Valor IT CC v Premier, North West Province and Others

The North West Department of Sports, Arts and Culture awarded Valor IT CC (VIT) a contract in 2011 for Phase 0 of an enterprise content management (ECM) project at a price of R498 000, following a limited quotation process. Despite the contract being confined to Phase 0, the relationship expanded over several years without any compliant open tender process, through additional schedules and agreements (Phases 1A and 1B), resulting in payments totalling over R41 million, including R22.8 million paid under a settlement agreement made an order of court. Serious concerns were raised by supply chain officials and the Auditor-General that the procurement violated s 217 of the Constitution. The Department cancelled the contract in 2013, settled ensuing litigation in 2014, but later sought to set aside the original contract, subsequent agreements, and the settlement agreement on the basis of illegality. Valor IT sought declaratory relief and damages exceeding R146 million following a further cancellation in 2015.

The appeal was dismissed with costs, including the costs of two counsel. The High Court’s order setting aside the service delivery agreement, all subsequent agreements, and refusing Valor IT’s claims was upheld.

The case reinforces the strict constitutional requirements governing public procurement under s 217 of the Constitution and confirms that organs of state may, and indeed must, seek to undo their own unlawful procurement decisions under the principle of legality. It affirms that illegality cannot be cured through settlement and that courts lack power to endorse unlawful settlements by making them orders of court, thereby strengthening accountability in the use of public funds.