Eskom applies to appeal judgment setting aside tenders worth R16bn

Eskom has lodged an appeal against a high court judgment that declared tenders worth about R16 billion for maintenance and outage repair services at its 15 coal-fired power stations unlawful and set aside.

The tenders were awarded to Actom and Steinmuller Africa in October 2021.

In a judgment handed down on 17 November in the High Court in Pretoria, Judge Anthony Millar ordered Eskom to conduct a fresh tender process and suspended the setting aside of the contracts with Actom and Steinmuller Africa until its finalisation.

Eskom on Tuesday lodged its notice of application for leave to appeal the whole judgment and the order handed down by Millar.

The judgment follows Babcock Ntuthuko Engineering lodging an application to review, set aside and declare unlawful the contract awards to Actom and Steinmuller Africa, after it was disqualified from the tender for failing to comply with a requirement in the request for proposals (RFP) to provide an ISO 3834 certificate issued by the South African Institute of Welding.

In terms of the tender award, Steinmuller was awarded eight power stations and Actom seven.

‘Court erred’

In its appeal, Eskom claims the court erred in concluding that the ISO precondition was ambiguous, and the tender process procedurally unfair – and that the tender award was therefore reviewable on these grounds.

Regarding Babcock’s disqualification from the tender, Millar said in his judgment that Eskom argued that “certification” meant “certificate” and the failure of Babcock to submit an ISO 3834 certificate was a failure to submit a mandatory returnable for evaluation.

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Millar said the words “certificate” and “certification” both appear with the list of Commercial Tender Returnables (CTRs) in the tender document and, on a plain reading of the use of these terms, it is clear that they were not intended to be used as synonyms.

He said the argument by Eskom that “certificate” and “certification” are to be read as synonyms and interchangeably in the context of the CTR list, is without merit.

To do so would render the requirements set out in a specific paragraph of the CTR list “redundant, irrational and out of place in keeping with the formulation of the RFP and its purpose”, he said.

Arguments

In its application for leave to appeal the judgment and order, Eskom said the court held that “certification” meant “the action of an instance of certifying the truth” or “referred to a body that has the authority to issue a certificate”.

Eskom said neither interpretation of “certification” fits comfortably in the framing of the ISO precondition in a way that renders its meaning sensible.

“But even if the court’s interpretation is nevertheless adopted, the ISO precondition still required the submission of an ISO 3834 certificate.

“A certificate is the means through which a certification agency or ‘body’ certifies that a person meets a quality standard,” it said.

Eskom added that nothing in the court’s judgment supports the interpretation of the ISO precondition adopted by Babcock, namely that “certification” means a mere statement by a bidder that it holds a certificate.

It said an interpretation of the ISO precondition that something less than an ISO 3834 certificate was required to be submitted by bidders – such as a mere statement by a bidder that it was certified – defeats the purpose of the precondition.

Eskom said that if the ISO precondition is read this way, even an uncertified bidder who was not qualified to weld to the appropriate standard could pass the mandatory requirements evaluation stage and be awarded the tender based on a “false” statement that it is certified.

Eskom said the ISO precondition was not ambiguous and the court erred in making this finding.

‘No confusion’

The power utility added that no party, Babcock included, contended in their affidavits or heads of argument in the review that the ISO precondition is ambiguous.

Eskom said it made it plain that the RFP in fact required the submission of an ISO 3834 certificate and both Actom and Steinmuller understood that an ISO 3834 certificate was required by the RFP and complied with this requirement.

“Babcock itself understood the requirement in this way. Babcock admitted in its letters to Eskom on 19 November 2018 ‘that copies of its current ISO 3834 certificates may have been excluded in error from its bid documents to Eskom’ and it repeatedly submitted ISO 3834 certificates after the tender closing date in an attempt to cure the defect.

“There is no evidence of any other bidder suggesting that the ISO precondition was ambiguous or suggesting that the precondition did not require an ISO 3834 certificate but merely a statement to the effect that the bidder had one.

“But even if the ISO precondition is ambiguous, the ambiguity was removed by the tender clarification meeting held by Eskom before bids were submitted, which was attended by bidders, including Babcock,” it said.

“As its title suggests, the meeting was convened to ‘clarify’ tender requirements about which there may be uncertainty.

“The minutes of the meeting recorded that bidders were required to provide a ‘valid certificate of ISO 3834’ and, in response to a question from a bidder, Eskom said that a ‘valid certified copy’ of such certificate would suffice.

“It was therefore confirmed that the submission of a certificate and not something less was required by the RFP,” it said.

If Eskom’s application for leave to appeal is successful, it will suspend the execution of Millar’s judgment until the appeal process is concluded, including his order that the fresh tender process should be expedited and commenced and completed within a period of six months.