Some Underwater Stones in Military Deals That May Cost Billions
SOFIA (Bulgaria), July 5, 2018, Source: Mediapool, Nikola Lalov, Photo credit: Pan.bg
The government intends within the next several months to solve the three biggest projects for the modernization of the Army – the purchase of new type of fighter jets, armoured vehicles and ships, which represent the most serious investment program in the Army since 1989.
The total value of the future deals will be about BGN 4 billion and they will predetermine the development of the sector for the coming decades. Although the need of new armaments and equipment is indisputable, there are many unclear, non-transparent and controversial issues around the three projects that may compromise the modernization process and threaten the stability not only of the Army, but also of the whole country.
According to sources of Mediapool the Government is working the hardest on preparing the deal for new armoured vehicles that will worth over BGN 1.46 billion. Exactly it, however, is the most non-transparent one. Tax payers have not any information about the activities of the Ministry of Defence (MoD), and even the major technical requirements of the needed machines are not known.
This allows of many speculations related to the Project, which concerns many different interests – business and political ones.
The main issue related to the aircraft Project is that it shall be made a choice between new and second-hand aircraft. The comparison is extremely difficult and in a similar situation Slovakia stopped the Project after having prepared it for years.
The future of the third Project – the purchase of two new patrol boats, is the vaguest, because of the limited budget. According to experts, there are very little chances the deal to fit in the planned budget – BGN 984 million. Although there are no such indications yet as the Project is in its initial phase, it is possible the Navy to lower the requirements for the required by them ships.
In general, however, experts in the sector are wondering if there will be a deal at all.
What is the schedule?
According to the schedule of the Defence Minister Krasimir Karakachanov, up to 25th July it shall be sent the invitations for offers for the projects for new types of fighters and for armoured vehicles. The deadline for submission of questions and clarification is 15th August. Up to 25th October the offers shall be received, and four days later – opened.
In November the offers shall be evaluated, and at the begging of December tests for the parameters of the machines shall take place. The contracts shall be concluded on 19th and 20th December.
Having in mind the past practice, it is likely that the schedule to suffer delays, but the political leaders of the MoD has already declared several times the ambition to conclude the deals by the end of the year.
The boat Project has been not discussed yet by the Parliament, and that is why it will suffer a delay of a few months.
The armoured vehicles: Lack of transparency and fuzzy political responsibility
At the moment, the Project for the armoured vehicles is in information blackout. Unlike the fighter jet Project, which is detailed, there is quite general information about it.
The Land Forces state that there is technical information about each required machine, but it is not public.
These details are key for the future selection as there are big differences between the offered machines.
Another specific fact is that this Project is entirely given in the hands of the military. Unlike the other two projects, there is no responsible Deputy Minister of Defence appointed for that one. It is not clear as of the moment what this reason for that is.
Underwater stones are also hidden in the set requirement the machines to be assembled in Bulgaria, which may make the order more expensive.
The fighters: almost an impossible choice
In the fighter Project, the main difficulty will be the choice, which shall be made between new and old aircraft.
The main competitors will be the Swedish new Gripen fighters and the second-hand F-16 from Israel or from Portugal and the USA.
The MoD wants also offers for newly-manufactured combat aircrafts F-16 Block 60 (or 70) and F/A-18E/F Super Hornet, second-hand F/A-18E/F Super Hornet, new or used Dassault Rafale (France), new or second-hand Eurofighter, but probably Bulgaria will not be able to afford them.
The Ministry of Defence submitted the Project to the Council of Ministers for a second time. Last year, the Parliament returned the old Project for further development, explaining that the offers of Portugal and the USA for a second-hand F-16 were excluded from it due to formal reasons because payment in instalments was not offered.
Already during the parliamentary control experts warned that it is offered in the Project a choice between new and used aircraft, which is very difficult.
Now the case is repeated, and offers are requested for new and old fighters.
Last month, the Slovak Government postponed its decision whether to purchase U.S. F-16 fighters or the Swedish Gripen, and the Slovak Prime Minister Peter Pellegrini explained that he wanted to see comparable offers.
Whatever algorithm is used by the Bulgarian Air Force, in all cases there will be pros and cons the choice made and probably the debate will prolong the Project again.
It is also possible that boats at that price may not be found
Last week, the Government also gave the green light to the Project for the purchase of two new patrol vessels for the Navy at BGN 984 million with VAT.
The Project for the new boats was in the finals, but at the end of last year, the only company that had submitted an offer – MTG Dolphin based in Varna, surprisingly gave up at the last minute.
The decision was not officially commented by the company, but it was explained by the MoD that it was due to the reduced cost of the Project. Initially, it was worth BGN 820 million, which had to be paid within the next five years. After legal changes had led to charging of VAT on military projects, the money for the deal was reduced by more than BGN 164 million.
Already last year, however, it was clear that even BGN 820 million would not be sufficient for finding enough candidates, and the Navy warned that the Project would increase its value with each passing day.
Now, the MoD finds itself in approximately the same situation. This time, however, it has also envisaged two new options for acquiring the boats: “purchasing of a new defence product (modified for the needs of the Navy) or licensed production and a combination of developing a new product and modifying an existing one.”
It is not yet clear whether and how these options would affect the Project and technical specifications of the ships, but it is clear that the Navy is trying to provide more options for the future suppliers.
It will be of significant importance the Government to clear up the doubts that the Project is being prepared for a particular company, which doubts existed during its first edition.
Worries and bad practice
At this stage the Defence Minister Krasimir Karakachanov remains moderate in connection with the future of the projects.
“We have worries. We have worries about all projects. Why shall we deceive ourselves and talk beautiful things? Everything may happen. It is also possible that offers are not submitted at all. Although there is interest in all three projects – the two voted ones and the one which is to be submitted. Interest is shown by companies, and they are not one or two,” said Karakachanov in front of the deputies from the parliamentary military commission.
“You saw what happened last year with the boats. In fact, only one company submitted an offer. Others showed interest, asked questions: can’t we change this, change that, mostly in relation to the prices and VAT. We cannot! It was voted in this way by the Parliament. Finally one company submitted an offer. We have worries, but as it is said, we will try to fulfil the work that depends on us in the best way and we will hope things to happen after that,” added Karakachanov.
Far more dangerous option than non-implemented projects, however, is the deals to be concluded, but not to lead to a qualitative change and the new machines to stay in the hangars, because it has turned out that it is not exactly what we need and is very expensive for maintenance.
In that respect the military have significant experience.
Against the spent hundreds of millions of levs during the past 15 years almost no combat capabilities have been acquired, and some of the signed contracts are emblematic with their poor planning and implementation.