New ICVs Could Cost between R14 and R15 Million Each [Sapa, 2005-07-28]

Publication: Sapa Issued: Johannesburg Date: 2005-07-28 Reporter: Leon Engelbrecht Reporter:

New ICVs Could Cost between R14 and R15 Million Each

Publication	Sapa ARMS-HOEFYSTER
Date	2005-07-28
Issued	Johannesburg
Reporter	Leon Engelbrecht

The SA Army's new infantry combat vehicle could cost between R14 and R15 million each, defence industry sources say.

The high cost is the result of the advanced technology, including four computers, fitted to every vehicle, said Richard Young, one of the sources.

The Army needs 264 of the vehicles, meaning the minimum price for the fleet, if the sources are correct, would be about R3,9 billion.

Young, managing director of CCII Systems, said that price "excluded logistics, project management, risk management, financing, statutory charges, etc. These items could easily add another 30 to 40 percent to the contract price."

The systems engineer's arithmetic was confirmed by several sources, including a company involved in "Project Hoefyster", the military's name for the acquisition.

The company, which cannot be identified, as Armscor tender rules prohibit bidders from talking to the media, said Young's figure was "conservative".

The defence force, through Armscor, last year called on local and foreign companies to tender for the deal.

But when the bids were due in February, only one was received, from a consortium involving Patria of Finland, Patria's part-owner, EADS (European Aeronautic, Defence and Space company), Denel, BAE Systems OMC and Land Mobility Technologies (LMT).

The vehicle the group proposed is Patria's 8x8 Armoured Modular Vehicle (AMV), as redesigned for southern African conditions by LMT.

The vehicle hulls are to be built by OMC. The turrets and guns will be provided by Denel.

Asked about the cost of the project, the Department of Defence's (DoD) chief of acquisition and procurement, Bruce Ramfolo, said: "The offer is being evaluated, thus no pronouncement on price can be made."

Asked about the paucity of bids, Ramfolo said the tender process followed on their behalf by Armscor was sound and "neither Armscor nor DoD are able to force any industry to participate."

The project will be subject to counter-trade as its value exceeds US$10 million, the trigger-level for offsets or industrial participation.

Part of the offset for buying a Finnish vehicle will be its local manufacture *2.

It is not clear why South Africa, with a long record of designing, building and fielding mine-resistant armoured vehicles would import a design *1.

Ramfolo did not directly answer that question, saying instead that "no decision regarding the bid has been made and therefore no decision on the design has been made."

A domestic competition for Hoefyster was held last year and LMT was declared the winner.

But shortly afterwards it was decided to re-open the competition.

The AMV acquisition may, in itself, be part of an offset for the Finnish Navy's acquisition of Denel's Umkhonto surface-to-air missile system.

Finland in October 2002 signed a deal to buy missiles, launchers and associated equipment for six vessels.

Elaborating on his cost estimate, Young said an informed breakdown would look as follows:

   Platform
   -- Chassis: R500 000
   -- Engine: R1 000 000
   -- Gearbox: R500 000
   -- Axles, Wheels, etc: R500 000
   -- Drivetrain: R500 000
   -- Armour: R500 000
   -- Vetronics: R500 000
   -- Other: R500 000
   Sub-Total: 4 500 000

   Turret
   -- Gun: R1 000 000
   -- Gundrive: R1 000 000
   -- Mechanics: R500 000
   -- Armour: R500 000
   -- Computer hardware: R1 000 000
   -- Computer software: R2 000 000
   -- Displays: R500 000
   -- Communications: R500 000
   -- Vetronics: R500 000
   -- Other: R1 000 000
   Sub-Total 8 500 000

   -- Integration: R500 000
   -- Test, etc: R500 000
   -- Grand total: R14 000 000

Young said the paucity of bids was disconcerting.

It also appeared that potential competitors were being encouraged to bid jointly.

Asked whether there was something wrong with the DoD's tender process, Young said: "Yes, it's not constitutional."

He explained that the White Paper on the South African Defence Related Industries of December 1999 said section 217 of the Constitution required that when the state contracted for goods or services, it must do so in accordance with legislation that establishes a system which is fair, equitable, transparent, competitive and cost-effective.

"At present defence acquisition is based more on balderdash, enrichment and expediency."

The AMVs are to replace the elderly Ratel currently in use with the mechanised infantry and armoured corps.

(Pix available at www.patria.fi)

With acknowledgements to Leon Engelbrecht and Sapa.

*1 Fortunately my days of national service are over.

This vehicle seems better suited at rushing UN and SADC troops home for a quick shower and then visit to the local rumpy pumpy venue than dealing with the dreaded ZU-23-2 or ZU-23-4 23 mm multiple-barrel guns in anti-armour elevation; or committed oppo with RPG-7.

It would be nice to see the User Requirement Statement.

*2 No doubt Moeletsi Mbeki's and Diliza Mji's *4 investment (using IDC *4 funding) in OMC via DGD Technologies has proved to be an excellent investment.

*3Former ANC Treasurer in kwaZulu-Natal and chairman at the time of funding allocation by the Industrial Development Corporation (IDC).

Great funds if you can get them.