Johannesburg – Manufacturing firm Instrument Transformer Technologies (ITT) is in a fight to stave off its impending demise after it was elbowed out of a lucrative contract with power utility Eskom.
ITT is one of the only two South African and African-based companies that manufacture and distribute high-voltage instrument transformers and other equipment to the power utilities, municipalities, mines and railways. Instrument transformers are used by Eskom to measure the consumption of electricity.
Eskom installs instrument transformers at every substation to allow them to bill the relevant municipality or consumer for electricity.
ITT’s revenue is highly reliant on the work it was getting for more than two decades from Eskom.
The company’s trouble began last year when it was disqualified from Eskom’s tender processes after being accused of double-dipping among other issues flagged by Eskom.
At dispute are three tenders awarded to ITT’s bigger rivals Actom, which counts Old Mutual and Kagiso Tiso Trust among its shareholders. Among the tenders disputed is the contract awarded to Actom to the value of R299.3-million for the manufacture, testing and supply, delivery and off-loading of estimated quantities of voltage transformers for four years.
Eskom, through its Cheadle Thompson and Haysom Inc, ITT and Actom’s attorney Baker McKenzie have been engaged in back-and-forth discussions for over a year on the matter with no resolution in sight.
On December 4 2020, ITT’s lawyers, ST Attorneys penned a letter to Eskom proposing that the tender awards be set aside and that Eskom pay one-third of each of the applications on a party and party scale.
ITT also wanted the matter to be remitted to Eskom to conduct the evaluation and assessment of all tenders submitted and be evaluated in terms of three criteria it accused Eskom of ignoring its bid on: commercial, finance and safety and health and environment.
ITT also wanted the proposals to be made an order of the court. Cheadle Thompson replied on December 10, saying it was in agreement that the awards be set aside and Eskom pay for the legal costs.
However, Eskom took issue with the third request by ITT that the matter be remitted to it for evaluation. “We do not think it worthwhile to burden an order with a detailed description of the point from which evaluation of each of the bids to be reconsidered will be recommended.
It is doubtful that a court would, in any event, be enthusiastic to micro-manage the re-evaluation process,” the letter reads in part.
Actom did not agree to the proposals by ITT and concessions made by Eskom. In a letter dated July 2 2021, Baker McKenzie made it clear to ITT it did not agree with the draft orders.
“Our client is not in agreement with the proposed draft orders, and persists in its opposition to the applications and its contention that: [a] Eskom’s decisions to disqualify your client’s bids were justified given the terms of the respective tenders which is also consistent with Eskom’s approach in previous tenders; and [b] as a result, the respective tenders were validly and legally awarded to our client.”
ITT has now approached the Joburg High Court to ask it to review and set aside the decision to award the contract to Actom.
One of the contentions of ITT is that Actom was awarded the contract despite it carrying a hefty price tag compared to its disqualified bid.
ITT CEO Avi Bhatt said the matter risked the closure of the business.
“Our business is on the verge of bankruptcy, we have laid off in access of 80 staff and now our landlord has lodged an application in the high court to liquidate us. We do not have the financial muscle to fight the case, so we are trying to reason with the landlord to hold off until the outcome of the court case, which is concerning as the process can be dragged out for another two years by Actom.
“What we find interesting is that the precedent has been set by Eskom CEO, why not cancel the contract and readvertise to ensure a just and equitable award, saving the much-needed money that is now being spent on lawyers who have already agreed that Eskom was wrong and that ITT was unfairly disqualified.”
Eskom and Actom could not be drawn to comment on matters before court.
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