Botched defence contract cost taxpayer R300m

2013-10-14 10:26

A cancelled contract of the defence department cost the taxpayer about R300 million after a ruling of the International Chamber of Commerce arbitration court.

A 2009 contract for aeromedical equipment with Austrian company AMST was repeatedly botched, Business Day reported today.

An internal defence department memorandum said AMST claimed that the department had repeatedly failed to respond to numerous letters to honour contractual obligations with regards to advanced payments, Business Day reported.

“As a result ... AMST alleges that it was left with no option but to cancel the contract and recover its costs under the agreement.

“The contract provides for an arbitration process in the event of a dispute between the parties in accordance with rules of the International Chamber of Commerce,” the memorandum read.

According to the report, AMST initially claimed the euro equivalent of R477 million when the proceedings began in Zurich, Germany, early in 2012.

In December, the claim was reduced to about R199 million, but later increased to about R296 million in the final award made in July and August this year.

Department spokesperson Siphiwe Dlamini confirmed the ruling.

“I can confirm that the international arbitration did rule in favour of AMST and that the matter has been settled with the payment of liabilities by the department of defence, at the reduced cost that had been demanded by AMST,” he was quoted as saying.

DA spokesperson David Maynier said it was astounding that the department had managed to hide a potential liability of about R700 million from Parliament, the newspaper reported.

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