Ninham Shand (Pty) Limted v Municipal Manager City of Matlosana and Others (25911/2007) [2008] ZAGPHC 113 (25 April 2008)

/SG

IN THE HIGH COURT OF SOUTH AFRICA

(TRANSVAAL PROVINCIAL DIVISION)

DATE: 25/04/2008

CASE NO: 25911/2007

UNREPORTABLE

In the matter between:

NINHAM SHAND (PTY) LIMITED APPLICANT

And

THE MUNICIPAL MANAGER:

CITY OF MATLOSANA 1ST RESPONDENT

CITY OF MATLOSANA 2ND RESPONDENT

DWP CONSULTANTS INC 3RD RESPONDENT

NEP CONSULTING

ENGINEERS (PTY) LIMITED 4TH RESPONDENT

KRM CONSULTING ENGINEERS CC 5TH RESPONDENT

KHASU ENGINEERING CC 6TH RESPONDENT

JUDGMENT

SERITI, J

1. Introduction

This matter came to court by way of motion. In the notice of motion, the applicant is praying for an order in the following terms.

1. That the following decisions be reviewed and set aside.

1.1 the decision taken on or about 14 March 2007 to amend the adjudication criteria (points system) applicable to tender CE48/1/2006 for the appointment of consulting engineers for the design, tender documentation and project management for the construction of 14400 toilets in Jouberton, Kanana, Khuma and Tigane.

1.2 the decision taken on 4 May 2007 not to award he abovementioned tender to the applicant (or to any other tenderer) but to re advertise it and to re invite tenders for the appointment referred to in paragraph 1.

2. That the applicant be appointed as the successful tenderer for consulting engineering services as referred to in paragraph 1.

3. In the alternative to paragraph 2 that it be declared that the applicant was the successful tenderer for tender CE48/1/2006 for consulting engineering services referred to in paragraph 1 and that the first respondent be directed to appoint applicant as such.

4. In the alternative to paragraphs 2 and 3 that the matter be referred back to the first respondent to reconsider and appoint a successful tenderer in accordance with the second respondent’s preferential procurement policy determined in terms of the Preferential Procurement Policy Framework Act, 5 of 2000.

5. That first and second respondents are directed to jointly and severally pay compensation to the applicant in such amount as will be determined by this court in due course.

6. That this matter be referred for evidence alternatively for trial to determine the quantum of the compensation to be paid to the applicant.

7. That the first and second respondents together with these other respondents who may oppose this application be directed to jointly and severally pay the costs of this application.

2. Founding Affidavit

It was attested to by Mr S J van der Linde, a business unit head of the applicant. In the first seven paragraphs he describes the parties to this action.

He further alleges that on 18 December 2006 first respondent by public notice invited tenders for consulting engineering services for the design, tender documentation and project management of the construction of 14400 toilets in Jouberton, Kanana, Khuma and Tigane. The closing date of these tenders was 18 January 2007 at 11:00.

Applicant obtained full particulars and tender documents from the first and second respondents, completed the documents and submitted applicant’s tender with the first and second respondents.

In the invitation to tender it is specifically recorded that the tenders will be adjudicated according to the second respondent’s supply chain management policy based on the Preferential Procurement Policy Framework Act 5 of 2000 as well as the BEE Act 53 of 2003.

A total of 26 tenders were submitted in response to the said invitation. The tenders were referred to the Bid Evaluation Committee, which committee prepared a report and submitted the report to the Bid Adjudication Committee. The latter committee recommended that the applicant be considered for appointment.

Applicant then received a letter from the second respondent dated 14 March 2007. In the said letter the second respondent informs the applicant that it amends the criteria for the adjudication of the tenders.

In terms of the amended criteria the ratio of the adjudication points between “price”, “functionality” and “preferential” is altered.

The ratio as it existed at the time of submission of tenders and in terms of the tender specifications were as follows:

Price – 70 points

Functionality – 20 points

Preferential – 10 points

The altered version was as follows:

Specific protect applicable expertise – 30 points

Approach and methodology – 10 points

Track record – 30 points

Price – 20 points

Empowerment – 10 points

The maximum points to be awarded for price was reduced from 70 to 20.

The said letter of 14 March 2007 further stated that the tenderers are required to provide the necessary information to enable the second respondent to adjudicate the tender according to the new criteria.

On 20 March 2007 applicant wrote a letter to the first respondent wherein the applicant, inter alia objected to the proposed amendment. Two other tenderers also wrote a letters of objection to the first respondent.

He is not aware of any valid reason for the amendment of the criteria at such late stage. The said amendment is prejudicial to the applicant.

The first and second respondents ignored the abovementioned objections and proceeded with the process of re evaluating the bids according to the amended criteria.

The Bid Evaluation Committee was then instructed to evaluate the tenders utilising the new criteria. The latter committee reported in writing to the Bid Adjudication Committee. The recommendations of the Bid Evaluation Committee reads partly as follows:

“…

(b) That cognisance be taken that the adjudication was done on the revised criteria.

(c) That the tender of Ninham Shanda (Pty) Ltd with the highest adjudication point of 85.84 with a tender price of R3 016 338.24 (excluding VAT) be considered for appointment.”

The applicant was again awarded the highest points, namely 85.84, and the nearest contester was awarded 79.31 points and then follows the other two with 67.93 and 65.95 points respectively. The document further records the following:

“Company D scores the highest points and therefore recommended for consideration. Due to the nature and timeframe of the project, it is recommended that the project be divided between the four companies scoring the highest points based on the tariff of company D.”

According to the said document company D is the applicant and apparently the other companies that are suppose to share the tender with the applicant is NEP Consulting Engineers, MDC Consultants (Pty) ltd and Moedi Consulting Engineers.

On 20 April 2007, a meeting called by the supply chain manager of the second respondent took place. At the said meeting, the representatives of the three companies mentioned in the previous paragraph were present together with Mr Greyvenstein representing the applicant.

At the said meeting the first respondent informed those present that he intends splitting the contract into four portions without indicating which one of the four parties will be expected to perform which part of the project.

The applicant was aware that it scored the highest points, and on 23 April 2007 applicant addressed a letter to the first respondent wherein the applicant objected to the proposed split of the work and also pointed out that it is the second time that the applicant scores the highest points but the tender is not awarded to the applicant.

Applicant then requested a meeting with the second respondent before any appointments of the consultants.

A meeting took place on 26 April 2007 and the applicant was represented by Mr Greyvenstein. The first respondent did not attend the meeting and was represented by Mr Strydom. At the said meeting Mr Greyvenstein raised the concerns of the applicant and also stated that the applicant gets the impression that the first and second respondents do not want to award the tender to the applicant despite the fact that the applicant is the preferred bidder.

On 4 May 2007 the first respondent addressed a letter to the applicant. In the said letter the following is written:

“With reference to the abovementioned tender, I have to inform you that your tender was unsuccessful.

The tenders are going to be re-advertised.”

On 6 May 2007 a new invitation was published inviting tenders for the same project. The said tenders had to be submitted on 21 May 2007 before 11:00. The new invitation materially differed from the contents of the first invitation especially with reference to the adjudication system.

The applicant, in several correspondence addressed to the first and second respondents and to their attorneys objected to the new invitation and stating that the first and second respondents should finalise the process that they started and award the tender.

The first and second respondents insisted that they will go ahead with the fresh tender.

The deponent further alleges that he has learned that on 11 June 2007 the tender was awarded to the third, fourth, fifth and sixth respondents.

3. First and Second Respondents’ Answering Affidavit

It was attested to by Mr Matshedisho Moses Moadira, employed by the second respondent as municipal manager. He admits that on 18 December 2006 they invited tenderers for the tender under consideration. Applicant is one of the sixteen tenderers who submitted their tenders.

He alleged that in terms of their procedures, after receipt of tenders, they are referred to the Bid Evaluation Committee which committee prepares a report and submits same to the Bid Adjudication Committee. The latter committee may respond to the written report from the Bid Evaluation Committee in writing, in a separate report.

After the tenders were dealt with by the abovementioned committees, the reports of the said committees are forwarded to him for final adjudication, consideration and decision. He then decides which tenderer to appoint. He can do so by following the recommendations of the committees or he can deviate from their recommendations. When the reports of the committees were presented to him he noticed that there was a material discrepancy in the prices of the tenderers. The lowest tender price, that of the third respondent was R543 859.65, whilst the highest tender price, that of Diaho Kgwale and Associates was an amount of R16 043 982.00.

Secondly he did not share the view of the Bid Evaluation Committee, where it is stated as follows:

“(b) That the lowest tender of DWP Consultants Inc with a tender amount of R620 000.00 (including VAT) not be considered, due to the fact that an effective monitoring process cannot be conducted with an amount of R43.00 per toilet (including VAT).”

He knows the third respondent well and they have a good track record. He also noticed that two other tenderers quoted prices which were far less than the price quoted by the applicant.

Notwithstanding the Bid Evaluation Committee’s view that Kwezi V3 Engineering and C and S Consulting Engineers should be regarded as non responsive tenderers as a result of the alleged non compliance with certain tender formalities, he was of the view that second respondent should seriously consider both the mentioned tenderers because of the fact that the prices they tendered were far better than the price of the applicant whose tender was recommended for acceptance by the Bid Evaluation Committee.

The third respondent’s alleged non compliance with the tender requirements is trivial. Third respondent is alleged to have failed to submit proof of its registration with the relevant professional body. The alleged failure is trivial as third respondent is a well known engineering firm in Klerksdorp, who on previous numerous occasions conducted projects successfully on second respondent’s behalf. As such it was a well known fact that third respondent was a reputable firm, duly registered with the relevant professional body.

He further alleges that the third respondent was the tenderer with the highest points scored and he believed that the third respondent would have been able to perform the required services. He was therefore entitled to award the tender to the third respondent, save for the issue of the capacity of any one tenderer to timeously complete a project of this magnitude. He was definitely not inclined to follow the recommendations of the Bid Evaluation and Bid Adjudication Committees.

He was also not happy with the point system utilised by the Bid Evaluation Committee to adjudicate the tenders, although the said point system utilised was the system set out in the tender document. The problem was that the evaluation and adjudication criteria provided for as stipulated in the tender documents were not appropriate to evaluate the tender under consideration. He had in mind a different criteria which criteria is mentioned in the founding affidavit by the applicant. The criteria he had in mind was more suited than the one stipulated in the tender documentation and applied by the Tender Evaluation Committee.

He wrote a letter to all the tenderers proposing that the tenders should be adjudicated using his new proposed criteria. Some of the tenderers objected and consequently they could not adjudicate and award the tender.

The said respondent’s Bid Evaluation Committee prepared an evaluation based on the amended criteria. In its report the Bid Evaluation Committee stated inter alia:

“(b) That cognizance be taken that the adjudication was done on the revised criteria as set out in the SCM Policy as adopted by Council on 15 March 2007.

…

(d) That cognizance be taken of the fact that Ninham Shand (Pty) Ltd scored the highest points, but due to the time frame for completion of the project, the tender be divided between the four consultants scoring the highest points based on the same fees as per tender document of Ninham Shand (Pty) Ltd …”

He was satisfied with the recommendations of the Bid Evaluation Committee.

He further alleges that the recommendation of the Bid Evaluation Committee and the Bid Adjudication Committee are mere recommendations and they do not bind him; and he can decide to follow them or refuse to follow them. The Bid Evaluation Committee and the Bid Adjudication Committee amongst others failed to question or at least address the material difference in the prices quoted by different tenderers. This is an issue which in his mind raised serious questions.

No tender was awarded based on the adjudication conducted in accordance with the amended criteria.

At the meeting of 20 April 2007 no decision was taken although the second respondent conveyed a proposal to the tenderers who attended the meeting to the effect that second respondent is considering awarding the tender to more than one contractor. The second respondent’s view was as a result of the magnitude of the contract, limited timeframes in which the project should be executed and the need for the effective and expeditions completion of the project.

He further alleges that the applicant did not score the highest points, and that the third respondent scored the highest points.

He confirmed that there was a meeting held on 26 April 2007 at which meeting the second respondent was represented by Mr G Strydom. At the said meeting Mr Strydom informed the representatives of the applicant that the second respondent is considering, taking into account the circumstances of this matter, not to award the tender to any tenderer.

Mr Strydom reported to him about the abovementioned meeting. At that time it was already evident to him that a well founded and valid reasons exists for not awarding the tender.

He then decided not to award the tender to any of the tenderers who tendered and to re-advertise the tender. All companies which initially submitted tenders were informed about the re advertising of the tender. One of the factors that led to the decision to re advertise, was to make provision for a different evaluation and adjudication criteria in order to properly and appropriately evaluate and adjudicate the tender.

38 Firms of engineers and project managers submitted tenders and after evaluating and adjudicating the tenders according to the appropriate criteria for the procurement of professional services, the second respondent awarded the tender to four firms, namely the third to sixth respondents in this application.

He further alleges that the four successful tenderers commenced with the project immediately after their appointment. The project is currently well under way over the halfway mark and will be finalised and completed during December 2007.

When the tender was re advertised the applicant elected not to submit a fresh tender.

In the initial tender the applicant’s price for the rendering of professional services amounted to R209.47 per toilet.

The re advertised tender was for the rendering of professional services, to wit project management for the construction of 13568 toilets. Second respondent decided to undertake the project management of 832 toilets internally by means of its civil engineering department.

The re advertised tender was awarded to the third to the sixth respondents at a price of R83.33 per toilet (excluding VAT). It was established that the said price constitutes reasonable, fair and realistic price for the rendering of project management services per toilet.

By not awarding the tender, investigating the price issue and applying the appropriate evaluation and adjudication criteria, second respondent saved an amount of approximately R1 643 627.52.

4. Applicant’s Replying Affidavit

It was attested to by Mr S J van der Linde. He alleges that prior to the launching of this application, the second respondent delayed to provide applicant with documents which were necessary for the applicant to prepare its documents. Second respondent refused to provide applicant with certain necessary documents. A formal request in terms of the Promotion of Access to Information Act 2 of 2000 was lodged on 10 May 2007. Some of the requested documents were received by the applicant on 5 June 2007. This application was served first on 22 June 2007.

He further alleges that at time of exchange of papers the respondents also attempted to delay the hearing of this matter.

He further alleges that the first and second respondents fail to make mention of the fact that it is in fact the municipal manager in his capacity as accounting officer who instructs the different committees including the Bid Evaluation Committee and the Bid Adjudication Committee. The municipal manager is in direct control of the Bid Evaluation Committee and the Bid Adjudication Committee.

If the first respondent was “alarmed” by the range of prices of the tenders he should have referred the decision of the Bid Adjudication Committee back to that Committee for reconsideration.

As already mentioned in the founding affidavit at a meeting held on 20 April 2007 with the representatives of applicant, NEP Consulting Engineers, MDC Consultants (Pty) Ltd and Moedi Consulting Engineers, the first respondent offered the contract to the four tenderers, but based on the price tendered by the applicant. If the applicant’s price was in any way alarming or unacceptable, he finds it strange that the first respondent was prepared to nevertheless pay that price as long as the contract is shared with the other tenderers.

He further alleges that the Association of Construction Project Managers recommends service fees ranging from 1.5% up to 4% of the construction costs. The construction costs of this project was estimated at R92 160 000.00. The applicant’s tender price therefore amounts to plus minus 3% of the construction costs.

The applicant’s tender price is plus minus 22.5% lower than the standard recommended fee for a project like the one under consideration.

The third respondent who tendered the lowest price has only nine fulltime employees as listed in the Bid Evaluation Report. The applicant is listed as having 512 fulltime employees and sixteen part time employees.

The Bid Evaluation Committee’s view was that the capacity of the third respondent is questionable with only nine fulltime employees. Third respondent, with an amount of R43.00 per toilet would not been able to conduct an effective monitoring process. The criteria for adjudication was drawn up by the Bid Specification Committee and should have been approved by the first respondent. The criteria can only be amended by the Bid Specification Committee and the first respondent does not have such authority.

The evaluation results based on the basis of a new system was also not accepted by the first respondent.

5. Findings

During oral argument the applicant’s counsel conceded that on the papers before court, the court cannot make any finding relating to damages. This means that prayer 5 of the notice of motion is now out of consideration. Prayer 6 is linked to prayer 5, and it means that it is also not necessary to consider it.

It is trite that the applicant bears the onus which onus must be discharged on a balance of probabilities prior to the court granting any order that is contained in the amended notice of motion.

It is common cause that the tender process in which the applicant participated was stopped by the respondents and no award was made to any of the tenderers. The respondents re-advertised the tender.

The re advertised tender was awarded to the third, fourth, fifth and sixth respondents on 5 June 2007. The four successful tenderers after their appointment as successful tenderers immediately commenced with the project. By September 2007 they were almost half way through the project and at that time, it was anticipated that the project will be completed during December 2007.

The probabilities are that at this point in time, which is about four months after the anticipated completion date of the project, the third to sixth respondents have completed the project or are about to complete the said project. Prayers 1, 2, 3 and 4 of the applicant’s amended notice of motion, if granted, will be of no practical effect to any of the parties as they have been overtaken by events. As stated earlier, the project under consideration is about to be completed or it has already been completed.

In Press Ordinary Court Martial v Freedom of Expression Institute [1999] ZACC 10; 1999 (4) SA 682 (CC) 13, p 687F-G LANGA DP said:

“Section 21A of the Supreme Court Act empowers the Supreme Court of Appeal or any High Court sitting as a Court of appeal to dismiss an appeal if the circumstances are such that the order it might give will have no practical effect or result.”

See also Mamabolo v Rustenburg Regional Local Council 2001 1 SA 135 at p 141A-D, para 8.

Applying the principles enunciated in the abovementioned cases, this court cannot grant the prayers contained in prayers 1, 2, 3 and 4 of the amended notice of motion. Even if, assuming the applicant has made out a case for the setting aside of the decisions of the first and second respondents, granting the prayers referred to above, will have no practical effect to any of the parties. Instead, such an order will cause chaos and prejudice all the parties involved in this dispute, including those people who are not parties to this litigation but are suppose to benefit from the project.

The applicant, in my view, should have followed a different route for a remedy, eg obtain an interdict at a much earlier stage.

My opinion is that the applicant has failed to make out a case for the prayers contained in its amended notice of motion.

During oral submission, the applicant’s counsel submitted that if the applicant’s application fails, the first and second respondents should be ordered to pay the costs of the applicant because of the manner in which the first and second respondents dealt with this matter.

On the papers before court, I cannot find any justification for the abovementioned submission. I think the normal rule should apply, namely that the costs should follow the results.

I therefore make the following order:

1. The application is dismissed.

2. The applicant is ordered to pay the costs of the respondent on a party and party scale, such costs to include costs consequent upon the employment of two counsel.

W L SERITI

JUDGE OF THE HIGH COURT

25911/2007

Heard on: 15 April 2008

For the Applicant: Adv Q Pelser SC

Instructed by: Honey Attorneys, Pretoria

For the First and

Second Respondents: Adv N G D Maritz SC & N G Laubsher

Instructed by: Messrs Lourens Heppel Bezuidenhout, Pretoria

Date of Judgment: 25/04/2008