Tender processes require fairness and transparency. In order to ensure fairness and transparency, an organ of state must adopt a proper evaluation process when considering and awarding tenders. An organ of state cannot rely on its selection of a preferred bidder in circumstances where the process for a preferred bid is not followed. When the award of a tender is found to be unlawful, the general position is to set aside the unlawful award.
In MEB Energy (Pty) Ltd v Ndlambe Local Municipality and Others, the court reinforced important principles relating to a preferred bidder under the Municipality’s Supply Chain Management (SCM) Policy and the default position on setting aside unlawful conduct.
The Municipality advertised a tender for an emergency sea water reverse osmosis plant which involved the conversion of sea water into drinking water. Quality Filtration Systems (Pty) Ltd (QFS) was awarded the tender, but for a blended option which involved the blending of wastewater and seawater.
The Municipality relied on the appointment of QFS as the preferred bidder in terms of its SCM Policy. QFS was the only tenderer that had submitted an offer for a blended water option. Therefore, the Municipality was not in a position to properly compare prices for the blended water option. There was also no functional scoring for the blended water option.
The court held that it was crucial to determine whether the process leading to QFS being identified as a preferred bidder was lawful. The court confirmed that the process of selecting a preferred bidder in the Municipality’s SCM policy ‘cannot be used to negotiate a different contract to the one referred to in the bid or change the terms of the bid’.
The court found that the Municipality was in contravention of its SCM Policy and then turned to consider a just and equitable remedy. The general default position is that unlawful conduct must be set aside. The Municipality contended that if the tender was set aside, the entire process would need to start again and there had been partial performance by QFS. The court held that ‘ordinarily, the Municipality cannot be allowed to utilise its own improper conduct as a tool to trump the default position that unlawful conduct must be set aside’. The court was therefore not persuaded that the Municipality had discharged its onus to deviate from the default position of setting aside unlawful conduct.
An organ of state must exercise caution in tender processes to ensure compliance with procurement law. A preferred bidder’s pricing must be verified and properly evaluated. In the event that an award of a tender is unlawful, the organ of state must show why the general default position should not be adopted. An organ of state cannot benefit from its own misconduct as this would be detrimental to the public interest.