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The rigour of tender compliance: Insights from the WBHO-Lubocon vs. Grinaker High Court Decision

30 November 2023

Tender processes and awards in South Africa have been a topic of fervent court activity in recent years. The case of WBHO-Lubocon JV v Eskom Holdings SOC Limited and Another (005599/2022) [2023] ZAGPJHC 1008, decided upon in the Gauteng Local Division of the High Court in Johannesburg, is no exception.

The case emerged from a tender awarded by Eskom Holdings SOC Limited (“Eskom”). The tendering process resulted in the disqualification of the WBHO-Lubocon Joint Venture (“WBHO”) based on specific criteria. Consequently, the tender was granted to the only qualifying bidder, Grinaker LTA-Ezra Construction Joint Venture (“Grinaker”).

WBHO, feeling aggrieved by the disqualification, sought a judicial review of the decision. They anchored their arguments on the Promotion of Administrative Justice Act 3 of 2000 (“PAJA”). The primary bone of contention was the perceived illegality of WBHO’s disqualification. Eskom’s stance was clear in that WBHO failed to provide certain mandatory information, leading to their exclusion.

In a decision that will undoubtedly be referenced in future tender disputes, the court sided with Eskom and the application by WBHO was dismissed with costs.

The Judge’s analysis:

  1. Legality of disqualification: Central to the case was the question of whether WBHO’s disqualification was in line with the rule of law. The judge examined the criteria set out in the tender documents and how WBHO’s submission was found to be incomplete. The verdict suggests that the judge found Eskom’s reasons for disqualifying WBHO to be both clear and justified. Eskom maintained that the disqualification was due to WBHO’s failure to provide mandatory information. In the opinion of the court, the omission, regardless of its perceived significance, was grounds for disqualification.
  2. Principle of fairness: The judge also weighed the principle of fairness in the tender process. WBHO’s contention was that their omission was minor and should not have led to their disqualification. The court, however, emphasised that the sanctity of the tender process requires strict adherence to the rules, irrespective of the perceived magnitude of an oversight.
  3. The role of PAJA: PAJA formed a pivotal part of WBHO’s arguments who believed that their disqualification was arbitrary and unjust. After examining the tender’s criteria and WBHO’s submission, the court found, however, that Eskom’s actions were consistent with the principles of administrative justice enshrined in PAJA.

Judgment implications:

This judgment underscores the importance of meticulous adherence to the requirements set out in tender documents. A failure to comply, even if perceived as immaterial, can result in disqualification. For companies and consortiums bidding for large tenders, this case serves as a stark reminder of the legal and financial implications of non-compliance.

  1. Stringent adherence to tender criteria: One of the primary lessons from this case is the emphasis on strict compliance with tender requirements. Even seemingly minor omissions or errors can lead to disqualification. For businesses and consortiums, this underscores the need for thoroughness and diligence in preparing tender documents.
  2. Legal precedence: The verdict sets a precedent for future tender disputes. The judiciary has signalled its intent to uphold the integrity of tender processes, which serves as a deterrent for potential litigants who might consider challenging tender outcomes. 
  3. Reinforcement of PAJA’s principles: The case reaffirms the principles of PAJA, particularly in ensuring that administrative actions are lawful, reasonable, and procedurally fair. Organisations should be mindful of these principles when participating in or administering tenders.
  4. Financial risks: Beyond the immediate legal ramifications, the case highlights the financial risks associated with tender disputes. WBHO not only lost the opportunity to secure the tender but also incurred significant costs. 

Tender disputes are complex, often involving vast sums of money. It is paramount for bidders to be acutely aware of the requirements and ensure complete compliance. As always, a proactive approach, coupled with sound legal advice, can mitigate the risk of unfavourable outcomes.

For clients operating in the challenging landscape of tender processes, the team at Tiefenthaler Africa remains committed to providing expert guidance every step of the way.

Article by Gerard van Beek | Associate

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