On 20 February 2023, the Western Cape High Court handed down a judgment that sheds light on the determination of tender qualification criteria for contractors in the construction industry.
In a tender review application brought by JK Structures CC against the City of Cape Town, the judgment addresses an important matter of principle that impacts not just JK Structures, but potentially also many other contractors who have been excluded from construction industry work because of the City of Cape Town's interpretation and application of the Construction Industry Development Board Act, 2000 ("CIDB Act") and its regulations.
Despite JK Structures having been graded 6CE by the Construction Industry Development Board and therefore as capable of undertaking construction works contracts of up to ZAR20 million in value, the City's interpretation and application of the CIDB Act and its regulations lead to the City determining a 7CE rating in the tender invitation, which rating is required to undertake construction work of up to ZAR80 million in value. This determination disqualified JK Structures (and other smaller contractors) from being appointed to a panel of contractors contracted to undertake construction work contracts (referred to as 'works projects') that each did not exceed ZAR6 million in contract or tender value.
In the judgment, Judge Binns-Ward commented that The City's interpretation "would exclude any contractor from tendering for a framework agreement that would potentially lead to construction works contracts each worth no more than R6-million being awarded to it during a three-year period unless the contractor had been graded as able to execute construction work contracts up to ten times that value."
The judgment clarifies how the City should determine qualification criteria for tender processes governed by regulation 25 of the CIDB regulations.
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