Lessons for tender processes from the Concourt

AllPay Consolidated Investment Holdings (Pty) Ltd and Others v CEO of the South African Social Security Agency and Others (CCT 48/13) [2013] ZACC 42 (29 November 2013)

Facts:

The dispute in this case dealt with whether the award of a tender by the South African Social Security Agency for the countrywide payment of social grants to beneficiaries, was constitutionally valid. Froneman, J found that it was not, and in the context of his judgment, with which the other judges concurred) set out the following principles for assessing the constitutionality of a tender process.

Principles:

  1. Where there’s public interest in a procurement process (e.g. here the outcome affects all recipients of social grants), there is no reason for the courts to be more reluctant to review the outcome of a tender. [paragraph 23]
  2. Even if proven irregularities in a tender process would not affect the outcome, this should not be taken into account by the court when the administrative process is subject to review. [paragraph 23]
  3. Deviations from fair process may indicate corruption. [paragraph 27]
  4. If there was non-compliance with a legal requirement, we look at whether the non-compliance was material by investigating the extent to which the purpose of the legal requirement was not attained [paragraph 27]
  5. Where the tender is issued by the State, there is are several laws which prescribe how the tender should proceed. Where State administrators depart from procedures, they must do so in a manner that complies with the Promotion of Administrative Justice Act (“PAJA”). [paragraph 31-40]
  6. Unfairness in the outcome of the tender process (unless the outcome is unreasonable) is not a ground for a review by the courts- there has to be procedural unfairness.
  7. An aggrieved party can challenge a tender based on any irregularity- the court must decide whether the irregularity gives rise to procedural unfairness, irrationality, unreasonableness or any other review ground under PAJA [paragraph 44]
  8. With regard to BBBEE, the requirement is that substantive empowerment, not just formal compliance will result from the tender award- the administrators need to investigate and confirm that the successful party has not misrepresented its empowerment credentials. [paragraph 55]
  9. Each tenderer has the right to a fair tender process, even if they are not awarded the tender. [paragraph 60]
  10. PAJA only applies where the rights or legitimate expectations of the tenderer are affected. It cannot be argued that a tenderer who is excluded from the process at an early stage does not have such a right or expectation, as irregularities in a tender have the capacity to affect legal rights. [paragraph 60]
  11. If there is  two-step evaluation process during which the empowerment criteria are examined as part of step 2, but once step 2 is reached, there is only one tenderer remaining, it is not acceptable to assume that the tenderer meets the empowerment criteria [paragraph 72]
  12. Vagueness and uncertainty (e.g. when the Request for Proposal states that a certain competency is preferable, but the Bidders Notice indicates the same competency is mandatory) are grounds for review under PAJA. In addition, vagueness can render a procurement process procedurally unfair. [paragraph 88]
  13. PAJA requires that an administrator give a tenderer adequate notice of the nature and purpose of the proposed administrative action; and a reasonable opportunity to make representations. In the context of a tender process, the tender documents give notice of the proposed administrative action, while the responding bids in effect constitute representations before the decision is made. Adequate notice requires sufficient information to enable prospective tenderers to make bids that cover all the requirements expected for the successful award of the tender. [paragraph 90]

Some useful quotes from the judgment:

“procurement so palpably implicates socio-economic rights that the public has an interest in its being conducted in a fair, equitable, transparent, competitive and cost-effective manner.” [paragraph 4]

“The purpose of a tender is not to reward bidders who are clever enough to decipher unclear directions. It is to elicit the best solution through a process that is fair, equitable, transparent, cost-effective and competitive.” [paragraph 92]

“insistence on compliance with process formalities has a three-fold purpose: (a) it ensures fairness to participants in the bid process; (b) it enhances the likelihood of efficiency and optimality in the outcome; and (c) it serves as a guardian against a process skewed by corrupt influences.” [paragraph 27]

 

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