Construction firms challenge Sanral’s award of N2 tender

The CSS Wild Coast Joint Venture (JV) – a partnership between Concor and JSE-listed Stefanutti Stocks – is challenging the award of a tender for the construction of a section of the N2 Wild Coast toll highway in the Eastern Cape to another bidder because its bid was the lowest and about R20 million cheaper than the successful bidder.

Sanral in January 2023 awarded the 45-month contract for the section of the highway between the Lingeni Intersection and the Msikaba Bridge to the WBHO-Edwin Construction JV, which submitted the second lowest bid for the project at R2 296 700 642.44 (R2.29 billion).

The CSS JV submitted a bid of R2 276 624 038.00 (R2.27 billion), the lowest of the five bids submitted for the tender.

In February 2023, the CSS JV lodged an urgent application in the High Court in Pretoria to review and set aside the contract award.

An agreement between the CSS JV and Sanral was made an order of court.

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In terms of that order, Sanral was interdicted and restrained from implementing the tender pending the finalisation of Part B of the JV’s proceedings to review and set aside Sanral’s tender process and the decision to award the tender to the WBHO-Edwin Construction JV.

The latter was cited as a respondent in the case but did not oppose the application.

Both Sanral and WBHO CEO Wolfgang Neff confirmed that a court date has not yet been set for Part B of the application to be heard.

Some background

Hendrik du Preez, the estimating director for Concor Construction, said in an affidavit submitted in support of the CSS JV’s application that Sanral issued inquiry documents for the tender in about September 2020.

The extended closing date for tender submissions was 12 March 2021, and Sanral requested seven extensions to the validity period of tenders submitted.

Du Preez said that during the extended tender validity period, Sanral requested the CSS Wild Coast JV to provide various clarifications, including about the financial position of both Concor and Stefanutti Stocks.

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He said the CSS Wild Coast JV complied with requests from Sanral and Inkazimulo Consulting, seemingly representing Sanral, for clarification and proof of financial standing and that the documents submitted during June 2022 established that the JV has the financial standing to perform the contract.

“Accordingly, the applicant [CSS Wild Coast JV] was the highest ranked tenderer, its tender did not present any unacceptable commercial risk to Sanral, no objective factor under clause 5.13 [of the tender] justified the award to the second ranked tenderer, and therefore Sanral was obliged to accept its tender, which Sanral failed to do,” he said.

Reasons requested

The CSS JV sent a letter to Sanral in February 2023 in which it requested that Sanral provide it with written reasons in terms of a clause in the tender conditions why the roads agency accepted the tender offer of the WBHO-Edwin Construction JV and not that submitted by the CSS Wild Coast JV.

It pointed out in the letter that:

• The CSS Wild Coast JV scored the most tender evaluation points in terms of the conditions of tender and the tender data;
• It demonstrated that it had all the requirements set out in clause 5.13(b);
• Sanral is an organ of state, which, in terms of the Promotion of Administrative Justice Act, is obliged to comply with administrative law principles of fairness, reasonableness and rationality; Sanral is also a public body obliged to provide the record of decision under the Promotion of Access for Information Act; and
• Sanral has not provided any reasons for its decision to accept the tender offer of the WBHO-Edwin Construction JV, and it is obliged to do so.

The letter stated that its request for reasons for Sanral’s decision included, as a minimum, certain documentation related to the tender.

These are:

• The evaluation panel’s determination of the tender evaluation points to be awarded to the CSS Wild Coast JV and those to be awarded to the WBHO-Edwin Construction JV;
• The record of decision by Sanral to accept the tender offer of the WBHO-Edwin Construction JV;
• A copy of the due diligence report, if any, used to evaluate the CSS Wild Coast JV’s ability to perform the contract, including all details of any risk assessment conducted; and
• Confirmation by Sanral on whether due diligence was conducted on WBHO-Edwin Construction JV and, if so, that Sanral provide a copy of this due diligence report.

Du Preez said the CSS  JV letter required Sanral to provide the requested information and documentation by no later than the close of business on 10 February 2023.

No intention to act transparently?

He said the letter recorded that should Sanral fail to provide the requested information and documentation, it would proceed on the basis that Sanral has no intention of acting transparently and in accordance with its obligations.

Du Preez said despite Sanral being obliged to provide reasons for the award of the tender, it has failed to do so, and this failure:

• Constitutes a lack of transparency, contravening the legislative framework governing administrative action; and
• Supports the inference that Sanral had no lawful justification for awarding the contract to the second-ranked tenderer, the WBHO-Edwin Construction JV.

“Sanral’s action of awarding the contract for the tender to the second respondent [WBHO-Edwin Construction JV] contrary to its own tender documents and the legislative framework, and thereafter refusing to provide written reasons for its decision (when requested by the applicant [CSS Wild Coast JV] to do so) constitutes unreasonable administrative action, which is unjust and unlawful,” he said.

“Sanral’s actions in ignoring the applicant’s [CSS Wild Coast JV] request for written reasons is similarly unreasonable and unlawful and supports the ineluctable inference that there are tender award irregularities that Sanral is reluctant to expose.”

Irreparable harm

Du Preez added that the CSS Wild Coast JV will suffer irreparable harm if the relief sought in its application is not granted.

He said the value of the CSS JV’s tender is significant and would represent a sizeable portion of its order book and revenue over the next four-year period, and Sanral’s decision not to award a contract to it will have a significant negative impact on the JV’s revenue and operations.

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In addition, Du Preez said upholding the awarding of the contract between Sanral and the WBHO-Edwin Construction JV would be contrary to public policy because the roads agency contravened binding statutory provisions of the Preferential Procurement Policy Framework Act in unlawfully awarding the contract.

The project is part of the South African government’s strategic infrastructure projects SIP-3, “South-Eastern Node & Corridor Development”, whose primary purpose is to serve as a catalyst to increase the economic growth of the Eastern Cape and KwaZulu-Natal.

Once the project is completed, the route will be about 69km shorter than the current N2 and 85km shorter than the R61 route.

This article is republished from Moneyweb under a Creative Commons licence. Read the original article.