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REPUBLIC OF SOUTH AFRICA

IN THE HIGH COURT OF SOUTH AFRICA

GAUTENG DIVISION, JOHANNESBURG

Case number 2016/17150

Not reportable

Not of interest to other judges

Revised

24 October 2017

In the matter between: -

BRILLIANT TELECOMMUNICATIONS (PTY) LTD                                                        Applicant

and

MOGALE CITY LOCAL MUNICIPALITY                                                            First Respondent

THE MUNICIPAL MANAGER:

MOGALE CITY LOCAL MUNICIPALITY                                                       Second Respondent

THE CHAIRMAN:  BID EVALUATION COMMITTEE

MOGALE CITY LOCAL MUNICIPALITY                                                          Third Respondent

THE BID ADJUDICATION COMMITTEE:

MOGALE CITY LOCAL GOVERNMENT                                                        Fourth Respondent

VOX TELECOM LIMITED                                                                                Fifth Respondent

and

VOX TELECOMMUNICATIONS (PTY) LIMITED                                                Intervening Party

 

JUDGMENT

 

OPPERMAN J

INTRODUCTION

[1] In December 2015, the first respondent municipality (Mogale City) invited bids to appoint a service provider, for a period of three years, to supply, maintain and support the following information technology services: a voice-over-internet-protocol telephony (VoIP) system back-end infrastructure; the leasing of a VoIP front-end wide-area-network (WAN) solution and internet connectivity to all municipal offices in Mogale City’s area of jurisdiction.  The applicant (Brilliant), along with ten other bidders, submitted a bid for the tender.  On 3 May 2016, Mogale City, acting through its designated decision-maker, the municipal manager, awarded the tender to the intervening party (Vox).

[2] On 20 May 2016, Brilliant instituted proceedings to interdict the tender’s implementation pending its review of Mogale City’s award of the tender to Vox.  The interdict was heard on 10 June 2016.  On 1 July 2016, the Court (Carstensen AJ) granted the following order:

2.1. Pending the determination of the review, the municipal respondents and Vox are prohibited from implementing the award of the tender or from taking any steps to implement or to give effect to the award; and

2.2. Costs of the application were reserved for determination by the review Court.

[3] Brilliant had previously been appointed (in 2009) to provide, and maintain, telephone and internet infrastructure to Mogale City.  The solution had, as technology does, become outdated and inadequate to meet the municipality’s needs; the tender under review had sought to acquire an up-to-date solution sufficient for the municipality’s needs.  The interim order had the effect that Brilliant continued to supply its solution on a month-to-month basis.

THE LEGAL FRAMEWORK

[4] The legally binding and enforceable framework within which bids were to be submitted and evaluated, and within which the tender was to be awarded, comprises the following:

· section 217(1) of the Constitution.

· the Preferential Procurement Policy Framework Act, 2000 (the Procurement Act) and the associated Regulations promulgated in 2011 (the Procurement Regulations).

· the procurement provisions of the Local Government: Finance Management Act, 2003,  and the associated Regulations.

· Mogale City’s supply chain management policy (the SCM Policy); and

· the Request For Proposal, which contained the bid specifications to which the bidders responded.

[5] The award of a tender is administrative action that is susceptible to review under the Promotion of Administrative Justice Act, 2000 (PAJA).  The overall approach on review is set out by the Constitutional Court in the merits judgment in Allpay v SASSA.[1]  The merits of the review are assessed first.  If the administrative action is assessed to fall foul of PAJA, it must be declared unlawful; the enquiry thereafter moves on to the appropriate remedy.[2]  The Court set out the following approach to assessing the merits of a review:

“[28] ... The proper approach is to establish, factually, whether an irregularity occurred. Then the irregularity must be legally evaluated to determine whether it amounts to a ground of review under PAJA. This legal evaluation must, where appropriate, take into account the materiality of any deviance from legal requirements, by linking the question of compliance to the purpose of the provision, before concluding that a review ground under PAJA has been established.

. . . .

[30]  Assessing the materiality of compliance with legal requirements in our administrative law is, fortunately, an exercise unencumbered by excessive formality.  …  Although a number of factors need to be considered in this kind of enquiry, the central element is to link the question of compliance to the purpose of the provision.  In this Court O’Regan J succinctly put the question in ACDP v Electoral Commission as being “whether what the applicant did constituted compliance with the statutory provisions viewed in the light of their purpose”.”

 

THE FACTS LEADING UP TO THE AWARD OF THE TENDER

[6] Mogale City received eleven bids in response to its invitation to tender (the Request For Proposal).  The ten bids that contained the documents required in the Bid Checklist were evaluated for functionality against the criteria in paragraph 10 of the Request for Proposal. Three bids, Brilliant’s, Vox’s and that of a third bidder, Bytes Technologies, passed the threshold for Functionality (18 out of 25 points) and were assessed for compliance with the substantive requirements of the Request For Proposal.   

[7] Brilliant’s bid was assessed to be non-compliant with the Request for Proposal for failing to tender for two items that the Request For Proposal required to be provided: 25 wireless telephone handset devices and 15 audio/video conference-capable devices. Its bid was therefore not considered for further adjudication, that is, for scoring for Price and B-BBEE.

SUMMARY OF THE ISSUES

[8] The Procurement Act permits a tender to be awarded only to an “acceptable tender”, that is, a bid which, in all respects, complies with the specifications and conditions of tender as set out in the tender document (the Request For Proposal).[3] 

[9] Brilliant’s initial assertions were that its bid was compliant with the Request For Proposal in all respects, and that it ought to have been awarded the tender rather than Vox’s, its price, so it said, having been cheaper than Vox’s.

[10] Mogale City’s response was that Brilliant had failed to quote for two items that the Request For Proposal required to be provided namely, the wireless telephone handset devices and the audio/video conference-capable devices. Brilliant did not dispute that the provision of these two Items was a mandatory requirement of the Request For Proposal.  It argued that, properly construed, its bid had tendered for both these Items.

[11] A further instance of Brilliant’s non-compliance emerged during the interim application.  The Request For Proposal had required bidders to furnish valid ICASA licences. In oversight during evaluation, Mogale City had not picked up that Brilliant had not submitted the (ICASA-issued) Electronic Communications Network Service (ECNS) licence required to operate the network, nor had it submitted the (ICASA-issued) Electronic Communications Service (ECS) licence required to provide voice and data services over the network.  The ICASA-administered Electronic Communications Act, 2005, prohibits the provision of electronic communications network services and electronic communications services without the two licences being held by the person who provides those services.

[12] It is common cause that Brilliant does not hold either licence.  Its response was that the two licences were not required.  It asserted that it was a reseller of electronic communications services (voice, video, data and internet services) and was therefore exempt from holding an ECS licence, it relied on its subsidiary’s ECS licence put forward in its affidavits and it asserted that the licences were not required to be submitted with the bid, but only when the tender commenced operation four months after award.

 

BRILLIANT’S QUOTE FOR A REQUIRED ITEM:  WIRELESS HANDSETS

[13] Mogale City’s position was that Brilliant had not quoted for the 25 wireless telephone handset devices that the Request for Proposal required bidders to provide. The Item is identified as Item 10 in the Pricing Schedule to the Request For Proposal.  Brilliant’s bid quoted “R0,00” as the monthly and three-year (lease) price therefor.

[14]  Brilliant argued that Mogale City ought to have interpreted its “0,00” to mean that it had tendered the wireless handsets at no cost, to the municipality.  In support of this statement, it pointed to other items in its bid, Item 11, for the installation of the SIP Trunk, and Item 12, the fifteen audio/video conference-capable devices, in respect of which its Pricing Schedule had also reflected the cost to be “0,00”. It referred, in general terms without identifying them, to other items in the bid that were also “zero rated” and in respect of which, the Municipality had had no complaint.

[15] Mogale City’s responses included that Mogale City had identified the “other items” in respect of which Brilliant’s Pricing Schedule had reflected “0,00” and had assessed each item for which Brilliant had written “0,00” in its particular context. Where an item quoted at “0,00” could notionally have been included in the cost of a related Item, the municipality had made the assumption in Brilliant’s favour that it had included the price of the former in the price of the latter.

[16] Mogale City also drew the comparison between Brilliant’s treatment of the wireless handsets, item 10, with the three other classes of handsets that bidders were required to supply, and in respect of which Brilliant had quoted prices: 1400 entry-level handsets (Item 7); 75 manager-level handsets (Item 8); and 25 executive-level handsets (Item 9). The point was made that the wireless handsets, Item 10, are physical devices that the Request For Proposal indicated that Mogale City intended to lease from the successful bidder, just as it had indicated that the physical handset devices in Items 7, 8 and 9 were intended to be leased.  In distinction to the VoIP Controller Software, the installation of the SIP Trunk, the SIP Trunk licences, the Primary Rate Interchanges and internet connectivity, the physical handsets were not capable of being notionally included under, or bundled with, any other Item.

[17] The municipality catalogued the instances in Brilliant’s bid where Brilliant had indicated in specific terms, “no charge” and “free”, where it had intended to supply items at no charge.

[18]  Mogale City pointed out that Brilliant did not use “0,00” in a consistent fashion.  For example, Brilliant’s Pricing Schedule quoted “0,00” for the 200 SIP Trunk Licences required (Item 24); nonetheless, its detailed pricing reflected a price of R120 852.48 for the licences. Similarly, its Pricing Schedule quoted “0,00” for the audio/video conference-capable devices (Item 12) with the annotation “refer Section C #25”.  Section C is Brilliant’s detailed pricing schedule.  Each line item in Section C has a price quoted therefor.  Item 25 in Table C likewise quoted a cost of R489 941.76.  Patently, “0,00” did not mean “no charge” or “free” in that instance (Item 12) either.

[19] In its second replying affidavit, Brilliant stated that on acceptance of its bid (that is, on award of the tender to it), it would be obliged, contractually, to provide the wireless handsets at no cost.  It did not deal with Mogale City’s explanation.  It did not point to any portion of its bid which identified the wireless handsets, and which Mogale City perhaps ought to have trawled through its bid to find.  Brilliant’s suggestion therefore, is that Mogale City ought to accept unidentified handsets, which it is not able to assess for compliance with the tender requirements prior to award, merely because the municipality would be getting the handsets for free.

[20] Compliance with the tender requirements is a threshold and a prerequisite to the entering into of any contract. Compliance with the tender requirements is a legal requirement, which may not be disregarded by an assessing organ of state, or by a bidder, at its whim.[4]

[21] Then there is the question of fairness to other bidders. The body adjudging tenders must have comparable offers. In this regard the dictum in Firechem,[5] is apposite:

"... to allow a tender board to withhold from the body of tenderers its intention to conclude a secret agreement with one of them, an agreement which the others have never seen and have had no chance to match, would be entirely subversive of a credible tender procedure. One of the requirements of such a procedure is that the body adjudging tenders be presented with comparable offers in order that its members should be able to compare. Another is that a tender should speak for itself. Its real import may not be tucked away, apart from its terms. Yet another requirement is that competitors should be treated equally, in the sense that they should all be entitled to tender for the same thing. Competiveness is not served by only one or some of the tenderers knowing what is the true subject of tender. One of the results of the adoption of a procedure such as Mr McNaught argues was followed is that one simply cannot say what tenders may or may not have been submitted, if it had been known generally that a fixed quantities contract for ten years for the original list of products, and some more, was on offer. That would deprive the public of the benefit of an open competitive process." (emphasis provided)

[22] In my view, Brilliant has not established that it tendered for the wireless handset devices for free. It made the bald assertion that “0,00” meant “no charge” or “free”.  It laid no factual basis therefor. It did not deal with the inconsistencies pointed out by Mogale City which included: some items marked “0,00” could logically be bundled with other related Items for which a charge had been specified and that Mogale City had made the assumption in Brilliant’s favour that the latter price included the former; that the physical handsets could not be accounted for as having been included in any other Item; and that other Items marked “0,00” in Brilliant’s Pricing Schedule had in fact been assigned a cost in its detailed pricing schedule.

[23] I find, that it was not irrational for Mogale City, having regard to the various meanings of “no charge” and “0,00” in Brilliant’s bid, to have understood that Brilliant had not tendered for the required wireless handsets. Considerations of fairness to other bidders militate against Brilliant’s suggestion that Mogale City was obliged to contact the applicant to obtain clarity.

[24] The code of conduct for Bid Adjudication Committees provides that:

‘4.4. Members of the Committee shall – ……

· apply their minds to matters at hand in order to take meaningful and accountable decisions and in the event of doubt or uncertainty, to propose that matters be referred back for clarification;’

[25] Brilliant argued, relying on National Lotteries Board and others v South African Education and Environment Project[6], and the code of conduct quoted hereinbefore, that Mogale City was obliged to contact Brilliant and to get clarity on those features which caused it to disqualify Brilliant’s bid prior to doing so.

[26] In National Lotteries Board (supra) the main issue was whether the board was justified in declining the applications because they did not comply with the guidelines for the distribution of moneys from the fund. The application was declined for two reasons, only one of which is relevant here. On the applicant’s application form and financial statements the organisation was named ‘Sikhula Sonke’ while its full name, Claremont Methodist Church Social Impact Ministry, Sikhula Sonke, appeared on other supporting documents. It contended that Sikhula Sonke was an abbreviation. The Supreme Court of Appeal held that the Special Board Committee had the full facts before it and that the difference in name could not lead to a reasonable suspicion of fraud. It was submitted that it would have been unreasonable and unnecessarily onerous to expect the board to embark on an investigation. This argument was rejected as the court found that no investigation was required as all the facts were before it. Cachalia, JA then continued and said: “And, if it remained unsure afterwards it could have clarified the matter with a single telephone call…”

[27] It is to this reference to a phone call, that Brilliant grasps, when it contends that Mogale City should have investigated the facts and should have phoned Brilliant for clarity. In my view, such a course of conduct would be wholly inappropriate in the circumstances of this case.  Not only would it offend against the rule that a tender should speak for itself and that its real import should not be tucked away somewhere, but it would also give rise to rampant abuse and corruption. Such a proposed course of conduct raises more problems than it solves. I mention but a few: How many phone calls should be allowed per applicant? How many questions may be posed by the officials? How are the responses to be recorded? What if there are contradictions between the answers provided and other portions of the document? What if a dispute arises as to what was said during such enquiries?

[28] It has been held in the procurement law context that the prescripts of an administrative process are legally binding.[7] This is to ensure the fairness, optimality and integrity of the process.[8]

[29] It would, in my view, be grossly unfair to the others who had tendered and who had complied fully and timeously with what they were required to do.

[30] There is in addition also the matter that Brilliant has never identified the handsets that it allegedly tendered.  It is not reasonable to expect the municipality to accept unseen, unassessed handsets merely because they were tendered for free.

[31] I accordingly find that Mogale City quite correctly found that Brilliant had not tendered for the provision of the handsets. 

 

BRILLIANT’S QUOTE FOR A REQUIRED ITEM:  AUDIO/VIDEO CONFERENCE-CAPABLE DEVICES

[32] The second basis upon which Mogale City had disqualified Brilliant’s bid from being scored was that Brilliant had not quoted for a second item required by the Request For Proposal: the supply of 15 audio/video conference-capable devices. Brilliant’s bid was consequently non-compliant with a material requirement of the Request For Proposal, was not an “acceptable tender”, and therefore did not proceed for further adjudication (scoring).

[33] Brilliant did not dispute that the supply of the audio/video conference-capable devices was a material and mandatory tender requirement.  It conceded that the Request For Proposal required physical hardware to be supplied.  Its defence was that its quoted price of “R0,00” for the audio/video devices (Item 12 in its Pricing Schedule) meant that it intended to supply the devices for free. It also said that it tendered software that could notionally be run on audio/video conference-capable hardware devices. Mogale City’s response was twofold: firstly, it contended that Brilliant has never identified exactly what physical hardware devices Mogale City would be getting for free.  In its very last reply, Brilliant annexed pages out of the Mitel product catalogue: there is no audio/video conference-capable physical hardware device to be found.  Brilliant’s approach would have it that the municipality has no way of assessing whether the (allegedly free) product satisfied the bid requirements; the municipality would see what product it was getting for the first time after a contract had been concluded.  This is not what the procurement legislation requires or permits; compliance with the Request For Proposal’s requirements is not met by tendering unidentified products on the basis that they are alleged to be free. 

[34] Secondly, Brilliant made much of the fact that it had tendered Unified Communications System Mobility software licences; the tender of software, it said, proved that it had tendered the hardware (albeit unidentified) upon which the software would run.  But Brilliant did not mention that the 25 Unified Communications System Mobility licences (software) it had tendered had been required to be provided under a separate Item (Item 25) to run on the 25 wireless handsets required to be provided under Item 25.  Brilliant had never tendered an additional 15 Unified Communications System Mobility licences (software) from which it now seeks to argue that Mogale City ought to have inferred that it tendered the 15 pieces of hardware (the specifications of which, and whether they are in fact audio/video conference-capable, are unknown to this day) for free.

[35] Nowhere in Brilliant’s bid is there evidence that it had tendered the 15 required audio/video conference-capable devices at all.  When challenged, it failed to identify where those devices could be located in its bid.  Brilliant’s responses dealt with an entirely different Item, namely, the 25 units of software required to be provided by Item 25, which were intended to run on the 25 wireless handset devices required to be provided by Item 10.  Neither the 25 wireless handsets (Item 10) nor the software required to operate them (Item 25) have anything to do with the 15 audio/video conference-capable devices required to be provided by Item 12.

[36] Mogale City put the matter squarely in its first answering affidavit. Brilliant’s quote of R0,00 for the 15 audio video conference-capable devices required had the annotation: “refer section C#25”. Mogale City first analysed Item 25 of Table C to Brilliant’s Pricing Schedule: Item 25 referred to an element that the Request For Proposal required to be provided, namely, 25 (not 15) Unified Communications System Mobility software licences (not devices), that is, the software that bidders were required to provide to be used on the 25 wireless handsets required by Item 10. The Request For Proposal had, in clear terms, linked the 25 Unified Communications Systems Mobile software licences required by Item 25 to the 25 wireless handsets to be used by employees whose work typically took them outside the municipal offices (Item 10). Relating as it did to Item 10, said Mogale City, Item 25 patently had nothing to do with the 15 audio/video conference-capable devices (Item 12) under discussion. 

[37] Brilliant failed to answer this in its replies. It did not deal with Mogale City’s explanation at all.  The result is twofold: firstly, that Mogale City’s explanation must be accepted as correct under the Plascon-Evans rule; and secondly, it must be borne in mind that Brilliant’s two replying affidavits deal, not with the 15 audio/video conference-capable devices required to be provided (Item 12), but with 25 units of software (Item 25) to run on the 25 wireless handset devices (Item 10).

[38] There is a second reason why Brilliant’s argument cannot be sustained. Brilliant had been challenged in the answering affidavits to indicate where its bid showed the audio/video conference-capable devices that it intended to supply.  Its sole response was in its second replying affidavit: it referred to an ICASA-issued equipment type approval certificate contained in its bid and said:

“The presentation of an ICASA licence for an integrated communications device [in Brilliant’s bid] is furthermore proof of the fact that [Brilliant] certainly quoted for the audio/video conference-capable device, [Item 12].”

[39] Brilliant offered no evidence in substantiation of its claim. The ICASA equipment approval certificate on which Brilliant relies pertains to a Mitel device with model number MW 3300 ICP.  The Mitel Manual for model Mitel 3300 ICP describes a telephone that is not video-capable: Mitel describes the display as "a two-line, 20-character LCD viewing area that assists [the user] in selecting and using phone features, accessing voice mail, and identifying callers.” That the display cannot be used for video-conferencing is plain from the photograph in the Mitel Manual, where the display is identified as “9”. The bid contains no reference to audio/video conference-capable devices.

[40] Mogale City referred to the general Mitel catalogue that Brilliant had attached to its bid: there was no audio/video conference-capable device to be found in the catalogue. The closest item was the audio-only conference (hardware) unit that Mogale City excerpted in its papers. There is no other reference to any audio/video conference-capable devices anywhere in Brilliant’s bid. Despite the case being squarely put, Brilliant’s last reply did not identify any such hardware.  Its response was that “the Micollab package includes audio, video and web conferencing”. That may be; but it is of no moment that a software package includes video-conferencing if the hardware device has no video capability. On a conspectus of the evidence, Brilliant failed to identify, in any way, in its bid and in its papers in these proceedings, what devices Mogale City would be getting, allegedly for free.

[41] Brilliant’s approach would have it that the municipality has no way of assessing whether the (allegedly free) product satisfied the bid requirements.  Its approach would have it that the municipality would see what product it was getting for the ‘[first time after a contract had been concluded.  This is not what the procurement legislation requires or permits.  Compliance with the Request For Proposal’s requirements is not met by tendering unidentified products on the basis that they are alleged to be free.  Fairness to, and the equal treatment of, other bidders likewise militate against the approach proposed by Brilliant.[9]

[42] Brilliant argued that it was perfectly permissible to identify the product for the first time after the contract was concluded. This is so by virtue of various provisions including for example clause 8.7 of the general conditions of contract which provides that any contract goods may be inspected and if found wanting, could be rejected and certain other consequences would befall the bidder. Clause 15.1 contains a warranty, clause 22 penalties and so forth. In my view, these clauses do not give a bidder carte blanche not to identify the nature of the goods tendered. How is the adjudicator to compare the quality of the goods to be supplied as between the various bidders? It would be impossible to make any kind of rational decision blindly and on this basis. The clauses are there to protect the municipality once the goods have been delivered and such goods are at variance with the product tendered. If there is no description in the bid document, against what standard is the product supplied to be measured?  

[43] I find that on a conspectus of the evidence, Brilliant has not made out a case that it tendered the audio/video conference-capable devices required to be tendered at all and that Mogale City was entitled to reject the tender on this basis too.

 

BRILLIANT DOES NOT HOLD THE ICASA LICENCES REQUIRED BY THE REQUEST FOR PROPOSAL

[44] The Request For Proposal comprised two components that are relevant to the discussion about licencing: The provision of voice, video, data and internet services (“electronic communications services” in the Electronic Communications Act, 2005); and the supply and operation by the successful bidder of the electronic communications network on which those services were to be provided.

[45] It was placed in issue during the interdict proceedings that Brilliant had not submitted two ICASA-issued licences that the Request For Proposal required bidders to submit, namely: an electronic communication service licence (an ECS licence) for the provision of the required voice, video, data and internet services; and an electronic communication network service licence (an ECNS licence) for the operation of the network on which those services were to be provided. It is common cause that Brilliant produced neither licence when it submitted its bid. It is further common cause that Brilliant holds neither licence. In respect of an ECS licence, it contends it is entitled to use it’s subsidiary’s licence. Such licence was only produced in its replying affidavit.

[46] During the initial stages of the evaluation process, it had been recorded in error that Brilliant had submitted the required licences.  The decision-maker on the tender, the municipal manager, did not at that stage know that Brilliant had not submitted the licences (or that it did not hold the licences).   He contends that had he known the true facts, he would have disqualified Brilliant’s bid on that basis.

Brilliant’s first argument: an ECNS licence is not required to carry out the tender

[47] Brilliant initially argued that the ECNS licence was not required to carry out the tender. Its argument was premised on Mogale City’s purported ownership of the existing electronic communications network “infrastructure” and “infrastructure equipment” (said by Brilliant to comprise antennas and local area network (LAN) switches). Brilliant added that the service provider was required to provide nothing more than connectivity between the municipal sites specified in the Request For Proposal, and was not required to provide infrastructure that (it said) would trigger the requirement for an ECNS licence.

[48] The Electronic Communications Act, 2005 is clear: it is the operation, not the ownership, of an electronic communications network of local municipal scope for commercial purposes that triggers the requirement for an ECNS licence.  The operator, the person who provides the service, not the owner, is required to hold the ECNS licence.

“5.  Licencing

. . . .

(5) Electronic communications network services ... that require a ... licence, include, ...

(a)   electronic communications networks of … local municipal scope operated for commercial purposes;

……

7.  Prohibition of provision of service without licence

... no person may provide any service without a licence.”

[49] At the commencement of the hearing, counsel representing Brilliant announced that he would be seeking a referral to the hearing of oral evidence in respect of the issue whether, objectively and having regard to the specific facts of this case, an ECNS licence is required. He argued that the nature of the services which are to be provided under the Request for Proposal, requires analysis by an expert and such evidence is needed to enable this court to make a finding as to whether or not an ECNS licence is, objectively, a requirement for the production of the services forming the subject matter of the Request for Proposal.

[50] No basis for this need was laid in the papers, nor was any such request made for this approach in the heads of argument. Be that as it may, I find that it is not necessary to hear expert evidence in respect of this issue and that a finding can be made on the facts as they stand. In any event, whether or not licences are objectively required is not the point. Mogale City required it and wanted its service provider to be compliant in this regard. It stated under oath, that it required licences (both ECS and ECNS) and its Request for Proposal stipulated the need for the production of such licences. This was an express requirement. Brilliant does not dispute the existence of this requirement, but at the hearing, argued that this requirement was a term and not a pre-condition for the bid to be considered compliant with the Request for Proposal. No authority was quoted to support this distinction or construction. Such a construction would offend sections 1 and 2 of the Procurement Act, which provides that the bid must comply in all respects with the Request for Proposal.

 

Brilliant’s second argument: an ECS licence is not required to carry out the tender; alternatively Brilliant is a reseller of the electronic communications services required; further alternatively, it relies on its subsidiary’s (Kitsokgolo’s) ECS licence 

[51] The Request For Proposal required voice, video, data and internet to be supplied. These items are “electronic communications” as defined in the Electronic Communications Act,[10] and their provision is defined as an “electronic communications service”.[11]  Section 5(5) of the Electronic Communications is again applicable:

“5.  Licencing

. . . .

(5) …  electronic communications services that require a ... licence, include, ...

(a)  electronic communications networks of … local municipal scope operated for commercial purposes;

as is the prohibition in section 7 against the provision of any service, including a electronic communications service, without the relevant (ECS) licence.

[52] Brilliant’s position was that the Request For Proposal did not require an ECS licence to be submitted. It maintained in its second replying affidavit that the only ICASA licences required to be submitted were the four Equipment Approval Certificates that it had submitted. It raised two arguments as to why it did not need an ECS licence: first, it said it was a “reseller” of voice, video and other electronic communications services; and second, it relied on the ECS licence of its subsidiary, introduced in its affidavits.

[53] Its first claim was that it was a reseller of “airtime and data time” (with the consequence that it could, theoretically, and under section 6(2)(b) read with section 6(1) of the Electronic Communications Act, be entitled to an exemption from holding an ECS licence). There is no merit to the argument: the facts establish that ICASA has never granted Brilliant an exemption from holding an ECS licence, for being a reseller.  It is therefore of no moment that Brilliant describes itself as a reseller.

[54] Regulation 3 of the ICASA Licence Exemption Regulations, 2008[12] provides that two classes of persons are eligible for exemption from holding an ECS licence: (1) a person who provides electronic communications services on a non-profit basis; and (2) a reseller that provides electronic communications services duly obtained from a licensee licensed in terms of Chapter 3 of the Act or a licence-exempt entity.  A reseller is obliged to apply to ICASA for an exemption.  Regulation 11(1) provides that “A person who intentionally or negligently contravenes or fails to comply with these regulations, is guilty of an offence and is, on conviction by a court of law, subject to a fine not exceeding R30 000.” In claiming to be a reseller of electronic communications services, Brilliant referred to “typical examples” of providers of electronic communications services such as Vodacom, MTN and Telkom (who, it said, were required to hold an ECS licence).  However, Brilliant failed to identify the provider from whom it intended to resell the services required by the tender, nor did it establish whether that entity held a ECS licence or was itself exempt from holding the licence. Brilliant declined to respond to Vox’s challenge to produce proof that it had complied with the Electronic Communications Act requirements relating to resellers: its response was a bare denial.

[55] It is a matter of public record that ICASA has not recognised Brilliant as reseller and has not granted Brilliant an exemption qua reseller from holding an ECS licence.  Mogale City referred to the General Notice: “Compliance: Broadcasting Service, Electronic Communications Services, Electronic Communications  Network Service and Postal Services Licensees” gazetted by ICASA on 12 September 2016 in GG 40268, which reflects that: “Any provider of services that are required to be licenced and who intends to operate as reseller is required to register for an exemption to provide services as a reseller with ICASA, to ensure compliance with the regulatory and statutory requirements” and “Any person who may be found to provide services without a licence or an exemption from ICASA will not be in compliance with the regulatory and statutory requirements and will therefore be contravening section 7 of the Electronic Communications Act [which provides that no person may provide any services without a licence].”

[56] The General Notice contains a list of currently exempt providers of electronic communications and electronic communications network services that have also applied for registration for exemption with the Authority.  The Notice states that “any licensee not listed therein, has not been approved by the Authority to be Licence exempt.” Brilliant is not listed as one of the exempt “licensees”, nor is it reflected that Brilliant has applied for, or been granted, exemption as a reseller.

[57] In its last reply, Brilliant dismisses the General Notice for the reason that it post-dates the award of the tender. This misses the point. The General Notice merely restates the requirements of the legislation, which existed at the time the tender was decided.  It is conspicuous that Brilliant does not deal with Mogale City’s point that Brilliant does not, in fact, possess a licence exemption, and did not possess such an exemption when it submitted its bid, when the tender was decided, or at any point thereafter.

[58] Brilliant’s second line of argument as to why it did not require an ECS licence is that it purported to rely on the ECS licence held by its subsidiary, Kitsokgolo. Kitsokgolo’s licence was produced for the first time in Brilliant’s replying affidavit.  It had never formed part of Brilliant’s bid.  Brilliant has advanced no reasons why it should be permitted, so late in the day, to supplement its bid to avert its disqualification. 

[59] Brilliant resisted the notion that it was a tender requirement that an ECS licence be submitted at all, and had pointed to its Equipment Approval Certificates as being the only “ICASA licences” that the tender required to be submitted.  Kitsokgolo’s ECS licence was proffered only “insofar as it is required”. In the circumstances, Brilliant cannot be heard to argue that any considerations of fairness favour the late supplementation of its bid:[13] it is clear from Brilliant’s approach that it had never intended to submit Kitsokgolo’s licence in the first place.

[60] Brilliant relies on an agreement entered into between it and Kitsogolo. However, the Kitsogolo license does not reflect Brilliant as a shareholder. Therefore, the so-called purchase of shares never came to fruition or the transaction was never approved by ICASA.  Vox in reply to the allegations in respect of the agreement indicated why Brilliant cannot rely on a cession, purchase or transfer of the licence:

Section 16(6) of the ECA provides :

“No class licence may be ceded, let, sublet or transferred without the prior written approval of the Authority, provided that if the Authority has refused or denied the cession, let, sublet or transfer within 30 days after notice has been given to the Authority, approval shall be considered to have been given.”

[61] The use of Kitsokgolo’s licence is in direct contravention of this section. Paragraph 3.3 of the licence conditions only allows Kitsokgolo’s subsidiaries, not its holding company, to use its licence. Brilliant stated in reply thereto that there is no cession, let, sub-let or transfer of the licence.

[62] During argument in court, Brilliant contended that clause 3.2 of Kitsokgolo’s license entitled Brilliant to use such licence. The clause reads: “The rights and obligations under the licence may be exercised or performed by a third party, including its agents and contractors….”  Vox argued that this only entitled Kitsokgolo to permit some of the tasks which make up all of the services it is entitled to provide in terms of the license to be performed by third parties otherwise it would amount to cession, letting, sub-letting or the transfering of the licence which is prohibited by section 16(6) of the ECA (and in any event disavowed by Brilliant).

[63] Such a construction would also render clause 3.3 of the licence meaningless. Clause 3.3 provides: ”The Licensee and any or all of its Subsidiaries shall be entitiled by virtue of this Licence to provide all or any of the Services together with all or any other rights granted to it under this Licence.” In my view cluase 3.2 of the license does not permit Kitsogolo to permit Brilliant to use its licence to provide electronic communications sevices.

Brilliant’s third argument: neither licence was required to be submitted at bid stage

[64] Brilliant contends that neither licence was required to be submitted at bid stage. It gives the reason that there is “ample opportunity” after the award of the tender for the successful bidder to obtain the necessary licences. The Request for Proposal expressly required valid ICASA licences to be submitted, contained in a bound and indexed bid.  

[65] The express terms of the Request for Proposal contradict Brilliant’s statement that the licences were not required to be submitted at bid stage. It is common cause that Brilliant holds neither an ECNS nor an ECS licence.  The award of a licence is never a forgone conclusion, particularly where no basis has been laid why Brilliant’s licence applications ought to be approved.  For example, section 18(1)(b) of the Electronic Communications Act provides that ICASA may refuse to grant a licence where the applicant is in contravention of the Act (as Brilliant might be shown to have done with its reselling which might be found to amount to an offence under the ICASA Licence Exemption Regulations, 2008) and section 16(1), which prohibits the grant of a class licence where the class licences obtained by one person collectively assume the scope or coverage of an individual licence.

[66] The tender required a wholly new, municipal-wide telecommunication infrastructure to be supplied: the existing PABX and the use of disjointed platforms and reporting systems was to be replaced by newer technology (voice-over-internet), a unified telephone management system and new equipment, the current equipment having reached its end of life when the Request for Proposal was issued.  The scope of what was required to be supplied on commencement was therefore not trivial. It was a tender requirement that the full solution was to be operational within four months of award i.e. the wholly-new solution described was required to be supplied and installed and made operational within four months of award.  The equipment required to have been supplied would likewise have to be obtained from the manufacturer, installed and made ready to be operational by the end of the same fourth month.

[67] The Request for Proposal was not prescriptive as to how bidders were to design their solutions: the tender specified what the Municipality required to be provided, but it was left open to bidders to design their own solutions.  It follows that another bidder would not be able to “take over”, had an initially successful bidder proceeded to implement its tendered solution with an eye to full operation in four months but had not been able to obtain the required licences.  The initial solution would have had to be removed, and would have been wasted expense. There can be no suggestion that the municipality ought to wait to see whether the successful bidder would be granted the licences. 

[68] Mogale City would be prejudiced should it have to wait an unspecified time for a successful bidder to obtain a licence and only thereafter begin to supply a solution.  The tender expressly required the solution to be fully deployed and operational within four months of the award. Brilliant’s suggestion that bidders were not obliged to submit licences in their bids, but only had to obtain licences once the time came (after four months) to operate the tender, is not supported by the language of the tender or by the surrounding facts and circumstances.

CONCLUSION AND ORDER 

[69] A reasonableness review under section 6(2)(h) of PAJA entails a simple test, “namely, that an administrative decision will be reviewable if……… it is one that a reasonable decision-maker could not reach”.^[14]  What is reasonable is bound up in the facts of each case.^[15]  On the evidence placed before me, I find that Mogale City’s decision was reasonable. It found, on reasonable grounds that Brilliant’s bid was non-compliant with the Request for Proposal on the two grounds, either of which would suffice. In addition, the license requirement is a legality issue which would have necessitated Mogale City setting aside the tender to Brilliant had it been awarded to it. However, I need not make a finding in regard to whether the existence of a license was a requirement nor, whether if it were, there was compliance with such requirement as I have found, that the two reasons advanced by Mogale City for disqualifying Brilliant, were not tainted by any irregularity which would amount to a ground of review under PAJA.

[70] The parties were in agreement that the costs incurred in respect of the urgent application, which costs were reserved for determination by this court, should follow the result.

[71] I accordingly make the following order:

The application is dismissed with costs including the costs incurred in respect of the employment of two counsel, the costs of the intervening party and the costs incurred in respect of the urgent application.

 

___________________________

I OPPERMAN

Judge of the High Court

Gauteng Division, Johannesburg

 

Heard: 18 October 2017

Judgment delivered: 24 October 2017

Appearances:

For Applicant:  Adv den Hartog

Instructed by: Strauss Daly Inc.

For 1^st to 4^th Respondents: Adv C Georgiades and Adv M Augustine

Instructed by: Nozuko Nxusani Inc

For intervening party: Adv G v R Fouché

Instructed by: Makda Cull Kotze Inc

 

 

[1] Allpay Consolidated Investment Holdings (Pty) Ltd and others v Chief Executive Officer, South African Social Security Agency, and others (“Allpay (merits)”) 2014 (1) SA 604 (CC).

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