Factors courts must consider when reviewing state tenders

27 June 2023 ,  Neo Madlala 622
With so much attention the last few years on corruption, tender fraud and unauthorised government procurement, a question that is frequently asked is to what extent our courts are allowed to become involved with government tenders and set them aside?

To establish whether our courts have any prerogative to get involved with government procurement, one must turn to our Constitution. Section 217 of the Constitution determines that every system used for public procurement must follow the principles of fairness, equitability, transparency, competitiveness and cost effectiveness. These are the five cardinal pillars of any procurement process and a failure to adhere to even one of the pillars may render a procurement process unconstitutional and invalid. 

Our courts are mandated under section 172 of the Constitution to declare an unlawful tender process as inconsistent with the Constitution and invalidate such tender process, thereby nullifying the entire process and all contracts subsequently concluded. 

Should a court wish to invalidate a tender process, our courts are empowered to make an order that is ‘just and equitable’. Such orders may include, but are not limited to:

a. Orders limiting the retrospective effect of the declaration of invalidity; and
b. Orders suspending the declaration of invalidity for a period of time and on conditions as determined by the court in order to allow government to correct the defect. 

One of the first cases dealing with just and equitable relief resulting from a flawed tender process was Millennium Waste Management (pty) Ltd v Chairperson Tender Board: Limpopo Province and Others [2007] SCA 165 (RSA). In this matter, the Appellant had been disqualified from a tender process because it had not signed the declaration of interest document. The Court found that the decision to disqualify the Appellant on such grounds went against the spirit of fairness, competitiveness and cost-effectiveness.

The Court, in reaching its decision held that there are four identifiable interests that must be considered and weighed when reaching a just and equitable order. The first interest is that of the aggrieved unsuccessful tenderer, and the opportunity they were denied to the unfairness. 

The second interest is that of the successful innocent bidder and the financial resources expended in tendering and that the tenderer should not be punished for failures not attributable to it. 

Analysing the third interest, the Court indicated that the public’s interest in accessing services or goods is paramount and must be considered. This interest was given significant weight in the matter of Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others (No2) [2014] ZACC 12, where despite the court invalidating the tender process it did not cancel the contract as doing so would be detrimental to social grant beneficiaries and especially minor children who make up the majority of social grant beneficiaries. The court suspended the declaration of invalidity pending SASSA embarking on a new tender process for the services or executing such services itself.

The fourth and final interest the court considered in the Millennium Waste Management-matter was the public purse and the impact on government to re-run the tender process as against the costs of the services being tendered.

A consideration of these four interests will form the basis of the order a court is allowed to make under section 172 of the Constitution when reviewing a state tender process or award. It will also be these interests that will need to be considered and addressed when applying for the review of any government tender as having failed to meet the requirements of section 172 of the Constitution.

Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s). 

Related Expertise: Appeals, Dispute Resolution
Related Sectors: Public Sector