Mzansi Fire and Security (Pty) Ltd v Durban University of Technology

• Jurisdiction: South Africa
• Judge: MR Chetty J
• Judgment Date: 03 March 2022
• Court: KwaZulu-Natal Local Division, Durban
• Hearing Date: 20 October 2021
• Docket Number: D1464/2020

Chetty J:

[1]

The applicant, Mzansi Fire and Security (Pty) Ltd, is a private security company which submitted a tender to the first respondent, the Durban University of Technology ('DUT'), to provide guarding services at its various campuses. In submitting the tender, the applicant was responding to a formal invitation in which DUT endorsed the provisions of the Black Economic Empowerment Programme as well as the Preferential Procurement Policy Framework Act 5 of 2000 ('PPPFA') as part of its procurement process. The applicant submitted a responsive tender, however the guarding contract was ultimately awarded to the third respondent, Izikhova Security Services CC.

[2]

The applicant was informed by DUT that when its bid document was evaluated by the Bid Evaluation Committee ('BEC') in Phase 2 of the process for quality and functionality, it achieved a score of 70.5 percent. In so doing, it failed to meet the minimum threshold of 75 percent in order to progress to the final evaluation stage in which pricing would be considered. The applicant, for reasons that will appear below, challenges the correctness of the scoring attributed to it and relies on an independent report of a firm of auditors in support of its contention that it scored the highest of all the bidders in Phase 2. On that ground as well as the process being tainted with fraud, the applicant contends that it was unfairly disadvantaged in the scoring of the tender and that the awarding of the contract to the third respondent should be set aside. It lodged an unsuccessful appeal against the decision of the BEC. As part of the internal appeal procedure, the applicant was obliged to pay a fee of R200 000.00 to DUT, which amount is non-refundable in the event of the appeal being dismissed. In this court, apart from the applicant seeking relief that the contract be set aside and that it (the applicant) be awarded the contract, the applicant also seeks an order that DUT refund to it the tender appeal deposit of R200 000.00 together with interest calculated from the date when such amount was paid (30 December 2019) to date of payment.

[3]

In reply to the contention of the applicant that the tender process was irregular and tainted with fraud, DUT contends that there is no basis for the relief sought by the applicant of it being substituted in place of the third respondent as the successful bidder, alternatively that the matter be referred back to the fourth respondent for adjudication. In the main, the contention of DUT is that the decision which is being challenged is of a

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'domestic' nature rather than it constituting 'administrative action' as defined in the Promotion of Administrative Justice Act 3 of 2000 ('PAJA'). On that basis the decision to procure security services by DUT is not susceptible to review by a court. Allied to this is the contention on behalf of DUT that it is not an 'organ of state' as contemplated in s 239 of the Constitution in that in procuring security services, it was not acting in terms of DUT's empowering statute, and that the focus of the enquiry should be on the nature of the function being performed (procuring of security services) rather than the identity of the function (see President of the Republic of South Africa and others v South African Rugby Football Union and others 2000 (1) SA 1 (CC) para 141).

[4]

The third respondent, which is rendering the security service at DUT's campuses, opposes the application on the basis that there was nothing untoward in the awarding of the contract to it, and that it would be substantially prejudiced if the award of the tender were to be set aside and either awarded to the applicant or referred back to the BEC. Despite the central issues between the applicant and DUT being focused on what is essentially a point of law – that is whether DUT is an organ of state and whether in the procurement of security services, it was performing a domestic function – the third respondent chose to immerse itself in the dispute, and sided with DUT in so far as the principal legal issues are concerned. The third respondent furthermore denies that it colluded or engaged in any fraudulent activity leading to the awarding of the tender to it.

[5]

The starting point in determining this application is whether the procurement of security services constitutes 'administrative action' as contemplated by PAJA. In Calibre Clinical Consultants (Pty) Ltd and Another v National Bargaining Council for the Road Freight Industry and Another 2010 (5) SA 457 (SCA), para 19, Nugent JA took the view that administrative action:

'. . . . is defined as much by the nature of the decision concerned (or the failure to make a decision) as by its source. In that respect it constitutes "administrative action" only if, amongst other things, it was made by -

"(a)

an organ of State when –

(i)

exercising a power in terms of the Constitution or a provincial constitution; or

(ii)

exercising a public power or performing a public function in terms of any legislation;

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or

(b)

a natural or juristic person, other than an organ of State, when exercising a public power or performing a public function in terms of an empowering provision . . . .".'

[6]

The position adopted by Mr Pillay SC, who appeared together with Mr Kistan for the applicant, is that DUT is an organ of state by virtue of it exercising a public power when it procured security services in as much as it conducted the tender in accordance with the provisions of the s 217 of the Constitution, as well as the provisions of the PPPFA read with the provisions of the Broad-Based Black Economic Empowerment Act 53 of 2003, as well as the Public Finance Management Act 1 of 1999. In the alternative, it was submitted that even if I found that DUT is not an organ of state, this is not a bar to its decision being administrative action, in the context of the institution performing a 'public function'. [1] In President of the Republic of South Africa and others v South African Rugby Football Union (supra) the Constitutional Court provided guidance as to what factors were to be taken into account in determining whether conduct constituted administrative action. The court said the following at paragraph 143:

'Determining whether an action should be characterised as the implementation of legislation or the formulation of policy may be difficult. It will, as we have said above, depend primarily upon the nature of the power. A series of considerations may be relevant to deciding on which side of the line a particular action falls. The source of the power, though not necessarily decisive, is a relevant factor. So, too, is the nature of the power, its subject-matter, whether it involves the exercise of a public duty, and how closely it is related on the one hand to policy matters, which are not administrative, and on the other to the implementation of legislation, which is. While the subject-matter of a power is not relevant to determine whether constitutional review is appropriate, it is relevant to determine whether the exercise of the power constitutes administrative action for the purposes of section 33. Difficult boundaries may have to be drawn in deciding what should and what should not be characterised as administrative action for the purposes of section 33.

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These will need to be drawn carefully in the light of the provisions of the Constitution and the overall constitutional purpose of an efficient, equitable and ethical public administration. This can best be done on a case by case basis.'

[7]

Correspondingly, PAJA provides that an 'organ of state' is an entity as defined in s 239 of the Constitution. That section defines the concept to mean:

'(a)

any department of state or administration in the national, provincial or local sphere of government; or

(b)

any other functionary or institution -

(i)

exercising a power or performing a function in terms of the Constitution or a provincial constitution; or

(ii)

exercising a public power or performing a public function in terms of any legislation. . .'

As I understood the further argument of counsel for the applicant with regard to DUT being an organ of state, it was contended that DUT in procuring security services was discharging a duty imposed on it as an institution (university) contemplated in s 20 of the Higher Education Act 101 of 1997 which Act deals with the establishment of public higher learning institutions. This Act, it was submitted, gives substance to the provisions of s 29(1)(b) of the Constitution which provides that everyone has the right 'to further education, which the state, through reasonable measures, must make progressively available and accessible'. Moreover, DUT is established in terms of the Institutional Statute: Durban University of Technology, GN 43, GG 34953, 20 January 2012 ('DUT's Institutional Statute') under the hand of the Minister of Higher Education and Training. DUT does not deny the submission by the applicant's counsel that the State is its largest benefactor, and it would therefore seem logical that where public funds are employed in the payment of goods and services, such as the provision of security for the students and infrastructure of DUT, such contracts must be concluded in a manner which is fair, transparent and equitable.

[8]

The applicant contends that this exercise of public power creates the gateway for the application of PAJA to any of the contracts concluded by DUT. DUT however adopts the contrary view and contends that when it contracts for services, it is not exercising a public power and such actions are not subject to judicial review under the ambit of PAJA.

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At the same time it is not disputed that the tender invitation affirms DUT's endorsement of the Black Economic...