IN THE HIGH COURT OF SOUTH AFRICA (NORTH GAUTENG HIGH COURT, PRETORIA)
NOT REPORTABLE Date: 2009-04-17
Case Number: 597/09
In the matter between:
MAREDI TELECOM & BROADCASTING (PTY) LIMITED Applicant
and
ERICSSON SOUTH AFRICA (PTY) LIMITED First Respondent
TELSAF DATA (PTY) LIMITED Second Respondent
TELKOM SA LIMITED Third Respondent
JUDGMENT
SOUTHWOOD J
[1] This is an urgent application in which the applicant (‘Maredi’) seeks
interim relief interdicting the third respondent (‘Telkom’) from entering
into a contract with the first respondent (‘Ericsson’) and the second
respondent (‘Telsaf’), alternatively, Ericsson, alternatively, Telsaf,
pursuant to the tender by Ericsson and Telsaf to Telkom under tender
number RFP085/07 (‘the tender’) and interdicting Telkom from ordering
from Ericsson and Telsaf any goods or services pursuant to the award
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by Telkom to Ericsson and Telsaf of the tender pending the final
determination of Maredi’s application to review and set aside the award
of the tender by Telkom to Ericsson and Telsaf and remitting the tender
back to Telkom for it to reconsider the award.
[2] The award of the tender by Telkom to Ericsson and Telsaf was the
culmination of a 16 month long process during which tenders were
invited, received and evaluated at four levels by representatives of
Telkom. On 1 December 2008 Telkom notified Ericsson and Telsaf
that their tenders were successful and that they were awarded the
tender in the ratio 40 % to 60 % respectively. On the same date
Telkom notified Maredi that it was not successful. Maredi immediately
took legal advice and requested Telkom’s reasons for awarding the
tender. On being informed that it failed to meet certain critical criteria
Maredi prepared and served this urgent application on Ericsson, Telsaf
and Telkom. Only Ericsson and Telkom oppose the application. Telsaf
has not given notice of intention to oppose or filed an answering
affidavit.
[3] The parties have filed compendious affidavits which deal in great detail
with the tender process with particular reference to the physical
evaluation of the products and the final decision to award the tender.
Maredi’s case in the founding affidavit is that in awarding the tender
Telkom acted in breach of various provisions of the Promotion of
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Administrative Justice Act, 3 of 2000 (‘PAJA’) (which, it is common
cause, applies to the award of tenders by Telkom).
Maredi alleges that Telkom was biased in favour of Ericsson and says
that Telkom ignored its own procedures to ensure that the tender was
awarded inter alia to Ericsson and deliberately misrepresented the
results of the technical testing that took place to ensure that the tender
was not awarded to Maredi but inter alia to Ericsson. During the
hearing, Maredi’s counsel informed the court that Maredi would not
persist in the allegations of dishonesty in the papers. It accordingly
became common cause that Maredi will have no right to claim
damages from Telkom if Telkom wrongfully awarded the tender to
Ericsson and Telsaf – see Olitzki Property Holdings v State Tender
Board & Another 2001 (3) SA 1247 (SCA) para 42; Steenkamp NO
v Provincial Tender Board, Eastern Cape 2007 (3) SA 121 (CC)
paras 55 and 56; Premier, Western Cape v Fair Cape Property
Developers (Pty) Ltd 2003 (6) SA 13 (SCA) paras 40-49 and 50-59.
[4] The applicant seeks interim relief. The applicant must therefore
establish:
(1) a clear right or, if not clear, that it has a prima facie right;
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(2) that there is a well-grounded apprehension of irreparable harm if
the interim relief is not granted and the ultimate relief (by way of
the review proceedings) is eventually granted;
(3) that the balance of convenience favours the grant of an interim
interdict; and
(4) that the applicant has no other satisfactory remedy. (LF Boshoff
Invesments (Pty) Ltd v Cape Town Municipality; Cape Town
Municipality v LF Boshoff Investments (Pty) Ltd 1969 (2) SA
256 (C) at 267B-E.)
When an applicant cannot show a clear right, and more particularly
where there are disputes of fact relevant to a determination of the
issues, the Court’s approach in determining whether the applicant’s
right is prima facie established, though open to some doubt, is to take
the facts set out by the applicant, together with any facts set out by the
respondent which the applicant cannot dispute, and to consider
whether, having regard to the inherent probabilities, the applicant
should (not could) on those facts, obtain final relief at the trial of the
main action. The facts set out in contradiction by the respondent
should then be considered and if serious doubt is thrown upon the case
of the applicant it cannot succeed. (Webster v Mitchell 1948 (1) SA
1186 (W); Gool v Minister of Justice and Another 1955 (2) SA 682
(C) at 688C-E; LF Boshoff Investments (Pty) Ltd v Cape Town
5
Municipality (supra) at 267E-G; Beecham Group Ltd v B-M Group
(Pty) Ltd 1977 (1) SA 50 (T) at 55B-E.)
In Beecham Group Ltd v B-M Group (Pty) Ltd (supra) the court said
with regard to the various factors which must be considered:
‘I consider that both the question of the applicant’s prospects of
success in the action and the question whether he would be
adequately compensated by an award of damages at the trial
are factors which should be taken into account as part of a
general discretion to be exercised by the Court in considering
whether to grant or refuse a temporary interdict. Those two
elements should not be considered separately or in isolation, but
as part of the discretionary function of the Court which includes
a consideration of the balance of convenience and the
respective prejudice which would be suffered by each party as a
result of the grant or the refusal of a temporary interdict.’
Where the applicant’s right is clear and the other requisites of an
interdict are present no difficulty presents itself about granting an
interim interdict. Where, however, the applicant’s prospects of ultimate
success are nil, obviously the Court will refuse an interdict (Olympic
Passenger Services (Pty) Ltd v Ramlagan 1957 (2) SA 382 (D) at
383C-D; Beecham Group Ltd v B-M Group (Pty) Ltd (supra) at
54H-55B.
[5] In the absence of a claim for damages, if Maredi establishes a prima
facie right (i.e. a prima facie right to an order setting aside Telkom’s
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award of the tender to Ericsson and Telsaf) it will follow that there will
be a well-grounded apprehension of irreparable harm if the interim
relief is not granted and the ultimate relief is eventually granted. There
is clearly no balance of convenience in favour of the applicant. In fact
the balance of convenience is overwhelmingly in favour of the
respondents. The applicant can point to no prejudice to it other than
the possible loss of profit while Telkom has dealt extensively with the
impact which interim relief will have on its business. It will not be able
to proceed with its expansion and development plans and this will
result in losses of approximately R50 million per month while the order
is in force. It is fair to accept that it will take six to eight months to file
the record and affidavits and obtain a date for the hearing of the main
application. In addition to this time there is the time it would take to
have the matter decided on appeal. Maredi’s counsel did not contend
otherwise. The real issue is therefore whether Maredi established a
sufficiently strong right to justify the court granting an interim interdict.
Maredi contends that it has established a clear right whereas the
respondents contend the opposite. This questions turns primarily on
whether Maredi was properly excluded from consideration.
[6] It must be recorded that in reply Maredi’s counsel handed to the court a
written undertaking given by Maredi addressed to Ericsson, Telsaf and
Telkom in which Maredi undertakes –
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‘RE: MAREDI TELECOM & BROADCASTING (PTY)
LIMITED/ERICSSON SOUTH AFRICA/TELSAF DATA/TELKOM
SA LIMITED CASE NO: 579/09
We undertake that in the event that the interim interdict sought
in case number 579/09 being granted to us and in the event that
the review under the same case number ultimately fails we shall
reimburse Ericsson, Telsaf Data and Telkom for any loss proved
to have been sustained as a consequence of the granting of the
interim interdict.’
This undertaking which is dated 20 February 2009 was marked ‘A’
(p1373) by the court. I agree with Telkom’s counsel that this
undertaking does not affect the balance of convenience. It is given by
a private company, apparently the subsidiary of the Japanese parent
company, and there is no indication that this company will be able to
reimburse any of the respondents for the loss they suffer as a
consequence of the granting of the interim interdict.
[7] In its founding affidavit Maredi alleges that the decision to award the
tender to Telsaf and Ericsson must be reviewed on the following
grounds (the references to the sections are to sections in PAJA):
(1) The decision was procedurally unfair (s 6(2)(c));
(2) The decision was biased or reasonably suspected of bias (s
6(2)(a)(iii));
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(3) The decision was taken for an ulterior purpose (s 6(2)(e)(ii));
(4) The decision was taken because the relevant considerations
were not considered (s 6(2)(e)(iii)); and
(5) The decision was taken arbitrarily or capriciously (s 6(2)(e)(vi)).
[8] In Maredi’s heads of argument Maredi relies only on the following three
grounds –
(1) The ultimate award of the tender was premised on the fact that
Maredi had confirmed that its tender did not comply with the
requisite technical specifications – this was wrong because ‘a
dispute existed between the applicant and representatives of the
third respondent as to whether or not features that the
applicant’s tender admittedly lacked were features that were
required, on a correct construction of the technical critical
criteria.
Maredi contends that, for present purposes, the relevant issue is
not the correctness of the applicant’s assertion that it complied
with the technical critical criteria but the fact of the existence of a
dispute as to this issue. Maredi argues that EXCO had sought
an assurance that the applicant admitted its non-compliance and
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the tender decision was premised on an erroneous belief that it
had done so. Maredi argues further that if EXCO had been
aware of the existence of the dispute as to the proper
interpretation of the technical critical criteria it would have been
called upon to determine whether the applicant was correct in its
assertions in relation to this interpretation issue but it never
considered that issue because it had been misled as to the
applicant’s stance.
(2) The decision is vitiated by the erroneous representation that
Maredi did not meet the technical critical criteria. EXCO relied
on paragraph 7.3.2 of the PRC recommendation. In fact Maredi
did comply;
(3) Improper favouritism and procedural unfairness in the test
extensions granted to Ericsson. In summary the argument is
that the fact of and the manner in which the date for the
demonstration was extended indicates bias.
[11] As already mentioned, in it answering affidavit Telkom describes in
considerable detail the tender procurement process. This evidence is
important background and is not in dispute. It may be summarised as
follows:
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(1) The following committees are involved in the procurement
process (where the value of the tender is in excess of R40
million):
(i) An ad hoc Subject Matter Expert Team (‘SME’);
(ii) A Cross Section Functional Team (‘CSFT’);
(iii) The Procurement Review Council (‘PRC’);
(iv) The Executive Committee (‘EXCO’).
(2) A service organisation (‘the sponsor’) requests the procurement
of a product or service. The Chief of Operations bears the
ultimate responsibility in respect of the procurement of network
or IT related equipment. The Chief of Operations is the sponsor
of the RPF085/07 tender.
(3) The SME is project specific. It compiles the evaluation criteria
which are to be applied to the tender. It utilises a prioritisation
matrix to weigh the evaluation criteria. This assists in the
selection of the most suitable vendor/s for Telkom. The SME
first prepares and presents to the CFST for its approval the
project plan for the relevant project. The plan contains the
identities of the persons constituting the project team, the
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evaluation criteria and weightings. The SME evaluates the bids
received in accordance with the approved project plan. Based
on the scores achieved by the vendors against the relevant
criteria the SME prepares a recommendation to the CFST on
the short listing of vendors. The CFST may approve the SME’s
recommendation or it may reject it.
(4) The CFST is a multi-disciplinary team whose primary purpose is
the procurement of products. It consists of representatives from
Telkom’s various divisions (service organisations). It is
responsible for all the preliminary steps which result in the
eventual procurement of products or services. The CFST must
consider whether the product required complies with Telkom’s
commercial goals and whether it advances Telkom’s needs and
interests. The CFST consists of executives (or their delegates)
from Procurement and other functional portfolios. It meets every
week. The CFST involved in the present case is the Network
CFST because the product required fell under the Network
Infrastructure Provisioning Functional Portfolio. The CFST had
a number of specific duties and functions. The members of the
CFST when the award of RPF085/07 was made were –
Name Service Organisation Level
Christina Naidoo Procurement Services: Senior
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Strategic Sourcing Manager
Andrew Hadley Network Infrastructure Executive
Provisioning: Technical
Strategy and Integration
Steve Lewis Network Infrastructure Executive
Provisioning: Technical
Product Development
Billy Fick Network Infrastructure Executive
Provisioning: Integrated
Network Planning
Robert George Network Call Operations: Executive
High Level Support
Cathy Magodie Procurement Services: Senior
Black Economic Manager
Empowerment
Arnold van Huyssteen Sales and Marketing Executive
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(5) The PRC is authorised to approve and issue all requests for
bids, proposals and information for the supply of goods/services
to Telkom in accordance with Telkom’s business strategy;
consider and approve the award of any tender/bid for the supply
of goods/services to Telkom up to but not exceeding R40
million; and consider and recommend the award of any
tender/bid for the supply of goods or services to Telkom in
excess of R40 million. Members of the PRC are appointed by
the chiefs of the various Telkom divisions. At the time of the
award the members of the PRC were:
Name Level Functional
Portfolio
Responsibility of
holder of the
functional
portfolio
Marius Mostert Group Executive Network
Infrastructure
Provisioning
Responsible for
network
technology
strategy,
planning,
technical product
development and
all associated
network
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infrastructure
deployment
Zethembe Khoza Group Executive Call Centre
Operations
Responsible for
managing all
contact points in
which customers
contact Telkom,
such as call
centres, Telkom
Direct shops,
commercial
services and
credit
management
Bashier Sallie Group Executive Information
Operations
Responsible for
Enterprise Wide
IT activities
including
infrastructure,
architecture,
application
development,
computer
operations and
support and
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internet services
providers
Anton Klopper Group Executive Legal Services Responsible for
managing the
provision of legal
advice and
assistance to
various business
units within
Telkom
Stafford
Augustine
(Chairman)
Group Executive Procurement
Services
Responsible for
overall
management of
procurement
services
encompassing
strategic
sourcing,
management of
outsourced
entities, corporate
support and BEE
Roy Sherriff Executive Capital and Asset
Management
The compilation
of the capital
budget for
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inclusion in the
company
business plan.
Support for
investment
decision making
using business
cases, funding for
which is
approved by a
funding council.
Capital funds
allocation and
accounting
support to project
managers for
capital work in
progress.
Updating and
maintaining the
asset register and
associated
depreciation.
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The Chairperson of PRC is the Group Executive: Procurement
Services who must sign the letter awarding the tender after the
relevant authority (either PRC or EXCO) has taken a decision to
award the tender and recorded the decision in writing. The PRC
meets every week. Its quorum is three members and decisions
are taken by simple majority. The PRC must provide direction,
guidance, advice and support to the CFST. It must review the
CFST activities and assist the CFST to meet its objectives. The
PRC functions include approving or supporting the final award of
bids or recommending the final award of bids; approving
recommendations on the shortlist of bidders and ensuring and
monitoring compliance by bidders with Telkom’s procurement
process.
(6) EXCO takes decisions to award a contract where the aggregate
of payments expected to be made under the tender does not
exceed R800 million. EXCO consists of all of Telkom’s Chief
Officers. At the time of the award of RPF085/07 EXCO’s
members were:
(i) Reuben September, Telkom’s Chief Executive Officer,
the Chairperson;
(ii) Motlatsi Nzeku, Telkom’s Chief of Operations;
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(iii) Thami Msimango, Telkom’s Chief of Global Operations
and Subsidiaries;
(iv) Naas Fourie, Telkom’s Chief of Strategy;
(v) Peter Nelson, Telkom’s Chief of Finance;
(vi) Charlotte Mokoena, Telkom’s Chief of Human Resources;
and
(vii) Ouma Rasethaba, Telkom’s Chief of Corporate Affairs.
(7) During November 2007 Telkom decided to publish RPF085/07
for the supply of Point to Point Split Mount Radio Equipment.
The initial criteria included commercial and technical criteria
which were prepared by CFST. Before RPF085/07 was
published the RPF approved all the critical criteria and the
weightings to be applied. In simple terms Point to Point Radio
Equipment enables the wireless transfer of data from a single
point to a single point. The equipment is essential for wireless
connectivity within Telkom’s network where physical
infrastructure such as copper or optical fibre cannot be
employed.
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(8) On 22 November 2007 RFP085/07 was published. It invited
tenders for Point to Point Microwave Equipment operating in the
frequency range L6GHz to 38GHz. The critical criteria to be met
were stipulated in the invitation. It was a condition of the tender
that all prospective bidders attend a bidders’ conference on 29
November 2007. The purpose of the conference was to enable
Telkom and all prospective bidders to clarify the bid
requirements. Representatives of Maredi, Ericsson, Telsaf and
Mobax SA (Pty) Ltd (‘Mobax’) attended the conference.
RFP085/07 is contained in a number of comprehensive
volumes.
(9) Pursuant to the publication of RFP085/07, Maredi, Ericsson,
Telsaf and Mobax submitted tenders. These tenders were then
evaluated by the SME consisting of the following persons –
Person Service Organisation Responsibility
James Wood Procurement Chairperson
Christina Naidoo Procurement Commercial conditions
Noncedo Mayikana Procurement BEE
Sandra Malusi Procurement Life Cycle Costing
Rajan Chetty Supplier Quality Supplier quality
Giel Laubscher TSI Functional specification
Ian Durston TSI Functional specification
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Paul Mulder TSI Network management
system specification
Luigi Pavona TSI Functional specification
Clifford Ardendorff Capability Management Turnkey statement of
work
Innocent Matlala NBMC Program
Management
Turnkey statement of
work
Corne Nortje Network Strategy Life cycle costing
Thembi Mazibuko TSI Management
specification
Trevor Schwikkard NNOC Maintenance and
support
Amith Samlal Davideen TSI Management
specification
Shaun Dick TSI Management
specification
Johan Boshoff NNOC Maintenance and
Support
Gerrie Opperman TSI Functional specification
Henning Vallgraaff Supplier Quality Supplier quality
(10) The evaluation was done in four phases –
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(i) Critical Criteria Evaluation and Short Listing – This is the
so-called ‘paper evaluation’ and was done between 2
January 2008 and 18 January 2008. This involved
comparing the content of the tender with the critical
criteria required. Each tenderer completes and signs a
Statement of Compliance stating that its bid complies with
all critical criteria. The tender document is examined
to see whether what is described complies with the
critical criteria specified in the invitation to tender. Each
bidder completes and signs a Statement of Compliance
which states that its bid complies with all critical criteria.
Unless the bidder complies with such criteria it will not
qualify for inclusion in the short list. No other information
is considered. Where possible the bidder’s claim of
compliance with critical criteria is verified by reference to
the supporting documentation. But where there is no
evidence in the bid or supporting documents the
declaration of compliance is accepted at face value.
Actual physical compliance is assessed at a later stage.
On this paper evaluation Maredi, Ericsson, Telsaf and
Mobax were short listed. The short list was then
submitted to CFST and PRC for approval, which they
granted.
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(ii) Evaluation and Scoring of Non-Critical Evaluation
Criteria. - This was done between 14 January 2008 and
1 February 2008. Once again the content of the tender is
compared with a predetermined scoring matrix
established and approved by the CFST and the PRC
before publication of the RFP. Maredi, Ericsson, Telsaf
and Mobax all successfully passed this evaluation.
(iii) Preparation and Physical Evaluation – This comprises a
physical technical evaluation of the equipment offered by
the bidder. In this phase the bidder is required to
demonstrate the equipment to the SME in accordance
with a test plan. According to Telkom its test plan
required the equipment to be set up for four different
scenarios. Maredi disputes this and contends that it was
only required to set up three. Maredi alleges that set up
four fell outside the parameters of the tender. This
dispute involves the one leg of the application for review
and will be dealt with more fully later.) It is not in dispute
that Telkom sent an explanation of the pre-determined
test plan to all the short listed bidders: Maredi, Ericsson,
Telsaf and Mobax. The object of this test plan is to
determine whether the bidders actually comply with the
technical critical criteria and the criteria of high
importance. On 8 February 2008 Telkom communicated
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the test plan set-up to Maredi and all the other short listed
bidders. The physical demonstration and evaluation of
the equipment was to take place in accordance with an
agreed schedule. Maredi, Ericsson and Telsaf requested
extensions and Telkom granted only those requested by
Maredi and Ericsson. The SME found that Maredi’s
equipment did not comply with the technical criteria.
Maredi disputes that its equipment was required to
comply with the relevant criteria. As already mentioned
this will be dealt with more fully later.
(iv) Clarification Session – On completion of the physical
evaluation clarification sessions are held to clarify any
uncertainty which arises with regard to compliance with
the technical critical criteria. Two such sessions were
held with Maredi. The first session was to explain the
questions put to Maredi for clarification and what was
required by the SME in response to these questions. The
second session allowed Maredi an opportunity to explain
its written responses put by the SME in the first session.
Only the SME evaluated the bids.
(11) On 21 May 2008, after completion of the evaluation, the SME
prepared a memorandum containing the SME’s
recommendation of the suppliers of choice. The memorandum
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describes the various evaluation phases already described in
this judgment. Four bidders were short listed and were referred
to as bidder 1 (Maredi), bidder 4 (Mobax), bidder 7 (Ericsson)
and bidder 9 (Telsaf). The SME concluded its comprehensive
memorandum as follows:
‘The technical SME team recommends that:
• Bidders 4, 7 and 9 are considered as the suppliers
of choice based on the technical compliance BUT
subject to acceptable costing.
• Bidder 1 cannot be considered as a supplier at this
particular point in time, since they did not fully
comply with the critical criteria as on 20 December
2007 as per the bid documentation and as
confirmed during subsequent clarification
exercises. Compliance might however have been
possible if the date of closing of the bid was June
2008.
• Since bidder 7’s system is already deployed in the
Telkom network, consideration should be given to
the current investment in the installed base of
equipment, network management solution,
integration time and costs, training and spares.’
(12) At its meeting on 4 June 2008 the CFST considered the SME
memorandum and resolved to accept the SME recommendation
subject to certain qualifications including that the tender would
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be apportioned 60 % to Telsaf and 40 % to Ericsson and that
this would be subject to change in the event that Ericsson
reduced its services costs.
(13) On 5 June 2008 the CFST prepared its recommendation for the
award to the PRC. The recommendation reads as follows –
‘In terms of clause 6.3.6.5 of the Delegation of Authority it
is recommended that RFP085/07 be awarded in the
following manner:
• Bidder no 9, Telsaf Data, ranks first and bidder no
1 Maredi Telecom and Broadcasting ranks second
based on the scoring with the LCC of all three
scenarios taken into account. As indicated in
paragraph 10.1 above however, effectively Maredi
is eliminated based on non-compliance to critical
criteria. Thus Telsaf Data ranks first and Ericsson
second.
• With Telkom already having Ericsson’s technology
in the network it will facilitate the continuity with the
provision of digital microwave links to the Mobile
Cellular Operators while the new technology of
Telsaf Date is being introduced.
• Based on dual supply principles this business
should be split between Telsaf Data and Ericsson
in a 60 %/40 % ratio, respectively. However, the
proviso should be that Ericsson align their turnkey
costs to those as proposed by Telsaf Data. The
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business split will be adjusted accordingly based
on the total costs for all three scenarios after
Ericsson has revised their pricing.’
(14) Chief of Operations is required to approve the recommendation
before it is made to the PRC. In this case the Chief of
Operations did not immediately sign the recommendation. He
first required that certain matters be clarified. On 6 June 2008
the Chief of Operations and Marius Mostert, the Group
Executive: Procurement Services, met to discuss these matters.
The Chief of Operations –
(i) wanted to be assured that Telkom was not being
disadvantaged on costing;
(ii) wanted clarity on all critical criteria and areas of
technical non-compliance;
(iii) wanted to be assured that the continued testing
had no material impact on the final scoring.
With regard to (1), the primary concern was that the Life Cycle
Costing (LCC) analysis did not take into account the support and
maintenance costs outside the guarantee period. Each of the
bidders offered different support and maintenance guarantees
27
and the idea was to normalise the bidders for comparative
evaluation purposes. Mostert undertook to take this up with
Procurement Services. With regard to (2), Mostert clarified the
scope of the technical critical criteria as well as the importance
of having the required interfaces and capacity. He also
explained to the Chief of Operations the applicant’s areas of
technical non-compliance. With regard to (3), Mostert pointed
out to the Chief of Operations that the test had commenced on 7
April 2008 but could not be concluded due to logistical problems
and the tests were therefore considered to be inconclusive. The
tests were not regarded as failed as they could not be
performed. Recommencing the tests with functional test
equipment therefore did not constitute an advantage to
Ericsson. Mostert also emphasised the fact that the ranking pre
and post the physical evaluation with Maredi disqualified due to
non-compliance with critical criteria, still resulted in Telsaf and
Ericsson as the successful bidders. Pursuant to further
questions posed by the Chief of Operations Mostert submitted to
him two memoranda, one on 1 August 2008 and one on 22
August 2008.
(15) On 22 September 2008 the CFST prepared a recommendation
for submission to the PRC which is the same as the
recommendation it prepared on 5 June 2008 but did not submit.
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(16) On 22 September 2008 the PRC considered the
recommendation at a special meeting. The second extension
granted to Ericsson to demonstrate its equipment was
considered. The minute of the meeting records the following:
• ‘Mr Khoza referred the members to an e-mail sent by the
Vice President of Ericsson to Ms Pahlane on the 11 April
2008 motivating the extension that was requested and
stating the reasons for the extension as being wrong
cables/equipment and indicated that the members
approved the revised date for the testing on 9 April 2008
based on the technical report provided by Telkom’s
technical team which indicated that the equipment was
damaged/faulty and not wrong. The wrong equipment
illustrates that Ericsson was not ready and should
therefore not have been allowed the extension. He
further indicated that the previous of the PRC to extend
the testing date for Ericsson was based on the wrong or
misrepresented information.
• Mr Roodt enquired why the PRC Chairperson to whom
the e-mail was addressed did not bring the matter to the
members for discussion and why Ericsson was allowed to
continue with the testing.
• The Chairman requested suggestions from the members
on how the matter should be addressed and thereafter
suggested that the validity of the extension to Ericsson be
investigated by internal audit to ensure that procedurally
Ericsson was not given an unfair advantage with the
approval of the revised testing date.
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• Mr Khoza required confirmation as to whether the
recommendation will be resubmitted together with the
audit findings.
• The Chairman indicated that he would request for the
internal audit to be completed by Friday 26 September
2008 and the recommendation will be presented together
with the audit findings at the next PRC meeting.
• All members agreed to above suggestion by the
Chairperson.
Decision: Referred back for decision at the next PRC
meeting including the internal audit findings.’
(17) On 1 October 2008 the internal auditor furnished his report to
the Chairperson of the PRC. The report sets out the facts
relating to Ericsson’s testing of the equipment as follows:
‘Procurement Services obtained approval from the
Procurement Review Council (PRC) on 20 October 2007
to republish an open RFP 4 Point 2 Point Split Radio
Equipment. The tender was published on 22 November
207 and on 24 January 2008 the short listed bidders were
notified that Telkom would like to test their equipment.
Ericsson SA (Pty) Ltd chose to test with Telkom locally,
the agreed date being 17 March 2008. The test date was
moved to 7 April 2008 on request of Ericsson. On 7 April
2008 testing was hampered due to damaged equipment,
faulty cables and misunderstandings by Ericsson’s staff
30
as to what the testing should entail (problems that one
would think should have been sorted out upfront given
the significance of the contract and the additional
extension in deadlines allowed before testing occurred).
Testing was unsuccessful notwithstanding the fact that
the Telkom evaluation team were very accommodating
from what TIA can gather ito the documentation
reviewed. Telkom requirements for the test scenarios
were also clearly communicated. On 9 April 2008 the
Vice President (VP) of Ericsson contacted Telkom
requesting another extension to test and followed up with
a letter on 11 April 2008 to the Chairperson of the PRC
indicating that the testing should have been done abroad
and that the wrong cables were shipped to SA. The PRC
was concerned about granting an additional extension
and referred the matter to Telkom’s Legal Department.
Telkom’s Legal Department advised that Ericsson should
be given a further (second) extension to bring their
equipment to SA to do the testing. This decision was
based on an earlier extension for another bidder.
Following this advice the PRC voted in favour of the
extension and a letter was sent to Ericsson indicating the
new test date of 7-11 May 2008.’
The auditor made a number of recommendations.
(18) On 2 October 2008 the PRC considered the report. The minute
reflects the following in respect of RPF085/07:
‘5.1 Feedback: Recommendation to Award of
RFP085/07 for the end to end solution of point to
point mount radio equipment. Mr Marius Mostert
31
raised an issue WRT the fact that he was informed
by a member of the SME team that they were
labelled liars by a member of the PRS and that this
was a seriously allegation. Mr Zethembe Khoza
reaffirmed his statement and indicated that his
view on this matter remain the same. The
Chairperson indicated that this concern was
noted.
The recommendation was presented for award by the
CFST to PRC on 22 September 2008. Members were
not in agreement with the recommendation by the CFST
as it was believed that Ericsson’s final technical scores
was as a result of a second approval granted by Telkom
to Ericsson for testing which was based on
faulty/damaged equipment vs Ericsson’s referral to wrong
equipment.
This raised concerns regarding the validity of the
extension granted to Ericsson and the impact thereof on
the award.
Mr Augustine indicated that PRC members agreed to
refer the matter to Telkom’s Internal Audit Division to
ascertain whether the tender process was compromised
by granting Ericsson additional time for the testing and
revert back to the PRC with the intention of making a
decision on the award. The audit findings were
presented to members.
Minutes of the Special PRC held on 22 September were
read and were accepted as true reflection of what was
discussed at the meeting.
32
The internal auditor report from Audit Division was also
circulated and discussed at length.
Based on the audit findings the members voted as
follows:
Anton Klopper: Based on the current backlog in respect
of facilities to the MCOs and VANS providers, supported
a dual supply as per the recommendation presented by
the CFST however for a two (2) year period only, with an
option to extend for one (1) year.
Gary Reddy: The same as Anton Klopper however would
like the split in business to be reviewed and increased
with the bidder that provide the best price after the
turnkey prices is finalised with Ericsson.
Marius Mostert: The same as Anton Klopper and
emphasised the need for a dual supply to support
Telkom’s market requirement and also informed the
members that the test was inclusive based on the SME
visit on 7 April 2008 and therefore had to be done on 6
May 2008 to obtain conclusive results.
Bruce Harbour: The same as Anton Klopper and Gary
Reddy.
Zetheme Khoza: Supported a single supply award to
Telsaf Data (Pty) Ltd since their proposal complied fully
with all Telkom procedures and based on their pricing.
Mr Khoza also indicated by granting the award to
Ericsson will question Telkom ability to uphold its own
policies and procedures as he believes that the process
was not transparent with equitable treatment of all
33
vendors; one PRC member was involved in discussion
with a vendor during the process and that Maredi’s non-
compliance was not material. He recommended that a
faze-in faze-out approach should be adopted to bring the
new supplier, Telsaf up to speed.
Stafford Augustine: The Chairperson informed members
prior to requesting them to vote that when making a
decision that their voting should be a business decision
for Telkom, in the best interest of Telkom and also
clarified with Anton Klopper as to whether the process
could be defended in a court of law.
Based on Anton Klopper’s response that the process is
defendable the Chairman supported a dual supply as per
the recommendation represented by the CFST however
for a two (2) year period only, with an option to extend for
one (1) year.
To the point of Mr Khoza, Mr Mostert indicated that his
interactions was only around the logistics of the testing as
the international trip was not approved and that the
finalisation of the testing was done in conjunction with
Procurement. He also indicated that no unfair advantage
was given to Ericsson as the first test was inconclusive.’
(19) On 8 October 2008 the Chief of Operations addressed the
following letter to the Chairperson of the PRC:
‘I have feedback from one of my representatives in the
PRC that reported to me serious anomalies and lack of
34
transparency, failure to meet Telkom’s policies and
procedures, lack of equitable treatment to bidders.
He pointed out that these procedural anomalies are most
certainly and materially damaging for Telkom. Among
them he stated the following:
(1) Modification of specification after bid closure
without consulting the Business Owner who
approved the specification.
(2) Unfair and inequitable treatment of bidders by
giving bidder(s) that fail tests a second opportunity
without disclosure to others and without due
consideration of equitable treatment.
(3) Possible tampering in procurement process by
some of the PRC who talk, consult or advise
bidders outside the process of tender while the
tender is under evaluation.
(4) Possible misrepresentation and/or withholding of
information to conceal the accurate picture of
events and this influence the outcome of a tender
adjudication process.
I need your response to this memo before Friday 10th
October 2008 because I intend to table it in the EXCO of
next Monday 13 October 2008.
Please be aware, that I don’t discuss the Procurement
tenders and bid but need assurance from my
representatives that the principle of fairness, equitable
treatment and transparency are upheld in order to protect
35
the company. Lastly, I signed the specification in my
areas of responsibility to ensure that I can meet my
deliverable. Compromise of these deliverables,
specification and business operational tactics
compromise my success rate to deliver for customer,
shareholders and others.’
(20) On 10 October 2008 the Chairperson of the PRC replied to this
memorandum as follows:
‘Your memorandum dated 8 October 2008 under the
same heading refers. I will address the issues raised in
respect of the perceived anomalies in the PRC in point
format.
1. Modification to specification after bid closure
The bid in question is the Construction
Consolidation bid where the critical criteria for
engineering works was relaxed since only two
bidders, at that stage, would meet Telkom’s critical
criteria under Engineering. The SME team
submitted a request in order to mitigate the risk to
Telkom and requested relaxation on one or two
areas of the critical area under Engineering, so as
to allow for greater participation of bidders to the
benefit of Telkom. The relaxation was done in
consultation with Legal Services and was
applicable to all the bidding entities. No bidding
entity was prejudiced through this relaxation. The
Business Owner was represented at SME, CFST
and PRC level.
36
Furthermore, the submission to EXCO fully
discloses this relaxation and EXCO will have all
the relevant information to enable them to either
accept or reject the recommendation for award
coming from the PRC.
2. Inequitable treatment of bidders – allowing ‘re-test’
without disclosure to other bidders
This issue refers to the fact that a specific bidder
was allowed a second extension to do equipment
testing. I need to add that another bidder was also
given an extension to test their equipment. The
second extension to allow for a further test date
was previously granted by the PRC on 9 April
2008 after some intense discussions. The testing
was then commenced on 6 May 2008.
The matter of allowing a second testing date to the
said bidder was brought up again on 18
September 2008 and the PRC suggested that an
audit should be done by Internal Audit to
determine if the tender process was compromised
and/or complied with in granting this extension.
The audit report indicated that Telkom should
weigh up its reputational risk as far as not
honouring their approval to allow testing by the
bidder or to consider non-compliance to our
internal policy which states that “a bidder/tenderer
might be disqualified if the demonstration is late.
Telkom reserves the right to extend the
demonstration date. Applications must be
37
submitted to Procurement in writing at least one
week before the deadline.”
This testing arrangement between Telkom and the
said bidder was based on a request from the
bidder that was approved by Telkom and needed
no further disclosure to any other bidder.
The PRC took cognizance of the audit report when
they arrived at their recommendation to EXCO.
This audit report and the testing by the said bidder
are also disclosed in the submission to EXCO.
3. Possible tampering in Procurement process by
some PRC members
This matter was also raised at the PRC and the
member involved indicated that he was contacted
by the bidder after the earlier inconclusive test and
subsequent to the non-approval of the international
testing. The member indicated that although his
section is responsible for the equipment, he
always referred the bidder to Procurement with
respect to the logistics of conducting the test.
However, if strong evidence suggests any irregular
behaviour by any PRC member, the matter can be
referred to TARPS for further investigation.
Problems of this nature can be mitigated in future
by having PRC members recusing themselves
when bids for their environments are discussed.
4. Possible misrepresentation
38
I would only be able to respond effectively to this
point when I have more information on the matter.
If it refers to the matter of the cables used by the
bidder during the testing, the minutes of the PRC
held on 9 April 2008 was reviewed by the PRC and
from this it was clear that active debate took place
on the extension matter and that the decision to
extend was properly discussed by the PRC before
an extension of the test date to the bidder was
granted. The allegation of misrepresentation by
the SME team is serious and should be backed up
with evidence so that proper action can be initiated
internally.
I hope you will find the above explanations in order and
would like to reaffirm that the PRC will always operate
with the highest integrity and in the best interest of
Telkom.’
(21) On 13 October 2008 the PRC prepared a recommendation for
submission to EXCO. The PRC’s recommendation was as
follows:
‘In terms of clause 6.3.6.4(c) of the Delegation of
Authority this recommendation is submitted to the
executive committee for approval to award RFP085/07 for
the provision of End-2-End Solutions for Point to Point
Split Mount Radio Equipment as follows:
39
• To bidder no 9 (nine), Telsaf Data (Pty) Ltd and
bidder no 7 (seven), Ericsson SA (Pty) Ltd who
ranks first and second respectively.
• Based on dual supply principles this business
should be split between Telsaf Data and Ericsson
in a 60 %-40 % ratio respectively. However, the
proviso should be that Ericsson aligns their turnkey
costs to those as proposed by Telsaf Data. The
business split will be adjusted accordingly based
on the total costs of all three scenarios after
Ericsson have revised their pricing.
• For a two (2) year period, with an option to extend
for 1 year.’
(22) On 15 October EXCO considered the PRC’s recommendation
and the minute reflects that –
‘With the exception of Mr Nzeku (i.e. the Chief of
Operations) who had reservations concerning the testing,
a conditional approval to approve the recommendation
from Procurement to award RFP085/07 provisioning of
End-2-End Solutions for Point to Point Mount Radio
Equipment to Telsaf Data and Ericsson was granted.
The Acting Chief of Finance had to request confirmation
where Maredi stated that it had not met the technical
criteria and report back to the CEO before unconditional
approval was granted.
40
Concern as to changes to procurement processes and
role of the business owner were expressed. It was
agreed that:
1. A letter from the CEO be drafted addressed to
Procurement where it must be emphasised that
before any change to any rule is implemented, that
this be properly approved and the consequence of
such a change be examined very carefully. Mr
Fredericks to draft;
2. The business owner has an important role in the
procurement process and also needs to take
certain responsibility with the evaluation process.
Mr Fredericks to resolve with Procurement;
3. Legal can not have a dual role within Procurement.
It cannot be a part of the award decision making
process and then provide an opinion as to that
process. Adv Rasetaba and Mr Fredericks to
resolve.’
(23) Pursuant to the decision taken by EXCO on 15 October 2008 Mr
Deon Fredericks, the Acting Chief of Finance, reported back to
the CEO in a memorandum dated 27 October 2008. Apart from
verifying that Maredi had confirmed that it had not complied with
the technical specifications, Mr Fredericks reported on two other
matters: viz –
41
(i) Whether the extension granted to Ericsson for the
purpose of testing its equipment invalidates the tender
process; and
(ii) Whether the interaction between Mr M. Mostert, a
member of the PRC, and a representative or
representatives of Ericsson ‘impacted negatively on the
tender process’.
With regard to the question of whether Maredi confirmed that it
did not comply with the technical specifications Mr Fredericks
verified that Maredi conceded this and that non-compliance was
confirmed by Telkom’s technical evaluation report. With regard
to the extension granted to Ericsson Mr Fredericks observed
that it is clear from the audit report of 1 October 2008 that the
extension was not appropriate and that this was confirmed by a
report from the evaluation team which made it clear that
Ericsson was not ready to perform the test. Mr Fredericks
nevertheless expressed the view that ‘in the light of the
extension given to Ericsson we need to continue and cannot
retract the approval now’. With regard to the interaction
between Maredi and representatives of Ericsson Mr Fredericks
reviewed the internal audit report which confirmed that the
interactions had not influenced the extension granted by the
42
PRC. Mr Fredericks’ conclusion was that EXCO could approve
RFP085/07 as proposed by the PRC.
(24) In November 2008 Mr Fredericks met Mr September, Telkom’s
CEO, to discuss the memorandum and on 20 November 2008
Mr September decided that the conditional approval of the
PRC’s memorandum could be considered to be unconditional.
On 1 December 2008 Telkom sent letters of award to the
successful tenderers.
[12] In its heads of argument Maredi contends that it has established a very
strong prima facie case and that this prima facie case is so strong that
it need not show that the balance of convenience favours it strongly. In
Maredi’s heads of argument Maredi deviates from the grounds set out
in its founding affidavit and contends that it has shown that it has a very
strong case that the decision to award the tender will be set aside on
the following grounds:
(1) Telkom’s EXCO (and CEO) took their decision on the basis of a
misrepresentation to them that the applicant admitted non-
compliance with the technical critical criteria;
(2) Telkom’s decision not to award at least part of the tender to
Maredi, on the basis that Maredi did not meet the requisite
43
technical critical criteria, is vitiated by the fact that, in truth, it did
meet those criteria; and
(3) The manner in which Telkom extended the dates for testing
Ericsson’s equipment was procedurally unfair and demonstrated
improper favouritism.
[13] For the first two grounds Maredi relies on s 6(2)(e)(iii) of PAJA; Swart
v Minister of Law and Order and Others 1987 (4) SA 452 (C) at
479H-480D; Pepkor Retirement Fund and Another v Financial
Services Board and Another 2003 (6) SA 38 (SCA) paras 47 and 48;
Government Employees Pension Fund and Another v Buitendag
and Others 2007 (4) SA 2 (SCA) paras 11 and 12; Chairpersons
Association v Minister of Arts and Culture 2007 (5) SA 305 (SCA)
para 48 and Hangklip Environmental Action Group v MEC for
Agriculture Environmental Affairs and Development Planning
2007 (6) SA 65 (C) at 80G-82B. For the third ground Maredi relies on
s 6(2)(a)(iii) of PAJA.
[14] It will be convenient to consider the first two grounds together. The first
ground is based on Telkom’s own evidence and was not alleged in the
founding affidavit. Maredi contends that the decision to award the
tender was premised on the understanding by EXCO and Telkom’s
CEO that Maredi had confirmed that its tender did not comply with the
requisite technical specifications whereas in fact –
44
‘A dispute existed between the applicant and representatives of
the third respondent as to whether or not features that the
applicant’s tender admittedly lacked were features that were
required, on a correct construction of the technical critical
criteria.’
Maredi contends that for purposes of this ground –
‘The relevant issue is not the correctness of the applicant’s
assertion that it complied with the technical critical criteria but
the fact of the existence of a dispute as to this issue. EXCO
sought an assurance that the applicant admitted its non-
compliance and the tender decision was premised on an
erroneous belief that it had done so. Had EXCO been aware of
the existing as to the proper interpretation of the technical critical
criteria, it would have been called upon to determine whether
the applicant was correct in its assertion in relation to this
interpretation issue, but it never considered that issue because it
had been misled as to the applicant’s stance.’
[15] The second ground is also based on an alleged dispute as to the
specification with which Maredi was required to comply. These are set
out in the specification for Point-2-Point Split Mount Radio Equipment
(specification number SP-1659). The alleged issue is whether Maredi’s
equipment was required to provide all the functions listed
simultaneously or not. It is common cause that Maredi’s equipment
cannot provide all the functions simultaneously. Maredi’s heads of
argument summarised the central issue as follows:
45
’49. The question that arises for consideration is who has
correctly interpreted the technical critical criteria
specifications. Is the third respondent’s interpretation as
encapsulated by Giel Laubscher’s summary on P1096
correct or is that of the applicant?
50. It is clear from a reading of section 7.2.1h that the
platform must be able to support multiple interfaces and
in addition must have a cross connect functionality.
51. The question arises whether it must be able to support
the multiple interfaces while being utilized in the cross
connect mode – 4 way or 8 way.’
[16] For these two grounds the applicant is largely dependent on the facts
set out in Telkom’s answering affidavit which for present purposes
must be accepted as correct. Maredi either cannot or does not dispute
most of this evidence and relies on inferences and argument in its
replying affidavit. The two witnesses are Mechiel Johannes Laubscher,
Telkom’s Manager of Wireless and Electromagnetic Compatibility, who
was part of the SME which tested the equipment and Deon Jeftha
Fredericks, a chartered accountant, who is Telkom’s Group Executive:
Corporate Financial Accounting Services.
[17] The following evidence by Laubscher is admitted by Maredi –
(1) He has been employed by Telkom since 1984 and since then
has had substantial experience in Transmission and Microwave
the technology relevant to the tender. While working for Telkom
46
he has received considerable technical training and he has been
registered as a professional technologist with the Engineers
Council of South Africa since 1999;
(2) In about 2006 he was involved in compiling the technical
specifications, including SP-1659 (which contains the
contentious items, 4, 6, 8 and 10) for the tender. Spec – 1659
covers the technical requirements for the equipment involved in
the tender;
(3) The tender was published for Point-2-Point Microwave
Equipment making use of a Multi Server Provisioning Platform
(MSPP) capable of interfacing with PDH, SDH, and Ethernet
with the future inclusion of Native Ethernet Capability. Telkom’s
business objective was to acquire a solution that would suit its
needs by being more cost effective and efficient: e.g. by
simplifying the installation and maintenance by having an MSPP
solution which meets the specification requirements of SP-1659;
(4) On 29 November 2007 Telkom had a bidders’ conference to
give Telkom and bidders an opportunity to clarify the bid
requirements. Maredi’s representatives attended and
participated at the conference. Laubscher gave a presentation
at the conference and explained all technical aspects fully;
47
(5) In the Life Cycle Costing Telkom instructed the bidders to list all
the equipment offered in the tender;
(6) The SME evaluated Maredi’s bid in four phases –
(i) Between 2 January 2008 and 18 January 2008 SME
conducted a paper evaluation. In this phase Telkom
relied on the information presented by the bidder and
accepted it as correct without testing the truthfulness or
accuracy thereof. In order to qualify for inclusion in the
shortlist a fully compliant statement against all critical
criteria was required;
(ii) Maredi submitted one offer which included the NEC
Pasolink Neo. Maredi indicated full compliance with all
Telkom’s technical critical criteria. During the paper
evaluation phase Telkom relied on the answers given by
bidders. The statement (correctness) is only tested later;
(iii) Based on Maredi’s written responses to the technical
critical criteria in the tender conditions Maredi was short
listed for further participation;
(iv) Between 14 January 2008 and 1 February 2008 the SME
conducted a second paper evaluation which involved
48
scoring technical non-critical criteria against a pre-
determined scoring matrix;
(v) The third phase involved furnishing each short listed
bidder with Telkom’s requirements of the configurations
to be tested. On 8 February 2008, at a clarification
session, Telkom explained the test configurations to the
short listed bidders. The tests are designed to determine
whether the short listed bidders actually comply with the
technical critical criteria and the criteria of high
importance. Telkom communicated the test configuration
to Maredi and all the other short listed bidders. On 14
February 2008 Maredi acknowledged receipt of the test
configuration by e-mail. In this e-mail Maredi indicated
that it would not be able to comply with test setup 4 of
Telkom’s test configuration at the time of testing and that
the Neo Enhanced Nodal (which was not offered when
the bid closed) would only be available in June 2008;
(vi) Between 31 March 2008 and 4 April 2008 in the fourth
phase, SME conducted the physical testing of Maredi’s
equipment. This involved the physical testing of the
equipment based on the four test setups which Telkom
had communicated to Maredi;
49
(vii) Maredi’s equipment was found to be satisfactory in the
tests for setups 1 to 3. However Maredi’s equipment was
found to not comply with Telkom’s requirements when
tested in setup 4;
(viii) On completion of the evaluation phase Laubscher
prepared a table depicting Maredi’s failure to comply with
the critical criteria;
(ix) After the evaluation phase was completed clarification
sessions were held to enable Telkom to clear up any
remaining uncertainties in respect of compliance with the
critical criteria. These clarification sessions involved
written questions and answers. During the clarification
session held on 20 May 2008 Maredi indicated that its
equipment did not comply with the functionality required
in respect of SP-1659 para 7.5.1 a, c, d, e and g.
Furthermore, in a letter dated 27 May 2008 addressed by
Maredi to Telkom, Maredi stated that ‘the SDH Nodal
solution one box equipment will be available in June
2008.’ Laubscher states that this was non-compliance
with an MSPP solution (i.e. SP-1659 para 7.3.2.1(h)(i), (ii)
and (iii));
50
(x) The SME found that Maredi’s equipment was non-
compliant with the technical critical criteria and was
accordingly disqualified from the tender. This is reflected
in the SME’s recommendation to the CFST, the CFST’s
recommendation to the PRC and the PRC’s
recommendation to EXCO;
(xi) Laubscher has no personal interest in the testing that was
conducted or in the award of the tenders to any of the
bidders. Furthermore, the SME team executed its
mandate professionally and impartially. Its function was
to test the equipment offered in each short-listed bid
documents in a professional and unbiased manner. This
was done in respect of each of the short-listed bidders.
(As appears from the personnel listed above, when the
SME evaluated the tenders it consisted of 19 members of
which Laubscher was one.).
[17] The following evidence of Fredericks is not or cannot be disputed by
Maredi –
(1) When the tender was awarded he was one of the members of
Telkom’s EXCO. (The other members are listed above. With
Diedericks they are number 7 and include all of Telkom’s chief
51
officers.) He conducted the investigation requested by EXCO at
its meeting on 15 October 2008;
(2) On 15 October 2008 EXCO provisionally accepted the
recommendation of PRC to award RFP085/07 to Telsaf and
Ericsson subject to the Acting Chief of Finance (Diedericks)
obtaining confirmation that Maredi had stated that it had not met
the technical criteria. On such confirmation being provided to
the CEO (September) PRC’s recommendation would be
unconditionally accepted. (My paraphrase of the EXCO minute,
annexure DF2 at p429);
(3) Diedericks investigated whether Maredi had stated that it did not
comply with the technical criteria and reported to the CEO by
means of a memorandum dated 27 October 2008. Diedericks
had to report to the CEO to satisfy the CEO that Maredi had
confirmed (in its own documentation) that it had not complied
with all the technical specifications;
(4) In addition to the matters referred to in the minute Diedericks
was required to consider whether the extension granted to
Ericsson for demonstrating its equipment invalidated the tender
process. During his investigation Diedericks also considered
whether the interaction between Marius Mostert and a
52
representative or representatives of Ericsson impacted
negatively on the tender process;
(5) In his memorandum to the CEO Diedericks confirmed that
Maredi had stated that it did not comply with all the technical
specifications and that this was in accordance with Telkom’s
technical evaluation report; that although the extension granted
to Ericsson was not appropriate in the circumstances, approval
had been granted and it could not be withdrawn and that
although one member of management had interacted with
Ericsson this did not influence the extension granted by the
PRC. Diedericks concluded that Telkom could accept the
PRC’s recommendation to award the tender to Telsaf and
Ericsson;
(6) The technical evaluation report dated 21 May 2008 was
prepared by the SME team and states the following with regard
to Maredi’s non-compliance with items 6 and 10 of SP-1659:
‘Items 6 & 10: The aggregation node offered as the
Nodal concept is a 2 way DXC card, and was not used for
demonstrating test setup 4. This card does not have an
STM-1 interface on the unit as required by Spec 1659 par
7.2.1h(i). Impact of this non-compliance is very limited
capacity.
53
The solutions tested in setup 4 was not offered in the bid,
it will be commercially available in June 2008 according
to the road map information received in February 2008.
At the time of testing no Ethernet interface was available
on this card as required by Spec 1659 par 7.2.1h(i). Non-
compliance to this criterion will put Telkom in a position
where we will not be able to comply with the latest MCO
requirements iro backhauling.
Bidder 1 provided a Neo Nodal for testing but was not
offered in the bid documentation. A Neo Enhanced Nodal
chassis was available for viewing only – it could not be
powered up and the functionality could not demonstrate
in any way.
Item 6: A single platform is required which offers
converged services in order to enable Telkom to grow
into an NGN environment seamlessly. This type of
solution is very flexible and scalable to allow for network
evolution and growth. The initial cost of this solution is
higher compared to a standalone microwave system, but
it becomes more cost effective as the demand for more
capacity at a site grows. Growing the site will only
require the addition of outdoor units, antennas, modem
cards, interface cards and licenses as necessary – all
indoor infrastructure (including the sub-rack, the controller
cards, element management connectivity, power
supplies, power cabling, and floor space) have already
been included in the initial SAPEX cost. The system
offers a pay as you grow option. This platform will also
reduce OPEX costs as it allows for remote traffic
configuration and routing.
54
If all the required interfaces cannot be provided on one
platform, it implies that additional equipment needs to be
purchased to satisfy the interface and cross connect
requirement. This additional equipment (such as an Ad
Drop Multiplexer) will increase the cost to Telkom
(additional training, spares holding, Element Management
System connection) as well as introduced more potential
points of failure.’
1.3.6 result subsequent to second clarification session.
1.3.6 Bidder 1 – Although the bidder claims compliance,
no evidence could be found that supported the
claim that the equipment was in fact offered in the
bid. This response given is in spite of it being
stipulated during the clarification session that the
bidder must reference Volume, page and
paragraph to substantiate a claim of compliance.
According to the technical SME team and the LCC team,
bidder 1 did not offer the Paso link Neo Nodal as no
technical references as stipulated during the clarification
could be found and no costing information was furnished.
In addition, no critical criteria SOC or any other SOCs
were submitted for the Paso link Neo Nodal. The bidder
replied that they did offer this solution but still did not
provide references to substantiate their claim. Please
refer to annexure A question 3 bullet 1.’
1.3.7 Explanation of non-compliances with respect to
table 4 (also referenced in table 7)
1.3.7 Bidder 1
55
Item 10 The specification requires STM-1
and gigabit Ethernet interfaces (items e and
g respectively). The bidder states the
following for the 2 Way DXC which was
offered and costed: … as for items e and g
does not warrant the air interface in this
configuration which is a maximum of 100
MBit/s’ Please refer to annexure A question
2. Please note that the 2 Way DXC
expandable card which is used in the Paso
Link Neo Nodal, can be interconnected with
each other to form an 8 Way System but
this card was not offered in the LCC or
technically (also no reference given as
stipulated during the clarification session).
The 2 Way DXC card does not have this
function. It is thus clear that the bidder
indicates non-compliance to the
requirement of an STM-1 and Gigabit
Ethernet interfaces based on the “maximum
100 MBit/s” statement.
In addition, the bidder also indicates non-
compliance to the critical criteria in
accordance to Annexure A paragraph 3,
bullet 4, that no Ethernet interfaces are
available on their Paso Link Neo Nodal at
this point in time but will be available in
June 2008.
Recommendations
The technical SME team recommends that:
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…
Bidder 1 cannot be considered as a supplier at this
particular point in time, since they did not fully
comply with the critical criteria as on 20 December
2007 as per the bid documentation and as
confirmed during subsequent clarification
exercises. Compliance would however have been
possible if the date of closing of the bid was June
2008’
[18] Laubscher’s and Diederick’s evidence is supported by
contemporaneous documents whose contents have not been disputed.
With regard to Maredi’s first ground, which is not a ground relied upon
in the founding affidavit. It is striking that –
(1) During the clarification session held on 20 May 2008 Maredi’s
representative conceded that it did not comply with certain
critical criteria. In Maredi’s replying affidavit, Maredi admits that
its answers given at the clarification session created the
impression that Maredi conceced that because the 2 way Card
did not support converged services and multiple interfaces
simultaneously and because the Paso Link Neo Nodal that was
offered to Telkom’s test team did not have Ethernet interfaces,
the tendered product did not comply with the critical criteria
(replying affidavit p1209 para 17.8-1211 para 17.16).
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(2) When Maredi allegedly discovered this erroneous response, on
27 May 2008 it addressed a letter to Telkom in which it said ‘the
proposed equipment from Maredi/NEC does meet all Telkom’s
critical solution criteria and hence the fact that we conducted the
testing in Japan successfully … in all 3 scenarios that was
requested which are in line with the tender specifications
Maredi/NEC do comply fully with each piece of equipment
requested … The roadmap that was submitted, for the non-
critical requirements, to Telkom during the clarification indicated
that the SDH Nodal solution one box type equipment will be
available in June 2008 (annexure TU13 p315);
(3) This letter does not allege that Maredi erroneously answered the
questions at the clarification session or how this error arose, that
Maredi disputes that it required to deliver equipment which could
perform according to setup 4 and could perform according to the
tender requirements.
There is accordingly no basis for finding that Diecericks erred for
holding that Diedericks erred in finding that Maredi did not
comply with the critical criteria. Even if Maredi is committed to
rely on the first ground it is not borne out by the evidence.
[19] With regard to the second ground the key issue is the correct
interpretation to be given to SP-1659. Maredi concedes that if
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Telkom’s interpretation is correct Maredi’s equipment did not comply
with SP-1659 in all respects.
[20] The main difficulty for Maredi to overcome is that in terms of clause 4
of the Proposal Conditions for RFP085/07 Maredi was obliged to
accept Telkom’s interpretation of any specific requirement in the RFP
document if there was a difference of interpretation between Maredi
and Telkom. In view of this provision there is no room for Maredi to
contend now that its interpretation is correct and Telkom’s is not.
Furthermore, the following object facts militate against a finding that
Maredi’s interpretation is correct:
(1) At the bidders conference Maredi was entitled to question the
requirements of the tender. It did not do so. Laubscher testified
that Telkom’s requirements were fully explained at the
conference. Maredi’s replies are a bald denial;
(2) After the bidders were short-listed Telkom sent to each short
listed bidder its requirements of the configurations to be tested.
Maredi did not object to setup four and to sate that the
equipment was not required to perform in accordance with setup
4;
(3) At a clarification session held on 8 February 2008 Telkom
explained these test configurations to Maredi and the other short
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listed bidders. Maredi did not object to setup 4 and state that the
equipment was not required to perform in accordance with setup
4. Maredi’s bald denial that the test configurations were not
explained is not convincing. Maredi’s e-mail to Telkom dated 14
February 2008 (MJL 6 p 1045-1046) states that it will be able to
have test setups 1, 2 and 3 ready for SME to evaluate; that with
regard to test setup 4 the fully functional setup (i.e. the Neo
Enhanced Nodal) will be ready by June 2008. The e-mail
concludes by saying:
‘It is our understanding that due to the fact that in
specification 1659 there was no clear requirement for
such a product but we do recognise that in the
clarification meeting it was mentioned to such “additional
requirements” must be available within 6 moths to which
we will comply’;
(4) At the clarification session held on 20 May 2008 after testing
Maredi’s representative conceded that Maredi’s equipment did
not comply with all applicable critical criteria. There is no
suggestion in the record that Maredi objected to Telkom’s
interpretation of the specification;
(5) After Maredi allegedly discovered that this concession was
wrong it did not convey this to Telkom or explain how the error
arose and allege that Telkom’s interpretation was wrong;
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(6) There is no indication in the papers that any other short-listed
bidder had difficulty in interpreting the specification as Maredi
allegedly does;
(7) Two other short-listed bidders Mobax and Ericsson were able to
perform setups 1 to 4 during the test phase;
(8) Maredi raises the interpretation of the specification as a
substantive issue only after its tender was not accepted.
[21] In view of Telkom’s evidence and the probabilities disclosed by the
objective facts Maredi has a very weak case in respect of the second
ground.
[22] With regard to the third ground it seems clear that whatever the reason,
whether it be faulty test equipment or faulty tender equipment, Ericsson
failed the physical test phase and for that reason alone should have
been disqualified from the tender. It also seems clear that there were
improper communication between Ericsson and Marius Mostert which
probably resulted in Ericsson having a second opportunity to
demonstrate its equipment. For present purposes it will be accepted
that this is so. It will also be accepted that this shows bias in favour of
Ericsson on the part of Telkom and that this is procedurally unfair vis-à-
vis the other short-listed bidders who were not disqualified: Telsaf and
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Mobax. Nevertheless, in my view, this does not warrant the grant of
interim relief in favour of Maredi. The reasons for this are threefold:
(1) Maredi’s case on the first and second grounds is very weak: i.e.
there is little or no likelihood that Telkom’s decision to exclude
Maredi will be set aside;
(2) Neither Telsaf nor Mobax seeks an order that the award of the
tender to Telsaf and Ericsson be set aside;
(3) The decisions to extend the date for the testing of Ericsson’s
equipment and effectively give Ericsson a second opportunity to
demonstrate its equipment were taken by PRC which is
authorised to take such decisions. These decisions are
substantive decisions which should have been the subject of
attack in the review.
[23] In addition, as already pointed out the balance of convenience heavily
favours Telkom and not Maredi. During argument Maredi’s counsel
conceded that unless the court found that Maredi has a very strong
prima facie case it would not be entitled to interim relief. A last and not
unimportant factor which weighs with me is that Maredi approached the
court with a case based on documents that seem to have been
wrongfully or unlawfully obtained from Telkom. Telkom and Ericsson
pertinently requested that Maredi explain where it obtained these
62
documents and Maredi failed to do so. The obvious inference is that
Ericsson and Telkom’s contention is correct: that Maredi obtained the
documents by some wrongful or unlawful means. I am hesitant to
assist an applicant who approaches the court for relief in these
circumstances.
Order
[24] The application for interim relief in terms of Part A of the notice of
motion is dismissed with costs, such costs to include the costs
consequent upon the employment of two counsel by each of the first
and third respondents.
_______________________ B.R SOUTHWOOD
JUDGE OF THE HIGH COURT
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CASE NO: 597/09 HEARD ON: 20 February 2009 FOR THE APPLICANT: ADV. A.J. FREUND SC ADV. M. SMIT ADV. M. SELLO INSTRUCTED BY: Mr. J. Feris of Cliffe Dekker Hofmeyr Inc. FOR THE FIRST RESPONDENT: ADV. D.N. UNTERHALTER SC ADV. A. COCKRELL INSTRUCTED BY: Mr. D.M. Pretorius of Bowman Gilfillan Attorneys FOR THE THIRD RESPONDENT: ADV. D.A. PREIS SC ADV. C. WOODROW INSTRUCTED BY: Mr. G.K. Hay of Mahlangu Inc. DATE OF JUDGMENT: 17 April 2009