Eskom awards ‘never-ending tender’ to Areva

After taking four years to make a decision, Eskom has awarded a
multibillion-rand Koeberg refurbishment contract to French firm Areva.

Eskom has awarded a multibillion-rand contract to refurbish six steam
generators at Koeberg nuclear power plant to French multinational Areva.

The award – announced late on Friday evening – presents a
remarkable turnaround for Areva because its American-Japanese rival
Westinghouse was twice recommended for the bulk of contract in 2011 and
2013.

Dubbed the never-ending tender, Eskom has taken more than
four years to arrive at its decision. The delays have risked what one
senior Eskom source has called “a nuclear safety issue” because the
steam generators have been in place for thirty years, and are nearing
the end of their lifespan.

“Based on the lead times for the manufacture of six new steam
generators, Eskom is planning for installation in 2018.
The 2018 installation plan is also aligned to Eskom’s maintenance
activities planned for Koeberg. The timeline also ensures that all
Koeberg safety issues are addressed to ensure compliance with regulatory
requirements,” Eskom said in its statement announcing the award.

But Eskom may not be out of the woods, given the chaos and acrimony that surrounded the tender decision-making process.

Court review available

Westinghouse
could now decide to take their decision to court for a review, a move
that is within their rights, but could drag the scheduled maintenance
date back even further.

Westinghouse could point to the fact that Eskom’s technical
team had recommended it for the bulk of a three-part contract in
January 2013, only for the board’s tender committee to review and
eventually overturn the decision.

The review process, conducted externally by European-based
consultancy firm AF Consult at the instigation of the board tender
committee, recommended a single integrated contract.

At one point, there were three competing legal opinions in
circulation – two commissioned by the technical team, one by the board
tender committee – which arrived at different conclusions as to whether
Eskom could award a single integrated contract when the original tender
had been issued in three parts.

The single integrated contract favoured by AF Consult and
the board tender committee also raised the stakes for both bidders:
whereas before they might have shared the spoils, the contract became a
winner-take-all decision.

Allegations of bias

With both bidders
biding their time ahead of the far bigger new nuclear build decision
that has long been promised by government, the steam generator contract
represents a useful return on their investment in South Africa in the
meantime.

AF Consult had also levelled accusations of bias against the technical team arising from their recommendation of Westinghouse.

The allegations of bias against the technical team were
only dropped when there was no turning back on a competitive negotiation
tender process that pitted Areva against Westinghouse.

Despite the way the process unfolded, Eskom said: “The
board is satisfied with the integrity [of] all processes and ensured
that they remained fair and in adherence to good governance.”

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