Joint venture agreements for tenders

In BKS Consortium v Mayor, Buffalo City Metropolitan Municipality and Others [2013] 4 All SA 461 (ECG), the High Court considered, amongst other things, the acceptability of a bid submitted by a consortium in circumstances where a joint venture agreement (JVA) was required.

The Buffalo City Metropolitan Municipality awarded a tender for the provision of a number of services in relation to the development of a Bus Rapid Transit (BRT) system. The successful bidder was a consortium that comprised a joint venture (JV) of three companies, which relied in turn on the services and preference points offered by several professional firms. In that regard, none of the firms was party to the JV.

For purposes of its bid, the consortium had supplied letters of undertaking from the firms in question. In terms thereof, each firm committed itself to the provision of services and indicated that it would enter into a sub-contractual agreement with the JV upon the award of the contract.

The High Court held that the consortium’s bid was not acceptable. The bid specifications had required a JVA where the bidder consisted of more than one entity. Here, the JVA was limited to the three firms that comprised the JV. The provision of letters of undertaking on behalf of the remaining firms was not sufficient to have met the bid specifications. For this and other reasons, the High Court set aside the award.

The matter is currently on appeal.

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