Negotiating the Minefield
 Tender irregularities- Preferential Procurement Policy Framework Act
- Loopholes closed
- The right to claim damages
PROCUREMENT law governing tenders can play out as a minefield, providing both clarity and leeway to companies seeking legitimate business opportunities from government.
Most supply chain policies state that, after assessing the tenders submitted, government departments must notify the unsuccessful applicants and wait two weeks before informing the successful company to allow time for questions or appeals. Only then can the successful bidder move on-site.
However, according to Cox Yeats partner for construction, engineering and infrastructure Richard Hoal, in not following that process, the often controversial issue of tender irregularities repeatedly raises its head in South African courts and decisions challenged in the Supreme Court of Appeal (SCA).
One local case saw the then social development minister Zola Skweyiya have the tender to supply and deliver food hampers in KwaZulu-Natal set aside several years ago after the court found the awarding of public tenders was “notoriously subject to influence and manipulation”.
Hoal said currently the amended Preferential Procurement Policy Framework Act awarded tenders in line with a points system where, in contracts over R1 million, 10 points were assigned to black empowerment goals and 90 points for the price. In smaller contracts the system was weighted 20/80 and in both cases, the contract must be awarded to the company scoring the highest points unless objective criteria and specified goals justified appointing another contractor.
New regulations published in June closed loopholes that had opened the tender process to a subjective evaluation of a company’s performance ability and now tenders may only judge a company’s quality if the criteria, weighting, values and minimum scores are specified in the documents.
Hoal said this move would help in eliminating subjective decision-making and told a recent Master Builders Association (MBA) workshop that companies tendering for government contracts had the right to request reasons and challenge the decisions made in the awarding process.
The Promotion of Administrative Justice Act entitled companies to written reasons for any decision taken within 90 days of requesting that information – and should that not happen, the law assumed there were no good reasons for the decision, paving the way for companies to have the courts review that decision.
“The downside is that it costs money to challenge those decisions. In exceptional cases the court can substitute its own decision or order the government to pay compensation, but the SCA has not yet considered that last element in any detail,” he said.
However, in light of myriad of tender irregularities that rear their heads across South Africa, many contractors faced issues on whether or not as unsuccessful tenderers, they had the right to claim damages. Hoal said a case heard five years ago by the SCA sealed the debate by indicating the departments were “immune from a damages claim” when incorrect or negligent decisions were made honestly as it opened the government to “a spiral of litigation”.
“Hence, claims only exists in the case of dishonesty or fraud,” he said.
MBA commercial and online manager Gary Amstutz believed resolving the tender issues required extensive training among municipalities and government departments on the legal framework for procurement law for tenders.
Negotiating the Minefield
Tender irregularities
Preferential Procurement Policy Framework Act
Loopholes closed
The right to claim damages
PROCUREMENT law governing tenders can play out as a minefield, providing both clarity and leeway to companies seeking legitimate business opportunities from government.
Most supply chain policies state that, after assessing the tenders submitted, government departments must notify the unsuccessful applicants and wait two weeks before informing the successful company to allow time for questions or appeals. Only then can the successful bidder move on-site.
However, according to Cox Yeats partner for construction, engineering and infrastructure Richard Hoal, in not following that process, the often controversial issue of tender irregularities repeatedly raises its head in South African courts and decisions challenged in the Supreme Court of Appeal (SCA).
One local case saw the then social development minister Zola Skweyiya have the tender to supply and deliver food hampers in KwaZulu-Natal set aside several years ago after the court found the awarding of public tenders was “notoriously subject to influence and manipulation”.
Hoal said currently the amended Preferential Procurement Policy Framework Act awarded tenders in line with a points system where, in contracts over R1 million, 10 points were assigned to black empowerment goals and 90 points for the price. In smaller contracts the system was weighted 20/80 and in both cases, the contract must be awarded to the company scoring the highest points unless objective criteria and specified goals justified appointing another contractor.
New regulations published in June closed loopholes that had opened the tender process to a subjective evaluation of a company’s performance ability and now tenders may only judge a company’s quality if the criteria, weighting, values and minimum scores are specified in the documents.
Hoal said this move would help in eliminating subjective decision-making and told a recent Master Builders Association (MBA) workshop that companies tendering for government contracts had the right to request reasons and challenge the decisions made in the awarding process.
The Promotion of Administrative Justice Act entitled companies to written reasons for any decision taken within 90 days of requesting that information – and should that not happen, the law assumed there were no good reasons for the decision, paving the way for companies to have the courts review that decision.
“The downside is that it costs money to challenge those decisions. In exceptional cases the court can substitute its own decision or order the government to pay compensation, but the SCA has not yet considered that last element in any detail,” he said.
However, in light of myriad of tender irregularities that rear their heads across South Africa, many contractors faced issues on whether or not as unsuccessful tenderers, they had the right to claim damages. Hoal said a case heard five years ago by the SCA sealed the debate by indicating the departments were “immune from a damages claim” when incorrect or negligent decisions were made honestly as it opened the government to “a spiral of litigation”.
“Hence, claims only exists in the case of dishonesty or fraud,” he said.
MBA commercial and online manager Gary Amstutz believed resolving the tender issues required extensive training among municipalities and government departments on the legal framework for procurement law for tenders.
For further information please contact:
Richard Hoal
Partner at Cox Yeats
Tel: (031) 536 8500 |
