Business

CoA dismisses Sierra’s street lighting project petition

By Madhusha Thavapalakumar

A petition by Sierra Construction Ltd. following the loss of an LED smart street lighting project awarded by the Colombo Municipal Council (CMC) was dismissed by the Court of Appeal on 19 June 2020.

The petitioner had held the CMC, its Municipal Commissioner, Richardson Technologies (Pvt.) Ltd., which was awarded the project, and the Attorney General as respondents of this petition. 

Sierra, one of the bidders for this project, specialises in telecommunication engineering and handles large construction projects relating to water supply and sewerage, power, roads, buildings, irrigation, and pilling besides civil telecommunication.

Sierra failed to secure the bid as its bid validity period was shorter than the bid security period. The bid validity period is the period within which a bidder agrees to keep their offer legally binding. During the bid validity period, if the bidder decides to withdraw their bid or not to sign the contract, if selected, the bidder’s bid security would be forfeited. 

Sierra had sought a writ of certiorari to quash the decision to award the letter of acceptance to Richardson Technologies, a writ of mandamus directing the Municipal Commissioner to pre-qualify Sierra for the said project, and a writ of mandamus granting the project to Sierra.

 

What happened? 

CMC, on 31 July 2017 called for tenders to develop this project as a public-private partnership (PPP) between them and the successful bidder.  The closing date for the submission of bids was to be 25 August 2017, the bids were to be valid until 20 February 2018 and the bid security was to be valid until 22 March 2018. However, in a letter dated 18 August 2017, the Municipal Commissioner had issued amendments to the bidding document which was that the closing date of the bids had been extended until 4 September 2017, the bid validity period had been extended until 2 March 2018, and the bid security was to be valid until 1 April 2018.

In addition, Sierra had been informed by a letter dated 15 August 2017 that the bid documents should also be changed to correspond with these days. Together with a covering letter dated 4 September 2017, Sierra had submitted its bid to the Municipal Commissioner and their bid was valid till 20 February 2018, while the bid security issued to them by Sampath Bank was valid till 22 March 2018. 

Thus, Sierra had not complied with the extension of the bid validity period and the extended bid security date. Subsequently, Sierra secured the bid security extension from Sampath Bank and presented it to the CMC along with a letter dated 25 September 2017. However, even at this stage, Sierra had extended only the validity date of the bid security and not the bid validity period.  

The bid had been evaluated by a Technical Evaluation Committee (TEC) and considered non-responsive as the bid validity period was shorter than the bid security period and because the name of the bid security was Sierra Construction (Pvt.) Ltd., which Sierra had changed to Sierra Construction Ltd. by then. 

 

Submissions and rejections 

The first submission made by Sierra was that the bid validity period can only be extended where exceptional circumstances arise, and that, as no such circumstances had arisen, the decision to extend the date of validity of the bid security is ultra vires and that no consequence would flow from such a decision. 

The Court of Appeal (CoA) had responded saying: “Not only did the petitioner not object, the fact that the petitioner accepted the said extension and acted upon it, is clear by the fact that the petitioner submitted its bid only on 4 September 2017, which is the extended date for the submission of bids.”

The court further noted that the party inviting proposals has the right to set out the terms and conditions governing the said invitation and therefore it is within the power of the CMC to determine the closing date of tenders. Further, it stated that the Municipal Commissioner had to extend the deadline due to several requests from prospective bidders to do so and the court had examined the said letters. The CoA noted that these requests can be considered as exceptional circumstances. The third reason was that the bidder should have refused to extend the bid validity period without forfeiting the bid security.

The second submission of Sierra was that it was unreasonable to reject its bid, for two reasons – the first being that the bid can be rejected only if there is no bid security at all and not where there is a discrepancy with its validity date, and the second being that by the time the TEC evaluated the bids, Sierra had rectified the error.

“Each bidder was required to comply with the dates stipulated by the first respondent, and it was mandatory that the bid was accompanied by a bid security valid until 1 April 2018. Any deviation from this requirement can be categorised as a major deviation, and the bid of the petitioner shall be rejected for such deviation, without any further evaluation,” the CoA responded. 

Richardson Technologies (Pvt.) Ltd. is expected to commence the project now that the case has been concluded.