Dear Corruption Watch
I am a contractor. I have done quite a lot of work for local government. The contracts I get are usually awarded after a tender is advertised and I have submitted a bid. A few years ago, I got a phone call from the head of a government department. He said that they needed me to do a piece of work urgently. I dropped everything I was doing and went to work on the project.
When the work was complete, I submitted my invoice as usual, but wasn’t paid for months. Eventually, after lots of requests and demands had no result, I sued the department for payment. The department is saying that it is not bound by the contract because it was not concluded after a transparent and competitive process as required by procurement law.
How can this be? How could I have known that the head of department hadn’t complied with the law in contracting with me? Are they saying I am guilty of corruption?
Out of luck
You are not being accused of corruption. What the department is saying is that the agreement it concluded with you is invalid because it was not part of a competitive and open bidding process. If so, the agreement may be unenforceable against the department.
The Constitution requires that when the State procures goods and services, it does so in accordance with a system that is transparent, competitive and cost-effective.
There are obvious reasons for this. Tendering must be transparent in order to prevent under-the-table deals and the allocation of lucrative contracts to friends and family. It must also be cost effective so that the state gets value for money when it pays for service delivery.
Competitiveness is an important element of ensuring cost-effectiveness. Without a fair and competitive process, we can’t be sure that the state is getting a good deal in its contracts.
As a result, there are rules, which require contracts of a certain value to be put out to competitive tender.
The question is what happens when a contract is concluded that doesn’t comply with this rule, as in your case.
There are two different approaches by our courts on this question.
According to the first approach, if a contract was concluded in breach of applicable procurement legislation, it is of no force and effect, and the courts cannot enforce it.
According to the second approach, the courts always retain a discretion as to whether to set aside a contract. If it would be unfair to set the contract aside, the court may enforce it even if it did not comply with the relevant procurement provisions.
These two approaches have not yet been reconciled in our law, and it is not clear which way the courts will go. This places you in a difficult position.
The situation you have described is not unusual. Government departments often try to avoid contractual obligations by appealing to their own failure to comply with the law in concluding the contract. This is especially likely when the contract was concluded by officials who are no longer employed in the department and the new guys would prefer not to be bound to the old contracts.
In our view and in the kind of situation you have described, this conduct is not a positive development from the point of view of good governance. It allows government to benefit from its own unlawful conduct. It also makes contracting with government a risky proposition, since you never know when they are going to turn around and renege on the contract if they change their minds. Of course, if corruption was involved, that would be a different story.
Once government contracting is seen as a risky proposition, the pool of companies who will be prepared to contract with government is likely to shrink, ironically at the cost of competitiveness and good service delivery.
- This letter first appeared in the Sunday Times Business Times on 2 June 2013