Eskom successfully defends challenge to Kusile tender award

Eskom has successfully defended a high court application by the WBHO-Lubocon joint venture (JV) to review and set aside its disqualification for a tender at the Kusile Power Station and the award of the tender to the Grinaker LTA-Enza Construction JV.

The tender was for the construction of a combustion waste terrace (a structure to house the ash that is a by-product of the coal burnt at the power station).

JSE-listed construction and engineering group WBHO first challenged the legality of its disqualification, with Eskom stating it disqualified WBHO because it had not provided mandatory information.

However, WBHO argued the obligation to provide this mandatory information was not made clear in the tender and, for that reason, it would be unfair to impose it on bidders.

WBHO’s second challenge was based on a change to the scope of the tender after the award to the Grinaker LTA-Enza Construction JV, which was the only tenderer given an opportunity to requote on the revised tender.

WBHO argued the tender should instead have been reopened to all, including those initially disqualified.

The group was further seeking to be awarded the tender, or alternatively to have the tender of the Grinaker JV and its tenders re-evaluated once WBHO was given an opportunity to submit a crucial document – known as the Appendix to Tender – and then for the best scoring tender, as at the date of the opening of the tenders, to be accepted by Eskom.

The omission of the Appendix to Tender was the basis for Eskom disqualifying the WBHO JV.

Eskom opposed both of WBHO’s reasons for applying to review and set aside the tender award.

Eskom put out the tender on 5 November 2020 to eight construction firms.

Kusile has an existing waste terrace, which was built by WBHO in a contract known as Phase 1.

Five bids

Five of the eight firms that were invited to tender for Phase 2 submitted bids, but for various reasons only the bid by the Grinaker JV successfully passed through the qualification stage.

However, the WBHO JV was the only bidder to challenge the award.

WBHO further argued that Grinaker had failed to answer a required question in the appendix on its bank details and, on Eskom’s own version, it was non-compliant and should have been disqualified.

However, in his ruling handed down on Friday (8 September) Judge Norman Manoin said in the context of this tender, one could not conclude that deferring the provision of bank account details was so material as to render the appendix submitted non-responsive.

“The fact that Grinaker elected to supply this information only later if it won the tender would not have been a comparative fact relevant to the assessments of the bids and hence, despite the insufficient response, would not have been a rational basis for disqualifying its bid,” he said.

Manoim said each bidder had an equal opportunity to access the mandatory returnable at the same time and the diligent bidder would have accessed the document from the website, as instructed, and seen from its contents that it was something that it was required to complete and return.

He concluded that the tender was not unfair nor was it irrational for Eskom to have acted in the way it did to disqualify WBHO.

“Once it [Eskom] had specified that completion was mandatory, it was obliged to disqualify a bidder which did not submit the completed Appendix.

“The review on this ground fails,” he said.

Manoim said the second basis for review, based on a change to the scope of the tender, was also without foundation.

No ‘major design change’

He said WBHO contends that this amounted to a “major design change” and even worse, amounted to “tender manipulation” designed to bring the Grinaker price down so it was affordable to Eskom.

Manoim said the argument that the whole Phase 2 project should have been put out for a fresh tender depends on the extent of the change or, put differently, is an argument about the consequences of substantiality.

The second argument suggests bad faith and that Eskom was manipulating the costs so as to bring the favoured bidder, post award, in line with a market-related price, he said.

Manoim said the argument around substantiality required WBHO to establish that the character of the tender had changed so materially from what was originally advertised that fairness required it be put up for a new bid or that all those invited should be permitted to re-tender based on the new specifications.

He said it was for WBHO as the applicant to make out its case on this aspect both on the facts and on the law but WBHO’s factual case amounted to no more than repeating what Eskom stated about the difference between the two specifications.

Judge Manoim said the fact that WBHO could so confidently state what its new bid price would have been had it been asked to tender on the new specifications, suggests that they were not that substantial technically – one layer of the materials to be used as opposed to two.

“This does not on the face of it appear to be a substantial design change that materially could have affected the nature of the original bid. Moreover, it led to a reduction in expense not an increase,” he said.

No case law cited

Manoim said WBHO had also not referred him to any case law as to when a change in design is so material as to justify – on the grounds of fairness, transparency, cost effectiveness or equitability – that a new bid is required.

He added that Eskom makes the point that its tender documents stipulated that Eskom reserved the right to engage in post-tender negotiations with a preferred bidder, which is precisely what it did.

Manoim said Eskom also makes the point that the regulatory approval only came in October 2021 – 10 months after Grinaker had been awarded the bid.

“This negates any suggestion of tender manipulation,” he said.

“Eskom needed this consent in order to lower the tender specification downwards and this was not available to it at the time of the original bid.”

Judge Manoim added that much was made by WBHO in its papers about the fact that its bid was substantially lower than that submitted by Grinaker and also suggested that, as the firm that had undertaken Phase 1, it was the obvious candidate for Phase 2.

He said further remarks about Grinaker’s financial status were also made arising from concerns that emerged by Eskom itself in the record.

“However, this case does not concern whether Eskom chose the best candidate.

“It is about whether WBHO was incorrectly disqualified from further consideration. I found that it was not. Second, whether given the scope change a new tender was required and I found that it did not,” he said.

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