Sithathu Funding (Pty) Ltd v The Road Accident Fund and Others

The Road Accident Fund (RAF - first respondent) issued a tender invitation (RAF/2021/00003) for rented office space for its East London Regional Office for 5 years. Four bidders responded: the applicant submitted two bids totaling R31,688,872.00 (the lowest), the second respondent bid R38,288,883.83, the third respondent R42,759,116.08, and the fourth respondent R107,632,953.00. The tender evaluation process had five phases: initial screening, mandatory requirements evaluation, technical/functional evaluation, site visits, and price/B-BBEE evaluation. The mandatory requirements included twelve specific conditions, including that bidders provide goods and passenger lifts (approximately 4m² each) and comply with parking and entrance/exit requirements. The applicant passed phases 1-3 and underwent a site visit on 4 May 2021. However, on 1 March 2022, the applicant was informed it was unsuccessful. The tender was awarded to the second respondent. The applicant's bid offered two passenger lifts (1.74m² and 2.35m² respectively) capable of being used interchangeably for passengers and goods, rather than separate dedicated lifts of approximately 4m² each as required.

• Whether the applicant's bid complied with the mandatory requirements of the tender, particularly regarding the lift specifications
• Whether the first respondent's decision to disqualify the applicant's bid was lawful, rational and procedurally fair under PAJA
• Whether the first respondent's decision was reviewable under section 6 of the Promotion of Administrative Justice Act 3 of 2000
• Whether the court should substitute the first respondent's decision and award the tender to the applicant or refer the matter back for reconsideration
• Whether non-compliance with mandatory tender requirements was material and fatal to the applicant's bid
• The correct interpretation of mandatory requirements in tender documents

1. The application is dismissed. 2. The applicant is ordered to pay costs of the application on Scale C, including costs of two counsel where employed.

The binding legal principles established are: (1) Mandatory requirements in tender documents are peremptory provisions requiring exact compliance, and failure to comply with all mandatory requirements leads to disqualification; (2) Mandatory tender requirements constitute jurisdictional facts - preconditions that must be satisfied before an organ of state has the power to award a tender; (3) An "acceptable tender" under the PPPFA means a tender that "in all respects, complies with the specifications and conditions of tender as set out in the tender document"; (4) A tender that fails to comply with mandatory requirements is not an acceptable tender and cannot be awarded, regardless of price competitiveness; (5) Tender documents must be interpreted according to ordinary grammatical meaning in context, applying the Endumeni principles; (6) It is for the organ of state inviting tenders to decide the prerequisites for a valid tender, and courts should not interfere unless those conditions are immaterial, unreasonable or unconstitutional; (7) Non-compliance with a peremptory requirement results in a nullity; and (8) The purpose of tender processes under section 217 of the Constitution is to elicit the best solution through a fair, equitable, transparent, cost-effective and competitive process, not merely to accept the cheapest bid.

The court made several non-binding observations: (1) It noted that the applicant may have failed to comply with other mandatory requirements as well, including the entrance/exit requirements and parking requirements, though the court found it unnecessary to decide these issues given the determinative nature of the lift non-compliance; (2) The court observed that there were questions about whether the applicant was truly a "landlord" as it claimed, or whether it was acting as an agent without proper mandate from property owners, which would constitute another non-compliance; (3) The court commented on concerns raised by the second respondent about parking bays at Deals House being owned by a related entity and unavailable for RAF use, and parking on municipal property without evident consent; (4) The court noted the second respondent's allegations about delay and the applicant's ulterior motives in prolonging proceedings while benefiting from an interim interdict, though the court did not need to rule on this; (5) The court observed that the best solution elicited through tender processes "inherently includes considerations of previous experiences and procurements"; and (6) The court commented that the RAF "surely knew what it wants and what it does not want" based on currently occupying the applicant's premises.

This case is significant in South African procurement law for several reasons: (1) It clarifies the peremptory nature of mandatory tender requirements and confirms that non-compliance, even if seemingly minor, is fatal to a bid; (2) It reinforces that mandatory requirements constitute jurisdictional facts - preconditions without which an organ of state has no power to award a tender to a non-compliant bidder; (3) It establishes that being the cheapest bidder does not override non-compliance with mandatory requirements; (4) It confirms that "acceptable tender" under the PPPFA means compliance "in all respects" with tender specifications and conditions; (5) It demonstrates the limited scope for courts to interfere with technical evaluations by bid evaluation committees where mandatory requirements have not been met; (6) It illustrates proper application of the Endumeni interpretative approach to tender documents; (7) It validates that organs of state may legitimately base tender requirements on previous operational experiences and genuine institutional needs; and (8) It confirms the constitutional principle under section 217 that procurement must be fair, equitable, transparent, competitive and cost-effective, but that these values do not require accepting non-compliant bids simply because they are cheaper.