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Johannesburg - The involment of the cabinet in signing off on the 1999 arms deal and the need for financing meant a break in standard acquisition procedures, according to Armscor.
On Monday, Dawie Griesel, Armscor’s acting general manager for acquisitions since 2009, started explaining Armscor’s role in the arms deal to the Arms Procurement Commission’s public hearings.
The commission is investigating the 1999 arms deal, properly known as the strategic defence procurement package (SDPP), which resulted in the acquisition of three submarines and four frigates for the SA Navy, and 24 Hawk fighter jets, 26 Gripen fighter jets and 30 light utility helicopters for the SA Air Force.
Armscor is the arms procurement body for the Department of Defence.
Griesel said Armscor was set up in terms of a 1968 law, and this applied during the SDPP acquisitions; the act was rewritten in 2003.
Under standard procedures, “Armscor is responsible for all phases of the tendering and contracting process”, he said.
He described at length the procurement process, which involves Armscor getting the user requirement statement from the Defence Department (the outline for what the department wants to buy), and the process of drawing up baselines for what is to be bought and evaluating the bids.
“The Armscor board of directors, being the tender board, has the sole authority that can authorise preferred bidders and also authorise contracts to be placed on identified preferred bidders,” Griesel said.
But when the SDPP came along, that changed.
“The practice dictates that the process would be led by Armscor and only provides for participation by the DoD (Department of Defence) on evaluation panels,” he said.
“In the SDPP process, some of the value systems and evaluation reports were finally approved and signed off by the DoD and not by Armscor.”
For the SDPP, the list of preferred bidders was ultimately authorised by the cabinet and the subsequent contracts were also authorised by the cabinet, he said.
It has always been known that the cabinet signed off on the deal, but the details of the tender process and the deviations were less well known.
Griesel said the SDPP did not have acquisition plans for all the projects, although these plans were regarded by the Department of Defence as “non-negotiable” documents.
The acquisition plans authorised the financial ceiling for issuing a financial authorisation to Armscor, “without which Armscor would normally not be in a position to consider authorisation of a contract on a preferred bidder”, Griesel said.
A new Department of Defence policy directive - directive 4/147 - was drawn up in August 1997 to set out the rules for dealing with international defence equipment offers.
Not only did the deal mean contracting with international companies, it also meant raising financing for the contracts with international banks.
Griesel said the acquisition process did not allow for outsiders to be part of the evaluation of bids, but the Treasury had to be included in order to evaluate the financing options.
Griesel said that in 1997, Armscor sent requests for information to the embassies of nine countries, for seven “cardinal” equipment types for the embassies to distribute to companies in their countries.
The countries were the UK, Germany, France, Canada, Italy, Spain, Sweden, Brazil and Denmark.
Griesel did not know why those countries were chosen.
A total of 37 responses were received from all countries except Brazil and Denmark; Russia and the Czech Republic also put in unsolicited offers.
These were assessed, and Armscor drew up a shortlist of 23 products from eight countries for the “best and final offer” bidding stage.
Griesel was to continue his evidence on Tuesday.