VOLUME 13 PAGES 994 - 1105

PROCEEDINGS RESUME

RICHARD MICHAEL MOBERLY YOUNG: s.u.o.

PRESIDING OFFICER: We now have the final version of those minutes. Can you proceed?

MR ROGERS: Mr Chairman can I just please indicate, just so that we are reminded of the context in which he wanted to refer to them in the first place. I think it had been suggested to him, or put to him, that Mr Shaikh might possibly have had a conflict of interest, that was not definitely a conflict of interest. I think it was in that context. --- If I may add, it was the areas and also the issue of whether there was a possible or potential or possible conflict of interests.

PRESIDING OFFICER: Yes. --- Okay. The first sentence under questioning from Andrew Feinstein, then Mr Shaikh responds:

"I do not have a conflict of interest at FBS. I had a conflict of interest with ADS as a family member became a director this year in ADS and I have declared that conflict of interest."

Paragraph 2, Mr Shaikh again:

"With regard to the Corvette programme, that is the only area, I reiterate, that I have a conflict of interest."

The third paragraph actually starts on the page before but just a couple of lines:

"With regard to the conflict of interest with ADS I have stated my particular conflict of interest and I have recused myself from any particular decision relating to the Combat Suites and that was duly recorded and stated."

MR MAHON: Mr Chairman I do not want to belabour the point. What I was trying to put, and perhaps I should put it to Dr Young, was simply this, that the fact that Mr Shaikh referred to it as a conflict of interest does not necessarily make it an actual conflict of interest. The question of what is or what is not a conflict of interest is something which there will be no point in debating. It is a legal proposition which there is no point in debating with Dr Young here this afternoon. The fact of the matter is that what he perceived to be a potential problem, call it a conflict of interest or not, was declared and that was the point that Mr Shaikh was making. I do not think we need to take it any further Mr Chairman.

PRESIDING OFFICER: Yes. Do you wish to comment? --- No.

I see, thank you. Mr Maseremule?

MR MASEREMULE: Thank you Mr Chairperson, I just have a couple of questions. Dr Young at paragraph 502, which I think is at page 70 of the original, page 70 of the original aide memoire, there is a suggestion there ...(intervenes) --- Could we just hold a second while we reorganise pages and things?

It is at paragraph 502. --- Yes, 502.

There is a suggestion in the paragraph that Armscor somehow allowed the German Frigate Consortium to deselect, which is the term that you use, to deselect your company from supplying the simulator. In the light of what has been put to you by the representative of GFC, is it still your contention that Armscor had anything to do with the decision whether or not your company was successful in obtaining that contract? --- The German Frigate Consortium received their contract based on selected equipment which had been selected by the Project Control Board and formalised in terms of a letter by the CEO of Armscor, who is the head of the Armscor Tender Board which is effectively responsible for tendering and acquisition. It would appear to me that they got that contract based on that particular scope of supply of the system. One thing I do know is that there is a thing called a main equipment list, although I do not have it because I do not have the contract. It would be surprising to me if the main equipment list did also not reflect the equipment that had been specified by Armscor.

Are you referring to the letter dated 29 June? --- That is right yes.

Well as I understand it that letter says no more than that the companies which are mentioned in the annexure are companies from which the main contractor can source either systems or whatever it is that is that is required to be supplied, but that did not amount to Armscor stating to either the German Frigate Consortium or to yourself that you had a contract for the simulator. Is that not so? --- The letter, I do not have it in front of me, but there is something like this that these are the final selections of the Project Control Board and what I am saying is it would be surprising to me if those final selections are not then reflected in the contract, if not in terms of a main equipment list.

Well the letter simply says:

"At a meeting held recently regarding the selection of major products and their suppliers for the Corvette programme, the following were selected (see attached list)."

--- That is correct yes.

But at that point in time there were no contracts either between Armscor and the German Frigate Consortium or between the German Frigate Consortium and the potential suppliers of different equipment. Not so? --- No but the German Frigate Consortium had been declared the preferred supplier six months before that.

Yes but the final decision had not yet been made. You would agree with that? --- I would agree with that yes.

And in fact what Armscor's position has been throughout these proceedings is that the decision to select any particular subcontractor is not a decision which is made by Armscor. --- I think we have actually, well certainly ADS in various letters has said the decision was not theirs, the decision was one of the State.

What I am saying to you is that Armscor did not make the decision to select for instance Siemens as the supplier in respect of the simulator. You must accept that --- No but they did in terms of the IPMS. The same letter, yes the integrated platform management system, the selection is Siemens / Siemens (South Africa).

Yes Siemens was selected by the German Frigate Consortium. --- No they were selected by the Project Control Board.

Which letter are you referring to, or which annexure are you referring to? --- I am referring to the letter which you have just read out to me.

"Project Control Board decisions regarding the Project Sitron technical baseline.

1. At a meeting held recently regarding the selection of major products and their suppliers for the Corvette programme, the following were selected."

"See attached list." --- Yes.

Is that what you are referring to? --- So it seems that Armscor is doing the final selection. That is how it reads to me.

Now Dr Young what you do know is that following this letter of 29 June you entered into discussions with the German Frigate Consortium for you to supply a specific quotation for the supply of the simulator, not so? --- That is correct.

You did not attend any discussions with Armscor. You did not supply any quotation to Armscor for Armscor to grant you the contract for the simulator, not so? --- No Armscor instructed the GFC and ourselves to negotiate this.

Yes. So and you submitted a proposal. --- Yes to GFC.

To GFC. --- That is correct.

You did not at the time when you were requested to supply the quotation say to the GFC that there was no need for you to do so because the contract had already been awarded in terms of the letter of 29 June, not so? --- I am not quite getting you there, I am sorry.

What I am putting to you is this. You understood after the letter of 29 June 1999 that you would have to liaise with the German Frigate Consortium. --- Yes.

That you would have to reach an agreement with them with regards to that particular contract, not so? --- That is correct yes.

And you were subsequently informed by them that they had selected a different supplier. --- Well only a few months ago, yes.

Yes but at the time that the decision was made, it was made by them and that decision was conveyed to you. --- The decision that we were not going to get it?

Yes. --- Yes, a few months ago yes.

And it was communicated to you by the German Frigate Consortium. --- That is correct yes.

And I am saying in the light of that it cannot be your contention that Armscor, as you suggest in the paragraph I referred you to, had anything to do with the decision as to whether or not the main contractor wanted you to subcontract. It cannot be, that is what I am suggesting. --- What I am saying is that I would imagine that the technical baseline on which the German Frigate Consortium won the contract also included the IPMS simulator. We had been preferred supplier and if there was not a good reason to deselect us, then why should we be deselected?

Dr Young all that happened was the GFC could not be expected to know which companies in South Africa are involved in what areas of defence and what Armscor did was to pass on to them a list of companies which could potentially supply certain parts of the main combat suite. --- I would like to quote from a letter. Okay. Basically there was a letter, and I am sure it was signed by Captain Kamerman, where he instructs the German Frigate Consortium to elicit a quotation from ourselves. I need to quote the whole letter to you, I am not sure whether we have it.

Whichever way you look at it Dr Young, the point is this, you understood at all times that you had to make a proposal to the GFC which must either accept or reject that proposal. Not so? --- Yes.

You understood that that is why you submitted your quotation to them and not to Armscor. --- That is correct.

And in fact when Mr Knight went to Hamburg to discuss the quotation for the simulator, Armscor and the project team were not involved in that discussion. --- No there were not, no.

In fact at no point was the project team involved in evaluating the technical proposals in relation to the simulator. That was a matter between yourself and the GFC, not so? --- That is correct but I would certainly think that in the 18 months from the time we submitted our first proposal to the time we were deselected after two or three requests for extension, if there was any problem then this would have been conveyed to us.

Yes but by whom? --- By the GFC and Armscor because Armscor are ultimately responsible for this.

But all that Armscor did was to say to the German Frigate Consortium here is a company which can potentially supply you with the simulator. You had then to negotiate with them and see whether you agree. --- I do not think that this letter says that potentially supply, it says these are the ones that are selected. That is my reading of the words on this letter. These are selected.

Dr Young the point I have already put to you which you seem to agree with, is that you understood and accepted that there was no contract between you and the GFC and that you had to submit a proposal to them which they could either accept or reject. Not so? --- What I am saying is that we legitimately expected the contract once we had been declared the preferred supplier for that and that we submitted a quotation which was conforming to their requirements and was roughly in accordance with the other requirements, costs and schedule etcetera. That is what I am saying.

So at best, as a result of the letter which Armscor sent, you had an expectation. Armscor did not confer on you a contractual right for the contract. Not so? --- No we had an expectation and I feel now that the expectation has not been realised because we have complained about other elements of the programme. That is what I am saying.

Yes but we know that you have been questioned with regards to the reasons why C2I2 was not selected. Do you accept that those reasons were provided to you by GFC after your company had made a presentation to them about the product that you offer, not so? --- Well that was the finality of it yes.

Yes and now what I am saying to you then is that in the light of this particular kind of evidence, it cannot be your contention, as it was suggested in your aide memoire, that Armscor had given you a contract which was taken away by ...(intervenes) --- I am not saying that, I did not say that, all I said is we feel now that we are being penalised for other reasons. I never said that we had a contract.

But do you accept that if anybody is penalising you, Armscor is not penalising you for anything. Do you accept that? --- Well somebody is penalising us, I am not saying Armscor.

Are you suggesting that Armscor is one of the parties that might be penalising you, is that your suggestion? --- I would not make it as direct as that.

Well are you making it as an indirect suggestion? --- I look at the end effect, the end effect is with me. I feel that I have been penalised somehow. There are a number of parties who it could be. It could be the Department of Defence, it could be Armscor, it could be the GFC or it could be the European South African Corvette Consortium.

So is your evidence then that notwithstanding what you have just agreed to, that Armscor is one of the parties that is penalising you? Is that your evidence? --- I think that would be a bit strong to say that.

But you see Doctor I have got to establish whether or not you are accusing my client of any wrongdoings here and whether my client has a case to answer and that is why I am putting to you that in the light of what we have agreed to that all you had was an expectation that you might get a contract, you cannot be accusing Armscor as one of the parties that is penalising you for anything that might have been done. --- We feel that we could only have been deselected, especially if we are specified on the main equipment list, with Armscor's knowledge and acceptance of that and we would expect Armscor, as stated by Mr Swan earlier, to be supporting the local industry. They are in overall control of this.

Well Dr Young you have accepted that whether or not you got the contract was a matter of negotiation between yourself and the GFC, not so? You accept that, do you not? --- The detailed contractual terms and conditions, yes.

No not the detailed contractual terms, whether or not you got the contract. --- What I am saying here is if we were deselected we would expect Armscor to intervene, at least to assist us in supporting the local industry in line with their previous selection. That is what I am saying.

So that is very different, is it not Doctor, it is very different from saying that Armscor had anything to do with it. You are saying now, as I understand you, that while Armscor had nothing to do with your deselection but because Armscor is the procurement agency perhaps it should have come to your assistance. --- Okay I will say that.

You can put it no higher than that, can you? --- Yes I will go with that.

And for that reason therefore accept that Armscor had nothing to do with it?

MR ROGERS: Mr Chairman I think this has been taken up enough with respect.

PRESIDING OFFICER: Yes. You are saying because Armscor did not intervene. So maybe to use some legalese, you would say by omission, by failing to intervene on your behalf? --- Yes. I am not going to get badgered into a particular admission or accusation. I am talking about I feel that I have been penalised. I am not going to say it is Armscor's responsibility entirely.

Mr Maseremule can we leave it at that?

MR MASEREMULE: I will leave it at that. Can I just move on to a different point? It is something that is of major concern. You say at the very beginning of your aide memoire, I think at paragraphs 6 to 8 on the second page, you state that you have a top secret clearance and that your company also has clearance to do business, which as I understand is the clearance which you got from Armscor. Not so? --- That is correct yes.

And do you agree with me that if for any reason Armscor becomes aware that there is a breach of any of its security regulations, it has reason to be extremely concerned? --- If there was a breach.

Yes. --- I would like to put this on the record that I have addressed this matter both with the divisional senior manager of Armscor's maritime division in terms of some of the documents to which I have referred and Armscor's security department. In fact I had a special meeting with somebody from Armscor's security. In fact I have had two, one was about a year ago and they said at best the information contained in some of the documents was now business confidential, it was no longer confidential from a military point of view.

And would you be able to tell us who are the people that you met with at Armscor who conveyed that information to you? --- I discussed it over the phone with Mr Hanafey and I might have discussed it face to face with him, I cannot remember, but I had a meeting with Mr Ogilvy Gericke of Armscor security and he consulted with his line manager, who is Mr ... His first name is Reichardt, it is like Richard but German, I cannot quite think of the surname now, and he consulted with his line manager and then he came down to Cape Town and we discussed this with him and he said as far as they were concerned Armscor's position was that I would not be compromising any actual classified information relating to the defence of South Africa.

In relation to the information that you obtained digitally, is that what you are saying, after you received the information you had a discussion with Mr Hanafey and Mr Gericke who said everything was okay? --- No the first time I spoke to Mr Hanafey and Mr Gericke was about a year ago. This digital information only came to my attention about two months ago and I have since had another meeting with Mr Gericke. That was about a month ago.

After you came into possession of the information and you disclosed to him the information that you had and he said it was okay? --- No I did not disclose to him.

So he was not aware at the time that you were in possession of information? --- Not the details, in general what it contained.

MR ROGERS: Mr Chairman can I raise at this stage whether Armscor concerns about Dr Young's security clearance and the veiled threats that seem to underlie this line of questioning have anything to do with your inquiry? I would submit not.

MR MASEREMULE: Mr Chairperson the witness has put information that relates to the arms practices before you including information he says which ... I am trying to establish whether in fact it was obtained from Armscor. Up to now the witness has not said that he obtained information from Armscor and I am simply trying to establish whether that is the case. Obviously if it is, Mr Chairperson we cannot ignore the fact that Dr Young has a top secret clearance given by Armscor and that if he is disseminating information or receiving information to which he is not entitled, it is a matter of great concern. He has a contract, he has got an ongoing contract from the packages and if he is in breach of the contract that he signed with Armscor I am simply trying to establish, over and above that it is a different point that I want to establish and that is if he has got information from elsewhere other than Armscor it is a different proposition. If he got it from Armscor it would mean that there is an employee within Armscor who is breaching his conditions of employment. I think it is information that we are entitled to.

PRESIDING OFFICER: Yes it is a matter that affects Mr Maseremule's interests directly and it is a matter arising out of his aide memoire. There is a limit to which we can deal with the matter here but I do not think the questions are improper.

MR MASEREMULE: I am not going to go beyond what I need for the purposes of my examination Mr Chairperson. Can I just confirm this Dr Young, is my understanding correct that the digital information that you have in your possession is information which was given to you by an Armscor employee? --- I am 99,99% sure that it did not come from Armscor.

My understanding is that your information comes from two sources. --- No I just said that the FBS draft contract came from two sources. It happened to be on the same set but that other FBS had been floating around in concerned ANC MP circles for months and months and months.

Can I just confirm this? In relation to classified information that you received in digital form, did you receive any part of that information from any person who is presently an employee of Armscor? --- No.

You did not? --- Definitely not. I would like to say that I have been completely candid with the forensic investigators. They have a copy of it. I am not in possession of it. I can categorically state, the person who gave it to me had no idea what was on this file. It is a very, very extensive file of hundreds and hundreds of pages. He had no idea and when it was given to me I had absolutely no idea what was on it. I was surprised to see a number of documents, some of which are directly relating to my case, and I have given the original back to the source and the copy I gave to the forensic investigators and deleted the files, first of all because they are very big and secondly I have no further need for them.

You would not have asked him by any chance where he got the information from? --- No I would not ask them that. It was completely unsolicited from me, it was completely surprising that it was offered in the first place and even more surprising to see the contents but I can categorically state that it did not come from Armscor.

Could I just get a second Mr Chairperson? Thank you Mr Chairperson I have no further questions.

PRESIDING OFFICER: Thank you Mr Maseremule. Mr Rogers?

RE-EXAMINATION BY MR ROGERS: Thank you. Dr Young you will recall that during the course of your evidence you spoke about your perception that C2I2, your company, had actually been nominated or selected to supply the IMS and you referred inter alia to the fact that your company was the only so-called candidate supplier listed for this particular subsystem. Do you remember the questioning about that portion of your evidence and Mr Kuper debating with you the meaning of candidate supplier? --- Yes.

Now at some point the Public Protector himself intervened to ask a question about when it came to eliciting requests for best and final offers, you must have appreciated now you were in some sort of competitive tendering or bidding process. Can I just ask you this? Given the specifications in the URS and the other naval documents at that time for the subsystem for which you were giving your best and final offer, was there in fact any other party who was capable of bidding for a subsystem with those specifications? --- Absolutely not. The technologies and the capabilities that were specified in detail, as well as the documents, applicable documents, to which they make reference, imply that there could only have been one supplier and that was ourselves.

In fact the specifications which had been developed by the Navy over the years had been specifications which for all practical purposes had been derived from the very product which you had been developing with them in co-operation?

MR KRIEGLER: Mr Chairman I do not know whether this is my province to object at all but it seems to me to be transcending the bounds of what is permissible questioning. It sounds like cross-examination. This is not an appropriate question for leading at all.

PRESIDING OFFICER: I think within the context it does amount to re-examination Mr Kriegler. I will allow it for the moment.

MR KRIEGLER: As you please Mr Chairman.

PRESIDING OFFICER: Yes, please.

MR ROGERS: Where had those specifications in the URS for the subsystem for which you were putting in your best and final offer, where had they come from? --- Yes, no Armscor had written the specification and they derived the specification from the capabilities that we had developed on their behalf for the IMS.

So was it ever perceived when you were asked to put in a best and final offer for the subsystem which had the specifications derived from your IMS, was it ever anticipated by anybody that they would receive a best and final offer from any party other than yourself? --- Not as far as I know.

But now let us consider what ultimately supplanted your IMS, which is the Detexis Databus. If one had written a specification with which the Detexis Databus complied, firstly was there in fact any URS or approved document which contained such specifications, in other words a variation of the specifications derived from the IMS? --- Not at the request for offer and the request for best and final offer stage. That was the URS. Eventually it was supplanted by ADS's own specification which initially, the initial two drafts, referred to our system but eventually they changed the wording to reflect the Detexis Combat Suite Databus.

And you have already questioned in your evidence the regularity about that departure from the baseline? --- Well certainly yes and more so at that late stage.

Would Detexis have been in a position to make a bid for the subsystem in accordance with the original specifications? --- I very much doubt it.

Let us now look at the other side of the coin. If a specification, if there had been as it were a formally approved change to the baseline specifications for that subsystem so that they now fitted the Detexis Databus, on that scenario were there other companies in South Africa and the world that could have bid competitively then for the subsystem? --- Yes. We certainly could have bid for the equivalent of internet and point to point links, we could have and I am sure that there are certainly other companies in the world who could have done so and possibly even this country. I cannot state that absolutely, but ...

And Detexis is, unlike your company, was a foreign company. --- Yes.

So if there had been a formally altered baseline such as to now accommodate Detexis, then that would have been a specification for which there could have been a genuine competitive tender process? --- That is right yes.

Was there? --- No.

As regards this question of the risk related costs of your IMS, just to understand the background to that, you have testified that the IMS was developed over a number of years in co-operation with the South African Navy itself? --- Definitely.

It was not as if at a stage when a specification produced by the Navy was put out to tender you came up with a product that they did not know about? --- No we had been designing it according to what had been the baseline, which was the functional specification.

And what about the Combat Suite architecture, had that likewise been something which was being developed by the Navy and the specifications for that architecture that had been developed with the Navy in conjunction inter alia with yourselves over a number of years? --- Absolutely. Actually what happened, I mentioned our early efforts in the 1993/1994 time period when one of the first major efforts was to do system design studies and we did a very, very comprehensive review of technologies and architectures and it was documented in a document called The Trade Off Study and the architecture that was recommended by The Trade Off Study was the one that was adopted, after formal review of the possibilities and the actual options offered.

So when the architecture and the requirements for the IMS and so forth were taken up in the element description document in the URS, that represented something which the Navy itself wanted and was happy with? --- Absolutely.

I just want to get out of the idea that at some late stage the Navy itself was not happy with these requirements. The requirements that you were complying with were the Navy's own developed requirements? --- That is correct yes.

If those baselines had been adhered to, would there have been any need on risk related considerations to make any adjustment to the price that you put forward originally, the R38 million excluding VAT? --- Not at all. If we had stuck to the original baseline we would certainly have complied. Even when there was this minor adjustment of the compromise situation of the CS7 Mod 1 architecture, even then our price remained the same. It was only when there were other baseline changes that we proposed this risk abatement plan, which that would have cost the extra 30% to 35% or approximately R15 million.

That more significant change, in other words not the, I think what you would record or describe as the very minor change from the baseline architecture, was the CS7 Mod 1 version. --- That is right.

If that is the architecture which had been adhered to, either the baseline or with the minor modification, the CS7 Mod 1, what would it have meant for ADS in the context of supplying the Tavitac CMS? In other words was there one form of architecture which was more convenient for them? --- Yes the CS7 Mod 1 architecture allowed a segmentation of the Combat Suite. One for the Combat Suite elements, other than the combat management system, and the other segment for the combat management system itself and they could have been free to choose their own Databus, including the Detexis one there, and this bridge interface unit, or gateway as it has been referred to, would have connected the two things together transparently.

But if you had stuck with the baseline architecture would ADS ...In other words was the architecture ultimately adopted? That was a significant departure, I think you have testified, from the baseline architecture. --- Yes.

Did that save ADS any money? --- Absolutely because if they had to change certainly their original architecture, they would have had to change some of the software inside their system, which had already been developed for the French system. So they would have had to change. So effectively what they did is they transferred the extra costs to us to save them the cost of change.

In other words the position which was encountered at that stage was that if the parties, including ADS, had stuck to the approved baselines on which you and the Navy and others had developed over a number of years, ADS would have had to have spent a bit more money to adapt their Tavitac CMS to that architecture? --- Yes I would say so.

And instead ADS found it useful to change the baseline and make you bear the extra cost? --- That is right yes.

MR KRIEGLER: Mr Protector it hardly bears mentioning that this is clearly a new matter. Quite apart from the leading questions put to the witness it is entirely new.

PRESIDING OFFICER: Mr Rogers I do allow a bit of leeway for you to cover matters but I think please, do not bring new matters.

MR ROGERS: Yes. If I can say, it is not strictly re-examination as I understand it.

PRESIDING OFFICER: Yes that is why I give you leeway but I think there are limits to which you can go because if you raise entirely new matters now the other parties are going to be entitled now to either ask more questions and so on and I do not think this is the idea even though acceptedly this is not a civil trial.

MR ROGERS: My learned friend Mr Kuper at one stage kept on bringing you back to the fact that even if the additional risk premium was as a result of commercial realities, nevertheless that was the position which the Navy at that point encountered. He used the term commercial reality. Are you aware of any commercial reality which required the Navy to depart from the baseline architecture? --- I think the only commercial reality was for ADS and Thomsen themselves. The commercial reality was for them to be able to introduce their combat management system.

Rear Admiral (JG) Kamerman who was sitting next to my learned friend Mr Kuper as he cross-examined you I think prompted him at one point to ask you whether in providing prices from time to time over the years for your IMS you had ever, as it were, had a specific identified component for risk contingency or anything of that kind and you answered no. --- It was not a separate risk contingency. One builds a small amount of margin of level of effort per work element. It is not a specific risk contingency.

Now was Rear Admiral Kamerman aware of the prices for the IMS that you were putting forward from time to time? --- Certainly yes. I think it was April 1997, we did a price and risk audit in May 1998 and then a similar exercise that was more of a price confirmation in I think it was March 1999.

And did he ever before yesterday display any great anxiety about the absence of a separately identified risk contingency in the prices you were putting forward? --- Definitely not.

In other words he did not suggest that something like that was required? --- Definitely not.

In fact to the contrary, if one suddenly started making contingencies for risk it would push up the price and that would have caused consternation. In dealing with the respective merits or otherwise of the Detexis system, my learned friend Mr Kuper accused you of leaving out a paragraph from the evaluation report. Do you recall that? --- Yes.

And I think it was a paragraph which apparently said something along the lines that Detexis are undoubtedly experts, or have great expertise and the Detexis Databus can do the job. --- That is correct. I think that they said that they are very knowledgeable and that with the new I think 7 April architecture the Detexis system can do the job.

Now in your scientific experience this expression "can do the job", is that a term of art which denotes any particular technical capability? --- No because when you are designing a system, especially a long-lived cardinal system like this, you do not just design it for the beginning, you design it for the envisaged life. So I think doing the job in that context meant that possibly they could, and I will quote a paraphrase in Emmanuel Mary, is fine-tune the system to make it work. But that would have basically, an expedient way of providing something at the beginning, possibly saving acquisition costs, but the expense of the upgradeability supportability and specifically the life cycle costs of the Corvette and its Combat Suite.

Can I ask, when it comes to doing the job, if we were to use perhaps more acceptable technical and scientific language and say could it comply with the specifications of the URS which the South African Navy had laid down, was there any way in which the Detexis Databus could do the job in that sense? --- It could not possibly comply with the user requirement specification.

So the ship could work and the lights could flash but it could not meet the technical specifications? --- No.

MR MASEREMULE: Chairperson before further questions are asked, maybe it is my turn now to raise the same objection that we seem to be traversing a matter that should have been traversed in chief in the extensive statement.

PRESIDING OFFICER: Yes but that one arises out of the coded section, but I suppose there is a limit to which doing the job can be analysed or embellished and so on, but it arises directly out of a matter which was raised by Mr Kuper which he had not mentioned, so I think he is entitled to re-examine on that.

MR ROGERS: Another matter concerning technical capability, and in fact one of the specifications in the URS which my learned friend Mr Kuper picked up with you, was this 6,5 millisecond specification, the latency requirement, the speed of transmission of data and you pointed out to him that perhaps when there is an Exocet missile coming towards your vessel you would rather react more quickly than more slowly. So you said the requirement was what in that instance, what was the specification? --- It was five milliseconds but for a much larger packet, a 4 000 bytes package of data.

Yes I think that is in your main statement at 110 and 111. I think what you said there was that at ...(intervenes)

PRESIDING OFFICER: Well if it is there why are we repeating it?

MR ROGERS: Because the suggestion, where that was left after that was raised, was that there was as it were a 1,5 millisecond difference between the specification but one cannot understand the extent of the discrepancy without knowing how much information is being transmitted in that time and I simply wish to identify that whereas the requirement was five milliseconds for 4 000 bytes, what Detexis could transmit in only 6,5 milliseconds was merely 165 bytes. That was the difference between the specification and the Detexis capability. Is that correct? --- That is correct yes.

You were much criticised by my learned friend Mr Kuper for your alleged lack of candour in leaving out this particular paragraph that he read to you about Detexis being able to do the job. When it comes to candour, can I ask, in the context of the evidence which I understand you to have read that was given at SCOPA and the submission made by the Department of Defence to SCOPA, and particularly concerning your deselection, what is your view as to whether candour perhaps dictated that the Department of Defence should have made that document available to SCOPA, that evaluation report, do you have a view on that?

PRESIDING OFFICER: I disallow that, I disallow that question. You have based that on a report which is not before ... You are referring to the SCOPA hearing.

MR ROGERS: I am asking whether that document was in fact made available by the Department of Defence.

PRESIDING OFFICER: Which document?

MR ROGERS: The evaluation report listing the merits and demerits.

PRESIDING OFFICER: In the SCOPA hearing?

MR ROGERS: Yes.

PRESIDING OFFICER: No I disallow that.

MR ROGERS: On the question of the SMS subsystem, my learned friend Mr Kuper put to you propositions which were designed to show that these additional percentages which were added onto your price were justified because in fact those were additional amounts of money which the State was going to have to pay, because ADS was going to add them on. Do you recall that questioning? --- Yes.

As I understand it, if those additional factors were justified and were added on, what was the arithmetic result? --- The arithmetic result of our system was still lower than the ADS's offer.

That was not challenged by anybody, so I will not take that further. Can I just ask you this though, concerning the justifiability of the integration fee and the handling fee and the way that this was put to you by Mr Kuper, he indicated that from the State's perspective if ADS was in fact going to add on to your SMS system the handling fee and the integration fee, then the State had to take into account that that was a real expense, whether or not the particular fees were justified. Do you recall that? --- I recall that.

Can I ask you, as at the time when the prices for the SMS were being evaluated as between your system and the ADS system ... Or perhaps I must first ask you this. The adding on of an integration fee and a handling fee by ADS, is that premised on ADS having a particular status in the Combat Suite contract? --- I would certainly imagine that they have been declared a priority as the main contractor.

It presumes that they have the integration contract? --- I presume so.

That is why they add on an integration fee and a handling fee. --- I would assume so yes.

Now at the time when the comparison of your price for the subsystem, the SMS, was being compared to the ADS subsystem, did ADS yet have the integration contract? --- Definitely not. They only got the contract at the end of 1999 and this was about April 1999.

So whoever added on the integration fee and the handling fee was assuming that merely because ADS was there, as it were, as the preferred ...(intervenes)

PRESIDING OFFICER: But that is speculation that you are putting. Whoever did, where does that come from?

MR ROGERS: In his evidence it is shown that in evaluating my client's price as against the ADS price a handling fee and an integration fee was added to my client's price and ...(intervenes)

PRESIDING OFFICER: Where does that come from?

MR ROGERS: It starts at about page 30. In mine it is paragraph 210, in yours it might be 209 or 211, I cannot remember which. It is 210. It talks about a handling fee for non-ADS components, 3,2% and integration fee of 7% and an estimated extended warranty of 1,85%.

PRESIDING OFFICER: Yes. I am asking now in terms of your interrogating it. I see it then again, I say it is stated. So what are you furthering now by asking him again?

MR ROGERS: Because my learned friend Mr Kuper in his cross-examination sought to try and persuade my witness that these additional factors were justified because they were amounts which the State was in fact going to have to pay to ADS and now what I wish to clarify with the witness, I think he has already answered this question, as at the time when these bids for the sub-system were being evaluated, ADS did not have this integration contract, did it? --- No they did not.

What was ADS's status at that time in regard to integration? --- They were a potential, how can I describe it, member of a consortium, a partner of the German Frigate Consortium.

Can I ask, was there status in relation to getting the integration contract at the time that these assessments were being made any different from your status in regard to getting the IMS contract? --- I do not think so.

I wish to deal briefly now with the conflict of interest aspect raised by my learned friend Mr Mahon and for that purpose I wonder if I could be placed in possession again of the minutes of the Project Control Board.

PRESIDING OFFICER: Yes, can we be assisted in that regard?

MR ROGERS: I would like all three please and all three for the witness as well, and perhaps for the panel. Perhaps while the documents are being collected, there were in fact one or two matters arising from Mr Kriegler's cross-examination. Dr Young you recall it was put to you by my learned friend Mr Kriegler for ADS that ADS's experts, I think it was Emmanual Mary, would say, would give technical evidence along the lines that a problem they detected, or perceived, with the IMS and with the architecture that had originally been baselined, I think it was referred to as congested, and that if something went wrong it would be very difficult to ascertain which subsystem had gone wrong or where the problem was. Do you recall that? That was put to you. --- Yes.

Whatever that evidence may be, can I just attempt to ascertain what the Navy's own view of that matter was? In the evaluation report that the Defence Force itself produced of the Detexis system as against the IMS system, was the question of trouble shooting and the ability to identify problems, was that identified in the lists of pros and cons of the two systems? --- Yes absolutely and in terms of the IMS that was identified as a con, as a pro, that the IMS had capability built in to allow much more advanced trouble shooting and maintenance and I think the precise opposite in the case of the Detexis Databus.

Perhaps just to reference it for the ease of the panel, that particular point I think in favour of the IMS appears in paragraph 287, if one looks at paragraph 287.4. What does that say? --- It says:

"It will be easier to manage and trouble shoot with the IMS resulting in easier maintenance."

That is one of the pros in favour of the IMS. If I can take you back to the technical assessment of Detexis, 283 in my document, point 9. What does that say as a criticism? ---

"The increased number of cables present, as well as the complexity of the switches, will make trouble shooting and maintenance difficult."

In there anything else in those lists of points in 283 which you think has a bearing on this proposition that was put to you concerning the difficulty of identifying trouble areas if something goes wrong in a subsystem? --- Yes I think their point 6 here is very important in relation to the Detexis Databus. It says:

"The details of design have not been thought through for example aero budgets and there is still a lot of design work that has to be completed. Design is in fact only a concept at this stage."

Whereas with respect to the IMS the equivalent point is number 9 on page 50: "A detailed system design has been done. DACS." That means the design advisory committees. Many, many, many studies had been done of not only what the requirements were but that for example there was no congestion in these boxes of equipment that transferred data between subsystems.

This very Mr Emmanuel Mary who apparently is the source of the technical proposition that was put to you by Mr Kriegler, he has in fact given you some feedback on the IMS. ADS and Thomsen paid a visit to your offices, did they not? --- That is right yes.

And I think you have recorded the nub, you have recorded his response to your product at paragraph 270, but was the proposition that has now been put to you, the difficulty with trouble shooting or finding the problems, was that suggested to you at that stage as a problem they say? --- Definitely no. If I may, it was a very short visit and for the first half an hour to three-quarters of an hour Emmanuel Mary lay almost with his head on his hands with an acute migraine and I do not even think that he was really listening to what we were saying. There was no real technical stuff. After the end of the presentation there was no discussion with the engineers.

You were considerably taxed in cross-examination with a statement you had made in your aide memoire, which was to the effect that in regard to the IMS there was no risk, or at least very little risk, and you were particularly challenged on the expression no risk and that was in respect of the IMS. In relation to Detexis, are you able to say there whether you can say there is no risk? --- Well when it says ... Can we just go to the relevant section? Are we talking about, well there are many things. This 100 megabyte per second internet system has never been done on a warship before.

You are going back to the evaluation report. I just wanted your general comment. You said, I think, that in any system it is going to be very difficult to say there is no risk and you said in regard to IMS it was tending towards zero. In regard to Detexis would it be possible to say in respect of the Detexis Databus there, there is genuinely no risk? --- Absolutely not. There would be always risk if they are deploying new technologies and I can tell you from a slightly more technical level, I have looked at the documents and some of the ways that they even meet the 6,5 millisecond specification are extremely marginal. Basically you have to guarantee that the data rates on those individual links have to be limited to one megabyte per second. Now that is extremely limiting. In the long term as soon as you change any of those things, all those critical timing parameters are going to change and those imply major risks down the road.

And then it was suggested to you that the general thrust, or conclusion perhaps, of the technical evidence which is going to come from ADS is that the Detexis Databus is as it were the very cutting edge of technology in this field. Can I ask you, having read the naval review of the merits and demerits of Detexis as against the IMS system, is it your understanding of that evaluation report that the Navy perceived the Detexis Databus to be the cutting edge of technology? --- Certainly not. When they refer to the 10 megabyte per second internet because that itself is almost obsolete. In fact to get on a par with IMS they were proposing, and it was still a concept, to go to the 100 megabyte per second internet system. So it is certainly not the cutting edge and I can tell you that there are other technologies that are going to be in new generation US warships and it was mentioned in my presentation to the whole team. There are far, far more cutting edge than 100 megabyte per second internet.

PRESIDING OFFICER: I think that there was sufficient response to Mr Kuper about that, the response that it was emanating from an interview on M-Net, so I think that point was covered.

MR ROGERS: Then just to finish off on the conflict of interest point. Do you recall that ... We have here now again the three minutes that you were referred to by Mr Mahon in date order. There were December ...(intervenes) --- I do not have these things. They have been refused to be provided to me.

PRESIDING OFFICER: Okay we will facilitate that. --- It is the end of a long day, can I just gather my wits about me here, get them in order for one thing.

MR ROGERS: There was December 1998 then April 1999 and August 1999. Those were the three minutes that have been referred to and Mr Mahon sought to establish with reference to these minutes that in two of them, well in all three of them reference was made to the conflict of interest and that in the earlier two minutes Mr Shaikh was specifically recorded as handing over the chairmanship and I think in one instance actually leaving the venue. Do you recall that? --- Right, yes.

And he then I think at the end point of that line of cross-examination suggested that all you really then had to go on was these paragraphs 10A and B in the August 1999 minutes. Can I just ask you this? Do you have any idea of roughly how many Project Board meetings there would have been at which the Combat Suite would have been discussed? --- I think between eight and ten, that is according to the testimony provided by Admiral Simpson-Anderson, so I can only go on that.

And if one refers for example to the April 1999 minutes, one sees that item 2, paragraph 4 ...(intervenes) --- 28 April?

Yes unfortunately it is a bit confusing because there is a typed date which says 25 May but that is presumably when the document ...(intervenes) --- Item 2 subparagraph?

4. --- 4, right.

Do you have there a reference to the minutes of the PCB held on 8 March 1999? --- Yes.

So there is another meeting, there is a set of minutes there which we have not seen. --- That is correct yes.

Similarly if you go to the August 1999 minutes, we do not necessarily have to turn it up, that refers to the minutes of the previous meeting as having been June 1999. --- That is right.

So if one wanted to ascertain whether in fact the conflict of interest had consistently been dealt with, I am not suggesting you have knowledge of it but it presumably the Public Protector would need to see all the minutes. --- I am sure yes.

If one looks at the April 1999 minutes, I think one finds on page 3 of those minutes, midway through page 3, that is the point where Mr Shaikh hands over the chairmanship and leaves the room because the Combat Suite is being discussed and then the middle of the next page, before they start on the submarines, he is recorded as returning and resuming the chair. Do you see that? --- I see that yes.

If you go to page 5, item 7, general, and there is a sub-item: "Affordability discussions. The chief of Acquisitions presented the meeting with feedback on the affordability discussion."

And then item 22:

"Project costing. POPS and POPW are to provide chief of acquisitions with the overall cost of their projects by Friday 30 April. POPS's costing is to include the price of the Combat Suite."

If we take the first of those items, affordability discussions, you are not able to say whether affordability at that stage might have touched for example on the Combat Suite. --- It must have because this was the item ...(intervenes)

PRESIDING OFFICER: This is speculation. How can you speculate about what must have been talked about? --- No I proved that the ceiling baseline of R1,47 billion ...(intervenes)

We are talking about these minutes and what they contain, not what you have proved elsewhere. These minutes do not refer at all ...(intervenes) --- We are talking about affordability.

With regard specifically to the Combat Suite. It just talks about affordability discussions. Now for us to speculate what that included I think is improper Mr Rogers.

MR ROGERS: No it was put to the witness as if it was proved that, from these minutes, whenever the Combat Suite was under discussion Mr Shaikh had recused himself. All I wish to establish through the witness is that, I mean project costing specifically, item 22, under the item, general, refers to the Combat Suite. I simply wish to ascertain that affordability ...(intervenes)

MR MAHON: Mr Chairman it was not put in that context at all. I put to the witness that he was not able to dispute what the then chief of Navy said when he said that a procedure had been adopted and this procedure was adopted in all cases. Again I think we are embarking on speculation Mr Chairman.

PRESIDING OFFICER: Yes. So I would not allow speculation. Let us talk about what is there in the minutes. We cannot add or subtract anything from it.

MR ROGERS: Well as I understand it my learned friend Mr Mahon says he is not putting it that the Combat Suite was not discussed in that context, so I will leave it there.

MR MAHON: Mr Chairman I am not putting anything as far as what item 7 was concerned, I simply did not deal with item 7.

PRESIDING OFFICER: Yes that is true, it was not dealt with and I think it is appropriate for you Mr Rogers to deal with what was dealt with in these minutes otherwise we might just as well canvass the whole lot of them.

MR ROGERS: I have no further questions.

PRESIDING OFFICER: Thank you.

MR KRIEGLER: Mr Chairman may I just mention that there may well be a matter which would require a brief further set of questions. I certainly do not propose doing so right now, I have my own commitments, but I would certainly wish to advise Dr Young that tomorrow, with your leave, I would seek to have an opportunity to put a further few questions to him. I see my learned friend is shaking his head.

PRESIDING OFFICER: Well maybe let us call a spade a spade.

MR KRIEGLER: Yes well let me then deal with it if I may. There are a number of minutes and it is a question of fairness and it is a question of fairness, believe it or not, to Dr Young, that I wish to put to him. There are a set of minutes which Mr Emmanuel Mary will deal with in his evidence, minutes which were produced by the Joint Project Team I think it is call, the JPT, which were produced I believe on 16 June, well after the report which emanated on meetings from 3 and 4 June where they compared the Detexis Databus with IMS's system and these minutes show that the JPT looked at a number of the concerns which they had not understood at the time when it was first proposed to them by their salesman on 3 and 4 June and asked questions which were resolved to their satisfaction by 16 June and it is necessary, I believe, to put that to the witness. I do not believe it is something which necessarily involves him directly but it arises and it occurred to me while my learned friend was putting questions to him now, that in fairness it probably should have been put to him at the time. So I am not even suggesting that it arises from the questions now but it did trigger in my mind that it probably is something that I should have put to him and I had not appreciated that Dr Young intended going back to Cape Town this evening. My insistence that it happens tomorrow was not intended to be rude to Dr Young, I had not realised that he is leaving, so I may do it now with your leave Mr Chairman. I realise it is late, it is 17:15.

PRESIDING OFFICER: If it is a matter Mr Rogers which when Mr Mary testifies about transpires, it should have been a matter that should have been put to Dr Young. It may transpire to be unfair you know because then he will not be here and then we might need to recall him and so, so maybe we just need to hear what it is about whilst you are here.

MR ROGERS: Well the alternative, I understand that a summary, is it Dr ...(intervenes) --- Mary's.

Evidence is going to be produced during the course of next week and perhaps that might be dealt with by way of a written, if my client considers that in fairness he needs to respond to documents that he has not previously seen he might do that in writing with your leave. I am quite sure that he would probably prefer to consider the documents and not after having given evidence virtually continuously since 9:00 this morning.

PRESIDING OFFICER: Well yes you have given the opportunity and it is not taken, so.

MR KRIEGLER: It is not the technical aspect of it that I believe should now be put to him for a debate, it really is just a fact that these minutes were produced at 16 June and in which these questions which were raised over the performance of Detexis, resulting from 3 and 4 June meetings, were subsequently answered to the satisfaction of the JPT as a result of which clearly they were satisfied with the Detexis product.

PRESIDING OFFICER: Are you aware of such minutes? --- Absolutely not. May I make an observation?

Yes. --- It might even be that they have just been sent to the legal team by Emmanuel Mary. I cannot handle it right now, certainly not today, my brain is about to stop.

You are not aware of them. I think we will leave it at that. --- But I would like to see it and I would like to respond in writing.

Yes. I think Mr Kriegler ...(intervenes) --- In fact if we could get a copy of the minutes now so we can go home and look at them.

PRESIDING OFFICER: We shall adjourn until 9:30 tomorrow morning. Thank you. 

PROCEEDINGS ADJOURN

PROCEEDINGS RESUME ON 30 AUGUST 2001

PRESIDING OFFICER: Good morning ladies and gentleman. I believe we are to proceed this morning with Vice-Admiral Kamerman.

MR MALINDI: Yes chairperson.

PRESIDING OFFICER: In terms of permission from the Minister, Ms Dreyer?

MS DREYER: Mr Protector, I am advised by the office of the Minister that such consent has been given. I just have difficulty in getting the signed authorization as the Minister is between Cape Town and Durban. I have been advised by the office of the Minister that such authorization should follow during the course of today and would be available.

PRESIDING OFFICER: And will be available in due course. Mr Rogers, I am glad to see you are here.

MR ROGERS: Yes, I am not sure that I am glad to be here, but I received a message after proceedings yesterday that my case in Cape Town had settled. May I just make one request? We are in your hands here, but I understand that from the Department of Defence side that they wish to lead two rebuttal witnesses, the one is Rear-Admiral Kamerman and the other Vice-Admiral Simpson-Anderson. Admiral Kamerman as I understand it will be quite lengthy. My learned friend indicated perhaps two to three hours in chief and usually those estimates prove to be a bit on the light side. Admiral Simpson-Anderson on the other hand would be much briefer.

PRESIDING OFFICER: Yes.

MR ROGERS: I suspect we will not be in a position, even if Admiral Kamerman finishes timeously, we will probably not be in a position to cross-examine him today. We would need to then consider and take instructions on his evidence, whereas the same would not apply to Vice-Admiral Simpson-Anderson. Since he is much briefer we were very much

hoping if we could not dispose of his evidence first and then get on to the longer witness.

PRESIDING OFFICER: Did you canvas this with your colleague?

MR ROGERS: Yes and he has expressed a preference to start with Rear-Admiral Kamerman. I am not sure if it is based on any specific sound reason, but timing constraints would appear to us to make it more convenient to start with the other admiral.

PRESIDING OFFICER: Well, to an extent whilst we could direct how we should go, we try not to interfere to that extent. If at all they are finding it more convenient and given the fact that his evidence is going to be that long and that you might not be able to cross-examine immediately, I take it we would then just, the order of cross-examination we would reorganise it as such that maybe you are last. Would that, and I am sure that that would then accommodate you.

MR ROGERS: Yes I anticipate that this is not all going to happen and finish today.

PRESIDING OFFICER: Yes, most likely not by present indications, most likely not.

MR ROGERS: And this I can say it is a certainty, we will definitely not be here tomorrow. I appreciate again that is not your problem, but so, anyway I have made my, I am also not sure whether other representatives who may also wish to be questioning Admiral Kamerman will be in a position to do so today and if not whether they would be ready to do so tomorrow.

PRESIDING OFFICER: I would just like to, about the question of not being here and being here Mr Rogers, I would like to indicate to you that I am supposed not to be here tomorrow and the whole of next week but I have indicated to those people on a very serious commitment that they will have to do without me and the reasons I have already give and why, I am really not trying to be obstreperous, the same goes for my colleagues here or to be insensitive to the commitments that other people have, but I just thought maybe for the record I will put that... (intervenes).

MR ROGERS: I am sure that is... (intervenes).

PRESIDING OFFICER: Tonight I cannot and I have indicated there are more compelling reasons and the compelling reasons are this hearing. So if only you will just bear that in mind when you are thinking about not being here or being here and so on. Any further submissions? Mr Malindi?

MR MALINDI: Chairperson we yesterday did state our constraints, in particular those of Admiral Kamerman's. He definitely has to leave on Saturday and therefore his cross-examination, considering the time constraints that the panel has, we submit cannot be postponed beyond tomorrow. And in any way chairperson if, at the time that Admiral Kamerman finishes his evidence in chief, the panel will then consider at that stage the order of cross-examination to afford parties that are not immediately ready some time to prepare themselves and another consideration may be to adjourn Admiral Kamerman's cross-examination to tomorrow and maybe for the afternoon have Admiral Simpson-Anderson whose evidence will be much shorter. I propose chairperson that we proceed with his evidence in chief and then we consider everyone's position at the end of his evidence in chief.

PRESIDING OFFICER: Mmh.

MR ROGERS: Mr Chairman, all I can say in response to that is that if things pan out as my learned friend for the Department of Defence says, it seems no reason why instead of having Admiral Simpson-Anderson this afternoon we cannot just have him this morning and then Admiral Kamerman can carry on and finish his evidence in chief this afternoon and carry on tomorrow. We will not be here to delay things tomorrow, so it does not sound like there will be any difficulty in finishing Admiral Kamerman's evidence by the end of tomorrow whenever he starts to testify.

PRESIDING OFFICER: Of course the concerns which you have already expressed, but there are also the concerns which Mr Malindi has already put on record. We have been made aware that Admiral kamerman is currently based in Germany and that is where he had to come from.

MR ROGERS: Yes but there does not appear to be any reason why he will not finish tomorrow, even if we start with the other admiral.

PRESIDING OFFICER: Yes. Mr Rogers, I am not here to whatshisname, and I would expect counsel to be able to order these things among themselves, the order of cross-examination and the order of leading evidence. For me to come and say oh no let us call this person, maybe I would ask you gentlemen to quickly please try and sort and reach agreement about these matters and inform us. We shall adjourn for five minutes so that you can consult.

HEARING ADJOURNS HEARING RESUMES

PRESIDING OFFICER: So we are to proceed with Admiral Simpson-Anderson.

MR MALINDI: Chairperson, that is so. We have agreed to commence today's proceedings with the evidence of Admiral Simpson-Anderson and Admiral Kamerman will follow immediately thereafter.

PRESIDING OFFICER: Yes. Good morning admiral and I am glad that you have been able to come back again, but indications are that you not going to be kept long this time. Has he been sworn in?

ROBERT CLAUDE SIMPSON-ANDERSON d.s.s. (recalled)

PRESIDING OFFICER: Please proceed.

EXAMINATION BY MR MALINDI (continued): Thank you chairperson and thank you for your indulgence for allowing us to consult. Admiral you have already given evidence before the panel on 14 June, is that so? --- That is correct.

The evidence that you gave on that occasion, do you stand by that evidence? --- I stand by that evidence yes.

There are two issues that you would like to give further evidence on in the form of amplification. Could you please tell the panel what those issues are? --- My chairman I would like to amplify on the recusal issue and also the decision-making process relating to the Corvette and the submarine programmes.

You have already stated your position at the relevant time in the navy, but for the benefit of the other legal teams that were not here

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PRESIDING OFFICER: You did say that you stand by your evidence which you gave earlier on? ??? That is right.

in June, could you please state for the record what position you held in the Defence Force, particularly in the Navy and so on. ??? I held the position of Chief of the Navy from 1 September 1992 up to retirement which was on 30 October 2000 and in that capacity as Chief of the Navy I was also member of the Project Control Board, of which Mr Shaik was the chairman of the Chief of Acquisition.

And by virtue of your position in PCB you took part in the acquisition process that is being discussed at this hearing. ??? That is right.

Now admiral could you proceed to amplify under the first topic that you referred to of recusal what your understanding was and how the question of recusal of Mr Shaik arose? ??? Thank you. Mr Chairman, at the first PCB meeting held on 4 December, Mr Shaik the Chief of Acquisition, informed the meeting about his possible conflict of interest and undertook to recuse himself from the Combat Suite elements of the Corvette and the submarine requirements. The recusal procedure was a simple one. When discussions of Combat Suite nature came up, Mr Shaik handed the chair of the PCB over to me. There was no rule or agreement that he would leave the room. When he did remain in the room he did not take part in the decision-making process.

Before you proceed admiral, did Mr Shaik state what the possible conflict of interest was? Did he detail it? ??? He mentioned that a brother of his was a director of I think at the time Thomsen South Africa which subsequently or at that time, I am not sure about dates, bought a stake, a 50% stake in African Defence System or at that stage I think it was still Altech Defence Systems, but ADS.

Could you proceed admiral? ??? His presence in the room did not bother me after taking over as chairman on those occasions, in fact after all he remained to be the link between the acquisition division and the higher levels in the hierarchy, notably the Secretary for Defence, the Sofcom, the Minister for Defence and the Minister's Committee. So on occasions he did provide the meeting with relevant information important to the discussion. For instance the Minister Committee's stand on cost ceilings, but not once was he in a position or did he try to swing decisions about the Combat Suites or elements of the Combat Suites: in fact no individual had the power to do so, not even myself as the Chief of the Navy. As said in my testimony on 14 June, the decision-making process for elements of the Combat Suites was a long and highly interactive process involving personnel from the Navy, Armscor, the acquisition division and the main contractor after the main contractors have been allocated the contracts.

PRESIDING OFFICER: If I may stop you there admiral and we deal just briefly with the question of recusal and its ordinary meaning, how do you understand it when an official of the nature that you are, the chairperson of any committee is asked to recuse himself and I understand what you are saying that in this particular case he would remain in the room, but is that your ordinary understanding of recusal? ??? Mr Chairman my understanding of recusal is non-participation in the discussion. IN our case it was the decision-making processes involving the elements of the Combat Suites. Ehm, recusal I have never believed was specifically leaving the room and having to come back at a particular time. I do not consider that to be necessary. Some people might consider it to be necessary but in our context I did not consider that to be necessary because in any case as I said Mr Shaik remaining the link with the upper levels in the hierarchy and from my point of view it, it was good for him to keep his ear to the ground so that he could in the reporting to the, for instance the Sofcom, he had the background on the discussions that had taken place.

Yes but I take it that in taking over as chair you could, well with your rank then, you could equally play that role and inform him about how the meeting had gone and so on and so forth. In other words you could come in as a link in the interim just for that period when he would recuse himself. You see why I am suggesting this to you admiral is because when a person declares a conflict of interest as he, according to your evidence did, and according to some of the minutes that we saw yesterday, is to take away the perception that might be created that there was favouritism or that some people had forward information or that some companies had inside information as we have now and that situation would not have arisen if for instance he left the room and just to complete this explanation, in fact he, according to some of the minutes which were shown to us yesterday, did leave the room on some occasions and then come back which means he also understand it in that manner on some occasions, but the strange thing on other occasions then he stays. And then we are having this problem about these allegations that that perception has not bee dispelled precisely because even he declared it, he remained in the room. Do you see that problem and do you have any comments? ??? Mr Chairman, I can imagine that that perception can exist yes, but I was at all the meetings, I was part of all the processes and I know for a fact and I can vouch for that is that Mr Shaik did not influence any of the decision-making because of possible family connections. As I was going to say the whole decision-making process was a very interactive one. Nobody said at PCB for instance it would be the MM40 missile that we are going to get. Shall we decide on that, yes that is there. The decision on the MM40 missile was one that took weeks if not months of evaluations, of studies of reports that were written and eventually placed before the Naval Board that made the decision what would go into these ships, not the PCB. The PCB ratified. The Naval Board was the ultimate client. The Naval Board made the decisions, being the ultimate client. So Mr Shaik's presence there did not intimidate us, did not worry me in the least because in any case Mr Chairman I was the chairman of many, many meetings in my life and I would never have allowed to, in the meeting of one of the members to take over that meeting or to disrupt the meeting. I would have called him out of order and I can also add here that I was Mr Shaik's senior by one level, I was a vice-admiral.

You see the problem here is not the perception that might have been created to you as chairperson, you might have been satisfied that there was no problem. The perception is to the ordinary man, to the ordinary reasonable man, so that does not dispel that sort of reason. ??? Well Mr Chairman I think that is why we are here, is to dispel that perception and to say to people right, maybe that is the perception that you had but I was there as the client, as the client representing the client organisation, the South African Navy and I was happy with, with the decision-making processes, whatever, whatever the perceptions may be. We also needed inputs from Mr Shaik in respect of information received from for instance the Minister's Council where they said that there was a cost ceiling and we must adhere to that ceiling. That information he had to convey to us.

And was there no other person to convey that information other than ...? ??? No sir because he was the only link with the Minister's Council.

But again just going back to the understanding of what recusal might mean, the perception also might emanate from the fact that even though he is not participating, he is there as an ear for the discussions. I am not suggesting that he did convey the gist or any information about those discussion to his brother or to his brother's company, but I am saying again the perception is that yes, he is not participation but he hears everything and if he has any inclination to do so he can then go and, which is again, that kind of information whilst not swinging any decision could give that particular company an advantage which others do not enjoy. What is your comment on that? ??? Mr Chairman as the Chief of Acquisition, say for instance he had left the room where a discussion had taken place and, and a decision was made, then as the chief, and he had left the room and he was not aware of what had been discussed there, then he was fully entitled to come to me as the Chief of Acquisition to say what was the decision. He could have then if he wanted to inform whoever what the decision was. So whether he gained that information by keeping his ear to the ground by being at the meeting or getting it from me as the acting chairman, it would not have made any difference, he would have got that information. And in any case the minutes were written and submitted a couple of days later. That information became, became known to those people who were entitled to that information.

Yes. Sorry to disrupt your trend Mr Malindi and the witness, but it is obviously an important question.

MR MALINDI: Thank you chairperson. Admiral, I do not know if you still remember where you were and would you proceed. ??? Mr Chairman I said most of what I was going to read here. Would you like me to in any case cover what I was... (intervenes).

Admiral maybe you had access to the meeting's minutes of the PCB is that not so? ??? Yes.

Are you able to tell the chairperson and other members of the panel according to your analysis of those minutes are you able to say at which meetings Mr Shaik, the Chief of Acquisition was present and at which he was not? Are you able to give that information? ??? I have a summary Mr Chairman. During the time that I was Chief of the Navy up to my retirement we had nine PCB meetings. At three of the meetings there was no need for Mr Shaik to recuse himself because not relevant Combat Suites issues were discussed, three of the nine. At three of the meetings recusal was done and it was recorded. In one of the three cases the recusal procedure was recorded in an unconventional way, we discussed that yesterday, because the secretary was new, he referred in the minutes to the minutes of a previous meeting where such a recusal had taken place, although I may add here that those minutes that are referred to, actually stat that Mr Shaik left the room but in this particular case he did not leave the room. That was on 24 August. In the case of two meetings I was the chairman throughout the meeting, right from the start to the end because Mr Shaik had other commitments. I remember one particular meeting where he spent most of the time that we had the meeting with the Secretary for Defence he did come back at times, but I was chairman of those two meetings throughout and at one meeting I myself was not present. So the total of nine meetings we can give you, we could by going back into the minutes now tell you on what date the different meetings took place, whether it was recorded or not recorded at that particular meeting, the recusal, I have that sort of information. I do not know whether you want a blow by blow, meeting after meeting. I think that is... (intervenes).

PRESIDING OFFICER: Well at this point maybe not, but I am sure counsel might want to refer to specific meetings, so we will leave it for now. ??? Yes.

Because I think your evidence is that some meetings he recused himself specifically, others you referred to other minutes and so on, but that is the gist of your evidence. ??? That is right.

Yes. Yes Mr Malindi?

MR MALINDI: Admiral can you just for the benefit of people who do not know what the Naval Board is, could you explain it and explain its role in terms of this acquisition process? ??? The Naval Board was and still is the most senior board in the Navy. The Chief of the Navy is the chairman and under him he has various senior naval officers, staff officers as well as flag officers and matters of a very wide ranging nature are discussed there, from discipline to uniforms to what should go onto ships. So in respect of the acquisition of the new ships we had a special Naval Board meeting held quite regularly to decide, make decisions on issues relating to the two main programmes, that is the Corvettes and the submarines.

In relation to overseas-procured items such as surveillance and target acquisition radar, hull-mounted sonar, surface to surface missiles, would those items have been decided upon by any structure in the acquisition process, the final decision which structure in the acquisition process would make the decision as to their acquisition? ??? The project team would do all the necessary studies, involve experts in the decision, in the evaluation of the various options, present those to the Naval Board where a decision was made or would be made and that was then passed on to the Project Control Board where the final decision was made. In actual fact it was a ratification, but the Naval Board representing the Navy which was the ultimate client, made the decision in respect of what would go onto those ships.

And I understand Dr Young's evidence to have been that those overseas-procured items that we have enumerated were not the choice of the South African Navy. Do you have any comment on that? ??? That is absolutely not true.

Thank you chairperson, no further questions.

In paragraph 3.2.3 of Dr Young's testimony he says that in his testimony Vice-Admiral Simpson-Anderson alleged that Mr Sheik recused himself on every occasion when there was a discussion on the Combat Suites and that this was minuted. Do you stand by that evidence that you gave which was to this effect? ??? Mr Chairman when it came to the decision-making processes, yes, yes. In some cases for instance there was a report-back from the Minister's Council which, which Mr Shaik had to pass onto us, but then it was of an informative nature but not for decision-making.

Yes. Any questions by Counsel? Mr Rogers?

CROSS-EXAMINATION BY MR ROGERS: Mr Chairman, just before I ask the admiral a few questions, can I just ascertain the permitted ambit of examination. The admiral has dealt with two topics, but there will be other matters relevant to the evidence which my client gave and on which my client was challenged which may well be within this witness's knowledge. I presume I am permitted to question him on those matters.

PRESIDING OFFICER: I am afraid not. In this sense Mr Rogers he is testifying about these matters because they were raised by your client and he has addressed them too and he was cross-examined before and you were at liberty to do so then.

MR ROGERS: When was that Mr Chairman?

PRESIDING OFFICER: When he gave his testimony and all the parties were at liberty to do so. It was widely publicised. Now in order for us to re-open his testimony and I think it was in that sense also that you yourself said he will be much shorter because we are just going to deal with these particular aspects which have been raised very pertinently by your client in his aide memoire and in his evidence when he was being questioned. So to open a wide-ranging cross-examination on other issues, and I dare say I think, without being presumptions about this, these aspects are also going to be covered in the, I think the aspects that you are talking about, in the evidence of Admiral Kamerman from what I have seen in the summary. So I would say it is not going to be lost to your client if at all.

MR ROGERS: Yes but Mr Chairman is it not vitally important in the public interest, which as I understand is ultimately the interest which your office is here to oversee, that on matters of importance which my client has raised, the truth should be tested as between more than one witness from the state's side. For example Admiral Kamerman may say one thing on a particular matter and Admiral Simpson-Anderson something different and it appears to me with respect to be unsatisfactory that for example Dr Young should have been questioned on all aspects of his evidence and tested aggressively and yet in regard to this witness, the voracity of some of my client's concerns should not be able to be tested by the examination of this witness.

Are you aware of his evidence earlier on?

MR ROGERS: Yes.

PRESIDING OFFICER: That he was testifying about the procedures and so on.

MR ROGERS: Yes.

PRESIDING OFFICER: And these meetings and so on. Now what particular aspects are you now talking about that you would like to canvas with regard to your client's testimony?

MR ROGERS: Certain matters on which my client was challenged in cross-examination, inter alia by the Department of Defence.

PRESIDING OFFICER: Which he raises in his earlier evidence or at any time?

MR ROGERS: Well perhaps only in very general terms in his earlier evidence.

PRESIDING OFFICER: Yes this is what I am talking about Mr Rogers, that if at all he did not raise those matters about which your client was challenged, how can you then want to put those to him because you are questioning this witness on his evidence today, on two specific issues. You see I am not going to prescribe your cross-examination that strictly but I am giving you broad parameters, broad parameters in that we are dealing with these issues with regard to this witness today and that if you want to allude in any way to his previous evidence yes, but if at all you want to then go into evidence which he never gave, no. Let us get that clear. If at all you are just going to say as Chief of the Navy you knew about these matters and he has not testified about that, I say no. So... (intervenes).

MR ROGERS: Mr Chairman if I can put no record I am not sure if my client was present at the previous hearings. I certainly was engaged long after the initial round of witnesses testified but ... (intervenes).

PRESIDING OFFICER: Can you go ahead Mr Rogers, we will see how much progress we can make.

MR ROGERS: Yes well I understand you to have made a ruling and I will comply with it. Good morning Admiral. The one topic concerning which you testified this morning was the aspect of the conflict of interest. Just to understand the idea of the conflict of interest, do you recall I think in previous evidence to the Public Protector, you put Mr Shaik's position as involving a possible conflict of interest rather than an actual conflict of interest. Is that what you said on the previous occasion? ??? Ehm, if I can remember, yes, yes.

In other words you expressed some uncertainty as to whether there really was a genuine conflict of interest. ??? Yes.

Now if we can put Mr Shaik to one side for the moment and I am not going to try to debate the law with you, but just speaking to yourself as a man of integrity and who would value fairness, if you were involved, as you were, in a procurement process of this kind and you had a brother who was involved as a shareholder and director in a potential supplier of equipment to the navy, would you for one moment think it fair and proper that you should be involved in decision-making relating to that company in which your brother was involved? ??? No I think it would not have been proper.

So can we put out of the way the idea that this was only a potential conflict of interest? If it was left to you and your assessment of what was fair and proper, there was a conflict of interest here?

MR MAHON: Mr Chairman I think I would like to ... (intervenes).

PRESIDING OFFICER: I do not think that necessarily follows, arising from your previous question.

MR ROGERS: With respect I am asking this witness whether as he says it, it would then be fair and proper.

PRESIDING OFFICER: Mr Mahon you have a view?

MR MAHON: Mr Chairman, Mr Rogers is putting a proposition of a statement of fact to this witness as to what the position is that Mr Shaik's brother had an interest in the supplier towards the contract. That fact has not been established.

MR ROGERS: No, I did not put Mr Shaik's position. I started my question by saying I am putting Mr Shaik's position to one side and raising with the admiral how he would see it if his brother were involved as a shareholder and director and I understood him to say that in his mind he would have no doubt that it would not be fair and proper then for him to be involved in a decision-making process relating to such a company. That I think he has confirmed. ??? Any case Mr Chairman I have no brother who has an interest or a possible interest in a business, so I do not think these questions can be put to me, it is absolutely irrelevant.

PRESIDING OFFICER: Well yes, that is the result, the last response, the result of speculative questions, much as I understand what grounds you are trying to lay Mr Rogers, but you know even as you lay that basis, I thought the testimony of the witness is to the effect that he did not take part in that decision-making, so your postulate from what y ou have just put is also presuming something which is not the client's testimony because he has consistently said even when he remained, you know, he was not whatshisnaming, so what you are putting to him is different from what exactly happened and then it becomes problematic.

MR ROGERS: I was questioning his prior testimony to the effect that this was in his mind really a potential conflict of interest and I was ascertaining from the most senior naval person at that time in South Africa what he would have regarded as a conflict of interest and he gave me his answer. I will not take it further.

PRESIDING OFFICER: Yes, alright. Okay.

MR ROGERS: Now you said that Mr Shaik had a sort of liaison role between the Project Control Board and inter alia the Minister's Council, is that correct? ??? That is right.

Did he have a liaison role in regard to this acquisition programme with any other bodies, between the Project Control Board and any other bodies? ??? There was the Sofcom, the Strategic Offers Committee, the Minister's Council and then he had a lot of liaising to do also with Armscor.

And in that liaison role he would...(tussenbei). ??? And the Secretary of Defence.

Yes. And in that liaison role he would. where it was relevant, either be conveying to the Project Control Board the views and positions of those bodies, or he would be conveying to them the views of the Project Control Board. ??? Ja.

He was then very much the linchpin in communication between all the relevant role players. ??? Yes

And accordingly the person who was conveying to the Project Control Board the view of a particular body such as the Minister's Council, was a person who had this conflict or potential conflict of interest. ??? Yes.

And the person who was conveying the views of the Project Control Board to the Minister's Council or other bodies with whom he liaised was this self-same person. ??? Mmh, yes.

It therefore appears to me - I put this for your comment - that leaving aside any role that he may or may not have had within the decision-making of the Project Control Board itself, it was this Mr Shaik with this conflict or potential conflict of interest who was colouring what came to the Project Control Board and what went out of it. ??? What do you mean with colouring? What is colouring?

MR MAHON: Mr Chairman I must object to that. You know there is no evidence that he was colouring anything.

PRESIDING OFFICER: Well the witness is also questioning that so there is no evidence. ??? I do not understand what colouring is.

MR ROGERS: Well let me put it this way then. The accuracy and fairness with which Mr Shaik conveyed the views of the Project Control Board to any of these other bodies is not a matter that you can comment on. ??? No.

And similarly the fairness and accuracy with which he conveyed to the Project Control Board the views of the Minister's Council is not something that you can comment on. ??? Well no, no, except what he, what he put on the table there and that is what we had to accept. Being a senior official we accepted that it was the correct information and that it was the truth.

So if we are talking for the moment just about the unfortunate perception that can arise in the public mind where a person has a conflict or a potential conflict of interest, we have Mr Shaik in the middle as it were, the linchpin, conveying and communicating information despite the fact that he has this conflict or potential conflict of interest. ??? Yes.

And you sitting on the Project Control Board have to rely on the fact that this very person is fairly conveying to you without slant or bias the views for example of the Minister's Council. ??? Yes.

And similarly the Minister's Council has to rely on the fairness and unbiasedness of Mr Shaik in communicating to them the views of the Project Control Board. ??? Ja.

And whether he did so fairly or not, you cannot comment on. ??? No except that, you know, sooner or later the truth comes out. Never did we get the impression that information was passed on, erroneous information or slanted information was passed on to any of these bodies: we would have heard because we, we ultimately also interacted with these people, very often socially. We, we saw the documents that had gone up to those people. It was not just a question of going talking to those people. Documents were submitted to those different bodies to which we had access, so we know what was conveyed.

I understood you to say to me just a moment ago that you cannot say what it was that he conveyed to them or what... (intervenes). ??? No, I do not know what sort of discussions he had with them, but the, the written information that, that we had access to, but what was conveyed at meetings, I am afraid I was not at those meetings.

So we can confirm the answer you gave to me a moment ago that the fairness with which he did it and whether there was any slant or not is not a matter that you can comment on. ??? Well I can only comment on that I trusted him with the conveyance of the information. Else, if I was not happy, I would have gone to my superiors, the Chief of the Defence Force, and I would have said I do not trust this person, I think we had better talk about this. I had no, on not one occasion I had reason to believe that.

But the person that you were trusting was the self-same person who apparently thought that he had a sufficient conflict of interest to have to recuse himself. ??? No he was just decent enough to inform his superiors that he had a brother working for one of the companies that was a contender for the Combat Suite.

And he thought it was a sufficient involvement with one of the potential bidders that he had to recuse himself because that is what he in fact did on a number of occasions. ??? Yes, yes.

To the extent of leaving the room and handing over the chairmanship to you. ??? Yes.

And you have told me what you think is fair and proper if you had found yourself in a similar position. ??? Yes.

All I am putting to you that it is this self-same person who you say you trusted to convey the views of the Project Control Board fairly and to convey to that Board the views of other bodies fairly. ??? Mmh.

You might not be entirely surprised that members of the public and other parties involved in the process with knowledge of his involvement with his brother might not share the same confidence and trust. ??? Well that is because of rumours spread by, amongst others, your client.

My client did not spread the rumour that Mr Shaik's brother had shareholder and directorship connections with ADS and Thomsen. That is a fact, is it not? ??? I presume so.

Yes. It was the very fact which caused Mr Shaik, whether it was strictly legally necessary or not, it caused him to recuse himself as you have described. ??? Ja.

No doubt because of the perception as the chairman of the panel put to you that his present there might create. ??? Mmh, mmh.

But it was that very same person who was as it were at the hub of the wheel disseminating and drawing in information from the leading roleplayers. That is correct. ??? Ja.

And when for example in the meeting of the Project Control Board on 24 August, that was the one occasion you recall where towards the end when certain decisions were made there was a reference to Mr Shaik's conflict of interest. ??? Yes.

But at an earlier stage there had been, you recall, some discussion of the Combat Suite where Mr Shaik had conveyed certain information. ??? Ja.

And I think we find - we do not have the minutes anymore because they are very secretive - but we find the relevant portion quoted, let me just find the passage. Do you have a copy of my client's statement in front of you? ??? No, not in front of me.

I think it is round about 306-307, do you have paragraphs 10A and B of the minute quoted there? ??? Yes.

If we can just go to paragraph 10B, this was that one occasion you told the panel Mr Shaik did not actually leave the room. ??? No he did not.

And at the time when, paragraph 10 of the minutes, this is where this comes from, was discussing the Combat Suite, you recall that? ??? Yes.

Paragraph 15 was the portion of the minutes which recorded the decision-making and the conflict of interest, you also recall that? ??? Yes.

Mr Shaik still had the chairmanship of the meeting at this stage. ??? Paragraph 10A and B yes.

Yes and in paragraph B as it is quoted here -

"Chief of Acquisition informed the Board that the CEO of Armscor had presented this matter to the AAC."

Just remind us what that body is. ??? The ehm Armaments Acquisition Council.

"And that the Minister supported the issue of the main contractor carrying the overall risk and the responsibility of the sub-contractors. If the principal of the main contractor carrying the risk is changed, then the added difference in costs will have to be borne by the Department of Defence. The principal of the main contractor carrying the risk must be adhered to. The AAC decided that the ceiling cost of the equipment must not be raised."

The extent to which that fairly and fully and accurately reflected the views of the Minister and the AAC are matters which you are not particularly able to comment on. ??? No, well I, I accepted that this was the information passed on from the Minister's Council.

Yes. ??? Of course this, that was not the first time that we, that information had been given to us. We were told time and again that there were cost ceilings, we had to adhere to the cost ceiling. This, this was not new information.

I see. NO and it is certainly not the only information that you from time to time received from Mr Shaik. ??? Of course.

Now you said that whatever perceptions may have been created by Mr Shaik continued presence at meetings of the Control Board when the Combat Suite was discussed, the fact of the matter is you were not worried or, I think you used the word intimidated by his presence. ??? No.

And you sought to convey by that expression that his mere presence there was not such as to put a dampener on what you felt free to communicate to other members of the Board. ??? That is right.

And you in fact said to the panel that you were in terms of Naval or other hierarchy, I am not sure quite what it is, you were at a superior level to him. ??? Yes.

But there were other members of the Project Control Board who were not. ??? That is right.

And there other members of the Project Control Board who were naturally at lower ranks and levels to yourself. ??? Yes,

And just taking yourself for a moment, you can perhaps understand the position that if you had had to recuse yourself from a matter but stayed in the room, junior officers to you might feel uncomfortable about putting forward points of view that were critical to the aspect where you had that conflict. ??? Could be.

And the extent to which more junior members of the Project Control Board had a similar sense in relation to Mr Shaik, is a matter for them to say: you cannot speak for them. ??? No.

All you can say is that as the chief of the Navy and Mr Shaik's superior you did not fell intimidated or held back in any way by his presence. ??? That is right.

But if a more junior person had wished to say frankly I think the Detexis system is entirely unsatisfactory and the proposed new architecture for the Combat Suite is a departure from the base line, I think we should stick to what we had, you cannot say whether some member of the Project Control Board perhaps felt sensitive about saying that in Mr Shaik's presence. ??? No. I can remember who all the members were, for instance there was an Admiral Howell, there were people like Mr Hanafey, all those people, they were free, they were full members of the Project Control Board, they could voice their opinions. I was a very, call it liberal chairman throughout my life. I invited people to give comments. Very often I said what do you think about this, how do you feel about that so no, the atmosphere was such most definitely, even with Ms Shaik present that people could voice their opinions. Once again I would like to say Mr Chairman that by the time things were tabled at the PCB, we had gone round the buoy as we say in the Navy, many, many times. We looked at all the advantages and disadvantages. Costs, we had proper studies. In some cases we even had, we knew where certain people felt strongly about going another way, we looked at those possibilities, so it, it was a forum where decisions, once again that were made by the Naval Board were ultimately ratified. We did not make the decision for instance at the PCB that well, just because we like Detexis we are going to go for Detexis. That was the end result of a thorough study that was brought to the Naval Board and ratified at the PCB.

Well now that you talk about the thorough study into the Detexis System that was then brought to the PCB, are you aware of this evaluation report which Dr Young has dealt with in his evidence where a number of pro's and cons of the Detexis System and the IMS were listed?

MR MALINDI: Chairperson, before the witness answers, I think the line of questioning on the evaluation report on the Detexis draws the admiral to testifying about aspects which he has not testified about and he has been recalled specifically for a few aspects.

PRESIDING OFFICER: Yes.

MR ROGERS: Now Mr Chairman, he himself has just opened that particular camp.

MR MALINDI: Chairperson he is just explaining the structures of decision-making processes.

PRESIDING OFFICER: Well when going around the buoy as he puts it, means they had ventilated all matters with regard to these acquisitions to all the committees, that is how I understand it because he referred to those committees whether it was in the army or whether it was in Armscor or whether it was in Minister's Committees and so on. You know these matters have been ventilated, if at all because he has said that they looked into all these matters you then become entitled to question him on all of those matters then we will never finish this hearing and that is exactly what you are doing if you are saying alright if you are saying whatshisname, you must therefore have knowledge about that report, of course he might have, but he has not testified about. Now you want him to testify about it and when he does testify about it, you have Mr Kriegler, you have Mr Mahon, who would then have to question him about that report and you are causing him to testify about it and we cannot allow that and it would not be proper because they would be entitled immediately you question about Detexis and IMS and so on, then they are going to go and you are causing him to give his evidence in chief about that today and this is exactly what I was explaining to you that we cannot allow that process otherwise we are never going to finish. Ask him about what he has said. You can refer to his earlier testimony even, but let us not reopen matters or bring them to the side door. We are dealing with what has come through his straight testimony and we cannot do it indirectly.

MR ROGERS: Well I will attempt to hang this line of questioning then on his previous testimony. Admiral, in your previous testimony before this Board, you read, under the questioning of Mr Mahon, a letter to the chairman dated 17 October 2000, the contents of which you confirmed. Do you recall doing so? ??? Yes.

And do you recall that in that letter you said that the process followed did not allow for any interference by any individual and then you made the following statement -

"No persons including Mr Shaik altered any evaluation results which were duly afforded to higher authority including cabinet level unaltered. In particular this statement did not alter any evaluation results."

Do you recall making that statement? ??? Yes.

Now I wish to test that statement in your previous evidence with reference to the review which was undertaken by the Navy of the respective merits and demerits of Detexis and IMS as Dr Young has testified. Were you aware of that evaluation?

PRESIDING OFFICER: Wait a minute, how do you test that by using that record? Was Mr Shaik involved in that review?

MR ROGERS: No the statement was not limited to Mr shaik, it was a statement by this witness that the evaluation results were at no stage altered by anybody including Mr Shaik.

PRESIDING OFFICER: Yes and he is talking about Mr Shaik.

MR ROGERS: No, no person including Mr Shaik altered any evaluation results. So neither Mr Shaik nor anybody else altered the evaluation results and I wish to test with this witness whether that is the truth.

PRESIDING OFFICER: And who do you suggest did the alteration in this case?

MR ROGERS: Mr Chairman to identify the specific people will ultimately be for your panel to investigate. What I will attempt to demonstrate to the witness is that the evaluation result was changed.

PRESIDING OFFICER: By?

MR ROGERS: Mr Chairman I do not know but you have the powers to find out.

PRESIDING OFFICER: Yes but, yes Mr Mahon?

MR MAHON: Mr Chairman this all arises, I mean the very heading of the letter is the question of the recusal of Mr Shaik.

PRESIDING OFFICER: Yes now we are going away from that you see. You see if at all that report evenly remotely had anything to do with Mr Shaik, I will allow the question but since it does not, I am not going to allow going into that report which is what you are trying to do because... (intervenes).

MR ROGERS: Mr Chairman you ruled a moment ago that I was free to raise with this witness not only the two matters he raised today, but matters raised in his previous testimony.

PRESIDING OFFICER: Yes but you are stretching matters rather far Mr Rogers. You are really stretching matters and you know it.

MR ROGERS: Mr Chairman I am just trying to get my hands from behind my back.

PRESIDING OFFICER: Yes but by so doing I was not saying, I have already indicated to you that that report this witness has not testified about and I am not going to allow you to then bring it ni in any way whatsoever, unless it is a matter that has to do with the recusal of Mr Shaik. Anything in that regard I will allow, but to just bring it up like that, I am not (inaudible - coughing).

MR ROGERS: My attorney noted down your evidence a few moments ago that in making its decisions the Project Control Board looked at proper studies that were done. ??? The Project Control Board received the results of proper studies.

Yes. ??? I mean some studies are volumes and volumes and eventually you, you get a one or a two-page report.

Was one of the studies the Project Control Board looked at the evaluation reports of the merits and demerits of the Detexis System? ??? Yes.

It was. ??? Ja.

I have been given a sufficient indication by the chairman that I must not pursue this, but thank you for that answer. I just hope the Navy does not end up fighting with its hands behind its back. ??? I must just come in here Mr Chairman. You must realise that at the level of the PCB you do not get long, long reports with very intricate outcomes of tests and evaluations, you get summaries, management summaries. You have, you can always if you do not like the summary, you can go back, you can dig back into the reports but at a level like that you get a one or a two-page summary, all the implications, the findings, the cost implications etcetera.

Mr Chairman I think there is precious little in the light of your directions that I am able to ask. My client just reminds me that the evaluation report of Detexis which you say the Project Control Board was aware of that evaluation, was only a document of a couple of pages. It was not a long, technical document. Are you aware of that? ??? I am not quite sure what report you are referring to.

It was one which listed 15 or 16 points against Detexis (inaudible) and so forth. ??? Yes. Because there, because as far as I can remember there were other reports as well, but I would like to refer that to the next witness who knows more about the detail of the Detexis evaluation.

thank you admiral. If I can just put on record then what I think my learned friend Mr Cooper put on record when he finished with Dr Young. There are many aspects of the evidence you gave previously and aspects concerning naval choices with which our client does not agree, but not only am I not going to cross-examine you on them but I am not permitted to. Thank you. I have no further questions.

PRESIDING OFFICER: Thank you. Any further questions for the admiral? Mr Kriegler? Mr Mtshaulana. Mr Doyle? Mr Mahon, you have some questions?

CROSS-EXAMINATION BY MR MAHON: Just a few questions Mr Chairman. Admiral, at the time of 4 December 1998 when the question of the so-called conflict of interest arose the Defence Force did not have in place a set of procedures to deal with a situation like this, did they? ??? No, it did not have.

So what was decided was a procedure which everyone felt would safeguard the security or whatever it was of the process which you were going through. Was that the principal objective? ??? Yes it was an internal agreement amongst us that Mr Shaik would hand over the chair to me on such occasions, so that was it.

You were not so concerned about public perceptions, you were more concerned about the lack of corruption of the process, am I correct? ??? Our main concern at the time was to have the experts together to make good decisions.

You did not... (intervenes). ??? And to, and to be able to get whatever information that comes into the, into the meeting to have that information on the table. At that stage definitely any possible conflict of interest, information possibly going to whatever firm was, was not relevant, it was not important. We wanted to be able to make good decisions.

In fact you did not anticipate that these minutes would ever become public. ??? Not at all. In fact I was shocked when they became public because, because they are classified, highly classified.

Now I think you were in the hearing when Minister Alex Erwin gave evidence on this issue. ??? Yes I was.

And you heard him confirm at a very early stage, I think it was much the same time, he and others were fully aware of the so-called conflict of interest. ??? Yes.

Mr Mahon, aren't you transgressing the same bounds that we have talked about?

MR MAHON: Sorry Mr Chairman. Thank you Mr Chairman, no further questions.

PRESIDING OFFICER: Yes. Admiral, you say that, or you confirmed the suggestions that you were not concerned with the public perceptions when you went through these processes? ??? No Mr Chairman at that stage this whole issue was not in the public domain. We, we spent a tremendous amount of time working on these projects. Our main concern regarding the public domain was to make sure that South Africa was going to get good ships at reasonable prices and submarines at reasonable prices. So this whole issue of, of possible conflict of interest was not an issue at that stage.

Yes I understand that admiral and you were the client as you described yourself and your primary concern was to get a good ship or good ships. ??? Yes that is right.

I think when you said earlier on that it was not possible for these decisions that were being taken to be suborned by a singular individual and you are stating that you went through not only the Navy, through Armscor, to the many committees, weren't you suggesting that the process had integrity? ??? Absolutely Mr Chairman. The whole process had integrity.

Yes. ??? We were under pressures, I admit, under tremendous pressure as has been stated here before and I think it is still a miracle that we achieved what we achieved in that amount of time because it was not just the Navy's projects, there were other projects as well. So as I said in my testimony on 14 June, it was a good process, it was an honest process and it was a process laced with integrity.

Yes, therefore I am just wanting to understand the last bits that were put to you by Mr Mahon when your reaction was conflict of interest was not important, we merely wanted good decisions I do not understand because decisions that have integrity imply that there must be no conflict of interest and therefore those issues are important. ??? Mr Chairman I think at that stage and still now even is when you have to make decisions of that nature you must have all your information, all your facts on the table: that is what we were going for at that stage. That was very important to us.

Yes but the ethical or moral aspects, if you like, are no less important. ??? No-no I would not say that but we did not consider this particular instance of Mr Shaik having a brother involved in the Defence industry to be a problem. We were aware of the fact that he had spoken to the Chief of the Defence Force about it as well. As far as I can remember I think the Minister was informed, Mr Erwin was aware of that. If any of those very senior people would have had a concern about this, I am sure they would have removed Mr Shaik but they had trust in him and there was absolutely no reason why I should not have had trust in him as well.

For how long had you worked with him prior to this project? ??? I have known Mr Shaik Mr Chairman sort of, I think from the mid-nineties. I would say about 1996 I think I met him the first time.

So your trust in him was not just emanating from the fact that the ministers and other higher authorities were not perturbed by his presence. ??? That is right. I had no reason to doubt his integrity. The fact of the matter is that he immediately, right in, way back in December 1998 that, that he came forward with this. There was actually no need for him to have come forward with it. He, he could have kept quiet about it, but he came with it, told us about it, he told his superiors about it. I think that already says a lot about his character.

Before he made that disclosure, had you known about it... (intervenes). ??? No, no sir.

that his brother was connected with a company which was making... (intervenes). ??? No, no I was not aware of it. No. In fact I have never even met his brother, not this particular brother.

Any further matters arising?

MR MAHON: Mr Chairman, perhaps just one or two questions arising out of that. The question of recusal has been raised and what is meant by that. One has a situation where words can have different meanings in different contexts. Obviously in the process of a court hearing if somebody is asked to recuse himself it involves the not-participating any further in the proceedings in that context. ??? Ja.

Would you agree with that proposition. ??? Yes, that, that is the way we looked at it and that is the way we treated the term recusal.

And in the situation, to give you another scenario, in a situation of a board of directors meeting where a particular director has an interest in possibly a transaction that the company is looking at, there is a duty on that director to disclose that interest. ??? Yes.

And having disclosed that interest, the board then decides in what manner that should be dealt with. ??? Yes, they would, they would then in such a case draw up rules I suppose for that particular individual.

And if I am correct what you are saying is effectively that is what transpired in this instance. ??? Exactly, yes.

Thank you Mr Chairman.

PRESIDING OFFICER: Thank you. Mr Malindi?

RE-EXAMINATION BY MR MALINDI: I have no questions.

PRESIDING OFFICER: Admiral you are excused.

MR ROGERS: Chairman, we are going to excuse ourselves at this point.

PRESIDING OFFICER: Before you do so Mr Rogers, Mr Pitman. Could we have some order please. I just wanted to put on record just one, we have a summary about the next witness.

MR ROGERS: Yes, I have it as well.

PRESIDING OFFICER: You have it?

MR ROGERS: Yes.

PRESIDING OFFICER: And that Admiral J G Kamerman is going to testify about quite a number of matters which your client testified about.

MR ROGERS: Yes.

PRESIDING OFFICER: You are aware of that?

MR ROGERS: I am aware of that.

PRESIDING OFFICER: But you do not wish to participate in cross-examination?

MR ROGERS: I anticipate, I was told he would take two to three hours and we would not be in a position to cross-examine today, even if he finished, but I very much doubt whether he will and we cannot be here tomorrow.

PRESIDING OFFICER: You and your client and your attorney.

MR ROGERS: Yes.

PRESIDING OFFICER: And you accept that position as being in your client's interest?

MR ROGERS: No, there is a great deal that has happened that I do not see as being in my client's interests but there is nothing I can do about it.

PRESIDING OFFICER: I see. Yes, that is in order.

MR ROGERS: Thank you Mr Chairman.

PRESIDING OFFICER: You can proceed.

JONATHAN EDWIN GOLD KAMERMAN d.s.s.

PRESIDING OFFICER: You may proceed.

EXAMINATION BY MR MALINDI: Thank you chairperson. Admiral, you have had the advantage of seeing Dr Young's statement prior to him giving evidence and you have listened to him giving evidence, is that so? --- In deed.

And you as a member of the Navy have prepared yourself to respond to some of the allegations made in his evidence and in his statement? --- I have sir.

Admiral before you proceed with your evidence, could you please inform the panel as to who you are and what your position is in relation to this whole procurement process? --- Certainly. Good morning Mr chairman and panel, honourable members. I am a Naval Combat Officer. I have 28 years of experience in the Navy and I, my specialisation is in the area of surface combat systems. When I say systems I do not mean the system we are talking about with Mr Young, I mean at the user level, ships and their weapon systems. I served at sea for, for 15 of these years, inter alia serving as the weapons officer who introduced the modern missile age in 1980 by firing the first missile in the southern hemisphere and I also commanded a operational combat vessel for a total of four years. I am currently the director of the Corvette acquisition. I am stationed overseas and in that capacity I also serve as not only the senior military officer in Europe, but also in my capacity between the Corvette and the submarine programmes being executed in Germany, I exercise oversight and control of the submarine programme as well. I was appointed as the project officer of the Corvette acquisition Project Citron in 1993 after I had written the Naval Staff requirement in my capacity as the staff officer responsible for that area and subsequent to that I have served almost uninterruptedly, except for courses and so on, in that capacity with the post being upgraded to that of director to take into account the additional responsibilities pertaining to the submarine programme and so on. During the entire exercise of this, pertaining to the selection of equipment or the evaluation of equipment, selection of equipment, the presentation of those evaluations, for the entire vessel I led the project team. When I say led, of course we have a joint project team, we do things completely jointly with our colleagues from the Armaments Corporation and in fact we formed a project executive very early on with my colleague Mr Fritz Nortjé, who in the latter stages of these evaluations was the programme manager. Prior to him it was Mr Biral Smith from Armscor and the two of us at any given time would then lead our respective colleagues from the Navy and from Armscor in a joint process. Thank you sir.

Admiral, before you proceed with your evidence, you have prepared a short statement, basically as an introductory statement of the structure of your evidence is going to be. --- Yes sir.

Could you please read that statement into the record? --- I shall do so if you give me a copy of it. Thanks very much. I am afraid I did not make enough copies. May I proceed sir?

PRESIDING OFFICER: Yes.

--- "Executive summary of Rear-Admiral of JG (that is junior grade) J E G Kamerman to the Public Protector on behalf of the Department of Defence in rebuttal of the testimony of R Young in the matter of the strategic Defence Package tendering and award for the Corvettes, today's date, 30 August. The testimony will start with a brief summary of the history of the Corvette project, Project Citron until contract award, as well as a brief history of the technology retention activity Subex ..."

and the acronym... (intervenes).

What does Subex stand for? --- The acronym Subex is an acronym. Subex is an acronym coined internally by the team and stands for the Surface Vessel Combat System Technology. It in fact denotes the technology demonstrator that we were working towards under that technology retention project, it does not denote the combat system of the Corvette -

"The testimony will briefly describe the Databus (?) in the context of the entire Combat Suite and also in the context of the acquisition system hierarchy. The following main themes of Dr Young's testimony will be examined and counted in turn at the level of the themes.

Theme 1 - That he was selected to supply the Corvette Databus System by the State (and when I say State I am now, with your permission sir, referring to this jointness between ourselves and Armscor even though Armscor as a schedule 21 company is not strictly speaking the state, nevertheless) having been selected he had therefore the right to be the supplier by virtue of -

(a) His participation in the early rounds of Project Citron, the Corvette Acquisition programme in 1993 to 1995 and his participation in Project Subex in 1995 to 2000 which was a continuation of Project Citron. In other words he contends it was a continuation of Project Citron.

It will be shown that Dr Young incorrectly weaves a contractual connection of the 1993-95 Project Citron activities and the tendering for Project Citron in 1998/99 inferring that a programme management plan which reflected the situation in 1995 was still valid in 1998. It will be shown that his early participation on Citron and Subex afford him no right to be so contracted.

Secondly. his nomination as the supplier in the RFO. that is Request for Offer sent by ourselves to the German frigate consortium and his listing in the Combat Suite User Requirement Specification, the so-called URS, had formed the basis for GFC to offer a Combat Suite. this is his contention. It will be shown that neither the RFO nor the URS was prescriptive for the main contractor; that Dr Young was not preferred by these documents or processes and that his listing in these documents do not afford him the right to be contracted. It will also be shown that Dr Young acted entirely inconsistently, vis-B-vis (it should read, I beg your pardon) with other contractors in terms of the logic of his own claim of exclusivity afforded him by the RFO and the URS and that by these actions he could not possibly have considered himself at the time to have had any privilege of exclusivity."

Next point -

"The virtue of his selection in the Combat Suite request for best and final offer to the German Frigate Consortium (that is his contention again) it will be shown that the main contractor had the full liberty from the State (in fact the encouragement from the State) to offer alternatives in the BAFO and did so for the Databus. There was therefore no prescription on the main contractor to exclusively propose C²I² and that therefore Dr Young has no right to claim any selection status of the right of being contracted.

His second theme after the selection and nomination issue, was that he was deselected, having been selected, by the State and/or the main contractor in favour of a foreign company with links to the main contractor due to the negligence or irregular conduct on the part of the project team or the project control board in that they allowed the main contractor to unfairly load his price with unjustified risk which caused his system to unaffordable, or alternatively that there was no actual price ceiling and even with the higher price to the State for his system, it should still have been chosen. It will be shown that the risk allocation was entirely justified, both in fact and in the rights of the state and the main contractor to so allocate risk to his system. It will also be shown that he acknowledged the risk of his system, but was not prepared to cover it himself. It will also be shown that the risks attendant on his system are not confined to the limited technical implications of a failure of his system, but would critically affect the whole programme, both in terms of the corporate obligations of the main contractor, as well as the operational obligations of the Department. (Of course I mean in the defence of our nation.)

Theme number 3 of Mr Young that his product is technologically superior to that contracted. That his product meets the user requirement and the one contractor does not and therefore the state acted negligently or wilfully in contracting an inferior product for a critical function, basing his claim on a preliminary technical report, one of several and an overall system timing document which in fact has nothing to do with the relative proficiencies of the busses.

It will be shown that his knowledge of the Detexis bus is fundamentally deficient and that it fully meets the user requirement and that in some critical areas it is actually superior to his system.

Theme number 4 of Dr Young. He was entitled to supply the SMS, that is the system management system because his price was lower, both in terms of his contention of the unfair and irregular additions of cost by the state as well as in the final mathematical calculation, even if those irregular costs were added. We have shown that this is simply not true and that the state was obliged to add all costs that we would have to pay in the end and that the calculation is exactly correct.

His theme number 5, he claims that Thomson and France Incorporated, my words was irregularly favoured by the state or individuals to secure the supply of other sub-systems to the corvette against more cost effective equipment preferred by the SA Navy, particularly the surveillance and target acquisition radar, the hull mount radar and the surface to surface missile. It will be shown that this is a mischievous fabrication based on his complete ignorance of the regular and professional tender process

followed, which resulted in the selection of the best equipment that the state could afford and which in fact represents the clear and formal preference of the SA Navy.

His theme number 6, is that he was selected by the state to supply the IPMS simulator but that the German frigate consortium deselected him by an unfair process.

It will be shown that the state did not select him at all and that the contract signed by the state with the main contractor, makes this clear and that he was not selected by the contractor on the grounds of his inability to make the required time scales, his large increase in price, his demand that technology be provided to him for free from the contractor and as well as the risks attended with his inexperience in contracting for systems of this nature.

Paragraph 4. It will be shown that Dr Young does not understand or to chooses to ignore the fundamental change in the contracting strategy on the corvette project between the early years of 93 to 95 and that pertaining in the 1998 99 period that formed the basis for the formal tender and negotiation activities of the vessel and its combat suite. We have shown that Dr Young does not understand or chooses to ignore the fundamental difference between the cost and risk scenario and constraints on the state between a technology retention activity and a capital acquisition project.

It will be shown that Dr Young does not understand or chooses to ignore the fundamental nature, differences and application by the state of a requirement baseline and I will come to explain that in due course, and a contractual baseline. Thank you.

Admiral having read your opening address, I would like you now to proceed to present your evidence in as full a spectrum as you can but as brief and precise as possible. --- Thank you sir. May I proceed sir?

CHAIRMAN: Yes. --- Sir I am going to try to answer Richard Young's evidence as completely in so far as they affect the South African Navy and as far as I have knowledge. And I need to tell you sir that when we executed this process, we did so under extremely difficult circumstances, already alluded to by various witnesses. It was an extremely difficult job and we do not claim that we have always got everything right. I wish to state that from the outset. And we accept the criticism of our process could and should in some cases be made.

But in that we did the best we could under the trying circumstances with men and women of integrity, I also want to understand that C²I² were in no ways during this process, then or now, considered to be our antagonists. In fact we have always had the greatest respect and we continue to have the greatest respect of the engineering proficiency of Dr Young himself in his personal capacity, the little company C²I² which we have nurtured for so long as well as the products that he was developing during the course of a very, very long association with him and his company, for the South African Navy.

But equally Mr Chairman I cannot allow Dr Young to make the statements he has made, to make the insinuations he has made, to make the allegations of impropriety that he has made, to make the selection use and to make these by the selective use of documentations, to make use of innuendo which essentially impugn on the character and integrity of the state in the first hand, but as far as I am personally concerned, primarily on the outstanding people that worked so hard in our project team and in fact deserve rather better than the shabby approach that was taken by Mr Young and I might add, he was right inside that process and when I say where he chooses to ignore something, I have no doubt that Mr Young with his great intelligence and his active and intense participation in this program, is fully aware of the actual circumstances of the selection process. But I will come to that in a moment.

If I may Admiral, just briefly, the extreme difficulties that you talk about as your opening phrase. Why? --- Sir we had a situation that was almost an untenable one. We had our own expectations of receiving a ship with a certain operational capability. But we came up against the very hard commercial realities of, on the first hand, the nation's willingness or ability in its apportionment between the socio economic realities of our country and the need to re-equip the Defence Force, that we had to cost see. We couldn't specify or we could not expect to get if we did specify, a fully fledged NATO frigate that we were used to in our previous acquisitions through the sixties and seventies and that we as naval officers of course, would always specify in the, forgive me if I say this, in the natural professional desire to have the best, irrespective of the cost. That was the one constraint that we had to, that we came up against, the harsh reality that the government was only prepared to pay so much for these ships and it didn't matter what we specified at the end of the day, we were only going to get so much money. So we had to in effect, in the English phrase, we had to fit a quart into a pint pot or a two litres into a single litre container.

You had to downgrade from frigates to corvettes? --- Sir yes essentially, that is essentially because in our termination of a corvette and it is subject to controversy because it is a name conjured up by naval officers across the world for a variety of reasons, prior to economic and political realities and so on but what is a frigate, what is a corvette. In our terminology, a corvette is a frigate sized vessel with a modest combat capability because we simply cannot afford a frigate size vessel with a frigate combat capability, as I have explained.

Yes. --- But the key issue here and I will touch on that with respect to growth because Mr Young did raise it in his testimony in his allegations that the system we have procured has no growth potential, but the key strategy of acquiring these ships was to build in growth from the very start. What do I mean by growth? I mean physical potential, mass, weight, I mean electronic potential, the expanding of our combat systems electronically, that you don't have to pull the whole thing out to put another, to add something. And most important of all, the growth in terms of the nature of the equipment that we acquire, that in order to make something better, you don't have to replace that item with something else.

So right across the board in our combat suite as I will explain briefly, the equipment we have got is the sort of basic version. It is the Volkswagen without the quadraphonic sound. You can add that later because you can't afford it now.

Our second difficulty Mr Chairman, do you prefer to be called Chairperson?

Yes (indistinct) --- Mr Chairperson, our second difficulty was the reality of the commercial world which we knew nothing about. When I say we knew nothing about, I mean that we had hitherto been protected, we being the military industrial complex of this country, we had been protected from the rigours of international competitive contracting and the demands that would be placed on us, if we attempted to obligate a main contractor in terms of his, of assuming certain risks in the manner that we did.

And the reason for that is very simple. In the years, certainly in my experience and I forgot to mention that I have been in projects since 1991, so it is a ten year experience, hitherto, i.e., prior to 1997 the seminal moment when the government went to the people about the defence, the nature of our, the defence of our country. Prior to that time, contracting had been very much within the aegis of the defence community. We basically called the shots and as you are probably aware, the accounting in those days was a secret process and one could argue and certain individuals in our body politic, do argue that it wasn't an accountable process.

But essentially when it came down to contracting, Armscor would place contracts even down to a sub-contracting level. And Armscor in effect with its, with the Defence Force naturally as its user, would in effect play the role that we obligated and have obligated the main contractor to play, in terms of a vessel. We were going to buy a ship. Hence that role was indeed played by Armscor, exactly so, on a number of other main acquisition programs for our Defence Force.

So if you want to use a colloquial term, Armscor is the daddy and the mummy to local industry. They would nurture them, they would place the contracts, they would do contract management on their behalf and inherent in that process, they would be taking the risks for those sub-systems.

Now what changed was the necessity of our nation to engage in a debate on the nature of our defence and our defence community and our defence industry and that debate was started by our government, soon after taking the reigns of government in 94 and in fact in 95, led to the minister standing up in parliament and deferring a decision on the corvette program, precisely to allow the nation to debate the issue, not of the corvette specifically but of the issue of what was the nature of the defence of our country and what did we need in equipment and what was the stance to be taken with regard to its acquisition. As a result of that process, there was the white paper on defence, the basic policy and its resultant defence review in 1997.

Out of that flowed departmental instructions and departmental policy with regard to acquisition in particular and particularly the departmental instruction governing acquisitions, the so-called DODI 1 of 98. Which said in effect that we should contract at the highest level. Which said in effect that we are no longer an isolated country and that we can and should have international competition at the main equipment level, at the so-called level 5 and I will explain that in a moment.

And that we should hold these international contractors fully accountable for that. That in effect is typically what the world does. Most countries of the world contract in that nature. That was a difficult thing for us to swallow, not only because of course it effects the rights and the authority of the project team to make these decisions because after all we are going to contract these sub-contractors. But it also was a difficult pill to swallow in that we then had to set aside in effect, our perception that those things do not cost money.

That if you oblige a main contractor to take full accountability corporately and legally and in terms of his necessity of posting performance, draconian performance guarantees, it will cost you money. And the third point was that if you do that, then you must accord and afford the main contractor the right to have a view and ultimately to have a right contractually to come to his own risk profile in the sub-contracting, if he is going to place those sub-contracts.

That was the nature of the difficulties that I was referring to from a technical and process issue. There was one other difficulty and I have to say that this was and in fact remains, a significant difficulty in the management of this process and that was time. Having waited so long for this activity and the activity itself taking a lengthy time, when I say activity I mean the government's going out on the tenders, we were under tremendous pressure, not only from the government because the window of opportunity and public opinion having been opened by the defence review, was starting to close, as well as from the main contractors in that the contracts that they proposed in 1998 was starting to run out of time, in terms of their contracts' effectiveness or rather the validity of those offers.

And of course the other aspect of time was merely, from our point of view, not to allow the delay or the stretching out of this activity more than the Navy could possibly bear because I have to tell you that when we lost the capability of ships with the requisite size to handle the sea conditions off our coast and ships with the requisite size to handle helicopter operations which is sine quo non of surface combat and patrol and when we lost in the mid-eighties the requirements of a ship that can handle the anti-submarine capabilities that we were looking for, we lost those capabilities in 1985.

We had I think, if my memory serves me, some seven attempts over the years, over the 13 odd intervening years from that moment until the moment of contracting, our nation's coastlines were unprotected on the one hand and on the other hand, the Navy was and in fact continues until we get these ships, losing the technology and the expertise of operating those type of vessels at sea. We always were a frigate navy, I was brought up in frigates. In this case I say NATO, full NATO standard frigates I might add, that when apropos my explanation of that we were used to that type of ship, we got in the sixties the most modern ships that we could get. We got them from the Royal Navy, brand new, built to NATO standards.

We got the best submarines that the world could offer, the Daphnes, they were the frontline hunter killer submarine. Even when we got the strike craft, albeit that they were not the ideal ships for our conditions, they were at the time the cutting edge of world fast attack craft technology. We were faced with the situation that we didn't have these ships at all, we had lost the capability in our Navy and time was passing. But we didn't have the money to go and buy them off the shelf.

So this is in general terms and I don't want to take up too much of your time, the whole scenario that the Navy and the nation and the defence, entities such as the Department of Defence and the Acquisition Directorate and Armscor.

And isn't it the position also, the very fact that this was a multi faceted project as opposed to having acquired before single items. --- Quite correct sir. That was a very, I think in the annals of our nation, quite a unique, in fact it was definitely a unique acquisition. I might tell you as the project officer, we were not pleased with that development because we, in effect, we were at the starting gate first.

The corvette program had been a running project, uniquely of all of those other ones. It had passed through the gates of initial approvals, it had passed through the gate of initial work and it had certainly passed through the gate of a lot of project team effort to evaluate possible options.

So in that the corvette was now part of a larger packet, inevitably we were going to suffer in terms of time and process. But of course we are disciplined officers and professional people and that was very clearly made, it was made clear to us that by putting the corvettes under the mantel of the project, the momentum of that strategic defence package, particularly in terms of the requirement of the government to maximise its industrial participation in terms of the socio economic return of this investment, we understood very clearly that we must bite the bullet and just carry on as we had done. But you are perfectly correct sir, this, the incorporation of initially seven and eventually five major acquisitions, is not only unique for this small country of ours but in fact would have been quite unique in the annals of very major nations such as the United Kingdom, Germany, France and so on. It just isn't done like that overseas either. So yes, it was a major activity. Thank you sir.

MR MALIND: Admiral if you say you were unhappy, do you mean you as the Navy having to wait for the other projects or you were unhappy with the multi project itself? --- No sir, I mean the former inference. And I mustn't over-emphasise the word unhappy. I just have to be honest with the panel, that I can't stand here today and say that we had a party when we were told that we were going to be part of a strategic package or we were not going to be part at all.

Yes, no, I understand you to be saying that the corvette project had been going.. (intervenes) --- It had been going on for neigh on four years already.

And you had to wait for the other projects to go in tandem with your project. --- Correct. We also knew very categorically that there was not only a cost ceiling per item in this package, there was an overall cost ceiling that the nation would not bear beyond. In other words, it might be one thing to spend six billion on corvettes but to spend 30 billion on a package, engages the attention of the nation naturally and certain that of our vigorous parliament.

Admiral I think you may proceed. --- Thank you sir. Sir I want then to do my testimony if I may sir, with your permission, in two main phases. The first phase I really need to deal with the themes that I have described because in a 509 page and I believe it is a 509 paragraph document but I have to tell you that our one is not exactly the one that was being referred to in recent days, I believe there was a change but I will refer if I may, to my document. That is the one the minister gave permission for at any rate, which is not a coherent continuum of chronological events and that is Dr Young's right of course to have proposed it like that. But it was very difficult to jump around. The themes are all over the place. So if you don't mind, I will cover the themes as the best I can and then I would like, because it is necessary, to go into some of the specific paragraphs, particularly at the technical level but if you will bear with me sir, I will do that.

PRESIDING OFFICER: Yes. --- Sir if I may show you a slide which denotes the system hierarchy. Sir this is a slide that was in fact shown to SCOPA. There is the SCOPA briefing number 2 and in fact I introduce it because it was put up by Mr Young in his testimony and I have to rebut what he had to say. We are contracting, as obliged by government regulation as I have explained this morning, at the so-called product system.

I want to tell you that I operate at the user system because of course plastic and steel maketh not a capability. It is the people, it is the facilities, it is the helicopters, it is the entire Navy in terms of doctrine, logistic support and so on. But let us proceed to the actual contracting level which is germane to Dr Young's, I beg your pardon for calling him Mr Young, it is no offence intended. I knew him for some seven years before his doctorate, so ....

Product system is the ship, over there. We have contracted only at that level. We only have one contract. It is a contract to supply that thing. This is a typical, this is an illustrative slide, please don't take, GFC in fact is the thing called the European South African Corvette Consortium, a horrible name denoting that it is a consortium that is jointly and severally accountable for the total vessels between Messrs German Frigate Consortium which are in turn a consortium but I won't bother you with that, Messrs African Defence Systems of Midrand South Africa and Thomson CSF of Paris. We only have one contract.

They have in turn placed sub-contracts on various entities for a combat suite and its sub-components and for the hull, the hull meaning the hull machinery. In this case Thomson ADS should read is supplying the combat suite and Blom and Vos is supplying the hull. Now when I say contracts, they in turn have placed internal contracts. They are not visible to us, these internal contracts, they are supplying the combat suit as a part of their scope of work, their scope of supply to us in the response, it is there and they are supplying the hull.

Because we are holding them accountable for the entire vessel. I don't care who supplies the hull or the combat suite in terms of the post contractual scenario and in any event, these companies come and go with returns of their ownership. Blom and Vos in terms of its corporate ownership is already changing and so on. Thomson is evolving from a wholly French government owned entity into a more private entity along with the trend in Europe and so on. There is coming and going with respect to equity sharing between the various European countries and international.

There are sub-contracts placed by this entity here, the so-called level 4, 5 entity on various contractors. To give an example, there is a contract placed on ADS for the supply of the combat management system. It is in turn in sub-system of this thing called the combat suite. It is therefore, what we would call a level 3 sub-system. These are not our terms, in personal terms, these are the state's terms in terms of the policy.

Part of the combat management system, always part of the combat management system and typically part of the combat management system on any international project that I am aware of, is a thing called a databus or an information management system. It is therefore by inspection, a component of a sub-system which is in turn, a sub-system of a product which is in turn a product of a product system. And below that of course not pertinent here, there would be the material processes and so on. Now we do not contract at that level. We do not contract at that level and we do not contract at that level and we do not contract at that level. We only contract at that level.

MR MALIND: And by saying at that level, for the record you mean levels 1, 2, 3 and 4. --- I beg your pardon, you are not recording this, okay, at that level I mean, I beg your pardon Mr Chairman and the ladies struggling to understand me, level 5. It is not true to say, as Mr Young has alleged, that his databus system was a level 3 system and by that I don't mean to denigrate his product at all. There seems to be an idea that by putting him at level 2 we are somehow saying well, you are a little kindergarten child, you are not in primary school yet, let alone in high school, let alone in varsity. Not at all. It is just the fact of the matter that this is a cable plant.

It is a fibre optic cable plant with very sophisticated switching and very sophisticated software. Let's not denigrate the product but let's call it what it is. This is not the engine of the motor car. It is not the gearbox of the motor car, it is the wiring between the engine and the gearbox, between the ignition and the engine of the motor car. That is not to denigrate the sophistication, it is a very sophisticated product and C²I² is a very sophisticated little company.

So I needed to explain that because it is very germane to what we are about to tell you today. There is another aspect as well and that is the aspect relating to the claim that because we had lumped the IMS system for convenience in a document which described the system, not in hierarchial terms, a document that merely listed the system in terms of its totality and it was a convenient costing template for us, that we listed the IMS system in a group of products which included the CMS. But I have to tell you Mr Chairman in that group of products which we call the integration group, was operations room furniture, chairs, Chinagraph pencils, state boards, Perspex state boards that you can write on.

So there was no intention on the state during this tendering process, by those documents that I will come to later down the road, to in any way hierarchically, manage or contract or select the IMS system or the databus in consideration of it as a product sub-system at level 3. That has not only been alluded to but it has been stated categorically in Dr Young's evidence that, you know, we must have said he was a level 3 system because after all, we grouped him in this group called integration and I have just alluded to the fact or stated to you that in that group was also chairs for the ops rooms. So that puts it in perspective I think.

May I continue sir?

PRESIDING OFFICER: Yes please. --- Thank you. I now want to show another slide and that is the slide of our combat system. This slide is not in itself highly classified, in fact it is not classified at all but I would prefer if we are going to give copies of this slide which inter alia reflects the total combat capability of the ship in terms of its suite, I would prefer to, I be directed to give the copies to yourself and your panel. But I need to show you this slide because it is very germane to what I am about to say at a later stage.

This very complicated, visually very complicated thing and I tell you technically and managerially very complicated thing, is our combat system. What I have attempted to do here is to show you all the components of the system down to some visually relevant level but it does not indicate the hierarchial nature, it is merely what the thing is.

What you see right here in the centre in this, I believe the term is cyan, I like the term light green but anyway, this light green, blue thing is the combat management system.

What is the combat management system? Perfectly analogous to the brain. It processes data and it gives instruction in data and electronics to the sensors, the eyes, they ears, the touch and the effect is, your fists, your boots and so on. And all of the organs that function together. So CMS that is the brain of any modern combat system.

But of course the brain is no good to work on its own. It does not connect the sensors, the eyes, the ears and to the effectors, the legs, the arms, the fists, at all. What the body does with that and please don't ask me about biology because I am not a doctor, I am merely an analogist, is the central nervous system.

The nerves that run and your spinal cord. That Mr Chairman is depicted here in the dark blue lines. That Mr Chairman is the databus. So the databus is a plant, it is a very sophisticated cable plant, fibre optic and I assure you ours is, I will come to that in a moment, that connects these effectors, gun there, gun there, missile there, missile there and so on, to the sensors, radar over there, radar over there, whole mounted sonar over there and so on, together.

Not only in terms of connecting them to targets which have been detected so that you can destroy them hopefully or if you can avoid them, but also it provides the command and control facility in terms of threat evaluation, in terms of a tactical picture for the commander to make his decisions on, that is a three dimensional picture of the sub-surface, the surface and the air picture. But it also provides the inter-connectivity to these systems and health monitoring systems which tell you if the gun is performing with intolerance or if the gun is not performing with intolerance. If your tracker is performing with intolerance or not. It is a very, very key system is the combat management system.

Now this perfectly illustrates that you cannot separate the spinal cord and the nervous system from the brain and expect that these two things will work somehow separately and individually. In all combat suites in the world today that I am aware of, and which reflect, that that reality is reflected in the contracting and the sub-contracting for those systems, the IMS or databus if you will, is always normally part of the combat management system as a component and is usually sub-sub-contracted by the combat management supply for the simple reason, you can appreciate, there is an enormous signal interface and there is an enormous software compatibility between this spinal cord and the brain, that simply cannot work if they are not compatible.

Now I asked you to understand on this diagram what would happen if there is any interruption or failure of this spinal cord of this databus. And I also asked you to consider on this diagram if, should that failure occur, exactly where do you pinpoint the failure contractually. That is not a black and white scenario. It is a very grey scenario.

If there is a failure of this bus inside that, this is called a signal interface unit, that leads to the missile, not connecting to the correct target from that radar, the start or leads catastrophically to that missile going for the wrong target, then where do you in fact draw the line that it was the bus's fault? That it was the combat management system's fault that allocated that gun to that target? That it was the gun's fault inside that signal interface unit or whether it was the sensor's fault.

Well in terms of the sensor and the gun, it is very easy. There is a complete break over there in contractual responsibility and physical responsibility and there is a complete break over there. But there is not a break over here. This is a continuum, this is a continuum of data rushing in and out between the brain and the nervous system, exactly as it is in the body and if you feel heat in your finger, is it that your central nervous system is not transmitting correctly or is your brain not interpreting the fact that there is no heat near your finger. I use these analogies loosely but it is roughly our problem too.

So our essential problem on this entire exercise, that if we were going to hold and in fact we absolutely did hold, the consortium including ADS as an equal, that is liable, equally liable partner, for this entire system and in fact the wider ship in itself and that they were supplying the combat management system themselves, that there had to be a very careful examination of what the risk implications were for the entire system and of course the entire vessel as an operational entity available to the chief of the Navy.

I am afraid and I will come to that in a very particular way in a moment, that it is not good enough to say that well, as Dr Young infers, that hey, this bus was tested. I mean I have been doing it for seven years and I can prove that a piece of software will go from there, a signal will go from there to there or even from there to there. And therefore I should be, the risk that I allocate to this exercise is a certain, has a certain quantity and you have no right, state or man contractor, to look beyond the bounds of that narrow technical confine.

Well I am afraid Mr Chairman that simply isn't the case. I wish it were so. And that if we are going to look beyond the bounds of the narrow confine of the cable plant and its sophisticated, albeit sophisticated software and we are going to examine the implications of a failure of this nervous system, and also the implications of a failure of us to determine exactly where the contractual point is that resulted in that failure, then we have to look at the entire risk issue.

Further point and I will come to that, there are so-called category B items in the combat suite that we have contracted for and there are so-called category C items that we have contracted for and I want to tell you what the difference is. Initially, when we went out on tender for these combat suites, we obliged the main contractor to come back and take full responsibility for every one of these items. From the placement of contract right until the end result which was firing at a missile in sea acceptance trials and we certainly intend to correctly test the system by that means.

He said to us, in terms of this contract in reality, if you want me Mr State to take full responsibility for the Kentron surface to air missile, that you only have developed under a technology retention program, then you have to pay me a lot of money because I add a massive risk premium onto that thing and so on for the gun and so on for the radar and so on for the communication sub-system and so on for the electronic warfare sub-system and so on and so forth.

All of these systems we had been developing in the gap when the minister said: you will defer the decision on the corvettes. When the state said to us: you may go out on tender for the corvette (indistinct - someone coughed), we had been developing under a technology retention program, aimed at a technology demonstrator which did not look like this and which was generic in nature and which explicitly is, bounded us by the project definitions and I will come to them in a moment, that we were to develop systems which even if the corvettes never materialised, we will be able to use in the upgrading of our strike craft, we will be able to use on other surface vessels and so forth and so on.

All I am trying to get back to now is the risk scenario where we had all of these sub-systems and all of a sudden we broke the bank. We couldn't afford these sub-systems. We couldn't even afford a percentage of these sub-systems and hence the functionality. And we sat down with the main contractor and we said: give us an alternative contracting model, put it on the table and we will talk about this.

We are prepared to consider that to a certain limited degree that we relieve you of the risk of those items where the implication of failure is not catastrophic for the program and that is how category C was born. Hence we not have contracted that Kentron, although Kentron is contracted by the main contractor, we don't contract them, Kentron has a responsibility towards us, up to factory acceptance tests, in the factory down in Centurion.

That up to and including factory acceptance tests, the main contractor will not be accountable to us for technical performance and for schedule. But after factory acceptance tests, when this thing roles out of Kentron's factory, on a truck down to Simonstown, at that moment the main contractor's responsibility start ticking and I might add those responsibilities are in fact the most difficult ones.

We saved an enormous amount of money by doing that. We saved the money that was the risk allocations that the main contractor had put on every one of these systems, much more than that. We in fact saved those sub-systems for South Africa. We saved those sub-systems for us to be able to realise a return on our investment, considerable investment over the years, the technology of those systems. We saved our own control of those systems in terms of the operational control of the specification. We don't want a foreigner to control our electronic warfare Algoren. It is a tactically critical thing.

We don't want to buy our surface to air defensive weapon from Britain but the only way we could do that was to assume some responsibility because we had a cost ceiling. But there was one system Mr Chairman that we were not prepared to allow the main contractor to escape his primary responsibility and that was the spinal cord. It unfortunately for Dr Young, was the only system where we said no and by the way I might add and I am coming to it, that the main contractor did not oblige us initially to do that. In fact he was very happy to offer this spinal cord as the part (indistinct) because thereby he would escape his responsibilities, if the main entity failed. But more than that, if something failed over here in the combat management system, it would be very easy for the main contractor to say: well it is not my combat management system, it is the databus and we would have great difficulty in proving it because, as I have described to you, you tell me where the difference is there. It is an intertwined (indistinct).

We said to the main contractor: no way, under no circumstances will we allow you to escape your responsibility for this spinal cord of your combat management system of the greater combat system and of the greater vessel.

At that point the main contractor said to us: well if I am going to take that risk, then my previous risk apportionment on this sub-system stands. You are not alleviating me of this risk therefore, kindly pay me. And we said we can't. You will offer us an alternative. You will offer us a cost effective alternative. You may offer in fact, we didn't instruct him to do but you may offer us a cost of effective alternative and it was exactly at that point that the main contractor, ADS, offered us a bus from yes, within their group, but a bus from the world renown supplier of combat suite data busses, Messrs Detexis. They are the world or they are amongst the world leaders and certainly the European leader of the supply of naval combat busses and I will come to that in a moment.

Where, because the product and the technology that was being offered was a great deal more mature than the South African technology and particular because it was backed up by the third largest electronic company in the world, the Thomson group with a turnover of several tens of billion of Rand every year, and because it was entirely remaining within the domain of the main contractor's responsibility, there was definitely an option to consider and we did consider it.

We considered it in a number of ways. We considered it initially by a preliminary technical overview, not review, overview of Detexis. I instructed my engineers, when I say I, I and my colleague Mr Nortje, instructed our engineers I might say, sorry, Armscor, to go down and look at the Detexis bus.

Our words were exactly: gentlemen go and look at this bus, come back to us and tell us can we even consider this bus as an option. If you tell us no, we drop it right there and then and we make a plan. I don't know how we would have made a plan but we would have had to go back to the Chief of the Navy and ask him to further reduce the functional performance of the ship by taking off further missiles and so on. Because the risk factor was in the order of R40 million.

But now if I may intervene, I think earlier on you mentioned something about not buying something that was foreign with regard to electronics and so on. --- Yes.

Was this consideration no longer the case? --- No it certainly was sir and that is the bitter pill that we had to swallow but I also want to place it in perspective. The technology of this bus is primarily commercial off-the-shelf technology. In itself the hardware of the bus is entirely commercially off-the-shelf available, it is not cheap to buy but you can buy it without, it is not a secret to buy. There are a few areas of proprietary software in the bus, in the Detexis bus but I must add that there is a few areas of exactly the same proprietary software in Dr Young's bus.

One can argue yes the one proprietary software was vested in a South African controlled company and the other aspect of proprietary software was vested in a foreign company. We have in our technology transfer plan, in the contract, categorically obliged to the main contractor to supply that technology to a South African entity and I will cover that when we come there. I am very satisfied that we will have no problem supporting this bus logistically and technically, in terms of our knowledge as South Africans and what the bus does.

But the rest, the combat management system is a South African combat management system. It comes from ADS, a South African registered company of hundreds of South Africans. It is not a South African controlled company but as we move through into the global village, less and less and less do we have the luxury and that is the down side of our strategy of opening up our arms industry to the world, and exposing it to the international comings and goings of equity and so on, that in this process, Rooitech Radar Systems is no longer an exclusive South African company. There is a 30% equity holding and that will increase shortly I hear, by the German company Daimler Benz Aerospace.

Grinaker Aviatronics, our most strategically important company in terms of the Navy which provides our electronic warfare, is 49% owned by a Swedish company and anything can happen. That company is a private company. Post contract they can sell the other 2%. It can happen.

We are trying desperately to maintain our control over our own Naval combat system. I think that we have very largely succeeded. Where we could not do so, we tried desperately to err towards those areas which the implication of not having that technology was not that severe and I tell you now sir, that the implication of not having the bus technology, is not that severe. I also might add that there are very many companies in this country who are skilled databus companies. The money you draw from your ATM automatic teller machine in the wall, that has a very sophisticated land network.

One can go to Midrand and find several companies and again I am not in any way denigrating the superb capabilities of the small company called C²I² and then admittedly niche capability in naval systems.

But the bitter pill we had to swallow that we could not have it all. We had to make compromises and those compromises, to the best of my knowledge, were the best that we could have made.

To end off this point sir because I have been belabouring your time, the issue with regard to risk therefore was that while there were many South African companies that were supplying systems to us, through the main contractor, that we could conceive to be in category C because the implication of not having a gun ready in time, the 35 millimetre gun is not there when the ship needs to go to sea for trials, so what? We are not at war.

Of course it is part of the baseline and we would most definitely call in all of the arrows in our quiver to enforce restitution for that particular situation. But if it was six months behind or if it was a year behind or if it didn't exactly function as it should have functioned, that does not catastrophically stop the entire ship from functioning. But if this combat management system and its attendant sub-component being the bus is not functioning, then you can appreciate the entire ship will not function and the environment that we operated in was not only our own inherent knowledge of this as professionals in the field, but there was also an international precedent, several international precedents in recent years.

There is a program called the Malaysian frigate program, they bought two F2000 class frigates from the United Kingdom in the nineties, starting in 94, 93, 94 going through to 90, supposedly initially going through to 97. In fact those ships were only delivered last year. They were three years late and there was a massive international uproar about that. The Malaysian government called in the obligations of the main contractor and it was one of the things that led to the demise of the supplier of the combat management system of those ships.

And the reason those ships didn't work and it is well-known in the international technical press as well as my own knowledge definitely of the situation with those suppliers, is that they couldn't get the sensors and the effectors to work together through the combat management system because of the fact that the data flow in this to-ing and fro-ing, was not satisfactory.

And they also could not and that is the most important thing, they also could not easily pinpoint the contractual point of responsibility for that and they could not therefore internally take the necessary contractual restitution. But in any event, we are not in the game of acquisition to seek restitution or to seek performance guarantees to be paid to us. We are in the game of getting ships to defend our nation.

So we don't to land in the situation in the first place but the risk that we had to contend was that if we don't, if we are not extremely careful with this thing, this green thing and this blue thing, then our entire ship ejected and that is really what I wanted to do by explaining what this thing is. It is an absolute necessity to understand what the combat management system and the IMS is before I go into the detail of what Mr Young's evidence says about this and what we contend is in fact the truth. Thank you sir. May I continue?

Yes you may proceed. --- So I am going to turn then to what I call main theme number 1 and essentially, I beg your pardon sir, and essentially main theme number 1 was that he was selected to supply the corvette databus by virtue of a number of things and I will come to those in due course. They are summarised in the executive summary.

Firstly I want to deal with his first claim that he was selected by the virtue of his participation in Project Sitron in 93 to 95 and then in his participation in this thing called SUVECS between 95 to 2000 which was, he claims, was a continuation of Project Sitron and then following that, his participation in the tendering and negotiation process for Project Sitron in 1998 1999.

There are many paragraphs related to this, the bulk is paragraphs 32 to 78 but not confined to those paragraphs. I am afraid Dr Young erroneously or wilfully weaves a contractual connection between the 93 95 capital acquisition activities called Sitron, the subsequent technology retention program called SUVECS and the subsequent and latterly parallel activity called Project Sitron again.

And the basis for his argument, as I understand it in his evidence, is that he participated in this continuum and therefore he had the expectations, in fact those expectations had been created by us, of a contract. And he does that, in fact he makes categoric statements that the technology program SUVECS was in fact an acquisition program done under the guise, he uses the word guise, I assume he means with sinister intent, of an acquisition program and I will contend and challenge that and show you that that simply was not so.

But I want to leave in your mind that the way that we manage these three activities that he weaves as a continuum, were absolutely not. There was a distinct phase of Sitron up to the point where the minister stood up in parliament and deferred it and by that deferral, we were not allowed explicitly to spend any more resources under Sitron. There was a distinct activity called projects, in fact called SUVECS, it wasn't a project as I will explain, it was a technology retention activity and there was the next and very distinct phase of project Sitron which in the mind of the government, was in fact for a continuum even from the first phase because in that interim period, there had been the fundamental change in the way we were to contract.

And in fact none of the previous baselines or results or evaluations that had been ratified at the highest level, including the minister's counsel, i.e., before May 1995, we had actually selected a ship, none of that was allowed or pertinent. It was all swept away in the tendering, the formal tendering process of 98 99.

If I may, you say something that could be significant legally speaking at least, because despite that sweeping away, you say we created that expectation which, and you know he has referred to a legitimate expectation. --- Yes sir.

I suppose you are sweeping away the previous project, maybe you say swept away that legitimate expectation but I don't get the sense of that. I mean it seems to me, but continue. --- Correct sir. I am not here to tell you what was in Mr Young's mind at the time and certainly in terms of what the contractor saw on the ground and the responses that we were giving them in terms of the encouragement, there would be and there was, a rightful expectation of participation in the opportunity to contract. But that is the key issue.

There was never ever an obligation or a committal by the state, in fact or in law or in any document or in any statement that we made or whatever the case may be, that would have led Mr Young to believe that he was the pre-selected, exclusive, pre-ordained supplier of the information management system.

In fact the subsequent round of tendering made it very, very clear and I will show you how clear we made it. These are clarities which Mr Young has sought to conceal. I use that word deliberately.

If I may, the previous absence of any other player, de facto maybe caused his mind to think: well I am the only player. So I am the only person that the client wants to participate in these projects. --- Sir yes, I can't categorically state that. Mr Young is not here but it would seem from his evidence that he thought that he had a legitimate right of expectation and that I tell you now, I knew what was in our mind. We also expected that this suite of South African industries that have the potential to supply this equipment, would indeed end up supplying that equipment.

But when we went out on tender in 1998, we were very careful and I will show you how careful we were, not to prescribe those systems to the main contractor. Not only in the hope in the, on the principle of good management in a competitive scenario which is what our job is to do in terms of the tender regulation, but also that we would not paint ourselves in a corner technically or in terms of risk or in terms of cost and so forth.

So I can't counter the fact that Mr Young feels aggrieved and I can't give him any absolution except a shoulder to cry on but we never ever gave Mr Young the assurances that he is alluding to and I will come to that in our evidence.

I want to state from the outset what the actual situation was with respect to this contractual continuum. Firstly his participation in the early contracting of Project Sitron was under a contracting model where the state placed separate contracts for the project elements. That is the first place and he knows that. His contract was not, did not come from the main contractor in the early days of Citron, it was little contracts placed by Armscor which was the situation that pertained in our acquisition environment at that time.

With the state taking overall vessel performance accountability, in fact that was our program plan and I will come back to the program plan because Mr Young continually refers to that program plan as if it is the program plan that was extant during the tendering phase of 1998. It was not. It was completely superseded by another program plan and I will come to that in a moment. I don't think he has a copy of that program plan, he probably he didn't receive it electronically or by any other means.

Now this is radically different, this idea that Armscor places all the penny packets and takes mamma responsibility. Radically different to the contracting model that was tendered for and contracted for in 1998 99, whereby a single contract, as I have indicated, for the entire vessel was entered into with the main contractor who places all sub-contracts and assumes full vessel performance accountability. I must add with the phaseal nuance that I indicated through the category C issue, that it is only a phase up to factory acceptance tests but as far as we are concerned thereafter, he has full accountability.

There is thus no connection to the previous program management plan issued in 1995 96 and the program management plan issued to support the tendering in 1998 which entirely supersedes the previous plan. And I now wish to illuminate to you in terms of this RFO issue. Here is the project management plan that accompanied the tender, not the project management plan that Mr Young alludes to throughout his evidence. It is titled: Program Management Plan for the Acquisition of Patrol Corvettes for the South African Navy, issued in, under signature of the program manager on 29 January 1998 and in fact it was not only an accompanying document but a very critical document of guidance to the completing and tendering entities in the tenders sent out on 13 February 1998, for which tenders were received on 1 May 1998 and which led eventually to the government selecting the German frigate consortium as the preferred supplier of corvettes on 19 November 1998. I will come back to this program management plan if you will allow me to sir.

Now the reason for the difference in the change in the contracting principles for armament acquisition from the 1990, arising from the 1997 defence review and the subsequent Department of Defence instruction on acquisition in 1998, which prescribes contracting at the highest level. That was the reason for the way that we went on that, as I have said before.

When you come to a convenient point.. (intervenes) --- Sir I think that is a convenient point.

Is it? We will take the lunch adjournment until 14:00. --- Thank you sir.

PROCEEDINGS ADJOURN FOR LUNCH