Trencon Construction (Pty) Ltd v Industrial Development Corporation of South Africa Ltd and Another

• Jurisdiction: South Africa
• Judge: Mogoeng CJ, Moseneke DCJ, Cameron J, Froneman J, Jappie AJ, Khampepe J, Madlanga J, Molemela AJ, Nkabinde J and Theron AJ
• Judgment Date: 26 June 2015
• Docket Number: CCT 198/14 [2015] ZACC 22
• Hearing Date: 05 March 2015
• Counsel: D Unterhalter SC (with M du Plessis and S Pudifin-Jones) for the applicant. GJ Marcus SC (with M Sikhakhane and C Motsepe) for the first respondent.
• Court: Constitutional Court

Khampepe J (Mogoeng CJ, Moseneke DCJ, Cameron J, Froneman J, Jappie AJ, Madlanga J, Molemela AJ, Nkabinde J and Theron AJ concurring): G

Introduction

H [1] In our society, tendering plays a vital role in the delivery of goods and services. Large sums of public money are poured into the process and government wields massive public power when choosing to award a tender. It is for this reason that the Constitution obliges organs of state to ensure that a procurement process is fair, equitable, transparent, competitive and cost-effective. [1] Where the procurement process is I shown not to be so, courts have the power to intervene.

[2] The first respondent, the Industrial Development Corporation of South Africa Ltd (IDC), made a decision declaring the tender application

Khampepe J (Mogoeng CJ, Moseneke DCJ, Cameron J, Froneman J, Jappie AJ, Madlanga J, Molemela AJ, Nkabinde J and Theron AJ concurring)

of the applicant, Trencon Construction (Pty) Ltd (Trencon), A non-responsive, [2] and awarded the tender to the second respondent, Basil Read (Pty) Ltd (Basil Read).

[3] The High Court set aside the decision of the IDC and substituted the award of the tender to Trencon. The Supreme Court of Appeal then B overturned the High Court's decision, remitting the matter to the IDC for reconsideration. In this court Trencon seeks leave to appeal against the judgment and order of the Supreme Court of Appeal.

Facts

[4] On 18 May 2012 the IDC issued a public invitation to building C contractors to submit proposals in order to prequalify for a principal building contract to upgrade the IDC's head office. The request for proposals (RFP) was an invitation to contractors to bid for the tender and it set out the rules governing the tender process.

[5] The RFP provided that any application received after the stipulated D closing date would not be evaluated or assessed. The closing date and time were Monday 4 June 2012 at 12h00. Trencon and other contractors submitted their proposals on time. Basil Read, however, submitted its proposal 14 minutes after the deadline. In accepting Basil Read's proposal the IDC took the view that its own guidelines permitted acceptance of late proposals if doing so were in the IDC's interest. E

[6] The tender process was carried out by the IDC's Bid Evaluation Committee, [3] Support Services, Procurement Department, Procurement Committee and Executive Management Committee (Exco). The IDC engaged Snow Consultants Incorporated (Snow Consultants), an independent firm of experts, as its principal agent for the evaluation of the F tender. It also engaged the De Leeuw Group of quantity surveyors (Quantity Surveyors) to assist the committees. The tender process was conducted in two phases.

[7] The first phase involved the screening of contractors' profiles based on their technical capability, environmental management, personnel G capabilities, financial standing and litigation history. On 25 June 2012, during this phase, Snow Consultants shortlisted seven contractors including Trencon and Basil Read. On 2 July 2012 the Support Services, through the Procurement Department, shortlisted the same contractors. With regard to Trencon, the Support Services in its shortlisting submission to the Procurement Committee stated: H

'The bidder demonstrated extensive capacity i.e. work experience; equipment and financial capacity to deliver on this project. The bidder's proposed key personnel demonstrated adequate skills and experience in providing the required services.' I

Khampepe J (Mogoeng CJ, Moseneke DCJ, Cameron J, Froneman J, Jappie AJ, Madlanga J, Molemela AJ, Nkabinde J and Theron AJ concurring)

A [8] On 4 July 2012 the Procurement Committee approved the seven shortlisted contractors to participate in the second phase. On 12 July 2012 the IDC issued a tender invitation to those contractors, which provided that the site handover date would be 6 September 2012.

[9] The second phase involved the evaluation of tender submissions on B the basis of price and broad-based black economic empowerment (empowerment) points. [4] The IDC's committees had all the documentation required from the contractors. These included relevant registration, tax and verification certificates, performance guarantees, proposed waste management, environmental and local sourcing plans, as well as a priced and extended provisional bill of quantities. [5] The contractors were C required to price each item listed in the provisional bill of quantities.

[10] The tender closed on 14 August 2012, at which time Trencon, Basil Read and two other contractors had submitted proposals for the award of the tender. [6] The four proposals were then evaluated according to the prescribed criteria and weighting in the Tender Data. [7]

D [11] In allocating points for price and empowerment rating, the IDC chose the 90/10 method. This required the bids to be measured against one another to determine which was the lowest. It is common cause that Trencon submitted the lowest bid price at R117 112 972,21, excluding VAT. Basil Read's bid price was R120 164 912,30, excluding VAT.

E [12] According to the 90/10 method, each contractor could be awarded up to a maximum of 90 points for price and up to a maximum of 10 points for empowerment. The points allocated to each contractor were calculated based on a comparison of the value of the contractor's bid with that of the lowest bid. [8] As it submitted the lowest bid, Trencon was awarded 90 points for price. Empowerment points were allocated F depending on each contractor's empowerment verification certificate. [9] Of the bidders Trencon was also awarded the most points for empowerment.

Khampepe J (Mogoeng CJ, Moseneke DCJ, Cameron J, Froneman J, Jappie AJ, Madlanga J, Molemela AJ, Nkabinde J and Theron AJ concurring)

[13] In its proposal, Trencon included a condition that its price would A remain fixed for the planned duration of the contract, provided that the site handover date of 6 September 2012 remained unchanged. The Quantity Surveyors sought clarification from the contractors about their pricing during the evaluation process. During the first round of clarification the four contractors were asked to advise on their conditions, B should the site handover be delayed to 1 October 2012. Trencon indicated that it would charge an additional monthly 0,6 % escalation amount — approximately R315 000, excluding VAT. Basil Read indicated that its bid price would remain fixed, regardless.

[14] In the second round several matters were raised regarding Trencon's C bid, two of which bear significance. The first matter concerned Trencon's interpretation of the IDC's bill of quantities in relation to sun screens. Trencon priced its bid on the basis that it was required to repaint and reinstall the existing sun screens. The IDC, however, maintained that the bill of quantities should have been interpreted to require the supply of new sun screens, and therefore, the screens had not been D properly priced in Trencon's bid. In its clarification answers on this matter Trencon did not accept the IDC's interpretation that the bill of quantities required the supply of new sun screens, and thus refused to alter its bid to account for the supply.

[15] The second matter, which was raised with Trencon as well as the E other contractors, concerned the provisional sums of two items that had not been included in the IDC's approved cost estimate. The Quantity Surveyors, in their clarification questions, thus asked the contractors to confirm a reduction of their bid price for both items. All the contractors agreed to the reduction. Trencon, however, made its agreement subject to conducting a final review with the Quantity Surveyors. F

[16] On 7 September 2012 Snow Consultants issued a Tender Evaluation Report. It included all the information regarding the evaluation of price and empowerment points; the Quantity Surveyors' tender clarifications and evaluation; the scoring of the tender offers; and a recommendation by the Quantity Surveyors. G

[17] To accommodate concerns that arose during the clarification process, the Quantity Surveyors recommended that Trencon be awarded the tender, subject to two conditions, that Trencon (1) remove its H conditional acceptance of the revised contract award value; and (2) either agree to the IDC's interpretation of the new sun screens in the bill of quantities and absorb the cost or confirm the value to be added to its bid price to allow for the new screens. The contract value recommended was the revised contract award value of R110 948 822,71, excluding VAT. [10]

[18] Snow Consultants, in its letter dated 7 September 2012, also I recommended that the tender be awarded to Trencon subject to the

Khampepe J (Mogoeng CJ, Moseneke DCJ, Cameron J, Froneman J, Jappie AJ, Madlanga J, Molemela AJ, Nkabinde J and Theron AJ concurring)

A same two conditions. Again, the value recommended for the award was the revised contract value. On 10 September 2012 the Support Services, through the Procurement Department, submitted their recommendation to the Procurement Committee. They, too, recommended that Trencon be awarded the tender. In making the recommendation, the Support B Services consolidated the contractors' scores, considered and endorsed the conditions set out in the Tender Evaluation Report and carried out a background check on Trencon.

[19] Importantly, all the recommendations to the Procurement Committee included the price escalation required by Trencon, should the site handover date occur on 1 October 2012. In spite of the price escalation, C Trencon's bid price was still the lowest.

[20] On 12 September 2012 the Procurement Committee considered the Tender Evaluation Report, the recommendations of Snow Consultants and the Support Services...