Nexus Forensic Services (Pty) Ltd v Minister of Employment and Labour and Others (74499/2019) [2020] ZAGPPHC 689 (13 November 2020)

HIGH COURT OF SOUTH AFRICA

(GAUTENG DIVISION, PRETORIA)

(1) REPORTABLE: NO.

(2) OF INTEREST TO OTHER JUDGES: NO.

(3) REVISED.

DATE 13 NOVEMBER 2020

CASE NO: 74499/2019

In the matter between:

NEXUS FORENSIC SERVICES (PTY) LTD

Applicant

and

MINISTER OF EMPLOYMENT AND LABOUR

First Respondent

COMMISSIONER OF THE COMPENSATION FUND Second Respondent

DIRECTOR: SUPPLY CAHIN MANAGEMENT:

THE COMPENSATION FUND Third Respondent

MINISTER OF FINANCE Fourth Respondent

SAB & T CHARTERED ACCOUNTATNS INC

T/A NEXIA SAB & T

Fifth Respondent

DIRECTOR GENERAL: THE DEPARTMENT OF

EMPLOYMENT AND LABOUR Sixth Respondent

J U D G M E N T

This matter has been heard in terms of the Directives of the Judge President of this Division dated 25 March 2020, 24 April 2020 and 11 May 2020. The judgment and order are accordingly published and distributed electronically.

DAVIS, J

[1] Introduction

1.1 This is the judgment in an application for the review of a tender for the rendering of forensic and related services to the Compensation Commissioner in respect of claims submitted and payments made in terms of the Compensation for Occupational Injuries and Diseases Act, No 130 of 1993 (the “COIDA”). Central to the application is the validity of a tender awarded after the expiry of the tender validity period.

[2] Background facts and chronology:

2.1 On 29 June 2018 the Compensation Fund, being the fund established in terms of Chapter III of COIDA, published an invitation for bids for the appointment of a “Service Provider to Provide Forensic Investigation Services for a period of Thirty-Six (36) Months TCF 02: 2018/2019” in the Government Tender Bulletin.

2.2 In terms of the invitation, a compulsory briefing session was held on 12 July 2018 for prospective bidders.

2.3 The initial closing date for bids was extended from 30 July 2018 to 6 August 2018. The applicant, Nexus Forensic Service (Pty) Ltd, and the fifth respondent, SAB & T Chartered Accountants Inc, trading as Nexia SAB & T and 21 other companies submitted bids before the closing date.

2.4 The Bid Evaluation Committee (BEC) met on 29 August 2018 to evaluate the bids.

2.5 In terms of the bid documents, the evaluation was done in three phases. The first two of these were disqualifying phases. The first phase consisted of a determination whether the bids submitted met the mandatory and documentation requirements. Only ten companies, including the applicant and the fifth respondent, were found to have submitted compliant bids. The second phase consisted of a technical functionality evaluation. A bidder had to obtain at least 65% for the technical elements of the bid to survive this phase. Six bidders passed the minimum required percentage with the applicant scoring 99% and the fifth respondent 86.75%.

2.6 The relevant provisions of the Preferential Procurement Regulations 2017, regulating the evaluation processes contemplated in the Preferential Procurement Policy Framework Act 5 of 2000 (the PPPFA) provides that once a bidder has passed the functionality evaluation phase, the bidder must in the third and final phase be evaluated in accordance with a preference points system of 80/20 in respect of price and B-BBEE qualifications.

2.7 The evaluations in respect of the third phase, which were not concluded on 29 August 2018 and which proceeded on 31 August 2018, resulted in four companies (including the fifth respondent) from being disqualified. The reasons given were that they had quoted “extremely high rates in terms of consultant’s fees”, had not specified the number of people reviewing certain aspects of the proposed forensic worked, had not quoted skills transfer costs, had quoted “highly expensive” imaging and indexing service and had quoted rates above the Auditor General’s rates (which rates were prescribed in the invitation to bid). Based on this, the BEC recommended that the applicant be awarded the contract.

2.8 Prior to the above recommendation being presented to the Bid Adjudication Committee (the BAC), the relevant Supply Chain Management Unit, through its Deputy Director, intervened and informed the BEC that the third phase was not a qualifying phase, but an evaluation phase. The BEC was advised to seek clarity on the bidders’ pricing proposals by way of further representations, which the BEC then did at a further meeting held on 19 October 2018. It was after that meeting that the BEC found that the fifth respondent had complied with all requirements and that it should be recommended as the successful bidder.

2.9 Based on the aforesaid recommendation, the BAC in its meeting of 14 December 2018 recorded its deliberations and decision as follows in the minutes of the meeting:

“During the process of evaluation, the Bid Evaluation Committee was having difficulty in evaluating the pricing proposals for Nexus and Nexia SAB & T and it was sorted out with the End-User. During that process Nexia SAB & T scored the highest points on preference points and B-BBEE and Nexus was the second- highest scorer … . The End-User was reluctant to appoint Nexia SAB & T due to the previous work that was done for the Compensation Fund. SCM requested legal opinion to check if the reasons were justifiable. The legal opinion indicated that the reasons were not justifiable as the service provider was not informed of poor performance and was not blacklisted in the National Treasury Database. The BAC recommended that the tender must be readvertised. The Director: Fraud sent an email indicating that the service needed was urgent and there are fraud issues that need to be addressed. It was also indicated that there is a successful bidder who is qualified and the

Bid Evaluation Committee recommended Nexia SAB & T as their reasons for disqualifying the successful bidder was not justified.

The Chairperson Mr Pitso Molot indicated that those were not the reasons that were given by Mr Jeffry Ngapo and he also indicated the committee did their work by indicating that their reasons were not justifiable and the decision taken in the Bid Evaluation Committee was changed after the Bid Evaluation Committee (sic). Question raised: is the amount R52 302.00? The Director SCM Ms Rebecca Kgantsi indicated that this is per rates per hour (sic). BAC Approval: BAC approved the submission to Nexia SAB & T and projects with the values R52 302.00 per hour inclusive of Vat.”

2.10 The minutes were signed and confirmed by the chairperson of the BAC and the secretariat thereof on 26 February 2019.

2.11 On 21 March 2019, the Director General of the Department of Labour (the DG) approved the award of the tender to the fifth respondent and signed and addressed a letter to that effect to the fifth respondent. On 9 April 2019 the Department of Labour, represented by the DG, concluded a service level agreement with the fifth respondent.

[3] Principal issue: the bid/tender validity period

3.1 The issue of the validity of the award of a tender after the expiry of the tender validity period has been considered by our courts on numerous occasions: Telkom SA Ltd v Merid Trading (Pty) Ltd & Others [2010] ZAZPPHC, (7 January 2011), Joubert Galpin Searle Inc v RAF 2014 (4) SA 148 (ECP) at paras 66 – 70, Bosch Munitech (Pty) Ltd v Govan Mbeki Municipality [2015] All SA 674 (GP) and Lepogo Construction (Pty) Ltd v Govan Mbeki Municipality [2015] 1 All SA 153 (SCA).

3.2 In all the above mattes, tender validity periods were expressly prescribed, to which the bidders had agreed by submitting their tenders. In Lepogo and Bosch Munitech specific modes of acceptance were also prescribed in the tender documents. In all these instances, either the awards of the

tenders or the acceptance in the agreed prescribed modes, took place after the expiry of the tender validity periods and were in all instances found to be invalid. This also invalidated contracts subsequently entered into. As Southwood, J put it in Telkom at [14]: “As soon as the validity period of the proposals had expired without the applicant awarding a tender, the tender process was complete - albeit unsuccessfully - and the applicant was no longer free to negotiate with the respondents as if they were simply attempting to enter into a contract.” These cases were referred to in passing in Trenco Construction (Pty) Ltd v Industrial development Corp of South Africa 2015 (5) SA 245 at par [79], with approval.

3.3 In the present matter, no tender validity period was contained in the tender documents. The applicant contends that this alone, renders the whole tender process fatally flawed.

3.4 The bid validation period is the period within which a bidder agrees to keep its offer legally binding. The purpose of the bid validity period is for bidders to commit not to modify or withdraw their bids for a specific period. It is also used to fix the prices “quoted” in the bid. The period, is generally expressed as a number of days calculated form the closing dated for bids. If it is anticipated that the award of the tender or the signing of the contract will not take place prior to the expiry of the bid validly period, the period can be extended. In such a case a request must be directed prior to the expiry date to all bidders who have not yet been disqualified for their consent to the extension.

3.5 In the present instance, despite the absence of a tender validity period, the Supply Chain Manager of the Compensation Fund has, on a letterhead of the Department of Labour, on the 31st October 2018 written to the applicant and the fifth respondent. The compensation Commissioner’s answering affidavit states that such a letter was written “inter alia” to these parties. It is, for present purposes, assumed in favour of the respondents that it was written to all other bidders then still in the running. The requests contain the following wording: “A possibility exists that the tender … may not be disposed of before the expiry of the current validity period and I shall be glad to learn whether you are willing to hold your tender valid in all respects for the further period indicated. To facilitate the matter, the reply form hereunder may be completed and returned. Should you not be willing to hold your tender valid for the further period, it will of course lapse on the expiry of the current validity period …” . The “current validity period” was not mentioned in the letter but the extension date was expressly mentioned as being 7 February 2019. Both the applicant and the fifth respondent agreed to extend the validity period of their bids to 7 February 2019. I interpose to state that the letter was written within 90 days after the extended closing date of the bids and the extension period was for a further 90 days, being a period often encountered in tenders, but none of the parties relied on a 90-day period per se. On the assumption that the bid validity period was validly extended, the question still remains whether a valid award was made within this extended period.

3.6 The respondents who oppose the application, that is the Minister of Employment and Labour, the Commissioner of the Compensation Fund, the Director: Supply Chain Management and the DG of the Department of Labour, had this to say in the heads of argument filed on their behalf on this point: “The applicant contends that the extended validity period of the bids expired on 7 February 2019 and that the award was approved by the DG on March 2019 and published on 14 June 2019 … . We submit there is no merit in this contention. The validity period of the bid relates to the process of adjudication. It has nothing to do with the acceptance and approval of the decision by the BAC by the DG. The process of adjudication of tenders or bids, which constitutes administrative action, ends with the award of the bid by the BAC”. No authority was presented for this submission.

3.7 This submission is flawed for multiple reasons. The first is that the BAC does not award the tender, the DG as accounting officer of the relevant Department does this. The BAC only renders a recommendation and the DG is the one who takes the actual decision. The tender documents even reserve the right for the Department, represented by the DG, to make an award, make no award or even make an award to the second highest bidder, under certain circumstances as prescribed by the Procurement Regulations. The BAC has no such rights. The validity period therefore does not relate to either the period or process of adjudication, but to the period up to the actual decision. Bids must be “kept alive” until a decision can be taken as to which bid is actually the successful one.

3.8 A tender process is therefore only complete when the decision is taken on the recommendation of a BAC and the award is then actually made (or declined). This much is clear form all the authorities quoted in paragraph 5.1 above. It must follow that in the present instance, the tender process was, in the words of Southwood J (above) “unsuccessfully completed” on 7 February 2019 upon the expiry of the extended period to which the bidders have agreed to keep their bids valid, upon which date their bids lapsed. After such date, no valid award could be made as there were no longer any existing or “live” bids.

3.9 The opposing respondents, in oral argument, sought to avoid the abovementioned consequences by arguing that an acceptance letter, referred to, but not relied on by the applicant, written by the Compensation Commissioner to the fifth respondent on 19 December 2018, informing it that it has been “accepted” to render the services referred to in the tender, constituted the award. Although the existence of the letter was admitted in the Commissioner’s answering affidavit, neither the DG nor the Commisioner placed any reliance thereon. Despite this, it was argued that, in terms of section 4 of COIDA, the DG can delegate certain powers, presumably also the powers to make award in respect of tenders pertaining to the rendering of services necessary for the functioning of the Compensation Fund, to the Commissioner. No such delegation has, however been averred in the papers nor has any document reflecting such delegation been made available. Notably further, the acceptance letter by the Commissioner states that no work is to commence until a written contract has been concluded. The contract which has been concluded subsequent to the award by the DG on 21 March 2019, was between the Department (and not the Commissioner) and the fifth respondent. The DG, clearly as the Department’s accounting officer, represented the Department in that contract. For these reasons, no legal weight or consequences can be attached to the letter of 18 December 2018.

3.10 I therefore find that, upon the expiry of the extended validity period to which the remaining bidders had agreed, the tender process had unsuccessfully been completed. The subsequent “award” of the tender on 31 March 2019 by the DG and the contract signed thereafter and all subsequent steps, including the publication and implementation of the award, are unlawful and invalid.

[4] Having reached the above conclusion, it is not necessary to resolve the issues pertaining to the other attacks on the tender process, such as the conflicting and varied conclusions and re-commendations of the BEC, the manner in which the BAC had reached its own conclusion and the alleged errors in the pricing contained in the fifth respondent’s bid or the BEC’s evaluation thereof.

[5] Appropriate relief:

5.1 In the applicant’s notice of motion, a substituting order was sought whereby the applicant should be appointed in the stead of the fifth respondent. In the alternative, a remittal of the tender is sought for re-adjudication thereof.

5.2 In Trencon (above) the substitution order granted by the High Court was confirmed on appeal by the Constitutional Court. From paragraphs [79] to [81] of that judgment, it is, however clear that the distinguishable facts between this case and the Trencon-case make the granting of similar relief in this case inappropriate: in Trencon, the IDC had awarded the tender within the tender validity period. A substitution of the award therefore did not require any extension of the validity period. This was contrasted with the positions in Telkom and Joubert Galpin Searle (above). In both those cases the administrative bodies involved had failed to award tenders within the validity periods. A substitution order would therefore had required the period to be extended after it had expired. This, the Constitutional Court found, would be inappropriate. The same applies to the present case.

5.3 Neither the issue of substitution nor remittal was insisted on by the applicant’s counsel and, in the circumstances properly so. Appropriate relief, as contemplated in section 8(1) of the Promotion of Administrative Justice Act, 3 of 2000 would however, include the setting aside of the contract with the fifth respondent.

5.4 The consequence of the review and setting aside of the tender, is would then be that the tender process must start afresh, should the Department and the Commissioner still have the need for the services specified in the tender.

[6] Costs

6.1 The applicant argued that it was clear that the tender process was flawed and the award after the expiry of the tender validity period was invalid. It argues that the Department (and the Commissioner) had therefore been under an obligation themselves to have the award set aside. See: Buffalo City Municipality v Asla Construction (Pty) Ltd 2014 (4) SA 371 (CC).

6.2 Even if no steps had been taken to have the invalid award set aside, the applicant argued that the opposition to the application was, in the circumstances, unreasonable. It does however appear that the opposition was not done as a result of obstinacy, but rather as a result of a bona fide but flawed interpretation of the tender process. In the exercise of my discretion, I do not find that such conduct justifies a punitive costs order.

[7] Order:

1. The award of the tender with bid description “The appointment of service provider to provide forensic investigation services to the Compensation Fund for a period of 3 years (36 months) (Bid Number: TCF 02: 2018/2019)” is hereby reviewed and set aside and any contract or agreement concluded as a result of such award is declared invalid.

2. The first, second, third and sixth respondents are, in their respective capacities, jointly and severally ordered to pay the applicants costs, including the costs of senior and junior counsel, where so employed.

N DAVIS

Judge of the High Court

Gauteng Division, Pretoria

Date of Hearing: 31July 2020

Judgment delivered: 13 November 2020

APPEARANCES:

For the Appellant: Adv. J P Van der Berg SC together with

Adv. E van As

Attorney for Appellant: VZLR Attorneys, Pretoria

For the Respondent: Adv. Z Z Matebese SC together Adv. A Gxogxa

Attorney for Respondent: The State Attorneys, Pretoria