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Listed printing giants in schoolbook court dispute

Caxton wants Novus’ multibillion-rand contract set aside.

The North Gauteng High Court on Wednesday morning postponed the latest battle in a litigation war over the biggest printing and distribution contract in the country until January 22.

JSE-listed printing giants Caxton and Novus have been fighting over the lucrative deal since April 2016, when the National Treasury cancelled the original tender for school workbooks for the Department of Basic Education. Bidders were called on to submit tenders for the printing, packaging and delivery of 60 million school workbooks for a period of three years, with a possible two-year extension.

The parties

Caxton’s CTP Limited is the major player in CTP JV, the entity that submitted the bid. CTP JV consists of CTP Limited, Bongani Rainmaker Logistics and Ndabase Printing Solutions. The three JV members are the applicants in the court case.

Novus is the major player in the Lebone Consortium that has been the incumbent for the past seven years. It consists of Lebone Litho Printers, Novus Holdings and UTI SA. Novus is listed on the JSE with  Naspers as one of its minority shareholders.

The Ministers of Basic Education and Finance, the Director-General of Basic Education, the National Treasury Transversal Contracting Office and the entities that are members of the Lebone Consortium are all respondents.

The contract

The contract is said to be worth between R2 billion and R3 billion over three years. It was implemented in April 2017 and is set to run until March 2020 despite the on-going court battle.

It is the flagship programme of the Department of Basic Education and comprises the printing of 60 million books with 8.78 billion pages in 11 official languages for learners in grades R to nine. These books have to be distributed to 24 000 schools in nine provinces. This happens in a cycle twice a year with printing taking place over 95 days and distribution over 35 days. The department calls it an “involved and intricate process”.

If Caxton succeeds in having the tender award declared constitutionally invalid and set aside, it wants it reevaluated and asks the court to order Novus to repay all profits it has earned while the “unlawful” contract was running.

The background

The saga began in November 2015 when the tender was first advertised. The bidding process would consist of four stages, first the bidders’ compliance would be assessed, those bidders who passed this hurdle would then be assessed on functionality which comprises their technical ability to do the job.

Only the bidders that scored 80% in this stage would progress to the next phase, where price and empowerment status would be assessed. The last phase is the recommendation of the successful bidder and award.

In April 2016 National Treasury however cancelled the tender, according to CTP JV, on the basis that it was favouring the incumbent Lebone. Lebone states it was done on request of the Bid Adjudication Committee.

The CTP JV brought an application to have the cancellation reviewed and set aside, presumably thinking they would have won. When they got the record in June 2016 and realised they were in fact eliminated at the functionality stage, they withdrew the application. The Lebone Consortium that would have won if the tender had not been cancelled, however then brought a review application.

Seven months later in February last year, the parties agreed to have the tenders that they submitted in the cancelled process adjudicated again in a new process. This was made an order of the court with specific safeguards to ensure a fair process. This included the appointment of an independent attorney, senior advocate and auditor to assist.

The new process

In March the tender was awarded to the Lebone Consortium and after receiving the reasons for the decision, the CTP JV brought a review application in June.

This is the application that will now be heard on January 22.

What CTP JV says

CTP argues that the process was unfair, does not comply with the Constitutional requirements and should be set aside.

Its grievances include that CTP initially scored 80% and thereby passed the functionality test, as did Lebone with a score of more than 90%. The panel then debated and rescored CTP, which resulted in a score of 79% and the elimination of CTP’s bid.

Unlike CTP’s, Lebone’s first score was accepted without any further debate or reassessment. This uneven treatment constitutes unfairness and inequity, which is a fatal flaw in the process, CTP contends.

It further argues that the process contravened the court order because the independent senior advocate was appointed late and even then his legal opinion, which found that the process was unfair, was ignored.

The court order was further contravened because officials of the Department of Basic Education, who were involved in the cancelled tender process and prohibited from any involvement in the new tender, did in fact participate in the new process, the CTP JV argues.

The Department of Basic Education and the Lebone Consortium are opposing the application.

The department’s opposing arguments

The department argues that the rescoring of the CTP JV’s functionality assessment was aimed at reaching consensus on whether it passes the test. Since there was agreement that Lebone passed the test, its score was accepted as is.

It disputes the CTP JV’s interpretation of the role of the senior advocate and says the opinion he gave was wrong and was in fact considered, but rejected in the light of another legal opinion.

The department disputes any improper involvement of officials in the new adjudication process.

Lebone’s arguments

The Lebone Consortium in court papers effectively accuses the CTP JV of being a sore loser who cannot accept the possibility that its bid was simply inadequate. It points out that CTP wants to strip Lebone of its profits despite the fact that there is no indication of impropriety on Lebone’s side or criticism of its service to the department.

Lebone states that the CTP JV was properly excluded and rejects its criticism of the adjudication process. It argues that the two-stage functionality assessment was predetermined and rational. Lebone further states that it was unnecessary to reassess its own score, since there was early consensus that Lebone had cleared the functionality hurdle.

The late appointment of the senior council was due to time pressures and practical considerations according to Lebone. It disputes that this constituted a contravention of the court order and insists that the Director-General did consider the advocate’s opinion together with a second opinion, which he favoured.

Lebone states that the involvement of the previous project leader was cleared with legal advisors and disputes that it has compromised the process.

The hearing will continue on January 22.

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COMMENTS   1

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Look up Mr Keith Michael, MD of Lebone.
Decide for yourself if he is trustworthy.

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