Eskom officials snubbed legal advice to enter into a contract with the winning bidder of a R31.5 million tender, following months of allegedly stringing the company along, before giving it an excuse that the validity period of the tender had expired.
The power utility had, for unexplained reasons, started engaging Shandu’s Technical Services (STS) on June 26 2018, 51 days after the validity period had expired on May 7, but turned around and used this as an excuse not to offer STS a contract.
For this blunder, Eskom now faces a damages claim of R5.6 million excluding VAT, which is the profit STS expected to make from the deal.
STS won the tender on April 10 2018 to supply, fit and deliver two 8x8 specialised, imported trucks, which work as aerial platforms from which engineers can work on live cables.
If not used as aerial platforms, the trucks are used as cranes and they can be used at any time because they do not need a special permit for abnormal vehicles to move around.
The tender was advertised on January 6 2018 and closed on February 7 2018, but remained valid for 90 days.
When Eskom officials began negotiations with STS on June 26 2018, none of its officials raised a red flag that the time for the tender was already up.
STS claims that it would not necessarily know about the expiry date or have control over it because it was an internal Eskom matter.
The officials, according to a trail of documents City Press has seen, strung STS along for a few months, and demanded that the company apply for two foreign currency accounts in dollars and euros into which it would be paid.
For the first time, on August 1, Eskom’s senior buyer Elias Mathabatha emailed STS, informing the company that the validity period of the contract had expired. However, after this email Eskom continued engaging STS about having the foreign currency accounts in place.
It is not clear why Eskom officials handled this tender in this manner, but the power utility’s lawyer, Wawa Xaluva, described it as “shoddy”.
Xaluva gave his opinion to Mathabatha on March 28 2019, and in no uncertain terms warned that Eskom could be liable for costs STS had incurred and would find itself paying for goods without receiving any value for money.
The legal opinion was given a day after Eskom published cancellation of the tender on its website.
Xaluva said Eskom had created “a reasonable expectation” that STS would be awarded the tender when it started negotiating with the company after the validity period had expired and also giving feedback to its procurement committee.
“In short, the bidder was strung along by Eskom with a promise of an award that never came. There is a risk if and when the bidder takes Eskom to court. The role-players will be cross-examined and, by evidence before me, none paid attention to detail. This could result in the shoddy style this matter was handled being in the public domain, worse the perceived incompetence of all involved,” Xaluva said.
He advised that Eskom could mitigate the risk by contracting STS.
“I can think of nothing other than entering into a contract with the bidder, as Eskom, if it loses the case in a trial, may find itself paying for goods without receiving any value for money. Obviously, this may have to be done on a single/sole source basis, the aim being to prevent paying money for no value received,” Xaluva said.
STS managing director Thembinkosi Mbatha said he did not understand why Eskom had wanted his company to open two foreign currency accounts.
“We’re a local company and could be paid in our currency ... I think they were playing us, hoping that we would give up and that legal processes would drain us. We gave them the foreign currency accounts and then they told us about the validity period of the tender that had expired, but they began negotiating with us after it had expired,” Mbatha said.
“The validity period has nothing to do with us; it’s an internal process that we do not have control of, so we cannot be penalised for that. Our overseas suppliers have lost trust and faith in us, and this will cost us in future deals. We’re still amenable to sit around the table with Eskom to resolve this,” he said.
Despite Xaluva’s advice, Eskom has hired external lawyers to defend STS’s claim for R5.6 million in lost profit as a result of the cancellation of the agreement, which, according to STS’s March 12 2020 court documents, was part written and part oral.
Eskom spokesperson Sikonathi Mantshantsha said that, when Eskom’s buyer started negotiating with STS, he was not aware that the validity period had expired, but could not explain why it took him about four months to realise that.
“The supplier was informed as soon as it was discovered that the validity period expired,” Mantshantsha said.
When asked about Eskom’s own lawyer’s opinion that the tender be awarded to STS, he replied: “The tender was cancelled after taking into account legal opinion and other considerations.”