Botched defence department contract cost millions of state funds

A cancelled defence department contract cost the taxpayer about R300-million after the International Chamber of Commerce arbitration court ruled that it had failed to honour contractual obligations, Business Day reported on Monday.

The department botched a 2009 contract for aeromedical equipment with Austrian company AMST repeatedly, according to the report.

An internal defence department memorandum said AMST claimed that the department had failed to respond to numerous letters to honour contractual obligations with regards to advanced payments, Business Day reported.

"As a result … AMST alleges that it was left with no option but to cancel the contract and recover its costs under the agreement.

"The contract provides for an arbitration process in the event of a dispute between the parties in accordance with rules of the International Chamber of Commerce," the memorandum says.

'The matter has been settled'
AMST initially claimed about R477-million when the proceedings began in Zurich, Switzerland, early in 2012, according to the report.

The claim was reduced to about R199-million in December, but later increased to about R296-million in the final award made in July and August this year.

Department spokesperson Siphiwe Dlamini confirmed the ruling.

"I can confirm that the international arbitration did rule in favour of AMST and that the matter has been settled with the payment of liabilities by the department of defence, at the reduced cost that had been demanded by AMST," he said.

Democratic Alliance defence spokesperson and MP David Maynier said it was astounding that the department had managed to hide a potential liability of about R700-million from Parliament, the newspaper reported. – Sapa

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