Denel withheld information from other potential bidders for Armscor contract

The Commission of Inquiry into State Capture has heard that state-owned entity (SOE) Denel withheld crucial information from other potential bidders for a contract with the department of defence’s acquisition agency, Armscor, despite being requested by the latter to release the information.

The chairperson of the commission, Deputy Chief Justice Raymond Zondo, was on Monday hearing Denel-related evidence from Armscor’s acting CEO Sipho Mkhwanazi.

Zondo heard that some potential bidders raised concerns that they could not gain access to some documents or information – data packs and technical information – required to bid for a tender at Armscor. The documents were with Denel, which had refused to supply the information to the potential bidders.

Denel was ultimately the only entity to give Armscor an offer for the tender, the commission heard.

Armscor, in July 2004, wrote to Denel requesting the SOE to release the information, the commission heard, with Mkhwanazi saying that he could not obtain a response from Denel following this request.

Mkhwanazi conceded that the information should have been made available to the other bidders and that Denel’s failure to do so seriously undermined the ability of the process being competitive, transparent and cost-effective, and that the bidding process was seemingly unfair.

Mkhwanazi said he was not aware of Denel’s reasons for not releasing the information, the commission heard.

Mkhwanazi said “it is a fair comment” that Armscor seems to have allowed the situation where one bidder, Denel, was advantaged because other bidders did not have access to the information.

Zondo asked Mkhwanazi to have a look at the Armscor board meeting minutes when it was decided that the agency’s CEO should write to Denel to request the SOE to release the information to the other bidders and that he should also look at minutes until it was decided that Denel should be awarded the contract to determine whether the issue of Denel’s failure to release the information was ever dealt with.

The evidence leader at the commission, Advocate Paul Kennedy, said Denel’s failure to release the information suggests that the entire bidding process was a “predetermined one, a sham and a façade” assisted by Armscor to ensure the SOE gets the contract.

Kenndy said serious concerns were also raised that if one company made an offer, that would make it impossible to compare prices, with Mkhwanazi agreeing that competitiveness is very important when it comes to bidding for a tender.

Kennedy also said that another concern raised was that foreign bidders were not invited to bid for the contract.

Kennedy pointed out that Mkhwanazi “inherited” this situation which was created by his predecessors.

Mkhwanazi said if he was heading Armscor’s acquisition at the time he would have ensured that the information was made available in the request for an offer document or it would have been stated that the information would be provided when requested.

Mkhwanazi said that Armscor had paid for part of that information, intellectual property, which it collectively owned with Denel and so could have made the information it paid for available to potential bidders.

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