Kawari Wholesalers (Pty) Ltd v MEC: Department of Health (North-West Province) and Others (1807/07) [2008] ZANWHC 12 (6 March 2008)

IN THE HIGH COURT OF SOUTH AFRICA

(BOPHUTHATSWANA PROVINCIAL DIVISION)

CASE NO. 1807/07

In the matter between:-

KAWARI WHOLESALERS (PTY) LTD Applicant

and

THE MEC: DEPARTMENT OF HEALTH First Respondent

(NORTH WEST PROVINCE)

THE SUPERINTENDENT GENERAL: Second Respondent

DEPARTMENT OF HEALTH: NORTH WEST PROVINCE

VUNA HEALTHCARE LOGISTICS (PTY) LTD Third Respondent

AMALGAMATED LOGISTICS Fourth Respondent

JUDGMENT

LEVER AJ:

[1] The Applicant applied on a semi-urgent basis to review and set aside the decision of the Second Respondent to award tender number NW DOH 03/07 (“the tender”) to the Fourth Respondent and not the Applicant. The tender was for the management of the Mafikeng central pharmaceutical warehouse and the distribution of pharmaceuticals to the public hospitals in the North West Province. At the time the Applicant filed its notice of motion and founding papers herein it appears that the Applicant was not sure whether the tender was awarded to the Third or the Fourth Respondent. After the record in the tender proceedings was lodged herein it was clear that the Fourth Respondent was awarded the tender. In any event, it is only the First and Second Respondent who opposed this application to review the award of the tender to the Fourth Respondent.

[2] The First and Second Respondents argued that: “The lack of urgency brought about by the long delay before the application also justifies the dismissal of the application with costs.”1 Mr Stoop on behalf of the Applicant pointed out that the Applicant stated that it was telephonically informed by an official of the Provincial Department of Health in June 2007 that its tender had not been successful. This official undertook to provide the Applicant with an official written notification that Applicant’s tender had not been successful in its tender. These facts have been conceded by Second Respondent. Such official written notification had to the date of the hearing not been forthcoming. Then during the week of the 17th August 2007 the Applicant received a memorandum from an anonymous whistleblower.

The contents of this memorandum caused the deponent to the Applicant’s affidavit to conclude that there had been serious irregularities in awarding the tender. A letter was then transmitted to the Second Respondent on the 27th August 2007 requesting the Second Respondent to give an undertaking not to implement the tender pending a review of the tender process.

In response to this letter the Second Respondent transmitted a letter to the Applicant’s attorney on the 31st August 2007 in which the Second Respondent declined to give the undertaking requested by the Applicant. Mr Stoop submitted that the clock must start to tick from the 31st August 2007 and that the notice of motion and supporting papers had been issued filed and served on the 20th September 2007. Some 17 days after receipt of the letter from Second Respondent in which Second Respondent failed to give the undertaking that the tender would not be implemented pending the outcome of the contemplated review of the tender process.

[3] Mr Stoop on behalf of the Applicant argued that having regard to the fact that the Applicant is based in Pretoria, its attorneys are based in Pretoria and that the seat of this Court is in Mafikeng, that 17 days is not an inordinate delay that would bar the Applicant from bringing the present review application on a semi-urgent basis.

[4] In my view, having regard to the nature of the application, the logistics involved in dealing with an attorney in Pretoria, securing the services of Counsel, settling the notice of motion and the founding papers and dealing with a correspondent in Mafikeng, 17 days delay from the date that Second Respondent makes it clear that she will not give the requested undertaking to the date the review is instituted is not such an inordinate delay that would justify dismissing the application on the basis of self-created urgency. Accordingly, I will turn to a consideration of the merits of this review application.

[5] As an aside the Second Respondent made much of the alleged “whistleblower” and made a counter-allegation that there was no whistleblower, but an informant in her department. Nothing turns on this and these counter-allegations are nothing more than a red-hearing to which I will give no further consideration.

[6] Facts which are common cause

The Applicant complied in all respects with the conditions that were laid down for the tender and timeously deposited its original bid document.

The Preferential Procurement Regulations 2001 as contained in Govt. Notice No: 725 were applicable.

By virtue of the value of the bids the 90/10 preference point system was applicable to this tender process.

The 90/10 system provides that 90 points allocated to the price and 10 points are allocated to specific contract participation goals.

Regulation 4(4) provides “Only the tender with the highest number of points scored may be selected”.

The applicable tender documentation incorporated, and were drawn up in accordance with the said Preferential Procurement Regulations.

The Applicant, the Fourth Respondent and the Third Respondent survived to the final selection phase where the Departmental Bid Adjudication Committee referred the said three bidders to the Second Respondent for her decision.

The final points scored by the said remaining bidders was as follows:

Third Respondent 28 points out of a possible 100 points;

Fourth Respondent 52 points out of a possible 100 points;

Applicant 92 points out of a possible 100 points.

The Second Respondent awarded the tender to the Fourth Respondent.

The approach followed by the Second Respondent

[7] In essence the Second Respondent raises the following arguments or concerns for not awarding the tender to the Applicant:

That the evaluation of the tender was done not only on price, but also on capability and risk assessment;

The Departmental Bid Adjudication Committee raised a concern regarding the practicality of the award of the tender to the Applicant based on general pharmaceutical pricing trend;

In considering the award of the tender the Second Respondent relying on her personal experience gained over the last eight years in her capacity as an accounting officer for three different governmental departments in the North West Province in procurement and provisioning found more often than not where a tender was awarded to the lowest bidder, after implementation of the contract they would request a price adjustment claiming that it was not possible for it to perform on the basis of its tendered price; and

As a result of her personal experience set out in 7.3 above the Second Respondent decided to take into account the capability and experience of the Applicant, Third and Fourth Respondents and balance the considerations of capability, experience and price. Second Respondent contends that the Applicant only achieved the highest overall points because it had tendered the lowest price. The Second Respondent then concluded that this constituted sufficient and justifiable grounds as contemplated in Regulation 9 of the Preferential Procurement Regulations of 2001 not to award the tender to the Applicant even though it had scored the highest number of total points.

[8] The Applicant has responded to the issues and concerns raised by the Second Respondent. In essence Applicant raises four grounds for review, which are:

8.1 The Second Respondent failed to adhere to the Audi Alteram Partem rule;

8.2 The irrationality of the Second Respondent’s reasoning and decision;

8.3 The Second Respondent’s failure to consider relevant documentation, namely annexure “WJ8”, and

8.4 That the Second Respondent misconstrued the contents and the terms of the tender documentation.

[9] Having regard to the view I take of the matter, it is not necessary for me to deal with every argument or concern raised by the Second Respondent. For the same reason, it is not necessary for me to consider every ground for review raised by the Applicant.

[10] It is clear that the Second Respondent placed a great deal of reliance on her past experiences in awarding this tender. It is equally clear that the Applicant was not afforded an opportunity to deal with the fears the Second Respondent has and the conclusions that she had reached based on those fears. Consequently, I cannot escape the conclusion that the Applicant’s ability to deliver on the quoted price was not assessed in any way.

[11] The evaluation and awarding of tenders in the Government procurement process constitutes ‘administrative action’ as defined in the Promotion of Administration Justice Act 3 of 2000 (“PAJA”). It follows that the Applicant is entitled to administrative action that is lawful, reasonable and procedurally fair.

An unsuccessful tenderer has locus standi to challenge decisions to award tenders by means of an application for judicial review.2

[12] In a situation such as the present one where the Second Respondent has based her decision not to award the tender to the Applicant on factors which the Applicant had not had an opportunity to deal with, it cannot be said that the Applicant has enjoyed administrative action that is ‘procedurally fair’. Cameron JA in the Logbro Properties case, set out the position as follows:

“Procedural fairness, in my view, demanded that the committee in reconsidering the tenders would afford the compliant tenderers an opportunity to made representations, at least in writing, on any factor that might lead the committee not to award the tender at all. That opportunity not having been afforded, the committees 1997 decision must be set aside, and the matter be remitted to the appropriate authority to afford the appellant and the other complaint tenderers the opportunity to make representations, at least in writing, on any supervening consideration relevant to the committee’s exercise of its powers in relation to the award or non-award of the tender.”3

Similarly, in the National and Overseas Modular Construction case, Malherbe J, stated:

“In any event it is common cause that applicant was never informed by first respondent that it feared that applicant ‘might at the end be overloaded with work.’

Consequently applicant was never given the opportunity to try and convince first respondent that it could cope with the work.”4

See also the comments of Griesel J in Du Bois v Stompdrift Kamanassie Besproiingsraad, who concluded:

“Ek kom derhalwe tot die govolgtrekking dat die besluit van die raad om nie die applicant se tender te aanvaar nie prosedureel onbillik was, aangesien die applicant (a) nie deur die raad in kennis gestel is van inligting wat hulle bekom het en van voorneme was om teen hom in aanmerking te neem nie; en (b) nie minstens ʼn geleentheid gebied is om op sodanige inligting kommentaar te lewer nie.”5

[13] On a proper reading of the tender documents and the Preferential Procurement Regulations in my view the Second Respondent has misconstrued the evaluation process. This is clear from her statement that she balanced the considerations of price, capability and risk. The considerations of capability and risk clearly belonged to an earlier stage in the elimination process. The consideration of risk could only have formed part of the assessment of capability and a tenderer who fell short on the capability requirement ought to have been eliminated as unresponsive.

[14] In my view the Second Respondent’s decision was neither justifiable in relation to the reasons given for it nor was it procedurally fair.

[15] The Applicant seeks costs against the Second Respondent only, but sought an order that included the costs of two Counsel up to the 7th November 2007, being the day before the hearing when the Senior Counsel involved in the matter had to withdraw due to ill health.

Counsel for the First and Second Respondents opposed the awarding of costs for two Counsel on the basis that the matter was not so complex as to justify the employment of two Counsel. Complexity of the matter is certainly a factor to consider when determining whether the costs of two Counsel ought to be awarded. However, it is not the only consideration. The issue of the importance of the matter to the parties is also relevant. This application involves a tender which I worth just under R30 million to the Applicant. On that basis alone I think that the appointment of two Counsel is a prudent and necessary step.

[16] In its heads of argument, Applicant sought to amend the relief set out in its notice of motion. Except for the relief claimed in paragraph 3.3 of the amendment, the First and Second Respondents did not object to the amendment of Applicant’s notice of motion. The Applicant abandoned the relief sought in paragraph 3.3 of the proposed amendment.

[17] Consequently, the following order is made:

The decision by Second Respondent not to award tender number NW DOH 03/07 to Applicant and to award the said tender to the Fourth Respondent is reviewed and set aside.

The awarding of tender number NW DOH 03/07 is referred back to the Second Respondent for consideration afresh in the light of:

the recommendations by the Departmental Bid Committee, a copy of which is annexed as Annexure “X” to the notice of motion;

such representations as the Applicant may be advised to make regarding the Second Respondent’s concern whether the Applicant would be able to perform duly in terms of its service level agreement with the Department of Health, in the event of the tender being awarded to the Applicant;

First and/or Second Respondents are/is ordered to take a decision on the awarding of the aforesaid tender within 10 days thereafter.

Costs of suit are awarded to the Applicant against the Second Respondent only, on the following basis:

Costs of two Counsel up to and including the 7th November 2007; and

Costs of Junior Counsel only for the 8th November 2007.

______________

L. G. LEVER

ACTING JUDGE OF THE HIGH COURT

APPEARANCES

DATE OF HEARING : 08 NOVEMBER 2007

DATE OF JUDGMENT : 06 MARCH 2008

COUNSEL FOR APPLICANT : ADV STOOP

COUNSEL FOR RESPONDENT : ADV ZWIEGELAAR

ATTORNEYS FOR APPLICANT : MINCHIN & KELLY INC.

ATTORNEYS FOR RESPONDENTS : THE STATE ATTORNEY

1

1st and 2nd Respondents’ Heads of Argument para.38

2 Transnet Ltd v Goodman Brothers (Pty) Ltd [2000] ZASCA 151; 2001 (1) SA 853 (SCA) @ 871 C-G; Logbro Properties CC v Bedderson N.O. & Ors 2003 (2) SA 460 (SCA)@ 465 para5; National and Overseas Modular Construction (Pty) Ltd v Tender Board, Free State Provincial Govt. and Another 1999 (1) SA 701 @ 703 H- 704 E.

3

Logbro Properties, supra, @ p.472 B-C

4

National and Overseas Modular Construction, supra @ 705 E-F

5 Du Bois v Stompdrift-Kamanasie Besproeiingsraad 2002 (5) SA 186 (C) @ 198 H – 199 B