SIU V Easyway, Tarmac, Pave and Projects CC and others

Background and context

In the matter of Special Investigating Unit (SIU) v Easyway, Tarmac, Pave and Projects CC and Others, the Special Tribunal was asked to review and set aside the decision of the Mogalakwena Municipality (“the Municipality”) to award a tender to Easyway, Tarmac, Pave and Projects CC (“Easyway”) on 26 February 2018 for the supply, delivery, installation, and/or construction of borehole development, storage reservoirs, and bulk gravity supply pipelines to the value of R167 919 973.47 (inclusive of VAT). The SIU further sought an order declaring the subsequent contract unconstitutional and invalid.

The basis for the application was an alleged misrepresentation by Easyway that it had undertaken three projects valued over R50 million at Marothobong in Nkangala District Municipality in 2013, Victor Khante Municipality in 2013, and Goven Mbeki Local Municipality in 2015.

On 13 October 2017, the Municipality advertised the tender for the supply, delivery, installation, and/or construction of borehole development, storage reservoirs, and bulk gravity supply pipelines. On 26 February 2018, the Municipality awarded the tender to Easyway in the amount of R167  919  973.47, inclusive of VAT. The parties subsequently entered into a contract for a period of 18 months, with the termination date set as 5 July 2020.

On 5 March 2021, the President of the Republic of South Africa directed the SIU to investigate the allegations contemplated in Proclamation R180 of 2021. In terms of the Proclamation, the SIU was instructed to investigate, amongst others, the procurement of, or contracting for, goods, works or services by or on behalf of the Municipality, and payments made in respect thereof, in a manner that was not fair, competitive, transparent, equitable, cost-effective, was otherwise ultra vires.

Following its investigation, the SIU found that the award of the tender to Easyway was characterised by irregularities, most notably in relation to the experience of the service provider. In its bid documents, Easyway stated that it had undertaken three projects valued above R50 000 000.00, namely:

• bulk water supply in the Nkangala District Municipality in 2013,
• construction of a water retention system in Victor Khante Municipality in 2013, and
• construction of roads and stormwater for Goven Mbeki Local Municipality in 2015.

Upon investigation, the SIU found that these works were valued only at R6 109 569.45 and that there was no record of work done for the Goven Mbeki Municipality. As a result, Easyway had misrepresented the value by R50 867 571.05 and had falsified work experience in order to secure the tender.

The SIU’s investigation further revealed:

• that the value of the tender awarded to Easyway exceeded the permitted contract value as per the Construction Industry Development Board (“CIDB”) by 29%, and
• that the tender was awarded to Easyway despite another bidder, Lilithalethu Trading 41 (“Lilithalethu”) receiving favourable scores in the tender evaluation process and submitting a bid of R58 656 021.15 lower than what was awarded to Easyway.

The SIU argued that Easyway acted fraudulently by misrepresenting its grading designation as per the CIDB framework, thereby inducing the Municipality to award the tender on the mistaken belief that Easyway was eligible for appointment. The Municipality, in making the appointment, did so to its detriment. Easyway, for its part, contended that what transpired during the tender process did not amount to fraud.

Judgment of the Special Tribunal

Judge Mashile delivered a comprehensive judgment delineating five key issues:

1. Whether Easyway secured its appointment by making a material misrepresentation;
2. Whether the evaluation criteria were unfair;
3. Whether exceeding the allowed contract value was unlawful;
4. Whether Lilithalethu was unfairly disqualified, and
5. Whether the Tribunal should thus review and set aside the appointment.

Judge Mashile began the judgment by setting out the relevant framework, including:

• section 217 of the Constitution, which governs public procurement and seeks to eliminate fraud and corruption;
• section 195 of the Constitution, which requires public administration to be governed by democratic values and principles;
• the Preferential Procurement Policy Framework Act (“PPPFA”), which requires organs of state to implement procurement policies through a preference point system;
• the Preferential Procurement Regulations, 2017 (“PPR”), in particular item 5, which requires that evaluation criteria objectively measure functionality;
• section 76(4)(c) of the Public Finance Management Act (“PFMA”), empowering the National Treasury to issue binding procurement instructions; and
• regulation 17 of the CIDB Act Regulations, which prescribes permissible contract values according to grading designations, including limited allowances for reasonable excess

Judge Mashile reaffirmed the settled principle that fraud unravels all. On this basis, Easyway’s conduct was scrutinised. It was common cause that, at the time it completed its bid documents, Easyway knew that it had not undertaken three projects valued above R50 000 000.00, yet represented that it had done so. This misrepresentation was exposed through the SIU’s investigation. Judge Mashile found that by submitting inflated contract values and referring to engineering projects that did not exist, Easyway deliberately misrepresented itself as a qualified bidder, despite knowing that this was not the case. Easyway did not meaningfully dispute the SIU’s evidence, rendering fraud a common cause. The tender was therefore unlawful and invalid. On the evaluation criteria, Judge Mashile stated that the bid evaluation committee had used summary evaluation criteria and did not record scoring utilising the sub-criteria recorded in the tender specifications. Further, there was another service provider who scored higher than Easyway, and the Municipality could not choose simply not to award the tender to the higher scoring service provider. The evaluation was thus unlawful and invalid.

With regard to the evaluation criteria, Judge Mashile found that the bid evaluation committee relied on summary evaluation criteria and failed to record scores using the sub-criteria specified in the tender documents. Furthermore, another bidder had scored higher than Easyway, and the Municipality could not lawfully disregard the higher-scoring bidder. The evaluation process was accordingly unlawful and invalid.

In relation to grading, the tender amount of R167 919 973.47 awarded to Easyway significantly exceeded the R130 000 000.00 threshold applicable to the relevant CIDB grading designation, even allowing for a fifteen per cent reasonable excess. Easyway was therefore not qualified to undertake the work, rendering the appointment unreasonable and unlawful.

On the facts, the Municipality failed to provide cogent reasons for differentiating against Lilithalethu, which held the same grading designation as Easyway and had submitted a substantially lower bid. Lilithalethu’s disqualification was thus unlawful and invalid.

Exercising the Tribunal’s remedial powers, Judge Mashile concluded that the only just and equitable outcome was for Easyway to repay the full amount it had received as a result of fraud. Accordingly: (i) the application was granted; (ii) the Municipality’s decision to award the tender to Easyway was reviewed and set aside; (iii) the contract concluded between the parties was declared invalid and set aside; and (iv) Easyway was ordered to pay the SIU R68 866 908.88, together with interest.

Timeline of Events

Conclusion

This judgment represents a firm enforcement of constitutional requirements in public procurement and a decisive response to fraud in the tendering process. The Special Tribunal reaffirmed the principle that fraud unravels all. The ruling underscores that failure to comply with section 217 of the Constitution and applicable procurement legislation renders public contracts unlawful, and serves as a clear reminder that the Tribunal will hold service providers financially accountable for funds unlawfully received.