The Constitutional Court has affirmed Eskom’s award of a R5bn contract to Areva, ending a long-running dispute between the power utility and rival service provider Westinghouse.
The contract was for the replacement of the six steam generators at the Koeberg Power Station.
The decision by the Constitutional Court sets aside judgments of the Gauteng High Court and Supreme Court of Appeal over the R5bn contract to Areva on the grounds that Westinghouse Electric Belgium Societe Anonyme did not have locus standi to bring the action.
The Constitutional Court held that the case should have been brought by Westinghouse USA as this was the real bidder for the tender and Westinghouse Belgium was simply acting as an agent for the company.
Throughout the long process of litigation Westinghouse claimed Eskom had introduced “strategic considerations” into the tender evaluation at a late stage in order to favour Areva.
The Gauteng High Court rejected Westinhouse’s application for a review of the tender award to Areva but the Supreme Court of Appeal ruled in favour of Westinghouse. Both judgments have now been thrown out.
In a majority judgment, Justice Raymond Zondo also granted Eskom and Areva leave to appeal against a Supreme Court of Appeal judgement and upheld Areva’s appeal.
But Deputy Chief Justice Dikgang Moseneke delivered a dissenting judgment, saying Justice Zondo’s assertion that Westinghouse did not have locus standi to initiate the review proceedings in the Gauteng High Court steered clear of deciding the merits of the dispute. Justice Zondo was supported in his judgement by five other Constitutional Court judges.
“I disagree,” he said.
“Westinghouse had the requisite standing in the judicial review it sought. In any event, it is not in the interests of justice for a court of final instance to dispose of a matter, of this constitutional magnitude, commercial import and of high public interest, by way of only a technical and dilatory bar as locus standi,” Moseneke said.
“Whatever the correct description of Westinghouse or its relationship with Westinghouse USA is, it was never a thing of substance in the tender process.
“That little matter changed nothing in the tender or subsequent litigation process and no entity may correctly claim that it had been thereby prejudiced.
“The main judgment should have found that Westinghouse has the requisite own standing and should have reached and decided the merits of the appeal by Areva and counter-appeal by Westinghouse.”
In his minority judgment Moseneke, along with acting Justice Lebotsang Bosielo, said Eskom was “truly meticulous and proper in its assessment of the bids”.
“It resorted to independent interlocutors to help it assess the technical strength of the respective bids. Here there was no suggestion in evidence or argument that the board tender committee was actuated by malice, irrationality, corruption or other improper motive.
“I am unable to agree that the strategic considerations by the board tender committee in awarding the tender to Areva made the decision unlawful because irrelevant considerations were taken into account or relevant considerations were not considered. The evidence suggests that the process was a hallmark of careful consideration of all relevant factors,” Judge Moseneke ruled.
“Westinghouse’s claim that certain vital strategic tender requirements were irregularly considered midstream is not supported by a careful evaluation of the tender process.
“In my respectful view the Supreme Court of Appeal erred by finding that the strategic considerations fell outside the bid evaluation criteria. Had the Supreme Court of Appeal given full and proper consideration to the actual bid evaluation criteria, it should have found that the strategic considerations were integral to the bid evaluation criteria or at the very least, could be properly inferred from the bid evaluation criteria.
“That must have been the understanding of Westinghouse too. As the High Court rightly observed, there was no suggestion by Westinghouse prior to the parallel negotiations or even during the negotiations that the strategic considerations were extraneous or that it did not understand them.
“Neither did Westinghouse seek clarity on what these considerations were. Instead, Westinghouse took part in the negotiations without even whispering a complaint.”
Eskom welcomed the decision. The utility has consistently rejected Westinghouse’s contention, arguing throughout the court processes that the strategic considerations were part and parcel of the tender evaluation criteria from the beginning.
It has insisted Westinghouse and Areva were treated equally and fairly throughout the tender process in relation to the strategic considerations.
Eskom interim CEO Matshela Koko has argued that while Westinghouse’s price offering was cheaper, it was never, at any stage, an outright winner of the steam generator replacement tender.
After considering both offers, the board tender committee awarded the tender to Areva. He said Eskom had explained to the Constitutional Court that Westinghouse had clearly admitted it would not be able to meet the 2018 deadline.
Westinghouse on the other hand was adamant it offered the best solution to Eskom and its bid was R140m cheaper than Areva’s, and it offered localisation benefits to the value of R157m better than that of Areva.
It has insisted that Eskom unlawfully introduced strategic considerations to suit Areva, resulting in an unfair tendering process — to the detriment of the public purse — even after Westinghouse was chosen as the preferred bidder.
It has dismissed the 2018 deadline as a red herring, claiming Areva is already nine months behind schedule and that the steam generators at Koeberg can operate safely for several years beyond 2018.
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