Urban Icon (Pty) Ltd v South African National Roads Agency SOC Ltd and Others

Between March and July 2017 SANRAL issued seven tenders for civil engineering services relating to road infrastructure projects. Urban Icon, a recently incorporated company with a modest track record, submitted bids for all seven tenders. Its bids met the technical functionality requirements, were lowest in price, and achieved the highest scores on price and preference. SANRAL initially intended to award multiple tenders to Urban Icon but became concerned about its capacity to execute all seven projects simultaneously. SANRAL conducted a further assessment of Urban Icon’s capacity and commercial risk, through an investigator (Mr Essa), who found that awarding all seven tenders to Urban Icon would pose an unacceptable commercial risk due to its limited experience, staffing constraints, and reliance on external specialists. SANRAL ultimately awarded three lower-risk tenders to Urban Icon and awarded the remaining four tenders to the respective second-highest scoring bidders, subject to a temporary moratorium on further awards to Urban Icon. Urban Icon sought judicial review to set aside the four awards and the stay condition, but the High Court dismissed the application. Urban Icon appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel. The awards of the four tenders to the second-highest scoring bidders and the stay condition were upheld.

The case clarifies that in South African public procurement law, organs of state may assess a bidder’s collective capacity and commercial risk when multiple tenders are involved, even where the bidder is highest scoring on price and preference. It confirms that incapacity constitutes an objective and potentially compelling criterion under s 2(1)(f) of the PPPFA, justifying deviation from awarding to the highest-ranked bidder, and affirms a flexible, purposive interpretation of procurement rules in line with s 217 of the Constitution.