In situations where a tenderer is aggrieved with the decision of the municipality in respect of a tender and wants to challenge it in the court law, what would, in law, be deemed as “exhausting all internal remedies”?

The first point in establishing the legal position i.e. rights of the tenderer and powers of the municipality is to investigate the provisions of the relevant laws. The rights of a tenderer to just administrative action amongst others can be sourced from the Promotion of Administrative Justice Act 3 of 2000 (“PAJA”). Section 6(1) of the PAJA allows any person including a tenderer to institute legal proceedings in a court or tribunal for the judicial review of an administrative action. However, section 7(2) provides that a person can only approach a court if he or she has exhausted any available internal remedies. But what constitute internal remedies? Does Regulation 50 (Reg 50) of the Municipal Supply Chain Regulations to the MFMA constitute internal remedies as contemplated in section 7(2) of PAJA? This issue was heard before the Supreme Court of Appeal (“SCA”) in the matter of DDP Valuers (Pty) Ltd v Medibeng Local Municipality and Another. In this matter the municipality was taken to court by DDP Valuers (“the Appellant”) in terms of section 6(1) of PAJA seeking an order to review and set aside the municipality’s decision to award a tender to another company. As one of its defences, the municipality argued in court that the appellant had failed to exhaust the available internal remedies, referring to a dispute resolution mechanism created by Reg 50. The court described the internal remedy as a platform, in the same organization, whereby an aggrieved person can have a chance to be heard by another forum or a tribunal which has the powers to vary, substitute or confirm the decision taken by the organization at a lower level. The court held that these internal remedies which are part of our law are designed to help a public body to correct its mistakes before they get to courts or tribunal. In Koyabe v Minister of Home Affairs (Lawyers for Human Rights as Amicus Curiae) [2009] ZACC 23; 2010 (4) SA 327 (CC), the court held that an aggrieved party must take reasonable steps to exhaust internal remedies for dispute resolution where available. The court went further and stated that this requirement should not be imposed rigidly nor shall it be used to frustrate the efforts of the aggrieved party to obtain remedies or to avoid judicial review. In other words the court indicated that will be exceptions to this law.

The court in DDP Valuers considered the provisions of the Reg 50 and held that the person appointed in terms of this regulation has no powers to vary, substitute or confirm the decision. Reg 50 empowers an accounting officer to appoint an independent and impartial person to assist with complaints, queries or objections regarding any decisions or actions taken by the municipality during implementation of its supply chain management system. The court held that the role of this appointed person is to mediate the disputes instead of re-looking into the merits of the decision taken and change it or confirm it. The court accordingly held that regulation 50 does not provide an internal remedy.  The court then held that the Appellant, in this matter, did not have to comply with Reg 50 as a pre-requisite for judicial review proceedings. It therefore dismissed the municipality’s defence.  Further, the court held that the regulation itself provide that the Reg 50 dispute resolution mechanism does not take away the aggrieved person’s right to approach the court at any time. 

The essence of the decision of the court in this case is that Reg 50 cannot be used as an appeal structure in the procurement process. The aggrieved party does not have to comply with it before he/she can approach the court. This is now the legal position which must be respected and complied with. This means that compliance or non-compliance with this procedure cannot be regarded as exhausting or failure to exhaust internal remedies as required by section 7(2) of PAJA. 

Most of the municipalities and municipal entities have adopted Reg 50 into their supply chain management policies as their dispute resolution mechanism. They also regard this mechanism as their appeal structure. It is therefore advisable to municipalities and municipal entities to revisit their supply chain management policies and make the assessment as to whether their internal appeal structures amount to an internal remedy as contemplated by section 7(2) of PAJA and interpreted by our courts.

Some of the Municipalities in our Province have adopted, to be part of their SCM policies, a recently established Municipal Bid Appeals Tribunal the legality of which is questionable. This tribunal is similar to the KwaZulu-Natal Bid Appeal tribunal.  

Prepared by Agrippa Mpungose – Head of Public Law department
Assisted by Sikhumbuzo Hlope – Candidate Attorney in Public Law department
Tel: 033-341 9107
Email: agrippam@tmj.co.za