Koeberg documents show odd decisions

Eskom documents reveal glaring anomalies in its award of a R4-billion tender to revamp the Koeberg nuclear power station – and the apparently key role of controversial interim chief executive Collin Matjila in overturning evaluators’ consistent preference for American-Japanese firm Westinghouse.

Eskom has made much of Westinghouse last month abandoning an attempt to interdict the contract award to French multinational Areva. 

But amaBhungane has learned that Westinghouse will soon return to the high court with an urgent application to review the award.

In its original application, Westinghouse accused Eskom board members, and Matjila in particular, of being party to “pickpocketing” the award from it after a long-running and acrimonious tender process, and despite it emerging as strongest in evaluations by Eskom’s technical team.

The contract is for the replacement of ageing steam generators at Koeberg.

Eskom claimed this week that their answering affidavit and supplementary documents disclosed during the abandoned interdict application last month “refuted Westinghouse’s hearsay evidence”.

But an amaBhungane analysis of the same documents shows that:

  • Eskom’s own experts repeatedly recommended Westinghouse, including advancing Westinghouse as the first option – with Areva as an alternative – in what appears to be their final formal recommendation;
  • Matjila assumed hands-on control of an additional technical review process, by Swiss company AF Consult, that trumped four years of work done by Eskom’s own technical team;
  • Matjila also co-signed a last-minute recommendation – prepared by Eskom’s acting group executive for the strategic technology and commercial portfolio, Matshela Koko – that came down solidly in favour of Areva;
  • Areva submitted additional information – most significantly, an apparent undertaking to perform the maintenance work quicker than Westinghouse – after the final bid submission window had closed; and
  • This late offer, combined with seemingly undocumented advice from the external consultants, appears to have ousted Westinghouse’s cheaper, more localisation-friendly offering.

The tender was originally issued in 2010 in three parts. The biggest is to manufacture and deliver the six replacement steam generators to Koeberg. The two other parts are for installation and safety assurance.

Westinghouse was front-runner
The court documents confirm what amaBhungane has previously reported: that Eskom’s technical team recommended Westinghouse for the bulk of the contract in 2011, and again in 2012. Each time, however, therecommendation was blocked.

Last year the tender was reissued as a single contract combining all three parts. 

For this composite ­contract, Eskom’s court documents indicate that Westinghouse “emerged as the lowest priced bidder, meeting Eskom’s key terms and conditions” and that, though both bidders met Eskom’s required localisation requirement, Westinghouse’s offer was better value.

Although pricing details were redacted from the court documents, they do reveal that Westinghouse’s offer was 0.99% cheaper than Areva’s. 

It was 4% cheaper than Areva’s when localisation was included – an overall saving of approximately R160-million.

According to Eskom’s technical team, there was no difference between the two bidders on the third determining factor – whether they could meet Eskom’s requirement that the steam generator installation be completed during a scheduled outage at Koeberg in 2018.

Closely managed consultants tip Areva
The reason Areva eventually triumphed is largely attributed to the advice provided by a parallel technical review team from AF Consult appointed in June last year.

The documents indicate that Matjila, who chaired the board tender committee from 2011 until his appointment as acting chief executive in April this year, closely managed this parallel process.

He met with AF Consult’s representatives to clarify “key objectives” and ordered the draft report be discussed with him before presentation to the rest of the board tender committee.

After the report was finalised, the committee retained AF Consult to help to implement the consultants’ suggestion to invite both bidders to a competitive negotiation.

AF Consult was asked to “oversee the negotiation process on behalf of the committee”.

As far as amaBhungane can tell, AF Consult’s team was just two consultants – Stewart Lynas and Frantisek Heczko – whereas Eskom’s technical team numbered around 25 people.

In addition, Koko appointed another consultant, Rudi Koenig, to lead the negotiation process.

After the competitive negotiation ended in July this year, both bidders had to submit a final response.

Tender games
Although Westinghouse thought it simply needed to confirm acceptance of Eskom’s “Key Commercial Terms” and handed in a three-page document, its officials noted that Areva submitted a thick sheaf of papers.

Koko confirms in his affidavit that Areva submitted additional information at this stage, but said that it “was not considered” by the executive procurement committee.

But, strangely, this seems to be what Koko himself did on August 5, when he and Matjila co-signed an apparently unsolicited recommendation in favour of Areva that cited an out-of-the-blue offer by the French ­company to deliver steam generators three months ahead of schedule.

The Matjila-Koko document is also peppered with advice proffered by AF Consult and Koenig. 

Both consultants declined to comment this week, and Koenig could not be reached.

Koko submitted this document to the executive procurement committee and also to the ultimate arbiter, the board tender committee.

Matjila and Koko’s recommendations also narrowed Eskom’s key imperative down to “deliver[ing] the Koeberg SGR project on time” because of the tight schedules imposed by the last realistic maintenance window in 2018.

Matjila’s role in introducing the AF Consult review had already delayed a decision by 18 months.

Koko’s affidavit states that, following his and Matjila’s submission, the executive procurement committee finally endorsed Areva.

But he excludes the crucial executive procurement minutes from the Eskom court papers to support this claim, an omission that jars with his inclusion of almost all other minutes.

Westinghouse cited a confidential source who was apparently privy to this meeting, who said that the executive procurement committee in fact endorsed Westinghouse.

The court will need to settle this contradiction, because in Westinghouse’s version, it suggests that the board tender committee then took a radical, and possibly reviewable, final decision in favour of Areva.

Eskom said in response to questions that “it will not conduct a legal review through the media … should Westinghouse be granted a legal review, the courts will confirm Eskom has acted within the prescribed procedures throughout the process”.

See:  Editorial: Nuclear ambition could cripple SA 

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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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Sam Sole
Sam Sole works from South Africa. Journalist and managing partner of the amaBhungane Centre for Investigative Journalism. Digging dirt, fertilising democracy. Sam Sole has over 17731 followers on Twitter.

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