This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
Recent court decisions in South Africa reveal the ongoing risks associated with procedural challenges to bid evaluations and awards. These cases serve as a reminder to public institutions across all jurisdictions of the importance of following clear tendering procedures to better ensure the defensibility of contract award decisions.
For example, in its November 2021 decision in Trencon Construction (Pty) Ltd v. Public Investment Corporation Soc Ltd, the High Court of South Africa upheld the rejection of a top-scoring bidder following a final clarification process. The dispute dealt with a tender call for the award of a principal building contractor for the redevelopment of a shopping centre in Pretoria. The complainant argued that the government agency improperly relied on a clarification meeting to reduce its top-ranked score and that the subsequent award to its competitor was based on a biased process. The Court disagreed, finding that both finalists were provided an equal opportunity to clarify their respective bids and that neither bidder was given preferential treatment over the other. The Court ruled that the resulting adjustments to the complainant’s score did not create an unfair or biased process. The Court rejected the complaint and upheld the contract award.
Similarly, in its December 2021 decision in Wattpower Solutions CC v. Transnet Soc Limited, the High Court of South Africa upheld the government’s decision to bypass the top-scoring bidder and award a contract to the next-ranked bidder. The dispute dealt with a solicitation for the upgrade of a fire protection system at a high-risk facility run by Transnet, a government-owned transportation agency. The complainant earned the top score after the first four stages of the evaluation process and entered the final stage as the top-ranking bidder. However, after applying a final technical due diligence assessment, Transnet bypassed the complainant and instead awarded that contract to the next-ranked bidder. While the complainant alleged that it was denied the award based on subjective reasons, the Court disagreed, finding that the government was within its rights when it engaged in a further assessment of the bidder’s capacity and capability to perform the work.
In fact, the Court found that Transnet had legitimate concerns over that bidder’s ability to perform the project. As the Court noted, the due diligence investigation was carried out by an independent engineering consultant, who found several shortcomings in the complainant’s proposed method of performance. Those shortcomings included technical concerns relating to the handling of the bulk fuel depot, along with concerns over the complainant’s proposed gas freezing arrangements during tank cleaning. While the complainant argued that the additional assessment was outside of the tendering rules, the Court disagreed and found that the additional due diligence step was contemplated within the terms of the tendering process.
However, in its December 2021 decision in Defensor Electronic Security (Pty) Ltd v. Centlec Soc Ltd, the High Court of South Africa voided a contract award and ordered a new tendering process after finding that the original contract was awarded to a non-compliant bidder after the expiry of the bid validity period. The dispute dealt with a tendering process initiated by Centlec, a state-owned company, for the award of a contract for the supply, delivery, installation, and maintenance of security equipment. The complainant alleged that Centlec failed to extend the bid irrevocability prior to its expiry and that the lapsed process could not be revived and had to be re-tendered. The Court agreed, finding that this procedural irregularity invalidated the contract award. Further, the Court ruled that the original award was made to a non-compliant bidder since the original awardee failed to submit a required pricing form.
As these cases illustrate, when challenged, the defensibility of award decisions will often turn on how clearly an institution defined its evaluation and award process, and how carefully it adhered to that process in practice.
