South African court says Areva contract is unlawful

14 December 2015


South Africa's supreme appeals court has ruled "unlawful" the award of a ZAR5bn ($315m) nuclear tender to France's Areva by power utility Eskom in August 2014.

The ruling vindicates Toshiba subsidiary Westinghouse, which had challenged the award of the tender. However, it does not mean the tender, to replace six steam generators at the Koeberg nuclear plant, will automatically go to Westinghouse. Westinghouse was Areva's only competitor and lost a High Court suit in March.

Areva and Westinghouse were the only bidders to meet the technical criteria. Westinghouse's bid was cheaper, but Eskom awarded the tender to Areva, citing "strategic considerations".

These included the fact that Areva was the original manufacturer of the equipment at Koeberg and had more experience. Eskom also asserted that Areva had detailed a schedule for completing the job, saying it could allow a three-month margin for error in its build.

In its judgment the appeal court acknowledged the importance and urgency of the replacement of the generators, saying it was "vital to the country's power grid". Justice Carole Lewis added that the energy crisis "would be greatly exacerbated" if the work was not done urgently. However, she said assessing the lawfulness of a tender process required a court only to look at whether the bids had "been properly evaluated against the tender criteria".

"Other considerations are not relevant," she said. Assessing the strategic considerations individually, she decided that each were not part of the original tender criteria and rejected Areva's argument that they had been implied from the start. The fact that the bid tender committee resorted to these "without making these known to either Westinghouse or Areva, and without making them part of the bid evaluation criteria, appears to me to be fundamentally unfair," she said. The further addition of the float as a decisive factor "added injury to insult".

Judge Lewis added that the failure to refer the strategic considerations to the bidders, to give them the chance to clarify their bids, or to reopen the process and amend the tender criteria, made the process "irrational and unlawful". "The award must thus be set aside," Justice Lewis said.

However, the court refused to award the tender to Westinghouse, as it would "not be equitable". If Eskom believed the strategic considerations were "vital", it should begin afresh and properly include them in its evaluation. It was not a foregone conclusion that Westinghouse would be awarded the tender if the decision were retaken since Areva had already begun work and the project had to be completed by 2018. It is unclear whether or not Areva and Eskom will take the matter to the Constitutional Court.



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