Department of Defence

Departmental Acquisition and Procurement Division

31 October 2004

www.mil.za/SecretaryforDefence/Frame/Frame.htm

Vision

The Departmental Acquisition and Procurement Division (DAPD) satisfies the DOD’s materiel requirements every time on time and in good time.

Mission

To acquire the end user’s specified materiel in an innovative and cost effective way, within the freedom provided by the prescribed policy process.

Goal

To provide the DOD with the materiel capabilities necessary for the South African National Defence Force (SANDF) to defend and protect the RSA and its people.

National and Departmental Policy

Acquisition and procurement in the DoD are regulated by the SA Defence Review (1998) Chap 13 as well as the Policy on the Acquisition of Armaments. (Note : To be linked later.)

Organisational Structure

The broad organisational structure of the DAPD is reflected in an organigram.

Armament Acquisition

Within the framework of defence management, the acquisition function satisfies the need to provide armaments to the SANDF. Defence management seeks the optimum combinations of personnel and equipment which will provide the maximum defence capability for available funds. A structured decision-making and authorisation process for the acquisition of armaments by means of baseline management and consequent phased contracting is followed, resulting in transparency and accountability. The armament acquisition process is fundamentally a system engineering process, requiring good project management.

Technology development and industrial development are closely related to armament acquisition and are therefore part of the overall acquisition process. The model used for structuring the armament acquisition management process allows for sequential and parallel phases separated by formalised baselines. Underlying the above phased approach is the systems engineering process. This process systematically translates functional needs stated by the operational user into technical design and manufacturing parameters. It also ensures that, parallel to the functional process, all other stakeholders and interest groups are kept involved. This process is managed by appointed project teams, representing all members of the DoD and Armscor. A project team is responsible for the execution of a project and for the submission of project milestone documents, as prescribed, to the approval committees and boards for acquisition programmes.

South Africa should not strive for self-sufficiency in arms development, but only limited self-sufficiency in key areas, as determined during the Defence Review and the subsequent DoD strategic planning process. Defence industry studies to indicate development, purchase or partnership options will be executed from time to time.

DoD acquisition guidelines will form the basis for defence industry planning. Technology development will be targeted primarily at those areas where self-sufficiency is to be maintained. The acquisition guidelines will guide acquisition decisions and will therefore be included in the value systems for tender evaluation.

Local Acquisition

It could be more cost-effective and operationally expedient to have the technology and capability to manufacture (if economies of scale can be achieved), upgrade and maintain equipment locally. Local manufacture allows understanding of the technology and processes, which again allows modifications to be made to improve serviceability, turn-round times and operational capability through upgrades, etc. It also has the advantage of stimulating the local economy through investment and savings on foreign exchange and in some instances, earn foreign exchange through exports. It also ensures independence from possible foreign coercion in times of tension. In certain strategic areas, such as electronic warfare, secure communications, equipment developed specifically for local conditions, etc, systems and services are not available on the international market.

Preference may therefore be given to the acquisition of defence products and services from local suppliers, providing such acquisition represents good value for money.

Competitive Acquisition

Open Competition

Fair and open competition will be used as far as is practical in the acquisition of armaments. This will include the invitation of foreign tenders.

Tender Adjudication

Adjudication of tenders will not necessarily be based on the lowest price, but on value for money and industrial development goals. Life-cycle costs, DoD requirement, local industrial development goals, social responsibility (economic empowerment of previously disadvantaged persons), and subcontracting will be taken into consideration in the awarding of contracts. The DoD affirmative procurement policy will be administered by the Secretary for Defence and will be considered during contract negotiations.

Where practical and not contrary to commercial confidentiality or security interests, companies who lost in the tender process should be informed of the reasons.

Competition on Sub-Contracts

Suppliers of major systems or items will be required to allow the maximum amount of competition on the sub-system and parts level in an offer (i.e. reduce vertical integration).

Bench-marking

In the adjudication of single offers, "bench-marking" against comparable foreign systems or products should be employed to ensure value for money. The basis for single-source offers should not include intellectual abilities, technical performance, previous work performance, additional work requirements, etc. Single-source offers should only be considered when no other suppliers respond to tender invitations or when there is a single supplier of specified equipment.

Foreign Acquisition

Logistic Support

Foreign acquisition will be considered when a requirement for a new product or system is at issue or when follow-up requirements for commodities can be satisfied from abroad. This would require the foreign commodity to be fully interchangeable with the local equivalent, e.g. ammunition. The logistic support implications of acquiring imported equipment will be considered in detail.

Industrial Participation

In the case of the import of defence equipment and related items, all contracts with a value of greater than US$2m and less than US$10m will be subject to a counter-trade requirement of at least 50%. This counter-trade obligation will be jointly monitored and implemented by Armscor and the Secretary for Defence (DAPD). All contracts with a value of greater than US$10m will be subject to National Industrial Participation Policy, which is administered jointly by the Department of Trade and Industry and the Department of Defence. There is a DoD Industrial Participation Policy (DIP) and a national Industrial Participation Policy (IP) that will affect foreign acquisition greater than US$10 million. The IP programme will be managed and administered by the Department of Trade and Industry (DTI), while the DIP obligations will be jointly managed and administered by Armscor and the DAPD.

Government has drawn up a national industrial participation policy, while the DoD, with the DTI, has established a DoD policy.

Offshore companies supplying armaments to the SANDF will be encouraged, through a Local Industrial Participation Programme (counter-trade/offset), to involve local industry, thereby ensuring maximum local content and support of the Government’s macro economic growth plan.

Contracting

Contracting will take place at the highest level in the system hierarchy, not excluding the possibility that contracting can be conducted on lower systems level, thus allowing for the promotion of previously-disadvantaged contractors. System suppliers will be contracted for the development, production and maintenance of defence systems. This will not, however, prevent the DoD and Armscor from contracting suppliers of sub-systems, components or materials directly if this proves to be more cost-effective. The same applies to commercially available equipment, spares and consumable items. Contracting will always ensure that the best value for money is obtained.

Tender Adjudication

Value Analysis

All tender adjudication for armaments will be based on a value analysis methodology and procedures. This value analysis methodology and procedures will be formulated jointly by the members of the DoD (DAPD), including Armscor and organised industry. The value analysis system per project must be approved and supported by the Secretary for Defence (DAPD). The value analysis system should not be used to exclude previously-disadvantaged contractors and should not limit national strategic considerations which can override technical performance parameters. This value analysis system must be above reproach and should not be a subjective analysis.

Defence Technology Acquisition Management

The aim of defence technology acquisition management is to identify technologies on a long-term prediction basis that will support the future needs of the SANDF and take into account South Africa’s Foresight Initiatives for advanced technology equipment and services. This management system will take into account threat analyses and required operational capabilities arising from the force structure plan and will develop, obtain, establish and maintain technologies according to certain priorities, for employment during the acquisition and operation of user system. Technology management is regarded as the activity of planning, approval, execution and assurance of technology establishment projects and plans.

The DoD remains committed to the development of new technology in South Africa and more specifically, to the application of science and technology in industry. The department is thought to be the largest source of state funding for R&D in the private sector.

Immaterial Rights

Ownership

The state will retain the immaterial rights to statefunded technology and will make such technology available to any of its contractors in either the public or private sector, or sell it to foreign institutions at its discretion.

The sale of South Africa defence industries to foreign industries will required the approval of the Minister of Defence where such sales will result in the transfer of state-owned technology from the South Africa industry to the foreign purchaser.

Royalties

The state may invoke its rights to a certain percentage of the value of the contracts for the export of products or technology where the state paid for the technology or product development. This decision to invoke a Property Rights should be shared between the company and the State in a pro rata ratio of their respective contributions. In the case of multi-purpose technology, the company may be required to pay royalties to the state if the technology is used in commercial applications.

International Alliances and Partnerships

Government Support

The Government will enter into agreements with other governments to enable the industries to co-operate and each government will financially support and maintain its own industry to enable it to participate in the partnership.

Foreign Participation Through Partnerships

Foreign companies wishing to enter the market will be encouraged to form partnerships or enter into joint ventures with local companies. Foreign companies are encouraged to engage with previously-disadvantaged communities or companies to ensure that all sectors of the community are empowered. The defence industry will form more alliances with local and foreign businesses to transfer technology and to market products. DoD consent must be obtained before companies, which have developed and/or possess technologies funded by SANDF research or development programmes, enter into any international alliance, partnership or change in ownership.

Social Responsibility of the Industry

Affirmative Action is defined and used in the context of a deliberate and sustainable anti-discrimination strategy that owes its existence to the principle of compensatory justice, equity and fairness in order to redress inequalities and imbalances within the defence industry beyond simple moral considerations to the realm of reconstruction.

Economic Empowerment in the Defence Industry

DoD policy will give preference to those companies that have a strong element of progressive empowerment policies and practices within themselves.

Support should be given to capacity-building measures in disadvantaged communities by the defence-related industries.

The defence industry should be committed to affirmative action and in a broader context, to economic empowerment of previously-disadvantaged groups. This encompasses redressing the imbalances created by previous practices arising from all forms of discrimination to include race, gender and disability.

The industry should be committed to redressing previously-created imbalances in the working population of South Africa.

The industry should support Government initiatives to encourage previously-disadvantaged persons as entrepreneurs, owners and managers of productive assets and wealth.

For an affirmative action programme to succeed, an organisational climate conducive to effectively managing diversity must be created within the defence industry.

This affirmative procurement exercise will be guided, monitored and controlled by the Secretary for Defence (DAPD).

Environmental Conservation

Before any military industrial facilities for the manufacturing, demolition, test and evaluation of armaments are established, operated or closed down, a comprehensive environment management plan will be drawn up and published for public scrutiny. Companies will be obliged to take all necessary action, at own cost, to conserve the environment and control pollution of all kinds, including noise pollution, to comply with national legislation.

Physical Address
Department of Defence
Departmental Acquisition and Procurement Division
Cnr Delmas Drive & Nossob Street
Erasmuskloof Extension 4
Pretoria
0001

Postal address
Department of Defence
Departmental Acquisition and Procurement Division
Private bag X910
Pretoria
0001

Telephone
012 355 5480

Facsimile
12 355 5428

With acknowledgement to the Department of Defence, South Africa