Presentation to the SA UN Procurement Summit Rakhee Ramgolam Turnaround Executive Market Linkage Session Armscor

INTRODUCTION TO ARMSCOR OVERVIEW OF ARMSCOR ARMSCOR SERVICE OFFERINGS OPPORTUNITY FOR INDUSTRY PARTICIPATION IN ARMSCOR ACQUISITION/COLLABORATION PROCURMENT INFORMATION PURPOSE

INTRODUCTION TO ARMSCOR Statutory Corporation established by an act of Parliament to be the designated Acquisition Organization for the SA DOD Minister of Defence is the sole shareholder of the Corporation Governed and Controlled by a Board of Directors – reporting to the Minister of Defence – with dual responsibility:  Accounting Authority of Armscor  Defence Matériel Tender Board INTRODUCTION TO ARMSCOR

STRUCTURE OF THE MINISTRY OF DEFENCE AND MILITARY VETERANS Minister of Defence and Military Veterans Armscor Chairman of Armscor Armscor Board of Directors Armaments Corporation of South Africa Secretary for Defence Chief of the SANDF Services and Divisions Director-General Divisions DOD DMV STRUCTURE OF THE MINISTRY OF DEFENCE & MILITARY VETERANS

ARMSCOR CORE BUSINESS FUNCTIONS 5 Acquisition Capital acquisition Development Technology development Product Support of existing systems Procurement of spares Disposal of Defence material Defence Industrial Participation Research & Development Armour Development Defence Decision Support Institute (Operational research, Decision support, Capability analysis, Product systems management) Ergotech (military ergonomics research and support) Protechnik (Chemical and biological defence research) Hazmat Protective Systems (Respiratory protection products) Flamengro (Computational mechanics modelling) Institute for Maritime Technology (Operational and decision support to SA Navy) Dockyard Strategic facility of the Navy SUSTAINABILITY/COMMERCIALISATION

ACQUISITION DEFENCE MATERIAL EXPENDITURE 6 Defence Materiel Expenditure Acquisition R4.5bn “100” projects A few in production phase Ranges from high tech to low tech Ranges from a few items to thousands Maintenance R6.6bn Normal maintenance Expensive maintenance (old equipment) From aircraft to trucks

RESEARCH & DEVELOPMENT Test & Evaluation Facilities Gerotek Vehicle Testing Paardefontein Antennae Testing Alkantpan Artillery Testing Range Technology Management Analysis & Innovation Electronic Aerospace Maritime Landwards Support IP Management Operational & Scientific Research Armour Development Defence Decision Support Ergonomics Hazmat Protective Systems Protechnik Institute for Maritime Technology (IMT) Computational Fluid & Dynamics Capabilities 7 The total business portfolio for the R&D Department for 2015/2016 was R 457 m and the estimate for 2016/2017 is R 480m.

 Armscor is mandated as the Acquisition agent of the SANDF. It may and does provide services to other government departments such as the SAPS. Armscor sources nearly all of the required goods from the SADI and Global suppliers  Traditionally Armscor contracted at a Systems level. This limited the participation of smaller business  Projects targeted for lower level contracting to allow for participation of SMMEs INDUSTRY PARTICIPATION IN ARMSCOR ACQUISITION

 Government Quality Assurance and Third-Party Quality Assurance  Government QA and Third-party QA is where the procuring party either a foreign government or a third-party (such as a company) where Armscor independents provides assurance of the goods or services procured  Armscor provides Government Quality assurance to the Netherlands, Germany, Holland, Spain;  And Third-party QA to SAPS and companies such as RDM and Thales.  QA services lends further creditability to SADI products as it gives clients assurance. Helps promote SADI product sales INDUSTRY COLLABORATION WITH ARMSCOR

Armscor and CSIR, on behalf of the DoD, is in process of developing an Africa Truck initiative which is a locally produced family of military vehicles which comply with SANDF and UN requirements specifically designed for African conditions. To be done in partnerships with industry and local and continental Armscor is in the process of leveraging its assets and is inviting business partnering proposals from private industry Armscor will support the sweating of SANDF/DOD assets by partnering with private industry INDUSTRY COLLABORATION WITH ARMSCOR

Armscor as a conduit for SADI products to the UN Armscor as a conduit for SADI products to the UN  Armscor responded to a UN RFI for  Uniforms. > 80% of the RFI could be serviced by SADI SMMEs. SMME would not be able to respond to the RFI on their own due to scope. Armscor as a strategic supplier to the UN: Consolidation of SADI products, especially SMME with addition value add such as QA, Example: Armscor as a conduit for SADI products to the UN  Armscor responded to a UN RFI for Uniforms.  If Individual companies would respond to the RFI on their own, it would result in a piece-meal response.  Armscor as an intermediary combined supply base which resulted in > 80% of the RFI capability provided by SADI SMMEs. Armscor as intermediary: enable small suppliers to participate, otherwise excluded or limited chances of success due to the scale of supply required – Note NOT mandatory Based on Armscor’s capabilities and mandate, UN could be approached to consider government level participation in UN work i.e. Armscor act as a strategic supplier for certain goods and services especially those used by own forces.

MAIN CONTRACTOR Consulting Spares Specializing on subsystems Joint Ventures SUBCONTRACTING PARTNERING Consortiums FORMS OF INDUSTRY INVOLVEMENT Work sharing

TENDERING AND CONTRACTING FOR ACQUISITION Generally open tender – competitive bidding subject to PPPFA Functionality Price BBBE Exceptions Strategic Capabilities Continuation work OEM’s Value Systems with mandatory and critical criteria Contracting at highest appropriate level – single point of integrative responsibility as main contractor Industry may also participate as a vendor or subcontractor Maximum competition at subsystem level Participation is by response to an Armscor issued RFI/RFO Compliance to Arms Control during contract execution

TENDERING AND CONTRACTING FOR BUSINESS COLLABORATION Generally open tender – competitive bidding Terms of reference will likely accompany the RFO inviting innovative business solutions from Industry Adjudication criteria to be confirmed but for income generation tenders will typically be: ROI Proximity to mandate and support mandate Support of Strategic intent Risk

All Armscor suppliers must be registered as an Armscor supplier Suppliers subjected to Armscor security policy requirements Suppliers BEE claim verified Tenders and Supplier registration links are on PROCUREMENT INFORMATION

QUESTIONS AND ENGAGEMENT