A suspect contract blew the fuse
The treasury in late 2017 blocked the extension of a suspicious contract that possibly could have prevented this week’s crippling load-shedding. It was found not to have met public procurement requirements.
Eskom is now investigating new irregularities picked up in a new attempt to restore the contract and to stave off load-shedding.
This week was the first time Eskom had to institute load-shedding overnight, which required President Cyril Ramaphosa and Public Enterprises Minister Pravin Gordhan to intervene. Load-shedding happens when Eskom is unable to meet the country’s energy demands and eases some of that demand by switching off the electricity supply to different areas on a rotational basis.
Gordhan held emergency meetings with Eskom on Sunday and, with the power utility’s chairperson Jabu Mabuza, chief executive Phakamani Hadebe and chief operations officer Jan Oberholzer, addressed the media on Tuesday.
Oberholzer and senior general manager Andrew Etzinger ascribed the load-shedding to boiler-tube leaks on seven units, which caught them by surprise.
They said this was aggravated by damage to the power lines from the Cahora Bassa power station in Mozambique, caused by Cyclone Idai, which cut off 1150
megawatts (MW) of power.
Oberholzer said the load-shedding could have been prevented if the contract for the boiler maintenance services had been extended. But the request was rejected by the treasury because of price concerns and doubts about how the company was initially awarded the contract.
On Thursday, the treasury’s chief procurement officer, Willie Mathebula, referred all questions to the treasury’s former chief director for governance, monitoring and compliance, Solly Tshitangano, who is now at Eskom.
The contract with Carab Tech-nologies to inspect, collect and analyse data, and track the maintenance of boiler tubes at power stations, is one of many Eskom deviations and extensions rejected by the finance department in 2017 and 2018.
Deviations from normal tender processes and extensions of contracts without going to tender are only allowed in the case of an emergency, or when there is only one supplier able to do the work.
Eskom had wanted the contract for the provision of the boiler maintenance services to run from September 2017 to September 2019 at a cost of just over R311-million. The previous contract, between 2011 and 2017, had cost the power utility R419-million.
At Tuesday’s press conference, Oberholzer said: “In the past, we had what we call a boiler healthcare service … We had an external company doing that for us.”
The work entails an engineer collecting data on the tubes, looking at 11 factors, including thickness, corrosion and erosion. This is then mapped on a system and over time gives Eskom an idea about the state of its tubes throughout a unit and about the issues different parts of the plant are susceptible to. It allows Eskom to know what needs to be done and so pre-empt failures.
Oberholzer said Eskom was working on getting the contract back in place this week, adding: “I think it’s an internal issue and we cannot blame anybody except ourselves.”
What he did not say is that Eskom last month scrapped the tender process for the appointment of a company to do this after technical staff found there were irregularities, including that the specification was written specifically for Carab.
The Mail & Guardian understands that Eskom’s chief procurement officer is investigating the irregularities.
Despite the earlier announcement that a new contract would be in place by the end of the week, Eskom on Thursday confirmed the cancellation, saying it had already issued a request for information.
But, at the same time, a request was submitted to treasury for a deviation, under single source.
“Eskom will not place a contract for a boiler healthcare system without the applicable commercial process,” Eskom said on Thursday.
It also said the “healthcare system” was a “temporal intervention”, and “skilled system engineers, inspection and repair co-ordinators are also critical. Equally important is the use of competent and experienced maintenance contractors to perform the required scope of work.”
Eskom revealed it has three maintenance and repair contracts for boiler pressure parts and high-pressure pipework worth R8.11-billion, which would be coming to an end at the end of March.
The utility also said it does not have the “required spare resources to run the system in its entirety”.
An Eskom source, who has previously blown the whistle on state capture contracts at the utility, said it was worrying that Eskom was again reverting to using emergencies as a reason to circumvent procurement processes for long-term contracts that run into hundreds of millions of rands. “The narrative being used is that there are no skills in Eskom when, in reality, we could do this ourselves using our human resource. This system relies on data and the analysis of it, and that we can do.”
Another Eskom source said: “These guys [Eskom leaders], they’re confused [and] they just blame everybody … They don’t need any other emergency [dispensation] from treasury. Even with coal, they have proper guidelines on how to procure.”
Documents show that, in November 2017, the treasury raised concerns about the contract with Carab because costs were escalating. It was to earn R311-million between September 2017 and September 2019, in addition to the R149-million it had already scored from the lucrative contract.
The treasury asked Eskom to provide evidence that there were no other suppliers to render the service and to clarify how Carab was initially appointed, given that no tender was issued. In reply, Eskom’s then chief procurement officer, Jaybalan Pillay, said: “A discussion was held with all the power station managers at the power station managers’ meeting dated 2 and 3 October 2008. All members at the meeting agreed that Carab system would be implemented at all sites.”
But the treasury found this explanation unsatisfactory and canned the Carab contract.
“Treasury said the system should come from Eskom not from them [Carab]. You can’t request the company to give you a data capturer, and that system is an Excel-based system; anyone can capture. Already in 2011, it [the treasury] said the company had already given training material to Eskom to train all these employees but, even after 2015, nobody was trained,” said a senior government official.
According to insiders, the Carab system that Oberholzer claimed would have helped Eskom to detect failures would not have staved off the current crisis. “The real problem is that, what is done at Eskom [is that], when they say they are attending to problems, it’s only welding where there’s a leak. If they had 20 to 30 days for a planned outage, then they would look thoroughly and then maintain … The problem is that we are just always patching,” one said.
Another, an engineer with more than a decade’s experience at Eskom, said: “All they do at Carab is collect data and use it to tell you when maintenance is due. The only reason stations are unable to do that is because they took the records when they left in 2018. They were isolating Eskom’s own system engineers at power stations. The real questions you need to ask is where their records are. Why did they [Carab] take them when Eskom paid for them?”
Carab did not respond to requests for comment.
Eskom’s problems were identified in 2015 in a redacted report by law firm Dentons, which pointed out a critical need for planned outages for maintenance.
“The Dentons report says the way maintenance contracts were [drafted was] not performance-driven. In other words, we would just pay you per month … whether you are delivering or not,” said one insider.
The report said maintenance backlogs at Eskom would take three to six years to clear. It identified the coal-fired power stations Arnot, Camden, Grootvlei, Hendrina and Komati as having the highest backlog of planned outages. At the time, only three out of seven maintenance outages were performed on time.
This week, Mabuza said they also discovered that maintenance funds had been used elsewhere.