Constitutional court of south africa

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(a) Separate bids

  1. The special conditions for submitting proposals in the Request for Proposals stipulated that bidders could submit proposals in respect of one or more provinces, but that each bid per province had to be submitted separately. This simple requirement was even illustrated: “For example, if bidding for two Provinces, submit two separate proposals”.79 SASSA reserved the right to disqualify any bidder who failed to submit all mandatory documents specified in the Request for Proposals. Cash Paymaster, which bid for all nine provinces, did not submit nine separate sets of documents.

  1. In terms of the Request for Proposals, the failure “to submit all mandatory documents specified in the [Request for Proposals]” was one of the bases for disqualifying any bidder. What one is left with is non-compliance with what the Request for Proposals regarded as mandatory. This means that a mandatory condition prescribed by an empowering provision was not complied with, which is a ground for review under section 6(2)(b) of PAJA. But the sub-section also requires that the non-compliance must be of a material nature. The purpose of separate bids for the provinces was surely to enable SASSA to assess whether the bidder would be able to provide the necessary services in each of the provinces for which it bid. This purpose was attained. The irregularity was not material. No ground for review under PAJA exists.

(b) Bid Evaluation Committee composition

  1. In terms of the Circular the Bid Evaluation Committee had to consist of at least five officials, one of whom should be a Supply Chain Management Practitioner. The Bid Evaluation Committee, however, consisted of only four members, without a Supply Chain Management Practitioner.

  1. The Bid Evaluation Committee formed an integral part of the process of deciding to whom to award the tender. Without its evaluation and recommendation the Bid Adjudication Committee would not have been able to do its work. Its composition was prescribed in the Circular in terms of the Treasury Regulations. A Supply Chain Management Practitioner “should” have been appointed in terms of the Circular. SASSA states that a practitioner was available to advise the Bid Evaluation Committee on technical aspects. That was indeed so. There is no suggestion that the Supply Chain Management Practitioner did not perform this role and function. However, because of his expertise, he may have voted differently on material issues before the Committee, had he been fully part of it. While it is speculative to say that his vote would not have made any difference, given the non mandatory nature of the Circular’s prescription (“should”), it is not possible to find a review ground under section 6(2)(a)(i) of PAJA.

(c) Non-attendance of Bid Adjudication Committee member

  1. The non-attendance by a member of the Bid Adjudication Committee at one of the final adjudication meetings was fully explained in the papers. There was a quorum for the meeting and the concerns of the member who could not attend were taken into consideration. No irregularity occurred.

(d) No proper empowerment assessment

  1. Section 16A6.3(b) of the Treasury Regulations provides that bid documentation must include evaluation and adjudication criteria prescribed in terms of the Procurement Act and the Empowerment Act. The Request for Proposals included a preference certificate that served as a claim form for historically disadvantaged individual preference points as well as a summary for preference points claimed for attainment of other specified goals. It indicated that responsive tenders would be evaluated using a system which awards points on the basis of the tendered price and equity ownership. The points system and equity ownership operated on the explicit premise of active management and control of the enterprise.80 In the event of a contract being awarded as a result of points claimed for equity ownership, the contractor could have been required to furnish documentary proof that the claims were correct.

  1. On the papers AllPay brought a challenge against the failure of SASSA to assess the ability of Cash Paymaster’s black economic empowerment partners to perform the tender. In considering the matter, the Supreme Court of Appeal dismissed the argument and found that evaluation of the bid was SASSA’s prerogative. It found that it was permissible for SASSA to cover this requirement by imposing appropriate contractual consequences on Cash Paymaster. But this does not address the point. By looking only at whether there was a general obligation to investigate the capabilities of a bidding consortium’s partners, the analysis falls short of considering the crucial role reserved for transformation in the procurement process.

  1. The Procurement Act provides that an organ of state must determine its preferential procurement policy within a preference-point system for specific goals, which may include “contracting with persons, or categories of persons, historically disadvantaged by unfair discrimination on the basis of race, gender or disability”.81 The handling of the tender process by SASSA made this a nullity, in that the black economic empowerment preference points – which were to be assessed in the second stage – played no actual role in the decision because by that stage there was no competitor. An investigation into the propriety of empowerment credentials does not become necessary only after a complaint has been lodged. There was an obligation on SASSA to ensure that the empowerment credentials of the prospective tenderers were investigated and confirmed before the award was finally made. That obligation became even more crucial when there were no other competitors left in the second stage. There is then an even greater obligation for the tender administrator to confirm the empowerment credentials of the winning bidder.

  1. Cash Paymaster claimed that its equity partners would manage and execute over 74% of the tender. Its tender did not substantiate this. All it did was to provide particulars of the management capabilities of its workforce, which included previously disadvantaged people. On the face of the information provided by Cash Paymaster in its tender it was not possible to determine whether its claimed empowerment credentials were up to scratch or not.

  1. Despite this failure, SASSA did not call on Cash Paymaster to substantiate its claimed empowerment credentials, presumably because by that stage the preference points could not have affected the outcome. This effectively made the consideration of empowerment an empty shell, where preference points were calculated as a formality but where the true goal of empowerment requirements was never given effect to.

  1. AllPay’s attack on the irrationality of SASSA’s failure to consider Cash Paymaster’s empowerment partners’ ability to manage almost three-quarters of the venture was not primarily based on this perspective of the substantive purpose of empowerment. It was a more generalised argument, based on the irrationality of awarding a tender when the tenderer’s own assertions about its ability to implement the tender are not assessed. This irrationality argument gains further crucial traction when the Constitution’s substantive transformative imperatives are brought to the forefront.

  1. Given the central and fundamental importance of substantive empowerment under the Constitution and the Procurement and Empowerment Acts, SASSA’s failure to ensure that the claimed empowerment credentials were objectively confirmed was fatally defective. It is difficult to think of a more fundamentally mandatory and material condition prescribed by the constitutional and legislative procurement framework than objectively determined empowerment credentials.82 The failure to make that objective determination fell afoul of section 6(2)(b) of PAJA (non-compliance with a mandatory and material condition) and section 6(2)(e)(iii) (failure to consider a relevant consideration).

(e) Bidders Notice 2

  1. There are a number of provisions in the Request for Proposals that relate to biometric verification of the identity of grant beneficiaries, both in the enrolment process and in the payment process. Biometric verification was mandatory for registration or enrolment purposes.83 The requirement for verification at payment was couched in less strict terms. In the “Scope of Work” section, the Request for Proposals provided that payment services of social grants “must be secured, preferably, Biometric based. [The Bidder’s proposal] should provide detail on the measures that the Bidder/s will put in place to ensure that the right person is paid the correct amount.”84 The Request for Proposals provided that “[a]ny amendments of any nature made to this [Request for Proposals] shall be notified to all Bidder/s and shall only be of force and effect if it is in writing, signed by the Accounting Officer or his delegated representative and added to this [Request for Proposals] as an addendum.”85

  1. On 10 June 2011 SASSA issued Bidders Notice 2.86 Its stated purpose was to give final clarity on frequently asked questions, after which “no additional questions [would] be answered.” The notice reiterated that a one-to-many biometric search had to be conducted at the time of registration. In addition, it provided:

“In order to ensure that the right Beneficiary receives the right amount at the right time, Biometric verification must be performed when a Beneficiary receives his Grant regardless of the Payment Methodology”. (Emphasis added.)

  1. AllPay argued that Bidders Notice 2 amended one of the bid requirements in a manner not sanctioned by the Request for Proposals, and that the ambiguity and confusion surrounding the requirement of biometric verification at the payment stage was exacerbated by the content of Bidders Notice 2. SASSA and Cash Paymaster countered that AllPay’s confusion was its own fault, because verification was required at the time of the payment into a beneficiary’s account and not at the time the money was withdrawn from the account. In any event, they submitted, biometric verification at the time of payment was always the preferential mode and Bidders Notice 2 did not change anything material in relation to that requirement.

  1. It is true that AllPay understood the initial preference for biometric verification at the payment stage to relate to actual payment in the hands of a beneficiary and that it did not consider biometric verification by way of fingerprints to be possible at payments from ATMs. In this regard, it appears that AllPay might have subjectively misread what was stated. But it was not alone in that. The minutes of the Bid Evaluation Committee meetings show that this was an issue that also concerned members of the Bid Evaluation Committee.87 The Bid Evaluation Committee’s initial assessment on functionality was based on the criteria set out in the Request for Proposals.88 That functionality assessment gave AllPay a score of more than 70%, which would have qualified it to enter the next stage of assessment based on price and preference points. After the oral presentation, AllPay’s scores were reduced to below the minimum and it fell out of further consideration. The crucial question is whether the change from the preferential requirement of biometric verification at payment to the mandatory requirement articulated in Bidders Notice 2 had anything to do with the change in scores.

  1. There is little doubt that the change influenced the scoring. The minutes record that AllPay could not comply with the mandatory requirement of biometric payment verification and that this was a major reason for the downward adjustment in its functionality score.89 In contrast, Cash Paymaster assured the Bid Evaluation Committee that it could provide biometric verification in the form of voice identification.90 Its score improved. The doubt and uncertainty that surrounded the effect of the change from preferential biometric payment verification, as stated in the Request for Proposals, to mandatory biometric verification in terms of Bidders Notice 2 did not, however, end there. It was raised again later in the process by the Bid Adjudication Committee.91

  1. Even if one disregards AllPay’s possible subjective misreading that biometric verification had to take place at the payment stage, the following has, objectively, been established:

  1. The Request for Proposals required biometric verification as a preferential mode at the payment stage. Bidders Notice 2 changed that to a mandatory requirement. The change was not done in accordance with the Request for Proposals, nor was its import adequately explained.

  1. The initial functional assessment was done in terms of the requirements set in the Request for Proposals.92 Both AllPay and Cash Paymaster received more than the 70% minimum score on this assessment.

  2. At various stages during the evaluation and adjudication of the bids, certain members of the Bid Evaluation and Adjudication Committees and their advisors expressed confusion about whether a preferential or mandatory standard of verification was required for biometric verification at the payment stage.

  3. The mandatory requirement of biometric verification in terms of Bidders Notice 2 was raised during the oral presentations of both AllPay and Cash Paymaster. AllPay indicated that it could not comply with Bidders Notice 2. Cash Paymaster indicated that it could do so by way of biometric voice verification.

  4. After these oral representations AllPay’s score was lowered to below the necessary 70% threshold, whilst Cash Paymaster’s score passed the threshold.

  5. The biometric verification accepted by SASSA in relation to verification at the payment stage was that of voice identification, not primarily fingerprint identification as originally defined and required in the Request for Proposals.

  6. Because of its exclusion at the functionality stage, no comparison of the competitiveness of AllPay’s and Cash Paymaster’s bids was made regarding price.

  1. All these factors created vagueness and uncertainty about the nature and importance of the verification requirements in relation to payments. They were highly material.

  1. This gives rise to two crucial, interrelated questions. Both have a direct bearing on the objective clarity of the evaluation criteria and thus, the fairness of the process. The first question is whether it was clear to bidders that their bids would be evaluated on the basis of the mandatory requirement of biometric testing under Bidders Notice 2 or the preference for biometric testing under the Request for Proposals. The second question is whether it was clear when and where biometric testing was sought. That is, could bidders appreciate that beneficiaries’ identities would have to be biometrically verified annually, at the time of enrolment (for example in a government office); at the time of monthly payment; or whenever the beneficiary withdrew the funds (at an ATM or another point of sale device)? Confusion over the second question appears to have given rise to confusion over which form of biometric verification was acceptable.93

  1. The answer to each question has a bearing on the answer to the other. For instance, if biometric verification were only a preference, other more cost-effective means of securing payment might ultimately have won the day. If verification were sought at payment points, neither fingerprint nor voice recognition would have been feasible. If it were mandatory only at the time of enrolment, or at the time of monthly payment, it might have been feasible in one form or another for several bidders.94 Thus, a lack of clarity regarding which criteria would be applied in the evaluation of bids – those in the Request for Proposals or those in Bidders Notice 2 – could cause confusion on all of these questions.

  1. Cash Paymaster addressed both of these questions in its argument in this Court. It argued, first, that in view of the express terms of the Request for Proposals, AllPay could not have been, or could not reasonably have been, under any misapprehension about the need for their bid to offer a solution which ensured that before payment there had to be verification of the recipient of the payment. Second, it argued that the Request for Proposals’ requirement of when and where biometric verification was sought was clear all along: SASSA sought identity verification monthly, at the time of every payment into the beneficiaries’ bank accounts. This last point was hammered home several times in oral submissions by Cash Paymaster’s counsel, who argued that AllPay’s confusion about when and where biometric verification was required was the result of its own misreading of the Request for Proposals’ terms, and not the result of any ambiguity in its language.

  1. Notwithstanding the vigour of Cash Paymaster’s arguments on these points, the record of the evaluation process says otherwise. At various stages during the evaluation and adjudication of the bids, certain members of the Bid Evaluation and Adjudication Committees and their technical advisors expressed confusion over both of the above questions.95

  1. Given the reservations of the tender evaluators and their own requests for clarification on how bids were to be evaluated and the meaning of the Bidders Notice 2 requirements, it can hardly be maintained that AllPay’s confusion was wholly subjective and self-induced.

  1. Cash Paymaster claimed that the switch from evaluation according to the terms of the Request for Proposals to those of Bidders Notice 2 was irrelevant, because biometric verification was preferred all along, and that AllPay’s attempt to argue otherwise is a hindsight argument that ignores the facts. This argument found favour in the Supreme Court of Appeal.96 But it is contradicted by the actual scoring process. When bidders were scored on the basis of the Request for Proposals, AllPay received a score of 70.42%. When it was scored on the basis of Bidders Notice 2, it received only 58.68%. There is thus little doubt that the changes in the bases of evaluation influenced the scoring. Where AllPay’s solution, which did not include monthly biometric verification, was previously acceptable, it suddenly became unacceptable. As noted by the members of the Bid Evaluation Committee, the effect of this change was substantial. It reduced the number of viable bids to one, rendering the process entirely uncompetitive and obviating any true, comparative consideration of cost-effectiveness.

  1. The Bid Evaluation and Adjudication Committees were unsure about the proper effect of Bidders Notice 2 right up to the end of the process. The effect was to knock AllPay out of contention altogether at the functionality stage. Without any competitor in the financial and preference-point stage, the process became entirely uncompetitive.

  1. Vagueness and uncertainty are grounds for review under section 6(2)(i) of PAJA.97 Certainty in legislation and administrative action has been linked to the rule of law. In New Clicks, this Court made the connection between the two and clarified where vagueness would fall as a ground for review in PAJA:

“It seems to have been assumed by the parties, and in my view correctly so, that vagueness is a ground for review under PAJA. Although vagueness is not specifically mentioned in PAJA as a ground for review, it is within the purview of section 6(2)(i) which includes as a ground for review, administrative action that is otherwise ‘unconstitutional or unlawful’. This Court has held that the doctrine of vagueness is based on the rule of law which is a foundational value of our Constitution. In Affordable Medicines this Court explained the doctrine in the following terms:

‘[L]aws must be written in a clear and accessible manner. What is required is reasonable certainty and not perfect lucidity. The doctrine of vagueness does not require absolute certainty of laws. The law must indicate with reasonable certainty to those who are bound by it what is required of them so that they may regulate their conduct accordingly’.”98 (Footnotes omitted.)

  1. There is another, related concern with the clarity of administrative action: vagueness can render a procurement process, or an administrative action, procedurally unfair under section 6(2)(c) of PAJA.99 After all, an element of procedural fairness – which applies to the decision-making process – is that persons are entitled to know the case they must meet.

  1. Section 3(2)(b)(i) and (ii) of PAJA reads in part:

“In order to give effect to the right to procedurally fair administrative action, an administrator . . . must give―

(i) adequate notice of the nature and purpose of the proposed administrative action; [and]

(ii) a reasonable opportunity to make representations”.100

  1. In the context of a tender process, the tender documents give notice of the proposed administrative action, while the responding bids in effect constitute representations before the decision is made.101 Adequate notice would require sufficient information to enable prospective tenderers to make bids that cover all the requirements expected for the successful award of the tender.102

  1. Given the confusion over the requirements of the tender on the part of both bidders and members of the Bid Evaluation Committee, the notice given by the tender documents in this case was inadequate. It did not specify with sufficient clarity what was required of bidders. The requirements of section 3(2)(b) of PAJA were thus also not met.

  1. The purpose of a tender is not to reward bidders who are clever enough to decipher unclear directions. It is to elicit the best solution through a process that is fair, equitable, transparent, cost-effective and competitive.103 Because of the uncertainty caused by the wording of the Request for Proposals and Bidders Notice 2, that purpose was not achieved in this case.

  1. For all these reasons the decision to award the tender to Cash Paymaster is constitutionally invalid.

Remaining issues

(a) New evidence

  1. AllPay sought to introduce new evidence before us, as it did after the hearing but before delivery of judgment in the Supreme Court of Appeal.104 The only difference was that we also had the benefit of an affidavit by Mr Tsalamandris,105 in which he disavowed any imputation of irregularity or wrongdoing in the procurement process. The evidence sought to be introduced fails the test of being so crucial that, if accepted, it would likely change the outcome of the matter.106 It remains hearsay evidence and introduces no new independent evidence of major irregularities. Counsel for AllPay was constrained to concede that the new evidence’s worth was that it provided an explanation for the apparently disjointed irregularities. That is an insufficient basis for introducing the evidence. There was some suggestion in written argument by Corruption Watch that the requirements for the admission of new evidence at a late stage should be relaxed in procurement cases in order properly to combat corruption. The answer is that no material evidence of corruption is sought to be admitted here.
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