In the awarding of tenders the process to be followed is usually set out in the request to tender drafted by the relevant organ of state. The allocation of points, out of a maximum of 100, are set out therein. The usual procedure is that tenders which do not comply with the technical requirements are eliminated.

Technical requirements normally include – but are not limited to – the requisite documentation which was required in the request to tender. Once this initial hurdle has been overcome the remaining tenders are all awarded points out of 100 and the tenderer with the most points is awarded the contract.

The Preferential Procurement Policy Framework Act of 2000 (The Act) states that when dealing with tender contracts with a value of over R500 000.00, 10 points may be allocated for specific goals provided that the lowest acceptable tender scores 90 points for price. The Act goes further and mentions that specific goals may include historically disadvantaged persons or categories of persons.

However, in terms of Regulation 8 of the Preferential Procurement Regulations 2001, the total combined points allowed for functionality and price, may not exceed 90 points. The Act and the Regulations  therefore seem to be in conflict with each other.

This exact question was raised in the matter of Sizabonke Civils CC t/a Pilcon Projects v Zululand Municipality, NRB Construction and Hire CC and The Minister of Finance (10878/2009) which was heard in the Kwazulu Natal High GCA Court.

The First Respondent prepared the tender documentation in terms of the Regulations, and was awarded the maximum of 70 points for price and 20 points for functionality. The Respondent then objected on the grounds that no points can be awarded for functionality and that 90 points must be awarded for price and 10 points for Historically Disadvantaged Individuals (HDI).

The court considered this objection and concluded that price could not be understood to include functionality and that Regulations 8(2) to 8(7) were inconsistent with the Act and were therefore declared invalid.

From this judgement it is clear that price is vitally important in that the lowest price must be awarded 90 points out of a possible 100. However, it could still be possible for functionality to act as an objective overriding criterion as if all the tenderers arrive at a similar price then the functionality would be the deciding factor.

Despite the recent declaration of invalidity of the relevant Regulations, tenders are still being advertised which do not allocate the full 90 points to price. The organs of state are therefore opening themselves up to have the awards of such tenders set aside by disgruntled unsuccessful tenderers.

Dingley Attorneys recently assisted a client in one such manner and successfully obtained an order rescinding the award of the tender to another tenderer. While this was in our client”s best interests it would have been preferable that the executive heeded the above court case in the first place and produce legally solid requests for tenders rather than – at the unnecessary expense of taxpayers and potential tenderers – have their decisions declared invalid by the courts.