Sanral’s new preferential procurement scoring system challenged

The South African National Roads Agency (Sanral) is facing a high court challenge after allegedly unilaterally introducing a new preferential procurement scoring system for its tenders.

The new scoring system allegedly significantly downgrades the importance of the Broad-Based Black Economic Empowerment (B-BBEE) Act ratings of most bidders.

Cape Town-registered H&I Construction (Pty) Ltd has launched an urgent application in the High Court in Gqeberha to interdict Sanral from implementing its new scoring system when adjudicating two specific tenders, pending an application to review and set aside this new scoring system.

H&I Construction will be applying for the latter in Part B of its application on the grounds that the new scoring system:

• Does not comply with the requirements set out by Section 2 of the Preferential Procurement Policy Framework Act 5 of 2000; and

• Was introduced with H&I Construction being consulted.

Francis Chemaly, commercial manager of H&I Construction, said the new scoring system that Sanral now seeks to employ “is unconstitutional and irrational and therefore reviewable both on grounds of legality and under the Promotion of Administrative Justice Act.

‘Unfair, uncompetitive, cost-averse’

“Sanral introduced these changes to its tendering system without consulting those directly affected by it, including the applicant [H&I Construction],” said Chemaly.

“The proposed new scoring system is so unfair, so irrational, uncompetitive and cost averse, that potential bidders such as the applicant [H&I Construction] will simply not be able to present a bid on a viable, cost effective basis, and have any hope of scoring sufficient points in a fair process to have the bid awarded to it, should Sanral be permitted to proceed with its new scoring system for these tenders.”

Moneyweb emailed Sanral a list of questions about the new scoring system.

Sanral GM for communications and marketing Vusi Mona said the matter is currently being processed legally.

“There is a litigation process that is currently underway and we are finalising our legal papers. You will appreciate our reluctance to litigate through the media. However, once all papers have been served and are before court, we may be in a better position to consider responding to the media queries under discussion,” he said.

Chemaly said Sanral’s new scoring system has relegated H&I Construction’s B-BBEE Level 1 rating “to a mere 10% of its tender scoring scorecard and elevated 100% black ownership to 50% of the scoring”.

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He said it will make it practically impossible for H&I Construction and other tenderers in a similar position to participate fairly and competitively in a transparent, cost effective bidding process.

Not board-approved?

Chemaly said it is unclear if the new scoring system has been approved by Sanral’s board and the absence of any such evidence on the Sanral website – where other public procurement and supply chain management procedures that were sanctioned by the board are to be found – “suggests that Sanral’s decision to introduce the new scoring system is invalid on that narrow ground already”.

Chemaly said Sanral was given the opportunity to urgently revisit and remove the inclusion of the new criteria for the two tenders but refused to do so.

JSE-listed construction and engineering group Wilson Bayly Holmes-Ovcon (WBHO) has applied to join Part B of the application.

A further 11 construction companies, including JSE-listed Raubex and Stefanutti Stocks, were cited as respondents and have provided signed affidavits in support of H&I Construction’s application.

Chemaly said these companies were cited as respondents by virtue of their interest in this application as major contractors in the construction industry.

He said these companies are potential tenderers for the tenders that have already been advertised that form the subject of this application and other Sanral tenders that have been advertised with the same new scoring system.

“They also have an interest … in the lawfulness and validity of Sanral’s new scoring system generally, given that Sanral has indicated it intends using the scoring system for its public procurement on various tenders nationally,” he said.

Chemaly said all the construction companies listed “stand to suffer the same prejudice, albeit to varying degrees” as H&I Construction, under the new Sanral scoring system.

Scorecard changes

He said Sanral in the past used a bidder’s B-BBEE rating to allocate the preferential procurement part of the score, awarding 10 or 20 points based on the tenderer’s rating.

“However, as a result of the amendments to the tenders, Sanral has relegated a bidder’s B-BBEE Level rating to a mere one point (in the case of a 90/10 tender) or two points (in the case of an 80/20 tender) and has elevated black ownership and sub-contracting to targeted enterprises to respectively five points (10 points in the case of 80/20) and four points (eight points in the case of 80/20) of the scoring of tenders that use the 90/10 scoring regime, i.e. tenders with a value of more than R50 million,” he said.

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Chemaly stressed H&I Construction’s application does not intend to disrupt the evaluation of any tenders under Sanral’s previous preferential procurement scoring system.

Where the new system falls short

He listed some of the reasons the new scoring system falls far short of the legal requirements set by the constitution for public procurement.

One of these is the fact that Sanral, according to the tender, will engage with bidders independently further in regard to the scoring criteria, which creates the real danger of the process not being transparent and the black ownership requirement being manipulated even further on entirely subjective and variable grounds.

Riaan de Necker, group MD for WBHO’s road & earthworks division, said WBHO is intending to participate in 11 tenders issued by Sanral, which now fall to be evaluated in terms of the new scoring system.

De Necker said WBHO shares H&I’s concerns about the constitutional invalidity and unlawfulness of Sanral’s new scoring system and intends to participate in Part B of H&I’s application as a co-applicant.

He said WBHO wrote to Sanral about each of the current tenders for which group companies intends to submit a bid.

It  sought an undertaking that each of these tenders be postponed until the issues concerning the scoring system are determined by the court.

De Necker said Sanral refused to provide such an undertaking, which is unreasonable.

He said the disadvantages of potential tenderers being required to submit bids and these bids being evaluated and contracts awarded on the basis of the new scoring system, which is under review, are obvious and avoidable.