The Supreme Court of Appeal holds that cancelling a tender is not administrative action and comes down in favour of municipal autonomy

The Supreme Court of Appeal in City of Tshwane Metropolitan Municipality and Others v Nambiti Technologies (Pty) Ltd [2016] 1 All SA 332 (SCA) held that the cancellation of a tender is not administrative action and therefore not subject to the Promotion of Administrative Justice Act, No 3 of 2000 (PAJA). The judgment is a clear affirmation of the primacy of the executive branch of government in setting procurement priorities.

3 Mar 2016 4 min read Dispute Resolution Alert - 3 March 2016 Article

In October 2012 the City of Tshwane issued an invitation (First Invitation) to submit tenders for the provision of information technology support services. Nambiti Technologies, the incumbent service provider with a contract running from 1 August 2009 until 31 December 2012, was among those service providers who submitted bids.

Shortly after publishing the first invitation, the City appointed a Chief Information Officer (CIO) to oversee its information systems. The CIO reviewed the terms of the First Invitation and concluded that they no longer served the City’s technological needs. The City’s Bid Adjudication Committee subsequently cancelled the First Invitation and resolved to re advertise it with amended specifications.

The City informed Nambiti of its decision to call for fresh bids. It also indicated that, because EOH Mthombo (a service provider to the City of Johannesburg) had been appointed to render the information technology support services on an interim basis, Nambiti’s services would not be required beyond December 2012. In May 2013 the City duly published a new invitation to tender (Second Invitation), reflecting its revised specifications.

Nambiti launched judicial review proceedings, seeking to set aside the decisions to appoint EOH Mthombo and to cancel the First Invitation. Nambiti also sought to interdict the City from acting on the Second Invitation.

The High Court set aside the City’s decision to cancel the First Invitation and directed the City to adjudicate the bids submitted in response to the First Invitation, duly updated, within a two-month period. Because EOH’s contract only had two months left to run, the High Court declined to set it aside.

The City successfully appealed to the Supreme Court of Appeal.

Wallis JA, for a unanimous court, concluded that the decision to cancel the tender was not ‘administrative action’ in terms of PAJA. He found that a decision not to procure certain services does not concern the ‘implementation of policies and functions of government’. He also found that the City’s desire to procure was ‘always provisional’ and that it remained ‘entirely free to determine for itself what it required’. He therefore concluded that the decision to cancel the First Invitation was not a decision ‘of an administrative nature’, which is a threshold requirement under PAJA.

Wallis JA was also of the view that none of Nambiti’s rights were infringed by the City’s decision to cancel the First Invitation: Nambiti had ‘no legal right to a contract’ flowing from the First Invitation and no right to be treated fairly once the First Invitation had been cancelled. He therefore concluded that the decision to cancel the First Invitation had no ‘direct, external legal effect’ and so failed to meet another threshold requirement for ‘administrative action’ under PAJA.

Because the City’s decision did not constitute administrative action, it was not susceptible to review under PAJA and Nambiti’s application fell to be dismissed.

The Supreme Court of Appeal also took the opportunity to rebuke the High Court for its unwarranted intrusion into municipal affairs. An organ of state’s procurement of goods and services ‘lies within the heartland of the exercise of executive authority by that organ of state’. For a court to interfere at all in procurement decisions is ‘an extremely serious matter’. However, to interfere by compelling an organ of state to acquire goods and services it has determined not to acquire ‘should only be done in extreme circumstances’, if it can be done at all.

The decision of the Supreme Court of Appeal is curious for a number of reasons. For one, the Court appears not to have engaged with its own jurisprudence regarding the treatment of bidders when an invitation to tender is cancelled and reissued (compare Logbro Properties CC v Bedderson NO and Others 2003 (2) SA 460 (SCA)). For another, its treatment of the Constitutional Court’s decision in Trencon Construction (Pty) Ltd v Industrial Development Corporation of South Africa Ltd and Another 2015 (5) SA 245 (CC) is far from convincing. And Wallis JA’s application of PAJA’s threshold requirements seems, at best, tendentious.

That being said, the Court was clearly committed to upholding the autonomy of local government in procurement matters and to defending a decision that was, on the face of it, eminently reasonable. While not without its flaws, the decision in Nambiti represents a clear assertion of the primacy of the executive branch of government in deciding procurement priorities.

An application for leave to appeal against the judgment of the Supreme Court of Appeal has been filed at the Constitutional Court. Should the matter eventually be heard by this Court, it will be interesting to see how the Supreme Court of Appeal’s judgment is received.

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