Nelson Mandela Bay Metropolitan Municipality and Another v MTN Service Provider (Pty) Ltd and Others (1661/12) [2014] ZAECPEHC 84 (4 December 2014)

IN THE HIGH COURT OF SOUTH AFRICA

EASTERN CAPE DIVISION, PORT EIZABETH

Case no. 1661/12

Date heard: 20/11/14

Date delivered: 4/12/14

Not reportable

In the matter between:

NELSON MANDELA BAY METROPOLITAN MUNICIPALITY............................First Applicant

VODACOM SERVICE PROVIDER COMPANY (PTY) LTD...............................Second Applicant

and

MTN SERVICE PROVIDER (PTY) LTD.................................................................First Respondent

CELL C SERVICE PROVIDER COMPANY (PTY) LTD...................................Second Respondent

CIGI CELL (PTY) LTD.............................................................................................Third Respondent

ALGOA OFFICE AUTOMATION (PTY) LTD

t/a NASHUA EASTERN CAPE...............................................................................Fourth Respondent

TELKOM SA LTD.......................................................................................................Fifth Respondent

DIMENSION DATA (PTY) LTD

t/a INTERNET SOLUTIONS.....................................................................................Sixth Respondent

Administrative law – application to review and set aside award of tender – application brought by municipality that awarded tender – authority of Municipal Manager to bring application – ratification of Municipal Manager’s actions – decision to disqualify six of eight bids taken by pre-evaluation committee – this committee not established by Supply Chain Management Policy – pre-evaluation committee having no lawful powers – award of tender reviewed and set aside.

JUDGMENT

PLASKET, J

[1] This case has a long and troubled history. It concerns the award of a tender by the applicant (the municipality) to the first respondent (MTN) for the provision to the municipality of mobile voice and data services. The tender was first awarded to MTN in 2009 but, on application by the second applicant (Vodacom),[1] was set aside in this court by Grogan AJ in Vodacom (Pty) Ltd & another v Nelson Mandela Bay Municipality & others.[2] Grogan AJ’s order read as follows:

‘1. The award to the second respondent of tender No 188 of 2009 is reviewed and set aside.

2. The tender is remitted to the first respondent for reconsideration on the following conditions:

2.1 the tender shall be re-advertised in accordance with paras 19, 20, 21, 22 and 27 of the municipality's supply chain management policy;

2.2 the tenders shall not be restricted to parties who previously bid for tender No 188, and those parties who previously bid may do so again;

2.3 tender documents previously submitted by bidders for tender No 188 shall be disregarded;

2.4 in considering the fresh tenders, the first respondent shall comply strictly with the provisions of paras 21, 23, 26, 28 (as interpreted in this judgment), 29 and 48 of the aforesaid policy;

2.5 the accounting officer shall, in accordance with para 26(3) of the policy, appoint a neutral and independent observer agreed to by the bidders to attend all committee meetings concerned with this tender;

2.6 should the parties not agree on the choice of the aforesaid neutral and independent observer, they may approach the court for a directive in that regard.

3. The above orders shall not be deemed to derogate from the rights of bidders under s 50 of the aforesaid policy.

4. The first respondent shall pay the first applicant's costs, such costs to include the taxed fees of two counsel, when utilised.’

[2] Pursuant to this order, the tender process commenced afresh. In due course, MTN received a letter from the municipality informing it that the tender had been awarded to it. Vodacom and the other bidders received letters stating that their bids had been unsuccessful. A while later, this application was launched by the municipality. It, through its acting Municipal Manager at the time, Mr Themba Hani, alleged that the award of the tender was irregular in various respects and it applied to have the decision to award the tender to MTN set aside. Not surprisingly, MTN opposed the application and Vodacom, an unsuccessful bidder, supported it.

[3] In this judgment I shall first set out the material facts, then deal with points in limine taken by MTN and finally determine the central issue of whether the award of the tender was vitiated by reviewable irregularity.

The facts

[4] The material facts, with one exception, are not in dispute. By and large, MTN appears to accept most of the facts put up by the municipality, interprets some of the documentation differently to the municipality and Vodacom and draws legal conclusions that differ fundamentally from the legal conclusions drawn by the municipality and Vodacom.

[5] Eight bids were submitted to the municipality. A number of meetings of committees followed. One such meeting was that of a pre-evaluation

committee. This committee, according to Hani, found six of the eight bids to be unresponsive, disqualified them and forwarded the two remaining bids to the Bid Evaluation Committee (the BEC). MTN accepts that the pre-evaluation committee determined that six of the eight bids were unresponsive but argues, first, that it did not take a decision but referred all eight bids to the BEC which disqualified the six unresponsive bids, and secondly that, in any event, all the pre-evaluation committee did was to undertake a mechanical process of checking each bid against the mandatory requirements stipulated in the invitation to tender.

[6] After the BEC had evaluated the bids, the Bid Adjudication Committee (the BAC) took a decision to recommend to Hani, the ultimate

decision-maker on account of the amount of money involved, that MTN be awarded the tender. Hani took the decision to award the tender to MTN but then became aware of possible irregularities in the process. Before he could do anything further, however, Mr M Matiwane, the Assistant Director: Contracts in the municipality, acting without authority, informed MTN that the tender had been awarded to it and the other bidders that their bids had been unsuccessful. This occurred on 10 February 2012.

[7] Hani then sought legal advice and it was decided to make an application for the review and setting aside of the award of the

tender. This application was launched on 28 May 2012.

[8] A substantial number of points were initially taken by MTN but during the course of argument most of them were wisely abandoned. One of these points, although abandoned, still bears mention. It was that the municipality did not identify the source of its entitlement to review the decision to award the tender to MTN. It is trite that the Promotion of Administrative Justice Act 3 of 2000 (the PAJA), and no longer the common law, applies when administrative action (as defined by it) is reviewed;[3] that it is not necessary to ritualistically refer to the PAJA as the source of the cause of action;[4] and that decisions by public bodies to award tenders are administrative actions justiciable in terms of the PAJA.[5]

[9] What remains to be decided by me are the following two points: (a) whether Hani was authorised to bring the application and, if not, whether his actions have been ratified; and (b) whether Vodacom is non-suited because its application was brought outside of the 180-day period prescribed by s 7(1) of the PAJA.

[10] What is no longer in dispute is that a decision was taken to award the tender to MTN. This was communicated to it, thus rendering it a final decision which was ripe for challenge.[6] The effect is that, irrespective of its legality, the decision has legal consequences and stands until set aside: it cannot be undone by the municipality itself because it is functus officio [7] The only options open to it are to apply, as it has done, to set the decision aside or to wait for MTN to institute proceedings against it to enforce the decision and resist that by raising the invalidity of the decision.[8]

[11] In circumstances such as these where a public body is of the view that a decision that it took is tainted by illegality, it is duty bound to do something about it, as the municipality has in this case. In Khumalo & another v MEC for Education, KwaZulu-Natal[9] Skweyiya J identified the source of this obligation:

‘Section 195 provides for a number of important values to guide decision makers in the context of public-sector employment.

When, as in this case, a responsible functionary is enlightened of a potential irregularity, section 195 lays a compelling basis for the founding of a duty on the functionary to investigate and, if need be, to correct any unlawfulness through the appropriate avenues. This duty is founded, inter alia, in the emphasis on accountability and transparency in section 195(1)(f) and (g) and the requirement of a high standard of professional ethics in section 195(1)(a). Read in the light of the founding value of the rule of law in section 1(c) of the Constitution, these provisions found not only standing in a public functionary who seeks to review through a court process a decision of its own department, but indeed they found an obligation to act to correct the unlawfulness, within the boundaries of the law and the interests of justice.’

The points in limine

Authority

[12] It is conceded by the municipality that when Hani deposed to the founding affidavit he was not authorised by a resolution of the council to launch the application on behalf of the municipality. It was argued by MTN that this is fatal to the municipality’s case and, because there is no application before me, Vodacom could not have intervened as a second applicant in a non-existent application.

[13] It was argued by the municipality and Vodacom on various grounds that Hani did have authority to act as he did. I shall only deal with one of the arguments because it is, in my view, dispositive of the issue.

[14] In an affidavit described as ‘applicant’s reply to first respondent’s supplementary answering affidavit dated 11 November 2013’, Mr Mpilo Sakhile Mbambisa, the municipality’s City Manager, with reference to a council resolution, stated in answer to the challenge to Hani’s authority:

‘By virtue of the Council resolution I am on a proper construction thereof authorised to proceed with any legal proceedings that

commenced prior to the date of the resolution and to ratify any actions taken in respect thereof, insofar as this may be necessary.

To the extent that it is necessary, I hereby ratify the steps taken by my predecessors in the present application.’

[15] On 6 August 2013, the council had passed the resolution he referred to. It did two things of relevance to these proceedings. First, it appointed Mbambisa as acting City Manager for a period not exceeding three months. Secondly, it delegated to him ‘those specific powers contained in Section 55 of the Municipal Systems Act, including the power to institute and defend any legal action on behalf of the Municipality’.

[16] It was argued by MTN that the delegation only had a life of three months because Mbambisa’s acting appointment was for a period that was not to exceed three months. When Mbambisa deposed to the affidavit he was the City Manager, and no longer the acting City Manager. There is no merit in the argument: the appointment was limited to three months, not the delegation which endured until revoked by another resolution or Mbambisa no longer being the City Manager. In other words, on his permanent appointment, he retained the powers delegated to him on his initial acting appointment. An interpretation that the council must have intended for the lapsing of his delegated powers on his re-appointment in an acting capacity or his permanent appointment does not make sense.

[17] The second issue raised was whether the empowerment to institute and defend legal proceedings included the power to ratify proceedings that had been instituted improperly. When consideration is given to the wording of the resolution – particularly the wide import that the word ‘any’ implies – and its purpose, it appears to me that the council could not have intended to give him power to institute new proceedings and defend new proceedings but not to ‘defend’ proceedings already instituted by remedying defective authorities by way of ratification. In my view, the resolution tacitly includes the power to ratify proceedings when necessary.

[18] In the light of this conclusion, there is no necessity for me to consider whether MTN’s challenge to Hani’s authority was procedurally competent, it having been argued by Vodacom that it was not.

Section 7(1) of the PAJA and Vodacom

[19] Section 7(1) of the PAJA states:

‘(1) Any proceedings for judicial review in terms of section 6(1) must be instituted without unreasonable delay and not later than 180 days after the date-

(a) subject to subsection (2)(c), on which any proceedings instituted in terms of internal remedies as contemplated in subsection (2)(a) have been concluded; or

(b) where no such remedies exist, on which the person concerned was informed of the administrative action, became aware of the action and the reasons for it or might reasonably have been expected to have become aware of the action and the reasons.’

Section 9 allows for the condonation of undue delays in launching review proceedings.

[20] It is not in dispute that the municipality launched its review application within 180 days of the administrative action under

challenge being communicated to the various bidders on 10 February 2012. It was argued, however, that when Vodacom, which was initially

the second respondent, applied successfully to intervene as the second applicant, it brought its application – and it did so more than 180 days after the impugned decision was taken.

[21] I have strong doubts that this argument can avail MTN. In the light of the view I take of the grounds of review raised by the

municipality, (which Vodacom supported when it was the second respondent) it is not necessary for me to decide the issue because it can, at best, only relate to the additional grounds of review raised by Vodacom. It is unnecessary for me to consider them for the reason stated.

The merits

[22] The issues that I am called upon to decide are whether the pre-evaluation committee took the decision to disqualify six of the eight bids and, if it did, whether it had the authority to do so. The first is a factual issue and the second is a legal issue. It seems to me, however, that the additional issue raised by MTN – that the pre-evaluation committee only exercised mechanical, non-discretionary powers – is a red herring: even if the powers it exercised were mechanical, if their exercise had legal effects, it still had to be authorised to exercise those powers. If it was not so authorised, its exercise of power was a nullity.

[23] The question as to who took the decision to disqualify six of the eight bids must be answered with reference to the documents attached to Hani’s affidavit that serve as a record of the decision-making process. The first is the report of Mr Nyameko

Gqamana (now Gqamana SC), an advocate practising at the Port Elizabeth bar, who had been appointed as a neutral observer of the

tender process in terms of paragraph 2.5 of Grogan AJ’s order in the Vodacom case.[10] The second is a report that contains the recommendation of the BEC after a report of the process followed up to the BEC’s meeting. The third is an annexure to this document that records the pre-evaluation committee’s decisions. The answer to the factual issue as to who took the decision to exclude the unsuccessful bidders lies in a proper interpretation of these documents.

[24] I commence with the report. It was compiled by the Directorate: Corporate Services of the municipality and addressed to the ‘Bid Evaluation/Adjudication Committees’. It appears to have been prepared for a meeting on 18 November 2011, presumably the BAC’s meeting.

[25] It sets out the following chronology of events in relation to the tender: (a) a pre-tender briefing was held on 19 May 2011; (b) a specifications committee meeting was held on 1 July 2011; (c) the tender was advertised on 17 August 2011; (d) a compulsory

clarification meeting was held on 7 September 2011; (e) the closing date for the tender was 29 September 2011; (f) the tenders were pre-evaluated on 11 October 2011; (g) a technical evaluation took place on 4 November 2011; and (h) the BEC met on 9 November 2011.

[26] It then records that only two bids, one being MTN’s, were responsive and that ‘both [bidders] were invited for technical evaluation’. It then, in dealing with the non-responsive bids recorded that ‘[t]enders were pre-evaluated as per specification’ and that six of them were non-responsive in ‘key areas of the specification and therefore were not subjected to further evaluation’.

[27] Annexure 2 to the report is a record of the decisions taken by the pre-evaluation committee on 11 October 2011. Under a heading ‘Outcome of tender evaluation’ it records that the bids of Internet Solutions[11] (in respect of the data component of the tender) and MTN (in respect of both the data and voice components) were responsive. It then lists the remaining bidders as being non-responsive.

[28] Gqamana’s report stated that a pre-evaluation meeting took place on 11 October 2011 and that, at this meeting, ‘all

tenders were checked whether they were responsive or non-responsive’. He then listed the non-responsive bids, stating that the ‘reasons for non-responsiveness are well documented in the Bid Evaluation Report dated 18 November 2011’ – the document to which I referred to above.

[29] Gqamana’s report then stated:

‘Thereafter those bidders who were responsive were invited to a Technical Evaluation meeting which was held on 4 November 2011. It was only Internet Solution and MTN Service Provider that were invited for the Technical Evaluation meeting.’

After this, he said, the BEC met and made its recommendation, followed by the BAC.

[30] It is clear from these documents that six of the eight bids were disqualified by the pre-evaluation committee and that the BEC did not consider the bids that had been disqualified. There is simply no other meaning that can sensibly be attributed to them. That being so, the legal issue arises for decision. It is whether the pre-evaluation committee had authority to evaluate bids. In order to answer that question it is necessary to set out the legal regime that governs procurement by the municipality and then to consider whether the pre-evaluation committee has a place within that regime.

[31] Procurement in the local government sphere is regulated by a set of interlocking statutory instruments that includes the following: s 217 of the Constitution, which requires that when organs of state procure goods or services they must do so in accordance with a system that is ‘fair, equitable, transparent, competitive and cost-effective’; ss 111 and 112(1) of the Local Government: Municipal Finance Management Act 56 of 2003 (the MFMA) which requires local governments to have and to implement a supply chain management policy and requires it to be ‘fair, equitable, transparent, competitive and cost-effective and comply with a prescribed regulatory framework for municipal supply chain management’; treasury regulations made by the Minister of Finance in terms of s 168 of MFMA; and the municipality’s Supply Chain Management Policy (the SCMP). Compliance with the requirements imposed by all of this legislation – supreme law, ordinary parliamentary legislation and subordinate legislation – is necessary for a valid tender process: none may be regarded as a mere internal prescript that may be ignored at whim.[12]

[32] For present purposes, the relevant instrument is the SCMP that was in operation at the time. Paragraph 20, in setting out the procedure for competitive bids, spoke of bids being evaluated ‘as detailed in paragraph 28’. Paragraph 26 created three committees through which procurement was to be effected by the municipality. They were the Bid Specification Committee, the BEC and the BAC and their members were appointed by the City Manager. The functions of the BEC were set out in s 28(1). It was empowered, as its name suggests, to evaluate bids in accordance with the bid specification and the applicable points system, to disqualify bids that did not meet the specification and to report to the BAC on its recommendations.[13]

[33] No provision was made in the SCMP for a pre-evaluation committee. This committee was not appointed by the City Manager, as required by the SCMP and, in the words of Hani, it committee was, ‘in truth, an ad hoc meeting of the individuals concerned which had no formal or legal status and which had no powers whatsoever’.

[34] Writing at a time when the review of administrative action was governed by the common law, Baxter captured what is really its first principles thus:[14]

‘Public authorities possess only so much power as is lawfully authorised, and every administrative act must be justified by reference to some lawful authority for that act. Moreover, on account of the institutional nature of law the public authority itself exists as an office or body created by law. A valid exercise of administrative power requires both a lawful authorisation for the act concerned and the exercise of that power by the proper or lawful authority.’

[35] The same principles apply now. They are now entrenched in the Constitution in two ways: generally, in the principle of legality

that forms part of the founding value of the rule of law;[15] and specifically, as part of the fundamental right to administrative action that is lawful.[16] That right is given effect to in various subsections of s 6 of the PAJA. Section 6(1) provides that ‘[a]ny person may institute

proceedings in a court . . . for the judicial review of an administrative action’. Section 6(2) sets out the grounds upon

which administrative action may be reviewed. Section 6(2)(a)(i) is of application in this case. It provides that an administrative action may be reviewed by a court if the administrator who took it ‘was not authorised to do so by the empowering provision’.

[36] As the pre-evaluation committee had no lawful existence, provision for it not having been made in the SCMP, it had no lawful authority in terms of the SCMP – the empowering provision – or any other law, for that matter, to disqualify bids. In the result, the award of the tender must be reviewed and set aside on this basis.

Conclusion and order

[37] MTN argued that, in the event of me setting aside the tender, I should, in terms of s 8(1)(c)(ii)(bb) of the PAJA direct that the municipality pay compensation to it. This was raised for the first time in argument. It is dealt with nowhere in the papers and nowhere in the volumes of heads of argument, supplementary heads and further supplementary heads filed by MTN. I need say no more than that there is absolutely no merit in the argument.

[38] MTN objected, for a reason that I did not understand, to reference in paragraph 1 of the notice of motion to the letter of 10 February 2012. This was the letter sent by Matiwane that informed it that the tender had been awarded to it. Both the municipality and Vodacom were prepared to amend the notice of motion by deleting reference to the letter. I shall make an order in those terms.

[39] I make the following order:

(a) The award to the first respondent of the tender to provide mobile voice and data services to the first applicant in respect of the first applicant’s contract enquiry No SCM 188/2011-2012 is reviewed and set aside.

(b) The first respondent is directed to pay the costs of the first and second applicants, such costs to include the costs of two counsel.

___________________________

C Plasket

Judge of the High Court

APPEARANCES

First applicant: S Rorke SC and M Booi instructed by Le Roux Inc

Second applicant: R Solomon SC and K Tsatsawane instructed by Friedman Scheckter

First respondent: M Basslian SC instructed by Greyvensteins

[1] In these proceedings, Vodacom was initially cited as the second respondent. In an application before Mey AJ, however, it was granted

leave to intervene as the second applicant. See Nelson Mandela Bay Metropolitan Municipality v MTN Service Provider (Pty) Ltd & others ECP 14 October 2014 (case no. 1661/12) unreported.

[2] Vodacom (Pty) Ltd & another v Nelson Mandela Bay Municipality & others 2012 (3) SA 240 (ECP).

[3] Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs & others [2004] ZACC 15; 2004 (4) SA 490 (CC) para 25.

[4] Bato Star Fishing (note 3) para 27; Ehrlich v Minister of Correctional Services & another 2009 (2) SA 373 (E) para 38.

[5] Millenium Waste Management (Pty) Ltd v Chairperson, Tender Board: Limpopo Province & others 2008 (2) SA 481 (SCA), para 4; Steenkamp NO v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC), para 21.

[6] Chairman, State Tender Board v Digital Voice Processing (Pty) Ltd; Chairman, State Tender Board v Sneller Digital (Pty) Ltd & others 2012 (2) SA 16 (SCA) paras 20-21.

[7] Oudekraal Estates (Pty) Ltd v City of Cape Town & others 2004 (6) SA 222 (SCA) para 26; MEC for Health, Eastern Cape & another v Kirland Investments (Pty) Ltd t/a Eye and Laser Institute 2014 (3) SA 219 (SCA) paras 20-22.

[8] Kirland Investments (note 7) para 33; Municipal Manager: Qaukeni Local Municipality & another v FV General Trading CC 2010 (1) SA 356 (SCA) paras 23-24.

[9] Khumalo & another v MEC for Education, KwaZulu-Natal 2014 (5) SA 579 (CC) para 35. See too Pepkor Retirement Fund & another v Financial Services Board & another 2003 (6) SA 38 (SCA) para 10; Municipal Manager: Qaukeni Local Municipality (note 8) para 23.

[10] Note 2.

[11] This is a reference to the sixth respondent, Dimension Data (Pty) Ltd trading as Internet Solutions.

[12] Allpay Consolidated Investment Holdings (Pty) Ltd & others v Chief Executive Officer: South African Social Security Agency & others 2014 (1) SA 604 (CC) para 40; Joubert Galpin Searle Inc & others v Road Accident Fund & others 2014 (4) SA 148 (ECP) para 57.

[13] This system is essentially the same as the system under the current SCMP.

[14] Lawrence Baxter Administrative Law at 384; Cora Hoexter Administrative Law in South Africa at 255. See too Jeffrey Jowell ‘The Rule of Law and its Underlying Values’ in Jeffrey Jowell and Dawn Oliver (eds) The Changing Constitution (6 ed) 5 at 10.

[15] Constitution, s 1(c). See too Fedsure Life Assurance Ltd & others v Greater Johannesburg Transitional Metropolitan Council & others [1998] ZACC 17; 1999 (1) SA 374 (CC) paras 58-59; S v Mabena 2007 (1) SACR 482 (SCA) para 2.

[16] Constitution, s 33(1): ‘Everyone has the right to administrative action that is lawful, reasonable and procedurally fair.’