MEB Energy (Pty) Ltd v Ndlambe Local Municipality and Another

MEB Energy (MEB) and Quality Filtration Systems (Pty) Ltd (QFS) both submitted bids for a tender to build and operate a desalination plant on the banks of the Kowie River. The tender initially specified a two megalitre plant with bids ranging from R132-140 million, but MEB submitted a five megalitre option knowing the Municipality wanted to upgrade. On 11 February 2020, the tender was awarded to QFS for R111 254 827.32 for a two megalitre plant, with a recommendation for a five megalitre plant at R102 580 335 if additional funding was received. The Municipality received R20 million from COGTA and R80 million from the Minister of Water and Sanitation. The Ndlambe area was experiencing severe drought with water rationing, daily water transportation from Canon Rocks, health risks, and civil unrest. MEB urgently applied for an interdict to stop implementation of the tender award pending a review application, alleging multiple irregularities in the tender process.

• Whether MEB established a prima facie right to review the tender award based on alleged irregularities
• Whether the balance of convenience favored granting an interim interdict
• Whether QFS's bid was acceptable in terms of the Preferential Procurement Policy Framework Act of 2000
• Whether the Municipality properly applied the minimum functionality score requirement
• Whether the Municipality could unilaterally change tender specifications from a two megalitre to a five megalitre plant after bids closed
• Whether the unexplained price increase by QFS rendered the tender process irregular
• Whether the 90/10 preferential points system was properly applied

A rule nisi was issued with immediate interim effect, interdicting the Municipality and QFS from implementing the tender award or concluding any contract pursuant to it. MEB was ordered to institute review proceedings within 10 days, failing which the interdict would lapse. If review proceedings were instituted, the interdict would operate until final determination of the review. The return date was set for 17 March 2020. The Municipality was ordered to pay costs of the application. The Registrar was directed to allocate an expedited date for hearing the review application.

A tender that fails to meet the minimum qualifying score for functionality as specified in tender documents is not an acceptable tender in terms of the Preferential Procurement Policy Framework Act and Regulations. An organ of state cannot unilaterally change material specifications of a tender after bids have closed and then only invite new bids from shortlisted bidders. A deviation authorisation does not permit acceptance of non-compliant tenders, lower functionality scores than specified, or the award of tenders not advertised. Where multiple substantial irregularities exist in a tender process that are not seriously challenged, an applicant establishes a prima facie right to review with strong prospects of success. The stronger an applicant's prospects of success in a review, the less the need to rely on prejudice in establishing the balance of convenience for interim relief. Courts will grant interim interdicts to prevent procurement processes from being completed before review applications can be heard, to ensure effective relief and vindicate the constitutional right to just administrative action, even where urgent public service delivery needs exist.

The Court observed that MEB's own bid should also not have been accepted, though this did not affect MEB's standing to challenge the award to QFS. The Court noted that the letter from COGTA allocating the R20 million grant did not support the Municipality's interpretation that funds would revert if not spent by end of March 2020 - the conditions at paragraph 6 did not refer to withdrawal and paragraph 7 did not allow for that interpretation. The Court referenced the limits to wrongfulness in delictual claims where administrative acts constitute breaches of statutory duty as discussed in Steenkamp NO v Provincial Tender Board, suggesting damages claims have limitations as remedies for administrative law violations. The Court commented on the general problem identified in Millennium Waste Management where applicants approach courts promptly but cases are not expeditiously heard, resulting in practical problems arising that reduce the scope for effective relief by the time matters are determined.

This case is significant in South African procurement law for several reasons: (1) It emphasizes strict compliance with the Preferential Procurement Policy Framework Act and Regulations, particularly regarding minimum functionality scores and acceptable tenders; (2) It confirms that organs of state cannot unilaterally change material tender specifications after bids have closed; (3) It demonstrates that deviation authorisations cannot be used to justify fundamental tender irregularities; (4) It balances the urgent public need for service delivery (water crisis) against the constitutional right to just administrative action and fair procurement processes; (5) It reinforces that damages are not always an adequate alternative remedy for procurement irregularities; (6) It shows courts will grant interim relief to prevent fait accompli situations where work completion would render review applications ineffective, applying the principle from Millennium Waste Management; (7) It illustrates the court's willingness to expedite matters involving both urgent public service needs and alleged procurement irregularities.