Publication: Sunday Argus Issued: Date: 2005-04-17 Reporter: Helmoed Romer Heitman Reporter:

SA Cannot be Faulted in Choice of Arms Acquisition Strategy



Sunday Argus




Helmoed Römer Heitman

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An American friend attending a high-altitude/low-opening parachute course was mildly discomfited to find the following stencilled above the jump door of the C141 Starlifter: "Take Note: Your parachute was supplied by the lowest bidder".

His experience should be borne in mind when considering South Africa's controversial "strategic packages" of arms. The SA public has focused on alleged corruption in the purchase of one sub-system *1 of the packages - the combat management system *2 of the patrol corvettes.

That has unfortunately clouded a very successful acquisition overall *3.

The 'strategic package' process has delivered the goods

So successful that some other countries have sent teams to be briefed on how it was managed.

There are two critical considerations that govern major arms acquisitions: the government's overall strategic objectives and the military/technical system selection.

This is not simply about buying "the best" or "the cheapest" equipment. Major arms acquisitions have much greater long-term implications than almost any other government acquisition.

This is reflected in the White Paper on Defence, which requires that "all acquisition activities are executed within national objectives, policies and constraints".

The White Paper on the Defence-Related Industries *4 goes further in Paragraph 9:

"Issues to be considered when acquiring high-value defence capital equipment include:

9.1 Establishing defence, trade and international relations that may endure for periods ranging between 30 and 50 years to provide the necessary maintenance, logistic support and future upgrades of the capital equipment to be purchased for the SANDF.

9.2 Balancing the national technology vision and national technology requirement with the potential transfer of key technologies and capabilities that may occur as a result of such capital-acquisition programmes.

9.3 Positioning the capital-acquisition programme within the national economic and industrial policies and strategies of government, and specifically the implications of the capital acquisition for developing or reinforcing strategic trading partnerships.

9.4 Engaging in financial programmes that do not place undue constraints on scarce national and financial resources.

9.5 Adequately meeting the military-technical requirements of the SANDF in terms of the equipment so that the SANDF may fulfil its constitutional obligations, yet in a manner that does not compromise other national priorities and considerations.

9.6 Evaluating the implications of the capital-acquisition programme in terms of potential benefits to the South African economy, and the implications from a national budgetary perspective relating to the fiscus.

9.7 Assessing the arms control and non-proliferation implications, with the objective of being a responsible purchaser of defence equipment.

9.8 Counter-trade issues affecting both defence and non-defence economic benefits for local industries and to serve strategic national industrial objectives."

The late Joe Modise, then minister of defence, stressed this aspect.

The military, he said, had been instructed to draw up a short list of systems for each requirement, setting out in order of preference systems that would meet its needs.

The cabinet undertook that the equipment selection would be made only from the "short list" for each requirement, regardless of what else might be offered.

"We did not promise to buy the particular system they preferred, but we did promise that we would only buy from the 'short lists', that we not buy something else just because the offsets were good."

That is as much as any military can expect of its government, and more than some enjoy.

Modise also discussed the strategic priorities against which the proposals by the short-listed suppliers would be evaluated.

Those were:

The final selection of suppliers matches almost exactly the first two of those priorities, with Germany and the United Kingdom winning the major orders, and on the strength of their offers, the third.

The outcome was only "out of synch" in two respects. One was the selection of the Swedish Gripen *5 to meet the light fighter requirement, and the other was the failure of France to win any of the major system contracts, despite being a major trading partner.

The selection of the Gripen was, however, almost inevitable when weighed against the broad set of factors to be considered:

The Gripen was offered, de facto, via BAE Systems and the United Kingdom which was then the second-most important trading partner after Germany.

The Gripen was the only type that really met the long-term requirement. The Mirage 2000 was not entirely suited, and the AT2000 was a "paper aircraft". Heavier twin-engine fighters had been ruled out on cost grounds. The French industry would probably have been awarded the tank contract if that had gone ahead.

Turning to the actual systems selected, there are four key questions to ask if one wants to consider whether the selections were, given the strategic priorities, good ones:

For each of the systems the answer is "yes" to the first three and "no" to the last - with a small niggle of doubt regarding the Swedish government's attitude as and when South Africa accepts that it must take a more active role in African security issues.

Analysis of the systems shows that they are well suited to the requirements that will arise *6 from the SANDF's overall mission over the next 20 to 30 years. They may not always be "the best", but they will do the job, and "the best" would simply not have been affordable.

The groups from which the aircraft and ships are being acquired all have long track records of developing and manufacturing good equipment. The German shipbuilders are the most successful frigate and submarine builders in the world; BAE Systems has been very successful with its Hawk family of trainers and other systems; Agusta is one of the largest helicopter manufacturers in the world, and allied with two of the others; and SAAB has a good track record of innovative and effective fighters.

South Africa is paying roughly market price for the submarines, Hawks and A-109s, perhaps a bit less than market for the Gripens, and well below market for the patrol corvettes.

The "bottom line" is that the selection of the systems matches perfectly the overall strategic objectives outlined by Modise during the early stages of the process.

The overall conclusion, then, is that the "strategic package" process has delivered the goods: its outcome matched the government's strategic objectives *7, the equipment will meet the requirements of the SANDF, and the prices obtained were all market or better.

The writer is a defence analyst and correspondent for Jane's Defence Weekly

With acknowledgement to Helmoed Romer Heitman and Sunday Argus.

*1   It is a pity that there was such a focus on the Corvette Combat Suite procurement. There was far greater corruption, if not irregularity in the aircraft acquisitions.

*2   The whole Corvette Combat Suite was riddled by fraud, corruption and irregularity. The Combat Management System (CMS) supplied by ADS and Thomson-CSF is just one small part thereof. Thomson-CSF and ADS "worked the inside track", on their own admission under oath on affidavit and in court, in order to win the CS contract, including the supply of the CMS and sensor (read surveillance radar and sonar). This was done by means of smokey room deals done between Thomson-CSF at the highest levels and Thabo Mbeki - long before the contract negotiation process had even started, let alone complete. This is probably fraud.

The Thomson-Detexis "combat suite" data bus was finally selected over the nominated CCII Systems Information Management System (IMS) based on conflict of interest, irregularity and fraud.

The ADS System Management System (SMS) was selected over the lower-priced CCII Systems SMS based on irregularity and fraud of breathtaking proportions.

*4  This article fails to say that the White Paper on the South African Defence Related Industries dated December 1999
( )
includes the following imperative :

"The Constitution requires that when organs of state contract for goods or services, they must do so in accordance with national or provincial legislation that establishes a system which is fair, equitable, transparent, competitive and cost-effective."

It also states that :

"This does not prevent the implementation of a procurement policy by organs of state providing for categories of preference in the allocation of contracts, and the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination."

Unfortunately for the Cabinet, they failed to implement this caveat. Indeed, affirmative procurement had been stipulated as a requirement in the Arms Deal, but was withdrawn as a criterion in the value system - at the final hour.

*5  This is a fallacy of logic. Acquisition of expensive equipment using public funds has to be a logical process. The most important logical criterion is known existing registered approved requirement, even if such a requirement is forward looking (in respect of geopolitical, national security, intelligence scenarios, etc.). It cannot be based on requirements that might arise. Therefore such a justification is a post facto fallacy of logic, i.e. it is based on things possible now or in the future where there is an defence acquisition imperative for it to be based on requirement analysis done at the period of time.

*6  There was no registered or any other such need at that time for a new light fighter aircraft. The SAAF already had 38 essentially new Cheetah C that were no only highly capable in their own right, but more than capable relative to any security threat arising south of the Sahara (which is in any case about 10 combat radii away from us). The SAAF was not ready to operate a new jet fighter and the DoD was not ready to acquire a new jet fighter. These are the facts. The rest is fiction.

*7   The government, if it indeed had any true strategic objectives behinds the defence acquisitions, polluted these with gross opaqueness, closedness, irregularities, conflicts of interest, unfairness, fraud and corruption.

If the government truly thought that they had a mandate arising out of the Defence Review to make these acquisitions from their pre-ordained foreign suppliers, why did they not just place purchase orders on the selected few and not waste the precious time, effort, money and patience of the multitude of competitors who prepared proposals and quotations and offers in good faith with the reasonable expectation that these would be considered equitably and fairly.

What's worse is that the RSA's constitutionally-appointed watchdogs, especially the Office of the Auditor-General and the Office of the Public Protector, transmongrolised overnight into government stooges and did almost nothing.

And not in at least certain cases that competitors' prices would be given to the pre-ordained ones - such as happened in the IMS and SMS cases.