To:

The Director General of the South African Department of Transport.

Re:

The request for a review of the tender granted to simunye with regards to phase I of the “Colossus”
project. The action is grounded on the principles of administratively unfair tender processes.

Opinion
Facts:

In January 2008 the South African Department of Transport published a notice in the Government
Gazette which invited interested parties to apply for the tender of phase I and phase II of the
“colossus” project. Only entities which had sufficient technical and financial experience would be
assessed with regards to the standards set by the “department”. All interested parties had to express
their intention to apply to “the department” by the 31st of march 2008 with a statement signed by
management confirming that such entity has no interest in any other infrastructural project.

Sublime showed their interest in the tender for phase I and complied with all the regulations set out
by the department. Once “the department” had accepted the interested parties who met the standards
set out in the “notice” the parties were issued with the “full requisites”.

It is not necessary to set out all the sections of the above mentioned document, the sections which
have relevance in this instance are paragraph 4 and paragraph 5.

The department excluded sublime’s application to tender for phase I because of a violation of
paragraph 4 which stated that following corporate governance, two members and the Chief
Executive must sign the tender. Sublime only has two members which take on the full responsibility
of the entity. In order to ensure that sublime would be considered for the tender the only member
present in the country applied for the tender and signed the statement.

This disqualification of sublime left one tenderer for phase I, simunye and the tender was awarded
on the 14th of September after all other requirements set out by the “department” had been done
away with. Sublime approached the “department” with its concerns regarding the tender process on
the 23rd of September, well within the time frame given for an appeal. The “department” attempted
to pacify sublime by offering considerations for other potential contract; none of these have ever
been presented to sublime further.

Legal principles:

In order to assess whether or not sublime has a right to review proceedings, one must first establish
whether the offering of tenders is an administrative action.

Administration law is governed by the Constitution of The Republic of South Africa 1(the
Constitution) and the Promotion and Administration of Justice Act 2(PAJA). When determing
whether conduct falls within the realms of administrative law one must look at the rules which
1
The Constitution of the Republic of South Africa Act 108 of 1996.
2
Act 3 of 2000.
govern tendering and licensing. According to the common law it has widely been accepted that the
issuing of tenders is an administrative action3, this view has been confirmed in a number of cases
such as Umfolozi Transport (Edms) Bpk v Minister van Veroer4 and Transnet Ltd v Goodman
Brothers (Pty) Ltd5. The courts have stated that generally any action with regards to tendering will
be prima facie administrative action.6 It was further confirmed in Millennium Waste Management v
Chairperson Tender Board7 that the act of inviting parties to tender is an administrative action and
therefore the actions and decisions which stem from such tendering must be consistent with S33 of
the constitution as well as the relevant section of PAJA.8

In the case of Kiva v Minister of Correctional Service9 the court established the determination
approach, this is that any administration action will effect a persons rights and when determing if
the action is administrative one must assess whether the action has the capacity to effect any rights,
if so one must assess if the action satisfies the definition of administrative action in S1 of PAJA.10 A
further approach was established in Goodman Bothers, the deprivation approach focuses on whether
or not the administrative action has deprived a person of their rights and if so that person will be
able to apply the remedies used to vindicate unlawful administrative conduct.11

Following the principles set out above it is evident that firstly, the process of inviting entities to
tender for the project “colossus” was one which falls within the scope of administrative law and
secondly that because such an action falls within administrative law the remedies of such law are
applicable to sublime’s claim of unlawful and unfair tendering processes.

Internal remedies and procedures:

It is important when dealing with processes such as tendering and licensing that the parties
exhausted all available internal remedies before seeking vindication under administrative law.12

Sublime followed all the requirements set out in the “full requisites” by the “department”. On the
discovery by sublime on the 6th of September 2008 that they had not been awarded the tender,
sublime complied with the time clause in paragraph 11 and applied to the “department” on the 23rd
of September 2008 with regards to the awarding of the tender. The “department” attempted to
pacify sublime by offering false opportunities and negotiations with regards to other projects. The
negotiations continued till the 19th of March 2009 and ended abruptly on this dated. At this stage
sublime had missed its opportunity to request an appeal on the decision made by the “department”.
In the “full requisites” paragraph 12 no time limit had been given in which to institute review
proceedings, however, S 5(1) of PAJA allows a party 90 days from the receipt of the decision in
which to institute review proceedings. Had it not been for the negotiations and delay by the
“department” sublime would have been able to file a review application within the prescribed time
limit. It should be noted that due to the delay in application for review proceedings sublime may
3
Alistair Hays “Unfair Tenders Can Be Set Aside” at
www.ameu.co.za/library/procurement/Uunfair%20Tenders%20Can%20Be%20Set%20Aside.doc .
4
Umfolozi Transport (Edms) Bpk v Minister Van Veroer [1997] 2 B ALL SA 548 SCA.
5
Transnet Ltd v Goodman Brothers (Pty) Ltd 2001 (1) SA 853 (SCA).
6
Cora Hoexter “Administrative Law in South Africa” Juta 2007.
7
Millennium waste v Chairperson Tender board [2007] SCA 165 (RSA).
8
Ibid.
9
Unreported Case. 1453/04 of 27 July 2006.
10
Ibid.
11
(Note 5).
12
(Note 6).
have difficulties in reviewing the matter, however the court should take into account that sublime
was in my opinion deliberately delayed by the “department” and that sublime should qualify for
review proceedings under S6 of PAJA.

Grounds for review:

S 6 of PAJA sets out the grounds on which one may apply for review. These grounds are consistent
with the constitution and promote reasonableness, lawfulness and fairness.13 S 33(1) of the
constitution states that any person has the right to lawful, reasonable and procedurally fair
administrative action, further S33(2)14 states that any person who is effected by and administrative
decision must be furnished with reasons as to why and how such a decision was reached, this is
further supported in PAJA.15 Another important principle of administrative action is found in S217
of the Constitution, this deals specifically with the notion that administrative action must be fair,
equitable, competitive and effective.16 In determing the fairness of a decision made by an
administrator when awarding a tender one must determine if the disqualification of a tenderer was
lawful and fair. One may assess this by determing whether or not the tender requirements had been
satisfied and complied with, Non-compliance however does not immediately justify the
disqualification of a tenderer.17

In the case of SA Eagle Co (Ltd) v Bavuma18 the court held that when dealing with non-compliance
of “peremptory requirements” one must evaluate whether or not the failure to comply may be
condoned in order to aid competition and public interest.19 The non-compliance of certain
requirements may be condoned if it purports S217 of the constitution in that it promotes efficiency,
competition and transparency.20 It is vital that where a person or in this case an entity is accused of
non-compliance that one assesses the significance of the requirement, the department may be
deemed to have acted unconstitutionally if it is established that the requirement was insignificant
and that the decision made by the “department” based on the non-compliance of an insignificant
requirement cause the entity to lose the tender.21 This principle was further supported in
Johannesburg Stock Exchange v Witwatersrand Nigel and Another22 and S 6(2) (e) (iii) which deals
with non-compliance and the failure of and administrator to apply their mind properly, such an act
will amount to the qualification of judicial review.23 Further, in millennium waste24 the court held
that a mere omission or obvious mistake of not signing the tender application does not amount to a
fair disqualification of a tenderer.

Sublime was disqualified from the tender process after only one of the two members signed the
tender notice. The reason for only one signature was due to the fact that the other member of
sublime was not in the country at the time the invitation to tender was published and on signing the
“statement” the remaining member did so in order to secure the application to tender. Following the
13
(Note 6).
14
Act 108 of 1996.
15
S4 (Note2).
16
TBP Building and Civils (Pty) Ltd v East London, Unreported Case. 230/09 of 17 march 2009.
17
(Note 7).
18
SA Eagle Co (Ltd) v Bavuma
19
Ibid.
20
(Note 7).
21
Du Toit v Minister of Transport 2006 (1) SA 296 (CC).
22
Johannesburg Stock Exchange v Witwatersrand Nigel and Another1988 (3) SA 132 (A).
23
Ibid.
24
(Note 7).
legal principle stated above, the “director” should have allowed sublime to make representations as
to the non-compliance of an insignificant requirement and should have allowed sublime to rectify
the mistake, allowing sublime to proceed to the second stage of the tender process.

The case of Metro Projects CC v Klerksdorp Municipality25 the court held that with regards to
tendering the process will be deemed to be unfair if a tenderer is not afforded the opportunity to
correct an obvious mistake. By not complying with this principle of procedural fairness the
“department” violated S 33(1) of the constitution and therefore according to S 6(2) (c) of PAJA,
sublime is entitled to a review of the decision. S33(1) of the constitution finally states that the
administrative action must be reasonable, the issue of reasonableness has not been defined in south
African law, however the general rule is that a person whose rights are effected by an administrative
action must be presented with evidence as to how the administrator arrived at the decision.26

The department should have afforded sublime the opportunity to correct the mistake of not
complying with paragraph 4 of the “full requisites”, by not giving sublime this opportunity the
“department” acted unfairly. Secondly, should the “department” have had valid reasons for not
allowing sublime to correct the mistake, the “department” should have furnished sublime with
evidence and reasons as to why sublime would not be permitted to correct the mistake. The failure
of the “department” to do so is a violation of reasonableness. Both the above factors are evidence
that the “department” acted unconstitutionally and therefore qualify sublime for a review process.

Recommendations:

As aforementioned sublime has exceeded the deadline stated in S5 of PAJA for a review process,
however, sublime should be allowed to pursue this matter on the basis that had it not been for the
delay tactics used by the “department” sublime would have been well within the time frame
prescribed by PAJA for review proceedings.

The tender contract was signed on the 14th of September 2008, it has been noted that the contract for
phase I has already progressed to stage two of the contract and the “department” has spent a
substantial amount of R 500 million on the project. To request a re-evaluation of the tenders would
be both detrimental to the innocent tenderer and to the “department”, the chance of an unbiased
process at the stage is questionable. It is therefore recommended that the “department” compensate
sublime for the expenses incurred in drafting the tender application which is the amount of R430,
000.00 on the basis that had it not been for the unlawful administrative action taken by the
“department” in not fairly and thoughtfully assessing both tender applications, sublime would have
been permitted to proceed to stage two of the tender process.

Question 2:
Legal principles:
25
Metro Projects CC v Klerksdorp Municipality 2004 (1) SA 16 (SCA).
26
(Note 6).
ZEN:

The first issue to be addressed is the tendering process conducted by the “department”, in the case
of TBP Building and Civils (Pty) Ltd27 the court set out a two stage approach which must be applied
when assessing bids for a tender. The first stage is the evaluation of the tenders according to the
requirements set out in the “tender notice”, the second step is to evaluate the remaining tenderers
and allocate points according to the standards set out in the preferential procurement policy
framework act28 (PPPFA), and the tenderer with the highest amount of points will be awarded the
tender.29 S2 of the PPPFA sets out the categories in which points are awarded, although each tender
will differ. S 2(1) (e)30 states that any other category in which points will be awarded must be
clearly stated in the “tender documents”.

All tenderers are entitled to a fair process according to S33 (1) of the constitution, further more, all
tenderers are warranted the expectation that the administrator will apply their mind when assessing
the merits of each tender as well as to make an unbiased decision.31

When any administrative decision is made one must assess whether the administrator had the
required authority to make such a decision. It has been recognized in law that one may need to
delegate certain authority within a department, however this power must be delegated to persons
with the necessary capacity to act in accordance with that power (delgatus persona).32 However,
certain forms of sub-delegation are prohibited in our law, under these circumstances the relevant
form of sub-delegation is unlawful referral, this occurs when an administrator whose sole
responsibility is to make a decision does not do so and instead allows an unauthorized person or
board to make the decision.33 S 6(2) (a) (ii) of PAJA states that should an administrator be found
guilty of unlawful referral, the matter will qualify for review proceedings.

With regards to the institution of review proceedings, the general rule is that the tender is to be set
aside and both tenders are to be re-evaluated by the administrative body.34 During the re-evaluation
process the body must take into account the interests of both tenderers as well as price differences
and the interests of the public.35

Firstly, simunye was awarded an extra 5 points for succeeding in winning the tender for phase I, this
is a direct violation of S2(e) of the PPPFA as no where in the “full requisites” was it stated that such
points would be awarded. Secondly, no written opinions or guidelines from the various “boards”
allocating the points were presented to the “director”. The director acted solely on the decision
made by the “boards” without any further enquiry into the decision making and point allocation.
This shows an unlawful referral.

27
(Note 17)
28
Preferential Procurement Policy Framework Act 5 of 2002.
29
(Note 7).
30
(Note 29).
31
S 6 (2) PAJA.
32
(Note 6).
33
Ibid.
34
(Note 3).
35
(Note 7).
In Oudekraal Estates (Pty) Ltd v City of Cape Town36 the court held that once a tender agreement
has been concluded, the re-evaluation of the tender would have a disastrous effect on both the
administrative body and the “innocent tenderer”, in such instances the court tends to avoid
destroying the contract already in place.37 In millennium waste38 the court held that when the issues
arises that there is a conflict between two tenderers the first enquiry is into the stage of the tender, if
the tender project is at a stage where the contract can be terminate then the court must re-evaluate
both tenders, side by side and take into account the price differences between the tenders and at the
same time, weigh up the conflicting interests of both parties with public interest.39

Phase II of project “colossus” has not yet commenced and only minor work has be done by the
tenderer in securing contractors and materials, if the contract should be terminated at this stage
there will be no significant loss to the tenderer or the public.

It is my opinion that Zen should apply for a mandatory interdict in order to prevent the
“department” from progressing further with the project. Further more, Zen is advised to initiate
review proceedings. Under these circumstances, both tender applications will be referred back for
re-evaluation by the “director”. Should Zen be successful in the re-evaluation, the “director” and
“department” will have no choice in awarding the tender to Zen and terminating the contract with
simunye, irrelevant of the contractual obligations the “department” has with simunye.

36
Oudekraal Estates (Pty Ltd v City of Cape Town 2004 (6) SA 222 (SCA).
37
Ibid.
38
(Note 7).
39
Ibid.