Public protector Selby Baqwa has advised Cape Town company Communications Computer Intelligence Integration to sue the Department of Defence for damages because it allegedly lost out on part of the government’s arms deal.

Baqwa is one of the people accepted in preliminary investigations into the controversial R43 billion arms procurement deal. Mbeki this week excluded the Heath Special Investigative Unit from the investigation. The corvette technology contract is one of the most controversial issues in the arms deal, as it has been dogged from the start by allegations of nepotism and political influence.

The French company which was awarded the contract put in a price of R80 million, while the Cape Town company’s price was R38 million, a significant difference, to be borne by South African taxpayers. And there are some remarkable connections between the French company, Detexis, and well-placed South Africans. Detexis is a subsidiary of African Defence Systems, itself a subsidiary of the French arms company Thomson CSF.

Shabir Shaik, brother of the South Africa’s defence secretariat’s head of procurement Shamin "Chippy" Shaik, is a director of Thomson CSF’s South African company, Thomson SA, and an associated company, Nkobi Holdings. The Mail & Guardian also reported this week that "Chippy" Shaik had refused to answer questions sent to him because it was possible he would be involved in litigation with Communications Computer Intelligence Integration. Shaik could not be reached for comment. The company’s owner Richard Young, who has a PhD in electronic engineering, said his company had been working on a technique particularly suited to the corvettes since 1993. It was implemented in strict accordance with Armscor’s and the South African Navy’s requirements. "Our system conforms 100% to their combat suite requirement specifications," he said. "Combat suite" is the term used to describe a combination of systems that enables the ship to fight. The navy had specifically nominated his company to provide the combat system to whichever shipbuilder was selected to provide the corvettes. The nomination was the initial step, he said. Once the German company, German Frigate Consortium, had been selected to build the corvettes, his company was asked by Armscor, through African Defence Systems (ADS), to provide a best and final offer for its technology.

"We were told we would be nominated up front. We were provided with formal tender documents nominating us, as well as ADS, for the corvette combat suite. Soon afterwards we were told we had been selected. "But at some stage ADS, which was doing its own final price negotiations with the Department of Defence, manipulated Communications Computer Intelligence Integration’s price. "They took our price of R38 million and increased it to R89 million. "They did so by doubling our price, added their own handling fee and added an extra R9 million for risk management. "It was said later that this was because we did not provide a guarantee. But we were never asked to do so. Price was very sensitive at the time and at the same time Thomson SA/ADS offered their own product, from their subsidiary French company Detexis. "Up until then, the French company had never been in contention. It came in literally at the death, after two years of negotiations. All the documentation up until that moment had referred to Communications Computer Intelligence Integration as ‘the preferred supplier’.

"In December the public protector advised us by letter to go to court and ask for damages, but I would prefer to be re-instated to supply the combat suite. It is not too late. "German Frigate Consortium, which will provide the hulls, has only just completed its steel plan. It has not yet started cutting steel." The public protector’s office confirmed yesterday it had advised Communications Computer Intelligence Integration to sue for damages.

With acknowledgement to Jean Le May Independent Newspapers.