Schoor Enterprises (Private) Limited v Procurement Regulatory Authority & 2 Ors

### Preamble
Judgment No. SC 148/20
1
Civil Appeal No. SC 116/19
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DISTRIBUTABLE		(140)

SCHOOR     ENTERPRISES     (PRIVATE)     LIMITED

v

PROCUREMENT     REGULATORY     AUTHORITY     (2)     THE      CITY      OF     HARARE     (3)     ROCKCASTLE        (PRIVATE)      LIMITED

SUPREME COURT OF ZIMBABWE

MAKARAU JA, MAVANGIRA JA & UCHENA JA

HARARE: 5 NOVEMBER 2019 & 5 NOVEMBER 2020

B. Ngwenya for appellant,

J.Bamu for first respondent

L.T. Muradzikwa for second respondent

V. Mhungu for third respondent

MAKARAU JA

On 15 February 2019, the Administrative Court issued an order dismissing with costs, an appeal by the appellant against the decision of the first respondent directing the second respondent to award a tender to the third respondent.

This is an appeal against that order.

Background facts

In December 2017, the second respondent floated a tender for the annual supply of water treatment chemicals. The appellant, the third respondent and six other entities participated in the tender.  For the same product, liquid aluminium sulphate, the third respondent submitted a bid for US$16.8 million and the appellant for US$13.2 million.

The second respondent adjudicated on the tender and submitted a report to the first respondent. In the report, the second respondent adjudged the appellant’s sample for the liquid aluminium sulphate, one of the chemicals to be supplied under the tender, as non- responsive. On that basis, the appellant was disqualified from further participating in the tender process.

For reasons that are not relevant to this appeal, the second respondent recommended that the tender be awarded to a bidder who is not before the court. Upon reviewing the report and noticing some inconsistencies in the recommendation, the first respondent declined to approve the recommendations and remitted the matter with a request that the second respondent make an appropriate recommendation.

The first respondent did not advert to the technical report disqualifying the appellant which remained extant.

The second respondent duly rescinded its first recommendation and in its stead, recommended that the tender be awarded to the third respondent. On 19 April 2018, the first respondent directed the second respondent to award the tender to the third respondent. The disqualification of the appellant again remained extant.

Aggrieved by the decision, the appellant noted an appeal to the court a quo raising four grounds of appeal.

In the main, the appellant contended that it was the lowest compliant bidder and ought to have been awarded the tender. It challenged the technical report that disqualified it from the tender as incorrect and argued that the first respondent ought to have reviewed the report instead of accepting it at face value.

Finding no merit in all the grounds of appeal raised by the appellant, the court a quo dismissed the appeal with an appropriate order of costs. In particular, the court found that the tender by the appellant was not valid as its sample was not technically compliant.

The Appeal

Still aggrieved, the appellant noted this appeal. It raised three grounds of appeal as follows:

The court a quo erred at law when it failed to find that the appellant was the lowest and compliant bidder as opposed to the third respondent.

The court a quo erred at law when it failed to find that the third respondent should have been disqualified for failing to adhere to the requirements of the invitation to tender which required the submission of the sample to a laboratory and submission of a test certificate.

The court a quo erred at law in making a finding that the appellant’s sample was not technically compliant in the face of evidence of the mandatory laboratory test.

The issue

The main issue that falls for determination in this appeal, and which main issue was also before the court a quo is whether the decision disqualifying the appellant from the procurement process on account of the technical report by the second respondent, was correct.

From the ratio decidendi of the judgment a quo, it would appear that the court a quo did not fully comprehend the issue that was before it.  The issue was the correctness or otherwise of the technical report by the second respondent and upon which the appellant was disqualified. The court a quo clearly accepted the disputed report as correct and based its decision on it.  The court a quo appears not to have appreciated that this was the very question that was placed before it for determination. Put differently, the appellant’s case before the court a quo was a direct challenge to the correctness of the report of the second respondent finding its sample non-responsive. It was a direct challenge to its disqualification. The court a quo was therefore being called upon to make a finding on whether the report, which formed the basis of the disqualification, was correct. It stands to reason that it could not determine the appeal without pronouncing itself on this issue.

Preliminary Issue

At the hearing of the appeal, counsel for the third respondent raised a preliminary issue, objecting to part of the draft order.  It was her submission, and one which counsel for the second and third respondent associated with, that part of the relief sought by the appellant was incompetent. It was counsel’s further submission that this court did not have power to amend the relief sought in the event that the appeal was upheld. In this regard counsel relied on the provisions of s 77 (2) of the Public Procurement and Disposal of Public Assets Act [Chapter 22.23], (“the Act”). which provides that:

“In an appeal the Administrative court shall not set aside the decision of the review panel but may award fair and adequate compensation to the appellant for any patrimonial loss or damage the appellant may have suffered.”

The draft order filed with the notice of appeal reads:

The appeal succeeds with costs.

The judgment of the court  a quo be and is hereby set aside and is substituted with the following:-

The appeal be and is hereby granted

That the decision of the Procurement Regulatory Authority awarding tender number COH/SFT/HW/S4/17 to the third respondent be set aside.

That the first respondent be and is hereby directed to award the tender above to the applicant being the lowest compliant bidder.

The first, second and third respondents be and are hereby ordered to pay costs of suit on an attorney and client scale. ( The offending parts of the draft order are emphasised)

On the sole basis that part of the relief sought was in contravention of a statutory provision, the respondents prayed for the dismissal of the appeal with an appropriate order of costs.

In resisting the point in limine, the appellant submitted, and correctly so, that the decision appealed against to the Administrative Court was that of the second respondent which disqualified it from further participating in the tender and not that of the review panel of the first respondent.

The tender in casu was floated in December 2017. At the time, the law in force was the Procurement Act [Chapter 22.14], (“the repealed Act”) which was repealed and replaced by the Public Procurement and Disposal of Assets Act referred to above. The latter Act came into force on 1 January 2018 and which date is also referred to as “the fixed date”.

In addition to the rule against the retrospective application of statutes, the tender proceedings in casu remained to be completed in accordance with the provisions of the repealed Act as s 103 (4) of the new Act specifically provides to this effect. It provides:

“Any procurement proceedings commenced before the fixed date shall be completed in accordance with the repealed Act……”

The above explains why even though the appellant had applied to the first respondent for the matter to be reviewed in terms of s 77 of the Act, there was no such review as the review panel would not have had jurisdiction over proceedings commenced in terms of the repealed Act. The appellant correctly noted an appeal to the court a quo in terms of s 43 of the repealed Act.

Therefore, on the basis that it is badly taken, founded as it was on an inapplicable law, the preliminary issue cannot succeed. It is duly dismissed.

The law

I return to the main issue in this appeal.

The public tender process is aimed at identifying in a transparent, fair and competitive manner, a supplier of goods or service to a public entity, who will provide good value for money. Thus, the process must ensure that procurement is effected in a manner that is transparent, fair, honest, cost-effective, and competitive. For it to be fair and transparent, the process must provide for the fair and equitable treatment of all bidders who must participate on the basis of criteria that is not only clear, but is pre-set.

For the purposes of the law and on a very broad level, the public procurement process has two distinct phases. It has a pre-contract phase and a contract phase which in China Jianxi International Economic & Technical Cooperation Co Ltd v Minister of Lands, Agriculture, Water, Climate & Rural Resettlement N.O 7 Others HH 737/19, is referred to as the ”post tender process”. For the two distinct phases, see also Cobra Security (Pvt) Ltd v Registrar –General and Anor HH 447/17.

The pre-contract phase commences with the announcement of the tender and ends when the bids are adjudicated upon and a successful bidder is identified. The contract phase commences thereafter and includes the time when the successful bidder is invited to conclude the procurement contract. It ends when both parties perform fully under the procurement contract.

A procuring entity cannot validly proceed to the contract phase without validly processing the pre-contract phase. Put differently, a valid pre-contract phase forms a critical path to the contract phase without which there can be no valid contract with any of the bidders.

Each of the two phases of the public procurement process is governed by a different law.

The adjudication of bids by the procuring entity is clearly an administrative function. In view of the fact that transparency, equity and fairness are the cornerstones upon which the adjudication of bids is based, the pre contract phase is to a large extent governed by the principles of administrative law and, to the extent that this is not specifically provided for in the Act or the repealed Act, this function is subject to the provisions of the Administrative Justice Act [Chapter 10.28].

Needless to say, the contract phase is governed by the laws of contract up to the time the contract is discharged. (See Bihati Solutions (Pty) Ltd v Telkom SA Limited & Others [2011] ZAGPPHC 1).

It presents itself clearly to me that an appeal against a decision taken during the pre- contract phase can only be an appeal in the wide sense. It unavoidably entails a review of the process. This is so because in keeping with the aims and objectives of public procurement the appellate tribunal or court must satisfy itself that the challenged decision was correctly made in a fair, equitable, and transparent manner. That this is the approach the court must take in such appeals is discernible from the decision of this Court in Selex v State Procurement Board  & Others SC 45/2016, in which the court set aside the award of the tender to the second respondent on the basis that once the procuring entity had made the valid finding that the second respondent had failed to comply with the mandatory requirements of the tender, it was not within its power to change goal posts and award the tender on other spurious grounds in breach of the mandatory requirements. In making this finding, the court found that the decision to award the tender was incorrectly made as it was not consistent with the pre-set criteria for the tender. Put differently, the court found the decision of the procuring entity to be incorrect as it was not procedural, a finding consistent with the exercise of review powers.

The approach is also discernible in Nokel Security v Crush Security (Pvt) Ltd SC 78/15 where the court had to determine whether or not the disqualification of the appellant on the basis that its bid was in violation of the law prescribing the minimum charges for security services was correctly arrived at. In allowing the appeal, the court re- assessed the evidence that was before the court a quo and found that there was no evidence that the appellant’s bids were in violation of the law. Clearly, the court substituted its own discretion in assessing the evidence that was adduced in the matter.

It further presents itself to me that all aspects of the tender process, including technical reports and disqualifications of bidders, are subject to the appellate court’s scrutiny to ensure that they are in compliance with the tender. Thus in Selex v State Procurement Board  & Other (supra), the court took issue with the evaluation report of the second respondent which it described as “fake”, before setting  it and the ensuing award of the tender aside. In Nokel Security (supra), the court set aside the disqualification of the appellant on the basis that there was no evidence that its bids were in violation of the law.

Analysis

It is common cause that the dispute in this appeal occurred during the pre-contract phase and that it centred around the disqualification of the appellant from the tender process. The issue to determine is whether the decision disqualifying the appellant was correct and correctly made.

As indicated above, the court a quo appears to have misapprehended the issue that was before it.  It instead took issue with the fact that the appellant had relied on an incorrect section of the repealed Act in contending that it was the lowest complaint bidder. The issue before the court a quo, and which issue it did not determine, was whether on the evidence on record, the decision to disqualify the appellant from the tender was correct.

In its third ground of appeal, the appellant again raised the issue of the correctness or otherwise of the report by the second respondent when it alleged that the first respondent did not scrutinise the report in as far as its disqualification was concerned.

The appellant directed the court a quo to parts of the record upon which it contended there was evidence refuting the finding by the second respondent that its sample was non -responsive. The court a quo did not analyse this evidence. It consequently failed to make any finding on the correctness or otherwise of the report.

In view of the above, it is my finding that the court a quo misdirected itself by failing to determine the issue that was before it. Its decision cannot therefore stand and must be vacated.

Disposition

I take note of the fact that the technical report by the second respondent was itself not in compliance with the tender. The criterion for qualification of the samples for the liquid aluminium sulphate was clearly given and pre-set in the tender documents as having a Ph  or acidity of 2,9 plus or minus 0.3 in  15 mg of water. Quite clearly, the acidity of the chemical was expressed to one decimal point. The report by the second respondent does not follow this formulation and expresses the Ph to two decimal points. The two yield different results and are different expressions of the Ph of similar quantities of water.

The requirement that the bid by prospective suppliers must be in compliance with the criteria set out in the tender documents also binds the procuring entity. The bids must be adjudged in accordance with the criterion pre –set in the tender documents.  There can be no shifting of goal posts after the bids have been submitted.  In other words, the procuring entity cannot introduce new criteria for qualifying the bids as this is inimical to the very aims and objectives of a public tender process.

A technical report that does not comply with the prescribed tender criteria is not valid and cannot be the basis of any valid decision in the tender process. On this basis, the report that disqualified the appellant cannot stand as it is not in compliance with the specifications set in the tender.

In the result I make the following order:

The appeal succeeds with costs.

The decision of the court  a quo is set aside and is substituted with the following:

“2.1 The appeal succeeds with costs.

The award of the tender to the third respondent is set aside.

The second respondent is directed to commence the tender process afresh.”

MAVANGIRA JA		:			I agree

UCHENA JA			:			I agree

Chinawa Law Chambers, appellant’s legal practitioners.

Attorney- General’s Office, first respondent’s legal practitioners.

Mbidzo, Muchadehama & Makoni, second respondent’s legal practitioners.

GN Mlotshwa and Company, third respondent’s legal practitioners.