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

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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

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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

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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