Makaba Khumalo and Associates CC v Acting Director General Department of Home Affairs and Another (18084/2019) [2020] ZAGPPHC 605 (21 October 2020)

IN THE HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

In the matter between:

MAKABA KHUMALO AND ASSOCIATES CC

Applicant

and

THE ACTING DIRECTOR GENERAL

DEPARTMENT OF WATER AFFAIRS

First Respondent

MINISTER, DEPARTMENT OF WATER AND SANITATION Second

Respondent

JUDGMENT

KUBUSHI J

This judgement is handed down electronically by circulating to the parties’ representatives by email and by uploading on Caselines.

INTRODUCTION

[1] There are two applications involved in this matter.

[2] The first application which I shall refer to in this judgment as the main application, is a mandamus and final interdict in which Makaba Khumalo and Associates CC, the applicant herein, seeks an order in terms of which the Acting Director General of Department Water and Sanitation, the first respondent herein and the Minister Department Water and Sanitation (“the Department”), the second respondents herein (collectively referred to as the respondents herein) are ordered to sign a service level agreement with the applicant in respect of Tender number WP11254 within 30 (thirty) days of such order; and, to issue the applicant with an official order for Tender number WP11254 within 30 (thirty) days of the order.

[3] The second application is a counter application in which the respondents seek an order in terms of which the decision of the Bid Evaluation Committee of the Department dated 29 January 2018 recommending the appointment of the applicant as a service provider under Tender number WP11254 is reviewed and set aside; the decision of the Bid Adjudication Committee of 1 February 2018 accepting the recommendation of the Bid Evaluation Committee to appoint the applicant as a service provider in terms of the said Tender be reviewed and set aside; and the letter of appointment issued by the Department under signature of the Director: Water Supply Chain Management is declared invalid and unlawful and reviewed and set aside.

CONDONATION

[4] The respondents have filed their answering affidavit almost four months out of time and have applied for the condonation of such late filing. The applicant is opposing the condonation application and has raised a number of defences why the application should not be granted. The applicant contends that it opposed the application because it was important for the inconsistencies and contradictions contained in the condonation application portion of the affidavit, to

be brought to the attention of the court. It contends further that the granting or refusal of the condonation application is not of much moment in this matter because the respondent's defence as well as their application for review lack merit. I, in that regard,

considered to grant the condonation application.

SALIENT FACTS

[5] On 17 November 2017, the Department, issued an invitation to bid under WP11254 in the Government Tender Bulletin (“the Tender”) with the closing date of 14 December 2017. The Tender was for the provision of professional services for the development of a business case and transition to independent economic regulator model, finalisation of pricing regulations and infrastructure funding model, as well as strengthening of various regulatory tools, for 36 months.

[6] The Tender comprised of a prescribed ‘bid form’ which prospective bidders were required to complete, and also contained the terms and conditions of the Tender with which bidders were required to comply with.

[7] After the bidding session, the Department received four bids which included the applicant’s bid. The applicant’s bid was submitted on 14 December 2017 on the prescribed bid form, together with supporting documents, which included a Curriculum Vitae (“CV”) of the consultants the applicant intended to employ for carrying out the professional services, if appointed; and, a Tax Clearance Certificate issued by the South African Revenue Service (“SARS”). I mention the two documents

specifically because they form the crux of the dispute in these proceedings.

[8] After the evaluation of the Bids, by the Bid Evaluation Committee and the Bid Adjudication Committee, the applicant emerged the successful bidder. On 6 February 2018 the Department issued the applicant with an appointment letter to undertake the professional services at the price tendered. The applicant accepted the appointment on 7 February 2018 subject to the signing of a Service Level Agreement and the issuing of a purchase order.

[9] In the period February 2018 to March 2018, there was a flurry of pre-contractual engagements between the applicant and the officials of the Department which the applicant contends culminated in the conclusion of a contract whose terms the applicant seeks to enforce in these proceedings. There was an offer and acceptance of the offer which formed a binding agreement between the parties. This is disputed by the respondents.

[10] During March 2018, the Department is said to have received complaints from two bidders who the respondents believed sought, among others, the review of the adjudication process that led to the appointment of the applicant. The two bidders were Price Water Coopers (“PWC”) which scored the second highest score after the applicant; and an entity known as Exceed Empowerment Services (Pty) Ltd (“Exceed Empowerment”). There is a dispute as to whether Exceed

Empowerment was a bidder or not. According to the applicant, Exceed Empowerment was not a bidder to the process that led to its

appointment as the service provider. The applicant’s submission is that Exceed Empowerment’s bid was not only excluded but that it never formed part of the bid process, thus, in that sense, it was never a bidder to that process. The receipt of the complaints resulted in a delay in finalising the tender process and after several enquiries and correspondence from the applicant, the Department informed the applicant about the complaints.

[11] The Department decided to conduct forensic investigation (“the investigation”) into the adjudication process, which it says was to assure itself that the proceedings do not expose the Department to legal challenges. The applicant opines that the Department should not have embarked on this investigation as the purported complainants did not ask for a review of the appointment. I am of the view that it was not for the complainants to request that the appointment of the applicant be reviewed and/or investigated. Once the Department became aware that there was a possibility of irregularities in the evaluation process leading to the appointment of the applicant, it was incumbent upon the Department to satisfy itself that such irregularities do not exist.

[12] The investigation was conducted by the Department’s Chief Directorate: Internal Audit. The investigation was concluded on 20 March 2019 and revealed several irregularities which established that –

12.1. The applicant and one of the members of the Bid Evaluation team failed to declare a conflict of interest as required in terms of the Tender and the Bid;

12.2. The applicant failed to comply with certain administrative requirements, which in terms of the Supply Chain Management Policy invalidates the Tender;

12.3. The applicant was not tax compliant; and

12.4. The Bid Evaluation Committee failed to take into consideration the fact that the applicant’s bid price excluded Value Added Tax (“VAT”) when compared with other bidders whose prices included VAT.

[13] The applicant was informed of the investigation on 30 September 2018 and was also interviewed in respect of the irregularities found. As a result of the findings revealed by the investigation the tender process was suspended and in the end the Service Level Agreement envisaged between the applicant and the Department was never signed.

[14] The audit findings were adopted by the Department on 9 April 2019 and on 12 April 2019, the Department addressed a letter to the applicant in which it stated, amongst others, the withdrawal of the applicant’s appointment.

THE APPLICANT’S CASE

[15] The high watermark of the applicant’s case is that firstly, by virtue of the Department issuing the applicant with a letter of appointment and the applicant accepting the offer, a clear binding contract came into being between the applicant and the respondents. Secondly, the applicant’s compliance with all the requirements of the Tender entitled it to proceed with the execution of the agreement

[16] The applicant’s proposition is that following the internal evaluation process, the applicant was regarded as the successful bidder for Tender WP11254. The applicant was notified in writing that it was the successful bidder to the Tender. Consequently, the applicant signed the acceptance of offer from the respondents; and, also, accepted the terms of a contract sent to it by the Department to review, with a projected commencement date of the project as 1 April 2018. Hence, according to the applicant, a binding and enforceable contract came into being.

THE RESPONDENTS’ CASE

[17] The respondents are disputing the applicant’s assertion that since it has complied with all the requirements of the Tender, a legally binding agreement has come into being on the basis that the awarding of the Tender is fraught with irregularities rendering the applicant’s appointment invalid and unlawful. In fact, the whole basis of the respondents’ counter application is that the awarding of the Tender was irregular, and therefore, the applicant’s appointment is invalid and unlawful. In this regard the respondents rely on the findings of the investigation, which amongst others, established that the applicant failed to disclose a conflict of interest as required in paragraph 2.9 in clause SBD4 of the terms and conditions of the Tender; and the applicant’s failure to disclose an original Tax Clearance Certificate in violation of paragraph 35.8 of the Special Conditions of Contract.

[18] In essence, the respondents oppose this application on the basis that by proceeding with the procurement process, by signing the Service Level Agreement and issuing the order number to the applicant, the parties would be acting in violation of the Public Management Finance Act[1], which conduct will be unlawful and offend public policy.

ANALYSIS

[19] As already stated, in disputing the applicant’s claim the respondents are relying on the findings of the investigation. There are blatant disputes of fact on the papers which ought to be dealt with in accordance with the Plascon-Evans principle.[2] The court in that judgment, stated the following in relation to the granting of a final interdict where there is a dispute of fact:

"It is correct that, where in proceedings on notice of motion disputes of fact have arisen on the affidavits, a final order, whether it be an interdict or some other form of relief, may be granted if those facts averred in the applicant's affidavits which have been admitted by the respondent together with the facts alleged by the respondent, justify such an order”.

[20] Having considered the arguments for and against the relief sought by the applicant, and taken the Plascon-Evans principle into account, my view is that the applicant has not proven its case, on a balance of probabilities, for the relief it seeks in the notice of motion. In coming to this conclusion, I deal hereunder with the findings of the investigation that I think renders the appointment of the applicant irregular and therefore, unlawful and invalid.

The Finding of the Investigation that Conflict of Interest was not Disclosed

[21] The respondents' contention on this aspect is that the chairperson of the Bid Evaluation Committee, as required by the Code of Conduct for evaluation committee members and the confidentiality and non-disclosure agreement signed with each Bid Evaluation Committee member on 24 January 2018, and the applicant, as required in terms of the provisions of clause SBD4 of the terms and conditions of Tender, failed to declare their interests.

[22] The evidence on record is that the Tender was evaluated by the Bid Evaluation Committee on 24 January 2018. Due to the absence of the designated chairperson, Ms Sizani Moshidi (“Ms Moshidi”), Chief Director: Economic Sector Regulation, who was the designated deputy chairperson, acted as the chairperson at that meeting.

[23] It is common cause that attached to the applicant's Bid, that served before the Bid Evaluation Committee, were among others, a pricing proposal, technical proposal and Curriculum Vitae (“CV”) of individuals whose resources the applicant intended to deploy for the implementation of the Project, if successful. Among the CV's was the CV of Ms Nhlanhla Johanna Mtetwa (“Ms Mtetwa”). According to the CV, Ms Mtetwa worked as a consultant in the Department during the period December 2011 to March 2014. Ms Mtetwa listed Ms Moshidi as one of her references on her CV. Ms Moshidi is an official of the Department and as appears from the above, acted as the chairperson of the Bid Evaluation Committee during the evaluation process of the Tender.

[24] During the forensic investigation that ensued, when she was interviewed, Ms Moshidi indicated that she was aware that Ms Mtetwa had listed her as a reference and that she in fact reported to her when she was working as a consultant in the Department. Ms Moshidi stated that she orally informed members of the BEC that she knew Ms Mtetwa but did not know that she was required to formally disclose such interest as Ms Mtetwa was not family and on the advice of the Supply Chain Management representative forming part of the Bid Evaluation Committee, considered it unnecessary to do so and continued with the evaluation. The Minutes of the Bid Evaluation Committee meeting for that date do not record such verbal disclosure. Ms Moshidi did not withdraw her participation from the evaluation process. She continued as chairperson and recommended the appointment of the applicant.

[25] The Bid Evaluation Committee was subject to compliance with an internal Code of Conduct applicable to members of Bid Evaluation Committees and Bid Adjudication Committees. All members of the Bid Evaluation Committee signed declarations in terms of this Code of Conduct before the evaluation process could commence.

Failure by the Chairperson to Disclose Conflict of Interest

[26] The question whether Ms Moshidi had a conflict of interest to declare is, therefore, determinable by reading the Code of Conduct for Bid Evaluation Committee Members which deals with conflict of interest as follows:

"Evaluation Committee members to the extent required by their position should declare any business, commercial and financial interest or activities undertaken for financial gain that may raise a possible conflict of interest."

[27] Paragraph 4.1 of the Code of Conduct for Bid Evaluation Committee Members provides further that -

“If a Bid Evaluation Committee member or other role player, or any close family member, partner or associate of such official or other role player, has any private or business interest in any contract to be awarded, that official or other role player must - disclose that interest, withdraw for participating in any manner whatsoever in the process relating to that contract.”

[28] It is not in dispute that Ms Moshidi clearly had no business commercial and or financial interest or activities undertaken for financial gain pertaining to Ms Mtetwa’s consulting in the applicant. The applicant’s proposition that the issue of Ms Mtetwa having previously worked as a consultant of the Department and reported to Ms

Moshidi and listed Ms Moshidi as a reference was not a disclosable conflict of interest, is correct. Ms Mtetwa's relationship with Ms Moshidi as argued by the applicant is purely professional and, therefore, her being a reference in Ms Mtetwa’s CV could solely be based on this relationship.

The Applicant’s Failure to Disclose Conflict of Interest

[29] Conversely, for the applicant to be in breach of conflict of interest clauses the non-disclosure must violate the provision in clause SBD4 of the terms and conditions of the Tender and the Department must state expressly which clause in the SBD4 was violated.

[30] Clause SBD4, which deals with declaration of interest required that the Bidder or his/her authorised representative declare his/her position in relation to the evaluating/adjudicating authority where –

- the bidder is employed by the state; and/or

- the legal person on whose behalf the bidding document is signed has a relationship with persons/ a person who are/is in the evaluation

and/or adjudication of the bid(s) or where it is known that a relationship between such person/s for or on whose behalf the declarant acts and persons who are involved with the evaluation and/or adjudication of the bid(s)."

[31] The applicant did not declare the name of Ms Moshidi in paragraphs 2.9 in SBD4 forms. Paragraph 2.9 reads as follows:

"Do you or any person connected with the bidder, have any relationship (family, friend and other) with a person employed by the state and who may be involved with the evaluation and adjudication of this bid.

If so furnish particulars."

[32] Thus, paragraph 2.9 in SBD4 requires the bidder or any person connected with the bidder to declare whether they have any relationship with a person employed by the State or who may be involved in the evaluation and/or adjudication of the Bid. In paragraph 4 thereof, the bidder is required to declare and certify that the information required in para 2 and 3 is correct. The paragraph further states that the State may reject the Bid should this declaration prove to be false.

[33] It is common cause that the applicant did not disclose Ms Moshidi’s name as required in paragraph 2.9 in clause SBD4 of the terms and conditions of the Tender form. The paragraph states that the state may reject a Bid should a declaration in this paragraph prove to be false. By not declaring that the applicant or anyone of its employees know Ms Moshidi, the applicant made a false declaration and its Bid ought to have been rejected.

[34] During the investigation it was also enquired from Mr Hlabezulu Khumalo (“Mr Khumalo”), the sole member of the applicant whether he or any member of his team had any relationship with the members of the Bid Evaluation Committee or were aware of any possible conflict of interest. Mr Khumalo stated that neither himself or his team members, associates and officials of the applicant knew that Ms Moshidi would be in the Bid Evaluation Committee and none of them knew the Bid Evaluation Committee members.

[35] In addition to Ms Mtetwa's CV, the applicant, in its pricing proposal had listed Ms Mtetwa as a project administrator, a position said to be just under Mr Khumalo. It is, therefore, as argued by the respondents, highly unlikely that Mr Khumalo would not have known that Ms Mtetwa was attached to the Department for three years and that he did not see her CV has listed a senior official of the Department as reference. The contention made, correctly so, is that the failure to disclose this fact is simply inexcusable.

[36] The applicant seems to misconstrue the irregularity revealed by the investigation on this aspect and hence, its denial that the issue of Ms Mtetwa rendered the applicant's appointment irregular. The irregularity here is not that Ms Moshidi or the applicant failed to disclose the relationship between Ms Moshidi and Ms Mtetwa, but that the Department officials failed to pick it up, or even if they noted the relationship, they failed to note that the applicant had not declared the relationship in paragraph 2.9 in clause SBD4. If they had noted this, they would have rejected the Bid. Paragraph 4 in SBD4 requires the bidder to declare and certify that the information required therein is correct. Non-disclosure or false disclosure is fatal to the Bid in that the State may reject the Bid should this declaration prove to be false. Non-disclosure is tantamount to false disclosure.

The Finding of the Investigation that the Applicant was not Tax Compliant.

[37] According to the respondents, the National Supply Chain Management Instruction 7 of 2017/18, paragraph 2.1 and 2.2, amongst others, provides that it is essential to ensure that persons conducting business with the State are tax complaint at the awarding of price quotations or competitive bids as no price quotations or competitive bids may be awarded to persons who are not tax complaint. In this regard, the respondents contend that the applicant was not tax compliant in respect of Tax Clearance Certificate and VAT.

The Tax Clearance Certificate

[38] In respect of the Tax Clearance Certificate, SBD1 in the Tender form requires the bidders to declare whether or not they have submitted a valid tax clearance certificate as required in terms of SBD2 of the Tender form. Consequently, the applicant attached a Tax Clearance Certificate to its Tender form.

[39] The respondents contend that the applicant failed to submit an original Tax Clearance Certificate, but submitted a copy thereof, in violation of paragraph 35.8 of the Special Conditions of Contract which provides specifically that failure to attach the original and valid Tax Clearance Certificate shall invalidate the Bid. The respondents argue that the Centralised Supplier Database registration report in respect of the applicant dated 26 January 2018, which served before the Bid Evaluation Committee during the evaluation of the Bids for administrative compliance revealed that the applicant had non-complaint tax status.

[40] Conversely, the applicant submits that it submitted a valid Tax Clearance Certificate and not the original, as Instruction 7 of the National Treasury states that copies are allowed. This was submitted together with a tax compliance status PIN. The applicant, in fact, submitted a copy of the original Tax Clearance Certificate issued by SARS which was valid for a year, from 9 -11-2017 to 09-11-2018. The Tax Clearance Certificate was issued together with a tax compliance status PIN certificate on 9 November 2017, exactly a month and 5 days before the closing date of submission of the Tender.

[41] The respondents admit that the Tax Clearance Certificate that was attached to the applicant's Bid showed that it was issued on 9 Nov 2017 with the expiry date of 9 November 2018. They, however, argue that the said Tax Clearance Certificate was a copy and, therefore, not in compliance with paragraph 35.8 of the Special Conditions of Contract which requires the Tax Clearance Certificate to be an original.

[42] Paragraph 3.2 of the Special Condition of Contract provides that -

"The Central Supplier Database and the tax compliance status PIN are the approved methods that will be utilised to verify the tax compliance as the SARS does not issue Tax Certificate but has made an online provision available, via e-Filing, for bidders to print their own Tax Clearance Certificate which they can submit with their bids or price quotations."

[43] Paragraph 3.3 thereof states that

"Accounting Officers and Accounting Authorities must therefore accept printed or copies of Tax Clearance Certificates submitted by bidders and verify them on the e-Filing."

[44] In this sense, the applicant is correct that the submission of a copy of the original Tax Clearance Certificate does not violate the provisions of paragraph 35.8 of the Special Conditions of Contract.

[45] Nonetheless, the applicant’s above argument does not address the latter part of the respondents’ complaint. The complaint relates to the information on the Centralised Supplier Database registration report dated 26 January 2018, which served before the Bid Evaluation Committee during the evaluation of the Bids for administrative compliance, and revealed that the applicant had non-complaint tax status. The copy of the said report is attached to the respondents’ papers and the applicant does not dispute the correctness thereof.

[46] As already stated, the National Treasury Supply Chain Management Instruction No.7 of 2017/2018, paragraphs 2.1 and 2.2 state that it is essential to ensure that persons conducting business with the State are tax compliant at the awarding of price quotations or competitive bids as no price quotations or competitive bids may be awarded to persons who are not tax compliant. In an attempt to comply with the prescript, the Bid Evaluation Committee met to evaluate the Bids for administrative compliance. In respect of the applicant, the Bid Evaluation Committee relied on a Centralised Supplier Database registration report dated 26 January 2018. The report revealed the applicant’s status as tax non-compliant.

[47] The applicant concedes that in terms of the National Treasury Instruction 7 of 2017, the Department is required to conduct business only with persons who are tax compliant and that determination of such status commences at an initial stage of the evaluation of bids.

[48] The applicant in trying to show that it was/is tax compliant, goes at length, in its own evidence in the replying affidavit, to explain the process that is followed by the Department when a Tax Clearance Certificate is found to be non-compliant during the bid evaluation process. According to the applicant, a tax clearance certificate is valid for a year. That valid tax certificate does not cover non-compliance during the year of its validity. In other words, so it is explained, one may comply as at a specific date and be issued with a tax clearance certificate valid for a year and would have a compliant status. But a week or two thereafter that person or entity may fail to submit a specific return and the status on the Central Supplier Database will then change to non-compliant tax status.

[49] Apparently, because of this ever changing nature of a compliant tax status on the Central Supplier Database, National Treasury in its Management Instruction Note 7 of 2017/18 covered this situation by providing that where during a bid process it is found that a bidder is not tax compliant, the bidder must be notified of their non-compliant status with SARS and be provided an opportunity to rectify the status. What actually happens is that a designated employee(s) must verify the bidder's tax compliant status prior to the finalization of the award of the bid price quotation. Where the recommended bidder is not tax compliant, the bidder must be notified of the non-compliant status with the SARS. The bidder must, thereafter, provide the procuring entity with proof of its tax compliance status which must be verified via the Central Supplier Database or e-filing. The Accounting Officer and Accounting Authorities must reject a bid submitted if a bidder fails to provide proof of tax compliance status. (The explanation is paraphrased)

[50] The applicant, therefore, accepts in its evidence, that it is common cause between the parties that the applicant was never advised of its non-compliant status nor was it ever requested to rectify that non-compliant tax status. Notwithstanding, the applicant fails to appreciate that this is the irregularity the respondents are complaining about, that is, the failure by the Department officials to notify the applicant about its non-compliant tax status. This is the irregularity according to the respondents, renders the appointment of the applicant irregular and therefore unlawful.

[51] It is not in dispute that in terms of the National Treasury Instruction 7 of 2017 the applicant was supposed to be advised of its non-compliant status as it was reflected in the Central Supplier Database registration report in respect of the applicant dated 26 January 2018, and be afforded an opportunity to rectify same. It is, also, not in dispute that the Department, through its officials, failed to notify the applicant about the tax status, and the tax status was never rectified, hence, the irregularity.

[52] It is worthy to note that the irregularity complained of is not in the respondent’s tender documents, but is inherent in the process of evaluation. The irregularity, actually, has nothing to do with whether the Tax Clearance Certificate submitted by the applicant with its Bid was valid or not. The irregularity relates to what happened during the process of evaluation. The irregularity was occasioned by the conduct of the Department’s officials in failing to notify the applicant about its non-compliant status as reflected in the Centralised Supplier Database registration report dated 26 January 2018, which served before the Bid Evaluation Committee during the evaluation of the Bids for administrative compliance. Having failed to notify the applicant, the non-compliant status was never rectified. There is no evidence on record that the applicant’s non-compliance tax status was ever rectified. The applicant concedes in its evidence that it was never given an opportunity to rectify same. It follows, therefore, that the Tax Clearance Certificate that was considered during the evaluation process was invalid.

[53] Paragraph 35.8 of the Special Conditions of Contract provides that –

"Failure to submit original and valid Tax Clearance Certificate shall invalidate your bid."

[54] Without a valid Tax Clearance Certificate, the applicant’s Bid was invalid and should not have been considered any further. It should have been excluded from the bid process. As we know the applicant’s Bid was considered and the Tender was eventually awarded to it.

[55] It should be kept in mind that the irregularity of the process does not relate to the bidders but to the officials of the Department. As such it would not avail the applicant to complain that the Department’s officials failed to perform their duties to his prejudice. Once the irregularity became known, the Department had to act.

[56] It is common cause that the evaluation criteria for the Tender was set out in the Special Conditions of Contract which formed part of the Tender and to which the bidders are subject. Paragraph 35.8 of thereof provides that "failure to attach original or valid Tax Clearance Certificate shall invalidate your Bid". Therefore, non-compliance with paragraph 3.58 of the Special Conditions of Contract is fatal to a bid. The applicant failed to provide a valid Tax Clearance Certificate in compliance with paragraph 3.58 of the Special Conditions of Contract, as such, the failure ought to have invalidated the applicant’s Bid.

The Applicant's VAT Status

[57] The applicant misconstrues the respondents’ argument in relation to the finding of the investigation in regard to its VAT status. The applicant argues that the respondents' argument on its VAT status is made ostensibly to imply that the applicant's failure to include VAT in its price calculation meant its price would not have been the lowest as it was. This is not what the respondents are saying. The respondents are simply saying that the Bid Evaluation Committee failed to record the fact that the applicant’s pricing was VAT exclusive whereas the other bidders’ pricing was VAT inclusive. The respondents’ argument in this regard is that the failure to record this distinction shows that there was lack of fairness and proper consideration of one of the most important aspect of the evaluation process, significantly because price accounted for 80% of the preferential score.

[58] The applicant’s Bid was priced R9 181 245 excluding VAT. In comparison to the other bidders, the applicant was the lowest in price. PWC, the bidder with second lowest price at R10 518 162, 17 included VAT in its pricing, whereas the applicant did not. This differentiation would mean that the applicant's price would, irrespective of the amount be at least less by the VAT amount. It was expected that the Bid Evaluation Committee note and record this distinction, but failed to do so. Hence, the irregularity.

[59] The respondents accept that the applicant stated in its Bid submission that it is not a registered VAT vendor. The respondents also concede that the applicant's bid price if it included VAT, at R10 466 629, 56 would still be lower than that of PWC which was at R10 518 162,17. The concern is only that, failure by the Bid Evaluation Committee to consider and thereafter record the fact that the applicant's price did not include VAT when comparing it with other bid prices, establishes a lack of fairness in the evaluation process.

[60] It is argued by the respondents that the failure to record this distinction by the Bid Evaluation Committee shows that there was lack of fairness and proper consideration of one of the most important aspects of the evaluation process, most significantly because price accounted for 80% of the preferential score.

[61] This is where the irregularity comes in. The failure by the Bid Evaluation Committee to consider and record that the applicant’s pricing was VAT exclusive and that of other bidders was VAT inclusive.

The Finding of the Investigation that the Applicant Failed to Fully Complete the Bid Documents

[62] According to the respondents, the applicant's representative failed to complete and sign some of the documents in the Tender form. There are two blank (incomplete) documents which have been annexed to the Bid and unsigned by the applicant. The applicant denies that at the time of submitting its bid documents the two documents were not completed and signed. According to the applicant, the Bid was checked by the applicant and four of the applicant's staff a few times before submission and the applicant contends that they could not have all missed such clear blank pages following each other consecutively. The applicant asserts that the unsigned documents were substituted with blank ones in order to find a reason to invalidate its tender. The court will need more than the ipse dixit of the Department to accept that the documents were not completed and signed. Neither of the approximately eight people all being the Department's officials who came into contact with the applicant's Bid evaluation confirmed the correctness of this very prejudicial allegation.

[63] The problem with this argument shows further that the applicant does not understand why it is that the investigation finds irregularities in the Bid process. What constitutes an irregularity in this regard is the fact that the Department officials did not notice the blank pages and proceeded with the Tender as if all was in order. The discrepancy, which the Department officials did not notice was revealed by the Audit committee during its investigation. The Bid should not have been considered without these documents. Therefore, the irregularity.

Conclusion

[64] I would hold, therefore, on the totality of the findings of the investigation, the applicant’s Bid should not have been successful. The respondents are correct to say that by proceeding with the procurement process, by signing the Service Level Agreement and issuing the order number to the applicant, the parties would be acting irregularly in violation of the applicable prescripts, which conduct will be unlawful and invalid.

COUNTER APPLICATION

[65] In the counter application, the respondents seek review and setting aside of the Department’s decision to appoint the applicant as a service provider in respect of Tender WP11254. This they do as a result of the irregularities in the evaluation process of the Tender, which were established by the investigation. The irregularities revealed by the investigation are said to have contravened the PFMA, the Supply Chain Management Policies of the Department and the National Treasury Instructions. In essence, the respondents, therefore, in the counter application brings an application to declare the tender process irregular and void ab initio. The review is based on the common law principle of legality and the Promotion of Administrative Justice Act[3] ("PAJA").

[66] The Supreme Court of Appeal in State Information Technology Agency SOC Limited v Gijima Holdings (Pty) Limited[4] handed down judgment which held that where an organ of State seeks review of its own decision, the review must be brought under the principle of legality and not PAJA. When dealing with whether the provisions of PAJA applies in a review application, that court stated as follows:

“ The Supreme Court of Appeal also makes the point that no sane applicant would submit to PAJA’s definition of administrative action or to the strict procedural requirements of section 7 if he or she had a choice and that, as a result, PAJA would soon become redundant. We do not agree. The point of the matter is that no choice is available to an organ of state wanting to have its own decision reviewed; PAJA is simply not available to it. That is the conclusion we have been led to by an interpretation of, primarily, section 33 of the Constitution and, secondarily, PAJA itself. Thus there is no basis for suggesting that an organ of state seeking a review of its own decision may simply choose to avoid review under PAJA for reasons of expediency.

The conclusion that PAJA does not apply does not mean that an organ of state cannot apply for the review of its own decision; it simply means that it cannot do so under PAJA...”

[67] In that regard, PAJA finds no application in the present matter, I shall, therefore, ignore any argument by the respondents based on it. The counter application will, thus, be dealt with on the basis of the principle of legality.

[68] The applicant has raised several defences opposing the counter application on the merits and also raised a question of delay by the respondents in bringing the review application. The Court in Buffalo City Metropolitan Municipality v Asla Construction (Pty) Ltd,[5] held that it is improper to have regard to the merits before determining whether the delay ought to be condoned. Consequently, I, have first, to consider the question of delay.

Delay in Reviewing the Appointment

[69] The applicant submits that there has been an inordinate delay in launching the application for review by the respondents. In support of that argument the applicant referred me to the Constitutional Court judgment in State Information Technology Agency Soc Limited v Gijima (Pty) Ltd [6] where that court in a paragraph titled "Delay" stated the following:

"Relying of section 237 of the Constitution Skweyiya J held in Khumalo:

"Section 237 acknowledges the significance of timeous compliance with constitutional prescripts. It elevates expeditious and diligent compliance with constitutional duties to an obligation in itself. The principle is thus a requirement of legality.

This requirement is based on sound judicial policy that includes an understanding of the strong public interest in both certainty and finality. People may base their actions on the assumption of the lawfulness of a particular decision and the undoing of the decision threatens a myriad of consequent actions.

In addition, it is important to understand that the passage of a considerable time may weaken the ability of a court to assess an

instance of unlawfulness on the facts. The clarity and accuracy of decision-makers' memories are bound to decline with time. Documents

and evidence may be lost, or destroyed when no longer required to be kept in archives. Thus the very purpose of a court undertaking the review is potentially undermined where, at the cause of a lengthy delay, it ability to evaluate fully an allegation of illegality is impaired"

[70] The respondents submit that the delay was not undue because the Department acted expeditiously once it became aware of the unlawfulness of the tender process.

[71] The Constitutional Court in Buffalo City Metropolitan Municipality v Asla Construction (Pty) Ltd,[7] when assessing the delay under PAJA and legality stated that the Constitutional Court in Khumalo v Member of the Executive Council for Education, KwaZulu Natal[8] endorsed the test enunciated in Gqwetha[9] for assessing undue delay in bringing a legality review application. Firstly, it must be determined whether the delay is unreasonable or undue. This is a factual enquiry upon which a value judgment is made, having regard to the circumstances of the matter. Secondly, if the delay is unreasonable, the question becomes whether the court’s discretion should nevertheless be exercised to overlook the delay to entertain the application. Put differently, the question is whether the interests of justice require an overlook of the unreasonable delay.

[72] The standard of assessing the delay is whether the delay was unreasonable. The proverbial clock starts running from the date that the applicant became aware or reasonably ought to have been aware of the action taken.

[73] When assessing the delay under the legality review no explicit condonation application is required. A court can simply consider the delay and then apply the two-step Khumalo test to ascertain whether the delay is undue and, if so, whether it should be overlooked. The reasonableness of the delay must be assessed on, among others, the explanation offered for the delay. Where the delay can be explained or justified, then it is reasonable and the merits of the review can be considered. If there is an explanation for the delay, the explanation must cover the entirety of the delay. Where there is no explanation for the delay, the delay will necessarily be unreasonable.

[74] The next step of the test is whether the delay ought to be overlooked. Courts have the power in a legality review to refuse an application where there is undue delay in initiating proceedings or a discretion to overlook the delay. That basis must be gleaned from the facts made available or objectively available factors. The approach for overlooking a delay in a legality review is flexible.

[75] I find that the applicant's argument that there has been an undue delay in this instances, to be not acceptable. Firstly, it need to be said that this is not a case where the court is faced with a situation where due to the delay, documents and evidence are lost or destroyed thus undermining the court's ability to fully evaluate the allegation of illegality. In this instance the evidence is available and I have been able to evaluate the alleged irregularity and found it to exist.

[76] Secondly, the explanation proffered by the Department as to why the review was done eleven (11) months after the appointment was made, is to me, satisfactory.

[77] According to the Department’s evidence, it awarded the Tender in February 2018. It became aware of possible irregularities in the evaluation process in August 2018 when it received complaints, from two bidders. The complainants sought the Department to investigate and review the appointment of the applicant. This fact is denied by the applicant whose proposition is that the Department ought to have known about the irregularities in March 2018 because the letters received from the purported complainants were respectively dated 26 and 27 March 2018. Except for the date of the letters as stated in annexures “MT5” and “MT6” attached to the respondents’ papers, there is no indication when the said letters were received by the Department. These are not emails where it would have been easily ascertainable when same was received. In the absence of proof that the letters were indeed received in March 2018, the applicant’s contention is speculative. I have to accept that the Department became aware of the irregularities in August 2018.

[78] On receipt of the so called complaints, the Department decided that its Chief Directorate: Internal Audit should conduct an investigation. The applicant was informed about the irregularities and intended investigation in a letter dated 18

September 2018. The investigation endured for almost six months and was concluded on 20 March 2019. The Department adopted the Audit findings on 9 March 2019 and informed the applicant on 12 April 2019 of the withdrawal of the Tender because of administrative

irregularities. On 19 March 2019, the applicant launched the present application. It took the Department approximately six months to conclude the investigation once it became aware that there were irregularities in the evaluation process.

[79] I find that the respondents have been able to explain the delay.

Non Joinder of Interested Parties

[80] The applicant's proposition in this regard is that the bidders who submitted responsive bids to the Tender but were not appointed have an interest in this matter and they ought to have been joined to these proceedings. The contention is that their non-joinder is fatal to this application.

[81] The test whether there has been non-joinder is whether a party has a direct and substantial interest in the subject matter of the litigation which may prejudice the party that has not been joined.[10] In Gordon v Department of Health, Kwazulu-Natal [11] it was held that if an order or judgment cannot be sustained without necessarily prejudicing the interest of third parties that had not been joined, then those third parties have a legal interest in the matter and must be joined.

[82] It is quite clear that in this instance the other bidders will not be prejudiced by any order or judgement that can be granted. Conversely, they stand to gain if an order is granted in favour of the respondents. The order or judgment that is granted herein can be sustainable without prejudicing the interest of those bidders.

[83] In light of what is stated above, I hold that the respondents have been successful in both the main application and that application must be dismissed. Similarly, the respondents are successful in the counter application and they should be granted the relief they seek therein.

COSTS

[84] As the successful party, the respondents are entitled to the costs of the main application and the costs of the counter application, as prayed for by the respondents, are costs in the course.

ORDER

[85] In the circumstances, I make the following order:

1. The application for condonation by the first and second respondents for filing the answering affidavit late, is granted.

2. The main application is dismissed with costs.

3. The counter application is granted in the following terms:

3.1 The decision of the Bid Evaluation Committee of the Department of Water and Sanitation on 29 January 2018 recommending the appointment of the applicant Makaba-Khumalo and Associates, as Service Provider in terms of tender WP11254 is reviewed and set aside.

3.2 The decision of the Bid Adjudication Committee of the Department of Water and Sanitation on 1 February 2018 accepting the recommendation of the Bid Evaluation Committee to appoint the applicant, Makaba-Khumalo and Associates, as a Service Provider in terms of Tender WP11254 is reviewed and set aside.

3.3 The Letter of appointment issued by the Department of Water and Sanitation under the signature of Director: Supply Chain Management is declared invalid and unlawful, reviewed and set aside.

3.4 The costs of the counter-application are costs in the course.

_________________________

E.M KUBUSHI

JUDGE OF THE HIGH COURT

Appearance:

Applicant’s Representative

: Ms L. Mbanjwa (Attorney)

Applicant’s Attorneys

: L Mbanjwa INC.

Respondents’ Representative

: Ms MPD Chabedi

Respondents’ Attorneys

: State Attorneys, Pretoria.

Date of hearing

: 18 August 2020.

Date of judgment

: 21 October 2020

[1] Act 1 of 1999.

[2] Plascon-Evans Paints Ltd v Van Riebeeck Paints (PTY) Ltd [1984] ZASCA 51; 1984 (3) SA 623 (A) at 634E - I.

[3] Act No. 3 of 2000.

[4] [2017] ZACC 40 at para 37 and 38.

[5] [2019] ZACC 15 para 39.

[6] [2017] ZACC 40 at para 43.

[7] [2019] ZACC 15 paras 44 – 72.

[8] 2014 (5) SA 579 (CC).

[9] Gqwetha v Transkei Development Corporations Ltd and Others [2006] 2 All SA 245 (SCA).

[10] Absa Bank Ltd v Naude NO & others (20264/2014) [2015] ZASCA 97; 2016 (6) SA 540 (SCA) (1 June 2015).

[11] [2008] ZASCA 99; 2008 (6) SA 522 (SCA); [2009] 1 All SA 39 (SCA) ; 2009 (1) BCLR 44 (SCA); [2008] 11 BLLR 1023 (SCA); (2008) 29 ILJ 2535 (SCA) (17 September 2008).