Utility inflated advance payment to Chinese firm

Eskom sneaked an inflated advance payment of R600m to Chinese firm Dongfang for a controversial R4bn tender to supply a new boiler at its Duvha power station in Mpumalanga. Business Day says this emerges from a report by audit firm KPMG. Eskom decided to award the tender to the state-owned Chinese company even though its offer was R1bn more expensive than rival bids, just days after the bids were reviewed at the 11th hour by Trillian, an advisory firm majority-owned by Gupta lieutenant Salim Essa. Business Day says the advance payment provides further evidence for claims made in court proceedings by losing bidders Murray & Roberts and General Electric that the tender was rigged to favour Dongfang. KPMG, appointed by Eskom to conduct an independent review of the procurement process, said the board tender committee had consented to a 15% advance payment, which was 5% higher than ‘what was agreed to between the parties’ during negotiations. This means Dongfang was paid an advance of R200m more than it should have been and raises suspicions that Eskom quietly continued to negotiate with Dongfang after final offers were submitted, which would have been unfair to the other bidders. ‘This is not in keeping with Eskom’s policy which states that all bidders should be provided with an opportunity to prove a best and final offer post negotiations,’ said the report. Eskom defended its decision in court on Friday and insisted its price risk assessments were based on objective criteria. Judgment has been reserved.