Thebe Ya Bophelo Healthcare Administrators (Proprietary) Limited and Others v National Bargaining Council for the Road Freight Industry and Another (39919/2008) [2009] ZAGPHC 36; (2009) 30 ILJ 1031 (W) (25 February 2009)

IN THE HIGH COURT OF SOUTH AFRICA

(WITWATERSRAND LOCAL DIVISION)

CASE NO: 08/39919

REPORTABLE

In the matter between:

THEBE YA BOPHELO HEALTHCARE

ADMINISTRATORS (PROPRIETARY) LIMITED

First Applicant

CALIBRE CLINICAL CONSULTANTS (PTY) LIMITED Second Applicant

THE RIGHT TO CARE CONSORTIUM Comprising the Third to Ninth Applicants

and

THE NATIONAL BARGAINING COUNCIL FOR

THE ROAD FREIGHT INDUSTRY First Respondent

HIV MANAGED CARE SOLUTIONS (PTY) LIMITED

Second Respondent

_________________________________________________________________________

JUDGMENT

WILLIS J:

[1] This case is concerned with a public tenderers’ lament. The applicants wish to set aside the award by the first respondent to the second respondent of the contract to manage the first respondent’s “HIV/AIDS Wellness Programme”. The applicants believe the contract should have been awarded to them. This HIV-AIDS Wellness Programme provides AIDS education, HIV/AIDS testing and, more recently, anti-retroviral treatment to employees in the Road Freight Industry. The contract commenced operation on 1st December 2008.

[2] This court has to determine the application for relief in “Part B” of the Notice of Motion, in which the applicants seek an order the relevant portions of which read as follows:-

“2. reviewing and setting aside the decision of the first respondent, which was communicated to the applicants during or about June 2008, not to appoint a service provider to provide an HIV/AIDS wellness programme to the employees of the road freight industry, pursuant to a tender process initiated by the first respondent during June alternatively July 2007;

3. reviewing and setting aside the decision of the first respondent, taken during or about May 2008, to exclude the applicants from any further tender process for the appointment of a service provider to provide an HIV/AIDS wellness programme to the employees of the road freight industry;

4. reviewing and setting aside the decision of the first respondent to appoint the second respondent as a service provider to provide an HIV/AIDS wellness programme to the employees of the road freight industry;

5. directing the first respondent, together with such other respondents who may oppose the application to pay the applicant’s costs of suit.”

[3] “Part A” of the Notice of Motion concerned an application for an interim interdict which was brought as matter of urgency and which was dismissed by my brother Jajbhay J on 9 December 2008. It seems that Jajbhay J dismissed that application because the balance of convenience did not, in his view, favour the applicants. He reserved the question of costs.

[4] The second respondent has indicated that it will abide the decision of the court.

[5] I shall take the unusual step of considering certain aspects of the law before dealing with the facts. The reason is that, at the commencement of the hearing, there was some debate as to which statute/s applied to this determination. Although the applicants contend that the decisions of the first respondent referred to the relief sought by them in Part B of the Notice of Motion (see para [2] above) offended against the provisions of sections 6(2)(c), (e)(iii), (iv) and (vi), (f)(ii) and (h) of the Promotion of Administrative Justice Act, No. 3 of 2000), the thrust of their complaint was that these decisions fell foul of:

(i) the “rationality” provisions; and

(ii) the requirement of procedural unfairness

referred to in sections 6(2)(f) (ii) and 6(2)(c) of the Act respectively. This Act is widely, if somewhat esoterically and inelegantly, referred to by lawyers as “PAJA”. Counsel for both sides did so throughout the hearing. For the sake of consistency, I shall do the same. Mr Kennedy accepted, “for purposes of argument in this court”, that administrative law and, in particular PAJA, is applicable to this case. He did so without finally conceding the point. If I understood him correctly, he wished to reserve his rights to argue this rather interesting aspect in another forum, should the matter go further. It seems clear that a bargaining council is not an “organ of state” as provided for in section 1 of PAJA. The more interesting question, upon which Mr Kennedy seemed to wish to keep his powder dry is whether a bargaining council, when it decides to award a tender is, in terms of section 1 of PAJA “exercising a public power or performing a public function in terms of empowering legislation”. Mr Kennedy does not accept, however, that either section 217 of the Constitution or the Preferential Procurement Policy Framework Act 5 of 2000 (“the Procurement Act”) is applicable to this case. In this regard, he referred to section 217(1) of the Constitution which provides as follows: –

“When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national

legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent,

competitive and cost effective”.

He submitted that, in order to fall within the purview of section 217 of the Constitution, the bargaining council, must be either “an organ of state in the national, provincial or local sphere of government” or ”any other institution identified in national legislation.” He went on to submit that, even if, within the ambit of this case, the bargaining council is an organ of state, as defined in section 239 of the Constitution, it is plainly not one “in the national, provincial or local sphere of government.” A bargaining council cannot, therefore, be brought within the purview of section 217 of the Constitution. Furthermore, it is clear, he submitted, that the phrase “any other institution identified in national legislation” does not refer to any institution named in any legislation for any purpose. Rather, the phrase refers to those institutions that are specifically identified in legislation as institutions to which section 217(1) applies.1 Thus included within this category, are those institutions governed by the Procurement Act and the Regulations thereto, as well as those institutions governed by the Public Finance Management Act, No. 1 of 1999 (“PFMA”). The Procurement Act is binding on organs of state as provided for in the Constitution only if they have been recognised by the Minister of Finance by notice in the Government Gazette as an institution to which the Procurement Act applies. The first respondent has not been so recognised and, accordingly, is not governed by the PFMA or the Procurement Act which regulates particular aspects of procurement, such as, inter alia, the manner in which tender proposals are to be evaluated. In summary, on these aspects Mr Kennedy submitted that:-

the first respondent is not bound by section 217 of the Constitution; and

the first respondent is not required by law to follow a particular type of procurement process, whether a “tender” process or otherwise.

However interesting these points may be, counsel for both sides agreed that that this case was to be decided on the basis that PAJA applies subject to the qualification that the Constitution infuses all aspects of law in our country.

[6] The facts upon which the applicants rely are largely undisputed. The first respondent is a bargaining council duly established and registered as such under the provisions of the Labour Relations Act, No. 66 of 1995, as amended (the “LRA”). It derives its funding from deductions of monies from employers and employees in terms of the LRA. Some years ago, the first respondent established a project known as “Trucking against AIDS” to manage the prevalence and impact of HIV/AIDS in the road freight industry. The project was the result of a collective agreement concluded under the auspices of the first respondent in terms of which a “Wellness Fund” was established. The project encompassed, inter alia, an AIDS awareness and education programme and an HIV/AIDS testing programme. During 2007, the parties to the first respondent decided to expand the project to include the provision of anti-retroviral treatment. This expanded project has been known as “the Wellness Programme.” During 2007 the parties to the first respondent decided to “appoint an external service provider to attend to the roll-out of the anti-retroviral treatment and the general management of the Wellness Programme”. In July 2007 the first respondent decided on the process by which the external service provider would be appointed. This was to be the same process as had previously been followed to appoint a service provider for the “Trucking against AIDS” project. As then, the process was to be conducted by the Wellness Committee (known as “the Committee”), a subcommittee of the Council established to deal with the Wellness Programme (“the Committee”). To this end, the first respondent soon thereafter called for tenderers to submit proposals for the provisions of an HIV/AIDS wellness programme to employees employed in the road freight industry (“the first tender process”). The first tender process was initiated by way of a written request for proposals which written request for proposals was subsequently revised and issued again. There was an advertisement calling for tenders. The requests for proposals, or “RFPs”, indicated that the programme would initially run for a period of less than 2 years, ending on 28 February 2009. The RFPs were not qualified in the sense that the first respondent did not reserve, either in the RFPs or the advertisement, the right not to award the tender at all and did not reserve the right to award the tender to a tenderer other than the lowest bidder. The applicants – acting in the form of a joint venture consortium and a partnership – submitted tender proposals. There were other tenderers, although it is apparent from the record that the partnership, comprising the first and second applicants, and the consortium, headed by the third applicant, Right to Care Limited (“RTC”), were for quite some time highly favoured, if not the preferred bidders. In June 2008 the first respondent notified the applicants that:-

“Tender For Wellness Programme Service Provider

This is to advise that the Council of the NBCRFI has decided not to appoint a service provider in response to its previous tender call in this regard. That tender process has accordingly been officially closed without any appointment having been made”.

[7] At the time when the first respondent decided to close the first tender process, it also resolved immediately to commence with a fresh tender process for the appointment of a provider to the proposed programme (“the second tender process”). This involved “head-hunting” or targeting possible tenderers of which the second respondent was one. The expressions “restricted invitation” or “selective tender” were also applied to this process. The second respondent had not, however, been one of the tenderers in the first tender process. The first respondent did not invite the applicants to participate in the second tender process. The second tender process culminated in the award of the tender to the second respondent. It is against this background that the applicants seek to review and set aside the three decisions referred to in Part B of the Notice of Motion.

[8] The first respondent contends that the applicants’ proposals were effectively disqualified at an early “due diligence” stage of the process. This was so for a number of reasons. There are, in Mr Kennedy’s submission, two which are sufficient to justify the first respondent’s decisions –

The first applicant was factually insolvent; and

The third applicant’s primary service provider, Dr Grietjie Strydom, was subject to a restraint of trade agreement which prohibited her from performing the required services.

[9] The first respondent emphasised that, the third applicant did not disclose the aforesaid restraint of trade agreement to the first respondent. The first respondent contends that the applicants were afforded an opportunity to address the above concerns but failed to do so to the satisfaction of the first respondent. In the circumstances the first respondent was not prepared to consider the applicants’ bids any further, regardless of what their merits on functionality or price might have been. The first respondent accordingly declined to make any appointment in terms of this process, informed the applicants accordingly, and instructed the well-known firm of auditors and management consultants, KPMG to source an alternative service provider through a second process. As has been noted above, it was through the second process that the second respondent was awarded the contract.

[10] The first respondent has enumerated other, additional facts. I shall refer, as did counsel for the parties, to the first and second applicants jointly as “the Partnership” and the third to ninth applicants collectively as “the Consortium”. The first respondent acknowledges that, after having received the applicants proposals, together with others, it shortlisted four proposals among which was that of the applicants. Thereafter, during or about October 2007, the Committee briefed a firm of auditors, Sizwe Ntsaluba (“Ntsaluba”), to conduct a financial due diligence in respect of each of the shortlisted proposers. Ntsaluba duly did so and produced its report on 6 December 2007 (“the Ntsaluba Report”). The Ntsaluba Report raised

a number of concerns in relation to the shortlisted proposals. In respect of the applicants, these concerns included, inter alia, the following:-

(i) “[The Consortium] is heavily reliant on a single individual who will be in charge of co-ordinating the project with no clear indication of succession planning regarding the replacement of this person should it prove necessary.” (This individual was Dr Grietjie Strydom.)

“[The Consortium] is currently occupying premises in respect of which it does not have a signed lease agreement. In terms of the memorandum of agreement with the Helen Joseph Hospital these premises are to be handed over to the Helen Joseph Hospital in 2009 and service delivery may be impaired if the organisation has issues in obtaining new premises.”

“[The Consortium] is heavily reliant on income from a single source, namely USAID. The income is reliant on dependencies that are not all under the control of [the Consortium] ”

“At 31 March 2007 [the first applicant’s] total liabilities exceeded its total assets by R130 556.00 rendering the company factually insolvent.”

[11] After examining the Ntsaluba Report, the Committee instructed Ntsaluba to engage with the proposers in an effort to address the concerns raised. The Committee’s intention was to ensure that the issues raised in the Ntsaluba Report were dealt with so that doubts could be removed from the process and the concerns discounted. Ntsaluba duly approached the proposers, including the applicants, and invited them to address the concerns. That the applicants in fact did so is confirmed in their own affidavit in the following terms: –

“I confirm that Sizwe Ntsaluba in fact approached the partnership and the consortium with questions that apparently derive from the Sizwe Ntsaluba report. The consortium addressed these questions in writing; the partnership gave a presentation to Sizwe Ntsaluba and also submitted further documents.”

[12] Ntsaluba produced a further document on 18th February 2008 in which it detailed the engagement process and the proposers’ responses to the concerns raised in its initial

report. This document was known as “the Ntsaluba Reportback.” Taking into account their responses to the concerns raised, the Ntsaluba Reportback then scored the four shortlisted proposers as follows –

The Consortium – 94%

The Partnership – 64%

Alexander Forbes Health Management Solutions - 61%

Medworx – 14%

The Ntsaluba Reportback was considered by the Committee at its meeting of 27th February 2008. The Committee was concerned that certain of Ntsaluba’s concerns had been answered “in loose generic

terms and had not been concretely resolved”. For example:-

(i) Ntsaluba raised as a concern the Consortium’s reliance on a single individual, Dr Grietjie Strydom, for the management of the entire Wellness Programme. The Consortium’s response to this was to state that “the third applicant would take responsibility for the Project and that Dr Strydom would increase her capacity to meet the needs of the Council”. The Committee viewed this response as less than satisfactory. In the event of its appointment, the Consortium, including the third applicant, would as a matter of law be required to take responsibility for the Wellness Programme. The issue raised by Ntsaluba was that a single individual was responsible for the management of the entire Programme. This raised concerns around capacity and succession. In the Committee’s view, the Consortium’s response failed to give a concrete indication of how these concerns would be dealt with.

(ii) In relation to the Partnership, Ntsaluba had raised as a concern the fact that the first applicant, one of the partners, was factually insolvent. In response to this concern the first applicant produced a letter from its holding company stating that the latter regarded the provision of affordable healthcare as a core component of its business strategy and was committed to the promotion of the first applicant. The Committee viewed this response as unsatisfactory.

[13] On 26th February 2008 (in other words, the day before the meeting of 27th February 2008 referred to above) the Council received a letter from Alexander Forbes Financial Services (Pty) Ltd advising that Dr Grietjie Strydom was a former employee of theirs and subject to a restraint of trade in their favour. The letter contended that Dr Strydom was precluded by the restraint of trade from providing HIV/AIDS related services – such as those to be provided in terms of the Wellness Programme. This letter was tabled at the Committee meeting of 27th February 2008. The Committee members were extremely concerned at its contents, not least because there had been no disclosure by the Consortium of such a restraint of trade. Ultimately, the Committee meeting of 27th February 2008 decided that the proposals received from Alexander Forbes and Medworx would receive no further consideration due to their poor performance in the “due diligence” enquiry. The meeting decided further that in the light of the concerns

referred to above and in particular the restraint of trade which had only come to hand the day before, no decision could be taken, at that stage, on the appointment of a service provider. The meeting decided further that the restraint of trade issue required further investigation. In relation to the restraint of trade, the Committee did two things. First, it sent a copy of the letter received from Alexander Forbes to Dr Strydom and asked her to comment thereon. Second, it sought legal advice from its attorneys on the enforceability of the restraint. Dr Strydom, in her written response to the Committee, confirmed that the restraint was in existence but contended that it was neither reasonable nor enforceable. The Committee’s attorneys advised that while the risk of the restraint being successfully enforced against Dr Strydom did not appear to be great, the Committee would have to weigh this against the material harm that would be caused to the Wellness Programme if the restraint was so enforced. No explanation was forthcoming from Dr Strydom or any other member of the Consortium as to why the restraint had not been disclosed to the Committee in the first place. Even in this application the Consortium has offered no explanation for its failure to disclose upfront the information that its primary service provider was subject to a restraint of trade that prohibited it from performing the required services.

[14] In all the circumstances, the Committee felt uncomfortable recommending either the Consortium of the Partnership for appointment and still sought comfort that the concerns raised had been concretely answered. At its meeting on 20th March 2008 the Committee accordingly resolved that: –

no appointment could be made in the context of all the issues raised; and

a second opinion be sought from KPMG using the information and report coming out of the Ntsaluba investigation.

[15] KPMG was not placed in possession of any new information but merely reviewed the same information that had been available to Ntsaluba. KPMG produced a report on 7th May 2008 in which it found inter alia as follows: -

(i) The issues highlighted by Ntsaluba relating to the appointment of the Consortium had prima facie been addressed; and

(ii) “If [the Council] can attest to the fairness and transparency of the tender award process ….it is recommended that the highest scoring bidder is awarded the contract”.

[16] The Committee considered the KPMG Report at its meetings of 23th May 2008 and 26th May 2008 and was unable to agree with the findings and recommendations set out above. The Committee was of the view that its concerns had not been sufficiently addressed. The Committee had been looking for guidance from KPMG to confirm that the potential

risks identified by Ntsaluba (and those arising out of the restraint of trade) were not in existence. This KPMG had not been able to do. The Committee was of the view that KPMG’s recommendation in paragraph [15] above was inappropriate in that KPMG had only considered one aspect of the matter, that of the potential risks arising out of the financial due diligence. The scores allocated by Ntsaluba had been allocated in respect of those risks and those risks alone. None of the Committee, or Ntsaluba, or KPMG had evaluated the shortlisted proposers in respect of functionality, price or BBBEE (Broad-Based Black Economic Empowerment). In summary, the Committee was not satisfied that the concerns had been satisfactorily resolved. As there would be serious detrimental

effects resulting from any interruption to an anti-retroviral roll out programme, the Committee was of the view that it ought to adopt a cautious approach and not appoint a service provider if there were potential risks associated with that appointment. For those reasons, the Committee recommended that no appointment be made in terms of the first process and that an alternative service provider be sourced through a second process. The Council accepted that recommendation and adopted a resolution to that effect on 28th May 2008.

[17] Thereafter, the Committee briefed KPMG to source an alternative service provider. The Committee instructed KPMG to employ a “restricted invitation” or “selective tender” process which excluded the applicants by reason of the concerns that had arisen in the first process. As part of its mandate KPMG made some revisions to the RFP. While the services to be provided remained the same, the revised RFP required the submission of a more formal proposal and set out the process and the criteria (including the weighting of the criteria) in terms of which the proposals would be adjudicated. This was: 80 points for functionality, 10 points for price and 10 points for BBBEE.

[18] Two proposals were received in terms of this process - one from the second respondent and one from an entity known as Aganang. When scored by KPMG in accordance with the above specifications, The second respondent received 87.57 points and Aganang received 76.14 points. The “due diligence” enquiry conducted by KPMG raised no concerns in respect of either the second respondent or Aganang. In the result, KPMG recommended that “the Council consider the appointment of the second respondent as its Wellness Programme Service Provider”. Pursuant thereto the Council took a decision to appoint the second respondent as its Wellness Programme service provider and a service agreement was concluded between the Council and the second respondent on 1st December 2008.

[19] The applicants seek final relief in motion proceedings. Insofar as the disputes of fact are concerned, the time-honoured rules set out in Stellenbosch Farmers’ Winery Ltd v Stellenvale Winery (Pty) Ltd2 and as qualified in Plascon-Evans Paints (Pty) Ltd v Van Riebeeck Paints (Pty) Ltd3 are to be followed. These are that where an applicant in motion proceedings seeks final relief, and there is no referral to oral evidence, it is the facts as stated by the respondent together with the admitted or undenied facts in the applicants’ founding affidavit which provide the factual basis for the determination, unless the dispute is not real or genuine or the denials in the respondent’s version are bald or uncreditworthy, or the respondent’s version raises such obviously fictitious disputes of fact, or is palpably implausible, or far-fetched or so clearly untenable that the court is justified in rejecting that version on the basis that it obviously stands to be rejected. These rules have been re-affirmed in innumerable cases and, recently, with some publicity, in the case of National Director of Public Prosecutions v Zuma4.

[20] Mr Leech, who appeared for the applicants submitted that insofar as Dr Grietjie Strydom’s restraint of trade agreement was concerned, the first respondent was aware of sound legal advice that it was too onerous to be enforceable and therefore should have disregarded that restraint agreement. It was, so he submitted, “irrational” for the first respondent to have taken this into account. Insofar as the financial strength of the first applicant was concerned, Mr Leech submitted that the first respondent acted “irrationally” in not taking comfort from a “letter of comfort” given to it by the first applicant’s holding company. I shall have regard to both these submissions in evaluating the decisions of the first respondent. I also accept that the applicants were dealt with dealt with in a less than perfectly fair manner. I accept that, ideally, the first respondent should have said something like this to the applicants before taking the first two decisions which have been challenged in this application:

“We are so troubled by the financial position of the Thebe Ya Bophelo Healthcare Administrators (Pty) Ltd and Dr Grietjie Strydom’s

restraint of trade agreement and the fact that we have no other suitable tenders at the moment that we have it in mind to make no appointment in this tender process and to employ a “restrictive invitation” or head-hunting process to find a suitable

tenderer. Please make representations to us as to why we should not act accordingly”.

That the first respondent fell short of the optimum standard in the circumstances is also a factor that I shall take into account, along with everything else.

[21] Mr Leech submitted that the applicants’ entitlement to relief in this case “derives principally from the provisions of PAJA and, more particularly, section 6(2)(c), (e)(iii), (iv) and (vi), (f)(ii) and (h) thereof”. Section 6(2)(c) of PAJA provides for judicial review of administrative action if it was “procedurally unfair”. Section 6 (2) (e)(iii), (iv) and (vi) provides for judicial review of administrative action in circumstances where the action was taken:-

“(iii) because irrelevant considerations were taken into account or relevant considerations were not considered;

because of the unauthorised or unwarranted dictates of another person or body;

arbitrarily or capriciously;”

Section 6(2) (f)(ii) provides for judicial review of administrative action if “the action itself”

“(ii) is not rationally connected to-

(aa) the purpose for which it was taken;

(bb) the purpose of the empowering provision;

(cc) the information before the administrator;

(dd) the reasons given for it by the administrator;”

Section 6(2)(h) provides for judicial review of administrative action if:-

“the exercise of the power or performance of the function authorised by the empowering provision, in pursuance of which the administrative

action was purportedly taken, is so unreasonable that no reasonable person could have so exercised the power or performed the function”.

[22] Nevertheless, insofar as the substantive (as opposed to the procedural) merits of the tender process are concerned, Mr Leech relied on the “rationality” approach apparent in several cases decided in the Constitutional Court (CC) and the Supreme Court of Appeal (SCA). In Pharmaceutical Manufacturers of SA: In Re Ex Parte President of the Republic of South Africa5 and Merafong Demarcation Forum v President of Republic of South Africa6 it was affirmed that rationality is considered a principle of the rule of law and all exercises of public power are required to comply with this principle.7 That which does not, falls short of the standards demanded by our Constitution for such action.8

[23] Sight must not, however, be lost of the important case decided in the Constitutional Court, Sidumo v Rustenburg Platinum Mines9 in which that court considered the basic test for administrative review is whether the decision reached is one that no reasonable

decision-maker could reach.10 The standard, the court reaffirmed, “is the one in Bato Star”.11 In the Bato Star case the principle of deference to an administrative decision-maker’s decision received some prominence.12 In the Sidumo case, Navsa AJ, delivering the majority judgment remarked that the definition of administrative action in PAJA is “intended to cover the field”.13 He also referred extensively to the Bato Star case (which was not a labour matter – it was concerned with the allocation of fishing quotas).14 Navsa AJ seems also to summarize the rights to fair administrative action in terms of PAJA as being a reflection of that which appears in section 33 (1) of the Constitution in these very terms, viz. the right to administrative action that is: (i), lawful; (ii), reasonable and (iii) procedurally fair.15 It sseems it may be gleaned from the Sidumo case that regard to administrative action, PAJA is a codification of administrative law that supersedes all other earlier law which may be in conflict with it (except, of course, the Constitution itself). In view of the fact-complex of Sidumo, this seems to entail that in the absence of procedural unfairness, or a failure by the administrative decision-maker to comply with an applicable statutory provision, extraneous to PAJA, a person aggrieved at administrative action can only succeed if he or she can persuade a court that the administrative decision-maker’s decision was one that no reasonable decision-maker could reach. It is not clear what the impact of Sidumo on the “rationality” or “rational connectivity” test has been. When the Constitutional Court decided the

Pharmaceutical Manufacturers case16 - which affirmed the rationality principle17- it did not make the decision by reference to PAJA. PAJA commenced only on 30th November, 2000. The Merafong case18, which, as we have seen19, reaffirmed it, related to legislative acts and not administrative action. The silence of the Constitutional Court in the Sidumo case on the rationality test seems to have been both deliberate and significant in more ways than one. The first is: why did they not apply it when it appears so clearly in section 6 (2) (f) (ii) of PAJA? The second is that Cameron JA, as he then was, writing the judgment for a unanimous SCA, specifically based his decision in that very case - which the Constitutional Court reversed - on the “rationality” principle.20 It seems that in regard to administrative action, at least, the Constitutional Court may have taken the decision to suffuse “rationality” into “reasonableness”. Admittedly, despite the undoubtedly fine intentions of those in the

government, legislature and judiciary who brought terms such as “rationality” and “rational connectivity”

into vogue and usage, previous debates about “rational connectivity” had became, in my experience, quite contorted

and at times, almost so lurid as to make one blush. Nevertheless, if all that all that a person aggrieved at the substantive aspects of administrative action may hang his or her case is whether the decision was one that no reasonable decision-maker could reach, this may be rather chilling. It seems that the rest of section 6 of PAJA (apart from that relating to procedural aspects) may have become, as a result, mere excrescences or garnishes – it is the “reasonableness” test (cast in an onerous form for challengers such as the applicants in this case) that seems to prevail. In the case of Palaborwa Mining Co Ltd v Cheetham & Others,21 I had to deal with a very different context in my capacity as a member of the Labour Appeal Court, I attempted to act with studied moderation and restraint to express certain reservations about the wider implications of the Sidumo judgment.22 Nevertheless, I referred to the well-known case of Cassell & Co Ltd v Broome23 which has been referred to with approval in S v Kgafela24. In the Cassell case, the then Lord Chancellor of England, Lord Hailsham of St Marylebone stressed the importance of judicial precedent in a hierarchy of courts and gave an unforgettable account of why this should be so.

[24] As the famous saying goes, “Quot homines, tot sententiae”.25 Opinions, even among reasonable men and women, may differ and, at times, quite markedly. If the test in a challenge to an administrative decision is whether the decision was one that no reasonable decision-maker could reach, it will, in practice, be very difficult to succeed. Interestingly, in The New Reclamation Group (Pty) Ltd v Eskom Holdings Ltd and Kwanda Ferro-Alloy African Resources (Pty) Ltd,26 my brother Blieden J set aside a tender because the successful tenderer posed a real financial and operational risk to Eskom. Opinions will differ as to the stance which the first respondent should have taken concerning the financial strength of the first applicant and whether it should have disregarded the restraint of trade agreement which applied to Dr Grietjie Strydom, but if one has regard to the totality of facts and circumstances as set out by the first respondent, it cannot be concluded that the decision of the first respondent not to continue with the first tender process and not to invite the applicants to participate in the second tender process was so unreasonable that no reasonable person could have come thereto. Moreover, even if the “rationality” or “rational connectivity” test still prevails, it cannot be found that the decisions of the first respondent in this regard were devoid of rationality or not sufficiently rationally connected with all that the first respondent had to consider so as to justify interference by this court. If the first two decisions of the first respondent (i.e. not to continue with the first tender process and not to invite the applicants to participate in the second tender process) survive, the decision of the first respondent to award the tender to the second respondent cannot, in all the circumstances of this case, seriously be questioned.

[25] Related to the question of the first respondent’s decision to initiate the second tender process is the question of the first respondent deciding to “head-hunt” or “target” specific tenderers or adopt “selective tendering” or “restrictive invitations”. I accept that some would regard this as a matter relating to procedural fairness. In my view, it relates to the substantive fairness of the process. In tender processes aspects may often be procedural in form but substantive in nature. If one has regard to the jurisprudence which has developed in labour law over the past thirty years, procedural fairness relates to the right of an affected party to a hearing and to make representations thereat, whereas the substantive aspects relate to the actual decisions themselves, the reasons therefor and, in the context of tenders, the steps such as advertising, that are taken along the way to reach such a decision. In this case, it makes no difference to the outcome as to whether the issue is characterised as “substantive” or “procedural” and therefore it is not necessary to dwell on these aspects. In practice, the difference between the two is likely to entail that where there has been substantive unfairness – at least to the extent that judicial intervention is justified – the tender process would have to be undertaken de novo by reason of the fact that the decision is, in a sense, “fatally flawed” whereas procedural unfairness may entail a more limited intervention to the extent of allowing a reconsideration at a hearing, as happened in the case of Logbro Properties CC v Bedderson NO and Others.27 The views expressed herein as to the difference between substantive and procedural fairness should be treated as merely tentative.

“Restrictive invitation” or “selective tendering” is not unknown in procurement. “Selective tendering”

occurs where only those contractors or candidates who are identified as most likely to provide responsive and cost effective tenders, and are most likely to perform in terms of their contractual obligations, are invited to tender.28 Bolton notes that selective tendering may be employed “so that an organ of state’s resources for tender evaluation are not unnecessarily strained by the need to review tenders submitted by unqualified contractors”.29 Bolton notes further that “selective tendering may also be employed when the time and costs required to examine and evaluate a large number of tenders are disproportionate to the actual value of the goods or services needed.”30 Mr Kennedy also pointed out that provision is made for selective tendering in the above circumstances in terms of Article 20 of the UNCITRAL Model Law on Procurement of Goods, Construction and Services. Especially if one has regard to the fact that the applicants failed to satisfy the first respondent in the “due diligence” enquiry, the failure to invite them to participate in the second tender process cannot be considered unfair. The same applies in respect of the applicants’ protest that during the second tender process the first respondent failed to compare their proposals with those of the second respondent and Aganang. Even if it were permissible for a court, in a case for the review of administrative action, to take a robust view and intervene where, objectively, the decision “offended against sound good sense” (the “rationality” test?), I would decline to do so in this case, even though I do not consider the applicants to be entirely undeserving.

[26] I turn now to consider the question of procedural fairness. Mr Leech referred to Chairperson: Standing Tender Committee v JFE Sapela Electronics (Pty) Ltd31 in which the SCA emphasised the constitutional imperative underlying fair tender procedures. He also referred to Logbro Properties case;32 Metro Projects CC v Klerksdorp Local Municipality33 and Bel Porto School Governing Body v Premier Western Cape.34. In the Metro Projects case, the SCA referred, with approval, to Cameron JA’s comments on the “ever-flexible duty to act fairly” that rested on a provincial tender committee and went on to say that:-

“Fairness must be decided on the circumstances of each case. It may in given circumstances be fair to ask a tenderer to explain an ambiguity in its tender; it may be fair to allow a tenderer to correct an obvious mistake; it may, particularly in a complex tender, be fair to ask for clarification or details required for its proper evaluation. Whatever is done may not cause the process to lose the attribute of fairness…”35

[27] Mr Leech also relied on the following extracts from the Logbro Properties case in which Cameron JA, as he then was, said:-

“[23] But in this Court Mr Marcus raised an entirely new point on behalf of the appellant - that the committee before deciding not to award the tender in 1997 should have given the appellant an opportunity to make representations, at least in writing, on the significance of the price increase. That point, although not raised in the affidavits or argued in the Court below, may properly be raised at this stage since not only are the facts before us clear, but neither party wishes to adduce any further relevant evidence. The unquestioned fact is that the committee decided to recommend re-advertisement without giving any of the compliant tenderers an opportunity to make representations.

[24] While, as Mr Marcus pointed out, it is no answer to a claim to be heard that the subject might have had little or nothing to say if such an opportunity had existed, it is certainly worth pointing out that, if afforded, the opportunity might have been extremely valuable. The fact of an increase in property values between 1995 and 1997 was undisputed before us. But its extent is unknown. The appellant's 1995 tender exceeded the property's then market value by more than 50 %. Did the increase over the next two years surpass that margin? We do not know. Whether it did or not, the appellant was entitled to try to persuade the committee that accepting its 1995 offer would be more advantageous, taking all factors into consideration, than a call for fresh tenders; and in any event that, given its investment in time and money and its employment of skill, fairness pointed notwithstanding any increase to acceptance of its tender.

[25] Procedural fairness, in my view, demanded that the committee in reconsidering the tenders would afford the compliant tenderers an opportunity to make representations, at least in writing, on any factor that might lead the committee not to award the tender at all. That opportunity not having been afforded, the committee's 1997 decision must be set aside, and the matter remitted to the appropriate authority to afford the appellant and the other compliant tenderers the opportunity to make representations, at least in writing, on any supervening consideration relevant to the committee's exercise of its powers in relation to the award or non-award of the tender”.36

[28] Mr Leech submitted that this principle, relating to the opportunity to make representations, was followed in Silverstar Development Ltd v Gauteng Gambling Board37 where Mynhardt J found as follows:-

“Counsel for Silverstar contended that the board had not given it, nor any other interested party, an opportunity to make representations on the question whether only five licences should be issued and the sixth licence for the West Rand area not be granted. It was contended that the board should have done that. That submission is undoubtedly correct. See Logbro Properties CC v Bedderson NO and Others 2003 (2) SA 460 (SCA) at 472B - C; the Bel Porto School case at 294B - C, 295G.

In my view, the board is accordingly not entitled now to approach the matter on the basis that only five casino licences would be issued”.38

[29] Mr Kennedy, on the other hand, relied on the following dictum in Milnerton Lagoon Mouth Development (Pty) Ltd v Municipality of George & Others39 (albeit in the context of a government tender process governed by procurement legislation): –

“The applicant contends that the municipality failed to inform it that its tender did not comply with the tender conditions; that it decided to invite new tenders without informing the applicant beforehand of its intention to do so; and that the municipality failed to grant it an opportunity to deal with all relevant information which the executive committee intended to take into account when deciding to invite new tenders.

These contentions are without substance. A tenderer’s ‘right’ to be heard in relation to its failure to comply with tender conditions before a tender is awarded to a successful tenderer who does so comply, is unheard of. In my view the recognition of such a right would take the duty to act fairly to new and far horizons. In any event, as regards its non-compliance with the tender conditions, the applicant itself says that its non-compliance with

conditions 8 and 9 were fully canvassed during its presentation to the executive committee….Furthermore, there was no duty on the municipality to invite all existing tenderers to make representations as to why fresh tenders should not be invited. It was made clear in the tender conditions that the municipality reserved the right not to accept the highest or indeed any tender.”40 (emphases added)

At most, so Mr Kennedy submitted, the applicants were entitled to reasons for the Council’s decisions not to make an appointment in terms of the first process and to invite new proposals in terms of a second process. The applicants were furnished with such reasons on request.

[30] As noted above, I accept that, ideally, the first respondent should have said something like this to the applicants before taking the first two decisions which have been challenged in this application: -

“We are so troubled by the financial position of the Thebe Ya Bophelo Healthcare Administrators (Pty) Ltd and Dr Grietjie Strydom’s

restraint of trade agreement and the fact that we have no other suitable tenders at the moment that we have it in mind to make no appointment in this tender process and to employ a “restrictive invitation” or head-hunting process to find a suitable

tenderer. Please make representations to us as to why we should not act accordingly”.41

I repeat: I accept that the first respondent fell short of the optimum standard in this regard.

[31] The question, therefore, is this: were the shortcomings of the first respondent so serious as to justify intervention by this court? Fairness entails a consideration not only of the interests of the unsuccessful tenderer but also the one who was successful as well as the interests of the person awarding the tender and the constituents who will be affected thereby.42 There appears to be a view that judges, when they sit on the bench, imagine themselves to be reclining in armchairs covered with the finest Moroccan leather, puffing away at the most delectable Cuban cigars and quaffing vintage armagnac, while perched in the highest porticos of the tallest of ivory towers, pontificating about the ignobile vulgus43 below. It has even been reported that judges consider themselves to have descended from heaven to grace the bench with their exalted presence. The truth is rather more mundane: judges – at least those with whom I have been privileged to deal – are keenly aware of their own limitations. If there is any doubt in this regard, one should read the judgment of Schutz JA in Minister of Environmental Affairs and Tourism and Others v Phambili Fisheries (Pty) Ltd and Another; Minister of Environmental Affairs and Tourism and Others v Bato Star Fishing (Pty) Ltd44 which was referred to with approval by O’Regan J (delivering the majority judgment) in the Bato Star case in the Constitutional Court.45 O’Regan said a court “should be careful not to attribute to itself superior wisdom”.46 It must be borne in mind that the persons making the decisions on behalf of the first respondent are not trained lawyers, they were acting in stressful circumstances, the record shows that they attempted to act with appropriate fairness and they did invite the applicants to make representations on the issues of the first applicant’s solvency and the restraint of trade agreement

applicable to Dr Grietjie Strydom – the two issues that led to the decisions of which the applicants now complain. Against the background of all the relevant circumstances of this case, it cannot, in my view, be concluded that the court should interfere with the decision of the first respondent to award the tender to the second respondent. The court is averse to taking an armchair view of the matter.

[32] I am fortified in this view by reference to a further aspect raised by Mr Kennedy: even if the conduct of the first respondent fell short of the required standard to the extent that it may be deemed unlawful, the court retains a judicial discretion as to whether or not to quash that decision. In this regard it is instructive to read Oudekraal Estates (Pty) Ltd v City of Cape Town and Others.47 In the case of Millenium Waste Management (Pty) Ltd v Chairperson Tender Board : Limpopo Province and Others48 Jafta JA stated:

“A decision to accept a tender is almost always acted upon immediately by the conclusion of a contract with the tenderer, and that is often immediately followed by further contracts concluded by the tenderer in executing the contract. To set aside the decision to accept the tender, with the effect that the contract is rendered void from the outset, can have catastrophic consequences for an innocent tenderer, and adverse consequences for the public at large in whose interests the administrative body or official purported to act. Those interests must be carefully weighed against those of the disappointed

tenderer if an order is to be made that is just and equitable”. 49 (emphases added)

[33] I draw further guidance from the fact that in Digital Horizons (Pty) Ltd v SA Broadcasting Corporation and Another,50 my brother Malan J held that the need for the first respondent in that case to comply with its obligations in terms of the 2010 FIFA World Cup outweighed the applicant’s right to administrative justice.51

[34] In the present case, quite apart from the considerations mentioned in paragraphs [24], [25] and [31] above, there is the fact that the dangers of interrupting an HIV/AIDS programme such as the one in question, are not only common cause but self-evident. Taking everything into account, it would not be appropriate for the court to intervene in the tender process in this matter.

[35] The application should be dismissed. There is no reason why costs should not follow the result. The importance of the matter and the complexity of the issues justify the employment of two counsel.

[36] The following is the order of the court:

The application is dismissed with costs, which costs are to include all costs reserved to date, together with the costs consequent upon the employment of two counsel.

DATED AT JOHANNESBURG THIS 25th DAY OF FEBRUARY, 2009

N.P. WILLIS

JUDGE OF THE HIGH COURT

Counsel for the Applicants: B.E. Leech

Attorneys for Applicants: Werksmans Inc

Counsel for the First Respondent: P.M. Kennedy SC

and, with him, H. Barnes

Attorneys for the First Respondent: Moodie and Robertson

Date of hearing: 18th February, 2009

Date of Judgment: 25th February, 2009

1 See, Penfold and Reyburn 2003 “Public Procurement” in Chaskalson et al Constitutional Law of South Africa 2 ed (Juta, Looseleaf) at 25-7; Bolton The Law of Government Procurement in South Africa 2007 (Butterworths) at 65.

2 1957 (4) SA 234 (C) at 235E-G

3 [1984] ZASCA 51; 1984 (3) SA 623 (A) at 634H-635C.

4 (573/08) [2009] ZASCA 1 (12 Jan 2009) at para [26].

5 [2000] ZACC 1; 2000 (2) SA 674 (CC) at [90]

6 [2008] ZACC 10; 2008 (5) SA 171 (CC); 2008 (10) BCLR 969 (CC) at [62] to [66]

7 Pharmaceutical Manufacturers of SA: In Re Ex Parte President of the Republic of South Africa at [90]; Merafong Demarcation Forum v President of Republic of South Africa at paras [62] to [66]

8 See, for example: Pharmaceutical Manufacturers Association of South Africa v President of the Republic of South Africa, at paras [85-86]

9

2008 (2) SA 24 (CC)

10 See para [110] of the Sidumo judgment

11 Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs [2004] ZACC 15; 2004 (4) SA 490 (CC); 2004 (7) BCLR 687 (CC) at para [44] and see para [107] of the Sidumo v Rustenburg Platinum Mines case (supra) where O’Regan J is quoted, quoting, in turn, from Lord Cooke in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 (CA) at 233-4[1947] EWCA Civ 1; ; [1947] 2 All ER 680

12 See paras [42] to [47] of the Bato Star judgment

13 At para [90]

14 See paras [43], [92],[93], [107] of the Sidumo judgment

15 See paras [89] and [112]

16 Pharmaceutical Manufactures of SA : In re Ex parte President of the Republic of South Africa [2000] ZACC 1; 2000 (2) SA 674 (CC) at paras [62] to [66].

17 See para [90]

18 [2008] ZACC 10; 2008 (5) SA 171 (CC); 2008 (10) BCLR 969 (CC) at [62] to [66

19 See para [22] above

20 See Rustenburg Platinum Mines Ltd v CCMA 2007 (1) SA 576 (SCA) at para [34]

21 (2008) 29ILJ 306 (LAC)

22 See paras [4], [5] and [6] of Palaborwa Mining Co Ltd v Cheetham.

23 [1972] UKHL 3; [1972] AC 1027; [1972] All ER 801 (HL)

24

2003 (5) SA 339 (SCA) at para [3]

25 The author was the Roman comic playwright, Publius Terentius Afer (Terence) writing more than 2000 years ago in Phormio. The fuller quote is: “Quot homines, tot sententiae: suo quoique mos”. – “There are as many opinions as there are people: each has his own correct way”.

26 Case No 07/27391 (WLD)

27 2003(2) SA 460 (SCA) at para [28]

28 Bolton supra at p 135.

29 At p 135 – 136.

30 At p 136.

31 [2005] 4 All SA 487 (SCA)

32 See the citation at para [25] above. It is illuminating to read para [5] of the Logbro case at 465F- 466 C, where the leading cases are collected.

33 (2004 (1) SA 16 (SCA) at paras [12] and [13]

34 [2002] ZACC 2; 2002 (3) SA 265 (CC) at paras [83] – [87].

35 Logbro at paras [8] and 9[] and Metro Projects at para [13].

36 Logbro Properties CC v Bedderson (supra) at paras [23] to [25}.

37

2004 (2) SA 289 (T)

38 at 320G—H,

39 [2005] JOL 13628 (C)

40 See paras [30] and [31]

41 See para [20] above

42 Millenium Waste Management (Pty) Ltd v Chairperson Tender Board : Limpopo Province and Others 2008 (2) SA 481 (SCA) at para [23]

43 The Latin is, very roughly, translated as “the masses”

44 2003 (6) SA 407 (SCA) at para [47]

45 The reference is given in para [23] above

46 At para [48].

47 2004 (6) SA 222 (SCA) at paras [25] to [37]

48 2008 (2) SA 481 (SCA)

49 At para [22]

50 Case No 2008/19224 (WLD)

51 See para [28] thereof