Maredi Telecom & Broadcasting (Pty) Limited v Ericsson South Africa (Pty) Limited and Others (597/09) [2009] ZAGPPHC 26 (17 April 2009)

IN THE HIGH COURT OF SOUTH AFRICA

(NORTH GAUTENG HIGH COURT, PRETORIA)

NOT REPORTABLE Date: 2009-04-17

Case Number: 597/09

In the matter between:

MAREDI TELECOM & BROADCASTING (PTY)

LIMITED Applicant

and

ERICSSON SOUTH AFRICA (PTY) LIMITED First Respondent

TELSAF DATA (PTY) LIMITED Second Respondent

TELKOM SA LIMITED Third Respondent

JUDGMENT

SOUTHWOOD J

[1] This is an urgent application in which the applicant (‘Maredi’) seeks interim relief interdicting the third respondent (‘Telkom’) from entering into a contract with the first respondent (‘Ericsson’) and the second respondent (‘Telsaf’), alternatively, Ericsson, alternatively, Telsaf, pursuant to the tender by Ericsson and Telsaf to Telkom under tender number RFP085/07 (‘the tender’) and interdicting Telkom from ordering from Ericsson and Telsaf any goods or services pursuant to the award by Telkom to Ericsson and Telsaf of the tender pending the final determination of Maredi’s application to review and set aside the award of the tender by Telkom to Ericsson and Telsaf and remitting the tender back to Telkom for it to reconsider the award.

[2] The award of the tender by Telkom to Ericsson and Telsaf was the culmination of a 16 month long process during which tenders were invited, received and evaluated at four levels by representatives of Telkom. On 1 December 2008 Telkom notified Ericsson and Telsaf that their tenders were successful and that they were awarded the tender in the ratio 40 % to 60 % respectively. On the same date Telkom notified Maredi that it was not successful. Maredi immediately took legal advice and requested Telkom’s reasons for awarding the tender. On being informed that it failed to

meet certain critical criteria Maredi prepared and served this urgent application on Ericsson, Telsaf and Telkom. Only Ericsson and Telkom oppose the application. Telsaf has not given notice of intention to oppose or filed an answering affidavit.

[3] The parties have filed compendious affidavits which deal in great detail with the tender process with particular reference to the physical evaluation of the products and the final decision to award the tender. Maredi’s case in the founding affidavit is that in awarding the tender Telkom acted in breach of various provisions of the Promotion of Administrative Justice Act, 3 of 2000 (‘PAJA’) (which, it is common cause, applies to the award of tenders by Telkom).

Maredi alleges that Telkom was biased in favour of Ericsson and says that Telkom ignored its own procedures to ensure that the tender was awarded inter alia to Ericsson and deliberately misrepresented the results of the technical testing that took place to ensure that the tender was not awarded to Maredi but inter alia to Ericsson. During the hearing, Maredi’s counsel informed the court that Maredi would not persist in the allegations of dishonesty in the papers. It accordingly became common cause that Maredi will have no right to claim damages from Telkom if Telkom wrongfully awarded the tender to Ericsson and Telsaf – see Olitzki Property Holdings v State Tender Board & Another 2001 (3) SA 1247 (SCA) para 42; Steenkamp NO v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC) paras 55 and 56; Premier, Western Cape v Fair Cape Property Developers (Pty) Ltd 2003 (6) SA 13 (SCA) paras 40-49 and 50-59.

[4] The applicant seeks interim relief. The applicant must therefore establish:

(1) a clear right or, if not clear, that it has a prima facie right;

(2) that there is a well-grounded apprehension of irreparable harm if the interim relief is not granted and the ultimate relief (by way of the review proceedings) is eventually granted;

(3) that the balance of convenience favours the grant of an interim interdict; and

(4) that the applicant has no other satisfactory remedy. (LF Boshoff Invesments (Pty) Ltd v Cape Town Municipality; Cape Town Municipality v LF Boshoff Investments (Pty) Ltd 1969 (2) SA 256 (C) at 267B-E.)

When an applicant cannot show a clear right, and more particularly where there are disputes of fact relevant to a determination of the issues, the Court’s approach in determining whether the applicant’s right is prima facie established, though open to some doubt, is to take the facts set out by the applicant, together with any facts set out by the respondent which the applicant cannot dispute, and to consider whether, having regard to the inherent probabilities, the applicant should (not could) on those facts, obtain final relief at the trial of the main action. The facts set out in contradiction by the respondent should then be considered and if serious doubt is thrown upon the case of the applicant it cannot succeed. (Webster v Mitchell 1948 (1) SA 1186 (W); Gool v Minister of Justice and Another 1955 (2) SA 682 (C) at 688C-E; LF Boshoff Investments (Pty) Ltd v Cape Town Municipality (supra) at 267E-G; Beecham Group Ltd v B-M Group (Pty) Ltd 1977 (1) SA 50 (T) at 55B-E.)

In Beecham Group Ltd v B-M Group (Pty) Ltd (supra) the court said with regard to the various factors which must be considered:

‘I consider that both the question of the applicant’s prospects of success in the action and the question whether he would be adequately compensated by an award of damages at the trial are factors which should be taken into account as part of a general discretion to be exercised by the Court in considering whether to grant or refuse a temporary interdict. Those two elements should not be considered separately or in isolation, but as part of the discretionary function of the Court which includes a consideration of the balance of convenience and the respective prejudice which would be suffered by each party as a result of the grant or the refusal of a temporary interdict.’

Where the applicant’s right is clear and the other requisites of an interdict are present no difficulty presents itself about granting an interim interdict. Where, however, the applicant’s prospects of ultimate success are nil, obviously the Court will refuse an interdict (Olympic Passenger Services (Pty) Ltd v Ramlagan 1957 (2) SA 382 (D) at 383C-D; Beecham Group Ltd v B-M Group (Pty) Ltd (supra) at 54H-55B.

[5] In the absence of a claim for damages, if Maredi establishes a prima facie right (i.e. a prima facie right to an order setting aside Telkom’s award of the tender to Ericsson and Telsaf) it will follow that there will be a well-grounded apprehension of irreparable harm if the interim relief is not granted and the ultimate relief is eventually granted. There is clearly no balance of convenience in favour of the applicant. In fact the balance of convenience is overwhelmingly in favour of the respondents. The applicant can point to no prejudice to it other than the possible loss of profit while Telkom has dealt extensively with the impact which interim relief will have on its business. It will not be able to proceed with its expansion and development plans and this will result in losses of approximately R50 million per month while the order is in force. It is fair to accept that it will take six to eight months to file the record and affidavits and obtain a date for the hearing of the main application. In addition to this time there is the time it would take to have the matter decided on appeal. Maredi’s counsel did not contend otherwise. The real issue is therefore whether Maredi established a sufficiently strong right to justify the court granting an interim interdict. Maredi contends that it has established a clear right whereas the respondents contend the opposite. This questions turns primarily on whether Maredi was properly excluded from consideration.

[6] It must be recorded that in reply Maredi’s counsel handed to the court a written undertaking given by Maredi addressed to Ericsson, Telsaf and Telkom in which Maredi undertakes –

‘RE: MAREDI TELECOM & BROADCASTING (PTY) LIMITED/ERICSSON SOUTH AFRICA/TELSAF DATA/TELKOM SA LIMITED CASE NO: 579/09

We undertake that in the event that the interim interdict sought in case number 579/09 being granted to us and in the event that the review under the same case number ultimately fails we shall reimburse Ericsson, Telsaf Data and Telkom for any loss proved to have been sustained as a consequence of the granting of the interim interdict.’

This undertaking which is dated 20 February 2009 was marked ‘A’ (p1373) by the court. I agree with Telkom’s counsel that this undertaking does not affect the balance of convenience. It is given by a private company, apparently the subsidiary of the Japanese parent company, and there is no indication that this company will be able to reimburse any of the respondents for the loss they suffer as a consequence of the granting of the interim interdict.

[7] In its founding affidavit Maredi alleges that the decision to award the tender to Telsaf and Ericsson must be reviewed on the following grounds (the references to the sections are to sections in PAJA):

(1) The decision was procedurally unfair (s 6(2)(c));

(2) The decision was biased or reasonably suspected of bias (s 6(2)(a)(iii));

(3) The decision was taken for an ulterior purpose (s 6(2)(e)(ii));

(4) The decision was taken because the relevant considerations were not considered (s 6(2)(e)(iii)); and

(5) The decision was taken arbitrarily or capriciously (s 6(2)(e)(vi)).

[8] In Maredi’s heads of argument Maredi relies only on the following three grounds –

(1) The ultimate award of the tender was premised on the fact that Maredi had confirmed that its tender did not comply with the requisite technical specifications – this was wrong because ‘a dispute existed between the applicant and representatives of the third respondent as to whether or not features that the applicant’s tender admittedly lacked were features that were required, on a correct construction of the technical critical criteria.

Maredi contends that, for present purposes, the relevant issue is not the correctness of the applicant’s assertion that it complied with the technical critical criteria but the fact of the existence of a dispute as to this issue. Maredi argues that EXCO had sought an assurance that the applicant admitted its non-compliance and the tender decision was premised on an erroneous belief that it had done so. Maredi argues further that if EXCO had been aware of the existence of the dispute as to the proper interpretation of the technical critical criteria it would have been called upon to determine whether the applicant was correct in its assertions in relation to this interpretation issue but it never considered that issue because it had been misled as to the applicant’s stance.

(2) The decision is vitiated by the erroneous representation that Maredi did not meet the technical critical criteria. EXCO relied on paragraph 7.3.2 of the PRC recommendation. In fact Maredi did comply;

(3) Improper favouritism and procedural unfairness in the test extensions granted to Ericsson. In summary the argument is that the fact of and the manner in which the date for the demonstration was extended indicates bias.

[11] As already mentioned, in it answering affidavit Telkom describes in considerable detail the tender procurement process. This evidence is important background and is not in dispute. It may be summarised as follows:

(1) The following committees are involved in the procurement process (where the value of the tender is in excess of R40 million):

(i) An ad hoc Subject Matter Expert Team (‘SME’);

(ii) A Cross Section Functional Team (‘CSFT’);

(iii) The Procurement Review Council (‘PRC’);

(iv) The Executive Committee (‘EXCO’).

(2) A service organisation (‘the sponsor’) requests the procurement of a product or service. The Chief of Operations bears the ultimate responsibility in respect of the procurement of network or IT related equipment. The Chief of Operations is the sponsor of the RPF085/07 tender.

(3) The SME is project specific. It compiles the evaluation criteria which are to be applied to the tender. It utilises a prioritisation

matrix to weigh the evaluation criteria. This assists in the selection of the most suitable vendor/s for Telkom. The SME first

prepares and presents to the CFST for its approval the project plan for the relevant project. The plan contains the identities of the persons constituting the project team, the evaluation criteria and weightings. The SME evaluates the bids received in accordance with the approved project plan. Based on the scores achieved by the vendors against the relevant criteria the SME prepares a recommendation to the CFST on the short listing of vendors. The CFST may approve the SME’s recommendation or it may reject it.

(4) The CFST is a multi-disciplinary team whose primary purpose is the procurement of products. It consists of representatives from

Telkom’s various divisions (service organisations). It is responsible for all the preliminary steps which result in the

eventual procurement of products or services. The CFST must consider whether the product required complies with Telkom’s

commercial goals and whether it advances Telkom’s needs and interests. The CFST consists of executives (or their delegates)

from Procurement and other functional portfolios. It meets every week. The CFST involved in the present case is the Network CFST because the product required fell under the Network Infrastructure Provisioning Functional Portfolio. The CFST had a number of specific duties and functions. The members of the CFST when the award of RPF085/07 was made were –

Name Service Organisation Level

Christina Naidoo Procurement Services: Senior

Strategic Sourcing Manager

Andrew Hadley Network Infrastructure Executive

Provisioning: Technical

Strategy and Integration

Steve Lewis Network Infrastructure Executive

Product Development

Billy Fick Network Infrastructure Executive

Provisioning: Integrated

Network Planning

Robert George Network Call Operations: Executive

High Level Support

Cathy Magodie Procurement Services: Senior

Black Economic Manager

Empowerment

Arnold van Huyssteen Sales and Marketing Executive

(5) The PRC is authorised to approve and issue all requests for bids, proposals and information for the supply of goods/services to Telkom

in accordance with Telkom’s business strategy; consider and approve the award of any tender/bid for the supply of goods/services

to Telkom up to but not exceeding R40 million; and consider and recommend the award of any tender/bid for the supply of goods or services to Telkom in excess of R40 million. Members of the PRC are appointed by the chiefs of the various Telkom divisions. At the time of the award the members of the PRC were:

Name Level Functional Portfolio Responsibility of holder of the functional portfolio Marius Mostert Group Executive Network Infrastructure Provisioning Responsible for network technology strategy, planning, technical product development and all associated network infrastructure deployment Zethembe Khoza Group Executive Call Centre Operations Responsible for managing all contact points in which customers contact Telkom, such as call centres, Telkom Direct shops, commercial services and credit management Bashier Sallie Group Executive Information Operations Responsible for Enterprise Wide IT activities including infrastructure, architecture, application development, computer operations and support and internet services providers Anton Klopper Group Executive Legal Services Responsible for managing the provision of legal advice and assistance to various business units within Telkom Stafford Augustine (Chairman) Group Executive Procurement Services Responsible for overall management of procurement services encompassing strategic sourcing, management of outsourced entities, corporate support and BEE Roy Sherriff Executive Capital and Asset Management The compilation of the capital budget for inclusion in the company business plan. Support for investment decision making using business cases, funding for which is approved by a funding council. Capital funds allocation and accounting support to project managers for capital work in progress. Updating and maintaining the asset register and associated depreciation.

The Chairperson of PRC is the Group Executive: Procurement Services who must sign the letter awarding the tender after the relevant authority (either PRC or EXCO) has taken a decision to award the tender and recorded the decision in writing. The PRC meets every week. Its quorum is three members and decisions are taken by simple majority. The PRC must provide direction, guidance, advice and support to the CFST. It must review the CFST activities and assist the CFST to meet its objectives. The PRC functions include approving or supporting the final award of bids or recommending the final award of bids; approving recommendations on the shortlist of bidders and ensuring and monitoring compliance by bidders with Telkom’s procurement process.

(6) EXCO takes decisions to award a contract where the aggregate of payments expected to be made under the tender does not exceed R800 million. EXCO consists of all of Telkom’s Chief Officers. At the time of the award of RPF085/07 EXCO’s members were:

(i) Reuben September, Telkom’s Chief Executive Officer, the Chairperson;

(ii) Motlatsi Nzeku, Telkom’s Chief of Operations;

(iii) Thami Msimango, Telkom’s Chief of Global Operations and Subsidiaries;

(iv) Naas Fourie, Telkom’s Chief of Strategy;

(v) Peter Nelson, Telkom’s Chief of Finance;

(vi) Charlotte Mokoena, Telkom’s Chief of Human Resources; and

(vii) Ouma Rasethaba, Telkom’s Chief of Corporate Affairs.

(7) During November 2007 Telkom decided to publish RPF085/07 for the supply of Point to Point Split Mount Radio Equipment. The initial criteria included commercial and technical criteria which were prepared by CFST. Before RPF085/07 was published the RPF approved all the critical criteria and the weightings to be applied. In simple terms Point to Point Radio Equipment enables the wireless transfer of data from a single point to a single point. The equipment is essential for wireless connectivity within Telkom’s network where physical infrastructure such as copper or optical fibre cannot be employed.

(8) On 22 November 2007 RFP085/07 was published. It invited tenders for Point to Point Microwave Equipment operating in the frequency range L6GHz to 38GHz. The critical criteria to be met were stipulated in the invitation. It was a condition of the tender that all prospective bidders attend a bidders’ conference on 29 November 2007. The purpose of the conference was to enable Telkom and all prospective bidders to clarify the bid requirements. Representatives of Maredi, Ericsson, Telsaf and Mobax SA (Pty) Ltd (‘Mobax’) attended the conference. RFP085/07 is contained in a number of comprehensive volumes.

(9) Pursuant to the publication of RFP085/07, Maredi, Ericsson, Telsaf and Mobax submitted tenders. These tenders were then evaluated by the SME consisting of the following persons –

Person Service Organisation Responsibility James Wood Procurement Chairperson Christina Naidoo Procurement Commercial conditions Noncedo Mayikana Procurement BEE Sandra Malusi Procurement Life Cycle Costing Rajan Chetty Supplier Quality Supplier quality Giel Laubscher TSI Functional specification Ian Durston TSI Functional specification Paul Mulder TSI Network management system specification Luigi Pavona TSI Functional specification Clifford Ardendorff Capability Management Turnkey statement of work Innocent Matlala NBMC Program Management Turnkey statement of work Corne Nortje Network Strategy Life cycle costing Thembi Mazibuko TSI Management specification Trevor Schwikkard NNOC Maintenance and support Amith Samlal Davideen TSI Management specification Shaun Dick TSI Management specification Johan Boshoff NNOC Maintenance and Support Gerrie Opperman TSI Functional specification Henning Vallgraaff Supplier Quality Supplier quality

(10) The evaluation was done in four phases –

(i) Critical Criteria Evaluation and Short Listing – This is the so-called ‘paper evaluation’ and was done between 2 January 2008 and 18 January 2008. This involved comparing the content of the tender with the critical criteria required. Each tenderer completes and signs a Statement of Compliance stating that its bid complies with all critical criteria. The tender document is examined to see whether what is described complies with the critical criteria specified in the invitation to tender. Each bidder completes and signs a Statement of Compliance which states that its bid complies with all critical criteria. Unless the bidder complies with such criteria it will not qualify for inclusion in the short list. No other information is considered. Where possible the bidder’s claim of compliance with critical criteria is verified by reference to the supporting documentation. But where there is no evidence in the bid or supporting documents the declaration of compliance is accepted at face value. Actual physical compliance is assessed at a later stage. On this paper evaluation Maredi, Ericsson, Telsaf and Mobax were short listed. The short list was then submitted to CFST and PRC for approval, which they granted.

(ii) Evaluation and Scoring of Non-Critical Evaluation Criteria. - This was done between 14 January 2008 and 1 February 2008. Once again the content of the tender is compared with a predetermined scoring matrix established and approved by the CFST and the PRC before publication of the RFP. Maredi, Ericsson, Telsaf and Mobax all successfully passed this evaluation.

(iii) Preparation and Physical Evaluation – This comprises a physical technical evaluation of the equipment offered by the bidder. In this phase the bidder is required to demonstrate the equipment to the SME in accordance with a test plan. According to Telkom its test plan required the equipment to be set up for four different scenarios. Maredi disputes this and contends that it was only required to set up three. Maredi alleges that set up four fell outside the parameters of the tender. This dispute involves the one leg of the application for review and will be dealt with more fully later.) It is not in dispute that Telkom sent an explanation of the pre-determined test plan to all the short listed bidders: Maredi, Ericsson, Telsaf and Mobax. The object of this test plan is to determine whether the bidders actually comply with the technical critical criteria and the criteria of high importance. On 8 February 2008 Telkom communicated the test plan set-up to Maredi and all the other short listed bidders. The physical demonstration and evaluation of the equipment was to take place in accordance with an agreed schedule. Maredi, Ericsson and Telsaf requested extensions and Telkom granted only those requested by Maredi and Ericsson. The SME found that Maredi’s equipment did not comply with the technical criteria. Maredi disputes that its equipment was required to comply with the relevant criteria. As already mentioned this will be dealt with more fully later.

(iv) Clarification Session – On completion of the physical evaluation clarification sessions are held to clarify any uncertainty which arises with

regard to compliance with the technical critical criteria. Two such sessions were held with Maredi. The first session was to explain the questions put to Maredi for clarification and what was required by the SME in response to these questions. The second session allowed Maredi an opportunity to explain its written responses put by the SME in the first session. Only the SME evaluated the bids.

(11) On 21 May 2008, after completion of the evaluation, the SME prepared a memorandum containing the SME’s recommendation of the suppliers of choice. The memorandum describes the various evaluation phases already described in this judgment. Four bidders

were short listed and were referred to as bidder 1 (Maredi), bidder 4 (Mobax), bidder 7 (Ericsson) and bidder 9 (Telsaf). The SME concluded its comprehensive memorandum as follows:

‘The technical SME team recommends that:

Bidders 4, 7 and 9 are considered as the suppliers of choice based on the technical compliance BUT subject to acceptable costing.

Bidder 1 cannot be considered as a supplier at this particular point in time, since they did not fully comply with the critical criteria as on 20 December 2007 as per the bid documentation and as confirmed during subsequent clarification exercises. Compliance might however have been possible if the date of closing of the bid was June 2008.

Since bidder 7’s system is already deployed in the Telkom network, consideration should be given to the current investment in the installed base of equipment, network management solution, integration time and costs, training and spares.’

(12) At its meeting on 4 June 2008 the CFST considered the SME memorandum and resolved to accept the SME recommendation subject to certain qualifications including that the tender would be apportioned 60 % to Telsaf and 40 % to Ericsson and that this would be subject to change in the event that Ericsson reduced its services costs.

(13) On 5 June 2008 the CFST prepared its recommendation for the award to the PRC. The recommendation reads as follows –

‘In terms of clause 6.3.6.5 of the Delegation of Authority it is recommended that RFP085/07 be awarded in the following manner:

Bidder no 9, Telsaf Data, ranks first and bidder no 1 Maredi Telecom and Broadcasting ranks second based on the scoring with the LCC of all three scenarios taken into account. As indicated in paragraph 10.1 above however, effectively Maredi is eliminated based on non-compliance to critical criteria. Thus Telsaf Data ranks first and Ericsson second.

With Telkom already having Ericsson’s technology in the network it will facilitate the continuity with the provision of digital microwave links to the Mobile Cellular Operators while the new technology of Telsaf Date is being introduced.

Based on dual supply principles this business should be split between Telsaf Data and Ericsson in a 60 %/40 % ratio, respectively. However, the proviso should be that Ericsson align their turnkey costs to those as proposed by Telsaf Data. The business split will be adjusted accordingly based on the total costs for all three scenarios after Ericsson has revised their pricing.’

(14) Chief of Operations is required to approve the recommendation before it is made to the PRC. In this case the Chief of Operations did not immediately sign the recommendation. He first required that certain matters be clarified. On 6 June 2008 the Chief of Operations and Marius Mostert, the Group Executive: Procurement Services, met to discuss these matters. The Chief of Operations –

(i) wanted to be assured that Telkom was not being disadvantaged on costing;

(ii) wanted clarity on all critical criteria and areas of technical non-compliance;

(iii) wanted to be assured that the continued testing had no material impact on the final scoring.

With regard to (1), the primary concern was that the Life Cycle Costing (LCC) analysis did not take into account the support and maintenance costs outside the guarantee period. Each of the bidders offered different support and maintenance guarantees and the idea was to normalise the bidders for comparative evaluation purposes. Mostert undertook to take this up with Procurement Services. With regard to (2), Mostert clarified the scope of the technical critical criteria as well as the importance of having the required interfaces and capacity. He also explained to the Chief of Operations the applicant’s areas of technical non-compliance. With regard to (3), Mostert pointed out to the Chief of Operations that the test had commenced on 7 April 2008 but could not be concluded due to logistical problems and the tests were therefore considered to be inconclusive. The tests were not regarded as failed as they could not be performed. Recommencing the tests with functional test equipment therefore did not constitute an advantage to Ericsson. Mostert also emphasised the fact that the ranking pre and post the physical evaluation with Maredi disqualified due to non-compliance with critical criteria, still resulted in Telsaf and Ericsson as the successful bidders. Pursuant to further

questions posed by the Chief of Operations Mostert submitted to him two memoranda, one on 1 August 2008 and one on 22 August 2008.

(15) On 22 September 2008 the CFST prepared a recommendation for submission to the PRC which is the same as the recommendation it prepared on 5 June 2008 but did not submit.

(16) On 22 September 2008 the PRC considered the recommendation at a special meeting. The second extension granted to Ericsson to demonstrate its equipment was considered. The minute of the meeting records the following:

‘Mr Khoza referred the members to an e-mail sent by the Vice President of Ericsson to Ms Pahlane on the 11 April 2008 motivating the extension that was requested and stating the reasons for the extension as being wrong cables/equipment and indicated that the members approved the revised date for the testing on 9 April 2008 based on the technical report provided by Telkom’s technical team which indicated that the equipment was damaged/faulty and not wrong. The wrong equipment illustrates that Ericsson was not ready and should therefore not have been allowed the extension. He further indicated that the previous of the PRC to extend the testing date for Ericsson was based on the wrong or misrepresented information.

Mr Roodt enquired why the PRC Chairperson to whom the e-mail was addressed did not bring the matter to the members for discussion and why Ericsson was allowed to continue with the testing.

The Chairman requested suggestions from the members on how the matter should be addressed and thereafter suggested that the validity of the extension to Ericsson be investigated by internal audit to ensure that procedurally Ericsson was not given an unfair advantage with the approval of the revised testing date.

Mr Khoza required confirmation as to whether the recommendation will be resubmitted together with the audit findings.

The Chairman indicated that he would request for the internal audit to be completed by Friday 26 September 2008 and the recommendation will be presented together with the audit findings at the next PRC meeting.

All members agreed to above suggestion by the Chairperson.

Decision: Referred back for decision at the next PRC meeting including the internal audit findings.’

(17) On 1 October 2008 the internal auditor furnished his report to the Chairperson of the PRC. The report sets out the facts relating to Ericsson’s testing of the equipment as follows:

‘Procurement Services obtained approval from the Procurement Review Council (PRC) on 20 October 2007 to republish an open RFP 4 Point 2 Point Split Radio Equipment. The tender was published on 22 November 207 and on 24 January 2008 the short listed bidders were notified that Telkom would like to test their equipment.

Ericsson SA (Pty) Ltd chose to test with Telkom locally, the agreed date being 17 March 2008. The test date was moved to 7 April 2008 on request of Ericsson. On 7 April 2008 testing was hampered due to damaged equipment, faulty cables and misunderstandings by Ericsson’s staff as to what the testing should entail (problems that one would think should have been sorted out upfront given the significance of the contract and the additional extension in deadlines allowed before testing occurred). Testing was unsuccessful notwithstanding the fact that the Telkom evaluation team were very accommodating from what TIA can gather ito the documentation reviewed. Telkom requirements for the test scenarios were also clearly communicated. On 9 April 2008 the Vice President (VP) of Ericsson contacted Telkom requesting another extension to test and followed up with a letter on 11 April 2008 to the Chairperson of the PRC indicating that the testing should have been done abroad and that the wrong cables were shipped to SA. The PRC was concerned about granting an additional extension and referred the matter to Telkom’s Legal Department. Telkom’s Legal Department advised that Ericsson should be given a further (second) extension to bring their equipment to SA to do the testing.

This decision was based on an earlier extension for another bidder. Following this advice the PRC voted in favour of the extension and a letter was sent to Ericsson indicating the new test date of 7-11 May 2008.’

The auditor made a number of recommendations.

(18) On 2 October 2008 the PRC considered the report. The minute reflects the following in respect of RPF085/07:

‘5.1 Feedback: Recommendation to Award of RFP085/07 for the end to end solution of point to point mount radio equipment. Mr Marius

Mostert raised an issue WRT the fact that he was informed by a member of the SME team that they were labelled liars by a member of the PRS and that this was a seriously allegation. Mr Zethembe Khoza reaffirmed his statement and indicated that his view on this matter remain the same. The Chairperson indicated that this concern was noted.

The recommendation was presented for award by the CFST to PRC on 22 September 2008. Members were not in agreement with the recommendation by the CFST as it was believed that Ericsson’s final technical scores was as a result of a second approval granted by Telkom to Ericsson for testing which was based on faulty/damaged equipment vs Ericsson’s referral to wrong equipment.

This raised concerns regarding the validity of the extension granted to Ericsson and the impact thereof on the award.

Mr Augustine indicated that PRC members agreed to refer the matter to Telkom’s Internal Audit Division to ascertain whether the tender process was compromised by granting Ericsson additional time for the testing and revert back to the PRC with the intention of making a decision on the award. The audit findings were presented to members.

Minutes of the Special PRC held on 22 September were read and were accepted as true reflection of what was discussed at the meeting.

The internal auditor report from Audit Division was also circulated and discussed at length.

Based on the audit findings the members voted as follows:

Anton Klopper: Based on the current backlog in respect of facilities to the MCOs and VANS providers, supported a dual supply as per the recommendation presented by the CFST however for a two (2) year period only, with an option to extend for one (1) year.

Gary Reddy: The same as Anton Klopper however would like the split in business to be reviewed and increased with the bidder that provide the best price after the turnkey prices is finalised with Ericsson.

Marius Mostert: The same as Anton Klopper and emphasised the need for a dual supply to support Telkom’s market requirement and also informed the members that the test was inclusive based on the SME visit on 7 April 2008 and therefore had to be done on 6 May 2008 to obtain conclusive results.

Bruce Harbour: The same as Anton Klopper and Gary Reddy.

Zetheme Khoza: Supported a single supply award to Telsaf Data (Pty) Ltd since their proposal complied fully with all Telkom procedures and based on their pricing. Mr Khoza also indicated by granting the award to Ericsson will question Telkom ability to uphold its own policies and procedures as he believes that the process was not transparent with equitable treatment of all vendors; one PRC member was involved in discussion with a vendor during the process and that Maredi’s non-compliance was not material. He recommended that a faze-in faze-out approach should be adopted to bring the new supplier, Telsaf up to speed.

Stafford Augustine: The Chairperson informed members prior to requesting them to vote that when making a decision that their voting should be a business decision for Telkom, in the best interest of Telkom and also clarified with Anton Klopper as to whether the process could be defended in a court of law.

Based on Anton Klopper’s response that the process is defendable the Chairman supported a dual supply as per the recommendation represented by the CFST however for a two (2) year period only, with an option to extend for one (1) year.

To the point of Mr Khoza, Mr Mostert indicated that his interactions was only around the logistics of the testing as the international trip was not approved and that the finalisation of the testing was done in conjunction with Procurement. He also indicated that no unfair advantage was given to Ericsson as the first test was inconclusive.’

(19) On 8 October 2008 the Chief of Operations addressed the following letter to the Chairperson of the PRC:

‘I have feedback from one of my representatives in the PRC that reported to me serious anomalies and lack of transparency, failure to meet Telkom’s

policies and procedures, lack of equitable treatment to bidders.

He pointed out that these procedural anomalies are most certainly and materially damaging for Telkom. Among them he stated the following:

(1) Modification of specification after bid closure without consulting the Business Owner who approved the specification.

(2) Unfair and inequitable treatment of bidders by giving bidder(s) that fail tests a second opportunity without disclosure to others and without due consideration of equitable treatment.

(3) Possible tampering in procurement process by some of the PRC who talk, consult or advise bidders outside the process of tender while the tender is under evaluation.

(4) Possible misrepresentation and/or withholding of information to conceal the accurate picture of events and this influence the outcome of a tender adjudication process.

I need your response to this memo before Friday 10th October 2008 because I intend to table it in the EXCO of next Monday 13 October 2008.

Please be aware, that I don’t discuss the Procurement tenders and bid but need assurance from my representatives that the principle of fairness, equitable treatment and transparency are upheld in order to protect the company. Lastly, I signed the specification in my areas of responsibility to ensure that I can meet my deliverable. Compromise of these deliverables, specification and business

operational tactics compromise my success rate to deliver for customer, shareholders and others.’

(20) On 10 October 2008 the Chairperson of the PRC replied to this memorandum as follows:

‘Your memorandum dated 8 October 2008 under the same heading refers. I will address the issues raised in respect of the perceived anomalies in the PRC in point format.

1. Modification to specification after bid closure

The bid in question is the Construction Consolidation bid where the critical criteria for engineering works was relaxed since only two bidders, at that stage, would meet Telkom’s critical criteria under Engineering. The SME team submitted a request in order to mitigate the risk to Telkom and requested relaxation on one or two areas of the critical area under Engineering, so as to allow for greater participation of bidders to the benefit of Telkom. The relaxation was done in consultation with Legal Services and was applicable to all the bidding entities. No bidding entity was prejudiced through this relaxation. The Business Owner was represented at SME, CFST and PRC level.

Furthermore, the submission to EXCO fully discloses this relaxation and EXCO will have all the relevant information to enable them to either accept or reject the recommendation for award coming from the PRC.

2. Inequitable treatment of bidders – allowing ‘re-test’ without disclosure to other bidders

This issue refers to the fact that a specific bidder was allowed a second extension to do equipment testing. I need to add that another bidder was also given an extension to test their equipment. The second extension to allow for a further test date was previously granted by the PRC on 9 April 2008 after some intense discussions. The testing was then commenced on 6 May 2008.

The matter of allowing a second testing date to the said bidder was brought up again on 18 September 2008 and the PRC suggested that an audit should be done by Internal Audit to determine if the tender process was compromised and/or complied with in granting this extension.

The audit report indicated that Telkom should weigh up its reputational risk as far as not honouring their approval to allow testing by the bidder or to consider non-compliance to our internal policy which states that “a bidder/tenderer might be disqualified if the demonstration is late. Telkom reserves the right to extend the demonstration date. Applications must be submitted to Procurement in writing at least one week before the deadline.”

This testing arrangement between Telkom and the said bidder was based on a request from the bidder that was approved by Telkom and needed no further disclosure to any other bidder.

The PRC took cognizance of the audit report when they arrived at their recommendation to EXCO. This audit report and the testing by the said bidder are also disclosed in the submission to EXCO.

3. Possible tampering in Procurement process by some PRC members

This matter was also raised at the PRC and the member involved indicated that he was contacted by the bidder after the earlier inconclusive test and subsequent to the non-approval of the international testing. The member indicated that although his section is responsible for the equipment, he always referred the bidder to Procurement with respect to the logistics of conducting the test.

However, if strong evidence suggests any irregular behaviour by any PRC member, the matter can be referred to TARPS for further investigation.

Problems of this nature can be mitigated in future by having PRC members recusing themselves when bids for their environments are discussed.

4. Possible misrepresentation

I would only be able to respond effectively to this point when I have more information on the matter. If it refers to the matter of the cables used by the bidder during the testing, the minutes of the PRC held on 9 April 2008 was reviewed by the PRC and from this it was clear that active debate took place on the extension matter and that the decision to extend was properly discussed by the PRC before an extension of the test date to the bidder was granted. The allegation of misrepresentation by the SME team is serious and should be backed up with evidence so that proper action can be initiated internally.

I hope you will find the above explanations in order and would like to reaffirm that the PRC will always operate with the highest integrity and in the best interest of Telkom.’

(21) On 13 October 2008 the PRC prepared a recommendation for submission to EXCO. The PRC’s recommendation was as follows:

‘In terms of clause 6.3.6.4(c) of the Delegation of Authority this recommendation is submitted to the executive committee for approval to award RFP085/07 for the provision of End-2-End Solutions for Point to Point Split Mount Radio Equipment as follows:

To bidder no 9 (nine), Telsaf Data (Pty) Ltd and bidder no 7 (seven), Ericsson SA (Pty) Ltd who ranks first and second respectively.

Based on dual supply principles this business should be split between Telsaf Data and Ericsson in a 60 %-40 % ratio respectively. However, the proviso should be that Ericsson aligns their turnkey costs to those as proposed by Telsaf Data. The business split will be adjusted accordingly based on the total costs of all three scenarios after Ericsson have revised their pricing.

For a two (2) year period, with an option to extend for 1 year.’

(22) On 15 October EXCO considered the PRC’s recommendation and the minute reflects that –

‘With the exception of Mr Nzeku (i.e. the Chief of Operations) who had reservations concerning the testing, a conditional approval to approve the recommendation from Procurement to award RFP085/07 provisioning of End-2-End Solutions for Point to Point Mount Radio Equipment to Telsaf Data and Ericsson was granted. The Acting Chief of Finance had to request confirmation where Maredi stated that it had not met the technical criteria and report back to the CEO before unconditional approval was granted.

Concern as to changes to procurement processes and role of the business owner were expressed. It was agreed that:

1. A letter from the CEO be drafted addressed to Procurement where it must be emphasised that before any change to any rule is

implemented, that this be properly approved and the consequence of such a change be examined very carefully. Mr Fredericks to draft;

2. The business owner has an important role in the procurement process and also needs to take certain responsibility with the evaluation process. Mr Fredericks to resolve with Procurement;

3. Legal can not have a dual role within Procurement. It cannot be a part of the award decision making process and then provide an opinion as to that process. Adv Rasetaba and Mr Fredericks to resolve.’

(23) Pursuant to the decision taken by EXCO on 15 October 2008 Mr Deon Fredericks, the Acting Chief of Finance, reported back to the CEO in a memorandum dated 27 October 2008. Apart from verifying that Maredi had confirmed that it had not complied with the technical specifications, Mr Fredericks reported on two other matters: viz –

(i) Whether the extension granted to Ericsson for the purpose of testing its equipment invalidates the tender process; and

(ii) Whether the interaction between Mr M. Mostert, a member of the PRC, and a representative or representatives of Ericsson ‘impacted

negatively on the tender process’.

With regard to the question of whether Maredi confirmed that it did not comply with the technical specifications Mr Fredericks verified that Maredi conceded this and that non-compliance was confirmed by Telkom’s technical evaluation report. With regard to the extension granted to Ericsson Mr Fredericks observed that it is clear from the audit report of 1 October 2008 that the extension was not appropriate and that this was confirmed by a report from the evaluation team which made it clear that Ericsson was not ready to perform the test. Mr Fredericks nevertheless expressed the view that ‘in the light of the extension given to Ericsson we need to continue and cannot retract the approval now’. With regard to the interaction between Maredi and representatives of Ericsson Mr Fredericks reviewed the internal audit report which confirmed that the interactions had not influenced the extension granted by the PRC. Mr Fredericks’ conclusion was that EXCO could approve RFP085/07 as proposed by the PRC.

(24) In November 2008 Mr Fredericks met Mr September, Telkom’s CEO, to discuss the memorandum and on 20 November 2008 Mr September decided that the conditional approval of the PRC’s memorandum could be considered to be unconditional. On 1 December 2008 Telkom sent letters of award to the successful tenderers.

[12] In its heads of argument Maredi contends that it has established a very strong prima facie case and that this prima facie case is so strong that it need not show that the balance of convenience favours it strongly. In Maredi’s heads of argument Maredi deviates from the grounds set out in its founding affidavit and contends that it has shown that it has a very strong case that the decision to award the tender will be set aside on the following grounds:

(1) Telkom’s EXCO (and CEO) took their decision on the basis of a misrepresentation to them that the applicant admitted non-compliance with the technical critical criteria;

(2) Telkom’s decision not to award at least part of the tender to Maredi, on the basis that Maredi did not meet the requisite technical critical criteria, is vitiated by the fact that, in truth, it did meet those criteria; and

(3) The manner in which Telkom extended the dates for testing Ericsson’s equipment was procedurally unfair and demonstrated improper favouritism.

[13] For the first two grounds Maredi relies on s 6(2)(e)(iii) of PAJA; Swart v Minister of Law and Order and Others 1987 (4) SA 452 (C) at 479H-480D; Pepkor Retirement Fund and Another v Financial Services Board and Another 2003 (6) SA 38 (SCA) paras 47 and 48; Government Employees Pension Fund and Another v Buitendag and Others 2007 (4) SA 2 (SCA) paras 11 and 12; Chairpersons Association v Minister of Arts and Culture 2007 (5) SA 305 (SCA) para 48 and Hangklip Environmental Action Group v MEC for Agriculture Environmental Affairs and Development Planning 2007 (6) SA 65 (C) at 80G-82B. For the third ground Maredi relies on s 6(2)(a)(iii) of PAJA.

[14] It will be convenient to consider the first two grounds together. The first ground is based on Telkom’s own evidence and was not alleged in the founding affidavit. Maredi contends that the decision to award the tender was premised on the understanding by EXCO and Telkom’s CEO that Maredi had confirmed that its tender did not comply with the requisite technical specifications whereas in fact –

‘A dispute existed between the applicant and representatives of the third respondent as to whether or not features that the applicant’s tender admittedly lacked were features that were required, on a correct construction of the technical critical criteria.’

Maredi contends that for purposes of this ground –

‘The relevant issue is not the correctness of the applicant’s assertion that it complied with the technical critical criteria but the fact of the existence of a dispute as to this issue. EXCO sought an assurance that the applicant admitted its non-compliance and the tender decision was premised on an erroneous belief that it had done so. Had EXCO been aware of the

existing as to the proper interpretation of the technical critical criteria, it would have been called upon to determine whether the applicant was correct in its assertion in relation to this interpretation issue, but it never considered that issue because it had been misled as to the applicant’s stance.’

[15] The second ground is also based on an alleged dispute as to the specification with which Maredi was required to comply. These are set out in the specification for Point-2-Point Split Mount Radio Equipment (specification number SP-1659). The alleged issue is whether Maredi’s equipment was required to provide all the functions listed simultaneously or not. It is common cause that Maredi’s equipment cannot provide all the functions simultaneously. Maredi’s heads of argument summarised the central issue as follows:

’49. The question that arises for consideration is who has correctly interpreted the technical critical criteria specifications. Is the third respondent’s interpretation as encapsulated by Giel Laubscher’s summary on P1096 correct or is that of the applicant?

50. It is clear from a reading of section 7.2.1h that the platform must be able to support multiple interfaces and in addition must have a cross connect functionality.

51. The question arises whether it must be able to support the multiple interfaces while being utilized in the cross connect mode – 4 way or 8 way.’

[16] For these two grounds the applicant is largely dependent on the facts set out in Telkom’s answering affidavit which for present purposes must be accepted as correct. Maredi either cannot or does not dispute most of this evidence and relies on inferences and argument in its replying affidavit. The two witnesses are Mechiel Johannes Laubscher, Telkom’s Manager of Wireless and Electromagnetic Compatibility, who was part of the SME which tested the equipment and Deon Jeftha Fredericks, a chartered accountant, who is Telkom’s Group Executive: Corporate Financial Accounting Services.

[17] The following evidence by Laubscher is admitted by Maredi –

(1) He has been employed by Telkom since 1984 and since then has had substantial experience in Transmission and Microwave the technology relevant to the tender. While working for Telkom he has received considerable technical training and he has been registered as a professional technologist with the Engineers Council of South Africa since 1999;

(2) In about 2006 he was involved in compiling the technical specifications, including SP-1659 (which contains the contentious items, 4, 6, 8 and 10) for the tender. Spec – 1659 covers the technical requirements for the equipment involved in the tender;

(3) The tender was published for Point-2-Point Microwave Equipment making use of a Multi Server Provisioning Platform (MSPP) capable of interfacing with PDH, SDH, and Ethernet with the future inclusion of Native Ethernet Capability. Telkom’s business objective was to acquire a solution that would suit its needs by being more cost effective and efficient: e.g. by simplifying the installation and maintenance by having an MSPP solution which meets the specification requirements of SP-1659;

(4) On 29 November 2007 Telkom had a bidders’ conference to give Telkom and bidders an opportunity to clarify the bid requirements. Maredi’s representatives attended and participated at the conference. Laubscher gave a presentation at the conference and explained all technical aspects fully;

(5) In the Life Cycle Costing Telkom instructed the bidders to list all the equipment offered in the tender;

(6) The SME evaluated Maredi’s bid in four phases –

(i) Between 2 January 2008 and 18 January 2008 SME conducted a paper evaluation. In this phase Telkom relied on the information presented by the bidder and accepted it as correct without testing the truthfulness or accuracy thereof. In order to qualify for inclusion in the shortlist a fully compliant statement against all critical criteria was required;

(ii) Maredi submitted one offer which included the NEC Pasolink Neo. Maredi indicated full compliance with all Telkom’s technical critical criteria. During the paper evaluation phase Telkom relied on the answers given by bidders. The statement (correctness) is only tested later;

(iii) Based on Maredi’s written responses to the technical critical criteria in the tender conditions Maredi was short listed for further participation;

(iv) Between 14 January 2008 and 1 February 2008 the SME conducted a second paper evaluation which involved scoring technical non-critical criteria against a pre- determined scoring matrix;

(v) The third phase involved furnishing each short listed bidder with Telkom’s requirements of the configurations to be tested. On 8 February 2008, at a clarification session, Telkom explained the test configurations to the short listed bidders. The tests are designed to determine whether the short listed bidders actually comply with the technical critical criteria and the criteria of high importance. Telkom communicated the test configuration to Maredi and all the other short listed bidders. On 14 February 2008 Maredi acknowledged receipt of the test configuration by e-mail. In this e-mail Maredi indicated that it would not be able to comply with test setup 4 of Telkom’s test configuration at the time of testing and that the Neo Enhanced Nodal (which was not offered when the bid closed) would only be available in June 2008;

(vi) Between 31 March 2008 and 4 April 2008 in the fourth phase, SME conducted the physical testing of Maredi’s equipment. This involved the physical testing of the equipment based on the four test setups which Telkom had communicated to Maredi;

(vii) Maredi’s equipment was found to be satisfactory in the tests for setups 1 to 3. However Maredi’s equipment was found to not comply with Telkom’s requirements when tested in setup 4;

(viii) On completion of the evaluation phase Laubscher prepared a table depicting Maredi’s failure to comply with the critical

criteria;

(ix) After the evaluation phase was completed clarification sessions were held to enable Telkom to clear up any remaining uncertainties in respect of compliance with the critical criteria. These clarification sessions involved written questions and answers. During the clarification session held on 20 May 2008 Maredi indicated that its equipment did not comply with the functionality required in respect of SP-1659 para 7.5.1 a, c, d, e and g. Furthermore, in a letter dated 27 May 2008 addressed by Maredi to Telkom, Maredi stated that ‘the SDH Nodal solution one box equipment will be available in June 2008.’ Laubscher states that this was non-compliance with an MSPP solution (i.e. SP-1659 para 7.3.2.1(h)(i), (ii) and (iii));

(x) The SME found that Maredi’s equipment was non- compliant with the technical critical criteria and was accordingly disqualified from the tender. This is reflected in the SME’s recommendation to the CFST, the CFST’s recommendation to the PRC and the PRC’s recommendation to EXCO;

(xi) Laubscher has no personal interest in the testing that was conducted or in the award of the tenders to any of the bidders. Furthermore, the SME team executed its mandate professionally and impartially. Its function was to test the equipment offered in each short-listed bid documents in a professional and unbiased manner. This was done in respect of each of the short-listed bidders. (As appears from the personnel listed above, when the SME evaluated the tenders it consisted of 19 members of which Laubscher was one.).

[17] The following evidence of Fredericks is not or cannot be disputed by Maredi –

(1) When the tender was awarded he was one of the members of Telkom’s EXCO. (The other members are listed above. With Diedericks they are number 7 and include all of Telkom’s chief officers.) He conducted the investigation requested by EXCO at its meeting on 15 October 2008;

(2) On 15 October 2008 EXCO provisionally accepted the recommendation of PRC to award RFP085/07 to Telsaf and Ericsson subject to the Acting Chief of Finance (Diedericks) obtaining confirmation that Maredi had stated that it had not met the technical criteria. On such confirmation being provided to the CEO (September) PRC’s recommendation would be unconditionally accepted. (My paraphrase of the EXCO minute, annexure DF2 at p429);

(3) Diedericks investigated whether Maredi had stated that it did not comply with the technical criteria and reported to the CEO by means of a memorandum dated 27 October 2008. Diedericks had to report to the CEO to satisfy the CEO that Maredi had confirmed (in its own documentation) that it had not complied with all the technical specifications;

(4) In addition to the matters referred to in the minute Diedericks was required to consider whether the extension granted to Ericsson for demonstrating its equipment invalidated the tender process. During his investigation Diedericks also considered whether the interaction between Marius Mostert and a representative or representatives of Ericsson impacted negatively on the tender process;

(5) In his memorandum to the CEO Diedericks confirmed that Maredi had stated that it did not comply with all the technical specifications and that this was in accordance with Telkom’s technical evaluation report; that although the extension granted to Ericsson was not appropriate in the circumstances, approval had been granted and it could not be withdrawn and that although one member of management had interacted with Ericsson this did not influence the extension granted by the PRC. Diedericks concluded that Telkom could accept the PRC’s recommendation to award the tender to Telsaf and Ericsson;

(6) The technical evaluation report dated 21 May 2008 was prepared by the SME team and states the following with regard to Maredi’s non-compliance with items 6 and 10 of SP-1659:

‘Items 6 & 10: The aggregation node offered as the Nodal concept is a 2 way DXC card, and was not used for demonstrating test setup 4. This card does not have an STM-1 interface on the unit as required by Spec 1659 par 7.2.1h(i). Impact of this non-compliance is very limited capacity.

The solutions tested in setup 4 was not offered in the bid, it will be commercially available in June 2008 according to the road map information received in February 2008. At the time of testing no Ethernet interface was available on this card as required by Spec 1659 par 7.2.1h(i). Non-compliance to this criterion will put Telkom in a position where we will not be able to comply with the latest MCO requirements iro backhauling.

Bidder 1 provided a Neo Nodal for testing but was not offered in the bid documentation. A Neo Enhanced Nodal chassis was available for viewing only – it could not be powered up and the functionality could not demonstrate in any way.

Item 6: A single platform is required which offers converged services in order to enable Telkom to grow into an NGN environment seamlessly. This type of solution is very flexible and scalable to allow for network evolution and growth. The initial cost of this solution is higher compared to a standalone microwave system, but it becomes more cost effective as the demand for more capacity at a site grows. Growing the site will only require the addition of outdoor units, antennas, modem cards, interface cards and licenses as necessary – all indoor infrastructure (including the sub-rack, the controller cards, element management connectivity, power supplies, power cabling, and floor space) have already been included in the initial SAPEX cost. The system offers a pay as you grow option. This platform will also reduce OPEX costs as it allows for remote traffic configuration and routing.

If all the required interfaces cannot be provided on one platform, it implies that additional equipment needs to be purchased to satisfy the interface and cross connect requirement. This additional equipment (such as an Ad Drop Multiplexer) will increase the cost to Telkom (additional training, spares holding, Element Management System connection) as well as introduced more potential points of failure.’

1.3.6 result subsequent to second clarification session.

1.3.6 Bidder 1 – Although the bidder claims compliance, no evidence could be found that supported the claim that the equipment was in fact offered in the bid. This response given is in spite of it being stipulated during the clarification session that the bidder must reference Volume, page and paragraph to substantiate a claim of compliance.

According to the technical SME team and the LCC team, bidder 1 did not offer the Paso link Neo Nodal as no technical references as stipulated during the clarification could be found and no costing information was furnished. In addition, no critical criteria SOC or any other SOCs were submitted for the Paso link Neo Nodal. The bidder replied that they did offer this solution but still did not provide references to substantiate their claim. Please refer to annexure A question 3 bullet 1.’

1.3.7 Explanation of non-compliances with respect to table 4 (also referenced in table 7)

1.3.7 Bidder 1

Item 10 The specification requires STM-1 and gigabit Ethernet interfaces (items e and g respectively). The bidder states the following for the 2 Way DXC which was offered and costed: … as for items e and g does not warrant the air interface in this configuration which is a maximum of 100 MBit/s’ Please refer to annexure A question 2. Please note that the 2 Way DXC expandable card which is used in the Paso Link Neo Nodal, can be interconnected with each other to form an 8 Way System but this card was not offered in the LCC or technically (also no reference given as stipulated during the clarification session). The 2 Way DXC card does not have this function. It is thus clear that the bidder indicates non-compliance to the requirement of an STM-1 and Gigabit Ethernet interfaces based on the “maximum 100 MBit/s” statement.

In addition, the bidder also indicates non-compliance to the critical criteria in accordance to Annexure A paragraph 3, bullet 4, that no Ethernet interfaces are available on their Paso Link Neo Nodal at this point in time but will be available in June 2008.

Recommendations

The technical SME team recommends that:

…

Bidder 1 cannot be considered as a supplier at this particular point in time, since they did not fully comply with the critical criteria as on 20 December 2007 as per the bid documentation and as confirmed during subsequent clarification exercises. Compliance would however have been possible if the date of closing of the bid was June 2008’

[18] Laubscher’s and Diederick’s evidence is supported by contemporaneous documents whose contents have not been disputed. With regard to Maredi’s first ground, which is not a ground relied upon in the founding affidavit. It is striking that –

(1) During the clarification session held on 20 May 2008 Maredi’s representative conceded that it did not comply with certain

critical criteria. In Maredi’s replying affidavit, Maredi admits that its answers given at the clarification session created

the impression that Maredi conceced that because the 2 way Card did not support converged services and multiple interfaces

simultaneously and because the Paso Link Neo Nodal that was offered to Telkom’s test team did not have Ethernet interfaces, the tendered product did not comply with the critical criteria (replying affidavit p1209 para 17.8-1211 para 17.16).

(2) When Maredi allegedly discovered this erroneous response, on 27 May 2008 it addressed a letter to Telkom in which it said ‘the proposed equipment from Maredi/NEC does meet all Telkom’s critical solution criteria and hence the fact that we conducted the testing in Japan successfully … in all 3 scenarios that was requested which are in line with the tender specifications Maredi/NEC do comply fully with each piece of equipment requested … The roadmap that was submitted, for the non- critical requirements, to Telkom during the clarification indicated that the SDH Nodal solution one box type equipment will be available in June 2008 (annexure TU13 p315);

(3) This letter does not allege that Maredi erroneously answered the questions at the clarification session or how this error arose, that Maredi disputes that it required to deliver equipment which could perform according to setup 4 and could perform according to the tender requirements.

There is accordingly no basis for finding that Diecericks erred for holding that Diedericks erred in finding that Maredi did not comply with the critical criteria. Even if Maredi is committed to rely on the first ground it is not borne out by the evidence.

[19] With regard to the second ground the key issue is the correct interpretation to be given to SP-1659. Maredi concedes that if Telkom’s interpretation is correct Maredi’s equipment did not comply with SP-1659 in all respects.

[20] The main difficulty for Maredi to overcome is that in terms of clause 4 of the Proposal Conditions for RFP085/07 Maredi was obliged to accept Telkom’s interpretation of any specific requirement in the RFP document if there was a difference of interpretation between Maredi and Telkom. In view of this provision there is no room for Maredi to contend now that its interpretation is correct and Telkom’s is not. Furthermore, the following object facts militate against a finding that Maredi’s interpretation is correct:

(1) At the bidders conference Maredi was entitled to question the requirements of the tender. It did not do so. Laubscher testified that Telkom’s requirements were fully explained at the conference. Maredi’s replies are a bald denial;

(2) After the bidders were short-listed Telkom sent to each short listed bidder its requirements of the configurations to be tested. Maredi did not object to setup four and to sate that the equipment was not required to perform in accordance with setup 4;

(3) At a clarification session held on 8 February 2008 Telkom explained these test configurations to Maredi and the other short listed bidders. Maredi did not object to setup 4 and state that the equipment was not required to perform in accordance with setup 4. Maredi’s bald denial that the test configurations were not explained is not convincing. Maredi’s e-mail to Telkom dated 14 February 2008 (MJL 6 p 1045-1046) states that it will be able to have test setups 1, 2 and 3 ready for SME to evaluate; that with regard to test setup 4 the fully functional setup (i.e. the Neo Enhanced Nodal) will be ready by June 2008. The e-mail concludes by saying:

‘It is our understanding that due to the fact that in specification 1659 there was no clear requirement for such a product but we do recognise that in the clarification meeting it was mentioned to such “additional requirements” must be available within 6 moths to which we will comply’;

(4) At the clarification session held on 20 May 2008 after testing Maredi’s representative conceded that Maredi’s equipment did not comply with all applicable critical criteria. There is no suggestion in the record that Maredi objected to Telkom’s interpretation of the specification;

(5) After Maredi allegedly discovered that this concession was wrong it did not convey this to Telkom or explain how the error arose and allege that Telkom’s interpretation was wrong;

(6) There is no indication in the papers that any other short-listed bidder had difficulty in interpreting the specification as Maredi allegedly does;

(7) Two other short-listed bidders Mobax and Ericsson were able to perform setups 1 to 4 during the test phase;

(8) Maredi raises the interpretation of the specification as a substantive issue only after its tender was not accepted.

[21] In view of Telkom’s evidence and the probabilities disclosed by the objective facts Maredi has a very weak case in respect of the second ground.

[22] With regard to the third ground it seems clear that whatever the reason, whether it be faulty test equipment or faulty tender equipment, Ericsson failed the physical test phase and for that reason alone should have been disqualified from the tender. It also seems clear that there were improper communication between Ericsson and Marius Mostert which probably resulted in Ericsson having a second opportunity to demonstrate its equipment. For present purposes it will be accepted that this is so. It will also be accepted that this shows bias in favour of Ericsson on the part of Telkom and that this is procedurally unfair vis-à-vis the other short-listed bidders who were not disqualified: Telsaf and Mobax. Nevertheless, in my view, this does not warrant the grant of interim relief in favour of Maredi. The reasons for this are threefold:

(1) Maredi’s case on the first and second grounds is very weak: i.e. there is little or no likelihood that Telkom’s decision to exclude Maredi will be set aside;

(2) Neither Telsaf nor Mobax seeks an order that the award of the tender to Telsaf and Ericsson be set aside;

(3) The decisions to extend the date for the testing of Ericsson’s equipment and effectively give Ericsson a second opportunity to demonstrate its equipment were taken by PRC which is authorised to take such decisions. These decisions are substantive decisions which should have been the subject of attack in the review.

[23] In addition, as already pointed out the balance of convenience heavily favours Telkom and not Maredi. During argument Maredi’s counsel conceded that unless the court found that Maredi has a very strong prima facie case it would not be entitled to interim relief. A last and not unimportant factor which weighs with me is that Maredi approached the court with a case based on documents that seem to have been wrongfully or unlawfully obtained from Telkom. Telkom and Ericsson

pertinently requested that Maredi explain where it obtained these documents and Maredi failed to do so. The obvious inference is that Ericsson and Telkom’s contention is correct: that Maredi obtained the documents by some wrongful or unlawful means. I am hesitant to assist an applicant who approaches the court for relief in these circumstances.

Order

[24] The application for interim relief in terms of Part A of the notice of motion is dismissed with costs, such costs to include the costs consequent upon the employment of two counsel by each of the first and third respondents.

_______________________­

B.R SOUTHWOOD

JUDGE OF THE HIGH COURT

CASE NO: 597/09

HEARD ON: 20 February 2009

FOR THE APPLICANT: ADV. A.J. FREUND SC

ADV. M. SMIT

ADV. M. SELLO

INSTRUCTED BY: Mr. J. Feris of Cliffe Dekker Hofmeyr Inc.

FOR THE FIRST RESPONDENT: ADV. D.N. UNTERHALTER SC

ADV. A. COCKRELL

INSTRUCTED BY: Mr. D.M. Pretorius of Bowman Gilfillan

Attorneys

FOR THE THIRD RESPONDENT: ADV. D.A. PREIS SC

ADV. C. WOODROW

INSTRUCTED BY: Mr. G.K. Hay of Mahlangu Inc.

DATE OF JUDGMENT: 17 April 2009