Special Review by the Auditor-General
of the Selection Process of Strategic Defence Packages
for the Acquisition of Armaments at the Department of Defence

 

Special Review

By The Auditor-General

Of The Selection Process Of Strategic Defence Packages For The Acquisition Of Armaments At The Department Of Defence

 

Published By Authority

Date : 2000-09-15

3.6.1 Frigates (corvettes)

A local company that was at that stage performing certain technological work on behalf of the SANDF, which was funded from a previous technology retention project, was not selected for one of the subsystems of the corvette namely the Integrated Management System (IMS). Although the SA Navy preferred the technical potential offered by the local company, this was outweighed by prohibitive risk-driven cost implications as determined by the prime contractor. The prime contractor, who had to accept unlimited risk for delivery, added a risk premium of approximately R40 million to the local product, which resulted in the acceptance of the French product.

As a complaint was lodged with the Office on this matter and the basis of determining the risk premiums did not fall within the scope of the audit, a forensic audit of the matter should be considered.

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Strategic Defence Packages Joint Report

Chapter 11

Allegations/Complaints by CI Systems (Pty) Ltd

Date : 2001-11-16

11.11.9 The Validity of the R40 Million Risk Premium Added to the Price of CI for the IMS
11.11.9.1       The imposition of a risk premium was not unreasonable.
11.11.9.2    The calculation of the risk premium cannot be evaluated without evidence from the GFC and the assistance of an expert witness. From a cost and time point of view it was not considered feasible to pursue this matter.
11.11.9.3      The JPT and PCB did not attempt to evaluate or assess the risk premium.