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Commission of Inquiry Into Allegations of Fraud, Corruption, Impropriety Or Irregularity in the Strategic Defence Procurement Package

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Commission of Inquiry Into Allegations of Fraud, Corruption, Impropriety Or Irregularity in the Strategic Defence Procurement Package COMMISSION OF INQUIRY INTO ALLEGATIONS OF FRAUD, CORRUPTION, IMPROPRIETY OR IRREGULARITY IN THE STRATEGIC DEFENCE PROCUREMENT PACKAGE (ARMS PROCUREMENT COMMISSION) REPORT Volume 2 DECEMBER 2015 Contents ABBREVIATIONS/ACRONYMS FREQUENTLY USED ............................................ viii CHAPTER 4 ................................................................................................................. 72 SUMMARY OF EVIDENCE ......................................................................................... 72 A. INTRODUCTION .................................................................................................. 72 B. DEPARTMENT OF DEFENCE ............................................................................. 73 I. SA NAVY .................................................................................................... 73 1. Rear Admiral Alan Graham Green .................................................. 73 2. Rear Admiral Robert William Higgs ................................................ 81 2.1. Project Optimum ................................................................. 84 2.2. Utilisation: frigates and submarines .................................... 88 2.2.1. Frigates .................................................................. 88 2.2.2. Submarines ............................................................. 89 3 Rear Admiral Philip Schoultz .......................................................... 91 3.1. Frigate utilisation ................................................................. 96 3.2. Submarine utilisation ........................................................... 97 4 Rear Admiral Derek John Christian ................................................ 99 5. Captain Jacobus de la Rey Jordaan ............................................. 101 5.1 The DOD acquisition structure .......................................... 110 5.2. Roles of various parties in the acquisition process ........... 112 5.3. The acquisitions process .................................................. 112 5.4. Flow of project submissions in the recommendation and approval process ............................................................... 118 5.5. Negotiating and approval structure ................................... 121 5.5.1. Armament Acquisition Council (AAC) ................... 121 5.5.2. Armament Acquisition Steering Board (AASB) ..... 123 5.5.3. Armament Acquisition Control Board (AACB) ....... 123 5.5.4. Strategic Offers Committee (SOFCOM) ................ 124 5.5.5. International Offers Negotiating Team (IONT) ...... 125 6. Rear Admiral (JG) JEG Kamerman .............................................. 128 6.1. The SA Navy’s need for frigates ....................................... 129 6.2. Inception of Project Sitron ................................................. 130 6.3 Project Sitron phase 1: 1993-1995 ................................... 130 6.3.1. Local combat systems ........................................... 130 6.3.2. Appointment of the project team ........................... 131 6.3.3 Feasibility study 1993 ............................................ 131 6.3.4. Project study and inclusion of Germans in 1994 ... 132 6.3.5. Suspension of Project Sitron ................................. 132 6.4 Ensuring retention of naval surface combat system technology 1995 – 2000 .................................................... 133 6.5. The success of Project Suvecs ......................................... 134 6.6. Project Sitron Phase 2: Project restart and selection of preferred supplier 1997-1999 ............................................ 135 6.6.1. SDPP RFI: September – December 1997 ............ 135 6.6.2. The inclusion of Germany ..................................... 136 i 6.6.3. Intended tender processes & contracting strategy 136 6.6.4. Prime contracting .................................................. 136 6.6.5. Project Sitron RFI strategy .................................... 137 6.6.6. Evaluation results .................................................. 138 6.6.7. SOFCOM .............................................................. 139 6.6.8. Ratification by the Naval Board and presentation to SOFCOM .......................................................... 140 6.6.9. SOFCOM derivation .............................................. 140 6.6.10. Contract negotiation phase: December 1998 – December 1999 ..................................................... 140 6.6.11. Invitation to the GFC to offer combat system ........ 141 6.6.12. The GFC and ADS as partners ............................. 142 6.6.13. Competition for overseas-sourced sub-systems ... 142 6.6.14. Competition for locally sourced sub-systems ........ 143 6.6.15. Compromises and strategies to reach a vessel technical contract baseline .................................... 143 6.6.16. Main contractor consortium ................................... 144 6.6.17. Consideration of new contracting model to share risk between supplier and the State ...................... 146 6.6.18. The risk of sharing contractual arrangement ......... 146 6.6.19. Further price reduction .......................................... 148 6.6.20. Contracting ............................................................ 148 6.7. Allegations made against him ........................................... 149 6.7.1. The German State Prosecutor’s investigation ....... 150 6.7.2. Allegations by Dr Richard Young .......................... 151 6.7.2.1 Selection criteria for the corvettes .......... 151 6.7.2.2 The State had nominated suppliers of the combat suite ..................................... 151 6.7.2.3 Dr Young’s attempts to replace ADS ...... 152 6.7.2.4 Mr Shaik’s role in the combat suite acquisition process ................................. 153 6.7.2.5 Mr Shaik’s alleged conflict of interest ..... 153 6.7.2.6 CCII Systems’ price allegedly disclosed to ADS .................................................... 154 6.7.2.7 SA sub-systems allegedly deselected in favour of French systems ....................... 155 6.8. Joint submission of Messrs Feinstein and Holden: the subcontract for the supply of the information management system (IMS) to be used in the corvette combat suite ...... 155 6.9. The specific risk attaching to the CCII Systems databus .. 157 6.10. The nature of the main contractor risk premium ............... 157 6.11. The PCB meeting of 24 August 1999 ............................... 159 6.12. Allegations relating to his retirement ................................. 160 7 Rear Admiral Anthony Neville Howell ........................................... 161 7.1. Background ....................................................................... 162 7.2. The Strategic Defence Procurement Package .................. 163 7.3. Management Directive: evaluation of international offers . 165 ii 7.4. His role as Chief of Naval Staff Plans, Director Naval Acquisition and Moderator of Projects Wills and Sitron .... 165 7.5. Project Wills ...................................................................... 167 7.5.1. RFI phase – Project Wills ...................................... 167 7.5.2. RFO phase – Project Wills .................................... 167 7.6. Project Sitron .................................................................... 169 7.6.1. RFI phase – Project Sitron .................................... 170 7.6.2. RFO phase – Project Sitron .................................. 170 7.7. The Strategic Offers Committee (SOFCOM) .................... 171 7.8. Post SOFCOM .................................................................. 172 7.9 SA Navy corvette gearbox ................................................ 172 7.10. The selection of Detexis databus ...................................... 173 8 Captain Andrew John Cuthbert Reed ........................................... 176 8.1. The RFO evaluation .......................................................... 177 8.2. Post evaluation phase ....................................................... 179 8.3. Negotiation phase ............................................................. 180 9 Rear Admiral Alan Graham Green ................................................ 181 9.1. Utilisation of frigates and submarines ............................... 181 II. SA AIR FORCE ........................................................................................ 181 10. Brigadier General John William Bayne ......................................... 181 10.1. Project phase .................................................................... 188 10.2. Role and capabilities ......................................................... 189 10.2.1 The Gripen ............................................................ 189 10.2.2. The Hawk .............................................................. 190 10.3. Utilisation .......................................................................... 191 11. Lieutenant General Willem Hendrik Hechter ................................ 198 11.1. Rationale for acquisition of the Hawks and Gripens ......... 199 11.2. The Air Force inventory ..................................................... 201 12. Major General Gerald Malinga ...................................................... 206 12.1. Helicopters ........................................................................ 209 13. Colonel Frank Kevin Sargent Viljoen ............................................ 213 14. Brigadier General Pieter Burger ..................................................
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