This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its 2006 decision in Public Procurement and Asset Disposal Board v. Research Solutions Integrators (Pty), Botswana’s Court of Appeal overturned a ruling issued by a trial court that ordered the government to terminate a contract award and redirect that award to the complainant bidder. The case dealt with a tendering process for the award of a contract for the computerization of border posts and passport issuing offices. The trial court found that Botswana’s Procurement Review Board failed to properly consider the recommendations of the government before approving a contract award to a selected bidder. The trial court overruled the Board decision and directed the government to award to the complainant, even though the complainant’s bid was initially rejected for exceeding the government’s budget.
The Court of Appeal overturned the trial decision, finding that the trial court overreached in second-guessing the decision of the Board. The Court of Appeal found that the trial court imposed an executive, rather than oversight, function on that Board, which would force the Board to revisit all parts of the government’s tendering process before approving contract award recommendations. However, while it overturned the trial court’s interpretation of the Board’s statutory duties under the Public Procurement and Asset Disposal Act, the Court of Appeal failed to clarify the appropriate review duties of the Board, finding that they should be determined in the future on a case-by-case basis:
The exercise of the Board’s duties
This case raises fundamental questions about the nature and extent of the statutory duties of the Board. These are addressed in the first two of the propositions in which the contentions on behalf of the Board are summarised above. In his submissions, Mr Peter, for the Board, stressed that the Board has a supervisory function. It is a body with a full-time executive chairman and three full time and three part-time members. It is not tasked with, and indeed not capable of, taking over and performing the functions of procurement entities. Those entities remained responsible for the performance of their functions. The Board would perform its statutory duty of supervision if it examined reports made to it, taking them at face value at first. If on such an examination it appeared that there was something deficient, further examination might be required. But if the reports were comprehensive and thorough, it was not for the Board to look for ‘ghosts and shadows’ where there was no indication that anything of the kind might exist. There was a statutory duty on the Board under s 27 of the Act to ‘ensure’ compliance, but that could only mean taking reasonable steps to that end.
It is clear, in my opinion, that the Board is a supervisory body, not an executive one. It would be a serious mistake to impose obligations on the Board which would amount to requiring it to duplicate the work of the procurement entity and check every step of the evaluation process which the entity had followed. That would be to create an extra layer of bureaucracy in the procurement procedure and would be liable to complicate and delay a process which is often quite slow and complex already. It does, however, appear to me that the formulation of the Board’s duties suggested by Mr Peter fails to give sufficient weight to the importance of the functions which the Board is asked to perform and to the emphatic language of the Act. In his judgment, Marumo J said, at p 502A-B:
‘Quite clearly the Act constituted the first respondent and clothed it with extensive powers to enable it to play the role of guardian to the public interest in the area of public procurement and asset disposal. It is a momentous fiduciary duty whose gravity should not be downgraded for a moment.’
That passage, in my view, places a proper emphasis on the importance of the Board’s function. Against that background, it seems to me that when ss 26 and 27 say that the Board is to ensure compliance, that requirement cannot be satisfied by a mere examination of reports taken at face value. It requires at least a sceptical and penetrating scrutiny of the material placed before it and a readiness to ask questions to make sure that the material which lies behind the reports and the basis of any recommendations has been properly understood. In a case like this, where a balance has to be struck between undue interference on the one hand and adequate scrutiny on the other it is not possible to formulate a simple rule which can easily be applied to determine what the Board has to do in any particular case. In any event, the Board is a relatively recent creation and with experience it will no doubt become easier to formulate some sort of guidelines or working practices: at this stage any attempt to state the Board’s duties more precisely would be unsatisfactory and it is better, in my opinion, to proceed case by case.
As the Court of Appeal found, the trial court overreached in its criticisms of the Board’s review of the government’s contract award recommendations, which, while imperfect, showed no evidence of bad faith or misconduct on the part of the Board that would justify overturning the Board’s contract award approval:
The judge’s criticisms of the conduct of the Board
The judge criticised the conduct of the Board, in relation both to their dealings with the tender decision and their conduct in the proceedings, and some of his comments were very severe. He began this part of his judgment by stressing the obligation of the Board to be open its dealings with the public and with persons affected by its decisions. He observed (supra), at p 502E:
‘It must not only be fair and principled, it must be seen to be so.’
At p 503, he stressed the importance of the right of the applicant for an order under Order 61 of the Rules of the High Court (Cap 04:02) (Sub Leg) to obtain a true record of the proceedings of the authority or tribunal whose decisions to be brought under review, and he referred to the judgment of Kriegler AJA in Jockey Club of South Africa v Forbes 1993 (1) SA 649 (A) at p 660. So far, I agree entirely with what he said.
He then proceeded to consider the way in which the Board dealt with the IBS tender. He observed, at p 504G, that IBS deliberately left the services element out of their bid, citing the passage from para 3.12 of the Technical Proposal, quoted above. From there, he proceeded to hold that the Board conferred an unfair advantage on IBS by accepting their tender. In my view, the judge went too far in expressing his criticisms as he did, and based his views on a misunderstanding of the position of the Board. Of course, if the Board had realised that there was this marked difference between the contents of the two bids and had deliberately preferred IBS, they would have been guilty of unfairness, particularly if there had been some element of concealment of the contents of the IBS bid. The information before us, however, does not demonstrate any such element of concealment. The IBS bid was perfectly clear about what it included and what it did not include. What went wrong was that, as I have suggested above, the importance of the pricing element of the bids was lost sight of in the evaluation process, so that the Board did not appreciate that the two bids were not directly comparable. There is nothing to show that the Board did not act in good faith in the exercise of their duties as they understood E them at the time. They did, I think, take too limited a view of what their duty of supervision required, but I do not think that it has been established that they violated their duty to act fairly, as the judge found at p 506H.
The judge was also very critical of the conduct of the Board in the course of this application to the court, which he described as ‘extremely disturbing’ (p 507B). He said that the Board had filed a record, in response to the application, which was ‘incomplete’ and that on two subsequent occasions they had failed to remedy the failure by filing the full terms of the relevant parts of the bids. He described the Board’s actions as ‘calculated moves intended to conceal important information’.
Again, in my opinion, the judge went too far in his criticism. As Mr Peter pointed out in his argument, the criticism starts from the misunderstanding that the full terms of the bids formed part of the Board’s record.
I do think that the Board is open to some criticism in that they failed, apparently, to take any steps to find out what the true position was and to disclose it, once the issue of the true nature of the IBS tender had been raised. In my view, the Board had a duty to investigate, in terms of s 53 as well as in pursuance of their general duty to ensure fairness, and they took much too negative a stance in their response to the application. However, I would see this as another case of misconstruction of their obligations, rather than anything more sinister.
The judge also criticised the Board, at p 508 and following, for refusing or failing to deal with important allegations in the affidavits filed by AST and for preferring to take their stand on technical points such as the contention that the allegations were based on hearsay. In this respect, I have much more sympathy with the judge’s view. Looking at the whole course of proceedings, it does seem to me that the Board have been excessively negative in their responses and more concerned to fend off any possible criticism of themselves than to ensure that the issues raised by AST were properly investigated and understood. Again, this may be the result of a misconstruction of the duties imposed on the Board, and I would therefore close this section of this judgment by repeating that while the judge was, in my view, wrong to draw inferences amounting to misconduct on the part of the Board, he was right to stress the Board’s responsibility for openness, fairness and transparency.
Given the above, the Court of Appeal also held that the trial court’s order to quash the initial contract award and redirect that award to the complainant was improper. Given the subsequent passage of time, the Court of Appeal ultimately found that the government should reapply to the Board for direction on how to proceed with the contemplated contract award:
The substitution order
This part of the case, although important, can be dealt with relatively briefly. Having set aside the award to IBS, the judge ordered the Board to award the tender to AST. In doing so, he correctly directed himself in terms of well established authority as to the circumstances in which a court will, in review proceedings, take the exceptional step of making the decision itself rather than remitting the matter to the administrative authority. He referred in particular to the statement of Hiemstra J in Johannesburg City Council v The Administrator of the Transvaal 1969 (2) SA 72 (T) at p 76 in which he defined the exceptional circumstances as follows:
‘(i) Where the end result is in any event a foregone conclusion and it would merely be a waste of time to order the tribunal or functionary to reconsider the matter. This applies more particularly where much time has already unjustifiably been lost by an applicant to whom time is in the circumstances valuable, and the further delay which would be caused by the reference back is significant in the context.
(ii) Where the tribunal or functionary has exhibited bias or incompetence to such a degree that it would be unfair to require the applicant to submit to the same jurisdiction again.’
In deciding to grant the substitutionary order, the judge referred, firstly, to the fact that, of the eight bidders originally interested, only AST and IBS had been found capable of delivering the project and that IBS had since declared itself unable to perform, leaving only AST; and, secondly, to his findings about the conduct of the Board as a factor weighing against a reference back. He considered arguments on behalf of the Board that it would be inappropriate to make the order when AST’s tender exceeded the budget but held that, given the fact that it would be open to the parties to negotiate the contract sum, there was no objection to making the order. He further held that he was not precluded from making the order by s 45 of the Act.
For the reasons already given, I think that the judge went too far in his criticisms of the conduct of the Board. On a proper view of the material before us, I do not think that this court need have any real doubt about the ability of the Board to treat fairly any issue relating to this project with which it may have to deal in the future. As regards the other matters I think that it would be an extreme step for this court to order acceptance of a bid which exceeds, by a very substantial amount, the funds budgeted for the project. Further, it would not be correct to say that acceptance of the AST tender was the only option if the IBS tender was set aside: it would have been open to the Board to direct that neither tender should be accepted and that the Department should either negotiate a price within its budget, or look for additional funds or reconsider its requirements. The passage of time has, in any event, complicated the picture. This court has no knowledge of, for example, the extent to which developments in technology may have rendered obsolete or inappropriate the solutions which were proposed in 2003. In all the circumstances, therefore, in my opinion, this part of the judge’s order should be set aside.
There remains a question as to what order this court should make. The normal order would be to remit to the authority to reconsider the matter. It is not, however, necessarily clear that that would be appropriate or helpful, given the changes of circumstances since 2003. There were, for example, some mentions of alleged changes in the status of AST which I have not thought it necessary to detail, but which might have some effect on the parties’ future plans. In my view, therefore, the appropriate course is to set aside the substitutionary order and declare that it is open to the Department to refer back to the Board any matter in connection with the tender of AST, should they so decide.
As this case illustrates, the failure to establish clear parameters around contract review and approval procedures, and around any resulting bid protest processes, leaves the outcome of any contract award, and the outcome of any resulting challenge, open to further dispute. The ultimate consequence of this uncertainty is that government contract awards, and the government operations that depend on prompt performance of those contracts, are put in an unnecessary state of peril. To avoid casting government contract awards under a cloud of uncertainty, each public institution should establish clear internal contract approval procedures, while at the jurisdictional level governments should create clear external oversight and review mechanisms to clarify the appropriate means for challenging contract award decisions.
