Most tenders are evaluated in stages as follows:
Stage 1: Administrative/substantive compliance (failure to comply leads to disqualification)
Stage 2: Functionality – the ability of the tenderer to deliver what is required, to meet the needs of the tender, to deliver a service or commodity which is fit for purpose (failure to obtain minimum threshold leads to disqualification)
Stage 3: Price/BEE Points (tender is usually awarded to the tenderer scoring the highest points)
Question: what happens in the event that you have two tenderers, one scoring the highest points on functionality (e.g. 95% vs threshold of 60%) but comes second under stage 3 (Price/BEE), and the other just making it on functionality (e.g. 61% vs threshold of 60%) but scores the highest points under stage 3 (Price/BEE)? Who should get the tender?
Answer: According to a recent High Court decision, if the price difference between the two tenders is negligible the tender should be awarded to the tenderer whose tender is functionally more responsive (i.e. obtaining a good score under functionality) and not to the tenderer who scored the highest points for Price/BEE but performed relatively bad on functionality.
Generally, a tender is awarded to the tenderer scoring the highest points under stage 3, unless objective criteria (other than functionality) justify awarding a contract to another tenderer. The Western Cape High Court recently crashed this approach of ignoring functionality under stage 3 (Price/BEE). It held that the constitutional imperative that the procurement system be cost-effective means that functionality must necessarily be taken into account under stage 3. Functionality has a direct bearing on the question of whether a tender is cost-effective i.e. whether it yields the best possible value for money. The court further held that it is not cost-effective to award a tender to a party who ticks the right boxes as regards price and BEE, but is unable to get the job done properly – whether through lack of experience, adequate personnel and financial resources.
What this means is that tenders should in fact be evaluated as follows:
Stage 1: Administrative/substantive compliance (failure to comply leads to disqualification)
Stage 2: Functionality – the ability of the tenderer to deliver what is required, to meet the needs of the tender, to deliver a service or commodity which is fit for purpose (failure to obtain minimum threshold leads to disqualification)
Stage 3: Price/BEE Points (tenders are ranked from highest to lowest scoring tenders)
(Compulsory additional stage)
Stage 4: Objective Criteria – consider whether objective criteria (including the scores obtained under functionality) justify awarding the contract to a tenderer other than the tenderer scoring the highest points. The tenderer who scores the highest points on functionality should be given preference, depending on the extent of the differences between the scores (e.g. tenderer B scores 95% on functionality and comes second under stage 3 (e.g. 10% more expensive than tenderer A) vs tenderer A who scores 61% on functionality but scores the highest points under stage 3 = tenderer B should be awarded the tender on the basis of its score under functionality)
There is still disagreement amongst High Courts on whether the objective criteria under stage 4 must be identified in the tender documents and, if so, to what extent.
