BRUNEI DEFENSE PROCUREMENT: PERSONNEL CHANGES

C O N F I D E N T I A L SECTION 01 OF 03 BANDAR SERI BEGAWAN 000317

SIPDIS

SIPDIS

DEPARTMENT FOR EAP/MTS
SINGAPORE FOR DAO AND ODC
OSD FOR IPSEN

E.O. 12958: DECL: 10/18/2017
TAGS: MASS PGOV BX
SUBJECT: BRUNEI DEFENSE PROCUREMENT: PERSONNEL CHANGES
AGAIN SLOW DECISIONS

REF: BANDAR 160

Classified By: DCM Justin Friedman, reasons 1.4 (a) (b) & (d)

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SUMMARY
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1. (C) Brunei's Defense White Paper update of May gives new
urgency to procuring systems to fill critical gaps in
Brunei's surveillance and C4I capabilities. However,
turnover at the top of the Ministry of Defense and
realignment of procurement responsibilities continue to slow
movement on long-stalled procurement decisions. We hope that
the latest batch of changes will usher in a period of
relative personnel stability, allowing the bureaucracy to
settle down to the work of awarding much-delayed contracts in
areas that play to U.S. firms' technological strengths. END
SUMMARY.

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Delayed Decisions on New Gear
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2. (SBU) In May, the GoB issued a update to its Defense White
Paper which gave new priority to procuring border and
maritime surveillance assets and developing a stronger C4I
technology base (reftel). Procurements of new systems had
been on hold pending resolution of a contract dispute with
BAE and the UK Government over the purchase of offshore
patrol vessels (OPVs). That dispute was largely settled
earlier this year when the GoB agreed to take delivery of the
ships with the intention of selling them to a third party.
For much of 2007, industry has been looking to the
announcement of the award of a combat network radio (CNR)
contract as a sign that the procurement drought is over.
However, GoB and MinDef officials have pointed us to the
absence of one key senior official or another as the reason
why no decision has been taken. The most recent delay was
attributed to MinDef Permanent Secretary Dato Mustappha
Sirat's absence from Brunei to attend senior executive
training at Harvard University in August, followed by the
annual slow down in work across the GoB during Ramadan.

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Personnel Shuffle Keeps Procurement on Hold
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3. (C) On October 11, to the surprise of the Brunei Defense
establishment, including Deputy Defense Minister Pehin
Mohammad Yasmin Umar, the Prime Minister's Office (PMO)
announced that Mustappha was switching jobs with PMO
Permanent Secretary (one of four) Pengiran Dato Haji Abdul
Hamid Pengiran Haji Mohd Yassin. Mustappha was the principal
author of the White Paper and a key decision maker on all
procurements. His departure means that the CNR procurement
will remain on hold for the time being.


4. (C) Mustappha told DCM at the Sultan's reception on
October 13 marking the first day of Hari Raya (Eid al Fitri)
that he had no advance warning of the move and had not been
given any idea what his new portfolio would encompass.
During other Hari Raya festivities, a PMO insider explained
to Ambassador that the move was instigated by a subtle hint
from the Sultan to Deputy Prime Minister Agaki that he would
like to see the job switch take place, which is the usual
method the monarch employs to effect personnel changes in the
PMO. Pengiran Dato Mashor Pengiran Ahmad, Deputy PermSec at
MinDef told DCM that Pengiran Dato Hamid had managed a only
quick visit to the Ministry on the 12th for a short briefing
before the Hari Raya holiday.


5. (C) Pengiran Dato Hamid is a relative novice to MinDef
with little background in defense issues, having spent much
of his career in various positions at the PMO overseeing
government-wide administration. At a Hari Raya call at his
home on October 20, Hamid told us that he will spend his
initial months on the job learning the ropes, a remark we
interpret as an indication of more delays on procurement
decisions. When the Ambassador inquired about specific
pending procurements, Hamid's responses made clear that he
had little or no specific knowledge of the current
requirements or state of play. NOTE: Hamid told us that he
has been briefed on the excellent training offered by the
USG-supported Asia Pacific Center for Strategic Studies

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(APCSS) in Hawaii and was interested in taking a course there
at the earliest opportunity once he has settled in to his new
position. Post will work with Hamid and APCSS to enroll him
in the next available Senior Executive course. END NOTE.

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Procurement Hold, but Roles May become Clearer
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6. (C) Notwithstanding this setback, other recent personnel
shuffles in the world of Defense procurement may lead to
progress. Royal Brunei Technical Services (RBTS),an arm of
MinDef, still has a legal monopoly on military and security
procurements, but the military services have been able to
make their own procurement decisions independent of RBTS for
the past year, according to MinDef Finance Director Ang Guat
Lay. RBTS lost its privileged position, in part due to
allegations of corruption in the OPV purchase. The task of
managing procurements has fallen to the Finance Department,
which has neither the staffing nor the experience to run
tenders and other procurement activities. In a recent
meeting with DCM and ODC Deputy Chief, Ms. Ang confirmed our
sense that opening direct procurement by the services had
created confusion which has been a significant contributor to
the recent paralysis in Defense procurements.

7.(C) This may be changing. In August, Lt. Col (ret.) Amir
Hamzah Hj Hanafi was named the new CEO of RBTS. Amir Hamzah
is a sharp, well-spoken ex-Military officer who is still
closely plugged in to MinDef decision making. Amir Hamzah's
previous job was head of the scholarship unit where he
reported directly to Deputy MinDef Pehin Yasmin. Amir Hamzah
was a key part of the team that opened up the MinDef-run
Supreme Commander Scholarship program to start sending
students for undergraduate degrees in the U.S. The first
five Supreme Commander Scholars have just started at four
U.S. universities (University of Pennsylvania, University of
Michigan, University of Illinois - Champaign Urbana (x2),and
Embry Riddle).


8. (SBU) In a meeting on October 10, Amir Hamzah told us
although RBTS is losing its procurement monopoly, it will
maintain its traditional procurement services role as it is
the only entity in the Brunei security establishment with the
technical skills to run tenders. Beyond that, he is trying
to restructure the organization into a value added security
service provider, adding three new roles to RBTS's mission:
a) acquisitions management - helping define and select
systems that meet MinDef's and the services' capability
requirements; b) systems management to provide local
maintenance and logistics services; and c) management of
research and development for defense and security needs.
RBTS is self-financed, so to survive in an era when it is no
longer guaranteed three percent off the top on all defense
and security procurements as was previously the case, it must
move more strongly into these areas. Hamzah has already had
some successes, as RBTS is conducting a requirements study
for the military's joint operations center and won a heavy
truck maintenance contract for MinDef in late September.

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Status of Procurement Priorities
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9. (SBU) On the immediate horizon, Hamzah told DCM that he
expected the CNR contract to be let by the end of the year.
RBTS will finish the joint operations center requirements
study by the end of this month and a tender should be issued
soon after. RBTS is compiling specifications and
requirements for C4I under a contract with MinDef and hopes
to win a similar contract to scope a future national disaster
management center. Over the next two years, RBTS is
positioning itself to take advantage of forthcoming tenders
to run naval vessel support services, electronics for
land-based systems (follow on the CNR),a training simulator,
and by 2010, to run the navy's shipyard.

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COMMENT: Turning Procurement Lemons into Lemonade
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10. (C) The recent turmoil in defense procurement, combined
with Brunei's traditionally slow, top-down decision making
process, has soured some U.S. firms on doing business here.
Harris Corp. is still a finalist for the CNR, but like other

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firms, it is grumbling about the amount of time and effort it
has expended chasing a relatively small contract. Several
U.S. firms have pitched to the GoB both technologies and
systems integration for the surveillance/UAV, C4I and
homeland security missions. We agree with Amir Hamzah that
MinDef and other relevant ministries lack the technical
expertise to adequately scope and specify Brunei's needs in
these areas. If Brunei is to avoid another OPV fiasco, it
will need to hire technical consultants to do this job.
Hamzah believes that having learned the lesson from past
mistakes, MinDef will want to hire consultants -- a job RBTS
wants to win in possible partnership with U.S. firms -- on
the condition that they exclude themselves from future
tenders to design and build these new systems. These may be
small contracts for major defense firms, but the sweet lemon
is that finally there soon may be several opportunities for
U.S. firms to take pieces of contracts that play to U.S.
competitive advantages in military procurement.
SKODON