Part II : How the Lead-in Fighter Trainer Contract was Given to the Hawk

On November 17 1997 the South African Air Force (SAAF) Command Council decided, at the instigation of Minister of Defence Joe Modise, that it required 24 dual-seated lead-in fighter trainers (LIFT), along with its advanced light fighter (ALFA) *1.

This was a shift in the requirements which was greatly to the advantage of the Hawk, which had failed to meet the user requirements for the Advanced Fighter Trainer programme - due to its lack of any real operational capability. The LIFT procurement programme was named ‘Project Winchester' and was also managed by the Ukhozi control council.

The purchase of the 24 training jets was now pursued with inordinate haste. On February 3 the council approved the issuing of requests for information to different suppliers, which went out on March 9 1998.

Under the previous acquisition process for the advanced fighter trainer it had taken a year to progress from the approval of the ‘staff target' to the approval of the more detailed, and rigorously costed, ‘staff requirement'.

To avoid further delay these were now lumped together, and by February 20 a ‘combined staff target and staff requirement' was ready for approval.

At a meeting of the council of defence on March 6 the Secretary of Defence, Pierre Steyn, warned that there had been very little debate around the logic of this purchase. He argued for the acquisition plan to be delayed by a year, to allow time for a "project study to make sure the SAAF had all the information necessary before any decision was made."

The department of defence, he later suggested to arms deal investigators, had started erring in the direction of first selecting the final product, and then writing the requirements to fit this choice. He noted: "There may have been individuals that had already decided what they wanted and were now cleaning up, as it were, the neglected process of stating staff targets and staff requirements."

However, his protestations were ignored and these targets and requirements were approved by Modise, as chairman of the armaments acquisition council, on March 16. The total cost for purchasing the 24 aircraft was expected to be some R2,2bn ($431m).

By April 6 the SAAF had received twenty proposals from suppliers for the LIFT. On April 7 and 8 the Ukhozi control council approved the value system for the evaluation of replies. Six contenders were eliminated at the start because they failed to fulfil all the mandatory requirements.

When the replies on the other fourteen contenders were evaluated it became clear, firstly, that the Hawk did very badly on cost effectiveness compared to the other bids. And, secondly, that if it was purchased the price was going to comfortably exceed the R2,2bn budget adopted only the month before. It was going to be, in other words, unaffordable.

This question of cost was discussed at a combined meeting of the armaments acquisition screening board and council [sic - of defence] on April 30. According to the minutes Modise "cautioned the meeting that a visionary approach should not be excluded." He added that within this vision - of "partnership" with certain European defence companies - "the most inexpensive option may not necessarily be the best option." He then requested "that the Department of Defence acquisition staff bear this vision *2 in mind during the selection process."

At the meeting it was decided that requests for best and final offers be sent out to four of the bidders including for the BAe Hawk 100, the Aermacchi MB 339FD, and the Aero Vodochody L159. The Aermacchi/Alenia AMX-ATA was one of the aircraft excluded. Although it fulfilled the training requirements it was rejected on the basis that it had been "designed and developed as a multi-role ground attack operational aircraft."

The requests for offers were issued on May 12 1998, and replies were received by June 15 1998, after which the evaluation process began. On June 29 1998 the SAAF command council met to discuss their recommendation for the LIFT. A single recommendation based on the costed option was presented. However, General Hechter then instructed that consideration should be given to the non-costed option as well. The minutes stated:

"A separate recommendation is required where cost is not taken into account as per the request from the Minister of Defence."

"The final recommendation gives two alternatives: the first alternative (A) is the most cost-effective solution based on achieved military value for the aircraft taking into account the associated risk and the cost of the aircraft system. The second alternative (B) does not take the cost of the aircraft system into account and is therefore the recommended aircraft based on the achieved military value with its associated risk."

The project team were instructed to produce two recommendations along these lines. According to the project team's assessment, the cost-effectiveness of the MB339FD was double that of the Hawk, which came third in the rankings.

Alternative A: Risk moderated military value including cost

However, even after cost had been excluded it still outperformed the Hawk on risk moderated military value.

Alternative B: Risk moderated military value excluding cost

The great advantage of the MB339FD for the SAAF, apart from cost, was that it was the successor to the Impala (MB-326). It would be technically easier, and more affordable, for the local defence industry to service. Purchasing the Hawk though required importing into South Africa a British design and support system - something which greatly increased the risk of the purchase.

However, by setting aside the issue of the unaffordability of the Hawk its proponents were able to keep it in play.

When the defence industrial participation proposals were evaluated, the L159 rated the highest (100), then the Hawk (95), and the MB339FD (94). The Hawk was only able to triumph, on the non-costed option, through its non-defence industrial participation offer. This, the Auditor-General's report later found, had been "radically inflated." Two of the projects were later revealed to have been bogus and without them "BAe had virtually no NIP package." It is likely that the MB339FD would have come out ahead on the non-costed option as well - were it not for BAe's voodoo accounting on the industrial participation offer.

In his 2001 testimony Steyn stated that the whole process of selecting the lead-in fighter trainer had been "turned arse about face" - with the SAAF's requirements being tailored to suit the decision maker's choice - "and I was irritated no end at going through a façade of legitimising what we were doing."

On July 16 1998 the armaments acquisition steering board, chaired by Steyn, resolved that only the costed option could be considered.

According to the minutes Steyn ruled that it "must submit a logical and rational recommendation" to the armaments acquisition council. He advised that from a legal perspective "only the costed option could be considered" and therefore only option A - the MB339FD - should be recommended upwards.

On the other main programmes, including the ALFA, the assessments had been successfully tweaked to give the preferred bidders the highest score. Yet, on the lead-in fighter the MB339 still outscored the Hawk. Steyn noted in his 2001 testimony:

"The decision makers, and those who supported the decision makers, tried various avenues to get to their presumably predetermined choice. Their choice for the Hawk was patently clear from the start, the Hawk 100. They tried non-costed options, it did not work. They tried, let us consider risk. None of them were decided upon upfront, when the process started ...How they got to the Hawk, has never really convinced me."

On August 21 1998 the armaments acquisition council met to discuss the bids for the different procurement programmes. At the meeting Steyn argued for the recommendation of the MB339FD. According to the minutes he "remarked that the Hawk doubled the cost of the LIFT aircraft for an increase in performance of approximately 15%."

Modise, however, ensured that the Hawk was not excluded and the two proposals would be sent upwards. According to the minutes he said, "the political decision needed must not revolve around the operational aspects of the aircraft." He added, "we must not prejudge - let the politicians decide."

Ten days later the politicians did decide - in favour of the Hawk. At 7pm on August 31 a meeting was held in Durban between senior government officials and a number of ANC cabinet ministers, including then Deputy President Thabo Mbeki. It was described, in the minutes, as a "special briefing... to the Deputy President, Mr T. Mbeki on the progress of the strategic defence package programme for the SANDF."

The meeting was chaired by Mbeki. Chippy Shaik presented an evaluation of the different defence strategic packages on offer. Those listed as present were: Joe Modise; Minister of Trade & Industry, Alec Erwin; Minister of Public Enterprises, Stella Sigcau; Deputy Minister of Defence, Ronnie Kasrils; DG of Trade & Industry, Zach Rustomjee; Chairman of Armscor, Ron Haywood; CEO of Armscor Lew Swan; and, Trade & Industry's Venan Pillay. Steyn and Esterhuyse were also in attendance.

In his testimony Esterhuyse said that Shaik mentioned that in the case of the LIFT there were two options, and a very brief discussion of the Hawk followed. According to both Esterhuyse and Steyn the meeting did not have formal decision-making powers, there was no secretary present taking proper minutes, and no decision was actually made on the Hawk while they were in attendance. They were both led to believe that the purpose of the meeting was simply to brief the top political leadership.

However, after the meeting Chippy Shaik drew up minutes which stated that the recommendations issued by the armament acquisition council, including on the ALFA, had been "supported and approved by the members present."

On the question of the lead-in fighter trainer, paragraph 8 stated that two options had been presented. The Hawk, although of higher cost, "offered a dual role aircraft, both pilot training and a limited operational use capability at a higher cost. The IP proposals of Option B were higher in total Dollar value and higher in total percentage against the tender price offered."

Paragraph 11 then concluded: "After lengthy discussions by the Ministers it was decided that Option B (HAWK) should be recommended as the best option to meet all Military and National Economic Strategic requirements for South Africa."

In his testimony Esterhuyse recalled that a couple of days after the briefing Shaik came to his office, "and said these are the minutes of the meeting in Durban and he would like me to finalise this and take it to the minister's office, because it must go to Mbeki's office for his signature."

"I said, that was not discussed at the meeting, there was no such decision taken. He then informed me that there were further discussions after we left in Durban and that there was such a decision. And I said, I am not party to that. And it is against all the rules of procurement, it was certainly not discussed."

In a memorandum to Shaik dated September 7 1998 Steyn also took issue with them. He wrote:

"I question the completeness and accuracy of paragraph 11. I cannot recall that a decision was made. The merits of neither the Hawk nor the MB 339 were discussed. The fact that the MB 339 meets the SAAF LIFT requirements adequately (with reference to the pre-determined criteria) is not reflected. The Hawk is not the ‘best option' from a military point of view - the fact that its acquisition cost would solicit substantially more IP apparently carries the day. The SAAF, however, will have to absorb considerably higher operating costs during its life cycle."

Esterhuyse drew up an alternative set of minutes, along with Lew (sic - Llew) Swan, which stated that both options for the LIFT should be investigated further. In his later testimony he said that people had been hinting at decision factors, but these had not been properly assessed.

"I could not determine what those factors are. And my main concern at that stage in time was, rather delay the process and find out what are those industrial parameters or concerns that we have not yet taken into account."

According to Esterhuyse, Swan then took the revised minutes to the minister. Some time later he came back to him and said the decision was in favour of the Hawk. On November 18 1998 the Hawk was presented to cabinet as the sole recommendation for the lead-in fighter trainer.

It was the opinion of both Steyn and Esterhuyse that the purchase of the Hawk was deeply flawed. Steyn tendered his resignation over the matter. Esterhuyse was convinced the acquisition process had been manipulated:

"I went to the internal auditors and I said: I believe that something has gone wrong and I am going to the Management Board of Armscor to inform them that I am launching a full scale inquiry, an audit, on the procurement of these packages."

However, he left Armscor shortly afterwards, and the audit seemed to have gone nowhere. In its chapter on the purchase of the Hawk and Gripen the unexpurgated version of the Auditor-General's report concurred with their suspicions:

"According to documentation the minister [Modise] could have influenced decisions made by certain role players during the process to select BAe/SAAB as the preferred bidder for the Gripen and Hawk aircraft. Furthermore, during the investigation it became apparent that preference was given to BAe by making changes to value systems midway through the process."

This paragraph was left out of the sanitised version of the report that was eventually published. In its stead the revised report stated - apparently on the behest of Mbeki and his ministers - that the decision to choose "the Hawk/Gripen combination to Cabinet as the preferred selection for the LIFT/ALFA was taken by the Minister's Committee [on August 31 1998] for strategical reasons, including the total benefit to the country in terms of counter trade investment and the operational capabilities of the SANDF."

If one looks back over the records, each of these reasons is revealed to be without substance. As noted earlier, the consensus of the South African aviation industry was that the BAe defence industrial participation offer was "very poor", and "aimed at the absolute minimum that they could get away with."

As for the counter-trade investment the two main offers tabled for the Hawk's non-defence industrial participation offer were a power-procurement plant, and a Titanium plant. As the Auditor-General's report noted: the power project "was the old (rejected) national power project in another form"; while the Titanium project collapsed after the company which was supposed to establish it, abandoned the project.

It is also difficult to see how the purchase of the Hawk/Gripen combination enhanced the SANDF's operational capabilities, or was in South Africa's strategic interest. The SAAF initially wanted, and needed, 48 advanced fighter trainers, along with some thirty future medium fighters. This would have given it some eighty fighters with varying degrees of operational capability. The budgeted cost of both programmes was R13,2bn, or about $3,7bn at 2007 dollar values.

When the SAAF initially launched its ALFA project it said it needed 48 fighters. At the same time as the lead-in fighter component was added, at the behest of Modise, this was reduced to 38. The 24 Hawks are just good for training, with no effective operational capability. The Gripen, while a capable fighter, was so expensive that the number of aircraft South Africa was able to afford had to be reduced to 28, and then 26. The SAAF thus ended up with 54% of the number of light fighters it believed it needed. Due to its expense the number of helicopters South Africa planned to purchase through the defence package had to be reduced from 44 to 30.

The total cost of the Hawk/Gripen purchase will cost the taxpayer close to $4bn, at 2007 dollar values. At the end of the acquisition process therefore the SAAF will purchased 26 fighters able to carry out military operations. And, of these, only the seventeen single-seaters will have full operational capability.

With acknowledgements to James Myburgh and Moneyweb.