Competition Tribunal dismisses R240m Eskom collusive tendering complaint

The Competition Tribunal has dismissed a complaint of alleged collusion by four firms and three joint ventures (JVs) in a R240 million Eskom tender.

Competition Commission spokesperson Siyabulela Makunga said on Thursday the commission has not yet taken any decision on whether to appeal the judgment.

Read: Eskom applies to appeal judgment setting aside tenders worth R16bn

“We are currently studying the judgment and we will decide on the next course of action in due course,” he said.

Comment on the dismissal of the complaint was requested from Eskom but has not yet been received.

Complaint lodged, withdrawn, pursued – in that order

Eskom lodged a complaint in March 2016 with the Competition Commission, which it subsequently withdrew, against SGB-Cape, a division of Waco International.

The power utility’s complaint followed it issuing a tender on 15 March 2015 inviting bids for the supply, transportation, delivery, installation and dismantling of scaffolding and thermal insulation for its 15 coal-fired power stations for a period of five years.

Eskom received bids from 31 bidders but while assessing the bids for completeness concern was raised that four of them – those submitted by SGB-Cape, Tedoc SGB-Cape Joint Venture (JV), Superfecta SGB-Cape JV, and Mtsweni SGB-Cape JV – were signed by the same person and contained similar or the same documents.

SGB-Cape is focused on the rental and sale of products and services related to scaffolding, thermal insulation, corrosion protection and asbestos removal while Tedoc, Mtsweni and Superfecta are human resource companies and Mtsweni has engaged in some small-scale construction and scaffolding work.

The JVs between SGB-Cape and Tedoc Industries (Pty) Ltd, Superfecta Trading 159 CC and Mtsweni Corrosion Control (Pty) Ltd were established specifically for the purpose of bidding for this Eskom tender.

The tribunal judgment said it is important to note that the invitation to tender had various requirements.

It said to qualify for evaluation and/or award of the contract, bidders were required to complete and submit mandatory safety, health and environment (SHE), commercial, financial, technical, and quality proposals.

Documentary requirements included a SHE policy, SHE plan and assessment, an approval certificate as an asbestos contractor, and quality and technical requirements including evidence of specialised experience.

The tribunal said Tedoc, Superfecta and Mtsweni were not in possession of these documents and did not meet the tender requirements and, while it was argued that Mtsweni could nevertheless have submitted a tender with a different partner who met the tender requirements, it is common cause that Tedoc and Superfecta were unable to tender for this opportunity on their own.

It added that SGB-Cape met the technical requirements but did not meet the requirement of 51% black ownership to the extent that it was mandatory, and on 28 April 2015 four bids were submitted to Eskom in the names of SGB-Cape, Tedoc SGB-Cape JV, Superfecta SGB-Cape JV and Mtsweni SGB-Cape JV.

Read: Welcome to Eskom, ‘SA’s largest organised crime network’

The tribunal said the four bids contained various similarities including that Johan Falconer, the commercial director of Waco Africa, was a common signatory and SGB-Cape being a common participant in respect of each bid.

“In addition, the bids contained identical commercial, technical, financial, SHE and quality documents,” it said.

The information obtained during the assessment of the bids was referred to the internal forensic and auditing team at Eskom, which made a finding of collusive bidding and referred the matter to the commission for investigation in March 2016.

Investigation continued

The commission continued its investigation despite Eskom’s withdrawal of its complaint and subsequently initiated its own complaint against Tedoc, Superfecta and Mtsweni plus three joint ventures (JVs) established between them.

This led to the commission on 6 February 2018 referring its complaint to the tribunal for adjudication, seeking a declaration that the firms and JVs had contravened Section 4(1)(b)(i) and (iii) of the Competition Act and the imposition of an administrative penalty.

The commission alleged in its referral that while the firms were in a horizontal relationship, they entered into an agreement or engaged in a concerted practice to fix prices and tender collusively.

Judgment

In dismissing the complaint, the tribunal said the commission failed to prove the first leg of the requirement of Section 4(1)(b) – that the firms and JVs are in a horizontal relationship.

“We find that the JVs are not in a horizontal relationship and that the counterfactual is a single bid by SGB-Cape (with or without a partner),” the tribunal said.

It added that the relationship between the JVs cannot be classed as horizontal competition because they would not have existed outside of this tender opportunity.

“The JVs were constructed for the specific purpose of this tender by SGB-Cape and, absent the decision to create JVs for this bid, they would not exist.

“Ultimately SGB-Cape, as the controlling mind, could not collude with itself for the same piece of work. We further find that the JVPs [joint venture partners] did not collude with each other.

“The commission’s theory of harm is not supported by the facts of this case. Accordingly, we find that there has been no contravention of Section 4(1)(b)(i) and (iii) [of the Competition Act],” it said.

R500m security tender also in the spotlight

Meanwhile, media reports on Thursday indicated that Eskom’s head of security Karen Pillay has been placed on precautionary suspension pending the finalisation and outcome of a probe into allegations made against her in the awarding of a R500 million tender to Fidelity Security Services.

Zondo called out by parliament

Parliament on Thursday expressed shock and strong objection to recent remarks made by Chief Justice Raymond Zondo, the former head of the Judicial Commission of Inquiry into Allegations of State Capture, about parliament.

The Zondo Commission highlighted fraud and corruption in many state-owned entities (SOEs), including Eskom.

Parliament spokesperson Moloto Mothapo said it is inappropriate for the Chief Justice, representing one of the arms of state, to engage in public attacks on parliament.

“We believe that utilising the established channels to address any concerns he [Zondo] may have regarding Parliament’s implementation of the commission’s recommendations would have been more appropriate.

“It is not the place of a Chief Justice to make such public remarks unless and until he is required to adjudicate on a matter with impartiality.

“The principle of separation of powers is fundamental to our democracy, and it requires each branch of government to respect the roles and responsibilities of the others. Chief Justice Zondo’s public attack on Parliament encroaches on this doctrine,” he said.

Mothapo added that it is crucial to provide parliament with the necessary space to fulfil its obligations, which it is implementing, guided by the recommendations made by the Zondo Commission.

“We want to emphasise that Parliament, through the diligent efforts of the Programming and Rules Committees, has taken decisive steps to address the recommendations of the State Capture Commission.

“The criticism made by Chief Justice Zondo against Parliament is therefore unfortunate, lacks merit and undermines the principles of separation of powers,” he said.

“As the head of the judiciary, it is essential for the Chief Justice to foster an environment of mutual respect and cooperation.”

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