AllPay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others (No 2)

SASSA awarded a five-year tender to Cash Paymaster Services (Pty) Ltd for the payment of social grants across all nine provinces. AllPay, an unsuccessful bidder, challenged the award. In the merits judgment (2013 ZACC 42), this Court declared the tender award constitutionally invalid on two grounds: (1) SASSA failed to ensure objective confirmation of Cash Paymaster's empowerment credentials, and (2) Bidders Notice 2 did not specify with sufficient clarity the requirements for biometric verification, resulting in only one bidder being considered in the second stage, making the process uncompetitive. The declaration of invalidity was suspended pending determination of a just and equitable remedy. The Court directed parties to provide factual information and submissions on the appropriate remedy, including time, costs, and steps for a new tender process; arrangements for continued grant payments; and public interest considerations.

• What is a just and equitable remedy following a declaration that a public procurement tender award is constitutionally invalid?
• Whether the contract between SASSA and Cash Paymaster should be declared invalid and set aside
• Whether the declaration of invalidity should be suspended and for how long
• Whether a new tender process should be ordered
• Whether Cash Paymaster has constitutional obligations to continue performing services during any transitional period
• Whether Cash Paymaster qualifies as an 'organ of state' for constitutional purposes
• What accountability and transparency measures should apply to a new tender process
• What remedies are available to unsuccessful bidders in unlawful tender processes

1. The Contract for the Payment of Social Grants between SASSA and Cash Paymaster dated 3 February 2012 is declared invalid. 2. The declaration is suspended pending SASSA's decision on awarding a new tender. 3. SASSA must initiate a new tender process within 30 days with: (a) safeguards ensuring no loss of lawful grants, no interruption of payments, and data privacy protection; (b) a five-year contract period; (c) new independent evaluation and adjudication committees reporting quarterly to the Court. 4. If no tender is awarded, the suspension continues until completion of the original five-year period, with Cash Paymaster required to file audited statements of expenses, income and profit, subject to independent verification by SASSA. 5. AllPay to pay SASSA and Cash Paymaster's costs relating to the unsuccessful application to lead further evidence in the main application. 6. No further costs order.

1. The corrective principle requires that consequences of constitutional invalidity be corrected or reversed where possible, as embodied in section 172(1)(b) of the Constitution. 2. A private entity performing public functions in terms of legislation (like administering social grant payments) is an organ of state under section 239(b) of the Constitution. 3. Private entities performing public functions assume constitutional obligations that extend beyond contractual duties, including obligations to respect socio-economic rights and ensure service continuity. 4. Government cannot be released from constitutional obligations by delegating functions to private entities - both remain accountable. 5. A declaration of invalidity may be suspended under section 172(1)(b)(ii) on conditions, including requiring continued performance under an invalid contract during the suspension period. 6. During suspension of invalidity, parties remain bound by the contract; any breach has constitutional dimensions beyond mere contract breach. 7. In procurement cases, to provide effective relief and avoid entrenching advantages from unlawful awards, courts may specify contract terms (like duration) when necessary. 8. Public accountability and transparency requirements apply to private entities' financial gains from public contracts. 9. Structural interdicts with ongoing court supervision are appropriate remedies in procurement cases affecting socio-economic rights.

The Court made several significant observations: (1) SASSA's conduct was deprecated for adopting an "unhelpful and almost obstructionist stance" by failing to provide crucial information, contrary to its obligations under section 195 of the Constitution. (2) The Court noted it was not in a position to determine various disputed factual issues regarding disruption risks, SASSA's capacity to take over administration, or advantages from incumbency - these would be clarified through the new tender process. (3) The Court emphasized that while children's best interests (section 28(2)) are of paramount importance, this does not automatically mean maintaining an unlawful contract is in their interests. (4) The Court observed that the disclosure of financial information relating to public contracts does not require disclosure of all private commercial information. (5) The judgment noted that any costs of re-running the tender (estimated at R5-10 million) are justified and may be recouped through more competitive, cost-effective solutions - this aligns with section 217's constitutional mandate. (6) Regarding AllPay's entitlement to further relief under PAJA, the Court noted that what was lost was "no more than the loss of the opportunity" to compete fairly, adequately addressed by ordering a new tender, though further relief could be pursued separately.

This landmark case establishes important principles for remedies in public procurement cases and the constitutional obligations of private entities performing public functions. It affirms that correction and reversal of unlawful administrative action is the default remedial position. The judgment clarifies that private contractors performing public functions (like social grant payments) become organs of state for constitutional purposes and assume public accountability obligations. It establishes that such entities cannot simply "walk away" when contracts are declared invalid - they have continuing constitutional obligations to ensure service delivery. The case demonstrates the Constitutional Court's willingness to use structural interdicts and ongoing supervision to ensure proper procurement processes, particularly where socio-economic rights are at stake. It balances the rule of law imperative to correct constitutional violations against practical considerations of service delivery to vulnerable beneficiaries, including children. The judgment emphasizes that public accountability and transparency apply to private entities when they exercise public power, requiring disclosure of financial information relating to public contracts. It also shows that separation of powers does not prevent courts from specifying contract terms (like duration) when necessary to provide effective relief for constitutional violations.