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The Importance of Tender Bid Validity

The Importance of Tender Bid Validity

Jaydian Doman: Cape Town

The concept of bid validity is central to the public procurement process, ensuring transparency, fairness and compliance with Section 217 of the South African Constitution. This section mandates that public procurement must be, amongst other considerations, fair and transparent.
 
Extending the Bid Validity Period
 
Where, for whatever reason, the evaluation or contract finalization process has not been completed within the initial bid validity period, the procuring entity may, as an intention to proceed with the evaluation and/conclusion of the contractual finalization stage, - enquire from bidders whether they would be in agreement to extend their offers due to the procuring entity’s intention to extend the bid validity period. The other option would simply to cancel the bid process. However, where bidders are requested to extend their bid, bidders will be afforded to select one of two options, being:

  1. Acceptance: The bidder agrees to the extension of the validity period without changing the bid’s conditions or pricing.
  2. Rejection: The bidder declines to the extension request and withdraws from the process.

To remain in line with Section 217, the process of requesting an extension must be transparent, ensuring equal treatment of all bidders. Therefore, the organ of state must request such extension in writing before the expiry of the initial validity period. Bidders must be afforded the necessary time to consider their response to the extension of the validity period.
 
Responsibilities of the Procuring Entity
 
The procuring entity or organ of the state has the following obligation, regarding bid validity:

  • Inclusion in Terms of Reference (TOR): The organ of state is required to include the bid validity period in the tender's Terms of Reference. This provides clarity to bidders on how long their offers must remain valid, helping them to price their bids and make other financial decisions accordingly.
  • Timely Communication: If an extension of the bid validity period is necessary, the request must be made in writing and sent to all bidders before the original period expires. This avoids delays and ensures that the procurement process can proceed without disruption. The extension request should only cover the time necessary to complete the evaluation and finalize the contract with the successful bidder.

Responsibilities of the Bidders
 
Bidders also have a role in ensuring a smooth procurement process by managing their bid validity properly:

  • Fair Pricing: Bidders must ensure that their bids are competitively priced and remain valid for the entire stipulated period.
  • Response to Extension Requests: If an extension is requested, bidders should acknowledge the request promptly and communicate whether they are willing to extend their bid validity or withdraw from the process.
  • Proactive Follow-Up: Bidders should remain proactive, particularly when the validity period is nearing its end. Following up with the procuring entity ensures that the evaluation process is progressing as expected and will be finalized before the validity expiry date.

Legal Precedents and Case Law on Tender Bid Validity
 
Several key legal cases in South Africa have shaped the understanding and enforcement of tender bid validity. These judgments emphasize the importance of adhering to the bid validity period and outline the legal implications of failing to do so.

  1. City of Ekurhuleni Metropolitan Municipality v Takubiza Trading & Projects CC and Others: In this case, the court ruled that an extension of the bid validity period must be communicated within the original validity timeframe. Failure to request or notify bidders of an extension before the validity period expires renders the process invalid. This judgment reinforced the principles of fairness and transparency by stating that any actions outside the validity period would violate procurement regulations. The ruling emphasizes that proper communication during the tender process is crucial to maintaining its integrity.

  2. Telkom SA v Merid Training (Pty) Ltd: The court in this case ruled that once a tender's validity period has expired before being extended, the process is considered complete. No further negotiations or extensions can be made thereafter. This judgment highlights the finality of the bid validity period and stresses that once it lapses, the procurement process must start afresh. Any attempts to alter or extend the terms without mutual agreement could lead to legal invalidation.

  3. Joubert Galpin Searle Inc & Others v Road Accident Fund: In this case, the court reaffirmed that once the bid validity period expires, the tender process is closed, and a new process must be initiated if no decision has been made during the original validity period. The court emphasized that allowing a process to continue beyond its bid validity without proper extension undermines the fairness and transparency of the procurement system. This judgment further underscores the significance of adhering to deadlines within the procurement process.


These are some of the judgments that serve as legal benchmarks for both bidders and procuring entities, emphasizing the need for strict adherence to the bid validity period – this to avoid disputes and ensure the fairness of the procurement process.
 
It further highlights the fact that the validity period is not just a procedural formality but a crucial element of the procurement process. Actions taken outside the validity period can invalidate the entire tender process.
 
Conclusion
 
Tender bid validity is fundamental to the integrity of the public procurement process. By adhering to the prescribed validity periods, both bidders and procuring entities ensure a fair, transparent, and legally compliant procurement process. The importance of tender bid validity cannot be understated as it upholds the principles of fair competition and maintains the trustworthiness of the bidding system.
 
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Reference

  • Treasury Regulations for departments, trading entities, constitutional institutions and public entities. (2005).
  •  (03 June 2022)[2022] ZASCA 82City of Ekurhuleni Metropolitan Municipality v Takubiza Trading & Projects CC and Others (Case no 846/2021) 
  • Telkom SA Limited v Merid Trading (Pty) Ltd and Others (27974/2010,25945/2010) [2011] ZAGPPHC 1 (7 January 2011)
  • Joubert Galpin Searle Inc and Others v Road Accident Fund and Others (3191/2013) [2014] ZAECPEHC 19; [2014] 2 All SA 604 (ECP); 2014 (4) SA 148 (ECP) (25 March 2014)
  • SUPPLY CHAIN MANAGEMENT: A GUIDE FOR ACCOUNTING OFFICERS / AUTHORITIES. (2004). http://ocpo.treasury.gov.za/Resource_Centre/Legislation/SCM%20Jan900-Guidelines.pdf