Putco Limited v The Minister of Transport For The Republic of South Africa and Others
| Jurisdiction | South Africa |
| Judge | Gildenhuys J |
| Judgment Date | 11 August 2003 |
| Citation | 2003 JDR 0484 (W) |
| Docket Number | 17271/2002 |
| Court | Witwatersrand Local Division |
Gildenhuys J:
The application:
[1] The applicant conducts a passenger bus transport business. It operates a number of public bus service routes throughout South Africa. In this matter, it applied for an order that the
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respondents award a tender to it for the supply of subsidised bus services on five routes in the Soweto area at a price of R193 311 958,25. In the alternative, the applicant applied for an order compelling the respondents, within a period of one month from the date of the order, to consider and adjudicate upon a number of tenders which have been submitted by various tenderers in respect of bus routes in Soweto. As a further alternative, the applicant sought an order setting aside the decision of the respondents not to award any of the current tenders for the Soweto routes.
[2] The applicant also applied for interim relief. On 26 March 2003 Horn J granted interim relief, directed at preserving the status quo on the servicing of the five Soweto routes pending the final determination of the application by this Court. I shall revert to the interim relief later in this .judgment.
[3] The respondents are government entities and functionaries involved in regulating public bus transport in South Africa. The applicant seeks relief against all of them. The first, third and fourth respondents contest the application. I will refer to all the respondents or to the appropriate respondents (as the case may be) collectively as "the government".
General background:
[4] Prior to the advent of democracy in 1994, the applicant provided passenger bus services throughout the country. It held the requisite permits to do so. The permits were of indefinite duration. The services were so-called subsidised services. It meant that in order to facilitate public transport, the applicant charged a fare to its passengers which was less than an economic fare. The balance of the costs of transporting the passengers was borne by the government through subsidies. The subsidies were related to the number of fares which had been sold.
[5] Subsequent to 1994, the Government decided to change the existing public bus transport system operating in South Africa to a system ,based upon competitive tenders. This affected not only the applicant but also a number of other operators throughout the country. Discussions were, held between the South African Bus Operators Association ("SABOA"), of which the applicant is a member, various participating labour unions and the nine provincial departments of transport represented by the National Department of Transport. There were a number of issues that had to be considered in phasing out the existing system. These include the following:
- The withdrawal of permits from existing operators would result in significant job losses;"
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- It was logistically impossible to simply close down existing operations and replace them with new operations in a single day. It was necessary to effect a gradual transition of the transport system so that there would be minimal disruption of commuter services;
- Most of the operators, such as the applicant, had permits of indefinite duration. The government recognised that constitutionally these permits could not simply be withdrawn.
At the same time, the existing permits and the vested rights which went with them could prejudice the envisaged new tender system if operators who held indefinite permits did not voluntarily or otherwise surrender their permits.
[6] In order to facilitate the transformation, the government agreed with the existing operators to enter into interim contracts that would preserve existing jobs and operations and gradually phase in the new tender system. In accordance with these measures, the applicant, the National Department of Transport and the Gauteng Department of Transport and Public Works on 26 March 1997 entered into an interim contract for the servicing of the Soweto routes. I will refer to it as "the interim contract". The commencement date of the contract was 1 April 1997. The duration thereof was 118 weeks, expiring during mid-1999 .The contract was extended from time, most recently (as part of the interim relief granted by Horn J) up to the final determination of this application.
The invitation to submit tenders:
[7] During November 2000 the fourth respondent called for public tenders to operate subsidised passenger transport services along a number of routes in Soweto. Five of them are relevant to this application. They are numbered GT1223/1TM, 2TM, 4TM, 5TM and 6TM. I will refer to them as "the five Soweto routes".
[8] The applicant has rights peculiar to itself in respect of the Soweto service area. These are contained in the interim contract. Of particular importance are clauses 6.3 and 6.4 of the general conditions of contract, which read as follows:
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The Employer shall with the consent of the Operator and with prior notice of not less than three months, extend the contract under existing conditions, should it not be in a position to call for tenders for the services described in the Specifications (Part 3).
At the end of the contract period the Employer may decide to invite tenders for the provision of services in substantially the same service area. If this is done, such invitation shall amount to a totally new contract on the terms and conditions set out in the new tender documents. The Operator shall have the right to be awarded the new contract at the rates and on the basis tendered by the tenderer which the State [Tender] Board has decided has submitted the most acceptable tender (which will not necessarily be the lowest tender), provided that-
the operator has tendered for the new contract and his tender amount is not more than 5% higher than the most acceptable tender, and the Operator proves to the satisfaction of the Employer that he is able to perform the new contract at the rates applicable to the most acceptable tender;
......."
The term "most acceptable tender" is defined in clause I of the general condition of contract, as follows:
"'most acceptable tender' means a tender conforming to all the requirements set for the rendering of the services described in the bus service tender documents;"
0The 5% referred to in clause 6.4(a) was subsequently increased to 10%, pursuant to a so-called tripartite agreement, with which I will deal later in this judgment. The right of first refusal contained in clause 6.4( a) lies at the core of the relief claimed by the applicant.
[9] By extending the interim contract several times, the government kept the existing transport services going. The applicant alleged that it was operating the existing services at a loss, and complained about the delay on the part of the government in commencing the tender process and in bringing it to completion. The applicant was constrained to continue performing under the interim contract, however, in order to preserve its right of first refusal. It called upon the fourth respondent to make good its operating losses. Eventually an agreement in respect of the losses was reached. I shall revert to that agreement later in this judgment.
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The rules and agreements applicable to the relevant tenders:
[10] The Soweto tenders were invited subject to tender rules laid down by the fourth respondent. One of them (rule 8) provides that the submission of a tender by an operator will amount to an undertaking to relinquish all authorisations and all existing bus permits to pick up or set down passengers within the service areas concerned, and also not to oppose applications made to the Gauteng Transport Board for or in connection with permits necessary to enable the successful tenderer to provide the services to which the tender relates. Another rule (rule 16) allows a tenderer to tender for a combination of two or more routes, where such combination would result in a reduction of the combined tender amount. Rule 24 provides that if the existing operator has tendered for a route, all tenders for that route will be subject to its right of first refusal, on the basis described above.
[11] Also of significance are the Gauteng Provincial Tender Board General Conditions and Procedures. [1] The following are relevant to the issues in this case:
"Conditions and procedures
The following general conditions and procedures have been laid down by the Board in terms or the Act and are applicable to all tenderers, contracts and orders, unless otherwise decided by the Board prior to the invitation of tenders.
Where applicable, special conditions or procedures are also laid down by the Board to cover specific supplies or services.
Where such special conditions or procedures are in conflict with these general conditions and procedures, the special conditions or procedures shall apply."
Of particular importance are conditions 25.1 and 25.3, which reads:
All tenders duly admitted are taken into consideration by the Board.
The Board is not obliged to accept the lowest or any tender."
[12] During September 1999 an agreement was concluded between the nine provincial departments of transport, represented by the National Department of Transport, participating labour unions and SABOA. This agreement is referred to as "the tripartite agreement". It is clear from the preamble and also from a reading of the document as a whole, that it was the intention
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of the parties to implement the tender system as soon as possible so as to stabilise the bus transport industry and to provide employment security to its employees. In clause 1.4 the right of first refusal referred to in various provisional contracts (including the interim contract) was amended as follows:
"The right of first refusal, in relation to the first tendered...
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