Functionality Matters: Fairness and Full Consideration in Tenders
Under section 6(2)(e)(iii) of the Promotion of Administrative Justice Act 3 of 2000 ("PAJA") as well as under the principle of legality, an administrator's failure to consider relevant considerations is judicially reviewable
In the recent case of Mpuzi Business Enterprise CC v Eskom Holdings Soc Ltd and Others (19716/2024) [2025] ZAWCHC 79 (5 March 2025), the Court considered this review ground in the context of the meaning of "in all respects" as a deadlock breaking mechanism when awarding a tender.
In this case, Eskom Holdings Soc Ltd ("Eskom") published an invitation to tender for the provision of vegetation management services, the Applicant, Mpuzi Business Enterprises CC ("Mpuzi") submitted a bid in response to the tender invitation but was unsuccessful.
The Applicant then instituted review proceedings in the Western Cape High Court alleging that Eskom deviated from the prescribed procedure set out in the invitation for tender.
The tender-bid evaluation process involved a three-stage process – stage one tested for responsiveness; stage two tested compliance with the minimum functionality threshold requirements, and stage three entailed the process of weighted scoring (i.e. 80 points in respect of price and awarded out of 20 points in respect of specific goals).
At the conclusion of the three stages, the bidders would be ranked from highest to lowest in accordance with price and specific goals and in the event of a deadlock, the bidder with the highest points for specific goals would be awarded the tender. And if two or more bidders scored the same total points in all respects, the tender would be awarded by the drawing of lots.
The Court considered Eskom and Mpuzi's differing interpretations of "in all respects" and in determining the correct interpretation, the Court turned to, as a starting point, section 217 of the Constitution which sets out the minimum requirements for a valid tender process and for contracts concluded following an award of a tender to a successful bidder.
The Court also considered the principles of statutory interpretation as set out in the cases of Minister of Finance v Afribusiness NPC 2022 (4) SA 362 (CC) and Capitec Bank Holdings Limited and Another v Coral Lagoon Investment 194 (Pty) Ltd and Others 2022 (1) SA 100 (SCA) which held that one must have regard to the language, context and purpose when interpreting any statutory provisions. The Court further emphasised that statutory interpretation is an objective process.
The Court considered the fact that the tender was evaluated on the ability of the bidder to provide the services for which the invite to tender was issued ("the functionality requirement") and that the bidders would be ranked based on their scores as per the PPPFA scoring.
In terms of the deadlock breaking mechanism, if two or more bidders scored an equal number of points, then the tender would be awarded to the bidder that scored the highest points for specific goals. If two or more bidders scored an equal number of points in all respects, then the bid would be awarded by the drawing of lots. This was akin to regulation 8 of the Preferential Procurement Regulations 2022 (the regulations").
In stage 3 of the tender process all the bidders were awarded the same points for price with the points for specific goals being the only variable.
The Court held that Eskom's narrow interpretation of "in all respects" was inconsistent with the language used both in the tender invite and in regulation 8 of 2022 as well as the objectives of section 217 of the Constitution as Eskom did not award the tender in a competitive and cost-effective manner.
The Court went on to say that a wider interpretation of "in all respects" which includes functionality, price and specific goals would be consistent with the objective sought to be achieved by the deadlock-breaking mechanism and would further Eskom's objective of implementing its vegetation management plan in an economical manner.
The Court concluded that Eskom's failure to consider functionality was a relevant consideration when it implemented the deadlock-breaking mechanism and therefore rendered the award of the tender irregular and unlawful.
This case reaffirms the importance of administrators applying their minds and carefully considering all relevant factors. Equally significant and subject to review is when important factors are dismissed or treated as less significant. This case further affirms that when certain language contained in legislation or regulations is transplanted into tender documents, the courts will not hesitate to go further than the tender documents and interpret the meaning in accordance with the regulations as well.
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