The criticized tender for tracked IFV may be cancelled in a few weeks and the equipment acquired by intergovernmental agreement

The criticized tender for tracked IFV may be cancelled in a few weeks and the equipment acquired by intergovernmental agreement
Caption: IFVs in the Czech tender
27 / 06 / 2022, 10:00

At its 13th meeting last week, the House Committee on Defence discussed, in addition to the planned items, two expected topics postponed from last week when Defence Minister Jana Černochová excused herself from the meeting. These were, on the one hand, information on the status of the order for tracked IFVs and, on the other hand, information on the donation and subsequent purchase of Leopard main battle tanks.

The MoD has the final conclusions of the legal analysis of the IFV tender, commissioned in February, and by the end of the week it will address the bidders by letter on the change of conditions - either all those addressed will explicitly agree to them, or the tender will be cancelled and the contract will be awarded under the intergovernmental agreement regime. The intention to accept the German Government's donation of 15 Leopard 2A4 tanks was noted by the Committee members. The MoD retains the option to procure another platform when negotiating the purchase of tanks in the latest 2A7+ version.

In her opening remarks on the item MoD Information on the tracked Infantry Fighting Vehicle project, the Minister of Defence reiterated her previously articulated criticism of the setup of the tender announced in spring 2019 and expressed regret that the then MoD leadership had not chosen a different way of acquiring this necessary equipment. She cited last year's purchases of CAESAR self-propelled guns and SPYDER anti-aircraft kits as a good alternative example.

The conclusions of the legal analysis of the tender cannot be published in full, according to the compiler, Havel & Partners, and even the members of the Defence Committee have not received more than a very brief extract of the main points.

In it, the law firm says that it has identified risks from the perspective of legal regulation that can only be eliminated if the MoD concludes a contract with the contractor after the amendment to the Public Procurement Act currently under discussion comes into force. Or if the MoD cancels the tender and awards the contract by way of an intergovernmental agreement. From the perspective of contract law, risks have been identified that can be mitigated by making specific changes to the terms and conditions, to which all bidders will explicitly agree, and at the same time waive any claims against the MoD in connection with the tender, in particular for compensation for damages, if the tender is continued.

The Minister of Defence summarised the tendering process to date and said that the previous government was responsible for the state of the contract. She wondered why an unnamed bidder, who had not delivered a draft contract, had not been excluded from the tender, even though it was a fundamental requirement of the MoD, and at the same time its bid was the highest. Lubomír Metnar (ANO), former Minister of Defence and chairman of the committee, replied that the expert team had recommended no other solution than to eliminate the bids of the bidders at the end of October and the beginning of November, not to exclude the bidders themselves.

According to Jana Černochová, the risks of litigation "cannot be eliminated, only minimised." A letter to the three bidders (BAE Systems, Rheinmetall and GDELS) was to be sent by the end of the week and a response can be expected within 10 to 14 days, according to Lubor Koudelka, deputy for management of the Armaments and Acquisitions Section of the MoD. In addition to the invitation to accept the amended terms and conditions and waiver of the claim for damages, the MoD will also have the option to exclude a bidder from the tender if it submits a non-evaluable bid or if it exceeds the maximum bid price of CZK 51.68 billion incl. The MoD will also be able to exclude a bidder from the competition at any time without giving any reason and will also be able to terminate the competition at any time.

According to MP Jiří Horák (KDU-ČSL), this could mean that a bidder who is not confident in the competition could very easily throw it off the table. He was interested in the time and financial shift in case the contract was subsequently continued in the form of an intergovernmental agreement. The Minister said the answers could not be pre-empted - the steps would come in stages as recommended by the law firm.

After a discussion of the political responsibility for the situation in which the Army is still waiting for tracked IFVs and the contract is very close to the new "ground zero", with the commitment to the Alliance to build a modern armed heavy brigade task force by 1 January 2026 still in place, the item was suspended until the next meeting of the Committee, scheduled for 30 August. In view of the above dates, it is understood that by that time the MoD will have the responses of the three bidders to the above letter - the tender will proceed if all bidders accept the terms and conditions. Alternatively, it will be cancelled and the contract will be awarded by way of an intergovernmental agreement. There was no information about its possible parameters and the Defence Minister refused to speculate on them.

The second agenda item postponed from Thursday's meeting was the Ministry of Defence's information on the purchase of Leopard tanks. However, the title of this item was somewhat misleading in view of the information provided. Two contracts are being negotiated in parallel - a contract for the donation of 15 Leopard 2A4 tanks from the German government, or Rheinmetall, including initial logistics, ammunition, integration of the Czech Armed Forces' communication systems and initial training; and a contract for the purchase of five dozen tanks in the latest Leopard 2A7+ version manufactured by the German company KMW.

The MoD's aim in the first case is to reach an agreement under which deliveries would start within six months of signing, with the first tank to be received by the Czech Army by the end of this year. In the second case, however, the MoD does not want to be bound by the initial donation to an alternative solution in the form of buying Leopards, according to the defence minister. The Army is preparing a proposal of parameters to ensure a realistic price corresponding to what other countries pay for this type of equipment. At the same time, the MoD perceives that Poland, for example, is negotiating the acquisition of South Korean K2 Black Panther tanks, and despite the different concept of development of the Polish Armed Forces in the different Polish situation, it does not a priori reject the possibility of operating multiple MBT platforms.

The rapporteur of the item under discussion, MEP Pavel Růžička (ANO), recalled the issue of inefficient spending of MoD funds on the modernisation or technical evaluation of the existing T-72M4 CZ tanks, Committee Chairman Metnar was interested in the date of signing the contract for the purchase of the tanks, and MEP Horák was interested in the issue of ensuring the servicing of the donated Leopard 2A4 tanks. According to Deputy Minister Koudelka, the Czech defence industry will be heavily involved in this process. The question of the outlook for the date of signing the contract for the purchase of modern tanks remained unanswered, adding that intensive negotiations were underway. The Committee took note of the information provided.

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