IN THE KVI/AZULU-NATAL HIGH COURT, PIETERMARITZBURG REPUBLIC OF SOUTH AFRICA
CASE NO:10878/2009
Date: 12/05/02010
In the matter between:

and

JUDGMENT

GORVEN J

[2] This applicant approached this court on the basis of urgency, it initially requested in interdict preventing the second respondent from taking any further steps to perform the" contract work pending the outcome of this application. Such an interim order was granted. At that stage very little work had been done on the prelect with only one payment certificate having been certified by the project manager in an amount of 3668 763.73, This in a contract worth more than R10.6m.

[3]     Tba applicant seeks the following relief;
(a) That the award of the contract under tender number ZDM769/2Q08 by the first respondent to the second respondent be and hereby is reviewed and set aside,
 (b) That it is hereby declared that regulation 8 of the Preferential Procurement Regulations, 2001 published in Government Notice R725 of 10 August 2001 ("the regulations") is inconsistent with section 2 (1) (b) of the Preferential Procurement Policy Framework Act, No. 5 of 2000.
(c)    That regulation 8 of the regulations is remitted for reconsideration by

(d)   That until such time as regulation 8 of the regulations has been
reconsidered and a replacement regulation issued, it is declared to be
invalid.
(e)    That tender number ZDM 769/2008 is remitted for reconsideration and re-evaluation by the first respondent In accordance with;
i. the circular of the KwaZulu-Natal Provincial Treasury dated 19 October 2009 and headed "Conflict between PPPFA and PPPFA Regulations: Evaluation of Functionality"; or 
ii. some other fair tender evaluation mechanism which does not rely upon regulation 8 of the regulations, 
(f)   That the costs of this application be paid by the first respondent and any other respondents which may oppose the application jointly and severally the one paying the other to be absolved.

[4] The second respondent opposed the application. The third respondent opposed the application on the narrow ground that no declaratory relief relating to the legality or otherwise of the regulation in question should be granted. The first respondent c Id not oppose the application.

An irgan of state must determine Its preferentialprocurement policy and imple ment it within the following framework.

[6]   S 2(1 )(d) in turn provides as follows: The s aecific goals may include -(i)    contracting  with  persons,  or categories  of persons,  historically disadvantaged by unfair discrimination on the basis of race, gender or disability;

[7]     S 5(1) provides in its material parts that

[8] Th third respondent, empowered by s 5(1) of the Act, made regulations by way of Government Notice R725 in Government Gazette 2549 of 10 August 2001. Regulation 8 provides as follows:
Evaluation of tenders on functionality and price
(1) An organ of state must, in the tender documents, indicate if, In respect of a particular tender Invitation, tenders wilt be evaluated an functionality and price.
(2) The total combined points allowed for functionality and price may, in respect of tenders with an estimated Rand value equal to, or below, R5QQ 000.00, not exceed B0 points,
(3) The total combined paints allowed forfiJnctlonallty and price may, in respect of tenders with an estimated Rand value above RSOO 00Q.00, not exceed 9Q points.
(4) When evaluating the tenders contemplated in this Item, the points for functionality must be calculated for each individual tenderer.
(5) The conditions of tender may stipulate that a tenderer must score a specified minimum number of points for functionality to quality for further adjudication,
(6) The points for price, in respect of a tender which has scored the specified number of points contemplated in subregulatlon (5) must, subject to the application of the evaluation system for functionality and price contemplated
In fills regulation, be established separately and be calculated in accordance with the provisions of regulations 3 and 4.
7)	Preferences for being an HDI and / or subcontracting with an HDI and / or achieving specified goals must be calculated separately and must be added to the points scored for functionality and price
Only the tender with the highest number of points scored may be selected.

2

In the present matter I can see no reason to regard the word "functionality" in the impugned tegulations as superfluous. In addition, on the plain grammatical meaning of the words, srice does not include functionality. They are entirely distinctive concepts.

a)	The setting aside of the contract awarded to the second respondent pursuant to il s tender being accepted; and
b)	The declaration of invalidity of the impugned regulations.

[13] Two separate enquiries arise. The first is whether the award of the contract should be reviewed and set aside. The second is whether the impugned regulations should be de clared invalid. Different principles govern each of these enquiries,

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[20] This submission does not take Into account all the evidence or consider vital matters which, bear on this issue. In the first place, regulation 9, which has not been attacked, provides as follows:
Despie regulations 3.(4), 4.(4), S.(4), fi,(4) and 8.(0), a contract may, on reasonable and justifiable grounds, be awarded to a tender that did not score the highes t number of points,

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[27] Mr Semenya SC, who together with Mr Mthembu appeared for the third respondent, submitted that the fact that the impugned regulations conflict with the Act does not necessitate a declaration of invalidity. He relied, in essence, on two arguments n support of this submission, in the first place he submitted that no invalidity is /islted on the impugned regulations. His argument in this regard was that s 5(1), which is the provision in the Act empowering the third respondent to make regulations, empowers him to do so "in order to achieve the objects of this Act". The objects of tt e Act are set out in the preamble which is to "give effect to section 217(3) of the Constitution by providing a framework for the implementation of theprocuremen t policy contemplated in section 217(2) of the Constitution; and to provide for matters connected therewith". Since the regulations meet these objects the fact that they conflict with the Act does not render them invalid. The third respondent has therefore acted within the powers given him by s 5(1) of the Act.

[28] The major difficulty with this argument is that the legislator saw fit to put in place as pgrt of this framework a requirement that a minimum of 90 points for price must be allocated in contracts of a particular value. In the light of this provision, the legislator must be taken to have intended to circumscribe the power of the third respondent to make regulations which conflict with this framework. The allocation of points in the Act as the basis for the award of contracts which meet the different price thresholds is clearly not contrary to the objects of the Act As such, the provisions of the Act mi st have been intended to set parameters within which the third respondent had to ope rate if he made regulations. What the third respondent did is to ignore the framework put in place by the Act. It cannot be said, therefore, that the regulations meet the obejects of the Act. I am accordingly of the view that the third respondent did not have tie requisite power to make regulations inconsistent with this aspect of the Act, In doii ig so he acted contrary to the principle of legality.

[29]    The second submission was that if there is a conflict between the impugned regulation and the Act, one must simply apply the provisions of the Act and Ignore the impugned regulations. No declaration of invalidity and setting aside of the impugned regulations is necessary,   Mr Semenya SC submitted that this was a constitutioi tal issue and referred to cases where the courts have held that if a matter can be de sided without recourse to constitutional issues that should be the course

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[32] A s milar situation obtains In relation to the reconsideration and re-evaluation of the tende r in question. It may be that the first respondent has resources, needs or priorities wh ich differ from those which obtained at the time the contract was put out to tender. For his court to require it to reconsider the tender would likewise amount to an unwarranted interference in the affairs of an organ of state by this court, In any event, the tender could not be reconsidered In its present form since the framework of the first responc ent for evaluating it cannot be utilised for the reasons dealt with above. The first res pondent must be free to make decisions which rest within Its discretion once the award of the contract is set aside. No further order is therefore either necessary or indeed, desirable.

[33] The applicant employed two counsel, at least In the two appearances In which I was involvod and in its heads of argument The third respondent did so both in its heads of argument and In the appearance before me at the hearing. I am of the view that the matter is sufficiently complex and Important to have warranted the use of two counsel by tl ie applicant where that took place and that the costs order should reflect this. The opposition by the third respondent was limited in nature but, since the promulgation of the impugned regulations gave rise to the need for the application, I do not consic er that this fact warrants a decrease In his exposure to a costs order.

[34]     In the event, I grant the following order:
(a) The award of the contract under tender number ZDM769/200B by the first respondent to the second respondent be and is hereby reviewed and set aside.
(b) It is hereby declared that Regulations B(2) to B(7) of the Preferential Procurement Regulations, 2001 published in Government Notice R725 of 10 August 2001 are inconsistent with section 2(1 )(b) of the Preferential Procurement Policy Framework Act, No. 5 of 2000 and are invalid.