Leonardo turned to the Office for the Protection of Competition regarding the multi-purpose helicopters acquisition

Leonardo turned to the Office for the Protection of Competition regarding the multi-purpose helicopters acquisition
16 / 12 / 2019, 09:00

In its petition to the Office for the Protection of Competition, Leonardo, the manufacturer of the AW139M multipurpose helicopters, offered to the Czech Army as a replacement for the outdated Russian Mi-24/35’s, opposed to the Ministry of Defence's procedure in the execution of the project. The ministry chose to purchase 12 helicopters in the form of an intergovernmental agreement and intends to purchase UH-1Y and AH-1Z helicopters from the US government. At the same time, it refuses to deal with formal objections raised by Leonardo against such a procedure. Leonardo asks the OPC to order the ministry to deal with the objections or to decide on them by itself.

In the introduction, the company summarizes the development of the process of purchasing multi-purpose helicopters. In 2015, the Ministry of Defence initiated a market survey to find out opportunities for the planned replacement of the Mi-24/35 army helicopters. The company Leonardo presented an offer to the ministry confirming that it was able to deliver the AW139M meeting all the requirements. The ministry, however, decided to purchase helicopters from the US government and outside the framework of the Public Procurement Act. Leonardo is now addressing the OPC because, in its opinion, the Ministry of Defence has unlawfully rejected the objections to the chosen procedure for the execution of the contract and because it feels harmed by the chosen procedure.

See also: Multipurpose Helicopters for the Czech Army - Is the Italian Solution Really Out?

During a market research conducted in 2015-2018, the Ministry reported that it had identified more options that met the criteria and that potential suppliers would be approached in the context of a public contract. On 28th February 2019, Leonardo updated the offer and confirmed the ability and readiness to deliver the helicopters as part of such a public contract. However, since the end of 2018, both the Minister of Defence and the Prime Minister have publicly announced that the contract would take the form of an intergovernmental, G2G, agreement with the United States government. In response, on 8th July 2019, Leonardo filed with the Ministry of Defence the first objections to such action, but these were rejected as premature. For the second time, the company filed its objections on 22nd October. And even these were deemed premature by the ministry and refused.

On 12th November, 2019, the Ministry publicly stated in a press release that the contract would take the form of an intergovernmental agreement and informed the Czech government. Leonardo responded with a third objection which was rejected by the Ministry for formal reasons, claiming that Leonardo was not entitled to object under the Public Procurement Act. Leonardo considers this illegal and considers the entire procedure of the Ministry that intends to the contract outside the standard public procedure as illegal.

See also: Czech multi-purpose helicopters tender – four Vipers cannot be effective

This is why Leonardo is addressing the Office for the Protection of Competition. In its petition, the company insists that the chosen form of intergovernmental agreement is illegal and restricts access to the contract for potential suppliers, inter alia from the European Union, thereby conflicting with EU rules. It refuses the formal rejection of its objections by the Ministry, stating that under the Public Procurement Act any objection may be raised by any contractor that has been or might be harmed. And Leonardo, adressed during the marketing research, feels harmed by the final decision taken. It rejects the Ministry of Defence's view that only the Italian Republic could be the harmed party: Italy was not addressed and is not manufacturer of the helicopters in question.

Leonardo does not agree with the Ministry of Defence's view that there is no competitive option in the EU for this kind of commodity and that the US government's bid is the only possible solution. In the opinion of Leonardo, the Ministry of Defence excluded it from the process on the basis of additional criteria, which were never communicated to it, nor were it ever established whether the company was able to meet them, which Leonardo describes as a completely non-transparent and discriminatory procedure.

According to its claim, Leonardo has proven its experience in integrating weapon systems for its helicopters, with references from the Ministry of Defence of the Italian Republic. It offers helicopters answering to the required specifications and having all necessary certificates. It points out that the requirement for helicopters to be deployed in combat was not part of the requirements of market research and that this was an additional argument intended to exclude the Italian tenderer.

See also: Multipurpose Helicopters - Dramatic difference of price between Italian and American solutions

At the same time, the Ministry of Defence cannot claim that Leonardo does not meet such a requirement, because it has never been asked such question. AW139M is deployed with armed forces of many states and has seen active duty. At the same time, the Ministry of Defence did not specify the exact parameters of its newly presented requirements for "battlefield survival", "live force protection" and "performing tasks in complicated conditions", while the AW139M meets such general requirements according to the manufacturer.

In its submission, Leonardo also objects to the claim that the Ministry of Defence has properly assessed bids from an economic perspective - it compares only two bids from the US government and thus has no comparison with other possible solutions. It rejects the claim that "the Czech Republic will purchase helicopters at the usual (fair and reasonable) price in time and place," because it has eliminated the more advantageous bid from the tender by its procedure.

At the end of its petition, Leonardo recalls the CASA transport aircraft acquisition case dating back from 2010. The European Commission then sued the Czech Republic at the European Court of Justice for violating European law, and the procedure was halted by the European Commission as a result of assurances from the Czech side that it would restrict the use of exemptions from public procurement rules only in exceptional cases in which the security interests of the state will be in question. In Leonardo's view, the acquisition process of multi-purpose helicopters is by no means such situation.

Leonardo asks the OPC to order the Ministry of Defence to deal with the objections, and if the OPC fails to do so, asks the Office itself to examine the Ministry of Defence's procedure for implementing the contract by an intergovernmental agreement in the sense of the objections.

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