Chinese firm loses RA office tender appeal

November 11, 2014, 9:21am

Chinese firm loses RA office tender appeal

A CHINESE building company's attempt to wrest a major construction project away from a Namibian competitor has ended in a final defeat in the Supreme Court.
The appeal through which the Chinese-owned New Era Investments wanted the Supreme Court to overturn a High Court decision in which the company's challenge of a tender for the construction of a new head office for the Roads Authority was dismissed, was also dismissed by Deputy Chief Justice Petrus Damaseb, Judge of Appeal Sylvester Mainga and Acting Judge of Appeal Johan Strydom of the Supreme Court on Wednesday last week.
They ordered the company to pay the legal costs of its opponents in the case.
In a judgement delivered in the High Court in February this year, Acting Judge Collins Parker found that the Roads Authority's decision not to accept the tender of New Era Investments in terms of a technical and financial evaluation was “based on sound and rational considerations”, and that New Era Investments failed to show that the RA acted unfairly or unreasonably when it did not accept the company's tender bid.
Acting Judge Parker also fund that New Era Investments failed to show that the RA's board of directors did not apply its mind when it considered the tenders it received and decided which tender bid to accept; that it took into account irrelevant considerations; or that the RA had been biased when it decided to award the construction contract to the Namibian-owned company, Namibia Construction.
The board of directors of the RA decided in early December last year to award the construction contract to Namibia Construction, which had submitted a bid to build the new RA head office in Windhoek at a cost of N$219,7 million.
Namibia Construction and New Era Investments were the only two companies that made it to the last stage of the RA head office tender process. New Era Investments' bid was, at N$198 million, considerably below the successful bid of Namibia Construction, but the RA board decided to follow a recommendation not to accept the lower bid and to award the contract to Namibia Construction instead.
The recommendation was made after an evaluation process in which New Era Investments was given a low score of 10,5 out of 20 in respect of the technical evaluation of its bid, while Namibia Construction scored 19 out of 20.
Because New Era Investments' bid price was more than 15% below a quantity surveyor's estimate of the project cost, the RA was also advised that the company's tender did not qualify in terms of a procurement policy used by the Ministry of Works and Transport.
Namibia Construction's bid was the closest to the quantity surveyor's estimate of the project cost, the court was informed.
The reasoning behind the policy of setting a benchmark of a deviation of not more than 15% from the quantity surveyor's estimate of a project's cost is that if a tender price is more than 15% above the estimate it is an indication that a tenderer would be unjustly enriched, the court was informed on behalf of the RA. 
On the other hand, if a tender bid is more than 15% below the estimated cost of a project it could result in the tenderer facing financial strain or insolvency, and then trying to cut corners which could result in poor quality of work, if such a tenderer is awarded a contract, the RA reasoned.
New Era Investments has been the main contractor involved in the construction of a new building for the Ministry of Finance in Windhoek over the past few years. The company did not receive a good performance evaluation from the project architect, though, and that was also taken into account when the tender bids for the RA head office project were evaluated.
The Ministry of Finance project architect reported that New Era Investments “came short on a number of key areas with regard to the level of administrative skills, quality control and skilled artisanship normally required for a project of this size and nature”, and pointed out that the project, valued at close to N$100 million, was expected to be completed about a year behind schedule
Werner Menges: The Namibian