Airports Company South Africa SOC Ltd v Imperial Group Ltd & Others

ACSA, a public company and organ of state, published a Request for Bids (RFB) on 5 September 2017 inviting members of the public to bid for the hiring of 71 car rental kiosks and parking bays at nine airports for ten years. Imperial Group Ltd, a car rental company operating Europcar and Tempest divisions at ACSA's airports for over 32 years, submitted a bid in response. Imperial challenged the RFB as unlawful, contending that certain provisions violated s 217 of the Constitution and the Preferential Procurement Policy Framework Act 5 of 2000 (PP Act) and the Broad-Based Black Economic Empowerment Act 53 of 2003 (B-BBEE Act). The impugned provisions included: (1) pre-qualification criteria in clause 4.2.4.1 requiring large entities to meet minimum percentages of designated persons at ownership, enterprise, supplier development and management control levels; (2) clause 4 setting a 50/50 price and B-BBEE compliance ratio; and (3) clauses 1.7 and 5.6 allowing ACSA to award bids based on transformation imperatives. Imperial brought an urgent application in the Gauteng Division of the High Court, Johannesburg, seeking to review and set aside the RFB. Only ACSA opposed the application. The High Court found the RFB unlawful, inconsistent with the Constitution and the legislative framework, and set it aside. ACSA appealed.

• Whether section 217 of the Constitution applies to a Request for Bids for the granting of car rental concessions where the organ of state is receiving payment rather than incurring expenditure
• Whether the application for review was premature given that ACSA had not yet made a final award
• Whether the decision to issue and publish the RFB constituted an administrative action reviewable under PAJA or the principle of legality
• Whether the RFB's pre-qualification criteria, preferential procurement provisions, and transformation imperatives complied with section 217 of the Constitution, the PP Act and its regulations, and the B-BBEE Act and Tourism Code
• Whether the RFB was based on an irrational process and an error of law
• Whether certain provisions of the RFB were incurably vague

The appeal was dismissed with costs, including costs of two counsel. The High Court's order reviewing and setting aside ACSA's decision to issue and publish the RFB was upheld.

Section 217(1) of the Constitution applies whenever an organ of state contracts for goods or services, regardless of whether it is incurring expenditure or receiving payment. The plain language is clear and unambiguous. An organ of state may only implement preferential procurement policies within the framework prescribed by national legislation as required by s 217(3). The PP Act and B-BBEE Act constitute that legislative framework and are binding on organs of state. Deviation from the provisions of the B-BBEE codes requires the Minister's express consent under s 10(2) of the B-BBEE Act. The PP Act's price-preference ratios (80/20 or 90/10) are mandatory. Any transformation criteria applied at a final stage of bid evaluation must specify objective criteria clearly in the tender documents as required by s 2(1)(f) of the PP Act and Regulation 11(2). For a decision to be rational, it must be based on accurate findings of fact and a correct application of the law; a wrong interpretation of statute constitutes a reviewable error of law. An administrative action that automatically disqualifies a bidder at the first stage of evaluation has the capacity to affect legal rights and is ripe for review without awaiting formal notification.

Ponnan JA, in a separate concurring judgment, emphasized the principle of purposive interpretation of legislation. He noted that where the literal meaning of statutory language would lead to absurdity or frustrate Parliament's intention, courts may depart from the ordinary effect of words to give effect to the true legislative intention. He observed that construing s 2 of the PP Act literally would place transactions where organs of state receive payment beyond the reach of the Constitution and procurement laws, which could not have been what the Legislature intended. The provision must be read mutatis mutandis to apply to both conventional transactions (where the state seeks lowest prices) and non-conventional transactions (where the state seeks highest rentals). The High Court's finding on the "single opportunity rule" in clause 5.6 was supported, though Imperial did not persist with this ground on appeal. The court noted that both counsel requested that all grounds of review be addressed even if one ground was dispositive, following the approach in S v Jordan.

This case is significant in South African procurement law for establishing that section 217 of the Constitution applies to all contracts for goods or services by organs of state, regardless of whether the organ of state is expending money or receiving revenue. It confirms that organs of state cannot design custom preferential procurement policies that deviate from the statutory framework prescribed in the PP Act and B-BBEE Act without following the proper procedures. The judgment emphasizes the mandatory nature of the legislative framework envisaged in s 217(3) and reinforces the principles of rationality, transparency and lawfulness in public procurement. It clarifies that preferential procurement policies must be implemented strictly within the framework prescribed by national legislation, and that organs of state may not arrogate to themselves powers conferred on Ministers. The case also demonstrates the application of purposive interpretation to ensure constitutional provisions are not rendered nugatory by technical arguments about form.