Czech Venoms and Vipers: the Czech Republic should duly justify why it used the exception from public procurement rules, expert says

20 / 01 / 2020, 10:00

Last week, the Security Magazin invited Jiří Flam, Ph.D., attorney at law and expert in arms contracts, for an interview on the purchase of 12 multi-purpose helicopters, which was finally concluded through all delays at the end of last year. The H-1 system Venoms and Vipers are to replace the aging Mi-24/35 of the Czech Air Force. The decision has been announced in August 2019 and the contract has been signed in December 2019. The qualities of the H-1 system are not questionable; what raises questions is the price and the procedures followed by the MoD.

SM: The Czech Republic completed several important contracts last year, the most interesting of which is the tender for the purchase of 12 multi-purpose helicopters from the USA and I wonder how the tender actually proceeded?

Jiří Flam: From publicly available sources, the Ministry of Defence first conducted a marketing research, that means it addressed several potential bidders to see whether they would be able to deliver the helicopter as intended by the Ministry. In the end, however, the Ministry concluded that there was no suitable bidder to supply the helicopters and decided to buy them through an intergovernmental agreement with the US Government. Such a procedure requires the application of an exemption from the Directive of the European Parliament and the European Council.

SM: Well, and if I follow up on you, how do you assess the use of that exception? Was it really the only possible supplier and could the government do that?

Jiří Flam: I am of the opinion that the Czech Republic can use the exception and buy helicopters in the form of an intergovernmental agreement. At the same time, however, it should proceed in accordance with the European Commission communication, ie the Czech Republic should duly justify why it used such an exception, and that there is no supplier on the market or any other way in which the contract could be executed. However, from publicly available sources it is possible to find out that there is at least one other possible supplier, Leonardo, which claims to be able to provide the Czech Republic with helicopters under either identical or possibly more favorable conditions. As there is an offer from Leonardo, the Czech Republic should pay maximum attention to justifying its decision to purchase helicopters through an intergovernmental agreement.

SM: Leonardo has filed a petition with the Office for the Protection of Competition (OPC, ÚOHS) and we have confronted the Secretary of Defence Metnar immediately upon his arrival after signing the agreement. Lubomír Metnar, Czech Minister of Defence, said: „I would say that the Czech Republic is a totally sovereign state. When the Czech Republic, respectively the Government decides to buy helicopters in this form, it is absolutely outrageous for a private company to torpedo this contract. If the petition is, as you say, at the antimonopoly office, so for me it is a very unreliable company for cooperation with the Czech Republic. According to negotiations with ministers from neighboring countries, this is absolutely unacceptable. And nowhere else has it happened. We proceed in full compliance with the laws of the Czech Republic and the European Union. We stand behind our progress. And this is how we approach it.“ What would be your comment on this?

Jiří Flam: The interveiw with the Minister shows that he expresses himself too strongly against Leonardo when he calls the company an unreliable partner and describes its procedure as blatant. The Minister should be neutral, impartial when deciding on tenders, and therefore his practice raises doubts as to whether he is in any way biased in this matter.

SM: And is the petition that Leonardo has just sent to the OPC procedurally correct?

Jiří Flam: I do not know Leonardo and I do not know what is the content of the petition, but quite generally: if someone disagrees with the procedure of the contracting authority in the implementation of the public contract, it can contact the Office.

SM: One of the most criticized points is the price for the US helicopters, which is actually twice as high as originally thought. So what do you think?

Jiří Flam: A doubled price of the contract would not be a problem if it was the only way to ensure the security of the Czech Republic. However, the Czech Republic must continue to assess whether its resources from public budgets are spent efficiently, economically and effectively. So the Czech Republic should justify why it spends multiples of previously envisaged amounts from public budgets.

SM: Concern has been raised several times about Minister of Defence Lubomír Metnar not to end up in court, like former Minister Ms. Parkanová in the CASA aircraft case. What is your opinion on this?

Jiří Flam: I am not able to assess from the available sources whether the helicopter case will evolve in the same way as the CASA case, but it should be pointed out that the CASA case has not been resolved within ten years, that is, there still exist legal uncertainties on the issue, and so we should be more transparent about the new contract, so that it would not be another problem for many years.

Czech Defence Journal on the multi-purpose helicopter acquisition project: