OBJECTIVE CRITERIA USED TO EVALUATE AND AWARD BIDS

PR Esau

Procurement Act s2(1)(d)-(f) ‘2(1) An organ of state must determine its preferential procurement policy

and implement it within the following framework:

(d) the specific goals may include -

(i) contracting with persons, or categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender or disability;

(ii) implementing the programmes of the Reconstruction and Development Programme as published in Government Gazette No 16085 dated 23 November 1994;

(e) any specific goal for which a point may be awarded, must be clearly specified in the invitation to submit a tender;

(f) the contract must be awarded to the tenderer who scores the highest points, unless objective criteria in addition to those contemplated in paragraphs (d) and (e) justify the award to another tenderer;

Rainbow Civils CC v Minister of Transport and Public WorksBRIEF FACTS: Tender part of the Building Facilities Maintenance Program for cleaning of various Schools &

Clinics etc..

10 tenders were received

8 eliminated for scoring less than the required minimum threshold for functionality (60%)

only the tenders of the Rainbow Civils and Safaz proceeded to the final stage of evaluation

Rainbow Civils achieved a functionality score of 95%, Safaz 61% (at one stage 58%, another 64%)

the Rainbow Civils price was the lowest at R 10 549 039.02 where as Safaz’s price was second highest at R 10 577 855.94;

Rainbow Civils was scored 90 for price, whereas Safaz received a score of 89.75 for price;

Rainbow scored 8 for B-BBEE status, whereas Safaz received a score of 10 for B-BBEE status;

Safaz scored the highest TEV score at 99.75, whereas the Rainbow scored 98 TEV points.

Rainbow Civils Brief facts:

The Tender was awarded to Safaz on 27 September 2012

2 November 2012 Rainbow Civils launched an urgent application to interdict the Public Works and Safaz from concluding a service level agreement

Parties agreed that the implementation of the Tender would be delayed pending the determination of the review proceedings

Rainbow Civils Applicants case:

a) there were material discrepancies and inconsistencies in the tender documents;

b) Safaz should not have been awarded any points for B-BBEE Status as it failed to submit the

prescribed verification certificate to substantiate its claim for B-BBEE preference points;

c) the decision to award the Tender to Safaz had been impermissibly influenced by considerations

of racial and gender preference outside the parameters of the 90/10 preference points system

laid down in the Preferential Procurement Regulations, 2011(‘the Procurement Regulations’);

d) functionality, or capacity, is a relevant consideration and an objective criterion for the purposes

of section 2(1)(f) of the Preferential Procurement Policy Framework Act 5 of 2000 (‘the

Procurement Act’), which should have been considered but was disregarded in the final

adjudication of the tenders.

Procurement Act s2(1)(d)-(f) ‘2(1) An organ of state must determine its preferential procurement policy

and implement it within the following framework:

(d) the specific goals may include -

(i) contracting with persons, or categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender or disability;

(ii) implementing the programmes of the Reconstruction and Development Programme as published in Government Gazette No 16085 dated 23 November 1994;

(e) any specific goal for which a point may be awarded, must be clearly specified in the invitation to submit a tender;

(f) the contract must be awarded to the tenderer who scores the highest points, unless objective criteria in addition to those contemplated in paragraphs (d) and (e) justify the award to another tenderer;

Rainbow Civils:

C: Racial & Gender Preference Outside Procurement Act

The Decision Maker based his decision on considerations of racial and gender preference falling outside the parameters of the Procurement Act and the Procurement Regulations.

Rainbow Civils:

C: Racial & Gender Preference outside Procurement Act

Decision Maker placed much weight on the fact that Safaz was owned by a black woman.

He states in terms that he had regard to the objectives of the B-BBEE Act, which include increasing the access of black women to economic activities.

The question is whether it was lawful for him to do so, i.e., whether this was a relevant consideration which could properly be taken into account in the decision to award the Tender.

Rainbow Civils Question -

Whether the criteria s2(d)&(e) (which include advancement of persons previously

disadvantaged on the basis of race, gender and disability)

may be taken into account for purposes of determining, in terms of s2(f) whether objective criteria exist for the award of the tender to one other than the highest scoring tenderer.

Rainbow Civils

Judgement:

the Decision Maker’s error in this regard was that:

he failed to appreciate that his power was confined to the Procurement Act, the Procurement Regulations and the Tender Document, and

he had no general discretion to take into account considerations of race and gender or affirmative action outside of the specific parameters laid down by law

Rainbow Civils Judgement:

Put differently:

Decision Maker erred in thinking that the B-BBEE Act was relevant and applicable to the discharge of his function, because he misinterpreted the nature and sphere of application of the B-BBEE Act.

This particular act is clearly aimed at achieving an integrated, co-ordinated and uniform approach to Broad-Based Black Economic Empowerment.

Its lays down concrete mechanisms for the achievement of its objectives, which are designed to be implemented systemically on a macro level, and not on an ad hoc individual basis.

Rainbow Civils

Organ of state is obliged:

in determining and implementing its preferential procurement policy,

to have regard to both the framework and preference point system laid down in the Procurement Act, and

the relevant codes of good practice issued in terms of the B-BBEE Act

RHI Joint Venture v Minister of Roads and Public Works

held that: “local labour, resources and affirmable business

enterprises [ABEs]” did not amount to objective criteria in addition to those contemplated in sections 2(1)(d) and 2(1)(e)

Lohan Civil - Tebogo Joint Venture v Mangaung Plaaslike Munisipaliteit

Held that:

“objective criteria” for the purposes of section 2(1)(f) of the Procurement Act must be criteria other than or additional to criteria relating to

equity ownership by HDIs or

whether or not a bidder was located in a particular province.

Shearwater Construction v City Tshwane Metropolitan Municipality

Applicant scored zero points for HDI goals in terms of 90/10 points system;

in adjudication phase this was regarded as reasonable and justifiable grounds in terms of the 2001 Procurement Regulations for not awarding the tender to applicant;

Court held that: penalising applicant twice for same shortcomings

amounts to gross irregularity; decision set aside and tender awarded to applicant.

Grinaker LTA Ltd v Tender Board objective criteria: “in addition to” those contemplated in paragraphs

(d) & (e) in section 2(1)(f)

as referring to criteria “over and above”

or criteria “besides;

as well as”

those contemplated in paragraphs (d) & (e) of section 2(1) of the Procurement Act

Section 2(1)(f) of the PP Act Rainbow Civils - Court confirm the judgement

in Grinaker LTA Ltd supra;

the court held that section 2(1)(f) of the Procurement Act is cast in peremptory terms

and involves a two stage enquiry

Organs of state must with each Tender apply 2(1)(f)

Functionality as an objective criteria in terms of section 2(1)(f) of the PPFA

Rainbow Civils takes Grinaker further:

constitutional imperative that the procurement system be cost-effective, means that functionality must necessarily be taken into account in the adjudication of competing tenders and should not be relegated to a mere qualifying criterion

functionality as an award criterion in a potential third stage of adjudication

Rainbow Civils Court introduce functionality as an award criteria:

“To my mind it is self-evident that it is not cost effective to award a tender to a party who ticks the right boxes as regards price and preference, but is unable to get the job done properly– whether through lack of experience, adequate personnel or financial resources”

“The point is simply that functionality should not be ignored in the final adjudication between competing tenders, and should be taken into account within the parameters of the Procurement Act”

Rainbow Civils “section 2(1)(f) of the Procurement Act, which

is cast in peremptory terms, posits a two-stage enquiry:

1. the first step is to determine who scored the highest points in terms of the 90/10 points system;

2. the next stage is to determine whether objective criteria exist, in addition to or over and above those referred to in sections 2(d) and (e), which justify the award of the tender to a lower scoring tenderer.

Rainbow Civils

“Decision Maker operated under the assumption that Safaz was the highest scoring tenderer.

It is evident from his affidavit that he did not expressly ask the question whether objective factors existed which justified the award of the Tender to the applicant instead of to Safaz”

“Decision Maker erred by failing to proceed to the second stage of the enquiry prescribed in section 2(f) of the Procurement Act,”

Sizabonke Civils CC t/a Pilcon Projects v Zululand District Municipality

The provisions in the 2001 Regulations which allow for the incorporation of functionality criteria in the award stage of the procurement process are ultra vires the enabling legislation, i.e. the Procurement Act.

Functionality criteria should serve as “qualification criteria” and not as “award criteria”;

more specifically, functionality criteria should not form part of the points system in terms of which points must be awarded only for price and preference criteria

Following this judgement NT issued 2011 Regulations

Uncertainty…. Certainty created by Sizabonke and the 2011

Regulations of functionality as a qualification criteria and not as an award criteria was short-lived

Rainbow Civils a few months later introduced functionality once again as an award criteria through the interpretation of “objective criteria”

“Rainbow Civils at para 110: “... constitutional imperative that the procurement system be cost-effective, means that functionality must necessarily be taken into account in the adjudication of competing tenders and should not be relegated to a mere qualifying criterion”

OTHER COURT EXAMPLES OF CRITERIA THAT AMOUNT TO OR NOT - “OBJECTIVE CRITERIA” S2(1)(F).

WJ Building & Civil Engineering Contractors CC v Umhlathuze Municipality, (after 2011 Regulations)

a contract was awarded to the second highest bidder on the grounds that (i) the highest scoring bidder had benefitted over the last five years on two major projects worth roughly R49.5 billion;

and (ii) the municipal council had expressed the need to encourage the rotation of service providers who carry out work for the council.

The court held that reasons were arbitrary.

As neither the tender documents nor the legislative provisions made reference to the criteria.

COURT EXAMPLES OF CRITERIA THAT AMOUNT TO OR NOT - “OBJECTIVE CRITERIA” S2(1)(F).

Road Mac Surfacing (Pty) Ltd v MEC for the Department of Transport and Roads, North West

A contract may be awarded to the second highest bidder if the highest scoring bidder is currently engaged in projects with the organ of state,

In this case the organ of state did not disclose in the tender documents that the tender may be awarded to another bidder if the highest scoring bidder was already engaged in a project with the organ of state

Therefor not allowed

Simunye Developers CC v Lovedale Public FET College

“there is clearly no statutory obligation on an organ of state to stipulate in the tender documents which objective criteria it may consider in a decision not to award the contract to the tenderer who has scored the highest points.

In fact it would often be impossible to provide a numerous clausus of such criteria.”

Prof Phoebe Bolton Possible “objective criteria” for the purposes of section 2(1)(f)

(1) the rotation of contracts amongst suppliers;

(2) the protection of the environment and

(3) the receipt of an abnormally low tender, provided that the bidder in question is allowed an opportunity to justify its tender.

(and which should as far as possible be disclosed to bidders in the tender documents include)

(AN ANALYSIS OF THE CRITERIA USED TO EVALUATE AND AWARD PUBLIC TENDERS)

Possible additional “objective criteria”?

Bidder in business rescue / liquidation proceedings?;

Other …. (debate)

Conclusion

Prof G QUINOT:

“By insisting that functionality again be taken into account during the award stage to potentially play a determinative role in awarding the tender,

after it has already been used as a qualification criterion,

is to alter essentially the basis upon which public contracts are awarded in South Africa.”

(THE ROLE OF QUALITY IN THE ADJUDICATION OF PUBLIC TENDERS 2014)

Conclusion

Prof G QUINOT

“Perhaps more problematic is regulation 4(1), which states that organs of state "must indicate in the invitation to submit a tender if that tender will be evaluated on functionality“

Under the Rainbow Civils approach this regulation will become redundant since all tenders will have to be evaluated on functionality

(THE ROLE OF QUALITY IN THE ADJUDICATION OF PUBLIC TENDERS 2014)