Why appeals against tender awards by the municipal manager are unlawful
Procurement
Municipal procurement decisions are particularly vulnerable to corruption and maladministration. This is why the Municipal Finance Management Act (MFMA) provides that councillors may not be involved in decisions to award tenders. Their role is to determine policies on how the administration takes procurement decisions, and to oversee the administration in carrying out those policies. The actual awarding of tenders must be done by officials, in terms of technical and policy criteria.
Municipalities take supply chain management (SCM) decisions at various levels within the administration. The municipality’s system of delegations determines which official or which committee takes which decision. At times, it may be the municipal manager who takes the final decision.
Appeals
Once a tender decision is made, there are winners and losers, and unsuccessful bidders may want to challenge the decision. They can go to court, but the court will expect them to first exhaust all other remedies. One such remedy is the internal appeal, i.e. where an appeal is lodged against the tender decision, to a ‘higher’ authority within the municipality.
However, there are limits to that appeal mechanism. The (executive) mayor or the council may never be the appeal authority against tender decisions taken by the municipal manager. In 2009, the High Court ruled (see below) that the mechanism used for these SCM appeals, namely section 62 of the Municipal Systems Act, does not apply to decisions of the municipal manager. To allow this, would force politicians to make procurement decisions, something which goes against the MFMA. In 2010, the Local Government Bulletin featured an article arguing that SCM appeals against tender awards made by the municipal manager are unlawful. The issue was further explored in this journal article by Bolton.
However, some municipalities still allow for appeals from the municipal manager’s tender decisions to the executive mayor, executive committee or the council. They allow for this in their system of delegations. This is unlawful and places the municipality at risk.
Why the Court ruled that there is no appeal against a municipal manager’s tender award
When municipalities permit appeals against tender awards made by the municipal manager, they purport to do so in terms of section 62 of the Municipal Systems Act. This generic appeal mechanism applies (1) if there is no special appeal mechanism prescribed in law and (2) if it is a municipal decision taken in terms of delegated authority.
The MFMA does not prescribe a special appeal mechanism for tender decisions. So the first criterion is met. The problem is the second criterion: if the decision to award the tender was taken by the municipal manager, it is not a decision taken in terms of delegated authority.
Legally, the municipal manager cannot receive a power to award tenders from the (executive) mayor or the council. It is an original power, i.e. the law itself places this power with the municipal manager. This was confirmed by the High Court in Lohan Civil-Tebogo Joint Venture v Mangaung. In this case, the municipal manager awarded a tender in terms of regulation 29(5)(b)(i) of the SCM Regulations. The High Court held that, in doing so, the municipal manager exercised an original power, and that section 62 of the Municipal Systems Act did not apply.
It makes no sense to argue otherwise, because the appeal could only work if the mayor, executive committee or the council delegated their power to award tenders to the municipal manager. And no councillor has the power to award tenders. It is not possible to delegate a power that you do not have, so neither the executive mayor, nor the executive committee, nor the council could have delegated the power to award tenders to the municipal manager.
Allowing appeals against the municipal manager’s tender decisions compromises the politicians that have to decide the appeal. As the appeal authority, the mayor, executive committee or the council is expected to “vary, confirm or revoke” the municipal manager’s decision. They have to focus their decision on the issues in dispute but they will still be forced to take a tender decision, something which the MFMA prohibits.
Allowing appeals to the mayor or the council against the municipal manager’s tender decisions also assumes that the mayor or the council will have access to independent advice in preparing the decision on appeal. But who will advise them? The municipal manager is the head of the administration: all the municipality’s officials ultimately fall under the auspices of the municipal manager, who took the original decision.
In short, where politicians are explicitly forbidden by the MFMA to enter the terrain of procurement by the front door, they cannot be brought in by the backdoor of an appeal process.
So what then?
If appealing against the municipal manager’s tender decision is not possible, what can the unsuccessful bidder do? The SCM Regulations expect the municipality to have a system in place to deal with ‘objections and complaints’ against procurement-related decisions. This is not the same as an appeal. The unsuccessful bidder must lodge the objection within 14 days of the decision. If the outcome does not satisfy the unsuccessful bidder, there is no alternative but to approach a court.
What about SPLUMA Appeals?
It could be argued that there is a precedent for appeals to the political arm of the council in the Spatial Planning and Land Use Management Act (SPLUMA). SPLUMA provides that land use management decisions of a municipal planning tribunal, or a municipal official, may be appealed to the executive mayor (or executive committee). So how is that different from SCM appeals? The answer is that SPLUMA specifically regulates this appeal. It even provides explicitly that section 62 of the Municipal Systems Act does not apply. When it comes to tenders, it is different: section 62 of the Municipal Systems Act does apply, together with its limitations.
Conclusion
Municipalities must guard against establishing systems that compromise the separation of politics and administration. Mandating the (executive) mayor, executive committee or the council to decide tender appeals, something which some municipalities still do, is unlawful. There is also nothing in law that forces the municipality to allow for appeals. There is no ‘right’ for unsuccessful bidders to an internal appeal. If the municipality wants to have a system to ‘filter out’ out cases before they go to court, it should ensure an adequate objections procedure under the SCM Regulations.