A MAJOR municipality has been warned that if it doesn’t improve the way it deals with tenders the courts may step in and award the tender to the company that should have won if proper procedures had been followed.

The Supreme Court of Appeal also warned this week that in such a case, officials identified as responsible for such an appalling situation might have to pay the costs from their own pockets. Holding ‘highhanded’ officials personally liable for costs might have a ‘sobering effect’ on ‘truant office bearers’, the court said.

Their warning came just days after the Constitutional Court, dealing with the Ngaka Modiri Molema district municipality, klapped councillors who tried to stymie the administrator appointed by the province to sort out the municipal mess.

Clearly both courts aretired of corrupt or ineffective municipalities:  while the appeal court suggested that officials might have to pay botched tender legal costs personally, the Constitutional Court made it clear that the interests of the community, often starved of basic services because of a useless municipal council, takes precedence over complaints by councillors that they have effectively lost their jobs.

This week’s case concerned a July 2011 call by Mogale City municipality for tenders to provide security services to the municipality.

The company that won the tender, Mafoko Security Services, initially scored so low that it should have been disqualified. However, this score was “revised”  to produce a qualifying score and eventually won.

Two other bids were far and away the best: Red Ant and Fidelity. But instead of the tender being given to one of them, the municipality decided to divide the work between the two in a completely arbitrary way, even though this was contrary to the terms of the tender. There was also no investigation about the feasibility of such a split for the municipality’s security services.

In addition to all the other irregularities, Red Ant was allowed to continue as a bidder – and was in fact the preferred bidder at some stage – at the same time as it was sponsoring a major function for Mogale City. Elected and employed municipal officials attended this function and were ‘the recipients of gifts’.

Just as bizarre, during the tender review process Red Ant made an agreement with Mafoko to share the contract between them. This agreement, said the court, appeared to have the approval of the municipality, and was another in the ‘litany of errors’ that could propel the court to intervene if repeated in the future.

The evaluation process disclosed another serious flaw. All companies submitting a bid had to sign a declaration that none of their directors had been listed as a tender defaulter and other questions probed whether a bidder or its directors were listed on the National Treasury’s data base as barred from doing business with the public sector.

In good faith Fidelity said its directors were all ‘clean’. But unknown to the company one of its directors had been so listed. All parties to the dispute acknowledged however that this data base was not accessible to companies or individuals but only to ‘public bodies on application to the national treasury’.

In other words it was unavoidable that Fidelity provided the wrong answer since neither the company nor even the particular director himself had been informed of the ‘listing’. It was only after the tender, with its declarations, had been submitted that Fidelity found out.

Once made aware of the situation Fidelity moved fast and within two days the director was gone. But the damage had been done, and the municipality then alleged that Fidelity had breached its legal obligations to declare the status of this director.

The advice from the municipality’s in-house adviser was that Fidelity’s bid had to be rejected. When the matter was argued in court, however, it was accepted by all parties that this advice had been ‘patently wrong’. This was because a possible obstacle to the award of a tender may be removed before a decision about the outcome is made.

This unfairness, added to the earlier decision that Fidelity should share the tender with Red Ant ‘in arbitrarily determined proportions’ even though this was inconsistent with the advertised basis of the tender, ‘warranted the tender being set aside’ as a breach of Fidelity’s right to fair administrative action, the court said.

Mogale City was given a fortnight to re-consider the bids and reach a proper conclusion in the light of the court’s stern warnings.

Mogale City v Fidelity Security Services