The award of a R10-billion contract for fighter trainers may be contested in court
Paul Kirk
One of the largest contracts awarded in South Africa’s R60-billion arms deal may be challenged in court by an Italian aeronautics company that lost out to a British contender after then-defence minister Joe Modise intervened to change the tender evaluation criteria in mid-course.
Henk Viljoen, local attorney for the Italian air giant Aermacchi, confirmed this week that consultations had been held with a view to legal action. This is the first indication that one of the main contracts in the controversial arms deal in this case the R10-billion contract for fighter trainers may go to court.
Aermacchi’s MB339FB jet originally scored highest when offers from international aeronautics companies were considered by the South African Air Force in 1998. But Modise and others insisted the tender criteria be amended so that a “non-costed” option could be considered. In the end the significantly more expensive Hawk 100, produced by British multinational BAe Systems, won the tender.
The unusual change of tender procedure, among other aspects of the arms deal, have enjoyed the scrutiny of the auditor general, the Scorpions and Parliament’s Standing Committee on Public Accounts (Scopa).
Viljoen said: “At this stage I can confirm that we have had consultations with Aermacchi with a view to litigation. However at this stage we are adopting a wait and see attitude waiting to see what comes out of the joint investigations into the arms deal.”
The wait may take a while still. The auditor general’s office told the Mail & Guardian that its long-awaited final report on the arms deal may not be complete by the time Parliament goes into recess over Christmas. Although Scorpions spokesperson Sipho Ngwema could not be reached, sources told the M&G their report too may also not be ready before the parliamentary recess.
Gavin Woods, the Inkatha Freedom Party MP who chairs Scopa and is a fierce critic of alleged irregularities in the procurement process, this week commented: “If the current investigation into the arms deal transactions is unable to offer a justifiable explanation as to why the tender criteria were so dramatically changed, then I would think grounds would exist for a bidder who was seriously prejudiced to take a strong case to court.”
When Auditor General Shauket Fakie reported to Parliament on his preliminary investigations into the arms package in September last year, he already expressed concern over the way BAe was awarded the tender: “The fact that a non-costed option was used to determine the successful bidder is, in my opinion, a material deviation from the originally adopted value system. This ultimately had the effect that a different bidder at a significantly higher cost, was eventually chosen on the overall evaluation.”
Fakie also stated that the explanations the Department of Defence gave were “unsatisfactory”. He stopped short, however, of addressing Modise’s role in the affair. Documents in possession of the M&G shed more light.
Minutes of a meeting of the Air Force Command Council dated June 29 1998 record that Modise asked for “a separate recommendation [on preferred bidder] where cost is not taken into account”. The minutes, marked “secret”, show the Air Force top brass complied.
They compiled two lists of preferred bidders an “A” list where military value was balanced against cost factors, and a “B” list where cost was not taken into account. Interestingly, at that stage the Aermacchi jet still topped both lists. The British Hawk scored third highest on the “A” list but came in second on the “B” list where cost was disregarded.
An earlier set of “confidential” minutes this time recording a meeting of the top-level Armaments Acquisition Council (AAC) and Armaments Acquisition Steering Board (AASB) reflect that Modise personally sang the same tune: that cost is not an issue. The meeting, attended also by then-deputy defence minister Ronnie Kasrils, then-Defence Force chief General Georg Meiring and controversial arms procurement head Chippy Shaikh, was held on April 30 1998 to consider the shortlist of contenders.
The minutes state: “The project team presented the meeting with an affordability analysis of the [fighter trainer] contenders. Without cost considerations, the selection process is biased towards the higher performance category of aircraft. These aircraft are, however, also significantly more expensive to acquire, operate and maintain. Thus, unless additional funding could be found to support the acquisition of a more superior aircraft, the Air Force would have to take cognisance of budgetary constraints.”
Modise weighed in: “The minister of defence cautioned the meeting that a visionary approach should not be excluded, as the decision would impact on the RSA defence industry’s chances to be part of the global defence market through partnership with major international defence companies With this vision the most inexpensive option may not necessarily be the best option. The minister requested that the acquisition staff should bear this vision in mind.”
It is unclear how the Hawk overtook Aermacchi’s MB339FB even when the Aermacchi jet still topped both the costed and non-costed lists in the June 1998 Air Force evaluation. But the price difference is significant. Buying 12 Hawks will cost the country an estimated minimum of US$1-billion (almost R10-billion at current exchange rates).
Sources claim the Aermacchi jets were offered to South Africa at US$260-million almost a quarter the price of the Hawks. The Italians offered a discount since they had lost out on an Australian contract and were keen to keep their production lines going. The Aermacchi is used by a number of air forces around the world, including in New Zealand, Argentina, Chile, Brazil and Italy.
A little more than a month before the meeting where Modise weighed in, BAe donated R5-million to the Umkhonto weSizwe Veterans’ Association a donation earlier exposed by the M&G.
Woods commented: “Given the failure of the government to offer convincing reasons for having broken its own rules by buying the more expensive Hawk, any suspicion regarding the BAe donation made through the previous minister to the MK Veterans’ Association is difficult to dismiss. My sense of proportions does however suggest that this ‘donation’ by itself would not have been sufficient to have influenced [the] decision.”
Linden Birns, spokesperson for BAe Systems commented: “Throughout the entire Strategic Defence Procurement process, BAe Systems found the conduct of all officials with whom we interacted to be of the highest levels of professionalism.The procurement process was handled, in our view, in a sophisticated and competent manner.”
The defence department failed to respond to faxed queries by late Thursday. Modise could not be reached through his lawyers.