Eskom can’t change rules mid-game

The titanic battle between two multi­national nuclear companies over a disputed R5-billion maintenance ­contract at the Koeberg power plant rumbled into court this week.

Losing bidder Westinghouse is challenging Eskom’s decision to award the contract to French company Areva in August last year, after a tender process that lasted three and a half years. During this time, the tender team recommended Westinghouse for most of the contract three times, only to be overruled on the advice of external consultants.

The shadow of South Africa’s R1-trillion nuclear build programme hangs over the Koeberg dispute because the consultants introduced future partnerships as a “strategic consideration” after the tender bids were in.

Jeremy Gauntlett, Westinghouse’s senior counsel, told the Johannesburg high court that six “strategic considerations” had been introduced at this late stage, that they were not reflected in the original tender criteria, and were subsequently applied unfairly to Westinghouse’s bid.

“You can’t just change the rules in the middle of a football match,” Gauntlett said, “or, if you do, then both sides need to be informed about it.”

Gauntlett pointed out that Eskom had cited four “strategic considerations” in an August 15 2014 letter to Public Enterprises Minister Lynne Brown, informing her of the tender award decision.

But he observed that these differed from other considerations Eskom claimed to have used to decide the award, and that these were again different in company documents and in the court papers Eskom had filed.

By the second afternoon of three scheduled days of argument heard by Judge Zeenat Carelse, Eskom’s senior counsel Vincent Maleka had got into a muddle about which “strategic considerations” were which.

“Strategic requirements”
Carelse asked Maleka to clarify the original tender requirements and whether these specified the “strategic requirements” Eskom used to appoint Areva. Maleka outlined the original criteria, then conceded they did not specify the “strategic requirements” used.

But he argued that these were implicit and Eskom reserved the right to apply “strategic considerations” in order to meet its “strategic objectives”. Eskom’s principal objective, Maleka said, was to meet a scheduled outage of Koeberg in 2018, by which point the new steam generators needed to be ready for installation.

Eskom asked both bidders to offer it a “float” – essentially, a guarantee that it could meet the tight delivery schedules. “Whereas Westinghouse’s float was conditional, Areva’s was not – and they did more to show how they would meet the deadline,” said Maleka. In January 2013, a year and a half before the tender was concluded, its executive procurement committee endorsed the tender team’s recommendation to split the contracts between Westinghouse and Areva, with the bulk awarded to Westinghouse.

At the time, the board tender committee stalled on approving this recommendation and decided to appoint external advisers. It was this advisory team whose “strategic considerations” ultimately swung the board tender committee behind Areva.

Gauntlett had observed that Eskom’s court papers do not contain any confirmatory affidavits from any of the five board tender committee members involved. Nor are there detailed minutes of the final meeting.

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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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