’s right to procedural fairness. Furthermore that by virtue of the fact that third applicant’s partners were individually registered with Tradeworld on third respondent’s database, and its tender was an acceptable tender and complied with all the requirements of the third respondent and the law.

[20] In response to applicants’ averments, the acting municipal manager of the third respondent Mr Temba Naboliti Selby Hani (Hani) deposed to an answering affidavit wherein he stated inter alia that:

- the first tender is for a 36 month contract.

- the scope of the work in respect of this contract was comprised of two parts, general and specialized.

- the value of contract exceed R500 000.00.

- tenderers had to be registered on the Municipality’s database.

- the municipality was not bound to accept the lowest tender or any tender.

- the second tender was only for a portion of the work advertised in respect of the first tender.

- the municipality may cancel a tender if no acceptable tenders are received.

- the first and second tenders are not identical.

- in respect of the second tender there is no provision for specialized mechanical repairs and maintenance to be executed.

[21] Hani contends that the relief sought by the applicants in prayer 2(b) is incompetent. Namely that the respondent be ordered to consider third applicant’s tender in respect of the first tender. The reason he cites for the contention is the following:

The value of the first tender was more than R10 000.000.00. The bid documentation did not comply with the requirements of section 21 of the Supply Chain Management Policy (SCMP) and has therefore defective. Section 21 of the SCMP provides that:

“The criteria to which bid documentation for a competitive bidding process must comply, must

(a)

(b)

(c)

(d) if the value of the transaction is expected to exceed R10 million (VAT included) require bidders to furnish –

(i) if the bidder is required by law to prepare annual financial statements for auditing, their audited annual financial statements –

(aa) for the past three years; or

(bb) since their establishment if established during the past three years;

(ii) a certificate signed by the bidder certifying that the bidder has no undisputed commitments for municipal services towards a municipality or other service provider in respect of which payment is overdue for more than 30 days;

(iii) particulars of any contracts awarded to the bidder by an organ of state during the past five years, including particulars of any material non-compliance or dispute concerning the execution of such contract;

(iv) …”

Hani also makes the point that third respondent exercised the discretion bestowed on it by the SCMP to choose not to award the first tender and to cancel it, which it duly did.

[22] Third respondent contends that applicants have not made out a case for the review of the decision of the first respondent in respect of the first tender. They did not identify the grounds of review relied upon and that the application should be dismissed with costs.

[23] A point is also made by Hani that there were no acceptable tenders received in respect of the first tender as a result of which the tender was cancelled by the Bid Evaluation Committee.

[24] As indicated earlier, applicants contend that, because officials of the third respondent would, after opening each tender, disclose the amount tendered, the fourth respondent became aware of which tender was the lowest tender. This would then have placed it at an advantage when it submits a subsequent tender. In response thereto, respondents contend that the disclosure of the bid price or prices is consistent with fair, equitable, transparent and cost effective bid process. And that in any event the Joint Venture did not tender in respect of the second tender. And that it does not follow that the lowest price will automatically be the successful bid.

[25] In reply applicants deny that there was no compliance with Section 21 (d) (1) in respect of the first tender, and allege that first and second applicants submitted their financial statements together with the tender. Applicants re-iterated that should the respondents proceed to award a tender in respect of the second tender they will suffer irreparable harm as they would have no legal remedy to enforce their rights in respect of that tender (first tender).

[26] Together with their replying affidavit, applicants filed a notice in terms of Rule 28 of the Uniform Rules of this Court that they will apply for the re-numbering of prayers to 2 (a) to 2 (d) instead of 2 (a) – 2 (c). That 2 (a) which reads:

“(a) The exclusion of the tender of third applicant and the consequent decision to cancel the tender that closed on the 10 November 2011 are declared to be invalid, be added.

[27] At the hearing of the application, Mr Buchanan for the respondents indicated that the application in terms of Rule 28 is opposed. No further submissions were made by the parties in this regard.

[28] Rule 28 deals with amendments to pleadings and documents. In terms of Sub-rule (2) thereof the notice in terms of this rule shall state that unless written objection to the proposed amendment is delivered within ten days of delivery of the notice, the amendment will be affected. The notice is headed:

NOTICE IN TERMS OF RULE 28

After the heading the following appears:

KINDLY TAKE NOTICE THAT the above mentioned Applicants will at the hearing of the Application apply for an Order that prayers 2 (a), (b) and (c) be re-numbered to prayers 2 (b), (c) and (d) respectively and that the following prayer 2 (a) be added:

“(a) That the exclusion of the tender of the Third Applicant and the consequent decision to cancel the tender that closed on 10 November

are declared to be invalid.”

[29] The notice does not comply with Rule 28 (2). No submissions were made by the applicants that would establish or show that the other party will not be prejudiced. No prejudice was alleged by the respondents either. This may of course be due to the “notice” to amend having been filed a few days before the matter was due to be heard and which did not comply with Rule 28 (2). I will however, in light of the fact that no prejudice was alleged by the respondent, exercise my discretion by allowing the amendment.

[30] In essence therefore the applicants are seeking the judicial review of the decision to exclude third applicant’s tender and the consequent decision to cancel the tender that closed on the 10 November 2011. That such decision be declared invalid. Applicants

contend that third applicant’s tender was unlawfully disqualified from being adjudicated. None of the four tenders received in respect of the tender in question was included. According to the third respondent, it was only fourth respondent bid that was

responsive. However it did not meet the evaluation criteria. It was as a result of this that a decision was taken to cancel the tender. We also know that now that the tender was subsequently cancelled due to inter alia the bid documentation not complying with Section 21 of SCMP and therefore defective, rendering the process invalid. A further decision was taken to separate the scope of work intended for the initial (cancelled) tender into two separate tenders. One for general work(s) and another for specialized work(s). Tenderers were then invited in respect of the general work(s). Applicants acknowledge that this tender was for “portion” of work that was covered by the tender in respect of which they complaining.

[31] Applicants’ contention is that the tender process followed by the respondents was not fair, equitable, transparent and cost effective. Part of the relief sought by the applicants is that first to third respondents should be ordered to consider third applicant’s tender in terms of the initial tender.

[32] It is common cause that at the time when tenders closed on the 11 November 2011, third applicant who is comprised by first and second applicant was not registered on third respondent’s database. This was still the case on the 23 November 2011 officials of the Directorate Infrastructure and Engineering met and compiled a report to Bid Evaluation Committee wherein it was stated that third respondent was not registered on the Nelson Mandela Bay Municipality (third respondent) data base. This was after an official of the third respondent had made enquiries in this regard from Tradeworld. The Bid Evaluation Committee approved the report aforementioned and marked third applicant’s tender non-responsive.

[33] Administrative action which materially and adversely affects the rights or legitimate expectations of any person must be procedurally

fair.[1] Any person may institute proceedings in a court or a tribunal for the review of an administrative action.[2]

[34] Applicants complain that the process followed by first to third respondents was not fair, equitable, transparent, competitive and cost effective. That is the process that led to them marking third applicant’s tender nonresponsive.

[35] Applicants’ case as I understand it is that:

The process followed by the first to third respondents did not comply with Section 6 (1) of the Promotion of Administrative Justice Act in that: First and second applicants who together formed third applicant (the joint venture) were registered on the database of the third respondent.

Although when the tenders closed on the 10 November 2011 third applicant was not registered on the database of third respondent, but on the 3 February 2012 when the Bid Evaluation Committee met third applicant was by then registered in third respondent’s database.

[36] Applicants argue that it would have required a simple phone call by the official of the first to third respondent to establish from Tradeworld whether third applicant was registered in third respondent’s database.

[37] In my view this loses sight of the undisputed fact that after the bids were opened, an official of the third respondent made an enquiry from Tradeworls as to whether third applicant was registered or not.

[38] The joint venture, upon its formation became a persona on its own independent of the members that formed it.

[39] The tender document in respect of the tender in question stipulates that “All tenderers must be registered on the municipality’s supplier’s database through Quadrem (previously Tradeworld). The municipality reserves

the right not to consider the tenders of tenderers not registered on the Nelson Mandela Bay Municipality’s supplier’s

database. Please phone Quadrem at 0861-225577 to register if not yet registered.” (my underlining).

[40] Clearly therefore registration third respondent’s database was peremptory.

[41] In Millennium Waste Management v Chairperson, Tender Board 2008 (2) SA 481 SCA Jafta JA stated as follows:

“17 Moreover, our law permits condonation of non-compliance with peremptory requirements in cases where condonation is not incompatible with public interest and if such condonation is granted by the body in whose benefit the provision was enacted. (SA Eagle Co. Ltd v Bavuma).”

As was pointed out in the Millennium Waste matter, the Preferential Procurement Act defines an acceptable tender as “any tender which, in all respects, complies with the specifications and conditions set out in the tender document”.

[42] In National Lotteries Board v SA Education and Environment Project 2012 (4) SA 504 SCA at 509 [11] the need for decision makers to be consistent was highlighted. The court also stated that “However it is not entitled to treat every departure from its literal prescription as fatal. Not even statutory formalities are approached in this way. The real question a decision-maker must ask itself is whether the object of the guidelines has been achieved. If it has, then insignificant or technical instances of non-compliance should generally be condoned”.

[43] What is the requirement to be registered on the database third respondent meant to achieve? According to Acting Municipal Manager of third respondent, the database is an integral part of the procurement process and accordingly registration on the database is not a mere formality. At paragraph 39 of the answering affidavit the Municipal Manager states:

“39. The purpose of requiring bidders to be registered on the Municipality’s supplier database is to ensure the verification

of details of any supplier. The registration on the database is fundamental to the proper governance of the Municipality’s

procurement process. Registration on the database verifies for the Municipality matters of fundamental importance such as the banking

account details for payment purposes, tax compliance and whether such entity is prohibited from doing business within the public sector. It removes this administrative burden from the Municipality and ensures independent audit of these requirements. It is for this reason that the failure to register on this database entitles the Municipality to declare a bid non-responsive.”

Clearly the need for registration in the third respondent’s database satisfies an important requirement. That of making sure that work or projects that are to be undertaken for the benefit of the citizens of Metro (third respondent) are undertaken by suitable entities. For example not by service providers who are not tax compliant or have been prohibited from doing business within the public sector. This, in my view in in keeping with Section 217 (1) of the Constitution which provides that:

217. Procurement.‒(1) When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods and services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.

Applicants seem to have been content with the registration of first and second applicants on the database of the third respondent. Clearly harbouring under a misconception that this sufficed and that it was not necessary for the third applicant to be registered on the database. As indicated earlier, the Joint Venture was a persona on its own. It was the bidder not first and second applicants.

[44] In the circumstances, it cannot be said that this requirement for registration is insignificant. In my view, the tender that was submitted was not an acceptable tender. In any event first to third respondents cannot consider third applicant’s tender in respect of a tender that has since been cancelled for a number of reasons as stated by Hani. The applicants have not succeeded in showing that they are entitled to thee relief which they seek.

[45] Accordingly the application is dismissed with costs.

N G BESHE

JUDGE OF THE HIGH COURT

APPEARANCES

For the Applicants : Adv.: B Pretorius

Instructed by : GREYVENSTEINS

St Georges House

104 Park Drive

PORT ELIZABETH

Tel.: 041 – 501 5500

Ref.: Mr T Labuschagne/mb/MAT34112

For the Respondents : Adv.: RG Buchanan SC

Instructed by : RUSHMERE NOACH INC

5 Ascot Office Park

Conyngham Road

Greena cres

Tel.: 041 – 399 6700

Ref.: Mr SK Gough/LK/mt/ MAT25621

Date Delivered : 13 November 2015

[1] Section 3 of the Promotion of Administrative Justice Act 3 of 2000 (PAJA).

[2] Section 6 (1) of Promotion of Administrative Justice Act.