IN THE CONSTITUTIONAL COURT
Case CCT 21/2016
In the matter between:
THE CITY OF CAPE TOWN Applicant
and
AURECON SOUTH AFRICA (PTY) LTD Respondent
and
CONSULTING ENGINEERS SOUTH AFRICA Amicus Curiae
______________________________________________________________
AMICUS CURIAE’S HEADS OF ARGUMENT
______________________________________________________________
Table of Contents
INTRODUCTION AND OVERVIEW OF SUBMISSIONS ... 3
TW O POSSIBLE INTERPRETATIONS ... 4
THE STRICT RULE IS INIMICAL TO SECTION 217 OF THE CONSTITUTION ... 7
THE FLEXIBLE INTERPRE TATION GIVES EFFECT TO S 217 ... 14
Competition and cost-effectiveness ... 14
Fairness and equitability ... 16
EUROPEAN LAW FAVOURS THE FLEXIBLE INTERPRETATION ... 19
CONCLUSION ... 28
INTRODUCTION AND OVERVIEW OF SUBMISSIONS
1 The amicus curiae (“CESA”) makes submissions on a question of law:
whether clause 95 of the City’s Supply Chain Management Policy and regulation 27(4) of the Supply Chain Management Regulations1 (“the provisions”) should be interpreted to strictly exclude any tenderer that was involved in preparatory work from being considered for the subsequent tender.
2 The applicant (“City”) contends that, properly interpreted, the provisions entail such a strict rule. The respondent (“Aurecon”) disagrees.
3 CESA submits that on a correct interpretation, the provisions do not entail a strict rule of disqualification. Instead, they require municipalities to make a flexible, fact-specific determination of whether involvement in preparatory work requires the disqualification of a tenderer from consideration for the subsequent tender. This interpretation accords with section 217 of the Constitution, and the purpose of the provisions. The European Court of Justice has endorsed the flexible interpretation in the context of a similar provision.
4 In the remainder of these heads of argument, I address the following issues:
1 Published under GenN 868 in GG 27636 of 30 May 2005.
4.1 The two possible interpretations of the provisions.
4.2 The strict rule’s inconsistency with section 217 of the Constitution.
4.3 The flexible interpretation’s advancement of section 217 of the Constitution.
4.4 The jurisprudence of the European Court of Justice.
TWO POSSIBLE INTERPRETATIONS
5 Regulation 27(4) of the Supply Chain Management Regulations provides:
“No person, advisor or corporate entity involved with the bid specification committee, or director of such a corporate entity, may bid for any resulting contracts.”
6 Clause 95 of the City’s Supply Chain Management Policy is phrased in identical terms.
7 The question is what this means where a person or entity has been involved in preparatory work for a tender. Following the European Court of Justice in the Fabricom decision discussed below, I use the term
“preparatory work” to refer to any research, experiments, studies or development in connection with public works, supplies or services. The term includes the preparation of a scope of work in the context of an engineering contract.
8 This Court is asked to decide between two possible interpretations of the provisions.
8.1 The City interprets the provisions to impose a strict rule.2 The strict rule says that it is always unlawful for a tenderer that was involved in preparatory work which is incorporated into a subsequent tender to be awarded the tender, because the preparation of a scope of work necessarily constitutes involvement with the Bid Specification Committee.
8.2 CESA contends for a different interpretation of the provisions.
CESA submits that it will sometimes be appropriate for a municipality to refuse to permit a tenderer involved in preparatory work to be considered for the subsequent contract. However, it will often be unnecessary and contrary to section 217 of the Constitution. CESA therefore contends for a flexible interpretation of the provisions, which requires the relevant municipality to determine on a case-by-case basis whether a tenderer who did preparatory work should be disqualified from consideration for a subsequent tender.
8.3 On the flexible interpretation, the question whether a person involved in preparatory work should be ineligible for a subsequent tender must be answered with reference to the particular facts of
2 City’s heads of argument, paragraphs 46-50.
the case. The answer may differ depending on the particular circumstances, including the following factors:
8.3.1 Whether involvement in the preparatory work confers any competitive advantage;
8.3.2 Whether involvement in the preparatory work amounts to a conflict of interest;
8.3.3 Whether the tenderer’s involvement in the preparatory work gives rise to a reasonable apprehension of bias; and
8.3.4 The effect of involvement in the preparatory work on the quality of the ultimate project and its cost to the public.
9 In the interests of certainty, I submit that this Court should state its view on the proper interpretation of the provisions, even if it dismisses the appeal on the grounds of the City’s unreasonable delay in launching the review application.3
3 This Court has previously made findings on issues that it was not strictly necessary to decide in the interests of justice and certainty.
See Gcaba v Minister for Safety and Security and Others 2010 (1) SA 238 (CC) at para 18;
Thint (Pty) Ltd v National Director of Public Prosecutions and Others; Zuma v National Director of Public Prosecutions and Others 2009 (1) SCA 1 (CC) at para 117.
THE STRICT RULE IS INIMICAL TO SECTION 217 OF THE CONSTITUTION
10 The question of interpretation before this Court is whether the provisions should be interpreted to mean that whenever a tenderer is involved in preparatory work which is incorporated into a subsequent request for proposals, it must be taken to be “involved with” the Bid Specification Committee as contemplated by the provisions, and is therefore strictly disqualified from bidding for the subsequent contract.
11 This Court has summarised the proper approach to interpreting legislation as follows:
“A fundamental tenet of statutory interpretation is that the words in a statute must be given their ordinary grammatical meaning, unless to do so would result in an absurdity. There are three important interrelated riders to this general principle, namely:
(a) that statutory provisions should always be interpreted purposively;
(b) the relevant statutory provision must be properly contextualised;
(c) all statutes must be construed consistently with the Constitution, that is, where reasonably possible, legislative provisions ought to be interpreted to preserve their constitutional validity. This proviso to the general principle is closely related to the purposive approach referred to in (a).” 4
4 Cool Ideas 1186 CC v Hubbard And another 2014 (4) SA 474 (CC) at para 28.
12 In Makate, this Court held that “every court that interprets legislation is bound to read a legislative provision through the prism of the Constitution.”5
13 As Aurecon has argued, the plain language of the provisions favours the interpretation advanced by CESA.6
14 Alternatively, and at best for the City, the plain language of the provisions admits of either interpretation. This is for the following reasons:
14.1 The Oxford English Dictionary defines “involvement” as “the condition of being implicated, entangled, or engaged.”7 For this reason, usage of the verb “involve” is “all a matter of the degree of envelopment or entanglement.”8
14.2 The plain meaning of the phrase “involved with” therefore entails some degree of connection or entanglement between the entity that performed the preparatory work and the Bid Specification Committee, but is silent on the precise form and degree of connection it contemplates.
14.3 It cannot be correct that any degree of connection with the Bid Specification Committee, no matter how remote, brings a tenderer
5 Makate v Vodacom Ltd 2016 (4) SA 121 (CC) at para 87.
6 Aurecon’s written submissions, paragraphs 26-32.
7 Oxford English Dictionary, 2nd Edition (1989).
8 The New Fowler’s Modern English Usage, Oxford University Press: 1996, p412.
within the prohibition contained in the prohibitions. If that were the case, for example, a company which provides catering to the Bid Specification Committee is prohibited from tendering for any tender emanating from the Committee, because there is some degree of connection between it and the Committee, no matter how remote or unrelated to the subsequent contract.
14.4 The question of what degree of connection suffices to constitute being “involved with” the Bid Specification Committee is therefore a matter of interpretation which is not determined by the plain language of the provision.
15 Even assuming therefore (again at best for the City) that the ordinary grammatical interpretation of the provisions does not determine the choice between the flexible interpretation and the strict rule, I submit that a purposive, contextual interpretation in the light of the Constitution favours the flexible interpretation.
16 Section 217(1) of the Constitution provides:
“When an organ of state in the national, provincial or local sphere of government, or any other institution identified in national legislation, contracts for goods or services, it must do so in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.”
17 The strict rule is inimical to the values and purpose of section 217. It produces results which are unfair, inequitable, anti-competitive, and not cost-effective.
17.1 This is because the strict rule always disqualifies a tenderer who was involved in preparatory work which is used by a Bid Specification Committee to determine the contents of the later tender.
17.2 The strict rule disqualifies such a tenderer even in circumstances in which:
17.2.1 Involvement in the preparatory work does not confer any competitive advantage on the tenderer.
17.2.2 Involvement in the preparatory work does not constitute a conflict of interest.
17.2.3 There is no question of any reasonable apprehension of bias in favour of the tenderer involved in the preparatory work.
17.2.4 The appointment of the relevant tenderer would reduce the cost of the ultimate project to the public.
17.2.5 The appointment of the relevant tenderer would produce significant benefits to the organ of state in terms of the quality of the ultimate project.
17.3 It is therefore clear that procedural fairness, competitiveness and cost-effectiveness do not require or justify the adoption of the strict rule. In fact, the adoption of the strict rule will often produce unfairness, undermine competitiveness and increase costs. This is because the strict rule rigidly and inflexibly requires the disqualification of tenderers who may be able to provide an excellent service, at competitive prices, and who have not been in any way advantaged by their involvement in the preparatory work.
18 The application of the strict rule in the specific context of the construction industry makes this particularly clear:9
18.1 Construction projects often involve several phases.10 A typical project may involve concept, pre-feasibility, feasibility, preliminary design, detailed design and construction phases.
18.2 In order to start the process, the client (in this case, the City) may have to commission the services of a consulting firm for the purpose of conducting preparatory work.
18.3 The preparation of a scope of work, of the kind prepared by Aurecon in this matter, constitutes a form of preparatory work that will often be required for an engineering project to begin or to progress.
9 CESA’s application for admission, founding affidavit paragraph 22.
10 Silbernagl affidavit, Vol 8, p713, para 5.
18.4 The majority of South African municipalities have to outsource such preparatory work, as they no longer have any in-house engineering expertise.
18.5 Preparatory work of this kind does not require significant resources and time, but rather requires the input of a seasoned specialist. As a result, such work tends to be less resource-intensive and less profitable than the subsequent work.
18.6 It is critical that the preparatory work be properly and professionally carried out, in order to allow the client to make an informed choice on the optimal solution, and to guide the further conduct of the project. The preparatory work conducted at the pre-feasibility and feasibility phases involves an investigation of various alternative solutions to the objective that the client hopes to achieve. It normally concludes with a recommendation of the best value for money engineering solution.
18.7 It frequently occurs that engineering firms are awarded a contract in respect of which they have performed preparatory work. This is standard engineering practice.11
18.8 The effect of the adoption of the strict rule would be to render this standard practice unlawful for construction projects subject to the Supply Chain Management Regulations.
11 Silbernagl affidavit, Vol.8 p714, para 6.
18.9 This will have a significant impact on the quality of engineering work and would not be in the public interest.
18.10 Firms will not want to perform preparatory work if it means that they are precluded from subsequent work as a result, as the preparatory work tends to be less profitable.
18.11 If an organ of state is unable to obtain quality preparatory work, the following consequences are likely to occur:
18.11.1 The organ of state will not be able to select the best value for money engineering solution to its problem.
18.11.2 If the organ of state is itself unable to define what it wants from the ultimate service provider, the project process may stall.
18.11.3 The consulting engineers involved in later phases will have to review and duplicate the preparatory work, resulting in increased, unnecessary and wasteful expenditure.
18.11.4 As a result, the cost of infrastructure is likely to increase significantly, and clients will not be certain whether they have chosen the optimal solution for their needs.
18.12 In municipalities with no internal engineering expertise, the strict rule will result in delays, wasteful expenditure, and worse quality
engineering work. Infrastructure projects in such municipalities may simply fail to get off the ground.
18.13 This is contrary to the interest of the client, the engineering industry, and the public interest.
19 By contrast, as I now demonstrate, the flexible interpretation accords with the constitutional values contained in section 217 of the Constitution and long-standing principles of our administrative law.
THE FLEXIBLE INTERPRETATION GIVES EFFECT TO S 217
Competition and cost-effectiveness
20 The flexible interpretation advances competition and cost-effectiveness. It does so by ensuring that otherwise meritorious tenderers are not excluded merely because of their involvement in preparatory works, even where that involvement gave them no advantage.
21 The purpose of competition in the procurement context is to ensure that the state procures the best quality goods and services at the best possible prices, in the public interest. This Court has held that “it is because procurement so palpably implicates socio-economic rights that
the public has an interest in its being conducted in a fair, equitable, transparent, competitive and cost-effective manner”.12
22 The SCA has held, in this regard, that:
22.1 The constitutional and legislative framework for the adjudication of tenders is designed to advance the public interest by ensuring that tenders are considered on their merits, and that the public interest is best served by the selection of the tender with the best price.13 22.2 In order to ensure that the tender process serves this purpose,
administrators must not elevate non-compliance with immaterial requirements of the tender to inflexible, formalistic grounds to disqualify meritorious tenders:
“[A] process which lays undue emphasis on form at the expense of substance facilitates corrupt practice by providing an excuse for avoiding the consideration of substance; it is inimical to fairness, competitiveness and cost-effectiveness. By purporting to distinguish between tenderers on grounds of compliance or noncompliance with formality, transparency in adjudication becomes an artificial criterion. In saying this I do not suggest that the tender board is not entitled to prescribe formalities which, if not complied with, will render the bid invalid, provided both the prescripts and the consequences are made clear. What I am concerned to stress is the need to appreciate the difference between formal shortcomings which go to the heart of the process and the elevation of matters of
12 Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African Social Security Agency, and Others 2014 (1) SA 694 (CC) at para 4.
13 Minister of Social Development and others v Phoenix Cash & Carry–Pmb CC [2007] 3 All SA 115 (SCA) (Phoenix).
subsidiary importance to a level which determines the fate of the tender.” 14
22.3 The overriding consideration is that the public interest is served by the selection of the tenderer who, having submitted a functional tender, offers the best price.15
23 The flexible interpretation accords with these principles, as it allows for a case-by-case determination of whether a tenderer should be precluded from bidding for the resultant contract, rather than an automatic disqualification no matter the circumstances. This will foster fair competition, which benefits the municipality procuring the goods or services, and the public who are the ultimate recipients of the goods and services.
24 In the engineering context, the undisputed expert evidence shows that the flexible interpretation “promotes accountability and avoids any unnecessary duplication of work and costs.”16
Fairness and equitability
25 The flexible interpretation gives better expression to the constitutional values of fairness and equitability.17
14 Phoenix at para 2.
15 Phoenix at para 2.
16 Silbernagl affidavit, Vol.8, p714 para 6.
26 The content of the requirement of fairness is a flexible one to be determined on the facts of each case.
26.1 In Joseph, this Court held that “fairness needs to be determined in the light of the circumstances of a particular case”, and referred to this as “a cardinal principle”, which has been given effect to by PAJA.18
26.2 In Zondi, this Court held that fairness is a relative concept which is informed by the circumstances of each particular case.19
26.3 In Walele, this Court held that the facts and circumstances of a particular case determine the content of the procedural fairness required.20
26.4 Similarly, the SCA has held that:
“In the Logbro Properties case at 466H–467C Cameron JA referred to the ‘ever-flexible duty to act fairly’ that rested on a provincial tender committee. Fairness must be decided on the circumstances of each case. It may in given circumstances be fair to ask a tenderer to explain an ambiguity in its tender; it may be fair to allow a tenderer to correct an obvious mistake; it may, particularly in a complex tender, be fair to ask for clarification or details required for its proper evaluation.
Whatever is done may not cause the process to lose the attribute of fairness or, in the local government sphere, the
17 As well as being a requirement of section 217 the requirement of fairness is protected by section 33 of the Bill of Rights and the Promotion of Administrative Justice Act 3 of 2000.
18 Joseph and Others v City of Johannesburg and Others 2010 (4) SA 55 (CC) at para 56.
19 Zondi v MEC for Traditional and Local Government Affairs and Others 2005 (3) SA 589 (CC) at paras 113 and 114.
20 Walele v City of Cape Town and Others 2008 (6) SA 129 (CC) at para 28.
attributes of transparency, competitiveness and cost- effectiveness.” 21
27 The strict rule precludes a flexible, case-by-case assessment of whether fairness requires the exclusion of a tenderer involved in preparatory works. It mandates the strict disqualification of all such tenderers, even though there may be no advantage that results from the involvement in preparatory works.
28 By contrast, the flexible interpretation allows for a case-by-case determination by municipalities of whether a tenderer involved in preparatory works has been placed at a competitive advantage. This accords with the well-established principle that the requirements of fairness are flexible and fact-specific.
29 The strict rule will therefore reduce competition, fairness, equitability, and cost effectiveness in circumstances where a tenderer involved in preparatory works has derived no advantage from such involvement. The flexible interpretation, by contrast, promotes those values by allowing the municipality to determine on a case by case basis whether involvement in preparatory works has given such an advantage, and therefore whether it should be disqualified from consideration for the subsequent tender.
21 Metro Projects CC v Klerksdorp Local Municipality 2004 (1) SA 16 (SCA) para 13, emphasis added.
EUROPEAN LAW FAVOURS THE FLEXIBLE INTERPRETATION
30 The European Court of Justice (“ECJ”) has considered this question in the context of a similar provision in the matter of Fabricom SA v Belgian State.22
31 Fabricom challenged the validity of Belgian procurement laws with the same effect as the strict rule.
32 The relevant law provided that:
“No person who has been instructed to carry out research, experiments, studies, or development in connection with public works, supplies or services shall be permitted to apply to participate in or to submit a tender for a contract for those works, supplies or services.” 23
33 Fabricom challenged the law on the grounds that it was, amongst others,
“contrary to the principle of equal treatment of all tenderers….to the principle of proportionality”.24
34 The ECJ held that:
34.1 “[T]he duty to observe the principle of equal treatment lies at the very heart of the public procurement directives, which are intended in particular to promote the development of effective competition in
22 Fabricom SA v Belgian State [2005] ECR I-1559, ECJ; ([2005] All ER (D) 67 (Mar) (Fabricom).
23 Fabricom at para 12.
24 Fabricom at para 16.
the fields to which they apply and which lay down the criteria for the award of contracts which are intended to ensure such competition.”25
34.2 “[T]he principle of equal treatment requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified.”26
34.3 A person who has carried out preparatory work is not necessarily in the same situation with respect to the contract as a person who has not done so.27 Such a person “may be at an advantage when formulating his tender on account of the information c oncerning the public contract in question which he has received when carrying out that work. However, all tenderers must have equality of opportunity when formulating their tenders.”28
34.4 A person who has carried out preparatory work may be in a position giving rise to a conflict of interest as “he may, without even intending to do so, where he himself is a tenderer for the public contract in question, influence the conditions of the contract in a
25 Fabricom at para 26.
26 Fabricom at para 27.
27 Fabricom at para 28.
28 Fabricom at para 29.
manner favourable to himself. Such a situation would be capable of distorting competition between tenderers.”29
34.5 As a result, it cannot be maintained that a person who has carried out preparatory works be treated in the same way as any other tenderer.30
34.6 However, critically, the strict rule “goes beyond what is necessary to attain the objective of equal treatment for all tenderers.”31
34.7 “Indeed, the application of that rule may have the consequence that persons who carried out certain preparatory works are precluded from the award procedure even though their participation in the procedure entails no risk whatsoever for competition between tenders.”32
34.8 The relevant European Council directives therefore precluded the strict rule.33
34.9 In particular, it is impermissible to preclude a person involved in preparatory works “where that person is not given the opportunity
29 Fabricom at para 30.
30 Fabricom at para 31.
31 Fabricom at para 34, emphasis added.
32 Fabricom at para 35, emphasis added.
33 Fabricom at para 36.
to prove that, in the circumstances of the case, the experience which he has acquired was not capable of distorting competition.”34
34.10 The grounds upon which the ECJ reached this conclusion were those advanced by Fabricom and the countries which supported its challenge to the strict rule. They were that:
“[T]he difference in treatment established by a rule such as that in issue in the main proceedings and which consists in prohibiting, in all circumstances, a person who has carr ied out certain preparatory works from participating in a procedure for the award of the public contract in question is not objectively justified. They claim that such a prohibition is disproportionate.
Equal treatment for all tenderers is also ensured where there is a procedure whereby an assessment is made, in each specific case, of whether the fact of carrying out certain preparatory works has conferred on the person who carried out that work a competitive advantage over other tenderers. Such a measure is less restrictive for a person who has carried out certain preparatory work.”35
35 The ECJ therefore established the following principles in Fabricom:
35.1 It will sometimes be the case that a person involved in preparatory works is in a position of advantage or conflict of interest when it comes to bidding for the resultant contract. However, it will not be true in every case.
35.2 A strict rule that always precludes a person involved in preparatory works from bidding for the resultant contract goes beyond what is necessary to ensure the equal treatment of all tenderers.
34 Fabricom at para 36.
35 Fabricom at para 32.
35.3 The strict rule may have the result of excluding persons even where their involvement in preparatory works bestowed no competitive advantage on them at all.
35.4 Instead of the application of a strict rule, a person involved in preparatory works should be afforded the opportunity to demonstrate that the preparatory work did not afford them a competitive advantage or give rise to a conflict of interest.
35.5 This entails a flexible, case-by-case assessment by the adjudicator, rather than the mechanical application of a strict rule.
36 The Fabricom judgment is directly analogous to the question of interpretation in this matter, because:
36.1 The law in issue had the same effect as the strict rule in this matter.
The Belgian State expressly defended the strict rule: “The Conseil d’Etat considers that that provision, generally and without distinction, precludes a person who has been instructed to carry out such research, experiments, studies or development…from participating in or submitting tenders for a contract.”36; and
36.2 Fabricom’s challenge was based on grounds similar to those contained in section 217 of our Constitution (namely, proportionality, competition, and equal treatment of tenderers).
36 Fabricom at para 19
37 The ECJ has recently followed and applied the principles established in Fabricom.
38 In Intrasoft International SA v European Commission:37
38.1 The ECJ held that a financial regulation could allow for exclusion of a tenderer on the basis of a risk of conflict of interest. It found, however, that the risk of conflict of interest must actually be found to exist, following a specific assessment of the tender and the tenderer’s situation, for that tenderer to be excluded from the procedure, and that a mere possibility of a conflict of interest cannot suffice for that purpose.38
38.2 Even where there is a conflict of interests, the Court held that the awarding authority is under no absolute obligation to exclude systematically tenderers in a situation of a conflict of interests because an exclusion would not be justified in cases where it is possible to show that that situation had no impact on their conduct in the context of the tender procedure and that it entails no actual risk of practices liable to distort competition between tenderers.39 38.3 In its assessment of the existence of a risk of conflict of interests on
the facts before it, the Court held that “it cannot be accepted that
37 Intrasoft International SA v European Commission Case T-403/12, Judgment of the General Court (Second Chamber) of 13 October 2015 (Intrasoft).
38 Intrasoft at para 74.
39 Intrasoft at para 76.
the risk of a conflict of interests can be based on the mere fact that the applicant had access, before the other tenderers, to the documents specific to another call for tenders because it belonged to the consortium which prepared those documents which, subsequently, were retained to be used as a reference for the activities associated with the call for tenders at issue in the present case”.40
39 In European Dynamics Luxembourg SA and Others v European Union Intellectual Property Office: 41
39.1 The applicants complained that one of the successful tenderers, a consortium, included the company that had drafted the tender specifications and therefore alleged that the successful tenderer was subject to a conflict of interests which precluded them from being awarded the tender.
39.2 The ECJ held that the existence of structural links between two companies, one of whom took part in the drafting of the tender specifications and the other of whom took part in the tendering procedure for the public contract in question is, in principle, capable
40 Intrasoft at para 82.
41 European Dynamics Luxembourg SA and Others v European Union Intellectual Property Office Case T-556/11, Judgment of the General Court (Fourth Chamber) of 27 April 2016 (European Dynamics).
of causing a conflict of interest.42 However, the Court emphasised that the contracting authority must check whether the relationship between the two companies actually impacted on the conduct of the successful tenderer in the context of the tendering process.43 The purported conflict of interest must have affected the timing or outcome of the tendering procedure.44
39.3 The Court held that in such a scenario, the tendering company
“must be allowed to demonstrate that that situation involves no risk whatsoever for competition between tenderers.”45
39.4 By contrast, a contracting authority must exclude the tenderer concerned, the Court held, “where that approach is the only measure available to avoid an infringement of the principles of equal treatment and transparency, which are binding in any procedure for the award of a public contract…that is to say, that no less restrictive measures exist in order to ensure compliance with those principles.”46
42 European Dynamics at para 43.
43 European Dynamics at para 45.
44 European Dynamics at para 57.
45 European Dynamics at para 45.
46 European Dynamics at para 46.
40 In both Intrasoft and European Dynamics the ECJ annulled the respective decisions to reject the tenders that were alleged to have been subject to conflicts of interest.
41 The ECJ has thus held, at least three times, that the question whether a tenderer involved in preparatory work must be excluded from the subsequent contract must be approached in a flexible and fact-specific way by the adjudicator. It is impermissible to rigidly exclude all such tenderers without giving them the opportunity to demonstrate that involvement in the preparatory work did not undermine competition by giving them an unfair advantage.
CONCLUSION
42 CESA submits that this Court should decline the City’s invitation to adopt a strict interpretation of the provisions, which would disqualify any tenderer involved in preparatory works from consideration for the subsequent contract.
43 Instead, CESA contends that the question whether a tenderer falls within the prohibition contained in Regulation 27(4) is one that must be answered based on the particular facts of the case, and in particular, with reference to whether the involvement in the preparatory works bestowed any competitive advantage relative to the other tenderers. It will frequently be possible for a municipality to neutralise any such putative advantage simply by making all relevant information available to all of the tenderers.
44 The strict rule will frequently undermine competition and cost- effectiveness and will produce unfair results. This is because it will disqualify tenderers from consideration even where involvement in the preparatory work bestowed no competitive advantage on them. It is therefore inconsistent with a contextual, purposive approach to the provisions in the light of section 217 of the Constitution.
45 The flexible interpretation, by contrast, permits municipalities to decide on case-by-case basis whether a tenderer should be disqualified because of involvement in preparatory works. It therefore gives better effect to the values of section 217 of the Constitution, the purpose of competition in procurement, and well-established principles about the flexible content of fairness. The European Court of Justice’s procurement jurisprudence clearly favours the flexible interpretation.
46 CESA therefore submits that this Court should refuse the City’s invitation to endorse the strict rule, and should instead adopt the flexible interpretation.
NICK FERREIRA
Counsel for the amicus curiae Chambers, Sandton
5 October 2016
TABLE OF AUTHORITIES South African Authorities
Allpay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer, South African Social Security Agency, and Others 2014 (1) SA 694 (CC)
Cool Ideas 1186 CC v Hubbard and another 2014 (4) SA 474 (CC)
Gcaba v Minister for Safety and Security and Others 2010 (1) SA 238 (CC) Joseph and Others v City of Johannesburg and Others 2010 (4) SA 55 (CC) Makate v Vodacom Ltd 2016 (4) SA 121 (CC)
Metro Projects CC v Klerksdorp Local Municipality 2004 (1) SA 16 (SCA) Minister of Social Development and others v Phoenix Cash & Carry–Pmb CC [2007] 3 All SA 115 (SCA)
Thint (Pty) Ltd v National Director of Public Prosecutions and Others; Zuma v National Director of Public Prosecutions and Others 2009 (1) SCA 1 (CC) Walele v City of Cape Town and Others 2008 (6) SA 129 (CC)
Zondi v MEC for Traditional and Local Government Affairs and Others 2005 (3) SA 589 (CC)
International authorities
European Dynamics Luxembourg SA and Others v European Union Intellectual Property Office Case T-556/11, Judgment of the General Court (Fourth Chamber) of 27 April 2016
Fabricom SA v Belgian State [2005] ECR I-1559, ECJ; ([2005] All ER (D) 67 (Mar)
Intrasoft International SA v European Commission Case T-403/12, Judgment of the General Court (Second Chamber) of 13 October 2015
