Analysis: Too soon to quit – Armscor tenders and SMME development

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“It is always too soon to quit”. This is a quote attributed to Norman Vincent Peale. I was starting to wonder if Armscor would ever get around to start issuing tenders that are of interest to people wanting to assist companies in putting forward innovative bid solutions.

As stated in my bio, I assist businesses in submitting proposals that are suitable for winning tenders based on a competitive focus. I particularly enjoy working with SMMEs (Small Medium and Micro Enterprises) and businesses that are looking to expand into defence as a sector. These are entities that can help achieve the goals of the defence sector charter.

In order to assist SMMEs you need significant risk appetite. SMMEs generally do not have the budget allocation for external consultants. Addressing risk means conducting a success analysis. This is possible if you can understand the whole product solution that is required. Then it boils down to risk versus reward and the understanding that the competition is also going through this analysis.

Armscor of late has released next to zero tenders for complex high value product solutions that would enable a SMME to formulate a solution against the major players. Great was the surprise that Armscor is now getting involved with South African Police Service (SAPS) acquisition and released two tenders for air assets for the police service. One for the acquisition a single Troop Carrier Helicopter. The other for an unmanned aerial vehicle (UAS) solution.

I want to use the helicopter tender to highlight the potential problem of Quiet Quitting. Quiet Quitting is when employees continue to put in the minimum amount of effort to keep their jobs, but don’t go the extra mile for their employer (for this article also think end user).

In reading the Request for Bid (RFB), you can quickly see which helicopter has been specified. This is minimum effort. Is there a reason for not going the extra mile to actually engage the end user for the true requirements/needs? Maybe the employer has a particular solution in mind. In this RFB’s case, the preferred solution – from an international original equipment manufacturer (OEM) already has a SA presence and obviously intervened early to influence the requirement. Good on them.

But, if there is only one solution in contention, stop wasting everyone’s time and go for a single source solution. It takes time and money for industry players to prepare bids. This seems to be something that Armscor does not understand. How many times in recent years has Armscor reissued complex system tenders on multiple occasions, or even just cancelled them mid-tender?

There is a change to the Armscor 90:10 value system. The 10% goal is now advancement of SMMEs. This helicopter tender presents a great opportunity for some of the newer aircraft maintenance SMMEs to get some alliance with an international OEM. An understanding of the pricing of the Troop Carrier class of helicopter indicates that this tender would require Defence Industrial Participation (DIP) and should also break through the National Industrial Participation (NIP) foreign value thresholds. This then aligns with SMME advancement, but it makes a simple tender significantly more complex.

The problem is that there is a three week submission deadline. This is a short timeline if you did not have forewarning that the tender was being released. The timeline is short even if the contract conditions are based on A-STD-61 Part 5 (COTS) and A-STD-61 Part 6 (Maintenance Programme) but applied to a complex mission system that requires DIP and NIP confirmation by bidders.

If an SMME would want to prepare a solution, they would need to immediately request an extension for the additional time to prepare a compliant commercial off the shelf (COTS)-based solution. You need to secure an agreement with a foreign OEM that can be convinced that there is an opportunity in South Africa. If possible, you need to secure the single rights for the tender submission on the product offering. Lastly, the DIP & NIP agreements need corporate approval. This takes time in any organisation, never mind a foreign entity. Once again if there is already a preferred OEM solution, either specify the product and get three submissions for the same product or go for a single source solution under an urgent operational acquisition model.

What is sacrilege, and the ultimate personification of Quiet Quitting, is when the procurement agency does not have the wherewithal to even answer a Request for Extension letter for the tender. The tender KD17 document was last updated on 12 May 2023 before issuing on 12 February 2024. It also took one member over a month to sign the KD17 backing RFB document. So, offset the tender response urgency timeline (21 days) with the 180 days validity, having known about the tender for nine months. The UAS tender was extended, albeit by a week. Note that a UAS would be difficult to exceed even the foreign DIP threshold, but really should have the requirement for a locally designed solution.

Why it is difficult doing business in the Aerospace & Defence sector? Before submission, there could be informal whispering (that would never be admitted if it did come out) that the SMME/bidder should not upset the bidding process as another party is already pencilled in for the work. Insult to injury for a Level 1 BBBEE SMME operating in the designated sector would be if the local entity, which was set up by the OEM at great cost, is not even submitting the bid. Armscor state that the goal is “Advancement of SMMEs”! To SMME’s out there: It is always too soon to quit.

This is the SA tender reality. What does it mean to the end user? There is less value for money. The potential best solution may not even be offered for evaluation.

There is still opportunity in South Africa in general, and specifically in the aerospace and defence sector. It is always too soon to quit. I remain engaged to assist real SADI businesses to secure work.

So, what now? How is this problem addressed? For the defence sector it is easy:

1. The various government sponsored plans have been calling for the South African Defence Industry’s (SADI’s) visibility of the Strategic Capability Acquisition Management Plan (SCAMP). defenceWeb up to 2009 had articles linked to the SCAMP and highlighted projects in the 30-year time frame. Armscor did trial a procurement plan two years ago showing timelines for release of tenders. Not sure why this innovation was discontinued.

2. It would also help if the SANDF new/latest force design is discussed with the SADI. This would ensure that local capabilities can be aligned with future SANDF capabilities. The Defence Review 2015 was a good benchmark in this regard. Local industry could examine the capability requirements and align with the outcomes desired. The funding versus capability unfortunately did not match. This is where the current SANDF force design process could be different if desired. AMD Executive, Sandile Ndlovu, has effectively committed SADI to assist in finding a solution. The defence capability role players need to put heads together to get a solution for moving forward.

3. Armscor needs to re-start announcing the tender values received and the successful tenderer on their website. This also stopped around 2010. They should include both the contract values/BBBEE status in a system update. This way there is potential for scrutiny of value for money as well as seeing where excessive mark-ups are going to impact the end-user limited budgets.

This takes effort, but the defence industry may be lucky. I do not see the SANDF as “quiet quitters”. The Chief of the Navy is a case in point. Long may C SAN stoke the fires and inspire the other arms of service to be vocal. It would be good if the ambitious fleet wish is also captured in the force design and SCAMP. The Chief of the Air Force has started action to coalesce the SADC region air forces with a call to action for self-sufficiency. Reach for the Stars! SA would need a new acquisition approach if regional co-operation was possible (Armscor opportunity calling). These two Chiefs of arms of service know it is always too soon to quit. If fact, I think that they are just getting started.

Armscor’s time for quiet quitting is at an end if these two arms of service take up the call to action. The SADI also needs to start engaging Armscor, as the defence procurement agency, to find a viable solution that is acceptable to all. Engaging with the SANDF and SANDF defence materiel department may also be a good idea for all concerned.

Written by James Kerr, Orion Consulting CC, which provides Market Entry Strategy and Bid & Proposal services to the Aerospace & Defence related industry and assists international SME mission system product suppliers to gain traction in South Africa.