Maximum Profit Recovery (Pty) Ltd v Sakhisizwe Local Municipality

The first respondent Municipality published an invitation to tender (SLM/SCM/22/2022/23) for the appointment of a service provider for revenue expert services for three years. The applicant and second respondent (Andrews Inc) both submitted tenders. The tender evaluation process consisted of three stages: (1) administrative requirements, (2) functionality assessment with a minimum threshold of 70%, and (3) point scoring under the 80/20 preference point system. The applicant was awarded only 60 points in the functionality assessment and was thus disqualified. The second respondent was awarded the tender at a 12% rate, while the applicant had tendered at 8.5%. The applicant contended it should have been awarded 10 points for having five tax practitioners registered with a recognized controlling body (functionality criterion 4) and should have scored 30 points (not 20) for methodology and approach (functionality criterion 5). The applicant alleged that if properly scored, it would have achieved at least 70 points and proceeded to the point scoring stage. The applicant challenged the decision as constitutionally invalid.

• Whether the applicant was required to exhaust internal remedies under section 7(2) of PAJA and section 62 of the Municipal Systems Act before approaching the court
• Whether the Municipality's decision to award the tender to the second respondent was reviewable under PAJA on grounds that relevant considerations were not taken into account (section 6(2)(e)(iii))
• Whether the decision was arbitrary and capricious (section 6(2)(e)(vi) of PAJA)
• Whether the decision was irrational for lack of reasons (section 6(2)(e)(iv) of PAJA)
• Whether the tender process was fair, equitable, transparent, competitive and cost-effective as required by section 217 of the Constitution
• Whether the court could substitute the Municipality's decision by awarding the tender to the applicant
• Whether there was a reasonable apprehension of bias (section 6(2)(a)(iii) of PAJA)

1. The Municipality's decision to award the tender to the second respondent is declared constitutionally invalid and set aside. 2. Any service level agreement between the Municipality and second respondent is set aside. 3. The matter is remitted to the Municipality for reconsideration. 4. The Municipality is directed to reconsider its scores and properly award points to the applicant, including for functionality criteria relating to tax practitioners and methodology/approach. 5. The Municipality is ordered to pay the applicant's costs, including costs of two counsel where employed.

1. Section 62 of the Municipal Systems Act, which requires exhaustion of internal remedies through appeal processes, applies only to decisions taken under delegated or sub-delegated powers, not to the exercise of original statutory powers by a Municipal Manager under the MFMA and Supply Chain Management Regulations. 2. A decision taken without considering relevant considerations (documents submitted by a tenderer) is reviewable under section 6(2)(e)(iii) of PAJA. 3. An administrative decision unsupported by reasons is irrational and reviewable under section 6(2)(e)(iv) of PAJA; ex post facto reasons provided in litigation cannot cure this defect. 4. Tender processes must comply with section 217 of the Constitution's requirements of fairness, equity, transparency, competitiveness and cost-effectiveness; failure to do so renders the decision constitutionally invalid. 5. Separation of powers principles generally preclude courts from substituting their decision for that of an administrator by awarding a tender, particularly where proper point scoring (a jurisdictional fact/condition precedent) has not been completed; the appropriate remedy is to remit the matter for reconsideration. 6. Organs of state must provide full, frank and credible explanations for administrative conduct when legality is challenged; bare assertions of "honest mistake" without explanation of how the mistake occurred are insufficient.

The court observed that the reason multiple members serve on bid evaluation and adjudication committees is to prevent corruption and eliminate mistakes through collective oversight - when all members fail to see relevant documents that should be obvious, this raises serious concerns. The court noted that the principle of equal treatment under section 9 of the Constitution is intertwined with the fairness and competitiveness requirements of section 217. The court commented that lack of fairness and competitiveness in a tender process can give rise to a reasonable apprehension of bias. The court emphasized that organs of state have a constitutional duty under section 165(4) to assist courts and must not be "coy" or "play fast and loose with the truth" when their actions' legality is challenged. The court remarked on the difficulty of comprehending how five certificates in the applicant's tender bundle could be missed by all committee members when the second respondent's certificates were seen without difficulty. The court noted that all tender requirements should be treated as equally important unless the tender documents specify otherwise, and administrators cannot ex post facto elevate certain requirements to justify irregular decisions.

This case clarifies important principles in South African procurement law: (1) Section 62 of the Municipal Systems Act (providing for internal appeals) applies only to delegated/sub-delegated powers, not to original powers exercised by Municipal Managers under the MFMA. (2) Courts will rigorously scrutinize tender processes for compliance with section 217 of the Constitution (fair, equitable, transparent, competitive, cost-effective). (3) Failure to consider relevant documentation constitutes reviewable administrative action under PAJA. (4) Administrative decisions must be supported by reasons; unexplained "mistakes" without proper explanation will not suffice. (5) While courts have power to review tender decisions, they will generally not substitute their decision for that of the administrator (respecting separation of powers), but will remit for proper reconsideration with appropriate directions. (6) Organs of state have a constitutional duty under section 165(4) to assist courts by providing full and frank explanations for their conduct. (7) The case emphasizes that all tender requirements are equally important and administrators cannot arbitrarily elevate some requirements over others to justify irregular decisions.