Supreme Court of Appeal upholds appeal lodged by Aurecon against the City of Cape Town


The court action initiated by the City of Cape Town was intended to clarify appointment of consulting engineers involved in pre-feasibility studies (upstream work) in the downstream phase of work.

The matter which was before the Supreme Court of Appeal entailed the very strict interpretation of the word “involved” in Clause 27(4) of the Municipal Finance Management Act No. 56 of 2003 Regulations, by the City of Cape Town to exclude Service Providers with minimal involvement in upstream work from tendering for downstream work.

If not challenged, South Africa ran the risk of the “upstream” phase of engineering, arguably the most important aspect of infrastructure and engineering services delivery, being neglected allowing for sub-optimal subsequent phases with huge financial cost uncertainties with respect to the end product.

Consulting engineering firms faced with a choice between the phases as interpreted by the City of Cape Town, would typically opt for the more profitable “downstream” phase at the expense of the “upstream” phase. This means that fewer firms suited to the “upstream” phase become available and the overall level of expertise which the project demands, is diminished. This is not in the National or Client’s interest as the “upstream” phase requires the most experienced, the best and the most innovative of engineering talent.

The problem would have been compounded in that many other municipalities, government departments and State-owned entities could possibly have emulated this stance which ultimately then would have been to the detriment of good engineering practice and client value for money.

On Wednesday, the Supreme Court of Appeal upheld the appeal lodged by Aurecon and dismissed the application with costs.

The Judgement augers well for the industry because CESA has always held the view, accepted by both Clients and Service Providers in the construction sector for many years, that full disclosure by the Client of information from the “upstream” phase of the project which is relevant to firms tendering downstream, would eliminate any unfair advantage and place all tenderers on the same ethical and commercial footing in competing for the award of work in subsequent phases of a project.

This is an essential principle to uphold in safeguarding the excellence and sustainability of the Sector whilst ensuring that our Client bodies derive fair and qualitative value for money.


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