Two construction companies have obtained high court interim interdicts stopping the South African National Roads Agency (Sanral) from implementing a controversial new scoring system for some of its tenders.
The interdicts were granted pending applications to review and set aside the new system.
Read: Sanral’s new preferential procurement scoring system challenged
The High Court in Gqeberha granted H&I Construction an interdict stopping Sanral from proceeding with the adjudication and award of two specific tenders in accordance with the amended tender scoring system as advertised by Sanral on 19 May 2023 in an addendum to its tender document.
The interdict was granted pending the finalisation of Part B of H&I’s application to review and set aside Sanral’s scoring system.
Nine construction companies submitted affidavits in support of Part A of H&I’s application, including Stefanutti Stocks, Power Construction and Baseline Civil Contractors.
The High Court in Pretoria granted construction and infrastructure company SMEC South Africa an interim interdict stopping Sanral from proceeding with and/or implementing and/or giving effect to the outcome of the tender adjudication process related to a list of tender invitations.
It was granted to SMEC SA pending the final determination of the review application in the High Court in Gqeberha or any review application related to the tender invitations listed that SMEC SA may institute in the High Court in Pretoria.
WBHO has applied to join Part B of H&I Construction’s application to review and set aside the new scoring system.
Sanral to continue advertising other tenders
Attorney Hein von Lieres, acting for H&I, said that as at 4pm on Tuesday, Sanral had not yet filed its answer to H&I’s case under Part B and/or to WBHO’s counter application.
Sanral GM for communications and marketing Vusi Mona said on Tuesday: “It is important to note that the interdicts are not brought against Sanral’s Preferential Procurement Policy, but are related to two specific bids as filed by H&I in the Gqeberha High Court and 65 bids as filed by SMEC in the Gauteng High Court.
“This means that Sanral will continue to advertise and evaluate numerous other tenders in accordance with its Annual Procurement Plan (APP),” he said.
Judge Nyameko Gqamana said in the reasons for his judgment handed down in the High Court in Gqeberha, published this month, it was argued on behalf of Sanral there was a backlog of almost 18 months on improving, constructing and maintaining roads, and it is in the public interest to make roads safe.
Gqamana said it was mentioned that 129 tenders had been issued by Sanral involving R18.1 billion.
“Therefore, if the interdict is granted, it will effectively suspend the maintenance and repairs of roads not only in respect of the two tenders which are of the subject matter herein, but will also have a ripple effect on all the 129 tenders.
“Sanral will be unable to proceed with any of these tenders until the review application is heard, and that would have far-reaching consequences on the maintenance of roads to the prejudice of road users and the public at large,” he said.
Agency can still award tenders
Acting Judge WJ Du Plessis also addressed this issue in his judgment of SMEC SA’s application, stating Sanral is not precluded from awarding tenders, merely from applying the new scoring system, pending the outcome of the review application.
Mona said on Tuesday that Sanral stands by its Preferential Procurement Policy, which recognises the need for and importance of driving transformation in the public infrastructure development space.
He said it should be noted that the Constitutional Court ruling of February 2022 gave each organ of state the prerogative to determine its own preferential procurement policy.
Read: ConCourt confirms validity of 2017 Preferential Procurement Regulations
“Given that Sanral’s Preferential Procurement Policy is before the courts – and out of respect for the judiciary – we do not intend to ventilate the merits of our case in the media.
“However, it is important to share with the public that Sanral will continue to vigorously pursue our mandate to improve the quality of the country’s road infrastructure, contribute towards growing our economy and transform the construction industry in order to achieve greater participation from previously disadvantaged communities,” he said.
Unconstitutional and irrational
H&I Construction argued that Sanral’s new scoring system is unconstitutional and irrational, and the changes to the scoring system were introduced without consulting those directly affected by it. It is, therefore, reviewable on grounds of legality and in terms of the Promotion of Administrative Justice Act (PAJA).
Judge Gqamana accepted that Sanral is empowered by the Preferential Procurement Policy Framework Act (PPPFA) to determine its own preferential policies and has the discretion to make its own policy choices regarding the specific goals it wishes to pursue.
He said the transformation agenda by Sanral to ensure broader black participation is commendable and is a step in the right direction and long overdue.
However, Gqamana said the policy has to be fair, lawful and rational.ADVERTISEMENTCONTINUE READING BELOW
“Further, what troubles me more is that the changes to the scoring system [were] introduced without consultation.
“It is not my suggestion that each time Sanral introduces a policy, it has to consult the applicant (H&I) or other bidders.
“However, the circumstances in this case are unique in that when the tenders were first advertised, there were certain terms and conditions which Sanral undertook to implement when evaluating and adjudicating the tenders, but [the] same [conditions] were changed without consulting those affected thereby.
“Based on that, my sense of fairness tells me that Sanral ought to have consulted them before introducing the changes,” he said.
Judge Gqamana added that in terms of the PPPFA, any specific goal for which a point would be awarded must be clearly specified in the invitation to submit a tender.
Black ownership criteria
He said regarding black ownership criteria, the measure that Sanral says will be applied is the share certificates of individuals.
“That creates a string of problems to me. One such example is the second respondent [WBHO], a public company listed in the JSE with its shareholders changing daily,” he said.
“The question is, at which date will the shareholding be determined?
“That is not specified in the invitation for tenders. In addition, it is envisaged that an entity like the second respondent [WBHO] will be required to attach to its tender documents all the individual share certificates, assuming it has more than millions of shareholders.”
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Judge Gqamana said Sanral says it will engage with the shareholders further in this regard, but that also raises concerns to him about transparency, adding where public funds are to be used, it is in the public interest that the procurement process must be transparent.
He said the preferential points allocated for black ownership criteria are not insignificant, and Sanral’s argument that in the greater scheme of things, black ownership carries a relatively light weighting “is artificially impressive”.
“The truth is, the black ownership criteria carries 50% [i.e. five out of 10] of the total points for specific goals.
“For the applicant [H&I] to compete fairly and to stand a chance of winning any of the two tenders, it would have to undercut on price, so that it could score more points on the 90% for price.
“That is not cost-effective, and it is also unfair,” he said.
Judge Gqamana disagreed with Sanral’s contention that the sub-contracting criteria are measurable because a bidder will be required to make an undertaking upfront and punished if it does not keep its undertaking.
“My greatest concern with that again is transparency. I do appreciate and commend Sanral’s desire to see greater economic benefits flowing to SMMEs [small, medium and micro enterprises] owned by the targeted groups.
“This has been long overdue. Organs of state must, unashamedly and radically, champion economic empowerment. Obviously, that must be done within the enabling legislation.
“Experience in procurement matters has shown us that any system which is not transparent is fertile ground for corruption.
“In any event … the Constitution demands that procurement by organs of state must be in accordance with a system which is transparent,” he said.
SMEC SA said the new scoring system renders the Broad-based Black Economic Empowerment Act (B-BBEE) a nullity, and compliance with the PPPFA is undermined because compliance now only amounts to a fraction of the points.
The company said all the money companies spent to obtain a high B-BBEE score would now also mean nothing.
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