Czech Military Acquisitions – excessive advance payments and overpriced contracts investigated

Czech Military Acquisitions – excessive advance payments and overpriced contracts investigated
02 / 03 / 2020, 10:00

In addition to the significant increase in the price of two deployable passive ESM trackers (DPET) from the initially estimated CZK 780 million to 1.5 billion, the critics of this acquisition project also mentioned excessive advance payments, which should be paid by the Ministry of Defence before the delivery. Currently, however, the MoD postponed the decision on the advance payment until the results of the investigation of the total value of the contract by its expert group were available.

In January Minister of Defence Lubomír Metnar said that the first advance of 227 million crowns should be paid within 30 days after the signing of the contract, and another 227 million crowns by 31st March. So the Ministry of Defence would pay the manufacturer almost half a billion crowns (and nearly three-quarters of the initially calculated total price), long before the military got anything.

See also: Further modernization the ex-Soviet Czech T-72M4 CZ makes little sense

Such proceedings were criticized, among other things, by the chairwoman of the Chamber of Deputies Defence Committee, Jana Černochová (ODS) in early February: "I find it unusual to give a 30% advance payment without the Ministry receiving anything." At that time, the Ministry argued, somewhat surprisingly, that the high advances had helped to lower the overall price, which, given its doubling, did not sound very convincing.

"Advance payments approved for 2020 have not yet been disbursed and the date of payment is not decided. The decision to pay the advance payment is tied to the results of the investigation of the total value of the contract by the expert group,“ the Ministry said.

This is an important shift and a responsible approach in the situation, although the DPET manufacturer (ERA from the Omnipol Group) expects the payments and the situation may cause delays of the delivery. Following the resignation of Filip Říha, MoD Deputy Director for Acquisitions, other contracts will also be reviewed. Currently, not only payments of advances for the VERA NG system are suspended, but also the modernization project of the T-72M4 CZ tanks (performed by VOP CZ) and Mi-171Sh helicopters (carried out by LOP Prague). In both cases, there was also a significant increase in the value of the contract, and a similar problem was also encountered in the acquisition of STRAKOM mobile jammers.

See also: VERA NG deployable passive ESM trackers case - Czech Army to pay three times more than the NCI did in 2014?

“I have taken unambiguous measures not to repeat such mistakes. And the control mechanisms worked. Contracts have not yet been signed for ongoing orders to upgrade tanks and transport helicopters. And it will not happen until the real price is known and justified. I will not tolerate any major price increases. I want everything to be in fact and procedural terms, ”Minister Metnar said in mid-February. There is cautious optimism that parliamentary committee control is working and feedback seems to be able to be grasped and used by the Ministry for more transparent management of acquisition projects.

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