A cautionary note regarding the ‘rectification of unlawful procurement processes’

In the judgment of the full bench of the High Court of South Africa, Free State Division, Bloemfontein, in the matter of MEC for Public Works and Infrastructure, Free State Provincial Government v Mofomo Construction CC, Case No.: A138/2016, (the Department and Mofomo respectively), the appeal court considered whether the court a quo had erred in finding that, consequent upon a valid procurement process undertaken by the Department, a valid and binding contract had been entered into with Mofomo for the building of classrooms at schools throughout the Free State.

15 Feb 2017 4 min read Dispute Resolution Alert Article

Subsequent to Mofomo receiving an appointment letter, executing works and receiving payment under a first progress payment, the Department withdrew Mofomo’s appointment stating, among other things, that the process of appointment had failed to comply with government procurement legislation and policies and was unlawful, making any agreement null and void. Mofomo launched an application seeking to stop the Department from not performing in terms of the contract and embarking on a new procurement process. The Department opposed the application and filed a counter-application seeking an order that the appointment and/or contract be declared invalid, unlawful and unenforceable. The application by Mofomo was successful.

Before the full bench, it was submitted on behalf of the Department that:

  • Mofomo had not proved that a contract was entered into and if it was, it was not lawful and binding;
  • the letter of appointment was subject to two conditions, namely the signing of the JBCC contract and providing a construction guarantee, which Mofomo had failed to prove compliance with; and
  • an invalid tender procedure was followed by the Department.

In considering the application and counter-application, the full bench referred to various judgments including Minister of Land Affairs and Agricultural v D & F Wevell Trust 2008 (2) SA 184 (SCA) wherein it was stated that in motion proceedings, the affidavits constitute both the pleadings and the evidence, and the issues and averments in support of the parties’ cases should appear clearly therefrom.

The full bench stated that:

  • The evidence indicated that Mofomo had presented the Department with a signed JBCC contract and a construction guarantee whereupon the site was handed over to it and the works started. The fact that the Department allowed Mofomo to perform and to draw the first progress payment was indicative of a vinculum iuris (legal obligation) between the parties.
  • The Department did not rely on non-fulfilment of the aforementioned conditions in its withdrawal of the appointment letter. Furthermore, it did not disclose the procurement process followed prior to Mofomo’s appointment, the reasons for its decision and all relevant documents
    in support of its allegations.
  • Nowhere was it stated in the Department’s papers that there was fraudulent activity between the parties.

The full bench held that:

  • The lack of evidence was not sufficient to assist an organ of state which alleges that an improper procurement process was embarked upon to such an extent that the process could not be regarded as fair, equitable, transparent, competitive and cost-effective as provided for in s217 of the Constitution, the starting point for an evaluation of the proper approach to an assessment of the constitutional validity of state procurement processes.
  • A tender process implemented by an organ of state is an ‘administrative action’ within the meaning of the Promotion of Administrative Justice Act, No 3 of 2000 (PAJA), and any administrative decision must be treated as though it is valid until a court pronounces on its invalidity and upon a declaration of invalidity, a court must make an order in terms of s8 of PAJA, according to what justice and equity dictate. The court referred to the judgment in MEC for Health, Eastern Cape and Another v Kirland Investments (Pty) Ltd t/a Eye and Laser Institute 2014 (3) SA 481 (CC) wherein Cameron J held, among other things, that “the decision, despite being defective, may have consequences that make it undesirable or even impossible to set it aside. That demands a proper process, in which all factors for and against are properly weighed”.
  • The Department was under a duty to approach the court for the review and setting aside of the decision to appoint Mofomo and did not have the power to do so itself, and the Department’s appeal was dismissed with costs.

In conclusion, an executive in all spheres of government is constrained by the doctrine of legality that they may exercise no power and perform no function beyond those conferred upon them by law. Accordingly, when an organ of state wishes to correct a decision made by it on the basis that it followed an “improper and invalid procurement process” in making such a decision, the subject affected by it is entitled to proper notice and to be afforded a proper hearing on whether such a decision should be set aside.

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