Westinghouse Electric Belgium Société Anonyme v Eskom Holdings (SOC) Ltd

Eskom Holdings (SOC) Ltd, a state-owned entity, conducted a tender process for the replacement of six steam generators at the Koeberg nuclear power station at a cost of approximately R5 billion. Two bidders participated: Westinghouse Electric Belgium Société Anonyme (Westinghouse) and Areva NP Incorporated in France (Areva). The tender process began in 2012 and lasted two years, involving multiple rounds of evaluation and parallel negotiations. The tender criteria included Supplier Development and Localisation (SD & L), financial considerations (35%), and technical criteria including safety, health, environment, programme and quality (35%). On 12 August 2014, Eskom's Bid Tender Committee (BTC) awarded the tender to Areva despite Westinghouse's bid being approximately R140 million cheaper and its SD & L contribution worth approximately R157 million more than Areva's. The BTC justified its decision based on 'strategic considerations' that were not part of the specified tender evaluation criteria, including: Areva's status as original equipment manufacturer (OEM) for Koeberg, better control of sub-suppliers, more extensive experience with steam generator replacement projects, offer of intellectual property rights, and Areva's inclusion of a three-month 'float' (buffer period) in its schedule. Westinghouse sought urgent review of the decision in the Gauteng Local Division, which was dismissed by Carelse J. Westinghouse appealed to the Supreme Court of Appeal.

• Whether the BTC's decision to award the tender to Areva was unlawful because it took into account considerations extraneous to the specified tender evaluation criteria
• Whether the tender process was procedurally fair
• Whether the introduction of 'strategic considerations' after the bid evaluation process constituted a reviewable irregularity under PAJA
• Whether Westinghouse had locus standi to institute proceedings (raised by Areva)
• What relief would be just and equitable: substitution of the successful bidder or remittal to the administrator for reconsideration

The appeal was upheld and the cross-appeal dismissed, in each instance with costs of three counsel. The order of the High Court was set aside and replaced with: (a) The application to review and set aside the decision of the Bid Tender Committee of 12 August 2014 succeeds with the costs of three counsel; (b) The matter is remitted to Eskom Holdings (Soc) Ltd for reconsideration in terms of s 8(1)(c)(i) of the Promotion of Administrative Justice Act 3 of 2000.

Where an administrative body entrusted with awarding a public tender takes into account considerations that are extraneous to the tender evaluation criteria as set out in the invitation to bid, its decision to make the award is unlawful under s 6(2)(e)(iii) of PAJA and procedurally unfair. Strict compliance with published tender procedures and evaluation criteria is legally required to give effect to the constitutional imperatives of fairness, equity, transparency, competitiveness and cost-effectiveness in public procurement under s 217 of the Constitution. The tender invitation and evaluation criteria constitute the legally binding framework within which tenders must be submitted, evaluated and awarded, and there is no room for departure from these provisions. If an administrative decision-maker takes a decision for any reason that is irrelevant or falls outside the parameters of the applicable criteria, the entire decision is vitiated, even if there are other good reasons supporting it. The failure to disclose decisive considerations to bidders and afford them opportunity to address those considerations renders the process fundamentally unfair. When 'strategic considerations' are introduced after the bid evaluation process has concluded, without amendment of the tender criteria or notification to bidders, this constitutes a material irregularity that vitiates the award decision.

The court made several important observations: (1) Not every flaw in a procurement process is fatal - fairness does not demand perfection and only material (not inconsequential) irregularities will vitiate a tender award. (2) Deviations from prescribed administrative procedures may be permissible if the basis for deviation is reasonable and justifiable and the process of change is procedurally fair, but administrators bear the burden of justifying such deviations. (3) The purpose of a tender is not to reward bidders clever enough to decipher unclear directions, but to elicit the best solution through a fair, equitable, transparent, cost-effective and competitive process. (4) Insistence on compliance with process formalities serves as a guardian against processes skewed by corrupt influences - unfair processes may betoken deliberately skewed processes. (5) On the question of appropriate relief under PAJA s 8, remittal is 'almost always the prudent and proper course' because administrative functionaries are generally best equipped by composition, experience and access to expertise to make the right decision. Courts should recognize their own limitations. (6) Substitution is appropriate only in exceptional circumstances where: the court is in as good a position as the administrator to decide; the outcome is a foregone conclusion; and substitution would be just and equitable considering fairness to all parties. (7) References in correspondence to acting 'on behalf of' a parent company are mere surplusage where the entity submitting the bid is clearly identified and understood by all parties to be the tenderer.

This case is a leading South African authority on procurement law and administrative fairness in tender processes. It reinforces fundamental constitutional principles governing public procurement under section 217 of the Constitution and their implementation through PAJA. The judgment establishes that organs of state conducting tender processes must strictly adhere to published evaluation criteria and may not introduce additional considerations, however strategic or important, after bids have been submitted without affording bidders notice and opportunity to respond. The case demonstrates that procedural fairness in procurement serves threefold purposes: ensuring fairness to participants, enhancing likelihood of efficient outcomes, and guarding against corruption. It confirms that taking even one irrelevant consideration into account vitiates an entire administrative decision. The judgment also provides guidance on when substitution versus remittal is appropriate relief under s 8 of PAJA, following the Constitutional Court's framework in Trencon Construction. The case is particularly significant in the context of major state infrastructure procurement and demonstrates judicial willingness to set aside irregular tender awards even where work has commenced and urgent national interests are at stake.