Judge sets aside flawed R33.2m roads tender

The Pretoria High Court has set aside a R33.2 million tender awarded by the Greater Tzaneen Municipality to a construction company to upgrade certain roads in Limpopo, after the court questioned the method used by the municipality in determining the winning bidder. Judge Neil Tuchten made it clear that he found only that the process followed by the municipality in awarding the tender to Makgetsi Construction Enterprises to be flawed. He could not find that the municipality’s decision to grant the tender to Makgetsi was either right or wrong, as the court was not qualified to determine which of the companies that applied for the tenders should have been approved.

One of the losing bidders, MacP Construction, asked the court to urgently review and set aside the tender awarded to its rival. It said that the formula used by an expert appointed by the municipality to assess the tenders was “irrational”. The tenders were advertised in October last year and 15 companies responded, including the two before court. The advertisement for the tenders made it clear that the municipality was not obliged to accept the lowest bid. The municipality appointed a consulting engineer, a Mr Mojapelo, to assist the bid evaluation committee in deciding which bid to approve. He estimated the cost of upgrading these roads to be about R33.9m. Judge Tuchten said the expert then did something which he “considered rather curious”.

He added up the sums tendered by the 15 bidding companies (including the six companies which had by then fallen out of the race) and divided the sum by 15. He then arrived at an arithmetical average of R33.4m. Using this data, Mojapelo concluded that MacP deviated from the estimated price by 30 percent and from the average price by 29 percent and that Makgetsi deviated by 2 percent from the estimated price and 1 percent from the average price. He further concluded that the rates accepted by the latter were acceptable, but was critical of MacP’s rates, as they “did not compare favourably with the average prices”. The tender was awarded to Makgetsi, which had already completed about 1 percent of the work when MacP obtained an urgent application earlier for it to halt further operations until the dispute was resolved.

It said the formula used at arriving at the winning bidder simply made no sense, but the municipal manager defended this by using the price of bread as an example. She (the municipal manager) said if one wanted to determine the average price of a loaf of bread, one would obtain the various prices from competing outlets. The minimum price must then be taken and compared with the highest price to determine the average price. The average price would therefore become the acceptable price, the court was told. But the court held a different view. “In my view the arithmetical average calculation is both unscientific and irrational,” Judge Tuchten said. It did not take into account that some of the bidders might by legitimate methods have lower costs of production compared to their competitors.

The municipality said there were dangers in accepting a “too-low tender”, as it could provide substandard work. This in turn would cost the municipality more in fixing the flaws in the road surface. It complained that tenders had been awarded to MacP in the past and that the road had to be fixed at an addition expense of R20 million because of shoddy work. This was denied by MacP and the judge said the allegations had no substance. He ordered the municipality to reconsider all the tenders.