The South African Army has not cancelled its R8.4 billion Project Hoefyster acquisition of some 264 locally-engineered Patria AMV, the Ministry of Public Enterprises says.
Indeed, the Army in October awarded Denel Land Systems (DLS) at Lyttelton in Pretoria a further R9.9 million to continue the development of the Badger infantry combat vehicle (ICV) products system under Project Hoefyster.
“Hoefyster project has not been shelved,” the ministry said in a written answer to a Parliamentary question by Congress of the People MP DB Veldman. “In accordance with the contract, Denel Land Systems (DLS) is still implementing the Development Phase of the contract,” the ministry added. “The Department of Defence will make the decision on whether or not to proceed with the Industrialisation and Production Phase before the end of 2010/11.”
DLS was contracted in May 2007 to supply the vehicle in five variants: section carrier, command, mortar, support and anti-tank. A R1 048 billion order to develop a prototype of each was awarded later that same month. One of each is currently undergoing evaluation. Once accepted by the military, 12 pre-production vehicles will be built. The first 37 production vehicles will be built by Patria in Finland.
Hoefyster was registered as a project in 1997. Unusually, the awarding of a contract was announced by Public Enterprises minister Alec Erwin in his budget vote speech in the National Assembly on May 17, 2007. Normally, such announcements are made by the military.
Rumours regarding the demise of the programme have circulated for years, driven in part by a lack of news on the project and apparently interminable delays. South African Army director strategy Brigadier General Eddie Drost last month told the National Assembly’s Portfolio Committee on Defence and Military Veterans landward renewal – a stated top priority for the DoD – “is not coming to fruition” with most projects “on hold because of cost escalation”. He did not say whether this included Hoefyster.
The Department of Defence (DoD) earlier this year warned Parliament that the Army faced a budget shortfall of R2.688 billion, including a R1.616 billion “operating shortfall”, for this current financial year alone. While underfunding is not a new phenomenon, it was exacerbated this year by R2.1 billion out of R2.4 billion being taken from the land service’s Strategic Defence Account, used for equipment acquisition an technology development.
Early reports speculated that the MOWAG Piranha IV was a shoo-in for the deal, as OMC, the country’s main vehicle house at the time, had then just been bought out by Vickers Defence Systems – a British concern – that had licensing rights to the Piranha IV. Counter-speculation at the time favoured the Piranha III, currently in use by the US Army as the Stryker armoured personnel carrier (APC).
News of local developments came at African Aerospace and Defence 2002, when LMT proposed a family of 6×6 and 8×8 vehicles built to a common design. LMT MD Dr Stefan Nell told the author the 8×8 would be the basis of the new ICV while the 6×6 variant – identical in all respects bar the fourth axle – would serve as armoured personnel carrier for the motorised infantry (Project Sapula). As such it could then replace the aging Casspir and Mamba APCs. Both designs, dubbed “Honeyguide” after a local bird, made maximum use of commercial-off-the-shelf technology. An electric drive proposal was also on the cards. Nell was adamant that the Army preferred a local solution rather than an import.
Talk at that show was that a decision on a preferred “Hoefyster” design to be further engineered and developed would be made in January 2003. It is not clear such a decision was made. It appears that at least four domestic companies, including LMT, OMC and the then-Mechanology Design Bureau were given seed money to develop prototypes. In early 2004 it was reported that the LMT design had victored. All were 8×8 designs designed to carry the Denel LCT35 turret, specified for the project. Scarcely had the news filtered out when the Army through its agent Armscor re-opened the competition and called on local and international companies to tender for the deal.
The Request for Proposals (RfP) was issued under the reference number MFT/2003/564 and asked eight South African companies and four international defence contractors to put forward ideas and quotes by February 25, 2005. Domestic companies asked to tender were state arms manufacturer Denel as well as private companies LMT, Benoni-based OMC, IST Dynamics, Industrial and Automotive Design SA, MDB, Advanced Technologies Engineering of Midrand, Grintron and Intertechnic. The four overseas contractors approached were GIAT Industries of France, Mowag Motorwagenfabrik AG of Switzerland and the pan-European Aeronautic, Defence and Space Company (EADS). The South African companies in particular were keen to bid and gladly showed off their ideas to selected journalists.
But, in February 2005, when the bids were due, only one was received, from a consortium involving Patria of Finland, Patria’s part-owner, EADS, Denel, OMC and Land Mobility Technologies (LMT). The vehicle the group proposed was Patria’s 8×8 Armoured Modular Vehicle (AMV), as redesigned for southern African conditions by LMT. The vehicle hulls were to be built by OMC and the turrets as well as guns would be provided by Denel.
Questioned in 2005 about the paucity of bids, the Department of Defence’s (DoD) then-chief of acquisition and procurement, Bruce Ramfolo said the tender process followed on their behalf by Armscor was sound and “neither Armscor nor DoD are able to force any industry to participate.” Ramfolo did not directly answer a question on why a foreign hull was preferred to a local design, saying instead that “no decision regarding the bid has been made and therefore no decision on the design has been made.”
Speaking around the same time, Strategic Defence Package critic, systems engineer and defence company MD Richard Young said the paucity of bids was disconcerting. It also appeared that potential competitors had been encouraged and “facilitated” to bid jointly. Asked whether there was something wrong with the DoD’s tender process, Young said: “Yes, it’s not constitutional.” He explained that the White Paper on the South African Defence Related Industries of December 1999 said the constitution, in section 217, required that when organs of state contracted for goods or services, they must do so in accordance with national or provincial legislation that establishes a system which is fair, equitable, transparent, competitive and cost-effective. “At present defence acquisition is based more on balderdash, enrichment and expediency.”
In May 2007, when Erwin announced the contract, talk was that the deal would see OMC, then owned by BAE Systems, and Denel Land Systems merge. Erwin’s announcement caused some surprise in light of comments by SA Army chief Lieutenant General Solly Shoke at various media briefings and observations by Armscor in Parliament in the early part of 2007. Speaking at a media briefing after a SA Army exercise at De Brug in November 2005, Shoke expressed some concerns over Hoefyster and said a review of the project as well as all other major SA Army projects were underway. A year later, at the same venue, he said that the project was at a “political level” and more enigmatically that it was going ahead but not in the way his audience imagined. At that time the AMV was already the only contender.
In March 2007 Armscor briefed the National Assembly’s Portfolio Committee on Defence that negotiations were still underway and that the sticking point was cost: “The unit production cost and total project cost was not acceptable,” the arms agent said. “Project Hoefyster provides a complete Level 5 New Generation ICVPS (NGICVPS) to replace the Ratel infantry combat vehicle that has been in service since 1976. The offer as submitted on February 24, 2005 by Denel as main contractor, as well as a NGICVPS prototype vehicle was evaluated by Armscor and DAPD [the Departmental Acquisition and Procurement Division,now the Defence Materiel Division, DMD].
“The technical performance of the vehicle offered was mostly on par with the requirements, except for a few minor deviations that could be overcome with some minor design changes or adjustment in the specifications. The unit production cost and total project cost was not acceptable. The (Integrated Project Team) IPT was mandated to obtain the ‘best offer’ from Denel, and present that for consideration to the Armaments Acquisition Steering Board in Project Study Report 3. Denel submitted a reviewed offer on November 18, 2005 to Armscor. The unit production price of the combat variants as well as the total project cost was still not acceptable. During December 2005 Armscor requested Denel to present their ‘best and final offer’ by February 2006. Denel submitted a revised offer (Issue C) on February 3, 2006. The prices offered for the turrets were considered acceptable, but the prices for the vehicle platforms were still unacceptable. Denel, together with Patria and OMC, again revised the offer and a more acceptable price was offered on March 3, 2006. The Project Control Board advised the IPT to enter into detail contract negotiations with Denel based on the revised offer received. The offer clarification process then started with Denel. Negotiations with Denel with the aim of arriving at a contracting position commenced on November 8, 2006.
From he Armscor Bulletin System:
Development of a new infantry combat vehicle products system for the SA Army – extension of EMFT/2003/564
IVS/S2010/1206 20 Oct 2010 R9 950 000,00 Denel Land Systems: Lyttelton
IVS/S2009/0810 6 Aug 2009 R37 403 508,00 Denel Land Systems: Lyttelton
IVS/S2007/0623 25 Jan 2008 R3 661 510,00 Denel Land Systems: Lyttelton
IVS/S2007/0520 23 May 2007 R1 048 673 907,00 Denel Land Systems: Lyttelton
Supply of a BADGER long range mortar ammunition system
EIVS/2007/376 19 Dec 2008 R153 476 518,33 Denel Land Systems: Lyttelton
Engineering support for the new Generation Infantry Combat Vehicle
EIVS/2007/636 26 Jun 2008 R4 621 980,00 Pronex Engineering Management Consultants