National

Nuke tender loser takes on Eskom

Lionel Faull

Westinghouse is demanding a review of the utility’s decision on Koeberg contract

Position of power: Former Eskom interim chief executive Collin Matjila (above). The challenge to the tender award could delay work on Koeberg. Photo: David Harrison

Westinghouse, the company that lost a hotly contested multibillion-rand tender for critical nuclear maintenance at the Koeberg power plant, wrote to Eskom this week to demand that it halt the appointment of rival bidder Areva.

The American-Japanese-owned nuclear company is asking Eskom to give it access to the record of decision of all its tender decision-making committees that culminated in the award of the steam generator replacement contract.

The decision in Areva’s favour is a remarkable turnaround, given that Westinghouse was twice recommended for the bulk of the contract, first in 2011 and again in 2013.

Eskom announced the award to French multinational Areva late last Friday evening after a tense week of deliberation by its board tender committee.

Westinghouse said it sent a letter to Eskom on Tuesday this week, demanding that Eskom confirm in writing that it would not finalise a contract with Areva until it had addressed Westinghouse’s concerns.

“Irregular” process
Its lawyers are understood to be ready to interdict Eskom if their demands are not met, and will rely on various laws and legal precedents to make their case. Among these, the courts have previously ruled that unsuccessful tenderers have the right to seek temporary relief (for example, a postponement of an award decision) pending a review, as well as the right to access all documents used to adjudicate and award a public tender.

Despite Eskom’s pronouncement last week that its board was “satisfied with the integrity [of] all processes”, Westinghouse said this week that it “believes there were irregularities in the tender process at the highest level – the board tender committee”.

The award decision was made in the dying days of interim chief executive Collin Matjila’s tenure. He chaired the board tender committee for almost three years until April this year, when he stepped down following his appointment as interim chief executive. Board member Neo Lesela replaced him as chairperson of the committee.

This week, the Cabinet finalised the long-awaited appointment of a permanent chief executive to replace Matjila.

The new man at the helm, former public enterprises director general Tshediso Matona, will face many headaches at Eskom, but the disputed steam generator contract constitutes an immediate migraine.

Eskom took more than four years to decide on the contract. The delays now risk what one senior Eskom source described as “a nuclear safety issue” because the steam generators have been in place for 30 years and are nearing the end of their lifespan.

Eskom has identified a scheduled outage of Koeberg in 2018, when the new steam generators must be installed, but they are complex and components must be manufactured.

Westinghouse’s requested tender review means that the manufacturing cannot begin in earnest and, with every passing week, the time narrows between now and the planned installation.

Legal action
Westinghouse said it was mindful of the need for a speedy resolution to their dispute with Eskom: “We are willing to work with Eskom to move swiftly on a review but, if they fail to work with us, we will be compelled to take legal action.”

Westinghouse is understood to be concerned that Eskom’s technical team had recommended it for the bulk of a three-part contract in January 2013, only for the board’s tender committee to review and eventually overturn the decision.

The board tender committee is a subcommittee of the board, tasked with overseeing the integrity of large-scale procurement. Unlike the technical team, however, its members are political appointees.

After the Westinghouse award recommendation, the board tender committee rescinded the technical team’s decision and commissioned external technical and legal expertise to review it.

The technical review was conducted by the European-based consult­ancy firm AF Consult and recommended a single integrated contract. The board tender committee favoured a single contract, ostensibly because Eskom was struggling to integrate separate contracts at its new Medupi coal-fired power station.

But the technical team objected, believing that a tender issued in three parts could not be restructured midway through the process without going out to tender again.

At one point, there were three competing legal opinions in contention – two commissioned by the technical team, one by the board tender committee – that arrived at different conclusions about whether Eskom could award a single integrated contract when the original tender had been issued in three parts.

Winner takes all
AF Consult accused the technical team of bias, arising from its initial recommendation of Westinghouse.

The allegations made about the technical team were only dismissed when there was no turning back on a competitive negotiation tender process that pitted Areva against Westinghouse.

AmaBhungane has seen a letter to the technical team, written by Matjila in his capacity as interim chief executive in June this year, which states: “Most anomalies are explainable and those that are inexplicable are due to a difference of opinion [between AF Consult and the technical team].”

The single integrated contract favoured by AF Consult and the board tender committee also narrowed Eskom’s options. Whereas Areva and Westinghouse might have shared the spoils of a three-part contract, the single contract became a winner-take-all decision. Now the loser is fighting back.The delays now risk what one senior Eskom source described as “a nuclear safety issue” because the steam generators have been in place for 30 years

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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.


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