In Valor IT v Premier, North West Province and Others (Case No. 322/19) [2020] ZASCA 62 (9 June 2020), the Supreme Court of Appeal considered a settlement agreement where a proper procurement process had not been followed. The agreement had been reached after one of the parties had attempted to cancel a contract for the provision of management services.

Valor IT previously made an unsolicited proposal to the Department of Sports, Arts and Culture in the North West Province for the management of electronic records. This led to the Department’s requesting quotations from a limited number of potential suppliers before awarding a contract to Valor IT for the work, in the amount of R498,000. No open tender process was followed.

The contract escalated over a period of three years. When supply chain management officials raised concerns about irregular expenditure, the Department cancelled the contract. Valor IT instituted legal proceedings for damages. The matter was settled on the basis that the contract remained in place and the Department paid damages of R22,800,000. This was made an order of court.

The Department later made a further attempt to cancel the contract. By that stage, it had paid Valor IT a total amount of R41,729,647. Valor IT unsuccessfully challenged the attempted cancellation in the High Court.

On appeal, the SCA held that the Department had not followed a proper procurement process. Accordingly, the original settlement agreement between the parties sought to give effect to an unlawful arrangement. The agreement was invalid and should never have been made an order of court.

The SCA dismissed the appeal with costs.