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THE HEARING RESUMES ON 2001-08-31

COUNSEL FOR ADS: Mr Protector, I wonder if I could just place something on record. This is the legal team for ADS. We did indicate to you yesterday afternoon that we might not be here today. Obviously what weighed heavily on our minds was the significant and large amount of work we still need to do under tight deadlines. However, in consulting overnight with our client, we do deem this evidence as both significant and important, and so simply for the record, since it was stated on the record last night that we might not be here, we are here. I do note that our view of the significance and importance of this is not shared by the public gallery, which is unfortunate. Mr Kriegler has a medical appointment and what is left of him hopes to be here shortly.

MR MALINDI: Mr Chairperson, before we commence, I do not know if this answers your question last night. I have had a discussion with Admiral Kamerman, and he has put to me his schedule as from tomorrow when he leaves for Germany. In the circumstances we want to put on record that his availability is only up to today. If a further date is set for further hearings, taking into account the statement that would be submitted by counsel for ADS, and a further date is set, we will try our utmost best to get Admiral Kamerman back, but at this stage we cannot promise that he will be able to make himself available for further hearings. So in our view we believe that the parties that are here will be capable of directing any questions that they wish to Admiral Kamerman, and that endeavours should be made by all legal teams of the available to do so today, otherwise we may encounter difficulties about his further availability, if another date is set for further hearing, and requests are made to cross-examine him at a further date.

PUBLIC PROTECTOR: May I just indicate that depending on what counsel for ADS - all counsel say about calling further evidence, I have it on good authority that if we finish, we might be actually finishing the public phase of hearings today, and if that is the case, and if at all you are going to incur expenses for Admiral Kamerman coming from Germany just for the purposes of finalising, it poses problems for you, but more importantly it poses problems for this hearing. If at all we finish the public phase today, subject of course to the statement still to be handed in by ADS, then I think we are staying somewhat on schedule, and that it would be convenient, even to suggest to him to leave, knowing that he is done with this hearing. Now, I hear what you are saying, that maybe what he has said and what you are saying now would be an incentive to all concerned to try and be as to the point as possible, in terms of their questioning. It would only mean one thing, that we sit until we have finished his evidence, whenever that hour may be, because I am trying to avoid suggesting that we could sit tomorrow, until he leaves, which would then be another possibility. But I think with all the inconvenience to participants here and the officials present here, that our sitting late, that would be a better inconvenience, rather than coming back on a Saturday to finish evidence, or coming back on any other day. So let us try and see what best we can do, because we are really looking forward to putting a lid on this part of the investigation, subject, as I say, to the statement that will be submitted. Any other submissions from counsel?

MR MAHON: Mr Chairman, just a point. The time that I will take with this witness literally will not be more than five or ten minutes.

PUBLIC PROTECTOR: That is helpful.

MR : Mr Protector, I think it is difficult to anticipate, not having heard the evidence, but we expect there will not - while we view this evidence as important, we expect there will not be significant questions that we have, or lengthy ones.

PUBLIC PROTECTOR: I will accept that. Of course, it also depends on how long you are going to be. The detail I must say has been helpful, but I know Admiral Kamerman has been listening, so that where he thinks maybe detail can be cut, and we cannot indicate, he knows best, that could be done to make sure that what we are talking about now becomes a reality. But I mean, even though he gave much detail yesterday, none of it was superfluous or useless, from where we are sitting.

JONATHAN EDWIN GOLD KAMERMAN (s.u.o.)

EXAMINATION BY MR MALINDI (continued): Admiral, we concluded yesterday, you were concluding on theme 2. -- Correct.

Could you proceed with your evidence? -- Yes, indeed. I wish to round off theme 2, first, before going onto theme 3, with an explanation of what a user requirement specification is. In the light that Dr Young has sought in his evidence to draw an analogy between a user requirement specification, on the one hand, and a programme plan on the other, and secondly, and more significantly, he has alluded and attempted to draw the reader and the listener down the path that a URS is something which was changed, our user requirement specifications changed, by the contractor and the contractor's contractual specifications. That is a very, very significant allegation, and I will show you now that it is just simply not true. Again, relating to my contention that Dr Young is ignorant or of chooses to ignore what a user requirement specification is. A user requirement specification is a baseline document when one goes into acquisition for an acquisition programme. It states what the state requires, hence the term user requirement specification, and it is a wish list, if you wish. It is the list of things that you want before you go into a contract negotiation, to determine exactly what the boundaries of what you can get are, and it remains a baseline document right through the programme, and it is the fundamental basis for what we call the requirement baseline. Now, the requirement baseline does not change during the course of a programme, except if there are fundamental reasons for it to be changed, such as a termination of a particular effort on the programme and so on. So our user requirement specification, which was set for this project Sitron acquisition, and which was signed on behalf of the chief of the navy, it is a navy document, in December 1998, is still an extant document; it is still one hundred percent part of the functional and requirement baseline of the South African Navy, and it is the document against what we will measure our output at the end of the programme against. In other words, this is what the navy required; after negotiation and the contract and the actual acquisition activity, this is what the navy got, and that process of measuring your requirement which you wanted in the first place, against what you eventually got, is a normal function of the acquisition process. It is not a sinister process to draw up a delta document, the difference between these two, as Dr Young categorically states in his evidence. In fact, it is an absolute requirement that one does so. Part of your process at the end of the programme when you terminate this project in four or five years' time, we will indeed say, we achieved that; what did we actually want, and that delta is then used by the navy in its normal requirement operational process where they say, look, we wanted 32 missiles, we could only afford to buy 16 missiles, we now need an operational - there is a gap in our operational capability, or maybe there is not by that stage, but if there is a gap still, that then becomes another project. That is exactly the continuum of these things, because you never - certainly in our experience, you never end up getting exactly what you want in the first place. So to claim that the South African Navy was displaced, that the URS of the South African Navy was displaced by the contractual specification is simply not true. However, that is used in the argument to support the fact that the contractual baseline has a different architecture in terms of the Combat Suite, not a fundamentally different one, I might add, but a slightly different one to the user requirement specification, and that the contractual baseline does not include all of the elements that are reflected in the requirement baseline. That is precisely what the negotiation process was all about. We had a requirement baseline established as is mandatory to establish, before you start negotiating the realities of the commercial world in terms of what you can actually afford and what you cannot afford. We believe that in fact our Corvette, at the end of the day, will be very, very close to our user requirement specification. There are some areas which it was unavoidable to reduce and which the naval board with great difficulty had to swallow the bitter pill of reducing. No doubt about that, but in the main we are not acquiring a ship that cannot go out to fight on behalf of our nation, the very day that it has declared operational. On the contrary; it will be able to do all of the tasks and the roles that were called up in the requirement specification, some of them to a lesser degree because of the limitations of the cost.

PUBLIC PROTECTOR: Just to make sure I understand what you are saying in regard to the URS, and you are saying that from where Dr Young sits, he is of the view that the URS would be a compulsory document in that the contractual baseline would have to comply with that; if it does not comply, it is an anomaly or an irregularity. -- That is his contention.

And you are saying ... -- I am absolutely telling you that that is not the purpose of the URS. The URS is a baseline which states the navy's original requirements. The contractual baseline is exactly that. The contractual baseline is the contract that you have eventually managed to negotiate, and that fundamental point, I am afraid, from a business perspective, if Dr Young is, and he certain is, an astute businessman, he knows that, and again I do not understand why he draws that quite wrong analogy. He knows exactly what a user requirement specification is. He functions in the defence contracting environment.

MR VAN ZYL: So the URS is not a minimum requirement? -- No, a URS is the user's requirement before you negotiate what you can actually achieve.

It is not a minimum? -- No, not at all. I wanted to clear that, because that was something I think that did not come out so strongly yesterday. I now, with your permission ...

Are you going to move to theme 3? -- Not yet. I still have one more claim under theme 2. It is related, and if you will forgive me, these things do not - I have conveniently broken them up into themes, but it is not necessarily so convenient in terms of the evidence. I want to cover the claim by Dr Young that it was strategically important and specified by the state that South African industry should be and must be the suppliers of the subsystems of the Combat Suite, and that a South African company should be the Combat Suite integrator and supplier of the Combat Management System, and his claim is, arising from that contention, that the state, however, allowed a non-South African company to supply the databus and allowed a non-South African company to be contractor as the Combat Suite integrator and the supplier of the Combat Management System. Now, he contends and infers throughout his deposition that ADS is a foreign company and that it was therefore not entitled to be contracted and act as the Combat Suite integrator or supplier of critical technologies to the RSA government, such as the Combat Management System, and that the state acted improperly in allowing - I would like to put the question to yourself, and specifically to Dr Young in rebuttal: Under which countries Companies Act is ADS registered? It is the South African Companies Act. It is in fact a South African company. Who is its chairman? He is a South African. How many employees does it have, and how many of them are South Africans? I will tell you that the vast majority of them are South Africans, and then of course one can also refer to the exclusivity inferred in this thing, which other South African companies of the Corvette programme have major shareholders. I will tell you. Reutech Radar has a very large equity holding by Daimler Benz Aerospace; Grinaker Avitronics has a very large, even larger equity holding by the Swedish company Celsius. I would also like to invite anyone to show us any document which prescribes the contracting only to companies that are wholly South African owned and controlled. It is our contention that although ADS is foreign controlled, that is absolutely the case, that the vast majority of its employees are South Africans, and that there in fact is no regulation or statement in any of our documents prescribing or governing the Corvette acquisition which proscribes the contracting of ADS at all. When we started the exercise, and when we went out on tender to international tenderers for the Corvettes, which was in February 1998, and when those tenderers came back on 11 May 1998, ADS was not a foreign controlled company, and whether one likes it or whether one does not like it, that is the way the world is moving and that is the way our industry is moving, and in particular the defence sector of our industry, and one can debate for hours whether the government should continue to artificially subsidise companies or provide the capital investment in those companies, which we may never receive a return on, or whether in fact we should allow to a certain degree the rules of commerce and the rules of competition in the global environment. We have attempted as best as we could, with the limitations that any state in a democratic society can on wholly private companies, to ensure that the vast majority of the Corvette work and in particular the very sensitive areas and very strategically sensitive areas, are in fact, if they are not conceived and delivered by South Africans, that South Africans at the end of the day will possess the technology inherent in those systems, and we fervently believe that we have done that. We have done that precisely and we have done that completely. In fact the Corvette programme by a very large order of magnitude has done that much more than any of the other packages. I am not now drawing an analogy between us and any of the other packages, but we were in a position to do so, precisely because we had nurtured our naval industry over the years under other acquisition programmes, such as the upgrading of our ships and submarines, and in particular because we bit the bullet as a navy, and spent such a large percentage of our expenditure in the years 1995 to the year 2000 on a technology retention programme. We did not expect - in fact we were quite surprised at the end of the day that we achieved what we did in terms of the percentages, but we certainly did not expect to achieve every single one of our expectations with regard to our technology retention. We also did not expect at that time that ADS would be sold to interests of French control, but that did not inhibit us in finally contracting to ADS, and in fact ADS, as we have said to you, was part of the tender offer by the German Frigate Consortium on 11 May 1998. In fact, had we come along to the German Frigate Consortium thereafter - and this is the point that I really have to make, with respect to the entire environment of contracting - the irony of this whole thing was that if we had come along to the German Frigate contractor after 11 May 1998 or after we had in fact selected them - when I say we, the cabinet had selected them as the preferred supplier on 19 November 1998 - and we had attempted to prescribe to them any other company but the one that they were offering, then ADS would be sitting in the complainant's chair today, and we would certainly be sitting in the respondent's chair as well. So it is an irony of this process that, if you look at it from the other perspective, and if we had in fact attempted to prescribe any other companies involved in this exercise to the main contractor, he could have well gone through the same exercise that Mr Young has gone through, and I say to you now, with a great deal more certainty of success in terms of any action against the state, and with a great deal - a much greater basis, a foundation of fact and contracting - obligatory realities on the part of the state than Mr Young has. But I continue. His supposedly high and patriotic stand for South African companies, however, did not prevent him from forming, very early on, an alliance with a completely British company, British Aerospace, and that is not just British controlled but a wholly British company in Britain, without any South African employees in its naval business unit, in December 1998, in other words well before the Combat Suite tendering and negotiation process, and most significantly, he was doing this while ADS - that is December 1998 - was still a fully South African controlled company. He then - that is Dr Young - proceeded to offer and vigorously lobby the main contractor and the state, and it is all documented in letters to us at that time, as well as presentations that he gave, and I can present those if you wish to the panel. He proceeded to offer and vigorously lobby us for this British company to become the Combat Suite integrator, and supplier of the Combat Management System for the Corvette. This is the man who takes the high moral ground that alludes and alleges and infers that we should have gone away from ADS, because although it was a South African company, it is French controlled. This is the man that at that time was getting into bed with an entirely British owned, controlled and employee company. So I am afraid it rings a bit hollow, and frankly, it is in a naval term, fairly rum. So I would ask Mr Young, if his main concerns are the interests of the RSA and South African companies, why did he actively pursue the displacement of a South African company at the time under South African control, with a wholly British company. I go on. He also had no inhibitions at the time, and throughout this process, of forming an alliance with a completely foreign company, STN Atlas from Germany, which is British and German owned and controlled and consists mainly of German employees; there are no South Africans to my knowledge working for STN Atlas, to compete against ADS, a South African company with South African employees, for the submarine Combat Suite, of which the Integration and Combat Management System is almost entirely foreign. That foreign company, I might add, in a very vigorous but fair, competitive process, won the supply contract for the submarine Combat Suite, and Dr Young and his company are at this very moment contracted by them, this wholly foreign company, to supply work into that Combat Suite. I would ask him as well, who is supplying the combat databus system for the submarines. It is in fact a wholly foreign company of foreigners employed by that company. So I would put it to Mr Young that his motives are much baser than he wishes this hearing to believe, and that his attempt to take the high patriotic ground, or to ascribe irregular practice to government officials, is nothing more than hypocritical opportunism. I now go on, if I may, to the third theme of my preparation.

MR VAN ZYL: Before you do so, there is one aspect in theme 2 that you have mentioned. You say, alternatively there was no actual price ceiling. -- Yes.

As claimed by Mr Young in paragraph 484. -- Yes.

And I have not heard much about it yet, that you are really contending that. -- If you bear with me, I am going to bring that in. Theme 3 is that Dr Young contends his product is superior. We contend that Dr Young falsely and selectively used two documents to prove - I say that in inverted commas - that his databus was firstly evaluated by the project team to be superior, that in fact his bus is superior and meets the user requirement, and that the Detexis bus is inferior and does not meet the user requirements, and that therefore the project team and/or the project control board were negligent or wilfully improper in allowing the Detexis bus to be incorporated into the supply contract instead of his bus. Now, before I commence the rebuttal of this, I need to say to you that it is quite extraordinary intellectual arrogance to say that you are always right, your system is the best, and that because you are always right, everyone else is wrong and their system has to be the worst. That is one thing, and I give Mr Young the right to be intellectually arrogant. It is not a crime. But it is quite another thing, sir, to be intellectually dishonest. It is quite another thing to conceal from a hearing of the stature of your hearing, deliberately conceal fundamental points which do not accord with your argument or with your proposition that your system was the best and that the state in fact evaluated it as such. It is also quite an extraordinary leap to then ascribe sinister motives, and to state that this was an irregular process by state officials, who are all men and women of high integrity, and the control process that governed this exercise was improper or that it was wilfully carried out and that in fact we, as guardians of the nation's defence, were going to put deficient equipment on our war ship and send our young men and women into battle. That is the point I wanted to state before I go into the actual rebuttal.

PUBLIC PROTECTOR: What I want to ask is just really a reference to part of Dr Young's evidence, which, given his capabilities and which have been testified to before, goes a long way to discredit and to doing the things that you are talking about now. For instance, when he was referring to the system, he was referring to Detexis, as obsolete, and obsolete compared to equipment that was utilised by the US in the 60s, and then he says he got later information to say in fact, he had been kind to say it was the 60s; it was in fact the 50s, and because it says to some of us who are not so clued up on the complexities of this system, that yes, the state has been ripped off seriously, if at all we can use equipment, or at least our defence force. So it is a point of worry, not only about the integrity of the process, but also indeed about how yourselves as the client could allow that kind of rip-off to happen. So I understand your statement, but it throws back that kind of evidence which he gave, and I thought, how is this possible, and I would like to know - of course you are going to deal with it, how valid or how invalid that kind of statement is. --- Let me say from the outset, it is completely untrue and it is a mischievous fabrication, or alternatively, and this may well be the case, that Mr Young is completely ignorant of the workings and the design of the Detexis databus, which he should be, because possibly that also was not given to him in magnetic media. It is commercially sensitive information; it is military sensitive information, but it stretches the bounds of credibility to suggest that the technologies embodied in the Detexis bus, that he is an expert on, a far greater expert than I, that he can ascribe to those technologies in the world today, the term obsolete, the term point-to-point, the term inferior, and so on. He well knows that 100 megabit fast Ethernet, is the current industry standard, it is the cutting edge of technology. He well knows that Detexis is the leading databus, naval combat databus supplier in Europe, and possibly in the world. It is one of the top companies. He well knows that the Detexis bus has been installed in the most strategically critical ships of NATO nations in recent years, the last one commissioned a year ago, and he well knows that it has just been selected, the exact bus that has been supplied to us, has been selected for inclusion in the most strategically critical British naval programme that has just started, and that is the Type 45 programme, chosen, I might add, over his FDDI technology, by British Aerospace, which not only knows his technology very, very well, but also knows the Ethernet technology, and has inside itself - British Aerospace that is - a division which has recently produced - in recent years produced an FDDI level of technology, which is currently on board the current Royal Naval Frigate. So the Royal Navy has gone away from FDDI to fast Ethernet.

DR RAMAITE: Admiral, the problem that I have, not only with your testimony in this respect, but also with respect to Dr Young's testimony, both of you simply state these are your own views or opinions. You do not refer us to specific examples, for example where the Detexis has been used, or at least to some material that one can refer to. -- I am going to try to do so. I am going to do that, and I am going to specifically draw you to - the technical descriptions that we can and will provide in writing. But I wish to, from the outset, having said that we are incredulous with regard to some of the statements, I am now going to go into some of the statements, not only those made about the performance of the Detexis bus, but about the key part of his evidence, and that was an interim preliminary evaluation report, which he partially revealed to this committee, and we will fully reveal to this committee, and we will put it precisely in the context of what it was. The pillar of his evidence with regard to the Detexis being inferior is the preliminary evaluation report commissioned by me on my engineers, and I will explain exactly how we managed to commission that report, and I will explain the subsequent evaluations and subsequent work that was done, to further our knowledge of the bus and to lead us to the conclusion that this is in fact a more than satisfactory alternative to be used, if you would bear with me. Now, the documents that Dr Young refers to in his evidence are this initial internal technical report to the project team management on the validity of the Detexis databus as an option, and (b) a contractual technical document by ADS to the project team on 15 August 2000, relating to the timing requirements of the entire Combat Suite. Those are the two documents that he calls up repeatedly in his evidence. So I have to address those documents in the correct context. Now, the instruction that was given to the engineering team that did the initial preliminary evaluation of the Detexis bus was a very simple one. With the best and final offer that arose in May 1999, with its alternative - remember, it did not displace Richard's bus, but it was proposed as an alternative in this cost risk scenario that I described yesterday, we had to ascertain for ourselves - when I say we, I refer specifically to myself and my colleague, Mr Nortjé as the project executive - whether this alternative had any merit at all as an alternative; whether we should ditch it immediately, in other words not further process this at all, or whether there was sufficient merit to continue a further evaluation, a deeper evaluation and to have further discussions with the main contractor on the technical issues surrounding this alternative offer. So immediately after the BAFO was presented to us, on 26 May 1999, Mr Nortjé and myself instructed our two engineers responsible for inter alia the bus, Mr Lewis Mathieson of Armscor and Lieutenant Commander Andrew Cothill, both of whom are very capable electronic engineers and both of whom are bus - not specialists, but that is the area in which they are very competent, to engage in a briefing given by the Detexis company, with the German Frigate Consortium's bus expert, Dr Wolfgang Vogel, who is an acknowledged European expert on bus systems. He is the man in charge of the Combat Suite integration and things relating to buses at Blohm and Voss Yard, the leading frigate supplier in the world today, by a very large margin. That took place on 3 and 4 June 1999. Now, that took place with Detexis people, who Mr Young chooses to call and to denigrate as marketing people. In fact he mistakenly accords the pejorative, in his context of a marketing person, someone who obviously would not know anything about engineering activities, to Monsieur Royer, who - on his business card it says "Business manager" of Detexis. Monsieur Royer is in fact a highly qualified databus engineer. He is the leader of the Detexis team who is supplying the bus to us, and he in fact is an internationally renowned expert in databus systems. So to ascribe to him the pejorative of marketing man, and I man no offence to any marketing man, but in the context of which Mr Young uses it, it was certainly a pejorative, I am afraid is a very malicious thing and it is simply not true, and I also have to tell you that Dr Young knows exactly who Monsieur Royer is. So we had what we considered to be an adequate representative and representatives from Detexis to give us a very high level explanation of what their bus was, without going into any detail, technical evaluation at that stage, because the brief of this evaluation team was very categoric: Go and see if this thing has merit as an option; will it meet the specification requirements and will it do the job. Well, what Mr Young concealed from this panel is the primary finding of my evaluation, preliminary evaluation team, and which he did not - he said that he just did not feel the need to include it, but I am afraid that is the primary finding of the evaluation team to me, and that is, from the outset - I read from the report of Mr Mathieson:

"From the outset it has to be said that Detexis, a former Dassault company, is very knowledgeable and that the proposed LAN - and it is an LAN; Mr Young avers that it is not an LAN - complies to the architecture proposed on 7 April - that is our bus architecture - and will do the job required."

My engineer then goes on, and my engineering team them go on, naturally, to highlight and illuminate what to them in a preliminary high level situation was a number of points of technical concern that they had, a number of comparative technical issues relating to the bus that was our baseline at the time, being the databus from C²I² Systems, and this new option that was not manifesting itself, and that is the substance on which Mr Young bases his claim.

DR RAMAITE: Can I just interrupt you? This whole thing, the comparison between Detexis and the IMS, and it is the crux of the issue, but can I just ask you this: Obviously we have heard from Dr Young that Detexis has been in use in fact, it took effect in the 1950s. Now, if one can just ponder this, is it actually still in use presently and if so, which navies in the world are still using it? Because I think for me as an ordinary person who does not understand all the technicalities, it will tell quite a lot. -- If you will allow me, I will come back to this, but I will answer that question immediately. The Detexis bus offered to us is the most modern bus in naval combat system used today. It has been installed in the Charles de Gaulle aircraft carrier, which is the lynch pin of the non-US NATO nuclear forces. It was commissioned in the year 2000. Mr Young alleged in his re-examination - in fact he did not allege, he stated, although he stated that he had been told by somebody, had been told by somebody, had been told by somebody, I will tell you the truth directly in my knowledge as a naval officer and my own discussions directly with the French authorities in this particular regard. He stated that the reason that Charles de Gaulle aircraft carrier has been delayed was as a result of the failure of the bus, or that was his allegation or his insinuation. The Charles de Gaulle aircraft carrier was delayed because it had a catapult problem - a catapult is an aircraft launching system - which required the forward part of the ship to be extended by several metres, that was a constructive delay, and secondly on its trials it had a propulsion delay. There has never ever been an issue with the databus on the Charles de Gaulle at all. That is simply ignorance on Mr Young's part or some sort of other intent on his part. So that is the first thing that I want to tell you, with the Detexis databus. The previous version of the databus standard that we are getting, because that was the version selected by the French navy in the mid-90s, and equipped the Charles de Gaulle aircraft carrier in 1999/2000, the previous version is equipping right now the lynch pin of the non-United States NATO naval nuclear forces. The second point: The databus being proposed by Detexis to us - not proposed, being obtained by us - has two months ago been selected by the British Royal Navy, which as you may be aware is the second largest operational navy in the world, and in fact is also the largest non-United States NATO navy, for their brand new Type 45 destroyer, which is in its design phase right now, and which will form the centrepiece of their anti-aircraft protection to their own carrier forces, and anti-aircraft situation is the most demanding operational requirement on a databus. That moment when the missiles are coming in at your formation, and you are desperately trying to get effectors and sensors and weapons and electronic warfare to defeat this stream of incoming attacks, that is by far the highest demanding loading of a databus. The British Navy has just selected that, over Dr Young's technology. They considered the FDDI technology and they selected the Ethernet technology. I also have to tell you, which Dr Young knows, that the standard of the databus, the technical standard of the databus, which is fast Ethernet, is the standard of more than 90% of the modern LAN systems, not in the 50s or the 60s or the 70s or the 80s or the 90s, but in the 21st century, and he knows that. I also have to tell you that the Detexis system, and the Detexis company providing that system, is the leading supplier of naval combat bus technologies, to the French Navy, now to the Royal Navy, to the Norwegian Navy in the upgrading of the Norwegian Navy's combat systems by Messrs Thomson; it is provided as the backbone right now in the current largest frigate project running, which is actually building ships in terms of its cost, and that is the Sawari II programme for Saudi Arabia with the Lafayette frigate programme, which combines this databus standard with the so-called Tavitac combat management system. It is also the standard that equips the recent French Navy frigate class, the Lafayette, of which they built five, and which is their standard frigate class that they are now - which is now the French Navy's basis for their - it is their international patrol commitments and we have a patrol Corvette. So right now the most modern ships in the world, combat ships, are serving NATO nations with the Detexis technology on board. It is by no stretch of the imagination an obsolescent system. It is by no stretch of the imagination a 50s or 60s or 70s or 80s or 90s technology. Let me come to architecture, which is really what Dr Young is saying is a 1950s or 1960s technology. Dr Young says that the Detexis bus is a point-to-point system because it uses switches. Well, his system also uses switches. He has things called fibre-optic concentrators, which are exactly the same as switches. It is just another thing by another name. He says that our bus that we selected is a copper bus, and his bus is a fibre-optic bus. Now, I suppose in a layman's mind copper is old technology, having been discovered by man some 6 000 years ago, and fibre-optics of course must be modern technology because it was discovered by man only a few years ago. Well, I would like to put this slide back, if I may, and I will show you to the extent that our bus is in fact a fully fibre-optic bus. Now, whether Dr Young knows that or not, I do not know, but by the same token if he does know it, then he is being rather wilful in his description of our bus. That is our bus, and it connects these things called interface units, signal interface units, which in turn, as I said yesterday, connect to the weapons and sensors. This entire ring here, fully fibre-optic, exactly the same technology as Dr Young's bus, and exactly the same architecture as Dr Young's bus. The connections, all of the connections from the bus to the interface units, these things, all of them, are fully fibre-optic; exactly the same as Dr Young's architecture was. The proper part are these little things here, some of them fairly long, I must admit; this is just diagrammatic; these connections between the output of the signal interface unit, which conveys data between the combat management system and the sensors and the sensors and their effectors, is copper, exactly as it would have been in Mr Young's architecture, because of the very beneficial properties of copper in certain technical applications, in certain installation realities on a warship. So it defies the imagination to believe why Mr Young would say that our bus is a copper bus and his bus is a fibre-optic bus. This is a fully fibre-optic bus. He either does not know the Detexis system, which I suspect, or he has other intent which I also suspect. Just coming back to really finally sum up your question: I do not sit here today to denigrate Mr Young's technology. I will not do so. He has very good technology. I do not sit here today to denigrate Dr Young or his fine company. They are a good hi-tech company producing good products. We have never said anything to the contrary. But to draw on a false assertion that the product selected by the South African Navy for installation in its critical war fighting systems, which may be called upon to defend our nation, to draw on - that is an obsolescent system and in fact a dud, in what is essentially, as you have heard over the last several days, to be essentially a commercial motive behind this entire exercise, is one thing, but the message you send out to the body public that this navy in fact is going to put to sea to defend you, Mr and Mrs Public, in obsolescent ships, is frankly - I can only describe it as malicious. I can only describe it as having an intent which has nothing to do with the commercial issues at hand. One can argue the toss about whether he was entitled; one can argue the toss about whether he was unfairly treated in the contracting process, and one can argue the toss about whether he has a case against any company or whether he has a case against the state. Of course, our argument in all three of those thing is that he does not. But I am afraid, to mislead the public as to what their trusted defence officials are acquiring to defend them in the event of war, in terms of our constitutional obligation to do so, I am afraid is really not what I would describe as fair practice in this particular case. May I continue?

PUBLIC PROTECTOR: Yes, you were busy with the report. In his paragraph 282 he had said that in late May 1999 it became apparent to the JPT that I was not going to accept our IMS's de-selection without a formal complaint. He puts that as the reason why you engaged in the study which you were currently referring to now. Is that correct? -- That is absolutely untrue, and I now need to draw your attention to the project control board minutes, which I reported at the time, where we reported on an alternative offer, and we reported our intentions to carry out such a high preliminary study. If you would bear with me for a second, I just need to find the minutes. On 27 May, the day after the BAFO was received by us, and we had now had a formal offer of an alternative - I must tell you that we had informal knowledge of the contractor's intention to offer such an alternative earlier than that, there was information coming in, we had a continuous negotiation; we had formal knowledge of his offer and formal knowledge of his alternative price and the high level technical description on 26 May. The next day I went to the board and I am afraid, we did not have any discussions between late - in the afternoon of 26 May, and I think it was 09:00 in the morning on 27 May, and I report to the project control board as follows:

"Combat Suite. Point 1: ADS response yesterday, R2 634 million, i.e. offer reduced by R330 million; point 2: large amount still outstanding, eg errors in calculating the selling price to us for Aerospatiale missile and the Thomson Marconi sonar exceeds R80 million; will discuss the issue today. Point 3: Dassault databus (Dassault is the company that owned Detexis at that time; at the time of the offer Detexis was not owned by Thomson, it was owned by Dassault, the company that subsequently sold the Detexis company to Thomson). Dassault databus now offered in place of the C²I² bus; project team awaiting the full specification and system architecture implications before this can be deemed to be acceptable."

The rest is not pertinent to the bus. On that day, in fact on the previous day, on the 26th, Fritz Nortjé and I instructed our engineers to make an arrangement, which they duly did three working days later, on 3 June, they met in Cape Town with this group consisting of Monsieur Royer and another man from Detexis, and then our group was the two engineers and of course the German Frigate Consortium as represented by Dr Vogel. So it is not true to say that we reacted solely and only and in fact at all as a result of Dr Young's complaint to us. We honestly can tell you that that is not true. But of course Dr Young does not know what the instruction was behind the commissioning of an internal preliminary report, and in fact it is listed and headed as a preliminary technical report. He does not know this, because he is not party or he was not party to internal discussions between the project executive and the project team members. At least he is not party to all of them, I understand.

Maybe just to follow up on that: At 283 he cites the number of reasons why C²I² should be retained, the 15 reasons why it should be accepted and the six negatives why it should not be accepted, and he goes on to conclude in that paragraph that in any event the ultimate recommendation of the evaluation was in favour of the IMS in preference to the Detexis Diacerto CSDB. Is that correct? -- That is simply not correct. I want to state from the outset that those very high level preliminary findings by our engineers, both of whom are absolutely prepared to come and testify to this committee exactly what I am saying. There is no discrepancy there whatsoever. We had total unanimity at the end of the day, but I will come to that in a moment, but the man who wrote this document, Mr Lewis Mathieson, an engineer at Armscor, and of course he wrote it with his colleague Lieutenant Commander Cothill, stands by the fact absolutely that this was a preliminary report to the project executive. These 15 points in fact, I actually have 16 points on the report that I was given by my engineer, were not in any way what Mr Young alludes to in terms of these prescribe the acceptance of - or the categoric recommendation of the IMS system and the other points categorically proscribe the selection or the recommendation of the Detexis bus. Firstly, that was not the intent of the investigation at all, of the preliminary evaluation. Secondly, at that point in time, as is stated in this report and it was stated to us categorically when the report was given to us and in the worksessions we subsequently held thereafter, it was based on the preliminary high level documentation that was provided to them, which was not an in-depth specification of the Detexis bus. That only came a few days after this, and I will come to that in a moment. But I also want to come to the conclusion that Dr Young draws. Dr Young draws the conclusion that what was being recommended here and proposed was that his product be the one that is selected, and in fact I want to read to you exactly what that says:

"From a technical point of view - and I will come back to that in a moment. From a technical point of view a Combat Suite project team - my two engineers - proposes that the current architecture based on the IMS be retained."

They in no way said that this prescribes the retention of the product from C²I². I read again:

"From a technical point of view the Combat Suite project team proposes that the current architecture based on the IMS be retained for the following reasons"

and the architecture was essentially retained. But I also want to go further. We did not allow, very specifically, our technical team to go and evaluate anything to do with costs, and we did not allow them to evaluate and come back and give us a full programme risk assessment of what the implications would be of a bus failure on the contractual scenario, of a bus failure on the performance guarantees that the main contractor had to account for, and that we would have to account for in terms of our calculations, and in particular we did not allow them to discuss cost at all with their Detexis engineering counterparts, because that was not what the aim of this investigation was. When we propose and make recommendations to a higher level about the implications of a particular system, we do not only bring into that room the technical implications, which is what this evaluation report is at its very least - rather, at its very most. We bring into the room all of the implications. We bring into that meeting, as we did to the PCB, the implications of the contracting model, the implications of the main contractor's performance guarantees, the implications of having to be obliged to fork out the risk factor, whether we liked it or not; it did not matter. If we had gone for the IMS bus based solely on the technical evaluation, preliminary evaluation, those are the considerations which we brought to the PCB. But I wish to go further. This was not the only document and the only process on which we based our evaluation that the Detexis bus would do the job. Quite the contrary. It is a three and a bit page document, commissioned solely to have a look and come back and tell us whether it would do the job, and that is what the report does. It does exactly that.

Are you saying the evaluation process occurs in stages, the technical aspects, risk aspects and so on? -- Yes, but even on the technical aspects, we then immediately, once they brought this report to us, we sat and we had a work session on this, and we said, okay, what you are saying to us, that this thing can do the job, but that it has got warts and spots; at the moment we do not really know how it works or we do not really know how well it works. So I was not prepared to go to the project control board at that junction, on a preliminary technical evaluation, notwithstanding the risk and the cost issues, just on the technical side, that was not more thorough and complete. So what did we do? We invited Detexis to send a senior engineering team, which met with us in a work session during the course of June, at least one of which has been recorded, on 16 June, but there were several sessions; we engaged them immediately at a more deeper technical level; we asked them to bring their technical specifications, and we had a very thorough process of examining the databus. There are other reports, there are further reports, also written by Mr Mathieson, which go beyond this report, and clearly indicate that the Detexis bus is not, even in some of the negative areas that he said here, that they were in error; they did not have the necessary amount of information to make those statements. They were also making guesses and assumptions, which subsequently proved not to be wrong, but which subsequently proved to be in error because they did not have the necessary detail. So by the time that we went to the project control board, on 24 August, we - and now I say not only myself and Mr Nortjé as the project executive, we, the entire project team pertinent to the bus issues, both of my engineers and both myself and Mr Nortjé were completely unanimous in that the Detexis bus not only will just do the job; it is a perfectly satisfactory technical alternative to the IMS bus. That is why when we went to the PCB ...

I do not wish to belabour this point, but just maybe, the concern would be that when you - this is totally from a lay person's point of view, when you look at some of these things and you know that this product, however good it looks on paper, and however good its originator's claim is, it is untested. I am already jumping to the risk assessment kind of thing, where you say, why should I go to the technological assessment process which is also quite elaborate, when I know it is untested and we have products that have been used that are tested, because it seems that that was quite a crucial element, and I took it that you would have known, having worked with him before, that we are dealing with a fairly good product, that because it is unlikely to see the light of day, because there is a great risk, as has been addressed. That is how I am trying to think, whilst understanding the various reports that you have referred to now. Why do you therefore go to test a product that you know on a fundamental consideration is not likely to see the light of day? -- Do you refer to why we considered C²I² a potential product in the first place?

Yes. -- The reason we did that was because we had invested in technology with C²I². We had brought his product through a technology programme to a certain degree of demonstratability under a technology demonstrator. In other words, we believed that subject to further testing and subject to risk money being incorporated on the programme to do those tests and to do those analyses, that it would be conceivably possible to consider his bus as having the necessary potential, but the key issue here was exactly that. That is why we did not essentially quibble with the main contractor about him coming to us and saying, if you go that route, then it is going to cost you R42 million more; R12 million to do this international study and R30 million to keep back as a reserve in case we have to replace the bus, and that is what the main contractor did. So we could not argue that our telling the main contractor to take this technologically untested - or untested product arising from a technology demonstrator without any risk apportionment in the quote of - and that was the key issue, as I said yesterday, that Dr Young did not include any risk coverage in his quotation to the main contractor, alone amongst all the local contractors. So the main contractor had this dilemma, and we had the dilemma because of the contracting model. That because there was no allocation for any risk work on Dr Young's product, in his quotation to the main contractor, the main contractor said, either Dr Young picks up the tab for this, or we, the state, pick up the tab for this. So in that particular circumstances, that is when we said no, we will not pick up the tab for this and we will not allow you to absolve the risk, the commercial contracting risk for this thing. So your question is a valid one, of course. In theory we could have, and in retrospect maybe we should have, not entertained the idea of the C²I² bus at all, but that was not our intention, and with hindsight that is probably a valid observation, but at the time we honestly believed that Dr Young's bus had the potential to be offered.

And of course it was a South African company? -- It was a South African company too, yes, indeed, and there was no malice in that at all. There was no intent on our part whatsoever to take away the food from the mouths of the South African, particularly one that we had nurtured so carefully through this entire process.

MR VAN ZYL: I just need to clear - I still have uncertainty about it. You made a statement that it was definitely the same architecture being used. Just back up your statement for me please. -- The fundamental architecture of the Detexis bus system, in terms of our functional requirements, not the actual design requirements but the functional requirements, will this architecture provide the same output in terms of the functional requirement, and between the two buses there was nothing. There is still today nothing in it. The actual way you connect your bus, whether you use a fibre-optic switch there or whether you run your cable there, is certainly not the same; they are two different products. You do not apply an FDDI technology in terms of its physical and even its software application, the same way as you do an Ethernet. That is no question about that, and I cannot say to you today that the architecture that we have building now on our ship is identical to the user requirement specification architecture that was our requirement specification.

During that evaluation it was the same? -- No, it was not the same, and that is what our engineers point out, that it is not identical to the architecture of the user requirement specification, because it is a different technology; it is a different technology package. So when I say the architecture implications - and I did not mean to mislead you there, but possibly that was what you understood. The architecture implications of the Detexis bus versus the C²I² bus, as far as we were concerned, are not significant. They have no significance in terms of the functional output of this bus providing a service for this naval ship versus that bus providing a service for this naval ship. You cannot put an Ethernet system together exactly the same way that you put an FDDI system together. They are two technology standards. Much has been made of this, but we do not agree with Dr Young. It is his right to say this, of course, as an engineer, but the fundamental underpinning of his argument is that we should have willy-nilly, slavishly, stuck to the requirements specification design, and when we introduced an alternative architecture, which is completely similar in its output, we were wrong. You cannot introduce another technology as an option and expect it to be put together in exactly the same way as a requirement specification written round an FDDI technology. It is bizarre to even consider that we would do that, and underpinning his fundamental argument, which we challenge, is that we had no right to consider alternatives, and we had no right to consider alternative architectures. I am afraid to tell Dr Young, we had every right to consider alternative architectures. He was not picking up the tab for the Combat Suite. He was not picking up the tab for the operational performance at sea. Those are the prerogatives on the one hand of the main contractor, on the other hand of the state. But I have to tell you that we had absolutely no malice or aggression or punishment of Dr Young. It is bizarre to even consider that. In fact, we invited and arranged a tendering process on other subsystems, and I will say later, not as a crumb thrown to him, but as a very genuine concern, and we saved the state millions of rands by doing that, and he in fact obtained the contracting. The navigation distribution system, when we awarded the navigation distribution system to him, as an alternative option, also does not have the exact same architecture as the navigation system that would have been provided to us by ADS, which in turn was the baseline architecture in the URS, because when he proposed his technology as the navigation distribution system, naturally it has a slightly different architecture. But we do not manage at the architectural level; we manage at the result level, at the output level. I am sorry, that is a long - are you satisfied with that? I wish to continue, if I may. Now, I tried to tell you about what the nature of this preliminary evaluation was that Dr Young makes so much of, but chose in his making so much of, to conceal to you the very first and fundamental conclusion of my team. We then went through a process where we thoroughly examined the Detexis bus, with very serious engineering staff, including Mr Emmanuel Marie from the main contractor's side, and I believe there will be a written deposition on that. He is, if not the leading, one of the leading integration experts of naval combat systems today in Europe, and I dare say in the world, Thomson being a very significant company in this respect. So his bona fides, I am afraid, although they have been challenged by others, certainly are not challenged by us. As a result of that process, we brought to the PCB the issue of the databus, on 24 August - if I could just find that - on 24 August 1998, by that stage convinced technically that the Detexis bus was not a dud and in fact quite the contrary; it was a very significant alternative offer, which would save the state R42 million, albeit at the expense of, unfortunately, and we were very - we say that not cynically at all, very unfortunately, at the expense of the local contractor. What we did with the PCB is that eventually we took it to the PCB, in essence there was a choice between the three alternatives at the PCB, and we went into those yesterday, but I wish to repeat it. We had an alternative that had a high price and very little risk, that was the C²I² databus at the contractor's risk, and I think I have illustrated that that was not a choice that we had to make. If we had prescribed the C²I² databus in category B, we would have to pay a very high price for it, albeit little risk to ourselves, because in category B it would be the main contractor's risk. A low price with some risk, in other words, the C²I² databus in category C, which was at our risk, and that risk, as I have said, it is not exactly quantifiable, but the implications of that risk are severe, that if it failed, we would have to at our risk replace the bus, and we would have to undertake the implications of pinpointing the point of failure between the main contractor and the bus. Then the third alternative was a low price, also with no risk to ourselves, and that was the Detexis databus, which was low price and low risk. Now, any tender process that I am aware of and any tender regulations that I am aware of obliges us to consider the best option for the state, not the best option for a commercial contractor, and the best option for us without any question was the one that had the low price with the least risk, and as I said to you yesterday, the issue - and the PCB minutes reflect that - was not saying, gentlemen, pick between these two buses, I give you a full technical report of this one, I give you a full technical report of this one, I give you a full commercial - etcetera. That is not the way the PCB operated, as the admiral indicated yesterday. It is bizarre to consider that we should or would have taken a preliminary high level report commissioned internally on a project team which had no status except within that team, to the PCB, which was alleged by Dr Young, and I tell you now, personally it was put to me by members of the forensic committee, forensic team, which it is their perfect right to do so. But my response then and my response now remains, that we would never have taken a preliminary high level, untested, unsubstantiated technical report that was commissioned internally, solely for the further internal considerations, to a higher forum until we were certain of our facts. It is only when we were certain of our facts, several weeks later, in fact a month or so later - two months later, that when we went to the PCB we were able to state, gentlemen, these are real alternatives and these are the risks and cost - this is the risk and cost scenario with these buses. Now, one of Dr Young's difficulties that he has already - I will not say admitted, that is too great a word, that he has already acknowledged - is that very unfortunately for Dr Young he did not have, and still hopefully does not have in his possession, the first eight pages of Appendix D of the PCB minutes of 24 August. He only, unfortunately for him, was given by his source page number 9, which does not deal with the bus at all. The first eight pages deal with the category B and category C, where the databus is explicitly listed and the risk issues around these buses in terms of high risk, low risk, high cost, low cost are in fact enunciated, and in fact are - that formed the basic kernel of the information provided to the PCB and the debate that ensued in the PCB. In that Dr Young's source unfortunately only gave him page 9 of the nine page appendix Delta to which the minutes refer, around which the decision was made, he would have drawn the conclusion, and that is the danger in selective - or the danger in obtaining information illegally or irregularly, that you are not certain that you are getting all the information from your source, particularly if it is in magnetic media, in that he would have assumed, and in fact it formed the basis of his testimony, that assumption is underlying that, that what the PCB minutes of 24 August reflect is a discussion on Appendix Delta, and an agreement on Appendix Delta, and when you turn to his Appendix Delta, the bus is not even mentioned. Again I am afraid to inform you that he did not have the first eight pages. These are in the record and they are available. I would rather not provide him with a copy of that PCB minute.

The Detexis system, which category is it, in terms of the risk category? -- Category B, absolutely. We were not prepared to go away from that, as I explained yesterday, because of the implications. So in a sense you could say that the choice on the state revolved around whether we were prepared to take the risk of the bus that was provided by Dr Young, and relieve the main contractor of that risk, in other words that the state had the choice to take the databus out of category B, and we had the full choice to put it into category C. That was our choice and that was the decision the PCB made. Our strong recommendation to the PCB, as professional combat officers and professional engineers, was not to do that, and the PCB unanimously agreed with us, because if we had done that, then the State, the Navy, Armscor, the Department of Defence would carry too great a risk of failure of the entire combat system, and therefore of achieving success with the Corvette capability, and we would have got into incredibly sticky stuff the moment there was a combat management failure, because ADS would be in a position - I am not suggesting to ADS's counsel that they would have done so, but they would have had the potential to say to us, well, it is not our CMS; it is your bus that is causing the problem, because you cannot determine where the point between the data lying on the bus is at fault or the bus's performance is at fault and where the combat management system is at fault. So we went to the PCB, and I stand one hundred percent behind that recommendation today still, irrespective of what has transpired, gentlemen, do you accept the risk for the databus or the combat management system in tandem, and they agreed fully and that is where we are today, but they were also not prepared to go to higher authority and seek a R42 million increase in the ceiling, merely to afford a commercial benefit to a local company. That was the pill that we had to swallow. So in this process of examining the Detexis databus, and subsequent to that, up to the contracting phase where we went into very, very detailed specification examinations, leading to contract, because of course the Detexis databus is part of the main contract with the main contractor, which the Minister signed on 6 December 1999, and prior to that we had to thoroughly acquaint ourselves with every single aspect of the technical specifications, in that process we were unanimous, and we are unanimous, in the decision that the Detexis bus fully meets the functional user requirements. I say that again, it fully meets the functional user requirements, and that in certain aspects, which have not been revealed to you hitherto, but I am about to do so, it in fact is superior to the technology proposed by Mr Young. I do not, however - I repeat, I am not here to denigrate the fine technology of the little company C²I², and neither the technical competence of Dr Young in his personal capacity. But it has to be said that there are certain aspects which you have not been informed of to date by Mr Young, because it does not support his argument, that the Detexis bus has characteristics that are in fact superior. So those characteristics originally thought to be deficient in the preliminary report, precisely because it was a preliminary evaluation at high level, have in fact proven to those fears expressed in that preliminary report, evaporated; they evaporated before our decision and by the time we got to contract signature, they were absolutely gone. Now, Dr Young in his evidence selectively takes a few, albeit very significant, parameters of our user requirement specification. He takes timing, for example, and he says that the latency - latency is the word they use to describe it - of the bus in terms of our user requirement specification, must be a maximum of 5 milliseconds, and he says, his bus makes 5 milliseconds; no doubt, he is 4.7 or 4.8 milliseconds. He then goes into a document and he quotes from the document - it is an ADS document to the project team - Combat Suite Timing Document of 15 August last year, 00, and he extracts from that timing report the notion, and in fact he puts it to you, that the Detexis databus has a timing latency of 6.5 milliseconds, and therefore the Detexis bus does not meet, as his bus does, the user requirement of a maximum of 5 milliseconds. What Dr Young is not telling you is that that timing report is a timing report for the entire system, and that when all thing are taken into account, the contribution that the databus can add to the timing of the entire system, may not exceed 6.5 milliseconds. It is by no means the performance specification of the databus, and I will use an analogy. If your requirement is to go from Pretoria to Cape Town in 18 hours, you do not have to drive faster than 100 kilometres per hour, because it is 1 800 kilometres, but your car does not only do 100 kilometres an hours, unless you have got a car like mine; your car probably does 200 kilometres an hour. That is the analogy that Dr Young is using. He is saying in this timing document, where the maximum contribution that the bus can add without the whole system breaking, is 6.5 milliseconds, he says that is the Detexis timing. I will tell you, that is simply not true, and I wish to enter into the record now that the Detexis timing latency is in fact 1,6 milliseconds, which is well within the 5 millisecond maximum latency required of the bus, and I tell you now that Dr Young knows that; I cannot say categorically he knows that, but it is my strong belief that he knows that, and that in fact he has selectively again taken something from a completely different report, which has nothing to do with the bus specification, and proposed it to you that this somehow meets his argument. So that is just the one aspect that I wish to highlight. I wish to highlight another few aspects with regard to this. He fails completely to mention to you in his deposition the very, very significant parameter of jitter. Jitter is on a databus, if you say that information must go from A to B and there is a certain time, it is the relative error of that certainty that you have at each of those points. It is called jitter. Now, that is an absolutely critical parameter of a databus, and in particular a critical parameter on his - Dr Young's databus. Now, he fails to mention that the specification for jitter is a maximum of 675 microseconds. His bus meets that, that it is more than 250 microseconds. It meets it, but it exceeds 250 microseconds. The Detexis bus is below 250 microseconds. In other words, the Detexis bus's jitter performance is better than his jitter performance, but he fails to even bring the jitter in as a parameter for your consideration in his statement. I give you that as

another example of selective reporting, if you will. There is a thing called a backbone in a databus. It is the fundamental fibre cable between the switches, and every bus - his bus has a backbone, the Detexis bus has a backbone, and so on, and this is the inherent ability of this medium to transport data across it, in terms of speed. Now, what he fails to mention - why he fails to mention the backbone to you, because the performance of the backbone in terms of data speed of the Detexis bus is far better than his bus. The specification is 100 megabits per second, and his systems meets 100 megabit per second, but the Detexis bus is one gigabyte per second, 10 times faster. But of course he fails to mention that at all in his report. But he fails also to mention that the Detexis bus has a fixed delay across it, and his bus does not have a fixed delay across it. Now, that is quite significant in this exercise of which bus is superior, and I am not claiming that one is superior to the other, but when you have a fixed delay across a databus, you do not require time stamping. It is a critical parameter of a bus, to be able to time stamp your data so that you can track this data right through across the bus. Now, in his system time stamping is critical, for time critical data, you have to have time stamping, because for time critical data you simply will lose all track of where that data is going and when it is going. With a fixed delay across a bus, such as the fast Ethernet technology, there is no requirement for time stamping. So that ceases to become a critical bus risk parameter, but of course he fails to mention that to you at all, and again, I need to stress that I am not denigrating the technology of his bus. There is no question that his technology would also have met the job that we had in hand, risk issues aside, just on a technical side. I have mentioned before that he fails to mention to you that his FDDI standard is nowhere near as universally used for LANs as the Ethernet standard in the world today. In fact it is something like a 90% usage for Ethernet and FDDI is a portion of the remaining 10% as I know it. I do not want to categorically state those percentages, but that gives you the order of magnitude. He also fails to mention that FDDI as a technology is starting to get its limitations. That is one of the reasons the Royal Navy has gone to fast Ethernet. He himself knows this, because during the course of his technology demonstrated development, he had to come to us for extra money to replace some of the chip sets that he was using on FDDI, because they had become obsolete. Again I am not saying that his system is an obsolescent or it is an incapable system. But again, that indicates to you that the management of obsolescence, on a system that the world is using 90%, is much - is logically going to be much better than the management of obsolescence of a very, very niche technology such as FDDI. He states that the - or he implies that the bus that we have selected has got less growth potential than his bus. Well, I need to tell you that that is also simply not true. We have, as I said, right from the outset when I started giving my presentation to you, a very significant strategic necessity for growth potential, physically, electronically and so on. Well, the Detexis bus that we have selected has a greater than 100% growth potential on our system. His bus also has growth potential, but it is not anywhere near that order. So I do not understand that Dr Young, knowing these things, he is an expert in bus systems, he is an expert on Ethernet, he is an expert on FDDI, knowing these things, could possibly have made the statement that the Detexis bus has not got the growth potential required across this programme. It is simply untrue. The FDDI XTP technology, which is what he was offering, is as a technology in use in United States ships at the moment; it was installed in the 90s and it is working, and there is a standard attached to it. So I am not going to do what Mr Young has done with Detexis, and denigrate the FDDI standard. All I am saying to you is that his denigration of the Detexis bus is simply untrue, selective, malicious, and in fact in terms of his attack on Detexis as a product, probably defamatory to that company, but that is something for them to decide, but most definitely misleading to the public of the Republic of South Africa in terms of what we are requiring to equip our front line combat vessels for their defence. That ends my item with regard to the technical issues relating to the bus.

PUBLIC PROTECTOR: I just wanted to put to you, page 36 where you are saying that the South African Navy specifically wanted to move away from the point-to-point architecture. -- Paragraph?

Paragraph 36:

"The SAN specifically wanted to move away from point-to-point architectures as these had been found to be extremely limiting by the SAN, as well as by other navies."

But to an extent you have addressed that. -- If I may just comment very briefly, and I promise to be brief. That is the premise that this is a point-to-point system. Detexis is not a point-to-point system. It is no more or less point-to-point that his system. The point-to-point is when in the old days you had a gun, you had a tracker, and you had a command and control system, and the gun connected to the command and control system, and it connected to the tracker. The tracker connected to the gun, and it connected to the combat management system. The combat management system - so you had these massive point-to-point wires running all over the place. You did not have a bus where data runs - that is why it is called a bus, a databus; it runs in a route; it stops and runs as a bus does around a city. So instead of going out in what we used to call a star configuration, a gun would connect to a whole lot of things, the gun now only connects once. It tells the system, I am here, I am the gun, I am performing like this, and everybody listens and draws off that in this bus system. So that the Detexis databus is not a point-to-point system. So if you take as your premise that the Detexis bus is a point-to-point system, then that is - if you take any premise, that is a perfectly true statement, but he uses that statement in the inference that ours is a point-to-point system. It is not a point-to-point system. We would never have allowed a point-to-point system, and in fact our categoric requirement is not to have a point-to-point system, but now you enter into the arcane world of engineers arguing about the finer points of exactly how much less, and exactly how much more of a point-to-point of a bus system a particular technology is. Well, again at the end of the day I rely on telling you that the Detexis bus system has been selected by the world's leading navies for the world's leading ships in their primary combat role.

Precisely, that is what Dr Ramaite was trying to address, to avoid the engineers' point scoring kind of - referring us to where these systems have been used effectively, currently. You have done that. -- But I also have to tell you, I am not an engineer, I am a combat officer. I know about these things, but I do not know about them with any intimacy, like I know of certain beautiful actresses, but I do not know about them with any sense of intimacy. If you would allow me now to go to the next point, which is my point about the SMS. Dr Young essentially has the theme that he is entitled to supply the SMS, because his price was lower, and that as I have said in my executive summary, his price was lower, but that we added, irregularly and unfairly, we added handling fee, we added an integration fee, and we added an extended warranty fee, although he did concede on the extended warranty fee that that was perfectly acceptable. He also during his re-examination stated very categorically that at the time we should not have done any of those things, because after all he was bidding in competition with ADS. At the time ADS did not have a contract, and was not the selected supplier of the equipment, and therefore he should have been treated exactly equal to ADS in terms of their basic price that they offered us for the SMS, and his basic price, and may the best man win. He stated in his re-examination categorically that at that time he had equal status to ADS in the competition. Well, I am afraid to tell Dr Young that that is simply not so. He did not have equal status to ADS at that stage of the competition, because ADS in the offer by the German Frigate Consortium, given to us on 11 May 1998, more than a year preceding the SMS issue, they offered to the South African government the following, and I read now an extract, page 34 of volume 1, part 1 of the German Frigate Consortium offer to the South African government to supply Corvettes to the South African government, dated 11 May 1998. Again Dr Young does not have this offer, and neither will he hopefully ever get this offer. It is a commercially sensitive issue between the South African Government and the German Frigate Consortium. However, of course you are most welcome to have this full offer given to you. I read from paragraph 1.6.1:

"Direct defence industrial participation (in other words, the supply of goods and services directly, that will go and be fitted on the Corvettes) it is proposed (in other words this was their proposal) that in case of contract award, the companies of the German Frigate Consortium and Altech Defence Systems (Pty) Ltd form the South African Patrol Corvette Consortium in order to act as vessel contractor. Furthermore, it is intended to purchase systems and equipment from a South African industry for the production of the Patrol Corvettes, to at least 10% of the ship platform element value."

And they go on in another paragraph to say, to at least 60% of the Combat Suite value, and they do not list or nominate or offer any other named South African Company in their offer. So on 11 May 1998 Altech Defence Systems had in fact been offered to the South African Government, to form a South African Patrol Corvette Consortium. The South African Government went on, on 19 November 1998, the cabinet of the government of the Republic of South Africa, selected the German Frigate Consortium and their offer, i.e. inclusive of ADS, as the preferred bidder, officially designated preferred bidder that would now enter into negotiations and would now conclude a contract, subject of course to acceptability in terms of cost, in terms of scope of supply and all sorts of other things. So when we came to examine the SMS, ADS was already acting in concert with the German Frigate Consortium as the vessel contractor. We of course understood very categorically that that did not entitle ADS to have pre-knowledge of the pricing in a tender process that involved themselves bidding for any subsystem. That would have been a contradiction of another part of the tender regulations, and in fact it would have been extremely irregular. So we obliged the German Frigate Consortium, and exclusively the German Frigate Consortium, to seek separate and alternative quotes from the manufacturers. We could have legally, but not morally, have asked this consortium consisting of ADS to ask C²I² for a quote, but I put it to you that that would have really strained the bounds of credibility. So we in fact did not allow ADS to ask for a quote from C²I², but we obliged the German Frigate Consortium to get separate quotations, and we never invited or entertained any ADS participation in that exercise, except to give us a quote as well. So we received these quotes, I believe, perfectly cleanly, which is of course not the allusion that is made in Mr Young's evidence, and I will come back to how we acted with regard to the sensitivities of the German Frigate Consortium vis-B-vis local industry, at a later moment. But we cannot escape the reality that any system that was going to be acquired from a supplier that was not ADS, was going to result in charges to the State of a handling fee, of an integration fee, and of an extended warranty fee, exactly in the percentages that were given. In fact, we even went back to ADS separately to conform - rather, to confirm, before we applied them, to get them to state categorically in writing what those would be, and to hold them to them. Thus those fees are apportioned to every single supplier of the local industry, the Kentrons, the LIWs, in this contracting, irrespective of whether it is a category C or a category B risk. Those are normal commercial practices, that if ADS is going to buy something that it is going to sell to us from another supplier, they are entitled and did claim the right to add those figures. I might also add that they are rather low, in general commercial practices, and they are particularly low in the field of defence contracting. The norm is between 10% and 15%, but I think they realised that there was a limit to which we would be pushed. However, let us get back to the SMS. Mr Young claims that the SMS competition not only added these things irregularly, but even if he concedes, or even if there was a concession that we had the right to add these prices, which after all were realities that we would have to pay for at the end of the day, then our calculation was wrong. Well, it boggles the mind, because you can take a calculator, and you can add, as we did, 3.2%, plus 7% plus 1.85%, which comes to 12.05%, and you can then apply it to the ADS price in the way that we always apply these percentages, the same way that VAT is calculated. You go one minus 12.05% and you get to 0.8795% of the price, and if you take the ADS price and you - if you take the C²I² price that they had offered to us of R26.42 million, which Dr Young does not dispute, and you divide it by 0.8795, you come to 30,046902 million. You do not come to the figures that he has stated in his report, and the reason I think that he has done it, in this place I am prepared to concede that he has made a mistake, and his mistake is in the calculation that we do, and how we apply percentages for handling fees and percentages for mark-ups, and how Armscor normally applies them, it is applied in the same way that one applies a VAT percentage. So you end up in fact, if you have got a percentage of 12.05% by the way you apply it in terms of your calculation, you end up in fact slightly more than 12.05%, in the same way that when you apply VAT, you end up slightly more than the percentages of the actual VAT. Now, I am prepared to believe that Dr Young is just ignorant of the way these things are applied, but I also need to tell you, even if we had erred by mistake, and we had come to a figure - correction, even if we had not done that calculation and we had done the simple arithmetic calculation that he is proposing, and we had got to him supplying the SMS for a total of R29 610 000, and the ADS's quote was R29 640 000, we would still have stuck with ADS, for the simple reason, there is a difference of R30 000, was in no way a reason to go away from the supplier that had initially conceived this through a technology retention programme, that had all the technical data in place, and in fact was best placed to provide this, because the SMS itself is also not to the same degree as the IMS, the SMS also interfaces with the entire system and presupposes the knowledge of the entire system. So we would have been very hard pressed, even if it was a question of the figures that Dr Young uses, where there is a R30 000 difference, we would still have stuck to ADS, for the reason that to go away from that would have cost us a heck of a lot more than R30 000. But please put that argument aside, because we did not come to R29,61 million for C²I². We came by our calculation, which we stand by, of R30,046 million, and in that case there is a clear winner. Dr Young's problem that he has is that we put onto his quotation handling fees, integration fee, and an extended warranty fee which we did not add to the ADS quotation. That is his problem. Well, I am afraid that at the end of the day, if we had selected his system over that of the ADS system, we, the State, the tax payer, would have had to pay those handling fees. It boggles the imagination, that he expects us to do an evaluation at our level which does not take into account costs that we know are going to accrue in that particular circumstances. I am afraid, I have no other things to say about the SMS. We stand by our prices and we stand by our selection.

PROCEEDINGS ADJOURN PROCEEDINGS RESUME

JONATHAN EDWIN JOHN KAMERMAN s.u.o.

CHAIRMAN: Admiral, you may proceed. --- Thank you, Sir. So then the next theme that I come to from Dr Young's evidence is that his claim or statement or innuendo, or whichever you wish it to be, is that Thomson and France as an entity, France Incorporated as I call it, was irregularly favoured by the state to secure the supply of other sub systems to the

Corvette against more cost effective equipment preferred by the Navy. Particularly in this case, and he mentions them, the Surveillance and Target Acquisition Radar, the so-called STAR, the hull-mounted sonar, so-called HMS, and the surface to surface missile, or the anti-ship missile, the so-called SSM. He says this in an attempt, I believe, it would appears to be from his evidence, that somehow the fact that these items went to French companies is proof or indication that his overall seem that there was an irregular situation pertaining to the award of equipment to French companies, inter alia the Detexis system, inter alia to French controlled companies such as ADS, etcetera, and then this is his supporting evidence, if you will. Well, in this entire report, I personally find that to be the most scurrilous allegation of all, because it attacks the very fundamental basis of our tendering process, of our integrity as a project team, as a project control board and ultimately, in fact, the government integrity. It also implies that we would stoop to selecting equipment for our nation's defence based on a favouritism towards any particular foreign entity, and that in itself is a scurrilous allegation with regard to not only the processes and our official obligations in terms of officials of the state, but also in terms of the commissions we hold in terms of the Constitution of South Africa to uphold the defence of the state and its constitution. And frankly it is the most hurtful allegation of all with respect to myself and my team. And more than that, he bases it, it would appear, on complete ignorance of that process, complete ignorance of the actual value systems that were applied, of the actual technical specifications that we received, and of course of the actual prices that we received. Dr Young does not appear to have in his possession the evaluation, the very comprehensive evaluation reports and the evaluation process that was followed, or the value systems that were applied in these particular competitions. Now I say this, because these competitions were not competitions pitting a local supplier against an international supplier. These were competitions pitting international suppliers against each other, and to make the allegation that we favoured a particular country or particular company, emanating from a country is simply unacceptable. We have in our records, and they are secret documents but they are completely available to you, Sir, the value systems for those items that were duly recorded and registered prior to the receipt of offers, as the tender regulations prescribe. We have the rough handwritten notes of every single member of the project, of the evaluation teams that took part, as well as of course the final draft evaluations and the evaluations that were duly signed off by the officials responsible. We were exceedingly careful to ensure that quotations from these international companies were received by us only via the German Frigate Consortium, which has no interest in any one of those companies, and I will just like to run through the list quickly. On the STAR, that is the radar, we received quotations from Messrs Thomson, which is one of the world's leading suppliers of naval combat radars. It is not because it is a French company, or controls ADS or had any shares in ADS. It is one of the leading suppliers of tactical naval radars in the world, supplying almost all of the NATO navies with radar, including the German Navy, the Dutch Navy, the French Navy, the Belgian Navy, the Swedish Navy, the Norwegian Navy, and I can go on. Another competitor in this STAR competition was Ericsson of Sweden, completely unrelated to us or to any of the companies that are part of our local industry, except now, latterly, Ericsson and the Celsius group have acquired an interest in Avitronics, but it certainly wasn't so at the time. And the third company was Damler-Benz Aerospace of Germany, at that time a fully German company, with a radar unit also providing, like Ericsson, very fine suites of naval radars which equip again the Danish Navy, the German Navy and others. These companies are all fierce international competitors, and that was very good for us. And they all are leading suppliers, as I have said, of naval radars. But even then we went to extraordinary limits to ensure that we evaluated it in the most fair and the most neutral way that we possibly could. In fact, we severely inhibited the capabilities of our team, because I and Mr Nortjé decided that we would not allow certain individuals in local industry and from our defence community to participate in the evaluations of these radars, not because the individuals themselves had any interest, but that there was potential links between those people commercially and so on. For example one of the finest radar brains in the country from the naval side is a man called Mr Simon Norval. He works for IMT, but he also worked partially for Avitronics as a company. And Avitronics had started commercial discussions with Celsius at that time. They hadn't concluded any equity sharing arrangements, but they had started. And he is a man of fine integrity, but we could not take the chance that there might be the allegation that he assisted us. We also did not include in our team people like Francois van der Merwe, Mr Francois van der Merwe, probably the leading radar designer in our country. He works for the CSIR for Defencetech. But again, he would be working on the part of the radar system that would be supplied by Reutech Radar Systems. So we took extraordinary lengths to make sure that the evaluation team was not, could not be, you know, subsequently accused of any bias towards one particular company or another. We assembled for this particular occasion a group of experts, the best that we could. Their activities were led by myself as the project leader, with my colleagues from Armscor and of course from the Navy, but also other experts from other divisions within Armscor, as well as from other scientific institutions. We evaluated the radars, and in the case of the offers that we received, the Thomson STAR radar called the MRR, multi-role radar, won hands down on performance and price. It is by far the better radar of the three options that we had to evaluate, not to say the other radars weren't good. But we are absolutely convinced, and we didn't make up the evaluation as we went along, it was against a value system duly vested and duly closed before the tenders were received. That is on record, sir, in a secret report. We did exactly, followed exactly the same process with the selection or the recommendation rather, we don't select, obviously, we recommend to higher authority for further ratification, the anti-ship missile, the so-called SSM, and the hull- mounted sonar. In the case of the hull-mounted sonar the competitors were Messrs Thomson/Marconi, at that stage a 50/50 joint venture between Marconi Sonar Systems of the United Kingdom and Thomson of France. Again - I beg your pardon, other competitors were STN Atlas, a German, Anglo/German company, operating out of Germany and Alenia of Italy. All three companies being world leaders in their class of frigate sonar supplies, marvellous equipment equipping navies all over the world. That was a close call, because unlike the radar, where the Thomson product won hands down, it was a very close call between the Thomson/Marconi product and the STN Atlas product. The Alenia product didn't pass the first round of our evaluation, because its price performance was very, very poor. And that is no denigration of Alenia, it is wonderful equipment, but their price was rather high and it well exceeded our budgetary estimates and our budgetary abilities. So we had a vigorous competition remaining between STN Atlas and Thomson, who go hammer and tongs at each other every day in the international market. They are the two big contenders, competitors in Europe.

And the Thomson product at the end of the day squeaked past the post in terms of price performance. Again, against value systems duly registered, against a vigorous evaluation by men of character and integrity, and again an evaluation team that consisted of several experts from industry and Armscor and the project team and the Navy. We were inhibited again in this competition from utilising the sonar expertise that lies in our industry, and sonar is a very specialist technology. And the sonar expertise in our country, primarily unfortunately for us in this particular case, lay in the company called ADS. They are the only company that had ever produced a sonar system in use in our nation in operational service, and in fact at that time were busy completing the upgrade of the sonar systems for our submarines. Well obviously we couldn't utilise any expertise from that company, not because they would necessarily have favoured any one or other of the companies, but because of the situation of a link of equity between ADS and Thomson, one of the competitors. Again, those are men of high integrity and I am not alluding at all to the fact that they may or may not have favoured one way or the other. They are engineers. But all I am alluding to is that we took extraordinary measures which inhibited us from utilising the best men in the country to do the job. But I have to tell you that we have no mean engineers in Armscor on sonar and I am perfectly happy that we did a very thorough evaluation. But I reiterate Thomson/Marconi product won on its own merits without any interference, without any inference, or without any pressure to go towards Thomson. And any allegation to that effect is completely scurrilous. On the anti-ship missile side, we had three competitors. One was the MM40 missile from Aerospatiale, a French company. The other was from Saab, a Swedish company, RBS15 missile. And the third one was the Poliphem missile from DASA, Damler-Benz Aerospace. It really wasn't an even competition as far as the Poliphem missile was concerned from DASA, because they didn't make the very first round of evaluation. In terms of technology risk it wasn't a qualified product and we weren't going to make, this is our main weapon system. The reason the Corvette exists is to kill other ships with that weapon. All of the rest is peripheral. But secondly, it didn't make the grade in terms of our minimum technical requirements, in terms of warhead size, in terms of range, etcetera, etcetera. So it didn't make the first minimum filter that we applied technically on this thing. So the competition was really between Aerospatiale and the RBS15. Again, related to our expectations as a Navy in terms of our requirements for a missile, and the reality of the commercial contracting and buying what we can afford, we would obviously have preferred to have a missile with as long a range as possible, or a meaningfully long range. And our URS states a missile requirement with a range of I think 125 kilometres, if I am not mistaken. And a whole lot of other things, a land attack capability for further upgrading and bla-bla-bla. But again, we were faced with a situation that neither of the two missiles that we had specified, rather neither of the two missiles that were on the table for evaluation before us, and incidentally the missiles that I have indicated to you are the world leading non United States missiles, the Aerospatiale missile and the Saab missile, between them apart from Russian missiles really equip the Western navies per se. We had neither of those two options fully met our user requirement. At the end of the day one of the major decisions that the Naval Board made in its quest to lower the cost of the combat suite and thus the affordability of the whole Corvette as a whole, was to reduce the initial batch of missiles from 32 missiles to 17 missiles. And these are very expensive things. They approach R20 million apiece. So if you reduce by 16 missiles, or 15 missiles, you can imagine that is an awful lot of money. It is a R300 million reduction, just be going there. And because we are not at war, the Naval Board was satisfied that they could save money by not buying as many initially as we intended in the requirements specification, because the requirements specification calls for 32. A bit later on once you have bought the first patch and you have tested them and so on, you can when you have money available due to a better balance between operating and personnel budget or whatever the case may be, you can buy more missiles.

What is the life span of these, incidentally? --- It is a 30 year missile, at least. There are some deficiencies, of course, depending on the propulsion. If you have a solid fuel propulsion system you need to replace the motor. It is a chemical reality, it has a shelf life. If you have a liquid fuel propulsion system, a jet propulsion system, you don't have to do that. But in terms of the missile as a viable round, as a viable piece of ammunition, it has typically a 30 year life.

Well, just a minor digression, these are tested, obviously? --- Yes, fully qualified products. Well, I will come back to that in one of the deficiencies of the Swedish product, but it is from a family of missiles.

May I just refer to a point which has amazed me, look at what happened in Iraq and supposedly one of the best, if not the best Navy in the world, and some if the misses that were happening there, and so on, how does it happen with these modern missiles? --- It happens because the modern missile is opposed by modern counter measure systems, sir. That is, missile warfare is a game - well, it is not a game, it is deadly serious - between the missile trying to find you and you trying to prevent that missile from finding you on the first hand. And it is a game between the missile trying to avoid your weapons and you actually shooting, successfully shooting down. I think I have just lost - have I not? Right. And the missile, and you shooting down that missile. So even in the modern age, if weapons and their counter measures evolve in tandem, then the basic principles of combat remain the same. That in the middle ages, if you had a sword and the other man had a sword, and he got a longer sword, you had better get yourself a longer sword. And if he got on a horse, you had better get on a horse as well. And so on and so forth. But the basic principle of tactics, of stealth, of vigour, of bravery, they all remain the same. So in this particular case a missile is not God's gift to fighting. It is, once it takes off your deck it is a dumb machine and it has got to do its own thing. And you in fact depose it by other machines, and it is a tussle. And that is exactly why we spent so much on the defensive side of the ship and less on the offensive side of the ship, because it is more, much more difficult to defend yourself against a machine, than to use a machine to kill a ship. That is in essence what our problem is. It is a very complicated science, and as I said, a deadly earnest one. And nations spend huge sums of money on this very basic idea, and things get out of date. The get obsolete and one could say well, we have a lot of missiles in our inventory right now, we bought them in the 70s and 80s. Why didn't we just put these missiles on our Corvettes? Why are we going to throw them away when they have still got a few years' life left? They are hopelessly obsolete. The Skerpioen missile we have is an obsolete missile. It will very soon be killed in a modern environment. So the missiles that were on the table in front of us, that is the MM40 Block 2 and the RBS15 Mark 3, represented and still represent the front edge of missile technology, anti-ship missile technology. However, there is a point to bear in mind with regard to the RBS15 Mark 3 which we were not aware of when we went out on tender to the Swedes. I don't say they concealed this from us, they are fine people and we had a lot of discussions with them as well as with their navy. But the fact of the matter was, we discovered through a costing exercise that the RBS15 Mark 3 was a paper missile. It had not yet been tested and qualified. Their navy uses the Mark 2 and they proposed to their navy the Mark 3, which is an upgrade, and quite a significant upgrade to particularly the electronics of the missile, as well as the launching system. And we were not immediately aware of the status of the missile, because like any other person who wishes to sell his products, he does not exactly amplify its deficiencies. The fact of the matter was that when we reduced having had, having accepted a tender for these things, having evaluated them to a certain degree, at that very point we were also going through the cost reduction exercise that pertained to the entire exercise and I will come back to it in a moment, where the Naval Board was reducing the scope of the combat suite to fit this quarter into a pint pot, as I averred to yesterday. In this exercise, by reducing the number to be initially purchased from 32 to 17, we obliged the German Frigate Consortium to go back to the manufacturers, and we had done a technical evaluation of both of them but now we wanted a quote. They had quoted for 32, we wanted them to quote for 17. And of course the quote isn't only for the missiles, the quote is for the missile system, of which the missiles are only a relatively small part. I am afraid, the Swedes came back with the same price, almost the same price for 17 missiles as versus 32, and we couldn't believe this. We went back to them and we said gentlemen, what is going on? And they said well, we have a minimum price, a break even price for our investment in the technology of the Mark 3 to bring it to a qualified product. So all of a sudden the clouds opened and we saw the light, that in fact they needed a minimum order of 32 in order to get a pricing scenario where they could offer the entire system at a certain price. If you went under that minimum level, if you ordered fewer items from them, their price still remained the same. So on a price performance basis, primarily, although there were certain distinct advantages operationally with the French missile and that is a fact of the matter, it was primarily on a price performance basis that the Exocet missile was eventually proposed to the Naval Board, which ratified it, which in turn was proposed to the, or brought to the PCB which in due course ratified it. I want, however, to emphasize that the Exocet MM40 Block 2 is the leading European missile and is supplied to dozens of nations and is in fact the front line anti-ship missile right now for many NATO nations as we speak. It is a superb missile. I also want to tell you that people have raised the issue, why didn't you consider American missiles, the American Harpoon missile, for example. We were inhibited in doing so by the decision by the cabinet right at the beginning of this program, that because of the restraining order that, the restraint of trade etcetera with Armscor at the time and was still extant in the American courts, that we would not solicit or oblige our main contractor solicitors any quotations for main equipment from the United States. So we did not consider United States missiles in the competition at all.

Exocet was Saab, or ... (intervenes) --- I beg your pardon, sir?

Saab, Exocet, is it a Saab, produced by Saab? --- No, Exocet is produced by Aerospatiale Missiles.

Aerospatiale, oh yes. --- Yes. Now I also want to tell you that at the time Aerospatiale was a French company and like Thomson had a very large share holding from the French government, because the French government has historically established their defence industry, for strategic reasons with a very large, in a similar way that we did with Denel and others. But Aerospatiale had a very large share holding by the French government, but there was not a Thomson connection per se at that stage. Subsequent to that, there has been a merging and a re-merging of companies in France, and the company called European EADS, European Aerospace Defence Systems I think, I am not quite sure, but we call it EADS, has emerged. Where that company is a holding company for the Aerospatiale business unit, for the previous DASA wholly German controlled and owned missile business unit and others. So this is a re-alignment of business units in Europe. That didn't concern us at the time at all, and still doesn't concern us. We were evaluating products from all of which were foreign products, and there was no consideration whatsoever in our value system, which can be confirmed by perusing that value system, in the ownership or the links or the connection or anything else, for that matter.

I was asking you whether Exocet is Saab, because with this price performance basis that you referred to, K43 you still found that buying 17 and 32 for the same price didn't make any difference? --- No, we did. When we reduced our scope and supply from 32 to 17, the Saab price stayed the same. So here we were going to get half a litre, but pay for a litre. It just didn't make sense. And we then discovered that the Mark 3 had not been, in fact, as had been purported it to be, a qualified product. They needed our money to invest in the Mark 3 to bring it to a qualified product. We also discovered that the Swedish Navy had not ordered the Mark 3, and

were waiting for an external customer, such as ourselves, to upgrade the Mark 3 and then they would hop onto the program.

Test it for them. I see. --- That is typical of navies and I don't blame the Swedish Navy for doing that at all. But we were not aware at the time that in fact that was the circumstance.

So that turned the scales, as it were? --- I beg your pardon?

That turned the balance in favour of ... (intervenes) --- That turned the balance in favour of the Exocet. But I can assure you and your panel that there was no consideration of the fact that it was a French origin missile, or a Swedish origin missile, or anything else. We don't do things like that. Then I come to the third item of supply, which was - I beg your pardon, I have covered all three items of supply. The point that I am trying to make in this entire exercise is that the allusion and the insinuation, the innuendo that drips in Mr Young's allegation that we favoured French companies in the selection of our primary fighting equipment, is simply not true. It is unfounded, and in fact is a mischievous fabrication. He has no knowledge, I would very much hope, well he certainly hasn't indicated that he has knowledge, of any of those tender documents, any of the technical specifications, any of our value system criteria and any of the prices. He quotes a price for the Exocet missile and then goes on to speculate, well this price is so low, it probably didn't include missile rounds. Well, it is an insane suggestion. We are requiring a full missile capability from Messrs Aerospatiale, including the stock holding that I have indicated to you. So I don't know why Dr Young claims to be an expert in the costing of missiles. It is actually not his science. But I am afraid, it is just simply untrue and unfounded.

Of course, you said the Exocet had been used, or is being used by many NATO countries, leading ... (intervenes) --- Affirmative, sir.

It was used, I believe, between the Argentineans and the British. --- It was used, the Exocet MM38 was used - it is an older generation - very successfully, I might add, as you know. It was also used in the Iran/Iraq war in the 90s. It was also used in the Gulf War, but again, older versions. The MM40 Block 1 was used in the Gulf War, and the MM40 Block 2 is a completely different missile. It is a brand new state of the art missile. It is the leading edge of missile technology today. As I have said, the Naval Board was not prepared to compromise on our primary weapons.

(Discussion about recording)

CHAIRMAN: Carry on. --- Right. I am then coming to, if there are no more questions on that allegation, apart from the fact that he has alluded to the fact that these are not the preferences of the South African Navy, I dispute the case. It was taken to the Naval Board and the Naval Board minutes are evidence of this and the Naval Board was unanimous in its decision to support those recommendations. And then it was taken to the project control board chaired by the chief of the Navy in his official capacity, where they were ratified. So I can tell you today that these selections represent the unambiguous preferences of the South African Navy. We now come to theme No 6 of Dr Young's allegations; that he was selected by the State to supply the IPMS simulator, but that GFC deselected him by an unfair process. The IPMS simulator is a shore based training simulator that allows us to train our machinery and electrical operators in the operation and control of the machinery of the ship, as well as in damage control. Mr Young alludes to, and in fact stated so under re-examination, that the South African Navy does not need to have trained people to go and fetch the ships from Germany. I don't know what would cause Mr Young to make that statement, but it is news to me, as the project director, and Mr Young has nothing to do with the training requirements or the provision of training facilities at all on this program. Mr Young made these statements in an attempt to indicate that the time scales which he could not meet in terms of his obligations towards the main contractor, should he be awarded the IPMS simulator contract, were not important, and that therefore his inability to provide the product on time did not matter. This is nonsense. The time scales are not only important to the South African Navy, but in fact are obligations of the main contractor in his main contract towards the State. We need the IPMS simulator in terms of these contracted time scales in order to train our people for the second, third and fourth ship, that is why the IPMS simulator must be delivered with the first ship from Germany. Mr Young presumes to speak on behalf of the Navy's training requirements and time scales, because he was unable to meet the delivery time scales for the IPMS simulator required by the Navy and also by the main contractor. But I am now going to come to the fact that he alludes that the IPMS simulator was selected by the State.

Just to confirm that the delivery of the first ship is in 2002 and that is the time that the IPMS simulator is due to be delivered? --- Absolutely, but I wish to emphasize that Dr Young presumes to make statements with regard to the South African Navy's training requirements and training obligations between the South African Navy and the main contractor, when Dr Young has nothing whatsoever to do with these issues and to use a supposed authority in these matters to justify his inability to meet tender time scales is simply dishonest. I wish now, sir, to read to you, with the permission of the German Frigate Consortium, an extract from the main supply contract between the State and the main contractor with regard to the provision of the IPMS simulator. It is from a page of the contract signed between the South African government and the main contractor on 6 December 1999, and it is initialled by my platform engineer responsible, the German Frigate Consortium engingeering manager responsible, as well as the project engineer. It is a page from annexure A part 6 to the main agreement, and it is designated the Build Specification for the South African Navy Patrol Corvettes. This is the contract that we have currently with the main contractor and the paragraphs deal with the provision of the IPMS simulator. I read from paragraph 13:

"13. The system described above (that is the IPMS simulator) reflects the Siemens offer against the budget included in the Main Agreement.

14. During the Design Phase (which is exactly the phase we are presently in and which covers the last several months during which the IPMS simulator selection was made) the system to be offered by C²I² shall be explored in order to determine a functionally optimised scope of supply. It shall be within the overall allocated budget and functionality and scope of supply shall not be less than that of the system described above.

15. Final supplier selection shall only be made after this detail investigation."

That is the agreement that we signed and was initialled on 25 June 1999, and which was signed by the Minister of Defence on 6 December 1999 and which came into effect on 28 April 2000. As can be seen, there is no substance whatsoever to Mr Young's claim that he was selected by the State to supply the IPMS simulator. He also stated under re-examination that he believes that he is listed on the main equipment list in the main agreement. This is simply not correct, the main equipment list reflects Siemens as the baseline supplier of the IPMS simulator with C²I² as an option; such option to be explored in accordance with the paragraphs that I have just read. Exactly that was done, and the main contractor preferred and selected Siemens as the supplier of this equipment. Mr Young alludes as a fact that there was somehow interaction between the State and the main contractor on this issue, and alludes that he was deselected in this process as a punishment for "blowing the whistle" on the matter of the IMS. In other words we, either the State or the main contractor, or both, were taking punitive action against him for his revelations on the IMS. This is the most scurrilous allegation that I can think of, because we have never had any interaction with the German Frigate Consortium on the matter of his deliberations in his choice of the supplier of the IPMS simulator, except in the early days, that is mid 1999, when we introduced C²I² and their capabilities as a potential supplier of the IPMS simulator to the German Frigate Consortium. I wrote a letter to the German Frigate Consortium saying look, we think you should also consider C²I², as they had received some technology funding for the development of similar systems (generic machinery and damage control simulators), some R800 000 or R1 million, if I recall, and had a reasonable potential to participate in the supply of the IPMS simulator. That letter, however, was in no way a selection by the State or a prescription on the main contractor. It was merely a suggestion that the main contractor consider C²I² as a potential supplier. So it was the State that actually afforded Dr Young the opportunity to participate in tendering for the supply of the IPMS simulator. But we took no part in any deliberations between him and the German Frigate Consortium, neither did we at any time intervene to influence the GFC selection, neither do I believe that the GFC had any sinister motive whatsoever in not selecting him. As the records of their meetings show, which have been provided to this panel already, the German Frigate Consortium had difficulties with his increase in price (56% I understand from the original 1999 quotation), his inability to meet their obligated time scales, his demand that technology be provided to him for free from Siemens, and the inexperience of C²I² in contracting for systems of this nature. Dr Young uses the selection of the IPMS simulator as another example to "prove" that the State, the project team, and the main contractor colluded to do South Africans out of work. This is simply not true. The IPMS simulator and a large chunk of the IPMS system will be provided by Siemens South Africa, by South Africans working in Midrand, working in Johannesburg, etcetera. Siemens has a very large investment in South Africa and there is extensive industrial participation by Siemens South Africa, including the IPMS simulator. So it is simply not true to say that work lost by one South African company will be work lost to foreigners overseas; it is simply not true. I have nothing further to add on the issue of the IPMS simulator. Sir, I am coming to the end of my testimony, but I need to cover one more aspect that was raised by Dr Young in his testimony, where he alludes to the fact that there was no real budget constraint or budget ceiling operating during the selections of the Combat Suite. Throughout the negotiation process for the vessel, including the combat suite, and leading to the final contract baseline for the Patrol Corvettes, the project team, the project control board, and the Naval Board were under the absolute constraint of a cabinet mandated budget ceiling for the Corvettes, resulting from the tender price that had been offered by the main contractor for the vessel in 1998. The tender price included an allowance for the combat suite which was simply an estimate by the project team at the time of original tendering in February 1998, and arising from budgetary estimates that had been taken during the technology retention activity, Suvecs. These budgetary estimates taken in 1997 and in 1998, were estimates based solely on a superficial engineering management appreciation of the possible costs of the equipment that we were hoping to acquire from local industry. These costs did not include any allowance for program risks, contracting models, performance guarantees, warranties, handling fees, etcetera, all of which were costs that we had to take into account in the commercial reality of negotiating a main contract. It also transpired that the prices supplied by local industry were prices mainly from their project management levels, and not necessarily from their commercial, legal or senior management levels, all of which added risk components when they had to quote in the real world for the supply of equipment under performance obligations to a main contractor. The single exception amongst these local companies was C²I², which did not include any risk component in their quotations. So it must be said from the outset that our budgetary estimate for the combat suite derived during a technology demonstrator environment and period, and not including cost components which are unfortunate commercial and corporate realities, but which were unfamiliar to us, coming from a previous contracting environment, was significantly underestimated. Thus the first quotation in February 1999 was untenable in terms of the project budget ceiling and "broke the bank". This was our fundamental challenge during the negotiation phase, i.e. to acquire a combat suite that still met our basic minimum functional requirements, but which was affordable within the price ceiling determined for the Patrol Corvettes. We achieved this in a number of ways. Firstly, we had to look harshly at the functionality and scope of supply for the combat suite that we had originally specified, and the Naval Board had to make compromises in this respect. Thus the scope of supply was reduced, eg. halving the supply of missiles, eg. reducing jammers from two to one, eg. reducing the scope of decoy rocket launchers, etcetera. Secondly, we obliged the main contractor and his potential sub contractors to significantly reduce their prices through a process of vigorous negotiation. Thirdly, we looked at the ship platform to see where we could reduce those areas which were not essential in terms of our strategy of acquiring the best platform that we could afford, but fitting "for but not with" where this was possible, for example the provision of a full nuclear, biological, and chemical defence system. In regard to the latter, for example we gave up the provision of very expensive filters from overseas, although these may be fitted at any time in the future and in fact could be sourced in the RSA.

Admiral, I thought you said that your strategy was to acquire the best ships and to compromise on the combat suites. --- Yes, sir, that was our strategy and which we maintained and achieved. I am referring to those areas of the ship platform which were "nice to have" and not "need to have". Notwithstanding our attempts to ensure that the platform was not overspesified, we still could find areas in the platform where money could be saved without in any way affecting the primary characteristics of the platform that we had specified, for example speed, sea keeping, helicopter operating, signatures, etcetera. So we were able to "rob Peter to pay Paul" between the platform and the combat suite to a certain limited extent. Fourthly, we looked at alternative contracting models whereby a phased approach to the obligations for risk on the part of the main contractor could be entertained for certain local systems, thus the so-called category C equipment model emerged, which saved the State over R300 million. Fifthly, we requested and encouraged the main contractor on several occasions during the combat suite negotiation to offer cost effective alternatives. This he did on several occasions, including, as you have previously heard, the SMS, NDS and the IMS. In this process the Detexis data bus was offered as an alternative to the local data bus which with its risk premium was R42 million more expensive to the State and which in fact caused us to exceed the Corvette ceiling by such an amount. I need also to tell you that even if we had had the R42 million at the time, we would have first considered restoring to the scope of supply and functionality of the combat system some of the combat functionality reductions that had been made with great reluctance by the Naval Board and the project team, rather than allocate the R42 million when an alternative cheaper solution was available. The allegation therefore that there was no price ceiling operating during the negotiations is ludicrous and untrue. The costs ceiling was an absolute reality and a critical constraint during the combat suite negotiation process.

 (Due to problems with the cassettes used for recording it was not possible to transcribe the rest of cassette 43.)

PROCEEDINGS RESUME

JONATHAN EDWIN GOLD KAMERMAN s.u.o.

CHAIRMAN: Mr Kriegler?

CROSS-EXAMINATION BY MR KRIEGLER: Just a few questions, Admiral. I recall yesterday you referring to correspondence exchanged, primarily, as I recall, between the German Frigate Consortium and the JPT, or rather the other way round, documents sent by, correspondence sent by the JPT to the Consortium concerning the development of an alternative proposal for a data bus. --- Yes, sir.

And as I recall, the correspondence arose around the time of about March 1999 and goes through to ... (intervenes) --- February, sir.

February 1999 and through to May. As I recall, there may be others. My question to you is whether you were part of the process which saw the response from the Consortium to those requests for alternative proposals to the architecture and for an alternative data bus. --- Yes, indeed. If you wish me to do so very shortly, I can go through the, shortly through the occasions and just highlight them.

Yes, I would be grateful if you would. --- Would you allow me to get the documents, please, Mr Protector? It is, I have them at hand here. I beg your pardon, sir, just give me a second, please. Here we are. I beg your pardon. Just to then annotate them, or read them into the record very shortly, I will only refer to starting in February 1999, which was the very first occasion of the very first presentation of the combat system proposal by the main contractor to us, following our instruction in December for him to do so as soon as possible. They then spent two months preparing, or a month and a half preparing this lot and they asked us for an extension we granted them, because of the leave period and so on. And eventually they did approach us formally and we had a K45 very large meeting on 22 February 1999. The first document then is, Summary of Corvette Combat Suite discussions between the South African Navy, Armscor, German Frigate Consortium and industry on 22 to 26 February 1999. It is a document signed by myself as the project officer, and by Mr Nortjé as the Armscor program manager, and I read para No. 7.

What is the date of that document? --- It is dated, well it would have - it is not dated 26 February.

But refers to 22 and ... (intervenes) --- But it was a confirmatory note written on 26 February, it was the last day. I recall that. Paragraph 7:

"7. The customer (that is us) emphasized that he would welcome alternative proposals to lower the costs while maintaining the maximum functionality. However, the customer expects an offer which is compliant to the URS in the first instance, and alternatives are to be submitted in addition to the base offer."

The following occasion on 1 March 1999, a week and a half later, when our second, remember the first phase, the first offer was not satisfactory, it broke the bank. So we met again a few days later. Paragraph 2, and this is discussion between the South African Navy, Armscor, German Frigate Consortium and ADS on 1 March 1999. This is dated 2 March 1999 and signed again by myself and Mr Nortjé, the Armscor program manager. Paragraph 2, second sentence:

"The projects team still requires the combat suite information as requested and still awaits proposals for alternatives in addition to the base offer."

The next occasion was the next day.

Before you continue, Rear Admiral, the purpose of this now throughout is to address this problem of breaking the bank, as you put it? --- Yes.

You are looking for alternatives. --- Of course. Indeed. The next occasion was the next day, confirmatory notes, discussions with GFC and ADS on 2 March 1999 at Silvermine. All of this was at Silvermine, which is our unit in the Cape. Again signed by Nortjé and myself. Paragraph 11:

"11. The project team indicated to the GFC that if the presentation on 15 March does not come within a realistic negotiation range, the GFC may be approached to suggest alternative contract arrangements with the view to getting a largely local combat suite at affordable prices."

16 March 1999, discussions with the German Frigate Consortium, signed again by Nortjé and myself:

"3. GFC is of the opinion that it is not very practical to invite a host of competitive tenderers, particularly not in the CMS case. (We were discussing possible alternatives.)

4. GFC is thus of the opinion that the current price incompatibilities must be exhaustively investigated first."

Paragraph 6:

"6. A final decision regarding alternative supplies will be taken in conjunction with the GFC after consideration of the combat suite information presented on 22 March."

And so on and so forth. Then we go to 8 March, in fact going back a little bit, because that was 16 March. Corvette Combat Suite, it is a letter from the CEO of Armscor, Mr Swan, dated 8 March 1999, addressed to the German Frigate Consortium, attention Mr Klaus Joachim Muller. I read from the middle of the document. With respect, sir, I would just like to, it doesn't really read - I will read the primary activities:

"Presentations by the Corvette Combat Suite Industry given to the Combat Project Team under the auspices of GSC during 22 to 24 February and subsequent discussions refer."

Those are the discussions that I have alluded to.

"I wish to reaffirm and amplify the project team's instructions to you as follows: GFC as the preferred prime contractor must present a baseline offer to the project team on 15 March that satisfies the SA Navy's Combat Suite requirements specification. This must be costed in accordance with the costing template provided (which we had done). In addition to the above, GFC is requested to present

(a) alternative strategies to best meet the user requirement at the lowest price, e.g. alternative contracting model or models, which achieve the most cost effective solution.

(b) alternative sources of supply, both at the Combat Suite integration level as well as the sub system level, with due consideration, however, of maximising the levels of direct participation by local industry."

Signed L R Swan.

31 March 1999 and a letter from again myself and Mr Nortjé. Actually I signed that alone, I don't, I can't recall why Fritz didn't sign it, but he certainly fully subscribes to this letter. We did it together behind my computer. It is a whole lot of things. It is to Mr Helmut Korn, German Frigate Consortium, as well as to the SA Corvette Combat Suite Group, and I will explain that briefly. By that stage South African industry had grouped themselves in what they called South African Corvette Combat Group on 9 March. It was Kentron, LIW, the Grintech group, and the Reutech group, and they formed the Corvette Consortium to work together and to offer hand in hand with the main contractor an offer for us. There is, of course, at that stage, C²I² was not invited into that group, for a variety of reasons. I won't go into the various reasons why there was antagonism between him and industry at that stage. It is not my part of ship to do so, but the fact was, they did not invite them to participate in that group and that is the designation that Corvette Combat Suite group. But nevertheless, we didn't allow his non-participation at that stage in terms of being the baseline offer. That is a fairly lengthy document. I take you, sir, to paragraph 12, in fact it is the last paragraph and doesn't have a paragraph heading, letter, number rather:

"Kindly ensure that a breakdown of the costs is provided to the detail as discussed to accompany the spreadsheet."

Last sentence:

"Kindly also offer any additional options as seen fit with an appropriate description and costing.

Yours faithfully ..."

etcetera.

Can I ask you just to pause there for a moment. We are now working through a process, as I understand the effect of this correspondence, which originated with the concern over the original offer, the baseline offer. --- Yes.

And hard, though negotiations, attempts to bring the price down. --- Yes.

And, as I understood your evidence earlier, yesterday, an area of movement was spotted, an opportunity was spotted which resulted in the compromise with warranties up to FAT factory accepted test levels to be borne by the manufacturer and then the warranties be taken over beyond that by the state. --- Yes.

It is against this background that ... (intervenes) --- In fact the other way round. Warranties would be borne by the state and then taken over by the main contractor.

I beg your pardon, of course. Because it is in control of the FAT project ... (intervenes) --- Ja, if I may interrupt you, Mr Kriegler, that was in evolution during this process, up to the letters of, it was in evolution in terms of please give us alternative strategies.

Yes, this is the process. --- They were proposing, that is the process, yes.

I appreciate that. And at this stage, in providing that background and the development of that process, it doesn't yet focus on the question of the selection of a bus. --- No.

It comes to that? --- No, it comes to that.

Fine. Please continue. --- Right. I continue on 6 May 1999, which is our best and final offer request to Messrs German Frigate Consortium and African Defence Systems (Pty) Limited, because by that stage they were acting in concert together in terms of the German Frigate Consortium's original offer to the state.

"Dear Sirs

Request for best and final commercial offer SAN Patrol Corvette Vessel System ..."

and it goes on and on, and I come to paragraph 11, last sentence:

"While you are still encouraged to submit any offers considered viable as potential cost efficiency measures for our consideration, we the customer, are not prepared to consider any further reductions in the primary scope of supply performance."

At that stage we said okay, enough is enough. We are not cutting back any more on missiles, we are not cutting back any more on jammers, we are not cutting back any more on rocket launchers. You now offer ... (intervenes)

You just do it. --- You must do it.

Bring the price down. --- You must bring the price down, yes.

Find other solutions. --- It was, of course, negotiations where, you never give your hand at all in these things, as you know well and we were hard balling them in this particular case. Signed again by myself and Mr Nortjé. And then in amplification to that very letter on 21 May 1999 to the German Frigate Consortium and to African Defence System from the Project Sitron office signed by myself again and Mr Nortjé:

"1. Request alternative offers, best and final offer request VHSR306/6/1431 dated 6 May 1999 (in other words the letter I have just recently read from) has reference.

2. You are reminded of an important principle regarding alternative offers as discussed on 11 May 1999."

Because after we had said on 6 May 1999, please offer us alternative offers, they came to discuss it with us and they said look, we would like to offer you alternative offers, but you know, what is the mechanism, what are the conditions and there was a general discussion. So we put together this letter and further amplification of our 6 May. So this letter in fact is also legally part of the best and final offer request.

"2. You are reminded of an important principle regarding alternative offers as discussed on 11 May 1999 and on several occasions since February 1999 (the ones that I have read).

3. As in any normal tender process, even at this late stage, you are free to submit alternative offers if in your judgment such alternatives could fulfil the requirements in a cost effective way and with due regard to other considerations like time scales and industrial participation. However, such alternative offers should not be submitted in place of a compliant offer, i.e. completely compliant to the user requirements specification, but rather in addition to a compliant offer. First and foremost you are required to submit an offer complying to the requirements. Alternative offers must be distinctly separate offers, additional to the compliant offer. Furthermore, before an alternative offer can be considered, the alternative or alternatives must be properly motivated and must be described and priced to a sufficient level to enable easy and direct comparison to the complied items."

And then that proceeded into the best and final arrangements. We were told that one of the offers on the table on 26 May was this alternative bus. Not for the first time did we know about it informally, but that was the first formal indication, on 26 May. We informed the PCB the next day on 27 May that we had this and we were about, before we made any statement about it whatsoever, we needed to examine it thoroughly and we needed to get an idea of what the implications were. We then went into that internal preliminary study ... (intervenes)

That is 3 and 4 June? --- Correct.

At Silvermine? --- Correct.

That was your first introduction to Detexis? --- That was our first introduction to Detexis. We knew about Detexis, we knew about their bus technology, of course.

But you, this meeting was intended to afford you an opportunity to speak to their sales people, to see something more, some more detail about the bus? --- It was an opportunity that we requested, in fact, that I had instructed our team to go and procure, so that they could come back to us, us being Mr Nortjé and myself, and answer our question we put to them, can this bus be considered at all as a viable alternative.

Just to pause there for a moment, now I understand, I believe I understand you correctly to be saying that during this process that you have just described, the offer of at least as it originated from ADS, sent upline towards the German Frigate Consortium and reached by you, already embodied the R40 million premium onto the IMS as a product which was contemplated at the time. --- Correct. The price given to us in the best and final offer.

So that was in their offer ... (intervenes) --- Yes.

It had been identified as the product which they had at that stage being incorporated on the basis of which the price was fixed, and that then resulted, not that in itself, but that was one of a number of considerations which, or a number of features which made up the final offer, or first offer if you will, which was then the subject of the negotiations which culminated ... (intervenes) --- Because it exceeded the ... (intervenes)

... culminated as far as the bus is concerned in the Detexis alternative being considered early June? --- Correct. The issue there was that on 26 May ADS-GFC offered us Richard's bus. They were obliged to offer us Richard's bus, Dr Young's bus. Because we told them, doesn't matter what alternatives you put on the table, you will offer our baseline so we can compare apples and pears, or apples and apples. It is no good replacing things when you lose track of where you are. And at that point they offered Richard's bus with the risk premium. They said, we are offering you this bus, but it has this cost. It does not have the cost that Richard offered to us, we are putting the monies accordingly, and they explained why. Of course we were negotiating. We told them to bug, we told them to get lost, you know, we don't accept any of this. We told them, it is a very strongly worded letter which you will see. We told them we were disappointed, that you, and frankly it is bizarre that you offer us something that is higher priced than the previous base line, and so on and so forth. I mean, this was negotiation, and this was hard ball stuff. We didn't budge an inch. We obliged them to - but fair enough, that is the nature of the game. What I am trying to illustrate to you, stripped of all its emotion, was that they offered Richard's bus to us, categorically, in the spreadsheet at the price that they offered it to us, which included a risk apportionment. They at the same time offered us an alternative which then was R42 million cheaper.

When the alternatives to the baseline were proposed from the outset, was the idea of an alternative bus at that stage contemplated, or were the first alternatives to the baseline introduced before an alternative bus was contemplated? --- Could you say that again to me? I have lost the thread of what you are asking me.

Yes. When the first, and I regrettably don't have the dates, we will presumably get them over the weekend for purposes of our statement. --- Yes.

But when the first moves were made away from the original architecture, at that stage, was the move away from the first proposal for the architecture made with a view to moving to another bus, or was it simply a change to the architecture per se? --- No-no, no-no. It was a move we, on 26 May that was a different architecture already, incorporating Dr Young's bus.

A new bus wasn't considered? --- No, no. We had to change the architecture as this whole thing evolved.

And the change of the architecture had nothing to do with trying to find an alternative bus? --- No, not at all. We had already changed the architecture to account for a large number of things, not the least being the integration of various other sub systems which were not exactly appropriate to the architecture originally proposed.

Were those alterations to the architecture done in association with you and with other members of the JPT? --- Oh yes, absolutely. They were proposed to us as - I just want to make a point here which has come through again and again and again. We were not that fussed about the architecture per se. The way the combat suite was put together, providing that there weren't outlandish, and you know, designs which would lead us to inter logistic support difficulties, or would lead us into a vulnerability, battle vulnerability things, for example we have insisted on a dual redundant architecture that if you lose one half of the bus or you lose one half of your system, you don't lose the other half and so on, but in terms of the basic architecture, remember our URS is a functional requirement. Yes, it included all sorts of specifics about design, but in essence a user requirements specification determines function. The most important ... (intervenes)

You want it to work at the end of the day. --- The most important features of our URS isn't the architecture of the combat system. It is whether you can shoot down a missile at nine kilometres with an 85% hit probability. Who gives a damn about the architecture if you can do that, providing it will survive in battle?

Now did Dr Young participate in these developments of the architecture from the original baseline to your knowledge? --- To my knowledge, he did. But I am not prepared to say exactly what transpired and when between him and the main contractor. But certainly we had no complaint that he was being excluded from any deliberation on the architecture.

Just a last few questions, do you know Mr Emanuel Marie? --- Yes, I do.

In what capacity did you get to know him? --- I got to know him as a very senior, very experienced and competent system engineer at Thomson on matters relating to combat suite integration and data buses and so on. And I got to know him better than that subsequently, and he in fact is a very fine gentleman.

And he was introduced into this project, was he not, to ensure the integration between the IMS with the CMS's and overall system? --- Correct, That is a higher level of integration and in fact, the poor fellow, because that is the singularly most difficult thing to do on a combat suite.

And when Detexis was first introduced or proposed, it was proposed as an idea by Marie, is that correct? --- Affirmative, yes.

And did you get the impression, when the name Detexis was put on the table by Thomson or by Emanual Marie, that he was punting for Detexis, or promoting it over IMS? --- Not at all. In fact, Thomson is not in the business of making data buses. At that time, I firmly believed and I am not sure of my facts now, but at the time our entire program believed, and I thought and knew that Mr Emanuel Marie believed that Detexis was a Dassault company and at that stage there was no, in my mind there was no thought that Thomson was going to buy Dassault in their various European comings and goings in terms of buying up companies and selling companies and so on. Mr Emanuel Marie, I think, took a very laudibly neutral position in this, but it wasn't a forced, it wasn't something forethought. He was just saying gee, you know, C²I² has got extremely interesting technology, let's look at it, and he was proposing various ways that we can incorporate it. But he was equally doing so with the Detexis bus. He was not pushing the Detexis bus at all.

Yes, in fact, he will say that he took a back seat when discussions on Detexis were first introduced. Not because he believed that there was any conflict of interest at all as a result of the tangential link between Dassault Electronique and the Thomson Holding company, but he took a back seat because he didn't particularly care which of the two, from a technical point of view, which of the two were accepted. --- No, he had no interest in that, emotionally, commercially, professionally, no.

But he will say that from a commercial point of view he appreciated the difficulty with C²I² at the end of the day, given that it was a tiny entity, a speck on the map, as it were, compared to the massive conglomerate of which Dassault Electronique was a part. --- Well, I am now aware of that through Richard Young's evidence to that effect, in terms of his exposure of documentation and letters that happened at the time. But it perfectly dovetails with my appreciation of the thing, because Emanual Marie is not only the engineer concerned with megabits and things, he is also the managing engineer. So he has got to per force consider things that are slightly above and beyond just the mere technical issues. He also is accountable through his management chain to make sure that he doesn't expose his company through his engineering decisions to any other commercial issues. I mean, that is the nature of his job. He is a senior managing engineer.

Which entailed, amongst other things, to devise a system, or to approve of a system which permitted ready, corporate allocation, or the allocation of corporate responsibilities in your overall system. Is that correct? --- I would certainly imagine so. That is what he is reporting to his corporate management on.

Then just finally ... (intervenes) --- I don't know what his brief was, but that is the way he acted, certainly.

Finally then aside from Emanuel Marie, are you aware, Rear Admiral, of any direct attempts by ADS either to you or to any other members of the JPT, or above your position, to punt the Detexis over the IMS as a system? --- No, not at all. In fact, as I have already said, initially ADS in the personage of senior managers and in particular Mr Moynot, offered the IMS system as a category C item. In other words, they were quite happy that we took responsibility for this bus, because as I said, that was a resolution of one of their problems.

Was this before Detexis was even in the framework? --- That was before Detexis was even in the framework, yes. But thereafter, we came under no lobbying or marketing or any other pressure, or even innuendo, or attempts to influence and so on, whatsoever. We certainly wouldn't have allowed it to, I think the record shows that on several occasions we wrote fairly caustic letters to Mr Moynot, but certainly not beyond, you know, we didn't get to a point of personal antagonism, but in that room it got heated and Mr Moynot and I and Mr Moynot and Fritz Nortjé exchanged words. But that is all fair enough in love and war, that is the way that these things should go. We have to get the biggest spring for the buck. But in direct response to your answer, no. We were never under any pressure from them whatsoever.

I have no further questions, thank you, Mr Chairman.

CHAIRMAN: Thank you, Mr Kriegler. It just about gets us to the end of this public phase. But before we get to the rear end, we just need to take care of the housekeeping arrangements. There is a statement to come from ADS, which shall be given to Adv Fourie not later than Tuesday the 4th.

MR KRIEGLER: At close of business, Mr Chairman, please.

CHAIRMAN: Fine, accepted.

MR KRIEGLER: Yes, subject to the necessary approval being obtained from the Minister of Defence, we will make it available to you, in any event, I believe, but there still must be the consent, if that is in order.

CHAIRMAN: Well, can we utilise the previous procedure with regard to a statement, you give it to the state attorney, you give it to Ms Dreyer and then she will do the necessary.

MR KRIEGLER: Thank you.

CHAIRMAN: And then for counsel that might be desirous and we would appreciate it if that happens, of giving any submissions, making any submissions to us, we would request that those be given to us either in a handwritten form, in which case they would be handed over to Adv Fourie at our offices here, or in digital form. Or shall I say electronically, or even faxed by not later than the 5th, which is next Wednesday, of September. I am aware that a lot has been said here, but we are on a short leash. I have already reiterated that time and again. The reason is, we are supposed to be in coordinating effort together with the other sections of this investigation shortly after the 5th and we cannot do so unless we say we have got everything, whether it is evidence and submissions, and so on and so forth. So that is why the short notice. So you will just bear with us in that regard. And lastly, on behalf of the panel here and on behalf of indeed the whole investigating team, we would like to express our appreciation of the cooperation that we have got from the legal representatives, attorneys, counsel, from the parties and indeed from Sneller Recordings, without whom - this is a huge investigation, we all know that, together with all the other sections of the investigation, and there have been immense difficulties that have been on the way, whether in the form of classified documents, just to mention one, but we got cooperation, you know, from quite a number of people who were involved and we appreciate that, in the interests of this investigation. We have also put you under serious pressure and you have other commitments elsewhere. You have had to forego those. We really appreciate those. And yes, the witnesses who have cooperated, Admiral at the back here and all the other witnesses who are not here. Some people may not have cooperated, but that is tough for the cause. But I seriously want to say we thank you, and we say that you did assist this investigation. It has not been a waste of time, we are certain of that. It has not been a waste of taxpayers' money and we hope at the end of the day we give value for it. We shall, of course, become public knowledge in the form of a report that is going to come from us hopefully not later than the end of September. In the absence of anything then - Admiral, my colleagues here are concerned that you have not been released formally and you are excused together with everybody ... (intervenes) --- Their concern is concernably exceeded by mine, sir.

CHAIRMAN: May you have a safe journey to Germany and thank you very much.