Article Thirty: Disputes and Arbitration
Any controversy, claim or dispute arising out of the application including termination of this contract which could not be settled amicably shall be finally settled by arbitration.
The party who intends to resort to arbitration shall notify the other party by registered letter (return receipt requested) stating the question(s) upon which he intends to resort to arbitration.
Within thirty days subsequent to the date of receipt of said registered letter, the parties shall endeavour to amicably resolve the related question(s).
Failing a complete agreement on all such question(s), the questions involved shall be submitted to arbitration in the following manner:
- One arbitrator shall be designated by the Supplier;
- One arbitrator shall be designated by the E.C.A.A.
- One arbitrator who shall not be resident or national of either the A.R. Egypt or United States, shall be designated by mutual agreement between the two parties and if they fail to do so, shall be designated by the President of the International Chamber of Commerce.
The three arbitrators shall be designated as hereinabove set forth within a period of twenty days subsequent to the end of the thirty days period of attempted conciliation mentioned above. They shall then promptly proceed to carry out arbitration in Cairo Regional Centre for international commercial arbitration acting in accordance to the Egyptian laws and the international commercial laws of the United Nations as stipulated in the letter of instruction to E.C.A.A. by the Minister of State under N° 1390 dated 10th of March 1993.
The party requesting the arbitration shall pay the arbitrators transportation cost to Cairo and their living expenses as well as their remuneration until the arbitration award has been made in English Language.
The arbitrators shall decide the party who pay the arbitration expenses. The parties agree that the arbitrators shall be vested with full power to make a final settlement of the matter being arbitrated and their award shall be final and binding upon both parties.
Article Six: Terms of Payment
All payments shall be made through a fully funded irrevocable and confirmable letter of credit in the amount of Thirty Million Nine Hundred Thousand United States dollars ($30,900,000.00USD) in a form and content satisfactory to the Seller by a US bank acceptable to the Seller. The letter of credit shall be established within sixty (60) days of Contract signature in favour [sic] Northrop Grumman Overseas Service Corporation [...]
Said letter of credit shall remain in full force and effect for a minimum of twenty (20) months and until payments due under this Contract have been made.
All payments shall be free and clear of any deductions or penalties assessed under the Contract, or taxes, assessments or charges imposed by the opening or confirmable bank, or by a country, department, agency, political subdivisions or taxing authority thereof for the equipment only. In the event Buyer is required to withhold any such charges from any payment made to Seller, then Buyer shall reimburse such charges upon presentation of an invoice therefor [sic]. All expenses relative to establishing of the Letter of Credit in Egypt shall be at E.C.A.A.’s expense. All expenses incurred for the confirmation of the letter of credit, if required, in the United States and in Egypt, shall be at the supplier’s expense.
Payment number 1 (down payment) shall be made within (60) days of Contract signature. All other payments shall be made by the confirmable bank upon presentation of Seller’s invoices certified by Seller in five (5) copies, and the other documents required in 6.1 upon the date and in the amount specified in the Schedule of Payments.
The Seller shall reserve the right at any time without recourse or prejudice to the Seller to discontinue all work under this Contract in the event (i) payment for a duly submitted invoice has not been received by Seller within 30 days from the Maturity Date of the respective invoice, or (ii) the letter of credit has expired or has not been extended or increased when required to complete all payments. In no event, however, shall Buyer be relieved from his duty to pay Seller for all performance rendered in accordance with the Contract.
Article Twelve: Delay in Delivery and Penalty for Delay
1. Delay in delivery of the equipment.
a) In the event of delay in delivery as defined in Appendix B in whole or in part of the quantities contracted for, the E.C.A.A. shall have the right to impose penalty for delay. Such penalty shall be considered as liquidated damages.
2. Delay in civil Works installation and services:
a) If the contractor fails to execute the erection of the civil works and the performance of installation and services within the period contracted for as defined in Appendix B, then the Contractor shall be liable to penalty for delay which shall be considered as liquidated damages computed upon this part or parts of civil works, installation and services of the contract so delayed, as follows:
c) The penalty shall not exceed 15% (fifteen percent) in any case of the value of the civil works, installation and services so delayed.
3. The penalties stated in paragraph 1 and 2 shall be enforceable by the sole fact of delay without any previous notification to the contractor or other formalities or recourse to judicial proceeding.
Should the contractor fail to perform its obligations within such time limit the penalties stated hereabove this clause shall not apply and be paid in full compensation to any other claim [sic] from the E.C.A.A. for the purpose of delay.
4. The amount of penalties will be paid to the E.C.A.A. by bank transfer or will be deducted from prices when effecting payments or from the performance guarantee.
5. If however, the contractor proves to the satisfaction (Logic Reasons) of the E.C.A.A. that the whole or part of the delay rise [sic] from cause beyond his control and which could not be foreseen at the time he signed the contract, the E.C.A.A. shall waive all or part of the said penalties.
6. In the case the Delay in Delivery exceeds three months the E.C.A.A. shall have the right to cancel the contract and the related Letter of Credit and confiscate the Guarantee Deposit after a 30 day notice without recourse to Jurisdiction or any other formalities. The Cancellation of the Contract shall in all cases be effected by a Registered Letter sent to the Supplier.
Notwithstanding any contrary provision contained in this Contract, Supplier shall not be responsible to E.C.A.A. in contract or tort (including negligence) or otherwise for any direct, incidental, special or consequential damages of whatsoever nature, or for attorney’s fees, loss of use, loss of market share, or lost profits however these are characterized. Supplier shall not be liable to E.C.A.A. for an amount which in combination with all claims by E.C.A.A. against Supplier under this Contract exceeds the value of this Contract. In any event the liability of Supplier to E.C.A.A., whether in contract, tort (including negligence) or under any warranty, or otherwise, is exclusively limited to the remedies expressly provided under the terms of this Contract, in lieu of any and all other remedies at law or in equity.
The Contract performance in accordance with the schedule in Appendix B shall commence on the date when all the events below shall have occurred which shall define the beginning of the contract performance under this Contract:
a) Establishment of the Letter of Credit as described in Article 6.
b) Supplier’s receipt of the down payment.
c) Letter of Guarantee for Performance (10% Eq. 5% non Eq.)
d) Letter of Guarantee for Down Payment.
15 months after the performance date
Site 1: 3 months after receipt of equipment at port in Egypt x
Site 2: 3 months after receipt of equipment at port in Egypt
Site 2: 3 months after receipt of equipment at port in Egypt
1 month after the last installation of equipment
Article Twenty: Provisional Acceptance
1. FOR CIVIL WORKS LOTS:
a) The buildings and furniture in them shall be handed over to the E.C.A.A. completed including electricity, air conditioning, etc. which shall be in working order and in particular comply with the specifications contracted for and with the safety and fire protection regulation in force.
b) The Works should [sic] be completed for provisional acceptance will be carried out for each station as follows:
1. Building and furniture
2. Power supply and air conditioning equipment and installation and good operation of the equipment delivered in the station under this contract.
3. Delivery of All technical documents related to this station called for in the technical specifications.
c) Provisional acceptance shall be requested by the contractor one month in advance. It shall be granted following completion of the Works, in presence of the contractor, his sub-contractors and the E.C.A.A
2. FOR EQUIPMENT AND INSTALLATION WORKS
a) Provisional acceptance shall be confirmed for each station depending on the case, following installation, adjustment ground testing and commissioning of the equipment and delivery of all technical documents called for in the general technical specifications.
b) However, if anomalies which prevents [sic] the operational use of the equipment are encountered in the equipment during flight testing subsequent to confirmation of provisional acceptance, the contractor shall be required to execute requisite modifications rapidly and at its cost.
c) Flight checks if any, shall be the responsibility of the E.C.A.A. and shall be carried out within a period mutually agreed upon following full execution of the Works. Related costs shall be borne by the E.C.A.A.
d) The provisional acceptance report of each station shall be signed by the two parties within two weeks after completion of the provisional acceptance test.
e) Without written comments and/or reserves from E.C.A.A. within those two weeks, the guarantee period as stated in Article 25 will start.
Article Twenty-Five: Period of Guarantee
Supplier covenants and agrees that the equipment delivered under this Contract shall be manufactured in accordance with the Supplier's drawings and specifications and shall be free from defect in material and workmanship for a period of twelve (12) months after the provisional acceptance, as evidenced by the signature by E.C.A.A. on the Provisional Acceptance Document Appendix E3. Supplier will at its option repair, correct or replace at no cost to the E.C.A.A., CIF Egypt any such equipment which proves to be defective as defined under this Article. Supplier may at its option, participate in the failure investigation of the equipment at the installation sites and repair, correct or replace the defective item at such site or at its designated facility.
Repair, correction or replacement in the manner provided above shall constitute fulfillment of all of Supplier's obligations under this Warranty. This Warranty shall not apply to any equipment or parts which have been subjected to accident, misuse or unauthorized alteration, to normal wear (which includes components with innate limited life), to failures caused by not complying with Supplier's installation and service requirements (if the failed equipment or parts were not installed by Supplier or the Supplier's subcontractor). This Warranty shall not apply to consumable delivered under this Contract.
This assurance shall apply to and include correction of Technical Data pertinent to defective work and equipment as to the extent, delineated above, but in no event to include computer software.
If the repair, correction or replacement of equipment is not within the scope of this Article, then Supplier shall require a separate purchase order therefore from the E.C.A.A.
THE FOREGOING COVENANTS ARE EXCLUSIVE AND ARE IN LIEU OF ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR PURPOSE OR OTHER WARRANTY OF QUALITY, WHETHER EXPRESS, STATUTORY OR IMPLIED. IN NO EVENT SHALL SUPPLIER BE LIABLE FOR SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES.
Article Twenty-One: Final Acceptance
21.1 Final acceptance of the systems shall be given at the dates of expiration of the corresponding guarantees periods, as defined in Article 25.
21.2 In all cases, final acceptances of the systems shall be awarded by E.C.A.A. which shall sign the relevant final acceptance certificates at the respective dates of expiration of relevant periods mentioned hereabove.
Final acceptance shall be subject to the Supplier having met all the requirements in this contract and to him having dealt with any accepted warranty claim which may have been pointed out during guarantee period, and any defects in the operation of the systems which arise during guarantee period.
21.3 Final acceptances of spares and consumable will take place upon complete delivery of such equipment to the installation sites and to E.C.A.A. stores, according to the case.
[...] The purpose of this Extension is to authorize Northrop Grumman Overseas Service Corporation to provide Upgrade of Approach and Terminal Area Control for Alexandria, Aswan, El Arish and Taba International Airports to the ECAA. The conditions of Contract No. 27/96/97 shall apply to this Extension. If there are any conflicts between the Conditions of Contract and the provisions contained in this Extension.6
c. The ECAA agrees to complete provisional acceptance at Sharm El Sheikh and Luxor by 7 September 2000. Northrop Grumman will support a shadow operation with technical support at the site for one month following provisional acceptance. The ECAA agrees to complete Hurghada flight testing by 15 September 2000 with provisional acceptance by 30 September 2000.
d. Northrop Grumman will provide a proposed SPARES SUPPORT PLAN to the ECAA by 10 September 2000 which will include support for all radar system installations including the shadow operation and provisional acceptance. This plan will include a comprehensive list of all SPARES to be provided at each site together with estimated delivery dates for each SPARE. The ECAA and Northrop Grumman shall agree on this plan by 15 September 2000.
e. Provisional acceptance consists of site acceptance and flight testing at each site. Completion of these test shall be confirmed by ECAA’s consultant MITRE Corp., directly to the ECAA immediately following accomplishment of provisional acceptance at each site.
f. Northrop Grumman agrees to submit a revised electrical and structural drawing for Al Arish and Alexandria to the ECAA by 4 September 2000. These drawings shall be approved by ECAA by 15 September 2000. Northrop Grumman has submitted a proposal for increasing tower height. The ECAA and Northrop Grumman will agree on the additional scope and prices by 25 September 2000. The TMA electrical drawings will be approved without the additional requirement for generator buildings.
g. The ECAA agrees to provide power at Alexandria, Al Arish, Taba and Aswan before installation of the radars or AMS communication equipment.
h. Northrop Grumman will resubmit all open invoices by 30 August 2000. The ECAA agrees to provide full payment for the 15 currently open invoices by 20 September 2000.
i. The ECAA and Northrop commonly agree to complete Factory Acceptance Testing on the last ASR 12 radar no later than 15 September 2000.
j. Northrop Grumman agrees to provide lodging and per-diem compensation for the 4-LOT consistent with that provided for the 4- LOT.
k. The ECAA will permit immediate shipment authorization of equipment to be stored in a facility in Cairo to be provided by ECAA. Northrop Grumman shall be responsible for providing air conditioning and payment for electrical and water services.11
Last month, you and I were able to resolve numerous issues that our respective teams were allowing to delay the completion of your ATC system. We documented our plan in a Memorandum of Understanding (MOU) and I believe you felt as I did, that this provided clear direction to our teams to move the program forward. Northrop Grumman has met all of the stated MOU commitments. Engineer Youssef has, to date, been unable to complete any of the MOU scheduled requirements. I urgently appeal to you to intercede with direction to your ECAA Project Team before we experience further delay. Of utmost importance are:
■ Provisional acceptance at Sham El Sheikh and Luxor which was to be accomplished on 7 September. This is holding up shadow operations, which were to commence immediately following provisional acceptance. Both systems are up and running and my people are standing by to support these tests.
■ Flight testing at Hurghada which was scheduled to be completed by 15 September. I understand that an aircraft has still not been scheduled.
■ Shipment of 4 Lot ASR-12 radar equipment by signing off the successful completion of FAT’s for the ASR-12 Radars.
■ Pay all open invoices as agreed. We prepared new invoices by the date agreed to (30 August), but have only received $472,054 of the $6.1 million we agreed to be paid by 20 September. I know that you will understand that it is impossible for my company to continue work without payment and to absorb delay and additional work at no cost.15
On 26 September 2001, the Respondent sent the Claimant three signed copies of the minutes of the 3-Lot Final Program Management Review Meeting held between 10 and 19 September 2001 (the "PMR Meeting").16 During the PMR Meeting, the Parties reviewed and discussed all open items listed on the Provisional Acceptance Certificates of the 3-Lot Contract sites.17 With respect to achieving final acceptance, the minutes of the PMR Meeting state as follows:
Per the contract, Final Acceptance will be granted once the defects that occurred during the warranty period are corrected and the remarks on the relevant Provisional Certificates are rectified to the satisfaction of both parties. Any defects that occur outside the warranty period are not the responsibility of NG and will not affect the granting of Final Acceptance.18
Sharm El Sheik [sic]
Effective warranty dates - 9 October 2000 - 8 October 2001
Effective warranty dates -- 13 December 2000 - 12 December 2001
Effective warranty dates - 5 February 2001 - 4 February 2002
This letter is to document the agreement between the undersigned Parties waiving:
1. Any potential claim by the NCANS to any payment of liquidated damages.
2.Any potential claim by the NCANS for Roof Access, SIT Testing, FAT Testing, Installation of Fiber Optic Interface vs. Microwave Interface to ADOC at Luxor, Performance of VCSS Training of 4 weeks instead of 6 weeks, BOQ items of 9 TEDs, 30 Handsets, 2 Foot Switches, 29 Dual Jack Modules, 11 Loud Speakers and 20 Recording Tapes, costs delineated in Attachment 1.
3. Any potential claim by NGOSCO related to AMS out of Scope software changes, Travel for NCANS Personnel within Egypt, Out of scope per diem and travel days, FAT lodging, Frequency Generator Spares, Facility Impacts, Replaced MSSR Antenna, Redundant Transformers, RSS FAT and Training. AMS Retraining, Delayed Payment Impact, Maintenance of Advance Guarantee, Letter of Credit Fees, Additional OMT’s for CANC, Shipping from Alexandria to Sites and work delay and disruption, costs delineated in Attachment 1.
Further, NCANS agrees it will pay NGOSCO customs duties and taxes upon mutual agreement of receipts presented. Payment shall be remitted to NGOSCO upon verification of customs duties and taxes receipts.
Per this agreement, any additional efforts for the 3-lot portion of the contract not specifically required in the contract will require a written requested from NCANS to provide those efforts. NGOSCO will review the request and or resolved by this agreement, respond with an appropriate proposal.
The parties here to have accepted and executed this agreement by their duly authorized representatives.21
a) The Tribunal has been properly constituted.
b) The Arbitration Rules ("Rules") of the Cairo Regional Centre for International Commercial Arbitration ("Centre") govern the arbitration.
c) The language of the arbitration is English. Except for legal precedents and doctrinal commentary, both of which shall be excerpted as appropriate in English but shall also be submitted in the original, documents in any language other than English shall be accompanied by an informal translation into English.
d) Correspondence between the Parties and the Tribunal, including submissions, applications and orders, shall be sent to and through the Centre.
e) The procedural timetable for filing memorials shall commence on 26 June 2006 and shall be as follows:
(i) The Claimant shall file its Statement of Claim by 9 September 2006.
(ii) The Respondent shall file its Statement of Defense (and Counterclaim, if any) by 24 November 2006.
(iii) Claimant shall submit its Reply (and in the case of a Counterclaim, its Statement of Defense to Counterclaim) by 23 January 2007.
(iv) Respondent shall submit is Rejoinder (and in the case of a Counterclaim, its Reply to the Statement of Defense to Counterclaim) by 24 March 2007.
(v) In the case of a Counterclaim, Claimant shall submit its Rejoinder to the Counterclaim by 24 May 2007.
(vi) Claimant and Respondent shall submit their Witness Statements (to include Expert Statements) by 8 July 2007.
(vii) Claimant and Respondent shall submit their Witness Statements in rebuttal by 7 August 2007.
(viii) The Tribunal’s Reading Period shall not exceed 60 days.
(ix) An oral hearing shall be held of no less than three eight-hour days, with one day held in reserve. Dates for an oral hearing shall be fixed by the Tribunal before 1 August 2006 after consultation with the parties.
(x) There shall be at least one round of simultaneous post-hearing submissions, the time-limit of which the Tribunal shall set by reference to the date on which the Parties will have received the transcripts of the oral hearing.
f) No new documents shall be introduced into the record after the first round of Witness Statements, except by leave of the Tribunal.
g) Submissions shall be color-coded, paginated, paragraph-numbered, and shall contain detailed tables of content. All numbering shall be continuous across submissions.
h) Exhibits shall be tab-numbered continuously across submissions. Claimant’s exhibits shall be cited as "C-Exhibit (sic) (x)", and Respondent’s exhibits as "R-Exhibit (x)", where (x) refers to the exhibit number.
i) No witness shall be heard who has not filed a Witness Statement.
j) All witnesses shall be subject to cross-examination.
k) No Witness Statement shall stand whose author fails to submit to cross-examination.
l) Witnesses, once heard, may remain in the hearing room.
m) Witnesses may testify in the language of their choosing. A Party calling a witness who proposes to testify in a language other than English shall arrange for the Centre to provide interpretation into English. The costs of the interpretation shall be costs in the arbitration.
n) A verbatim transcript of the hearing shall be prepared. The costs of the transcript shall be costs in the arbitration.
o) The Tribunal shall endeavour to render its final award as expeditiously as possible while always retaining the right to do so at such time as it considers appropriate.
i. The arbitration clause contained in Article 30 of the Agreement of 10 May 1997 [as supplemented] is valid.
ii. The Tribunal has jurisdiction to adjudicate the present dispute.
iii. The present arbitral proceedings are admissible.
iv. Each Party shall submit to the Tribunal a duly notarized Power of Attorney in favor of their respective solicitors authorizing them to undertake all measures necessary to file and pursue the present proceedings within fourteen (14) days from the date of the present Interim Award.
v. Respondent’s requests are rejected as being moot.
vi. The costs of the present proceedings will be reserved until the Tribunal’s decision on the merits.26
If, before the award is made, the continuation of the arbitral proceedings becomes unnecessary or impossible for any reason not mentioned in paragraph 1, the arbitral tribunal shall inform the parties of its intention to issue an order for the termination of the proceedings. The arbitral tribunal shall have the power to issue such an order unless a party raises justifiable grounds for objection.
(6) The procedural timetable for filing memorials shall commence on 1 September 2008 and shall be as follows:
(i) Claimant shall submit its Statement of Claim by 1 November 2008.
(ii) Respondent shall submit its Statement of Defence (and Counterclaim, if any) by 1 January 2009.
(iii) Claimant shall submit its Reply (and in case of a Counterclaim, its Statement of Defence to Counterclaim) by 1 March 2009.
(iv) Respondent shall submit its Rejoinder (and in case of a Counterclaim, its Reply to Statement of Defence to Counterclaim) by 1 May 2009.
(v) In case of a Counterclaim, Claimant shall submit its Rejoinder to the Counterclaim by 1 July 2009.
(vi) Claimant and Respondent shall submit their Witness Statements (to include Expert Statements) by 15 August 2009.
(vii) Claimant and Respondent shall submit their Witness Statements in rebuttal by 15 September 2009.
(vii) (sic) The Tribunal’s Reading Period should not exceed 60 days.
(viii) There shall be held an oral hearing of not less than three eight-hour days, with one day held in reserve.
(ix) There shall be at least one round of simultaneous post-hearing submissions whose time-limit the Tribunal shall set byreference to the date on which the Parties shall have received the transcript of the oral hearing.
(i) Claimant shall submit its Statement of Claim by 1 December 2008.
(ii) Respondent shall submit its Statement of Defence (and Counterclaim, if any) by 1 February 2009.
(iii) Claimant shall submit its Reply (and in case of a Counterclaim, its Statement of Defence to Counterclaim) by 1 April 2009.
(iv) Respondent shall submit its Rejoinder (and in case of a Counterclaim, its Reply to Statement of Defence to Counterclaim) by 1 June 2009.
(v) In case of a Counterclaim, Claimant shall submit its Rejoinder to the Counterclaim by 1 August 2009.
(vi) Claimant and Respondent shall submit their Witness Statements (to include Expert Statements) by 15 September 2009.
(vii) Claimant and Respondent shall submit their Witness Statements in rebuttal by 15 October 2009.
(viii) The Tribunal's Reading Period should not exceed 60 days.
(ix) There shall be held an oral hearing of not less than three eight-hour days, with one day held in reserve.
(x) There shall be at least one round of simultaneous post-hearing submissions whose time-limit the Tribunal shall set by reference to the date on which the Parties shall have received the transcript of the oral hearing.
(i) Claimant shall submit its Statement of Claim by 1 December 2008.
(ii) Respondent shall submit its Statement of Defence (and Counterclaim, if any) by 1 March 2009.
(iii) Claimant shall submit its Reply (and in case of a Counterclaim, its Statement of Defence to Counterclaim) by 1 May 2009.
(iv) Respondent shall submit its Rejoinder (and in case of a Counterclaim, its Reply to Statement of Defence to Counterclaim) by 1 July 2009.
(v) In case of a Counterclaim, Claimant shall submit its Rejoinder to the Counterclaim by 1 September 2009.
(vi) Claimant and Respondent shall submit their Witness Statements (to include Expert Statements) by 15 October 2009.
(vii) Claimant and Respondent shall submit their Witness Statements in rebuttal by 15 November 2009.
(viii) The Tribunal’s Reading Period should not exceed 60 days.
(ix) There shall be held an oral hearing of not less than three eight-hour days, with one day held in reserve.
(x) There shall be at least one round of simultaneous post-hearing submissions whose time-limit the Tribunal shall set by reference to the date on which the Parties shall have received the transcript of the oral hearing.
The party requesting the arbitration shall pay the arbitrators transportation cost to Cairo and their living expenses as well as their remuneration until the arbitration award has been made in [sic] English Language.
After spending a whole year reading and writing in preparation of the Arbitration file, the Claimant is quite convinced that this Arbitration is totally confined to legal and documents matters, which need no Witness or Expert opinion.
Therefore, Claimant shall not submit any Witness or Expert Statements. Meanwhile, Claimant reserves its right to comment on any Witness or Expert opinion, if any, to be submitted by the Respondent.
1. In accordance with the Tribunal’s Procedural Order of 28 October 2008, para 3(vii), the Claimant may submit Witness Statements in rebutal of Respondent’s Witness and/or Expert Statements, if any, by 15 November 2009.
2. In accordance with Article 24(1) of the Arbitration Rules of the Cairo Regional Centre for International Commercial Arbitration, each party has the burden of proving the facts it relies on to support his claim or defence and, in accordance with Article 25(6) of the Rules, the Tribunal will determine the admissibility, relevance, materiality and weight of the evidence offered.
3. Obviously, if a party does not submit any witness or expert statements, it will not be allowed to present any witnesses at the hearing. However, it may cross-examine Respondent’s witnesses and comment on Respondent’s witness statements. In due course, the Tribunal will determine, in its decision, whether or not each Party has discharged its burden of proof.
The Tribunal has considered the positions put forward by both Parties and reaffirms that either Party may submit rebuttal witness statements on or before 15 November 2009 or comment orally on any evidence put before the Tribunal at the hearing. The next available opportunity for the Parties to submit written comments to the Tribunal is through the submission of Post-Hearing Briefs, as may be directed by the Tribunal in due course.
The Tribunal recalls that, as in any arbitration, it is vital that the record in the present Arbitration include all the evidence which is relevant to the issues in dispute between the Parties. It is also essential, for the sake of good order, that procedural directions of the Tribunal be complied with by the parties. At the end of the day, an arbitral tribunal, such as the present one, is vested with a measure of discretion which allows it to issue decisions which harmonize these two principles without causing prejudice to either party.
Accordingly, the Tribunal, pursuant to para 7 of the Tribunal’s Procedural Timetable of 17 September 2008 has decided to grant leave, retroactively, to the Claimant to introduce into the record the following factual exhibits: Exhibits C-450 to C-468, Exhibits C-470 to C-479, and Exhibits C-482 to C-485 inclusively.
With respect to Exhibits C-480 and C-481, the Tribunal has decided to allow these factual exhibits into the record provided Claimant submits, within two weeks from this date, an English translation of same - English being the language of this Arbitration.
On the other hand, Respondent’s request to strike from the record Claimant’s Comments to Respondent’s Witness Statements (75 pages) and Exhibits C-443 to C-448 and Exhibit C-469 is hereby granted. As the Tribunal stated earlier, in due course, the parties will be allowed to provide written comments to the Tribunal through the submission of Post-Hearing Briefs.
All of Respondent’s additional costs incurred as a result of the Tribunal’s decision will be borne by the Claimant and will be adjudicated at the conclusion of the Hearing.
In addition, the Tribunal notes that Respondent, in its letter of 10 December 2009, stated, in part, as follows:
"[...] Northrop Grumman also could have submitted yet more documents showing Claimant’s breaches."
Accordingly, the Tribunal grants leave to Respondent to submit, within two weeks from this date, any additional factual documents "showing Claimant’s breaches" as well as documents which relate to Claimant’s new Exhibits, listed above, which the Tribunal has allowed into the record.
The arbitral proceedings will now continue in accordance with the Tribunal’s Procedural Order of 28 October 2008. The Tribunal reconfirms that the hearing in Cairo will be held as scheduled from 20 to 23 March 2010.
1- Claimant noted, with due respect, the decision of the esteemed Tribunal to allow respondent’s exhibits R-341 to R-361 into the record of the arbitration.
2- Claimant does not want to cross-examine any of the 13 witnesses whose written statements were submitted by respondent.
3- As for the draft Order of Proceedings for the hearing, I discussed it with Mr. Tamim Foda, Counsel for Respondent, and we agreed to it. So there is no need to hold a telephone conference on this matter.
4- Mr. Tamim Foda and myself agreed to request the esteemed tribunal to allow us one week extension of time to submit the Sekelton Argument so as to submit it by 15 March 2010 instead of 8 March 2010.
We shall be grateful if this is granted.
As for the draft Order of Proceedings for the hearing, which was discussed with Mr. Tamim Foda, Counsel for Respondent, we would like to clarify that no agreement has been reached in this regard. Based on the foregoing, Respondent confirms that it still wishes to hold a telephone conference on this matter with the tribunal as confirmed for March 1st 2010.
1- Claimant counsel is going to be available for the conference call set for 1st March 2010 at 4:30 pm Cairo time.
2- As for cross-examining the Respondent witnesses, Claimant’s earlier position not to cross-examine any of them was based on an understanding, after telephone call between Mr. Tamim Foda, counsel for the Respondent and myself, that none of the witnesses is going to be present in the hearing. However, now it seems that I was mistaken in this understanding and as six witnesses are going to be present in the hearing Claimant reserves it’s right to cross-examine them.
3- Claimant shall submit it’s Skeleton Arguments on or before the dated (sic) fixed by the Tribunal i.e. 15th March 2010.
4- Claimant confirms that it need not to have a transcript of the hearing and thus is not ready to share the cost of such transcript with Respondent.
1) Do proposals, such as Respondent’s Proposal for Upgrading the Approach and Terminal Areas [...] Books 1 and 2, and Technical Proposal and. Technical Specifications constitute pre-contractual documents that define Respondent’s obligations under the 3-Lot and 4-Lot Contracts? Did the Parties materially vary the content of these proposals through subsequent agreements? What is the interpretation and effect of Article 32 of the Conditions of Contract entitled "Order of Precedence"? To what document(s) in particular does item 3 of Article 32, the "Supplier’s Technical Proposal", refer? What is the legal weight afforded to such document(s) and can they be amended under Egyptian Civil Law?
2) Did Respondent deliver fully operational AMS, radar and communication systems at all 3-Lot and 4-Lot Contract airport sites in accordance with the Parties' contracts? Are theses systems currently operational? In this connection, the Tribunal refers to Dr. El-Awa's closing oral arguments at pp. 322-324 of the Transcript of 21 March.
3) Does the 3-Lot Settlement Agreement of 10 November 2001 constitute a bar to the Parties' claims arising under the 3-Lot Contract? What of claims arising under the 3-Lot Contract for damages incurred after the signature of the Settlement Agreement?
4) Did Claimant exercise its contractual rights and obligations in good faith? Did Respondent exercise its contractual rights and obligations in good faith? What are the requirements of good faith during the performance of a contract under Egyptian Civil Law?
5) Is Respondent’s inclusion of the following amounts in its counterclaims allowed under Egyptian Civil Law?
(a) cost of capital at 6% per annum compounded
(b) loss of profit of 20%, and
(c) for certain counterclaims, cost of inflation at 4%
6) Has Claimant met its burden of proving the facts relied on in support of its 16 principal claims (Article 24.1 of the CRCICA Arbitration Rules)?
7) Has Respondent met its burden of proving the facts relied on in support of its 7 counterclaims (Article 24.1 of the CRCICA Arbitration Rules)?
1. The arbitral tribunal shall apply the law designated by the parties as applicable to the substance of the dispute. Failing such designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of laws rules, which it considers applicable.
3. In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.
Any controversy, claim or dispute arising out of the application including termination of this contract which could not be settled amicably shall be finally settled by arbitration.
The three arbitrators shall be designated as hereinabove set forth within a period of twenty days subsequent to the end of the thirty days period of attempted conciliation mentioned above. They shall then promptly proceed to carry out arbitration in Cairo Regional Centre for international commercial arbitration acting in accordance to the Egyptian laws and the international commercial laws of the United Nations as stipulated in the letter of instruction to E.C.A.A. by the Minister of State under N° 1390 dated 10th of March 1993.27
1. The arbitral tribunal shall have the exclusive power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause or of the separate arbitration agreement.
2. The arbitral tribunal shall have the power to determine the existence or the validity of the contract of which an arbitration clause forms a part. For the purposes of article 21, an arbitration clause which forms part of a contract and which provides for arbitration under these Rules shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
3. A plea that the arbitral tribunal does not have jurisdiction shall be raised not later then in the statement of defence or, with respect to a counter-claim, in the reply to the counter-claim.
4. In general, the arbitral tribunal shall rule on a plea concerning its jurisdiction as a preliminary question. However, the arbitral tribunal may proceed with the arbitration and rule on such a plea in their final award. A party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator.
16. Specifically, Claimant will establish that, among other breaches, Respondent has failed timely, properly or at all (a) to provide and maintain financial guarantees contemplated by the Agreements; (b) to design, build, test, package, invoice, insure, ship, install, commission and maintain hardware according to contractual specifications; (c) to design, build, package, invoice, insure, install, commission, test, license, and maintain software according to contractual specifications; and (d) to train Claimant’s personnel to operate and maintain the equipment supplied.
17. Additionally, Claimant will establish that Respondent has sought to overcharge Claimant for services either not provided at all or provided otherwise than in accordance with the terms of the Agreements.31
1. Claim One/1: Undelivered radar support system ("RSS") in the amount of US$180,091.50
2. Claim One / 2: Undelivered radar output analysis tool ("ROAT") in the amount of US$21,698.00
3. Claim One/3: Undelivered automatic site selection ("ASS") in the amount of US$53,977.10
4. Claim One/4: Undelivered data link analysis tool ("DLA") in the amount of US$26,988.55
5. Claim One / 5: Undelivered RSS sensor models in the amount of US$30,000.00
6. Claim Two / 1: Undelivered frequency generators under the 4-Lot Contract in the amount of US$743,432.00
7. Claim Two/2: Undelivered remote control and monitoring system ("RCMS") under both the 3-Lot Contract and the 4-Lot Contract in the amount of US$198,247.00
8. Claim Three: Voice Communication Switching System ("VCSS") tinder both the 3-Lot and 4-Lot Contracts in the amount of US$346,703.40
9. Claim Four / 1: Undelivered bypass recording and playback servers in the amount of US$241,144.00
10. Claim Four / 2: Undelivered flight strip printers in the amount of US$27,818.00
11. Claim. Four/3: Unsupplied air carrier billing units ("ACBs") in the amount of US$562,667.00
12. Claim Four / 4: Unsupplied furniture in the amount of US$893,508.00
13. Claim Five: Failure to supply test equipment and tools under the 3-Lot and 4-Lot Contracts in the amount of US$394,268.00
14. Claim Six: Failure to supply documentation under the 3-Lot Contract and the 4-Lot Contract in the amount of US$261,040.00
15. Claim Seven / 1: Microwave subsystems removed from the scope of work under the 3-Lot and 4-Lot Contract, representing the amount of [US$240,934.10 per Statement of Claim / US$242,926.00 per Post-Hearing Brief]
16. Claim Seven / 2: MV/LV transformers removed from the scope of work under the 3-Lot and 4-Lot Contracts, representing the amount of US$205,593.00
17. Claim Seven / 3: Uninterruptable power supply units ("UPS") removed from the scope of work under the 3-Lot and 4-Lot Contracts, representing the amount of US$320,463.00
18. Claim Seven/4: Voltage regulators ("VR") removed from the scope of work under the 3-Lot and 4-Lot Contracts, representing the amount of US$134,080.00
19. Claim Eight: Failure to replace the diesel generator at the El-Arish site in the amount of US$58,149.00
20. Claim Nine: Failure to supply twelve HVAC units access ladders to sites under the 3-Lot and 4-Lot Contracts in the amount of US$81,132.00
21. Claim Ten: Failure to supply spare parts under the 3-Lot and 4-Lot Contracts in the amount of US$2,324,458.00
22. Claim Eleven / 1: Delay penalty under the 3-Lot Contract and 4-Lot Contract in the amount of US$6,485,009.29
23. Claim Eleven / 2: Extending the letters of credit under the 3-Lot and 4-Lot Contracts in the amount of US$558,242.43
24. Claim Eleven / 3: Damages Due to Delays in Achieving Cost Recovery Under the 3-Lot and 4-Lot Contracts in the amount of US$3,699,041.16
25. Claim Eleven/4: Damages due to delays in providing radar service under the 3-Lot and 4-Lot Contracts in the amount of US$4,491,957.60
26. Claim Eleven / 5: Cost of supervision team used during the execution of the 3-Lot and 4-Lot Contracts in the amount of US$2,798,700.00
27. Claim Eleven / 6: Technical consultant fees in the amount of US$359,500.00
28. Claim Twelve: Containers rent and storage charges incurred during the performance of the 3-Lot and 4-Lot Contracts in the amount of US$610,387.90
29. Claim Thirteen: Non-performance of certain 3-Lot Contract works in the amount of US$111,170.00
30. Claim Fourteen / 1 Supply of ASR-10 instead of ASR-12 at all 4-Lot Contract aites in the amount of US$1,034,080.00
31. Claim Fourteen / 2: Maintenance of Respondent’s PSR under the 3-Lot and 4-Lot Contracts in the amount of US$1,816,920.00
32. Claim Fourteen/3: Programmable output format under the 3-Lot and 4-Lot Contracts in the amount of US$350,000.00
33. Claim Fourteen/4: Failure to provide an MSSR upgradeable to Mode S in the 3-Lot and 4-Lot Contract sites in the amount of US$187,500.00
34. Claims Fourteen/5, 6 and 7: Failure to provide Radar data production rates, Range accuracy, and Range coverage under the 3-Lot and 4-Lot Contracts for a total amount of US$2,364,555.00
35. Claim Fourteen / 8: Plot output rate under the 3-Lot and 4-Lot Contracts in the amount of US$ 364,000.00
36. Claim Fourteen / 9: AMS VCRI requirements in the amount of US$3,092,743.36
37. Claim Fourteen / 10: Unsupplied AMS capabilities in the amount of US$4,135,843.00
38. Claim Fourteen / 11: Voice recording and playback in bypass mode under both the 3-Lot and 4-Lot Contracts in the amount of US$ 608,032.00
39. Claim Fifteen / 1: Undelivered VCSS depot maintenance training under the 3-Lot and 4-Lot Contracts in the amount of US$194,202.00
40. Claim Fifteen / 2: Undelivered in-site familiarization training under the 3-Lot and 4-Lot Contracts in the amount of US$1,021,768.00
41. Claim Fifteen / 3: Undelivered domicile furniture and equipment under the 4-Lot Contracts in the amount of US$600,539.00
42. Claim Fifteen / 4: Undelivered maintenance engineers for the 3-Lot and 4-Lot Contracts in the amount of US$111,928.00
43. Claim Fifteen / 5: Factory acceptance tests cancelled / conducted in absence of the Claimant for the 3-Lot and 4-Lot Contract sites in the amount of US$487,240.00
44. Claim Fifteen / 6: Undelivered trainees’ lodging under the 3-Lot and 4-Lot Contracts in the amount of US$293,720.00
45. Claim Fifteen / 7: Undelivered site integration tests ("SITs") under the 3-Lot and 4-Lot Contracts in the amount of US$1,530,470.00
46. Claim Fifteen/8: Undelivered DEC radar support under the 3-Lot and 4-Lot Contracts in the amount of US$ 139,247.00
47. Claim Fifteen / 9: Unattended operation in the amount of US$1,000,000.00
48. Claim Fifteen / 10: Undelivered program management and program engineering management under the 3-Lot and 4-Lot Contracts in the amount of USS7,677,792.00
49. Claim Sixteen: Reliability, Maintainability and Availability in the amount of US$3,736,087.95
13. Claimant has yet to prove any actual Contract specification that was not met by Northrop Grumman- Claimant similarly has yet to prove that any particular Contract item was not delivered. Instead of putting forth specific and definitive facts supporting its argument, Claimant offers no witness testimony, misstates facts, and distorts the evidentiary record. Northrop Grumman shipped, delivered, and installed all ATC System equipment, spares, and contractually required documents. Evidence substantiating NANSC's statement is in no record before this Tribunal, and this has never been rebutted by anything other than lawyer's arguments.
14. After shipping all required equipment, Northrop Grumman successfully delivered and installed the ATC System equipment at all seven sites. Claimant issued, albeit delayed, Provisional Acceptance at all seven sites. As stated in the Contract and discussed at the Hearing, Provisional Acceptance follows numerous contractual tests that must be met, and in turn, show the sites are fully operational precisely because those tests have been met. Thus, after Provisional Acceptance, there is "nothing left... [because] the system is completely ready to be used."33
Specifically, Claimant repeatedly delayed contract performance by, inter alia, failing to timely provide the Contract down payment and letter of credit; and coercing additional equipment and services from Northrop Grumman. As a result, Northrop Grumman experienced increased labor and equipment costs and was prevented from completing the 3-Lot and 4-Lot Contracts under the contractual timeline. Claimant also repeatedly breached the 3-Lot Contract and 4-Lot Extension by, inter alia, demanding that Northrop Grumman supply services and equipment beyond the scope of the 3-Lot Contract and 4-Lot Extension, and refusing to pay Northrop Grumman monies owed.34
a. Damages due to the Claimant’s delays and the Respondent’s provision of out-of-scope work under the 3-Lot Contract and the Claimant’s repudiation of the 3-Lot Settlement Agreement
b. Damages due to the Claimant’s delays and loss of concurrency under the 4-Lot Contract
c. Direct costs due to the Claimant’s failure to pay for out-of-scope work under the 4-Lot Contract
d. The Claimant’s withholding of payments owed to the Respondent and the Claimant’s improper draw-down of the Respondent’s performance guarantee
e. The Claimant’s failure to pay for the design for the construction of an external building and the provision of this design to a third party in breach of contract
|Counterclaim Cost Element||Counterclaim Amount||Revised Amount|
|Profit & Interest On 3-Lot Settlement Agreement||$7,615,356||$7,615,356|
|3-Lot (combined with 4 Lot impact) Material Increases Due to Loss of Concurrency||$2,398,070||$6,206,848|
|3-Lot Labor Cost increases Due to Loss of Concurrency||$3,400,000||$3,428,406|
|4-Lot Delay Damages Period One - 6.5 months||$700,000||$745,038|
|4-Lot Delay Damages Period Two -15 Months||$6,200,000||$6,208,650|
|4-Lot Delay Damages Period Three - 6 Months||$900,000||$993,384|
|4-Lot Tower Extensions||$306,000||$298,303|
|Additional RF Test Generator||$75,467||$101,582|
|Additional Step Down Transformers||$42,464||$57,158|
|FM 200 Fire Protection Systems Installation||$197,832||$266,291|
|Temporary Access Road||$167,317||$225,217|
|Live Fire at Borg El-Arab||$68,508||$92,215|
|Land Mines at El Arish||$62,736||$84,446|
|Fiber Optic Access Points||$24,742||$33,303|
|4-Lot Mid-Point Escalation||$2,300,000||$3,968,327|
|4-Lot Material Cost Increase||$3,350,836||See combined 3 Lot and 4 Lot impact above|
|Advanced Payment Bond Fees||$35,694||$42,830|
|4-Lot Banc du Caire Fees||$421,849||$287,268|
|Delay in Payments due to Delay of Performance Milestones||$6,058,800||$11,410,063|
|Drawdown of the 4-Lot Performance Bond||$4,817,036||$5,117,858|
|Withheld 3-Lot Invoices||$785,609||$795,298|
|Withheld 4-Lot Invoices||$3,985,437||$3,801,528|
|Misappropriation of Design||$2,832,408||$2,780,738|
29. In the weeks following the PMR, Mr. Simoni, Chairman Raafat, and I, among others, reached a mutual agreement on behalf of the parties to cancel all remaining 3-Lot issues previously identified at the PMR. NANSC agreed to waive approximately $2.3 million worth of potential claims, and Northrop Grumman agreed to waive approximately $4.2 million worth of potential claims. At the time, I understood that the parties were fully resolving the 3-Lot effort.
30. On November 10, 2001, Mr. Simoni and I signed the 3-Lot Settlement Agreement on behalf of Northrop Grumman. At the time of execution, the parties agreed that the 3-Lot Contract was concluded (with the exception of any warranty items already ordered). The parties agreed that NANSC would provide the Final Acceptance Certificate for all the sites after execution of the 3-Lot Settlement Agreement. In addition, the parties waived all future 3-Lot related claims, and NANSC agreed to pay all outstanding invoices as well as custom duties taxes previously paid by Northrop Grumman. After Mr. Simoni and I signed the 3-Lot Agreement, Chairman Raafat insisted that all of his lead engineers sign the agreement. Once this was complete, Chairman Raafat signed the agreement and gave us one of the two originals.132
Meetings were held today with Northrop Grumman personnel (Kirby Neal, John Murray, General Meawi and John Jackson) and ECAA Personnel (General Bagoury, Eng. Nagi Samual and Eng. Youssef Abdelmaksoud) to finalize parallel support for the 3-lot and 4-Lot program activities.
ECAA personnel at the meeting stated that they would not provide parallel support for the 3-lot and 4-lot programs. Their intentions as stated were to complete the 3-lot sites prior to providing any concurrent effort for the 4-lot Factory Acceptance Testing (FAT) activities. They indicated a desire to slip the planned FAT for radar testing scheduled to begin on May 30, 2000 to mid July. [...]145
After explicitly promising not to do so in a meeting attended by myself in December 2002, NANSC drew down Northrop Grumman’s performance bond on January 2, 2003 in the amount of $3,362,000. On that same day, I wrote to NANSC’s Minister of Civil Aviation, Air Marshal Ahmed Shafik, asking him to assist Northrop Grumman recoup the draw down amount. After NANSC refused to pay back the draw down amount, I traveled to Egypt to meet directly with NANSC representatives, including Chairman Ibrahim A. Manna. Although NANSC admitted that it had agreed that it would not draw down the bond, nevertheless they were unwilling to pay it back. This is another example of NANSC’s bad faith in its dealings with Northrop Grumman arising directly out of funding shortages due to the mismanagement of program funds.150
53. Claimant’s fifty-eight page "rebuttal" of Northrop Grumman’s October 15, 2009 witness statements, initially filed and stricken from the record in November 2009, amounts to nitpicking and fails to rebut any of Northrop Grumman’s defences or counterclaims. It is readily apparent that Claimant’s witness-by-witness response was prepared long before the Hearing and relates not at all to the live testimony. Claimant’s sole focus on the written witness statements is an admission that it utterly failed in its cross-examination of Northrop Grumman’s witnesses at the Hearing. [...]
55. Claimant’s comments on Northrop Grumman’s witness statements generally fall into three categories: (1) minor points on Northrop Grumman’s witnesses’ recollection of particular dates more than ten years old; (2) false issues raised by Claimant’s misinterpretation of a witness statement; (3) minor errors that were acknowledged and corrected during the witnesses’ live testimonies which Claimant studiously ignored in its brief. None of Claimant’s comments goes to the substance of Northrop Grumman’s witnesses that (1) all seven ATC Systems were successfully installed and (2) at considerable delay and cost increase caused by Claimant. [...]152
MR WARNS: Appendix A is a list of the equipment that was going to be provided under the 3-Lot contract at a summary level.
MR O'BRIEN: When was this document submitted to NANSC?
MR WARNS: At the time of contract signing.
MR O’BRIEN: May 1997?
MR WARNS: That's correct.
MR O'BRIEN: Let me jump forward to the period of June 1998. Would you go to that exhibit, please, this is R-31. What is this document?
MR WARNS; This is the detailed BOQ which takes the simplified version, at the top it says it's an ASR-12 radar, and what comprises of that radar and the pieces that will be delivered that make up that radar.
MR O’BRIEN: So in May of 1997, you had one BOQ?
MR WARNS: That's correct.
MR O'BRIEN: You described for us the process where you were negotiating with NANSC through technical meetings and the requirements are being applied, is that correct?
MR WARNS: That’s correct.
MR O'BRIEN: So, does this BOQ capture those changes?
MR WARNS; Yes, it did.
MR O'BRIEN: This again this BOQ was submitted in what time period?
MR WARNS: This was submitted in October of 1998.
MR O’BRIEN: Did Northrop Grumman complete the ATC installation for the 3 and 4-Lots during your time?
MR NEAL: Yes, we did.
MR O’BRIEN: Were there any tests that were required to be performed?
MR NEAL: There were several tests.
MR O’BRIEN: Let me ask, for the Tribunal’s purposes, could you please start from the first test and walk through each of the tests?
MR NEAL: The first test was the factory acceptance test, which was done on individual components, such as the radar or the generator at the factory, where they were built. This was witnessed by members of NANSC, who would travel to the factory.
The factory acceptance test was required to be complete in order to get permission to ship the equipment into country. Once the equipment arrived in country, it was sent to the site and we would begin installation and check out. The installation and check out; we would inventory the equipment, we would install it by Northrop Grumman engineers, with the help of NANSC engineers. It would be thoroughly installed and tested.
As you know, the three major components are communications, radar and AMS. Each of these would be checked out thoroughly and then there would be an integration test to ensure that they would work together. Following the integration test, we would do a site acceptance test.
The site acceptance test was a test that had been previously approved by NANSC and it would thoroughly check out each one of the major components and it was witnessed by a subject matter expert from NANSC and the test was signed.
The site acceptance tests were performed on every single major component at every single site.
THE PRESIDING ARBITRATOR: And it was preceded by the factory acceptance test, is that correct?
MR NEAL: That is right. The factory acceptance test was for NANSC to ensure that what they were buying - because they would demonstrate one of the actual items that was being shipped over here. If they went to a factory for the radar, that radar was the radar that would come to Egypt, it was not a sample.
THE PRESIDING ARBITRATOR: I understand.
MR O’BRIEN: To be clear, Mr Neal, after the factory acceptance test, you mentioned the installation and check-out test?
MR NEAL: Right. The factory acceptance test preceded the shipment of the equipment, the installation and check out would thoroughly check out the operation to prepare for the site acceptance test.
The site acceptance test was a formal test witnessed by NANSC, signed off by NANSC. Then, following the site acceptance test that showed that all of the individual components would work together, the site acceptance test was followed by the flight test.
MR O’BRIEN: What happens in the flight test stage?
MR NEAL: The flight test involves NANSC providing a test aircraft that follows - again it is a test that is previously approved and it follows a particular set of tests that are checked out to ensure that the entire system works together.
MR O’BRIEN: You also mentioned the site acceptance test. Is the site operational at the site acceptance test stage?
MR NEAL: Yes.
MR O’BRIEN: Was it incumbent on Northrop Grumman to get a site acceptance test certificate signed by NANSC?
MR NEAL: Yes.
MR O’ BRIEN: Did you get those?
MR NEAL: Yes, we did.
MR O’BRIEN: Could you please look at exhibit 5, Mr Chairman. Can you describe for the Tribunal what this document is?
MR NEAL: This is the site acceptance test cover sheet for the Airspace Management System at Sharm El Sheikh.
MR O’BRIEN: If I could turn your attention to page 11, can you describe to the Tribunal what is here, within this site acceptance test document, what kinds of items are being discussed on this page?
MR NEAL: As you can see at each step, they would perform a particular step that was part of the function of the AMS system and they would check it off if the results of that test met what the expected results were. It would pass or fail.
MR O’BRIEN: If we could turn to page 12, please.
MR NEAL: Again, it is basically a checklist of all of the functions of the AMS to ensure that it is performing everything that it is supposed to perform.
MR O’BRIEN: Let me show you two other pages, 13 and 14. What are these?
MR NEAL: Additional checklists showing that it performed, for example, a display control and the standby status window.
MR O’BRIEN: Go to the signature page of exhibit R-5, please, if you could blow up the whole page.
THE PRESIDING ARBITRATOR: That is page 71?
MR O’BRIEN: I believe that’s correct. Yes. It is 71, yes, sir.
MR NEAL: The Northrop Grumman representative was our engineer who performed the test and Engineer Shoukry was the NANSC subject matter expert for the AMS. He would witness the test and sign off that it had been completed successfully.
MR O’BRIEN: So, is this the signed site acceptance certificate for Sharm El Sheikh?
MR NEAL: That is correct.
MR O’BRIEN: Did you obtain SAT site acceptance test certificates for all 3-Lot sites?
MR NEAL: Yes. There were two copies made; one we would deliver to NANSC and one we would keep in our site manual.
MR O’BRIEN: Was NANSC using the system at this point?
MR NEAL: Well, remember the site acceptance test is a prerequisite for the flight test. The flight test ensures that the entire system works together and then following flight tests, there was nothing left but provisional acceptance in which that is when the system is completely ready to be used.
The provisional acceptance would be a period of time in which NANSC would use the site for a year and we would have a one-year warranty period. Immediately following delivery of the flight test results, we would submit a certificate to NANSC for provisional acceptance.
MR O’BRIEN: So did you get provisional acceptance on the 3-Lot sites?
MR NEAL: No, we did not.
MR O’BRIEN: But that was required after the completion of all testing, right?
MR NEAL: The flight test proved that the site was operational and ready to be used. NANSC used the site, but they still did not give us - they did not sign a provisional acceptance certificate.
MR O’BRIEN: Do you know why?
MR NEAL: No, we don’t.155
MR PETERSON: To your knowledge, did Northrop Grumman meet all Air Traffic Control program requirements?
MR MASON: Yes.
MR PETERSON: Where was this verified?
MR MASON: It was verified throughout the testing program, mainly the flight tests that were conducted. All the systems were run against a standard FA flight test verifying the performance of the system met the standards.156
MR NEAL: They agreed that they would pay the outstanding 3-Lot invoices that had not been paid following our resubmittal of the invoices.
MR O’BRIEN: Northrop Grumman was required to resubmit the invoices?
MR NEAL: Yes.
MR O’BRIEN: Did you do that?
MR NEAL: Yes, we did. We did that the next day.
MR O’BRIEN: I want to point you to exhibit R-293. If you could tell the Tribunal, what is this document?
MR NEAL: This is a covering letter that I sent along with the invoices when I submitted them the next day after the MOU was signed. These were the open 3-Lot invoices that had not been paid.
MR O’BRIEN: So again NANSC required you to resubmit the invoices and you did so the next day?
MR NEAL: Yes.
MR O’BRIEN: Did NANSC pay you after you resubmitted those invoices?
MR NEAL: No.
MR O’BRIEN: Were you able to get provisional acceptance after the memorandum of understanding?
MR NEAL: The provisional acceptance at Sharm El Sheikh was granted 28 September. We did not receive provisional acceptance at Luxor until December and they did not sign the certificate for Hurghada until the following June 2001.159
MR KAVANAUGH: I would like to direct your attention next to a document which is exhibit R-15 and ask you if you can identify that document for me, please.
[Exhibit R-15 displayed]
MR WILHELM: I can, sir. It is a 10 November 2001 letter, and it represents the final 3-Lot agreement between Northrop Grumman and NANSC.
MR KAVANAUGH: What was your involvement in getting this document executed?
MR WILHELM: Subsequent to the PMR in September 2000, we worked very diligently to resolve all the issues that could be resolved. We still had some open items relative to equitable adjustments that we were asserting, and we directed our teams, General Kato and myself, to meet in country and attempt to resolve all the open issues. This document reflects the final agreement on the 3-Lot and the resolution of those issues.
MR KAVANAUGH: Looking at the first page of this document and the paragraphs 1,2 and 3, can just summarise [sic] for me the major items that you were attempting to resolve?
MR WILHELM: Paragraph 1 states that NANSC agrees to waive any liquidated damages under the contract associated with the 3-Lot. Liquidated damages was their remedy for any deficiency on Northrop Grumman's part in the contract. So, they figured number 1 was to waive their liquidated damages if any.
Number 2, they agreed to waive potential claims that they had asserted for certain specifics items.
Number 3, we agreed to waive specific claims associated with similar and specific claims.
Number 4, NANSC agreed to pay the customs duties and taxes that they owed us on equipment that we had delivered and to make proper payment to us for the remaining unpaid invoices under the 3-Lot program.
MR KAVANAUGH: The last full paragraph before the signature page, what was your understanding of any additional work that might be required, how any additional work under the 3-Lot contract would be acquired?
MR WILHELM: The language that we agreed upon, after considerable discussion, was that if any work was required by the contract, any remaining work was required by the contract, we would perform that work, but if there was a request for any additional work, apart from the contract requirements, then Northrop Grumman would submit a proposal that was appropriate for the work being requested and the intent of being paid for that additional effort.
MR KAVANAUGH: Turn to page 2 of this document. I believe that you have already talked about these. Can you just describe what these two columns of items represent?
MR WILHELM: Sure. The lefthand column entitled NANSC represented the claims, requests for equitable adjustment, that they asserted against Northrop Grumman, and they totaled USD 2,379,641. The righthand column is the NGOSCO list of requests for an equitable adjustment that they had to resolve and they totaled USD 4,220,539.
Then there was also some agreed upon scope that had not yet been paid, or a portion of it had been paid, some of it had not been paid relative to changes in tower height, and we also had taxes and duties that were paid.
MR KAVANAUGH: So, at the time that this was signed, did you feel as though it was finally resolved with the exception of those two payment issues, everything that was to be done under the 3-Lot?
MR WILHELM: Actually, NANSC required us. prior to the execution of this agreement, to have performed all the work specified in this agreement. In other words, they refused to sign it until we had demonstrated we had already done the work. So the work in here that was called out was not prospective in nature on our side. The only prospective portion of this agreement, the only thing that remained open, after the parties had each waived their claims against each other, was really to receive the final payments that were due to us for customs fees, dues and invoices.
MR KAVANAUGH: Were those paid in accordance with this agreement?
MR WILHELM: No.
MR KAVANAUGH: Have they been paid to this day?
MR WILHELM: No.160
THE PRESIDING ARBITRATOR: Did he represent to you that he had authority to negotiate with you a settlement of the 3-Lot programme?
MR WILHELM: Absolutely, he absolutely had that authority. The chairman at that time was a Chairman Raafat that worked for General Kato and General Kato was in charge of that entire effort and he was the one that interfaced with concerning the details that were necessary in order to achieve that agreement.
THE PRESIDING ARBITRATOR: Did he at any time say to you that the memorandum of understanding or the settlement agreement were not being respected, not being adhered to by NANSC because he had lost any of his authority?
MR WILHELM: Are you referring to the 3-Lot, sir?
THE PRESIDING ARBITRATOR: Yes.
MR WILHELM: No, he never repudiated the 3-Lot agreement. We always considered it the final agreement, he always stood by it. There was never any deviation on his part of the 3-Lot agreement.
THE PRESIDING ARBITRATOR: In answer to question from Mr Kavanaugh, and I didn't quite understand the full answer, you said: One day he said "I can direct people to do things but I can't make them do it", or words to that effect.
Could you expand a little on that?
MR WILHELM: General Kato felt his job was to provide the overall leadership to NANSC and ECAA, depending on what job he held at what time.
When I would complain about the fact in this series of MOUs that were signed, starting in August of 2000 and ending with the November 2001 MOU that was signed on the 3-Lot representing the final agreement - when we would talk about the fact that these interim agreements and going back to the August 2000 agreement were not upheld and were not performed by NANSC he would say to me, "Mr Wilhelm, I signed the document. It is up to my people to make these things happen. I cannot make the individual items happen. They have to make them happen." And that was true.
There was a significant disconnect between the direction of the senior management in the execution of written agreements and what happened and he would simply explain to me, "I can’t go out and make these items that are agreed to in the documents happen. My people have to do that and if my people don't do that, then we will, go back and we will create another agreement to try and make it happen."
We were very patient with that process because normally in our country when you sign a document, you do it. We don’t have this evolutionary non-performance that you see here.
So when we signed these documents, I guarantee you on our side of the equation we were executing them.161
Provisional Acceptance of the Respondent’s work and completion of the one year warranty period, Mr. Wilhelm testified as follows:
MR KAVANAUGH: Was it your understanding, I think you testified earlier, that at end of the guarantee period that you would receive, as a matter of course, final acceptance certificates?
MR WILHELM: That is all it was. It was perfunctory. As soon as you got the provisional acceptance, the warranty period started. The warranty ended at the end of 12 months and at the end of 12 months your final acceptance took place.
What we experienced was an inordinate amount of delay in getting provisional acceptance because everybody understood that, when provisional acceptance took place, the warranty started.
So, we agreed, at several points of time, completion of provisional acceptance for the one-month shadow period where NANSC could test the system, use the system, make sure that it met all its requirements. In many, many cases those one-month periods stretched into five, seven, eight months, thereby extending our warranty and extending our obligations for warranty, for which we have not really claimed in this submittal to this Tribunal.
MR KAVANAUGH: Is it your belief that you, Northrop, delivered all seven sites operational and in accordance with the 20 specifications?
MR WILHELM: It is my belief and conviction that everybody agreed that we had done that.
MR KAVANAUGH: Therefore, have you gotten final acceptance certificates on any of the seven sites as we sit here today?
MR WILHELM: No, sir.162
MR GREEN: I would now like to introduce exhibit R-24. Could you look at these, there are four of them, and identify what they are for us, Mr Simoni?
[Exhibit R-24 displayed]
MR SIMONI: The one on the screen is the provisional certificate for Taba.
MR GREEN: The next one?
MR SIMONI: The next document is the 9 provisional certificate for El Arish.
MR GREEN: And the next one?
MR SIMONI: The next one is the provisional certificate for Borg EL-Arab.
MR GREEN: And the final one?
MR SIMONI: The final one is the provisional certificate for Aswan.
MR GREEN: Mr Simoni, under the contract, what did these provisional certificates mean?
MR SIMONI: When signed by both parties it meant that all contractual items were completed in accordance with the contract to include installation, testing, spares, logistics, training, so forth and so on, and it was closure for provisional acceptance for the sites.
MR GREEN: What remained after the signing of the 4-Lot provisional acceptance?
MR SIMONI: The only thing that remained was the one-year warranty period for the sites.163
MR KAVANAUGH: Aside from the concurrency, were you also suffering other delays under the 4-Lot program?
MR WILHELM: We were. We actually had a significant set of delays in the program. I already mentioned the delay in the effectivity date of the contract. The real issue with that delay and the real issue with the subsequent delays was that we were in constant contact with NANSC and we were trying to understand when the contract would be effective because we had the people associated with performance of the contract ready to perform the contract, they did not perform the contract, and we were repeatedly assured by NANSC that the contract would be effective at any moment.
So, the first delay was delay in contract effectivity.
We signed the contract with the expectation that we were going to get the money associated with the 4-Lot to make it effective in late 1997. Unfortunately, when the money did not come and we did not get a stand down relative to a partial stop work on the program, we continued to anticipate that the money would be coming any day.
It was not until the middle of the December when we held another PMR, December of 1998, it was disclosed to us that NANSC had not yet received the funding from USAid. However, they guaranteed they would receive the funding by the end of December and we would have the effective contract. That is in the minutes of that meeting. Unfortunately, again, the promise was not kept. The funds were not provided until May of 1999.
MR KAVANAUGH: Was this funding requirement actually a contract provision, a contract requirement?
MR WILHELM: It was. The contract extension for the 4-Lot required the downpayment to be made 60 days after the contract extension was signed.
MR KAVANAUGH: I am going to direct your attention, in order to facilitate explaining the other delays you have experienced, to exhibit R-323 and ask you to idenfy that.
[Exhibit R-323 displayed]
MR WILHELM: This is my chart. Financial made this chart a number of years ago. The top line of this chart represents the contract as the contract was signed and the plan to execute the contract extension for the 4-Lot.
The second line reflects the delay in the downpayment of 6.5 months. It was supposed to be there 11/98. It actually occurred on 6/99. By the way, it is important to note that that extension of the L/C was paid for by NANSC, who fully recognised that they were responsible for that delay and paid the extension.
Then, as I already mentioned, in one of the other letters NANSC refused to support the 4-Lot activity in significant nature because of the fact that the 3-Lot had not yet been completed. So, as a consequence, we suffered 2 unplanned delays in the accomplishment of the FAT attendance, approval of generators that had changed because manufacturers no longer built them.
Site selection: There was a great deal of vacillation by NANSC in terms of sites. They were unsure of where they wanted to put sites, and we had to go through multiple site layouts, multiple site location surveys, and that delayed the program as well as some approvals associated with things like fire alarms. It was actually about a 22-month period of delay.
One of the things that I did was I laid out all the delays and then I looked for the overlap of delays and we reduced the delay period from 22 months to 15 months in our request for equitable adjustment. I believe that to be accurate.
The process that I use is: I lay out the schedule, then I lay out our costs against the schedule to see if the costs match the periods under which we experienced impact. If we experienced impact and the costs do not line up, then we do not have a basis for a claim. So thecosts have to be there and marry up with the periods of delay in order for us to claim compensation. So, we did that with regard to those delays.
Once the 3-Lot was complete, things moved along. However, we were in essence in an accelerated schedule because NANSC refused to relax the schedule of the program that was remaining. We had constructive acceleration where the front end of the schedule we were not able to perform because we could not get their support, and we then had to do all the work in a much shorter period, costing us a lot more with regard to people and material, a lot more inefficiencies.
When we finally got through that period, we delivered all the equipment, and we have recovered a good deal of this program scheduling, I might add, which saved everybody a lot of money.
But, unfortunately, NANSC did not have the money to pay for the equipment to come out of customs in Egypt. So, once again, we were assured, on virtually a daily basis, that they would pay the customs fees to release the equipment.
Instead, the equipment sat in customs for a period of approximately six months, and, finally, as we could not handle the impact to the overall program any longer, we paid the fees ourselves in order to get the equipment out, even though it was a contractual responsibility of NANSC to do so.164
DR EL-AWA: In paragraph 35 of your witness statement you said your engineers had started installation in the follow-up sites in April 2001. The first provisional acceptance occurred or was signed on 19 March 2002. Do you have any explanation for this lengthy period, from April 2001-March 2002, for the installation of the Lot?
MR NEAL: Yes.
DR EL-AWA: As you remember, the original period in the contract is three months. Now, this took about a year.
MR NEAL: The problem with the 4-Lot was 21 that the equipment arrived in Egypt in December of 2000 at their request. However, it was not released from Customs until the end of April of 2001. So we were not able to do anything and in order to finish a site, for example, we could not install a radar system in the radar building until the air conditioner was installed on the roof. So if the air conditioner or the tower was still in Customs, we could not begin installation. There was a large delay in starting the installation and even in April, when the equipment came out, it did not all come out at the same time. So we would have a radar, for example, antenna at a site, but the tower would still be in Customs. You cannot install a radar antenna if you don't have the tower erected. So the delay in releasing the item from Customs basically stretched the entire 4-Lot installation out to over double of what we had originally intended.
DR EL-AWA: Thank you, sir. In this case it was more than double, it was a year instead of three months.165
DR EL-AWA: Can you divide this delay and disruption between the two parties? What is the responsibility of the Respondent and that of the Claimant to this delay and disruption? Who is responsible for whatever part of it?
MR WILHELM: Are you talking about in terms of the work or are you talking about dollars? What are you talking about?
DR EL-AWA: No, I am talking about the delay and disruption.
MR WILHELM: I have made clear, I think in a number of the pieces of communication that you have, that Northrop Grumman was responsible for a significant portion of the delays and disruption in the 3-Lot. Conversely, NANSC was responsible for most, if not all, the delays and disruption -
DR EL-AWA: I am only limiting it to 3-Lot, sir, and in your letter, which is C-451, dated 4 February 2001, you say that the Respondent is responsible for approximately 80 per cent of these losses and Northrop Grumman, the Respondent, which is not in agreement, is responsible for 80 per cent of these losses, while NANSC, the Claimant, is only responsible for approximately 20 per cent. Are you still standing by this statement or have you changed it?
MR WILHELM: There’s no conflict in my statement. I asked you whether you were talking about dollars or you were talking about the scope of the work and you said it doesn’t make any difference.
This letter is relative to dollars. It is talking about who is responsible for dollars, not the total degree of disruption under the contract. It is simply saying that NANSC, in this letter, is responsible for 20 per cent of the dollars; we are responsible for 80. The letter also says that NANSC is responsible for 80 per cent of the delays in the 4-Lot and we were responsible -
DR EL-AWA: So the Respondents were responsible for 80 per cent of the delay in payments as 4-Lot contract?
MR WILHELM: Not payments, sir; costs.
DR EL-AWA: For 80 per cent of the delay costs?
MR WILHELM: Of the cost increase, sir; the cost increase.
DR EL-AWA: The cost increase?
MR WILHELM: Yes, sir. At that time, that was in February of 2001, it was 80:20 on the 3-Lot and it was 20:80 on the 4-Lot.167
PROFESSOR ELKHOLY: I would just like to ask you about the problems you mentioned in your report. You said that you made 47 trips to Egypt and that you have appointed two men to help you, General Menawi and Nabil Shoukry?
MR SIMONI: Yes, sir.
PROFESSOR ELKHOLY: And that all this did not work because one man was an obstructionist. That is Engineer Youssef.
This looks a little bit strange. Can you please explain some more, because this Engineer Youssef is interested to see his project finished, completed. But why should he be an obstructionist and is he the only one there. You have these 47 trips and these two men appointed to help you. All this did not work. Can you please explain some more because to my mind it looks a little bit strange.
MR SIMONE I will give you a couple of examples, sir.
THE PRESIDING ARBITRATOR; Go ahead.
MR SIMONE When I first came here in May of 2000, we stated to the ECAA at the time, now NANSC, that we were going to accelerate the 4-Lot and get it installed as quickly as possible.
After we met, we met all the team from the NANSC side, I met with my in-country program people, I immediately went back to Baltimore to start putting a schedule together for factory acceptance tests for the various equipments. One of them was the radar, the ASR-12 radar.
At that time I asked the ECAA to come in, around a June/July time-frame, and it took an actual MOU between Mr Wilhelm and General Kato to say that we would run that test in September, that delayed from June, July and August and we did not test it until September. So, that was one delay. That was one obstructionist delay.
PROFESSOR ELKHOLY: Yes, but my question is the following: If I am an obstructionist, I have to give some reasons —
MR SIMONI: I never got reasons.
PROFESSOR ELKHOLY: -- or a pretext or call it whatever you like. What were the reasons given --
MR SIMONE Sir, I never got the reasons.
THE PRESIDING ARBITRATOR: Let the question be put.
PROFESSOR ELKHOLY: -- to have this obstructionist position?
THE PRESIDING ARBITRATOR: Now answer.
MR SIMONI: Sir, I never got the reasons.
We were trying to work mutually to get these things installed as quickly as possible, and many FATs were delayed. In fact, I ran some FATs without the customer present, which was allowed by the 4-Lot.
PROFESSOR ELKHOLY: And with all your efforts you could not overcome this obstructionist approach?
MR SIMONI: No, sir.
DR EL-KOSHERI: What are the other examples that you mentioned?
MR SIMONI: Other examples were the VCSS. We asked them to come in on a certain date and they could not come in on that date. We asked for another date and then another date and then finally we got a date, but it took many, many efforts to get them to the United States for testing.
THE PRESIDING ARBITRATOR: At the end of paragraph 13, which my colleague questioned you about, Mr Simoni, the reference to Engineer Youssef in the last sentence, you say: Unfortunately, Engineer Youssef continued to delay this program until his departure just after 3-Lot provisional acceptance was granted, which leads me to ask two questions initially. Did you ever complain to Engineer Youssefs superior about the fact that, from your perspective he, Engineer Youssef, was an obstructionist?
MR SIMONI: I did not use that term, but I did talk to General Kato, yes.
THE PRESIDING ARBITRATOR: What did you tell General Kato?
MR SIMONI: That the program was being delayed.
THE PRESIDING ARBITRATOR: And did you point a finger at Engineer Youssef?
MR SIMONI: Yes, sir, I did.
THE PRESIDING ARBITRATOR: And what did General Kato answer?
MR SIMONI: I believe shortly thereafter he was removed from the program. There was no answer from General Kato.
THE PRESIDING ARBITRATOR: But shortly after you complained he was removed from the program, is that your evidence?
MR SIMONI: Yes.
THE PRESIDING ARBITRATOR: After his departure, did the relationship with NANSC improve?
MR SIMONI: It improved a little bit, yes.168
DR EL-AWA: Thank you, sir. You brought me to my next question, which is about money. You said during your testimony today that NANSC didn't have enough money to pay the Customs and now you have mentioned again the money that NANSC doesn’t have to conduct this. How do you know that NANSC doesn't have money?
MR WILHELM: If you go back and look at the entire performance of the 3 and 4-Lot, it is punctuated with a large number of events where NANSC did not have the money to perform its required responsibilities. When I talked to General Kato on several occasions about why work was not being done, I was told directly that money wasn't available.
Let's go back for a minute and just remember a couple of things. When the contract extension for 4-Lot was not effected, we waited six and a half months for the down payment while being assured by NANSC that the money was in their bank and available to Northrop Grumman on almost a daily basis. They never received the money until six and a half months after they claimed they had it.
When we tried to get them to attend sites here in-country, ECAA personnel to go to sites in-country, we were repeatedly told they did not have the money to do so and Northrop Grumman had to pay for transportation for NANSC personnel to attend site acceptances.
We were required to pay Customs' fees and duties. We were required to pay bank fees and duties that were the direct responsibility, clearly called out in the contract, as NANSC responsibilities.
We had our hardware sit in Customs for six months because NANSC could not come up with the money to pay the Customs' fees. There was a serious shortage of money on the NANSC side in the performance of this contract. It wasn't a secret. It isn't an abstract conclusion. It is a fact.
DR EL-AWA: It is not secret, but it is not written anywhere that anybody told you personally or told any of your colleagues?
MR WILHELM: I just testified they did.
DR EL-AWA: It is not written.
MR WILHELM: They did tell me directly. General Kato told me on a number of occasions that there was no money to pay for not only the activity I have just described, but the additional funds necessary to reimburse us for the additional work that we did.169
After explicitly promising not to do so in a meeting attended by myself in December 2002, NANSC drew down Northrop Grumman’s performance bond on January 2, 2003 in the amount of $3,362,000. On that same day, I wrote to NANSC’s Minister of Civil Aviation, Air Marshal Ahmed Shafik, asking him to assist Northrop Grumman recoup the draw down amount. After NANSC refused to pay back the draw down amount, I traveled to Egypt to meet directly with NANSC representatives, including Chairman Ibrahim A. Manna. Although NANSC admitted that it had agreed that it would not draw down the bond, nevertheless they were unwilling to pay it back. This is another example of NANSC’s bad faith in its dealings with Northrop Grumman arising directly out of funding shortages due to the mismanagement of program funds.170
MR WILHELM: We entered into a period after the provisional acceptances were accomplished at the end of 2001/middle of 2002 where in 2002 we started an intense dialogue with NANSC relative to the resolution of the 4-Lot issues. We made very good progress in the latter-part of 2002. In the third quarter of 2002, I went in country and we reached agreement that our parties would agree to a fixed schedule for the resolution of the remaining items, and I would meet with the Minister at the end of 2002 and the two of us would resolve any issues that the two teams had been unable to resolve.
We received a request at the end of 2002, in December, that our performance bond was about to expire. So, we were asked to extend our performance bond an additional three months to permit the execution of the agreement for the 4-Lot. We were told by the Chairman of NANSC, by the deputy chairman of NANSC, that our bond would not be drawn down and that this extension was simply necessary to assure them that we would in good faith execute the settlement for the 4-Lot program.
My team remained in country to mid December and reached agreement on most items. There were some items that we did not reach agreement on. NANSC stated that they had to consult with their attorneys at the end of 2002, in order to obtain approval to pay us any additional moneys, and they asked that our team come back to the United States and we would be called back at the beginning of 2003 to execute the 4-Lot agreement. Instead, we found out, when we returned from our holiday shut down at the end of 2002 that NANSC, without notice, without following the requirements for bonds, had drawn down our performance bond on the program and we were, as I said, very shocked, very disappointed.
MR KAVANAUGH: I would like to refer you, then, to exhibit R-28 and ask you to identify that particular document.
[Exhibit R-28 displayed]
MR WILHELM: As I indicated, shortly after coming back to the office in January, we were notified on January 2 of the draw down of our performance letter of credit in the amount of USD 3,362,197.
I wrote this letter, dated January 2, the same date as the bond was drawn down, to His Excellency Air Marshall Ahmed Shafik, who was the Minister of Civil Aviation at that time, complaining about the fact that it had been done without notification or warning. I pointed out that we were assured, by senior management, including the Chairman and Vice Chairman of NANSC, that this would not be done, that it was done, and I asked in my letter for an immediate review by Minister Shafik of the situation. I explained the pretence that was offered to us as to why the meeting was adjourned in great detail, and I simply asserted that the Egyptian party had suddenly, and without warning and provocation from Northrop Grumman whatsoever, acted in a manner that was inconsistent with our written and oral agreements.
MR KAVANAUGH: At the time of this draw down of this performance bond, was there any work left to be done on the 4-Lot extension?
MR WILHELM: That is the really interesting part. The provisional acceptance had already taken place, and so we were in the warranty period of the contract. The way that warranty period works, final acceptance is automatic after a year, after provisional acceptance takes place, and there was virtually no way that we understood why this was taking place. It was very difficult period for us.
MR KAVANAUGH: As a result of this letter or anything you did subsequent to this letter, was the money that was drawn down eventually returned to Northrop Grumman?
MR WILHELM: No, sir. The last I knew of the draw-down money I was made aware that there was a separate bank account. NANSC produced a document that showed there was a separate bank account with that money in the bank account. But we never received our 3-Lot and 4-Lot payments, and I never received assurance, a similar assurance, on the 3-Lot and 4-Lot payments that had not been paid, that there was a bank account with those funds in that bank account.
MR KAVANAUGH: But, as we sit here today, have any of those funds been received, to your knowledge, by Northrop Grumman?
MR WILHELM: No, they have not.171
It is my understanding that NANSC alleges that Northrop Grumman’s Cost and Technical Proposal is the final document detailing certain Contract specifications. This is not true. Northrop Grumman submitted the Cost and Technical Proposal in response to NANSC’s tender. After Northrop Grumman submitted its Proposal, the parties extensively negotiated the 3-Lot technical specifications and cost for same at the Technical Interchange Meeting and subsequent Program meetings.179
[...] this document contains low-level detail that is more a description of specific implementation than a set of operational requirements.186
NGOSCO is, also, kindly reminded to make sure that the Instructor will bring with him the latest RSS build that contains expanded Datalink Functions and an improved process to assist the operator in building maps from DTED data, load it and include it in the curriculum training.190
[...] I bought the RSS tool on behalf of Northrop Grumman to provide to NANSC.193 The RSS was first shipped to Baltimore where training for NANSC personnel was conducted.
While the RSS was still in Baltimore, I used the RSS tool to create a site coverage report including coverage diagrams for every 3-Lot and 4-Lot site to determine the best location for the radars. This was a requirement in NANSC’s specifications and could not have been accomplished without the use of the RSS or an equivalent tool. This site coverage report, including several plots for possible radar locations, was given to NANSC. None of this would have been possible if the RSS did not include its operational software. The software resided in the Sun workstation and was in the Sun workstation when it was shipped to Cairo.
Northrop Grumman used the RSS tool output plots at the flight test at every 3-Lot and 4-Lot site. I personally used the RSS output plots at 3-Lot site Sharm El Sheikh and 4-Lot site Aswan during the flight test.194
It is my understanding that NANSC alleges that Northrop Grumman did not deliver the Radar Output Analysis Tool ("ROAT"). The ROAT is a software program installed on a PC running windows. The purpose of ROAT is to analyze data collected from the ASR-12 radar to measure, among other things, the probability of detection aircraft, aircraft code validation, false alarm rates within the radar’s coverage, and other performance capabilities. ROAT runs on a Microsoft Windows computer. Although NANSC did not have a requirement for ROAT in its technical specifications, I offered this tool to NANSC as an additional feature that could be used by engineers in Cairo to analyze data recorded from each of the ASR-12 sites and thus measure the ASR-12 performance. ROAT was delivered toNANSC on a Microsoft Windows computer at the same time the RSS was delivered.
Northrop Grumman not only provided NANSC the ROAT on a PC but Northrop Grumman also used a copy of the ROAT software during flight test at every 3-Lot and 4-Lot site. I personally used the ROAT during the flight test analysis at Sharm El-Sheik and Aswan.198
The data link software is not installed. The price included additional sums equal to $56818 and $28409 for Automatic Siting and Data link software, respectively. Refer to Task ID 232 (Deliver Data Link Analysis Software) and Task ID 321 (Deliver Site Selection Software) in the Monthly Reports. The Company’s representatives stated that they will check this issue with the Company’s responsible offices- who was on vacation at the time of training- and will notify ECAA later. [...]203
The data link software is not installed. The price included additional sums equal to $56818 and $28409 for Automatic Siting and Data link software, respectively. Refer to Task ID 232 (Deliver Data Link Analysis Software) and Task ID 321 (Deliver Site Selection Software) in the Monthly Reports. The Company’s representatives stated that they will check this issue with the Company’s responsible offices- who was on vacation at the time of training- and will notify ECAA later. Data Link Analysis software should be provided [...]208
Therefore, ECAA hereby requests that NG should undertake the necessary actions and arrangements to complete the following listed training tasks to enable ECAA to make the utmost utilization and benefit of the designed capabilities of the RSS system: [...]
4. Training on how to use the system with ASDE equipment. [...]
7. ECAA Trainees noticed that the RSS software included analysis of, only, the effect of sea surface but does not include analysis of the effect of ground surface on the Radar Performance (vertical lobbing...) except for ASDE. [...]
Northrop Grumman agreed to provide a second set of Frequency Generator spare modules at each of the seven sites.214
Return of the OMTs It was agreed to replace the 3-Lot OMTs with the same style delivered on the 4-Lot during TIM#1. However, the replacement OMTs will not be shipped unless NGOSCO gets written authorization to ship the 3-Lot replaced OMTs back to the U.S.217
Please find attached the list of open items on the 3-Lot. The values assigned to the various tasks are assumed to be imebedded in invoices that have been submitted for the 3-Lot. As agreed in our meeting yesterday with you, Gen. Manawi, Mr. John Jackson, Mr. Mike Bums and myself, you agreed to approve all outstanding unpaid 3-Lot. invoices after deducting the value of the 3-Lot open items.220
|Bypass Processor||$ 18,467.00||$ 55,402.00|
|Cables||S 208.00||$ 624.00|
|Server Switch||$ 1,996.00||$ 5,989.00|
|I&CO||$ 59,710.00||$ 179,128.00|
|Total:||$ 80,381.00||$ 241,144.00230|
On the 7 systems, Northrop Grumman agrees to implement the recording and playback of bypass data displayed on the RCW when the system is operating in the bypass mode.232
Northrop Grumman has evaluated this request and has determined this change would require a substantial software development effort. Should the ECAA formally request a quote, then Northrop Grumman will provide a cost proposal.234
Three years after the 3-Lot Settlement Agreement, Claimant in bad faith demanded that Northrop Grumman provide an additional bypass feature linked to the playback recorder for the 3-Lot sites. In an unsuccessful effort to facilitate Claimant’s payment of outstanding monies due, Northrop Grumman provided this out-of-scope additional bypass feature. Claimant’s Reply states that Northrop Gramman provided no evidence that it installed this feature at the 3-Lot Sites. Although Claimant accepts Northrop Grumman’s 4-Lot SATs as evidence that this feature was installed for those sites, its Reply dismisses Northrop Grumman’s 3-Lot SATs as well as the 3-Lot Retrofit Certificate as evidence that this feature was installed. The attached invoice demonstrates that this bypass feature was installed at the 3-Lot Sites.237
Please be kindly informed that your representative had received (2) two faulty recording and play back units from Sharm El Sheikh TMA, and NCANS didn’t receive any other alternative recording unit or informed with the status of the faulty units which led to a risky operating condition of this unit. [...]240
The contractual obligation is to supply two Flight Strip Printers. In fact, Claimant received only one Flight Strip Printers and this is why Claimant is claiming for the other Flight Strip Printers.241
The basic Egypt Airspace Management System (AMS) comprises the following major hardware components: [...]
• one Air Carrier Billing (ACB) unit246
Northrop Grumman provided NANSC all required furniture for the 3-Lot and 4-Lot sites. This was a fixed-price contract in which NANSC paid the contractually agreed amount of the performance prior to Northrop Grumman’s performance. The difference between the price of the furniture stated in the BOQ and the lower price listed in Northrop Grumman’s shipping records was the result of various add-on costs, such as overhead and insurance costs, that were not listed in the invoices. Thus, the actual cost of the furniture is less than the selling price of the furniture.251
6.5 Support Equipment and Tools
The Contractor shall provide Special Test Equipment (STE) and Tools which are required to maintain the delivered radar system and equipment. Software maintenance tools required to support Engineering staff to modify, upgrade, update, select radar sites, check and analyze performance of the equipment, shall also be provided.253
The Borg APQC link
Related to the Borg ADOC you indicated after further evaluation that the only viable option available to the ECAA for the Borg ADOC link was the nearly 20km long microwave link. This is the link that was recently surveyed by our selected microwave subcontractor. Northrop-Grumman indicated that a detailed analysis is underway using the data gathered.
Preliminary results indicate a change in frequency due to environmental conditions will be required to ensure the required link availability at this site. Northrop-Grumman mentioned a system in the 7GHZ band and you indicated a desire to consider a system in the 14GHz band. Either change in frequency will require an approval on your part. In addition, the analysis will provide the required height of the towers needed at each end. Upon completion of the analysis any cost impact from the contract proposed microwave system will be provided to the ECAA.274
Use of (2) extra 3 Lot Transformers for 4 Lot - The ECAA has agreed to let NGOSCO use the two extra 3-Lot transformers on the 4-Lot program. The ECAA does not want to trade the transformers for economizers on the HVAC units for the TMA Buildings. ECAA is considering trading the transformers for emergency generators for the TMA buildings.280
[...] the UPS system model EPS2000 required to be supplied by the contract is no longer in production. This model has been replaced by the Galaxy PW UPS model. Both systems are manufactured by MGE.
In addition, we have attached additional information requested by your Facilities Engineering personnel regarding the Galaxy PW system. [...] Your approval to this change is required by 1 February 1998 inorder [sic] for Northrop Grumman to proceed with the purchase.286
The facilities proposal, page 21, paragraph 2, states that "30 minutes Nicad batteries" will be provided with the UPS system. Because of space restrictions in the Electrical room where the UPS system will be housed, the batteries we have proposed (ref. B letter) are 15 minutes. In addition, we have proposed "Sealed Lead Acid Batteries" instead of Nicad. Nicad nowadays are very rarely used, because of technological advances (safety, etc) with the "sealed lead acid batteries". We have discussed this matter with your Facilities Engineering personnel.
We request your kind approval to proceed with use of 15-minutes lead acid batteries.287
Please be informed that the High Consultancy Committee (HCC) has approved your proposal to provide 15 minutes Lead Acid Batteries with the UPS system instead of the 30 minutes Nicad Batteries.288
With regard to the failures that have occurred on the Voltage Regulators, we draw your attention to attachment 1 which is a printout of a voltage surge from the Voltage Analyzer installed at Sharm El Sheikh.
The section of chart shows that at 03:-- am on 12 September 2001 the incoming main power (nominal 380V) experienced a voltage surge of 761.9V and an accompanied current surge of 488 amps from a nominal load current of 73 amps.
The output voltage regulation specification of the voltage Regulator is designed to maintain a nominal 380V plus or minus 5% with input voltage between +15% (437V) and -25% (285V). The voltage surge that was experienced was +200.5%, which is more than double the nominal.
The Voltage Regulator is not designed to withstand such power surges. Northrop Grumman is not responsible for the commercial power to the buildings. It is recommended that NCANS install a surge protector to protect the voltage regulator from these input power surges. A quotation from EM for this type of protective equipment is forwarded under Attachment 2. Recommend you contact them directly for further information.293
The site Engineer reported that the Generator no. 2 was totally damaged. We took picture of the armature to capture the damage. Bits and pieces of the magnetic wire and the permanent magnet are scattered in the enclosure. According to this site Engineer, they heard a big bang from the Generator room when this incident happened.296
142. As an initial matter, Generator No. 2 at El Arish did not fail as Claimant contends. Rather, as clarified in a conversation between Claimant’s engineer, Mr. Ibrahim El Malt, and Northrop Grumman, the generator failed when the battery ran out of power after a 3 Amp. fuse in the micro-processor controller blew due to Claimant’s failure to maintain a proper power source and to perform routine maintenance on the equipment. The commercial power source at El Arish was Claimant’s responsibility. Indeed, it is well documented that throughout 4-Lot Extension performance, the power supply at El Arish was consistently unreliable and led to manifold defects on the equipment supplied and properly installed by Northrop Grumman. Further, this problem was exacerbated by the lack of any back up emergency power supply at El Arish.
143. The depletion of batteries in Generator No. 2 at El Arish was not covered by the warranty guarantee because its failure was due to normal wear and Claimant’s failure to follow product technical specifications. Furthermore, the alleged failure occurred two years after site acceptance, and, thus, this claim is outside the period of guarantee. Nevertheless, in good faith, Northrop Grumman purchased two additional generator batteries for Claimant and hired a driver to take the batteries to El Arish the same day of the aforementioned telephone conversation.298
Northrop Grumman respectfully refers the NANSC to the successful generator testing inspection that was performed at Al Arish on the 20th August 2001 during which time the generator batteries were tested and accepted. Since then, and due to the many failures of incoming power at 4-Lot sites, battery problems have been experienced at Al Arish and other 4-Lot sites. These failures are not covered by the warranty because they would be classified as abnormal use. In an ongoing effort to maintain goodwill on this project, Northrop Grumman has to date replaced at its own cost, 8 batteries for the generators; 4 at Taba, 2 at Borg El Arab and 2 at Al Arish.
Please find as attachments two (2) additional batteries for Al Arish, making a total of ten (10) extra batteries supplied. Please note that these will be the last battery replacements that Northrop Grumman will provide until satisfactory progress is made on settling our outstanding payments.300