Mngomezulu and Mistry Inc v MEC for Health: N.W Province and Another (M449/2016) [2019] ZANWHC 18; [2019] 3 All SA 796 (NWM) (20 March 2019)

IN THE NORTH WEST HIGH COURT

MAHIKENG

CASE NO. M449/2016

In the matter between:

MNGOMEZULU AND MISTRY INC Applicant

and

THE MEC FOR HEALTH: N.W. PROVINCE 1ST Respondent

DRS MOTSHUDI, KEKANA AND PARTNERS 2nd Respondent

RADIOLOGISTS INC

DATE OF HEARING :

08 FEBRUARY 2019

DATE OF JUDGMENT :

20 MARCH 2019

FOR THE APPLICANT :

Adv. S Freese

FOR THE RESPONDENT : Adv. M Gumbi

JUDGMENT

KGOELE J

[1] The applicant launched an application in terms of the Promotion of Administrative Justice Act 3 of 2000 (PAJA) in relation to a tender which was issued by the first respondent (“the Department”) for the provision of tele-radiology services in the North West Province. Such services pertain to the transmission of radiological images (i.e. x-rays) from the site where they are taken to allow an off-site radiologist to read and report on the image.

[2] The application revolves around the decision of the Department to split the tender for five sites between the applicant (which was awarded three sites) and the second respondent (which was awarded two sites); and also to pay the second respondent a substantially higher price for the same services as those rendered by the applicant.

[3] The tender was awarded for a period of three years, commencing on 1 April 2016. The contract will accordingly run until end March 2019.

[4] The application was first set down for hearing on 19 April 2018. It was postponed several times for various reasons, as a result the applicant filed an amended notice of motion to cater for the delay and inter alia sought the following:-

4.1 The reviewing and setting aside of the decision to award part of the tender to the second respondent; alternatively, the decision

to pay the second respondent more than the applicant (referred to as the pricing decision). Such relief is catered for in section 8(1)(c) of PAJA.

4.2 The substitution or varying of the administrative action or the defect resulting from it, by ordering the applicant to provide to the Department those services previously provided by the second respondent for the remainder of the contract (i.e. a period of just under 6 months). Such relief is catered for in section 8(1)(c)(aa) of PAJA.

4.3 An order directing the Department to compensate the applicant for the losses and prejudice that it suffered due to the impugned decisions. Such relief is catered for in section 8(1)(c)(bb) of PAJA.

[5] At the hearing of the application, the applicant further sought an amendment relating to the last prayer dealing with compensation through a suggested draft order which was couched as follows:-

“1.The decision of the first respondent to award tender NWDOH18/15 for the provision of tele-radiology services (“the tender”) to the applicant and the second respondent jointly (“the decision”) is unlawful.

2. The aforesaid decision is hereby reviewed and set aside.

3. The applicant is entitled to just and equitable compensation in

accordance with section 8(1)(c)(ii)(bb) of the Promotion of Administrative Justice Act 3 of 2000.

4. The following issues are referred to viva voce evidence (“the

hearing”):

a. The quantum of the applicant’s loss of profits that it would have made:

i.

had the applicant been awarded the tender for all five tele-radiology sites, as opposed to the three sites it was awarded;

ii.

had the applicant provided the same services at the additional sites that the second respondent performed over the duration of the contract awarded to the second respondent; and

iii.

at the same rates at which the applicant provided services to the first respondent at the three tele-radiology sites it was awarded.

b. The quantum of the applicant’s loss of profits that it would have made in relation to the three tele-radiology sites it was awarded by the first respondent:

i.

If the applicant had been able to apply the same economies of scale across the three sites that it would have been in a position to apply across five tele-radiology sites.

c. The amount of compensation that is just and equitable on the facts of this matter.

5. Should any party wish to lead the evidence of any person who has not deposed to an affidavit in these proceedings, that party shall submit an affidavit containing a summary of such person's evidence, together with any documents upon which they rely and shall do so at least 15 days prior to the hearing.

6. Whether a party is entitled to call any witness who has not presently deposed to an affidavit will be determined by agreement between the parties, failing which on application to the court at the hearing of the matter.

7. Within 20 days of the making of this order, each of the parties shall make discovery on oath, of all documents relating to the issues referred to above, which documents are, or have at any time been, in possession or under control of such party.

8. Such discovery shall be made in accordance with Rule 35 of the Uniform Rules of Court and the provisions of that Rule with regard to the inspection and production of documents discovered shall be operative.

9. Either party may subpoena any person to give evidence at the hearing, whether such person has consented to furnish a statement or not.

10. The fact that a party has served a statement or has subpoenaed a witness, shall not oblige such party to call the witness concerned.

11. The first respondent is to pay the applicant’s costs.”

[6] The only party that opposes the relief sought is the Department because the second respondent did not file any papers. The essential chronological factual background which is common cause between the parties is as follows:-The Department advertised a tender for the provision of tele-radiology services in the North West Province on the 28 August 2015. The tender was to be awarded for a period of three years at five hospital sites in the Province. Following that invitation, the applicant and the second respondent submitted their bid applications which were then considered together with four others. Only the applicant and the second respondent qualified to move to the next round and the other four bidders were eliminated having failed to meet the minimum requirements.

[7] The remaining two bids then served before the Bid Evaluation Committee (BEC) for the next evaluation phase, the Technical specification requirements. The BEC assessment was to the effect that none of

the two bids were successful as each had failed to meet the requirements in different respects, and for that reason recommended

to the Bid Adjudication Committee (BAC) that the tender be re-advertised.

[8] I pause here to indicate that the failure by this two bids to meet the requirements were recorded as follows:-

· For the second respondent : Scored below the minimum threshold 14/30;

· For the applicant : Did not quote for after hours – Mammograms & screening procedure, thus not responsive.

[9] The BAC approved this recommendation and also recommended same to the Head of Department (HOD) Dr Lekalakala, who did not approve the recommendation, but requested that the two bids be re-evaluated, and that the Radiology Technical Evaluation team should invite the two bidders for presentation wherein the bidders should clarify the information that is not clear regarding mammograms. He further indicated therein that tele-radiology, capability and the radiology element is to be left out and the fair total functional score should be 20.

[10] The presentations by the applicant and the second respondent were done on 18 January 2016. On 26 January 2016, a special meeting of the BEC took place at which applicant and second respondent were re-evaluated, and the BEC resolved to submit the bid to the BAC for adjudication.

[11] On 23 February 2016, the BAC met to adjudicate the re-evaluated bids, and importantly, adopted the following resolution which appears on page 20 of the record, to the effect that the bid should be awarded to the applicant for the whole Province (i.e. for all five sites): It was couched as follows in item 4.4.6 of the Minutes of their meeting:-

“Departmental Bid Evaluation Committee: Re-evaluation report NWDOH 18/2015: Provision of expert radiology services through tele-radiology

interaction to the North West Department of health for a period of three (03) years.

RESOLUTION 4.4.6

The Departmental Bid Adjudication Committee recommends to the Head of Department that the bid be awarded to Mngomezulu & Mistry Inc as the most responsive bidder that scored the highest points. Motshudi Kekana & Partners Radiologists Inc.’s prices are high and therefore the DBAC requests appointment of Mngomezulu & Mistry Inc for the whole Province.”

[12] It is also common cause that the applicant achieved the highest number of points after this re-evaluation. The HOD instead of approving the BAC’s recommendations as it was, decided to split the tender between the applicant and the second respondent.

[13] On 29 February 2016, the Department wrote to the applicant and advised applicant that it was the successful bidder but only at three of the five sites identified in the tender. This came as a surprise to the applicant. It was only in the meeting held on the 22 March 2016, that the applicant was advised that a second bidder, the second respondent had been awarded those sites which had not been awarded to applicant. The applicant was also advised that the pricing of the second bidder, particularly its pricing for CT Scans, was “substantially higher” than that of the applicant. Aggrieved by this decision, the applicant launched this review application.

[14] The applicant contends that the Department’s decision falls to be set aside on the grounds of non-compliance with:-

1. Section 2(1)(f) of the Preferential Procurement Policy Framework Act 5 of 2000 (PPPFA) and

2. The terms of the tender invitations itself.

The applicant relied on Sections 6(2)(a)(i), 6(2)(b), 6(2)(e)(vi), 6(2)(f)(i) and 6(2)(f)(ii)(bb) of PAJA.

[15] The grounds for the review as set out by the applicants are predicated on the fact that:-

15.1 the Department was not authorised in terms of section 2(1)(f) of the PPPFA of the invitation to tender to award the tender or any part thereof to the second respondent. The Department therefore failed to comply with the mandatory requirements of section 2(1)(f) of the PPPFA and the invitation to tender in that it failed to award the tender to the bidder who scored the highest number of points;

15.2 the Department was not authorised in terms of the 2011 PPPFA regulations or the invitation to tender to award the tender to more than one bidder;

15.3 the Department’s decision to award part of the tender to the second Respondent (Regulations) and to pay the second respondent a higher price for the services than it was required to in the circumstances, is a decision which is arbitrary and/or capricious and not rationally connected to the purpose of the Preferential Procurement Policy Framework.

[16] The legal principles applicable to the award of tenders are trite and well established. Section 217(1) of the Constitution of the Republic of South Africa, 1996 (“the Constitution”) provides that an Organ of State must contract for goods in accordance with a system which is fair, equitable, transparent, competitive and cost effective. Section 217(3) requires national legislation to prescribe a framework within which a procurement policy may be implemented. The legislation contemplated in Section 217(3) of the Constitution is the PPPFA.

[17] The bid invitation issued by the first respondent stated that the conditions contained in the PPPFA and the 2011 PPPFA Regulations (the Regulations) (amongst other things) applies to the tender. Section 2(1) of the PPPFA provides in relevant part as follows:

“2. Framework for implementation of preferential procurement policy.—

(1) An organ of state must determine its preferential procurement policy and implement it within the following framework:

(a) A preference point system must be followed;

(b) (i) for contracts with a Rand value above a prescribed amount a maximum of 10 points may be allocated for specific goals as

contemplated in paragraph (d) provided that the lowest acceptable tender scores 90 points for price;

(ii) for contracts with a Rand value equal to or below a prescribed amount a maximum of 20 points may be allocated for specific goals as contemplated in paragraph (d) provided that the lowest acceptable tender scores 80 points for price;

(c) any other acceptable tenders which are higher in price must score fewer points, on a pro rata basis, calculated on their tender prices in relation to the lowest acceptable tender, in accordance with a prescribed formula;

(d) the specific goals may include—

(i) …

(ii) …

(e) any specific goal for which a point may be awarded, must be clearly specified in the invitation to submit a tender;

(f) the contract must be awarded to the tenderer who scores the highest points, unless objective criteria in addition to those contemplated in paragraphs (d) and (e) justify the award to another tenderer; and

(g) …”

[18] A summary of Section 2(1) of the PPPFA is to the effect that:-

18.1 Any specific goal other than price which is to be taken into account in awarding the tender must be clearly specified in the invitation to submit a tender; and

18.2 the contract must be awarded to the tenderer who scores the highest points, unless objective criteria justify the award to another tenderer.

[19] Item 11 of the Regulations provides:-

“11. Award of contracts to tenderers not scoring highest points:-

(1) A contract may be awarded to a tenderer that did not score the highest points only in accordance with Section 2(1)(f) of the Act

(2) If an organ of state intends to apply objective criteria in terms of Section 2(1)(f) of the Act, the organ of state must stipulate the objective criteria in the tender documents.”

Impermissible splitting of the tender

[20] The argument of the applicant is that the statutory framework envisages only one successful bidder being awarded the tender as section 2(1)(f) of the PPPFA provides that the contract must be awarded to the tenderer who scores the highest points. Same goes with Regulation 6(5) of the Regulations.

[21] It is furthermore the submissions of the applicants that even the Department’s own bid documents envisages only one successful bidder being awarded the tender as per paragraph 3.1 of the preference points claim form. It also deals with an event when two or more bids scoring equal points and in paragraph 3.4, 3.5 and 3.6 thereof.

[22] The gravamen of the applicant’s submissions is therefore that, the mandatory requirements of the bid invitation, the PPPFA and its accompanying regulations to award the tender to the highest point scorer, were not adhered to.

[23] It was submitted by the Department that the application of the applicant is wholly without basis for the simple reason that when regard is had, amongst other things, to item 8 of the bid invitation document which makes it clear that the Department reserves the right to accept any bid in whole or in part, and does not bind itself to accept the lowest, or any bid in whole and price alone is not a determining factor.

[24] This item alone, so says the Department, ought to be dispositive of this application with the result that this application ought to be dismissed with costs. This is especially so because, their argument continued, when regard is had to this item, it would seem that the first respondent, when drafting the invitation bid, had anticipated a situation akin to the one that arose in circumstances where it might have to split the bid. Hence, it specifically included the item and thereby acting within the provisions of the PPPFA.

[25] Advocate Gumbi appearing on behalf of the Department argued further that, the tender was split in line with item 8 of the bid invitation so as to minimize the risk of having only one service provider in rendering of the expertise services as indicated by the deponent to the answering affidavit of the Department, and it was well within the powers of the HOD, who is the accounting officer of the Department, to exercise his discretion in awarding the tender to two bidders. According to him, there was absolutely nothing wrong with the splitting. He submitted that item 8 should be interpreted purposively by reading together the provision of the PPPFA and the Regulations to be able to understand the reasoning of the HOD of splitting the tender.

[26] The other leg advanced by the Department in seeking to oppose the application is that it did split the tender because to adopt a strict point scoring system as it were, would amount to closing the door to the new entrance in to the market and thereby restricting their right to economic trade which files in the face of the Constitution.

[27] In reply to these arguments Advocate Freese appearing on behalf of the applicant argued that, Clause 8 of the bid invitation cannot be read to have the effect contended for by the Department. Further that, the bid invitation document did not mention as a criteria that the risk of having one service provider and that of excluding new entrants to the market will be taken into consideration during the evaluation of the bids.

[28] Further that, stipulating this as a requirement would be mandatory in terms of Section 2 (1) (e) of the PPPFA, which provides that any specific goal for which points may be awarded, must be clearly specified in the invitation to submit a tender.

[29] Lastly that, the process followed in awarding the tender was also not fair because Ad-hoc criteria which are not objective and which were not mentioned in the bid invitation were introduced after-the-fact to favour a party who scored lower in points. This was a shifting of the goal-posts. According to him, the decision to split the tender was not rationally connected to the purpose of the process, which was to obtain the most competitive contract pricing for the services, with due regard to the points system.

[30] The law relating to Procurement has been well established in our Country. In the case of Dr J S Moroka Municipality and Others v Betram (Pty) Limited and Another 2014 (1) All SA 545 (SCA) it was remarked by the Supreme Court of Appeal (SCA) that Procurement law is prescriptive precisely because the award of public tenders is notoriously prone to influence and manipulation.

[31] Bolton in his book “The Law of Government Procurement in South Africa, 2007 edition, at page 182 paragraph 2.4 said the following:-

“Tenderers prepare their tenders based on the specifications laid down in a call for tenders. As a general rule, therefore an organ of state should not be allowed to make changes to tender specifications after a call for tenders has been advertised. It is in the interest of fairness and transparency (and also competitiveness for organs of state to abide by the tender specifications initially provided”.

[32] Lastly in paragraph 3.1.1 she remarked:-

“The PFMA Regulations provide that tender documentation must ‘include evaluation and adjudication criteria, including the criteria

prescribed in terms of the [Procurement Act] and the Broad-Based Black Economic Empowerment Act, 2003 (Act No. 53 of 2003) (BBBEEA).

This clearly goes a long way in ensuring fairness and transparency in government procurement procedures. The pre-disclosure of tender evaluation and adjudication criteria enables contractors to make informed decisions as to whether or not they are in a position to tender and enables all contractors to prepare and submit responsive tenders. It also ensures that organs of state do not apply criteria that are unknown to contractors and facilitates the monitoring of the procurement process. The criteria specified by organs of state can be said to create a legitimate expectation on the part of contractors that tenders will be evaluated and adjudicated in accordance with the criteria specified”. [Footnotes omitted]

[33] In Sanyathi Civil Engineering and Construction (Pty) Ltd and Another v eThekwini Municipality and Others, Group Five Construction (Pty) Ltd v eThekwini Municipality and Others [2012] 1 All SA 200 (KZP) at paragraph 34 the following was held in relation to the prescriptive nature of procurement law:

“Procurement law is prescriptive precisely because the award of public tenders is notoriously prone to influence and manipulation. Allowing discretion would weaken the law of its purpose of preferential procurement and curbing corruption. Consistent with its peremptory nature the PPPFA prescribes that only acceptable tenders be considered. The PPPFA defines an acceptable tender as any tender which in all respects complies with the

specifications and conditions of tender as set out in the tender document. As this definition severely proscribes the exercise of any discretion, an organ of state wishing to exercise discretion must reserve such discretion for itself in the tender document in the interests of fairness, transparency and competitiveness provided the PPPFA permits such discretion. For example, s 9 of the PPPFA permits a contract not scoring the highest number of points to be awarded on reasonable and justifiable grounds.” [Footnote omitted]

[34] In the evaluation of bids, such a bid document must speak for itself, i.e. the terms and conditions of a particular tender must be succinctly, explicitly and unambiguously stated in the tender document and not in extraneous or with reference to other material. This principle was neatly enunciated in GVK Siyazama Building Contractors (Pty) Ltd v Minister of Public Works and Others [2007] 4 All SA 992 (D) at paragraph 68 in these terms:

“In my judgment, section 217 of the Constitution requires that the material terms and conditions of a public tender, objectively

considered, should be such as to enable the person to whom it is addressed, namely a prospective tenderer, to know with reasonable and with sufficient certainty what is required of him or her to in order to submit a valid and acceptable tender. In my judgment this is a necessary threshold to a fair, equitable, transparent, competitive and cost-effective tender process”

[35] Furthermore, tenders may only be assessed against the evaluation criteria stated in the bid document. This entails that a bid should not and cannot be evaluated against criteria which were not clearly and expressly stated in the bid documents.

[36] The crux of the argument before this Court is the decision of the HOD to split the award to two tenderers. What is conspicuous from the above undisputed facts of this review is that the HOD unilaterally decided to split the award contrary to what the BEC recommended. The Department’s answer is that the HOD, as an Accounting Officer of the Department was well within his powers to exercise his discretion, and there was nothing wrong because it was in line with item 8 of the bid invitation.

[37] Item 8 heavily relied upon by the Department was couched as follows:-

“The Department reserved the right to accept any bid in whole or in part, and does not bind itself to accept the lowest, or any bid in whole and price alone is not a determining factor”

[38] Firstly, if this is the criteria upon which the HOD relied upon when splitting the tender, it boggles one’s mind why the BAC and BEC missed this seemingly important Item as it is apparent that their recommendation was not based on this criteria. It is clear that this evaluation criteria was not taken into account in their evaluation, nor did it play a role in regard to their recommendation.

[39] Secondly, if one has regard to the reason given by the HOD of splitting the tender, including the submission by the Department’s Counsel that it would seem that the Department anticipated a situation where it might have to split the tender and therefore specifically included this Item in the bid, it then becomes apparent that the bid document was vague to say the least. A vague tender violated Section 217 of the Constitution. In the Minister of Social Development and Others v Phoenix Cash and Carry PMB CC [2007] 3 All SA 115 (SCA) in paragraph 2, the Supreme Court of Appeal held:-

“Without attempting a comprehensive survey of the circumstances which will offend against s 217(1) [of the Constitution] certain general observations are demonstrated as true by the fact of the present case –

(1) A tender process which depends on uncertain criteria lends itself to exclusion of meritorious tenderers and is opposed to fairness among tenderers, and between tenderers and the public body which supposedly promotes the public weal.” [My own emphasis]

[40] Unfortunately, Item 8 does not specify in what situation or circumstances will the Department accept the bid in part or the objective criteria the HOD claimed to have used. The tender document is also conspicuously silence about why this clause was inserted. Reading the whole bid document and the PPPFA including other Procurement Policies referred to in the invitation to tender, one does not find any correlation of this Item with any of the provisions therein. In fact, if one looks at it with care, it is at odds with the bid document and the Procurement Policies and legislation referred therein. Regulation 11(2) requires an organ of State to stipulate the objective criteria if any in the tender document if they want to apply it.

[41] By including the averments that the Department does not bind itself to accept the lowest price and that price alone is not a determining factor in Item 8 of the bid documents, the Department was just reiterating the obvious in terms of the criteria embodied in the bid document because the 90/10 points system was envisages. But above all, a proper interpretation of Section 2(1)(e) of the PPPFA provides that any specific goal other than price, which is to be taken into account in awarding the tender, must be clearly specified in the invitation to submit a tender. The Department, through the HOD in particular, reserved themselves the right not to accept the lowest price, without specifying the very same specific goals they now claim to be the reason of splitting the tender. Irrespective of how good or meritorious the specific goals they claim

they wanted to achieve might sound to be, they are to be used as a criteria for evaluating bidders and preferring bidders only if they were specified in accordance with this Section.

[42] In the case of AllPay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Agency and Others 2014 (1) SA 604 (CC) (AllPay 1) the Constitutional Court reiterated that vague tender documents are unlawful. Froneman J held (for a unanimous Court):

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

“It seems to have been assumed by the parties, and in my view correctly so, that vagueness is a ground for review under PAJA. Although vagueness is not specifically mentioned in PAJA as a ground for review, it is within the purview of section 6(2)(i) which includes as a ground for review, administrative action that is otherwise ‘unconstitutional or unlawful’. This Court has held that the doctrine of vagueness is based on the rule of law which is a foundational value of our Constitution. In Affordable Medicines this Court explained the doctrine in the following terms:

‘[L]aws must be written in a clear and accessible manner. What is required is reasonable certainty and not perfect lucidity. The doctrine of vagueness does not require absolute certainty of laws. The law must indicate with reasonable certainty to those who are bound by it what is required of them so that they may regulate their conduct accordingly’.

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

[43] I fully agree with the applicant’s Counsel that the bid invitation although it should be read as a whole together with Item 8, and interpreted purposely as contended to by Counsel representing the Department, cannot, in my view, have an effect of the tender to be split because, the bid document did not mention as a criteria that the risk of having one service provider and that of excluding new entrants to the market will be taken into consideration during evaluation of the tender. Not only these were not specified in the bid document, but they were not mentioned as the reasons that it will form a basis for the Department exercising its discretion to not accept the bid in whole or in part. Stipulating this as a requirement is mandatory in terms of Section 2 (1)(e) of the PPPFA which provides that any specific goal for which points may be awarded, must be clearly specified in the invitation to submit a tender. But above all, Item 8 contradicts the very purpose the Procurement Policy Framework advocates.

[44] It can only be inferred as contended by the applicant’s Counsel, correctly so, that the process embarked upon by the HOD was not fair, as ad-hoc criteria which were not mentioned in the bid were introduced after the fact to favour a party who scored the lowest points. Indeed, this was a shifting of the goal posts.

[45] Lastly, this Item 8 was inserted by the Department in the bid document without any reference to any particular prescripts, regulation and/or legislation as a basis for it. We are also not told whether it is a policy of the Department or not. It can therefore surely not supersede the Constitution, the PPPFA, the Supply Chain Management Policy (SCMP) which are National policy frameworks regulating the procurement process. If it stems from a Provincial framework policy, which fact we are not told, it still cannot pass the master because the National Framework prevails over it and this is trite law.

[46] The inexplicable conclusion is that the HOD could not legally have done what he did because the tender document did not provide for any criteria in terms of Section 2(1)(f) of the PPPFA. There is furthermore no rational basis for the decision of the HOD as it appears that he did also not apply his mind properly to the recommendation of the BAC because of the following aspect emanating from the record:-

46.1 In the first report dated 25 November 2015, the BEC, besides seeking for an approval of the cancellation and re-advertisement of the bid, they opined that no bidder had met the technical bid specification requirements.

46.2 The report went on to confirm that in the first elimination

phase, four of the six bidders were eliminated for not adhering to administrative requirements, leaving only the applicant and the second respondent (who both passed over to the next evaluation phase).

46.3 With reference to functionality, the report recorded that the applicant had scored 30 points out of a possible maximum of 30 points, whereas the second respondent had achieved 14 points out of 30 points. This appears on page 35 of the record. Importantly, the report recorded the following regarding the second respondent:

“THE BIDDER WHO SCORES BELOW 20, WILL NOT QUALIFY TO THE NEXT STAGE OF EVALUATION.

Note be taken that Motshudi Kekana & Partners Radiologists Inc [i.e. the second respondent] did not achieve the minimum threshold of 20 required in the functionality evaluation”

46.4 As already indicated above, the technical requirement which the applicant, had not met, was that it did not quote for after-hours mammograms and screening procedure. As appears below, the non-compliance by the applicant with a technical requirement was non-existent in this regard, and this was the view expressed by the HOD himself. In his letter to the BAC he stated amongst others under the heading “Costing Schedule:-

“Costing Schedule” (with reference to the applicant not having quoted for after-hours mammograms and screening procedure):

“The Office of the Accounting Officer has applied its mind on the Pricing Comparisons and Costing structure. – The information provided in the costing structure is not sufficient and some of the services like mammographs are not necessary after hours. It is necessary that the technical evaluation Committee invite the two bidders for a presentation wherein bidders must clarify and present their clarity in writing on points that are not clear especially the matter of mammographs.

The cost schedule template to be revised on bilateral mammograms, as it is not necessary/practical after hours e.g. mammogram is not a life saving procedure.” [My emphasis]

46.5 Accordingly, the HOD permitted the applicant to remedy the issue relating to not having quoted for after-hours mammograms and screening procedure, by making a presentation in which it provided clarity on this issue as it was requested and for it to be re-evaluated.

46.6 On 23 February 2016, the BAC met to adjudicate the bid after the BEC re-evaluated the applicant and the second respondent, and importantly, adopted the following resolution which appears on page 20 of the record, to the effect that the bid should be awarded to the applicant for the whole province (i.e. for all five sites):

46.7 The first respondent admits that the applicant prepared its costs on the basis of anticipated monthly volumes. Once the bid is split across more than one service provider, that advantage of economies of scale, which was for five identified sites, which allows for more competitive pricing is lost.

[47] The sum-total of the above consideration is that, whereas the applicant clarified the issue which had been erroneously found to be non-compliant (which clarification was consistent with the HOD’s own remarks relating to mammograms), it appears that the second respondent’s non-compliance could not be remedied. The HOD does not indicate that the second respondent’s scoring points increased from 14 points. The Department through its BEC is noticeably silent about this as well. Sight should not be lost that the HOD in his letter indicated that “the fair TOTAL Functional Score should be 20”. The silence is obviously telling and it is inexplicable that despite the events described above (which are evident from the record), the tender was nonetheless split between the applicant and the second respondent, with the second respondent being paid significantly more for the same services.

[48] In the light of what is set out above, it is clear that there was no basis to split the tender between the applicant and the second respondent. The applicant was the highest scoring bidder. The second respondent’s bid was hopelessly inadequate, and it scored only 14 out of 30 points, including the 20 points threshold belatedly introduced by the HOD’s changed criteria. This simply meant that it was again disqualified from even proceeding to the next round of the evaluation process. The second respondent’s pricing was also significantly higher than that of the applicant. It does not come as a surprise that even after re-evaluation the BAC resolved on 23 February 2016 that all sites be awarded to the

applicant, which resolution the HOD decided to unilaterally veto.

[49] The HOD favouring of the third respondent was accordingly irrational and at best, on a conspectus of the facts, ultra vires. There was no basis in law for the HOD’s unilateral decision in the circumstances where the BAC and BEC evaluations did not contain any basis for splitting the award nor an award being given to the third respondent.

[50] The above considerations are equally dispositive of the third leg the applicant is relying on, to the effect that the Department’s decision to award the tender to the second respondent whose price was higher because there were no specific goals which were clearly stipulated by the Department as required by Section 2(1)(e) of the PPPFA. It suffices to indicate that the Provisions of Section 2(1)(a) of the PPPFA are mandatory. Regulation (2)(2) is emphatic that an Organ of the State “must” only apply a preferential procurement system which is in accordance with the Act and these Regulations.

[51] Section 217(1) of the Constitution which in the genesis of the law of procurement emphasizes that organs of the State “must” contract in accordance with the system which is fair, equitable, transparent, competitive and cost effective. The Supreme Court of Appeal also acknowledged the pinnacle position of price in paragraph 2 of the Phoenix matter already quoted above wherein it held that “public interest is best served by the selection of the tenderer who is best qualified by price.”

[52] It is clear that the decision of the HOD contravened the PPPFA because the other part of the tender was awarded to a tenderer not having the highest score. The discretion was therefore not exercised within the confines of the PPPFA. Furthermore, objectively speaking, there was no rational connection between the outcome of the decision which the HOD made and the facts upon which the decision was based. The decision is to be set aside.

Just and equitable remedy

[53] It is common cause that this contract is expiring at the end of March 2019. Counsel representing the Department submitted that reviewing it in the manner suggested by the applicant in the face of the fact that it is only left with a few months to run should not succeed on a properly considered scale.

[54] His contention is that this Court should exercises its discretion against the relief sought by the applicant. The contrary would have huge implications on the Department and the second respondent as well in that, because of its appointment, it has decided not to consider other contracts and it may be difficult to secure other contracts. Furthermore, the Department would have to go through the tendering process again, which according to him, is unnecessary having regard to the fact that there is no suggestion that the second respondent is not doing its work properly.

[55] Advocate Gumbi urged this Court to further take into consideration that an important feature of this matter is that all the parties had already performed and/or still are in terms of the agreement. According to him it will therefore not be practical to undo what has been done and restore the status quo ante. He referred this Court to the matter of Chairperson: Standing Tender Committee and Others v JFE Sapela Electronics (Pty) Ltd and Others [2005] 4 All SA 487 (SCA) wherein the Court refused to set aside a decision to award a tender, despite the fact that the decision was invalid and that there was no suggestion that the applicant for review had unduly delayed or was at fault. He argued that it did so simply on the basis that due to the effluxion of time and intervening events it was no longer practical to start the tender processes all over again for the work outstanding on the relevant contract.

[56] He finally submitted that the public has an interest in the Department delivering services efficiently and effectively and that setting aside of the second

respondent’s appointment will cause disruption in the Department resulting in the failure of service delivery. Further that, should this Court find that the aforesaid averments cannot be countenanced by law, it is submitted that the fact that if an administrative act is unlawful, does not necessarily follow that it had to be set aside. He maintained that in reviewing and considering whether to set aside an administration action, Courts are imbued with a discretion and may in the exercise thereof refuse to order the setting aside of an administrative action, notwithstanding substantive grounds being present for doing so. He relied on Oudekraal Estate (Pty) Ltd v City of Cape Town and Others 2010 (1) SA 333 (SCA) for this proposition.

[57] To drive his point home, he placed emphasis on paragraph 28 of the Sapela matter already quoted above wherein the Court made it clear that in deciding whether or not to exercise its discretion against the grant of substantive relief it will have regard to the failure by the aggrieved party to institute review proceedings within a reasonable time and whether there is a public interest element in the finality of administrative decisions and the exercise of administrative functions. He emphasized that it will also be guided by a consideration of pragmatism and practicality.

[58] Advocate Gumbi referred to many other authorities to convince this Court to exercise its discretion against the Order sought. One such authority is the case of Bengwenyana Minerals v Genorah Resources (Pty) Ltd and Others 2011 (4) SA 113 (CC) wherein the Constitutional Court pointed out that when making a choice of a just and equitable remedy in terms of PAJA it will be important to emphasize the fundamental constitutional importance of the principle of legality, which requires invalid administrative actions to be declared unlawful. He indicated that it was further said in this matter that this would ensure that the discretionary choice of a further just and equitable remedy follows upon that fundamental finding and will precede the finding of invalidity. He submitted that in setting out the approach to be followed in determining a just and equitable remedy following upon a declaration of unlawful administrative action the Court held further at paragraph 85 that:

“….The rule of law must never be relinquished, but the circumstances of each case must be examined in order to determine whether factual certainty requires some amelioration of legality and, if so, to what extent. The approach taken will depend on the kind of challenge presented – direct or collateral, the interests involved and the extent or materiality of the breach of the constitutional right to just administrative action in each particular case.”

[59] The case of Eskom Holdings Ltd and Another v New Reclamation Group (Pty) Ltd 2009 (4) SA 628 (SCA) was also relied upon by him wherein the SCA remarked that, while it may be true that the review is aimed at setting aside an invalid act on the basis that it fails to satisfy the principle of legality, sometimes practical considerations would require finality, rendering it less desirable to set aside an invalid act. That would be the case where an invalid administrative act has over a period of time remained unchallenged and third parties have arranged their affairs in accordance therewith and its setting aside may cause them injustice.

[60] The SCA matter of Millennium Waste Management (Pty) Ltd v Chairperson of the Tender Board: Limpopo Province and Others 2008 (2) SA 481 (SCA) wherein it also invoked considerations of the passage of time and practicality to decline to set aside an invalidly granted contract that has a few more months to run was also relied upon. The following remarks in this matter were quoted by him:-

“The learned judge, in reaching his conclusion, failed to have any regard to the position of the innocent Moseme. He also did not consider the degree of the irregularity. He assumed incorrectly that King was entitled to the contract and he underestimated the adverse consequences of the order. I therefore conclude that he erred in the exercise of his discretion. This means that King, in spite of the imperfect administrative process, is not entitled to any relief. Not every slip in the administration of tenders is necessarily to be visited by judicial sanction.”

[61] Advocate Freese appearing on behalf of the applicant submitted that they even through the applicant handed in a suggested Draft Order, the applicant still relies on the prayers found in its amended Notice of Motion. Despite this submission, she informed this Court that basically the applicant does not seek an Order to the effect that the current contract be stopped immediately because it is coming to an end soon. What the applicant want is for this Court to declare that the applicant is entitled to compensation in terms of Section 8(1)(c)(ii)(bb) of PAJA. She clarified that in accordance with the suggested Draft Order, the additional prayers they now seek relate to the issue of quantum of the damages they claim so that it can be referred for oral evidence as there are no sufficient facts placed by the applicant in this application whereupon the Court can make an informed decision as to how much will be just and equitable.

[62] The many authorities which the Department’s Counsel heavily relied upon to urge this Court to exercise its discretion against the setting aside of the decision were already thoroughly considered in the Constitutional Court case of Bengwenyana Minerals cited above by him. Plasket J also referred to the decision of the Constitutional Court in the Bengwenyama Minerals with considerable emphasis in the case of Joubert Galpin Searle Inc. and Others v Road Accident Fund and Others 2014 (4) SA 148 and said the following in paragraph 97:-

[97] In Bengwenyama Minerals (Pty) Ltd and Others v Genorah Resources (Pty) Ltd and Others. I believe it is fair to say that Froneman J made it clear that, even though courts always retain a discretion to refuse to award a remedy when unlawfulness is found, the default position is that the principle of legality should be upheld and vindicated, and that there must be compelling reasons to override this default position:

'[84] It would be conducive to clarity, when making the choice of a just and equitable remedy in terms of PAJA, to emphasise the fundamental constitutional importance of the principle of legality, which requires invalid administrative action to be declared unlawful. This would make it clear that the discretionary choice of a further just and equitable remedy follows upon that fundamental finding. The discretionary choice may not precede the finding of invalidity. The discipline of this approach will enable courts to consider whether relief which does not give full effect to the finding of invalidity, is justified in the particular circumstances of the case before it. Normally this would arise in the context of third parties having altered their position on the basis that the administrative action was valid and would suffer prejudice if the administrative action is set aside, but even then the desirability of certainty needs to be justified against the fundamental importance of the principle of legality.

[85] The apparent anomaly that an unlawful act can produce legally effective consequences is not one that admits easy and consistently logical solutions. But then the law often is a pragmatic blend of logic and experience. The apparent rigour of declaring

conduct in conflict with the Constitution and PAJA unlawful is ameliorated in both the Constitution and PAJA by providing for a just and equitable remedy in its wake. I do not think that it is wise to attempt to lay down inflexible rules in determining a just and equitable remedy following upon a declaration of unlawful administrative action. The rule of law must never be relinquished,

but the circumstances of each case must be examined in order to determine whether factual certainty requires some amelioration of legality and, if so, to what extent. The approach taken will depend on the kind of challenge presented — direct or

collateral — the interests involved, and the extent or materiality of the breach of the constitutional right to just administrative action in each particular case.'

[63] It therefore becomes apparent that the law in this regard is settled. I fully agree with the synopsis of what the law is as summarised by Plasket J in the above quotation. Apart from the fact that this is how the issue of discretion is to be approached by our Courts, I have realised that a thorough analysis of the quotations as provided by Advocate Gumbi of the Bengwenyama matter is not completely correct and were also quoted selectively. In paragraph 84 which he also quoted in paragraph 26 of his heads, the word “not” was left out. His submissions and the heads quoted verbatim reads:-

“This would ensure that the discretionary choice of a further just and equitable remedy follows upon that fundamental finding and will precede the finding of invalidity”

[64] I am not sure whether this is deliberate or not because the correct quote from paragraph 84 of the paragraph in Bengwenyama reads as follows:-

“… the discretionary choice of a further just and equitable remedy follows upon that fundamental finding. The discretionary choice may “not” precede the finding of invalidity”. [My Emphasis]

Secondly, it is clear that paragraph 85 which he quoted and heavily relied upon of this judgment amongst others was preceded by the following remarks which were left out by him.

“….The apparent rigour of declaring conduct in conflict with the Constitution and PAJA unlawful is ameliorated in both the Constitution and PAJA by providing for a just and equitable remedy in its wake….”

If one reads only the quote Advocate Gumbi relied on without having regard to the above remarks, the full import and meaning of paragraph 85 of this judgment is lost or maybe misconstrued. His quotation start towards the end of this paragraph where it start with the words:-

“….The rule of law must be never be relinquished, but the circumstances of each case must be examined in order to determine whether factual certainty requires some amelioration of legality and if so, to what extent…………..”

[65] In this matter, I have already found that the award of the tender was invalid and did not shy away from that finding. I found the following remarks in the case of Trencon Construction (Pty) v Industrial Development Corporation of SA Ltd and Another 2015 (5) SA 245 (CC) extremely helpful in inquiry such as the one before this Court:-

[1] “[47] To my mind, given the doctrine of separation of powers, in conducting this enquiry there are certain factors that should inevitably hold greater weight. The first is whether a court is in as good a position as the administrator to make the decision. The second is whether the

decision of an administrator is a foregone conclusion. These two factors must be considered cumulatively. Thereafter, a court should still consider other relevant factors. These may include delay, bias or the incompetence of an administrator. The ultimate consideration is whether a substitution order is just and equitable. This will involve a consideration of fairness to all implicated parties. It is prudent to emphasise that the exceptional circumstances enquiry requires an examination of each matter on a case-by-case basis that accounts for all relevant facts and circumstances.”

“[52] What must be stressed is that delay occasioned by the litigation process should not easily clout a court’s decision in reaching a just and equitable remedy.” [My Emphasis].

[66] Tracing the events from the time when the award was made up to the judgment in this Court, it is apparent that after the applicant received a letter from the Department dated 29 February 2016 informing them that only three of the five sites were allocated to the applicant, a meeting was held between the two parties on the 22 March 2016. This is also the date when they heard that the second bidder’s price, whom the two sites were allocated to, were substantially higher than that of the applicant. The appellant therefore wrote to the Department on 4 April 2016, to complain about the award. The Department replied to this letter on the same day and directed the applicant to lodge an appeal to the office of the HOD. The applicant’s letter to the HOD was written on the 5 May 2016, but unfortunately it was never responded

to.

[67] The review application was filed on the 9 September 2016 with the Registrar with no specific Court date regarding the hearing thereof. After the delivery of the review application, the first respondent failed to dispatch the record of the decision sought to be reviewed within the requisite 15 day period, despite being called upon to do so in the notice of motion and also filing their notice to oppose the application on the 28 September 2016.

[68] Their answering affidavit was filed on the 24 January 2017, and the replying affidavit of the applicant on the 10 March 2017. It was only in July 2017 that applicant applied for a date of hearing and was given a date of 23 November 2017, which date was never taken up. The applicant requested another date and the application was set down to be heard on 19 April 2018, but was postponed to 27 April 2018 in circumstances where protest action in Mahikeng had presented logistical challenges in relation to the hearing of this matter. According to the applicant, what transpired on 27 April 2018 is that, the parties’ legal representatives presented legal argument in respect of the review application. During the course of the parties’ arguments, the representative of the Department sought to refer to a document which was not before the Court (given that the record had not been delivered by the Department by that time).

[69] According to the applicant’s papers, it appears that the presiding Judge subsequently called the parties’ representatives to meet with her in chambers, and during that meeting, the presiding Judge expressed reservations regarding the determination of the review application in the absence of the record. In those circumstances, the parties agreed to the following:-

(a) That the Department would deliver the record by 21 May

2018;

(b) That the applicant would then deliver a supplementary

affidavit (if any) by 4 June 2018;

(c) That should the department wish to supplement its

answering affidavit, it would deliver a supplementary answering affidavit by 11 June 2018;

(d) That the applicant would supplement its replying affidavit, if necessary, by 18 June 2018; and;

(e) That the review application will be heard on 20 June 2018.

[70] The Department failed to deliver the record by 21 May 2018, and delivered it on 29 May 2018. This means that the Department took 1 year 8 months to deliver the record to the applicant since they were requested in September 2016.

[71] To cut the long story short, from the 20 June 2018 the case was postponed about three times before it was finally heard on 8 February 2019 for various reasons not borne out by the papers or Court Orders. Besides, these postponements does not take this issue any further because the contract was by this date, 20 June 2018, only having approximately 8 months to expire. Much time was lost during litigations between the parties.

[72] It is quite clear from the above that although the applicant did not waste time to launch the application, it took a rather loath stance in prosecuting the matter. Firstly, I do not see any reason why the applicant did not apply for an interim interdict to stop the implementation of the award when they filed the review application. Secondly, the application itself was not done on an urgent basis, and worse, no specific hearing date was suggested or given in the notice of motion. Thirdly, the applicant just allowed the respondent to dictate the circumstances of the litigation including the various postponements without putting a fierce fight about finalising the matter expeditiously.

[73] It is obvious from the above set of facts that the applicant ended up enrolling the matter without the benefit of the record. The Court had to Order the Department to file one. When the record was finally filed on the 29 May 2018, the contract was nearing its expiry date. It therefore becomes apparent that the respondent also, adopted the slow attitude demonstrated by the applicant and dragged its heels too. Probably to its advantage. In my view, both parties are responsible to shoulder the blame for the delay in this matter.

[74] Coming to the decision by the HOD, I found that it was ultra vires, apart from it being bias. The extent of the materiality of the breach of the Constitutional right of the applicant to just administration action in my view is such that I cannot exercise my discretion in not setting aside the award despite the lapse of time. In my view, that will not be a just and equitable Order in the circumstances of this matter. The Department together with the second respondent unduly benefitted from this fatally flawed tender. An Order setting the award aside would accord with what Moseneke DCJ (as he then was) said in Steenkamp NO v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC) that:-

“[29]…Ultimately the purpose of a public remedy is to afford the prejudiced partly administrative justice, to advance efficient and effective public administration compelled by Constitutional precepts and at a broader level, to entrench the rule of law”.

[75] This Court has the benefit of the record with all the recommendations and it is therefore in a good position to make a decision itself. In my view, this is a case where the outcome is a foregone conclusion. But one thing that is certain is that the contract is coming to an end in less than two weeks by the time the judgment will be delivered. As indicated above, compensation as a remedy on review is an exceptional one. Because a substituted decision or remittal is no longer practically feasible in the circumstances of this matter, I am of the view that the case of the applicant is an exceptional one and compensation is an appropriate remedy. Damages are by their nature unliquidated. It is the Court’s task after hearing evidence to quantify the damages. Unfortunately, as the applicant correctly indicated during the submissions in Court, I am unable to deal with the quantum of damages at the moment as there are no facts before Court to support this.

[76] I am of the view that the requirements of Section 8 (1)(c) (ii)(bb) of PAJA have been met, and that a declaratory Order as to the invalidity of the tender award coupled with an Order of compensation to the applicant is a just and equitable relief in this matter.

[77] The following Order is therefore made:-

“1. The decision of the first respondent to award tender NWDOH18/15 for the provision of tele-radiology services (“the tender”) to the applicant and the second respondent jointly (“the decision”) is declared unlawful;

2. The aforesaid decision is hereby reviewed and set aside.

3. The applicant is entitled to just and equitable compensation in accordance with section 8(1)(c)(ii)(bb) of the Promotion of Administrative Justice Act 3 of 2000.

4. The following issues are referred to viva voce evidence (“the hearing”):

4.1 The quantum of the applicant’s loss of profits that it would have made:

4.1.1 had the applicant been awarded the tender for all five tele-radiology sites, as opposed to the three sites it was awarded;

4.1.2 had the applicant provided the same services at the additional sites that the second respondent performed over the duration of the contract awarded to the second respondent; and

4.1.3 at the same rates at which the applicant provided services to the first respondent at the three tele-radiology sites it was awarded.

4.2 The quantum of the applicant’s loss of profits that it would have made in relation to the three tele-radiology sites it was awarded by the first respondent:

4.2.1 If the applicant had been able to apply the same economies of scale across the three sites that it would have been in a position to apply across five tele-radiology sites.

4.3 The amount of compensation that is just and equitable on the facts of this matter.

5. Should any party wish to lead the evidence of any person who has not deposed to an affidavit in these proceedings, that party shall submit an affidavit containing a summary of such person's evidence, together with any documents upon which they rely and shall do so at least 15 days prior to the hearing.

6. Whether a party is entitled to call any witness who has not presently deposed to an affidavit will be determined by agreement between the parties, failing which on application to the court at the hearing of the matter.

7. Within 20 days of the making of this order, each of the parties shall make discovery on oath, of all documents relating to the issues referred to above, which documents are, or have at any time been, in possession or under control of such party.

8. Such discovery shall be made in accordance with Rule 35 of the Uniform Rules of Court and the provisions of that Rule with regard to the inspection and production of documents discovered shall be operative.

9. Either party may subpoena any person to give evidence at the hearing, whether such person has consented to furnish a statement or not.

10. The fact that a party has served a statement or has subpoenaed a witness, shall not oblige such party to call the witness concerned.

11. The first respondent is ordered to pay the applicant’s

costs.”

A.M. KGOELE

JUDGE OF THE HIGH COURT

ATTORNEYS

For the Applicant : Dockrat Incorporated

C/O Van Rooyen Tlhapi Wessels Inc

9 Proctor Avenue

Corner Shippard Street

For the Respondent : State Attorney

First Floor, East Gallery

Mega City Complex

Cnr Sekame Road & Dr James Moroka

MMABATHO