Publication: Business Day Issued: Date: 2003-08-21 Reporter: Linda Ensor

Shock Arms Deal Letter Takes Fakie by Surprise



Business Day

Date 2003-08-21


Linda Ensor

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Cape Town - Auditor-General Shauket Fakie was caught off guard yesterday by correspondence showing that a winning bidder in the arms deal changed its price a day after the tender closed and after having access to details of a rival offer.

The bombshell disclosure adds weight to suspicion of irregularities in the arms deal and suggests that the findings of a joint investigating team that probed the deal were not as rigorous as they should have been.

Observers said the correspondence could be enough to launch court action to have the relevant subcontracts invalidated on the grounds of tender irregularities.

When the investigating team, which included Fakie's office, submitted its report to Parliament in November 2001, it acknowledged irregularities had occurred in the tender process for one of the subcontracts.

But it said they could not be "conclusively proved" because the evidence resided with one of the arms deal suppliers, the German Frigate Consortium.

But it emerged yesterday that Fakie's office in fact possessed this concrete evidence, in the form of the correspondence, which would have allowed it to make a conclusive finding that the irregularity had occurred.

A letter from a successful bidder for a subcontract, African Defence Systems (ADS), to the defence department reveals that ADS reduced its tender price for the system management system for the South African Navy's corvettes' combat suite from R32,5m to R29,6m.

It did so on April 16 1999, the day after the deadline, on the grounds that its original bid contained "a number of clerical errors and omissions". The investigating team reported this irregularity, but did not pursue it.

Schabir Shaik, a brother of former chief of defence acquisitions Chippy Shaik, and financial adviser to Deputy President Jacob Zuma, had interests in ADS.

More damning, however, is that attached to the ADS letter are pages containing details of the bid put in by rival CI Systems, suggesting that ADS reduced its bid after having seen CI's offer. But the probe's report said it could not be "conclusively proven" that ADS had had sight of CI's bid.

This is despite the fact that the documents were stamped with the auditor-general's stamp, dated May 10 2001, and the pages were given auditor-general's serial numbers. This evidence was not disclosed in the report.

The report did indicate that ADS had been allowed to reduce its offer from R64,7m over a period of a month and said this created the impression that CI was merely requested to quote in order to bring down ADS's price.

Fakie found it difficult to respond when he was presented with the letter by Democratic Alliance MP Nigel Bruce before Parliament's public accounts committee yesterday.

Fakie appeared before the committee to answer questions about his special report, in which he denied media allegations "attacking his integrity". The reports claimed Fakie altered the draft report by the investigating team after meeting cabinet members.

Fakie was at first unsure about the ADS letter and later said he would have to examine its contents before answering in full. He said ADS had been allowed to change its bid because of mistakes in its original tender.

However, before disclosing his possession of the document, Bruce asked Fakie whether the amendment of a bid after the closure of a government tender process was irregular and what he would do if he was aware of it.

Fakie replied that this would be irregular and he would be bound to report it.

Bruce received the letters from CI MD Richard Young, who secured them from Fakie's office three weeks ago in terms of a court order. Bruce said if it was proven ADS had undue privilege, the contracts could be legally challenged. If Fakie knew about the letters, this would also reflect on his integrity, he said.

With acknowledgements to Linda Ensor and the Business Day.