A very odd way to buy a submarine

The selection of the German Submarine Consortium (GSC)—led by MAN Ferrostaal—as a preferred bidder was such a farce that the possibility of corruption has become an almost irresistible inference.

Ferrostaal executive Horst Wereteki this week dismissed the R30million bribe claim as “absolute nonsense” and denied his company paid any bribes to win the contract.

He said Ferrostaal was considering legal action against the Sunday Times, which published the claim last weekend.

However, the German bid did not succeed because its submarine was rated the best compared with those of its rivals, Fincantieri of Italy, DCN of France or Kockums of Sweden.

In fact the military performance results of the evaluation team put GSC last and Fincantieri first.

GSC was pushed to the preferred supplier position by outrageous emphasis given to certain scores in the tender evaluation process.

The first was the weighting accorded to “integrated logistic support” (ILS), something that made up roughly 5% of the total cost of acquiring the submarines.

But this tiny factor was given a 67,5% weighting in the evaluation criteria of military performance, meaning a low quotation for ILS radically distorted the overall score.

Curiously, the ILS cost quoted by the Germans was so low the evaluators did not believe it and arbitrarily increased the quoted cost by 75%.
Despite this, GSC still had the lowest ILS cost, which skewed the scoring and made GSC the leader in terms of the overall military performance assessment.

This anomaly has never been explained.

The other factor that helped GSC’s bid was the weighting given to the German company’s proposed stainless steel plant at Coega, which originally made up 93% of its “industrial participation” or offset offer.

Officials at the Department of Trade and Industry were so enamoured of this project that they assigned a multiplier-weighting of the assessed value of this project of 23, pushing it to 97% of the GSC offset offer, assessed to be worth a massive $239billion.

This amount dwarfed the more modest offset proposals by other bidders. The Coega plant never materialised.

Once again, this extraordinary evaluation process has not been properly investigated, despite the fact that an official who played a key role in the evaluation process was later fired for taking a R55 000 discount on one of the infamous cut-price vehicles offered by another German arms bidder.

Other suspicions fell on the late Joe Modise. The then defence minister “initialled” the contract with GSC shortly before leaving office and long before Cabinet’s ministerial committee responsible for the deal had formally approved it.

The “initialling” has been dismissed as purely ceremonial and rumours that Modise received R10million for his efforts have never been substantiated.

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