SAA to pay extra R500m to US company for controversial contract

06 February 2020 - 18:12 By ZINGISA MVUMVU
SAA will end up paying R500m it never budgeted for to a US company that scored a tender to provide aircraft components through questionable means.
SAA will end up paying R500m it never budgeted for to a US company that scored a tender to provide aircraft components through questionable means.
Image: SAA

Embattled national airline SAA will end up paying R500m it never budgeted for to a US company that scored a tender to provide aircraft components through questionable means.

This emerged at the Zondo commission on Thursday where acting head of supply chain management at the airline Schalk Hendrik Human was giving evidence.

The initial estimated value of the contract was R1.3bn but to date SAA has parted with R1bn.

Human said current estimates reveal that SAA will pay a total of R1.8bn by the time the contract ends.

The tender was awarded to US company AAR Aviation in 2016 after four retractions of the same tender.

ARR, Zondo heard, “inappropriately” participated in the bidding process through the breaking of several supply chain rules.

Among these, the company entered into a “strategic partnership” memorandum of understanding with SAA during a time a tender which they were part of was open and yet to be concluded.

As if this was not enough, within that period before the bid which AAR was competing for with other companies such as Air France and Lufthansa, the company sponsored a visit to their US facilities by top SAA technical officials.

Among those in the delegation was then head of procurement as SAA technical advocate Nontsasa Memela who was also chairperson of the bid adjudication committee (BAC), thus conflicted as she would have had to preside over a process that would decide AAR's fate in the open tender.

The events that would follow somehow showed that AAR was destined to get the tender by all means necessary.

After ARR, Lufthansa and Air France made the final cut in the bid. The first decision by procurement was for the contract to be awarded to Lufthansa because their quote was the lowest.

But after the SAAT cross-functional sourcing team met, it changed the decision and recommended that the tender instead be awarded to Air France.

“The reason of unrealistic low price was cited, that is why it was passed over,” said Human.

The next stage was the BAC's time to have a say on the tender and it affirmed the decision to award the tender to Air France who previously provided the service which had come to an end for this bid to be opened.

The BAC meeting on May 6, 2016 did not meet quorum thus a round robin system was used and Air France got the nod.

Three days later, the process moved over to the board of SAAT for a final verdict.

The board overturned the BAC decision, opting to award the tender to AAR to the value of R1.3bn.

Human said the SAAT  board should not have awarded the bid to AAR but rather refer it back to BAC to deal with whatever concerns they had with their recommendation of Air France.

Even after this questionable award to AAR, something “unusual” according to Human happened as the US service provider together with their BEE partner JM Aviation were paid a R60m deposit without any services having been provided.

Moreover, JM Aviation has performed “zero” of its duties as stipulated in the contract but has individually been paid R53m.

Their primary duty, said Human, was to be on-the-ground representatives to ensure that contract obligations were met.

“Up to now we have seen zero supply development verification and there was no agreement that has been signed by them with the DTI (department of trade & industry) therefore zero work on the contract,” said Human.

Evidence leader advocate Mike Mbikiwa asked Human “what is the total spend SAA has paid for this contract?”

Human replied: “It is just above R1bn and ... over the duration of the contract it will end at R1.8bn when one checks the current rate of expenditure.”


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