Defence Committee discussed VOP CZ, new tanks and grenades for the Czech Armed Forces

 27. 03. 2024      category: Events
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Almost two months later, the Defence Committee of the Chamber of Deputies of the Parliament of the Czech Republic met again, this time with a busy agenda. The deputies dealt with the current situation in the state-owned company VOP CZ, information on the modernisation of the tank army and the purchase of hand grenades for the Czech Armed Forces, the lease of the JAS-39 Gripen supersonic aircraft and the closed part of the meeting dealt with information on developments in Ukraine and Israel. The Minister of Defence, Jana Černochová, was represented at the meeting by her 1st Deputy František Šulc, and the Chief of the General Staff of the Czech Armed Forces, Lieutenant General Karel Řehka, the Chief of the Military Office of the President of the Republic, Major General Radek Hasala, the Chief Director of the Property Section of the Ministry of Defence, Marta Kopecká, and the Chief Director of the Armaments and Acquisitions Section of the Ministry of Defence, Lubor Koudelka, were also present.

Foto: Téměř po dvou měsících se opět sešel Výbor pro obranu Poslanecké sněmovny Parlamentu ČR, který měl tentokrát nabitý program. | Jan Zilvar / CZ DEFENCE
Picture: Almost two months later, the Defence Committee of the Chamber of Deputies of the Parliament of the Czech Republic met again, this time with a busy agenda. | Jan Zilvar / CZ DEFENCE

Due to the absence of Defence Minister Jana Černochová, the MPs excluded the agenda item concerning information on the acquisition of unmanned aerial vehicles at the very beginning of the meeting on the proposal of Committee Vice-Chair Pavel Růžička, citing the possible bias of First Deputy Minister František Šulc. Some coalition MPs also voted in favour of the removal and the motion passed. Furthermore, the Defence Committee this time also discussed all the information on the participation of the Armed Forces of the Czech Republic in military exercises outside the territory of our country and the participation of the armed forces of other countries in military exercises on the territory of the Czech Republic, and this procedure passed the Committee smoothly.

State enterprise VOP CZ

However, the discussion on the current situation and the results of the public administration audit at the state-owned enterprise VOP CZ went less smoothly, as at the end of the hour-long discussion, deputies from across the political spectrum did not adopt either of the two proposed resolutions. Six MPs wanted to take note of the resolution, five were against and one abstained. 6 Members voted in favour, 3 against and 3 abstentions in favour of adjournment pending the report on the public audit.

On 1 December last year, the Minister of Defence, Jana Černochová, dismissed the Director of this state enterprise, Marek Špok, due to the long-term dismal results of the strategic state enterprise of the Ministry of Defence and problems in its internal corporate communication. In addition, the Ministry of Defence launched an inspection of the company in the autumn of 2023. At yesterday's committee meeting, MEP Josef Bělica reminded the committee that the minister herself said after the dismissal of director Špok that the company was not in an easy economic situation. By the end of January 2024, the announced outcome of the aforementioned ongoing public audit should have been available. "On 1 March, I asked through the Defence Committee for the results of the audit to be made available, that is, more than a month after the audit had been completed, so that we could get acquainted with it," said MEP Bělica, adding that he was told at the time that the findings of the audit would be presented only at a meeting of the Defence Committee. Bělica also interpellated the Minister on the matter. According to MP Bělica, this meeting is an example of how the Ministry of Defence generally approaches the Defence Committee, which is supposed to exercise an oversight role over the ministry. "I cannot imagine at all that the defence committee, which is supposed to control the ministry, simply does not receive the information that is available at any given moment," said MP Bělica, who was also interested in the economic result of the VOP CZ company for 2023 or the state of preparations for the CV90 project, which the state-owned company is supposed to tackle. First Deputy Minister of Defence František Šulc, in response to the aforementioned reservations, stated, among other things, that the situation in the company has stabilised and preparations for the CV90 project, which is crucial for VOP CZ, are actively underway.

Foto: Primárním úkolem VOP CZ jsou především opravy a modernizace vojenské techniky | Michal Pivoňka / CZ DEFENCE
Picture: The primary task of VOP CZ is mainly repair and modernisation of military equipment | Michal Pivoňka / CZ DEFENCE

Subsequently, Marta Kopecká, Chief Director of the Property Section of the Ministry of Defence, informed the MPs about the results of the discussed public audit in VOP CZ, which was launched on 16 October last year. "The audit was focused on compliance with legal and internal standards of the company. It examined the procedures for managing funds and the procedures for concluding contracts and responded to complaints and suggestions from employees and other sources," Kopecká said. In general, the audit and findings were divided into three areas: operational, personnel and business. They investigated complaints about the frequency and expediency of business trips by management, the use of company funds for private purposes, and how business travel reimbursements were handled. The audit showed that VOP CZ did not have an internal control system for the use of funds related to business trips, nor a procedure for evaluating the effectiveness of such trips. There was also insufficient control over the allocation of company payment cards and the acceptance of payments by these cards. "The audit group therefore recommended that the company's authorised director take measures to eliminate the identified deficiencies and implement a newly set internal control system," Kopecká said, adding that parallel proceedings are currently underway by the state enterprise against the former management. "With regard to the reimbursement of funds, i.e. expenses of the state enterprise for private purposes of the former management by the control group, the founder of the enterprise (the Ministry of Defence of the Czech Republic) was also recommended to regularly discuss with the directors of state enterprises the plans of their business trips and thus underline the legal obligation of the director of the state enterprise to always act with due care," Kopecká added.

In addition, in the area of personnel, initiatives to create new jobs and the occurrence of negative phenomena in interpersonal relations at the workplace, such as bullying or bossing, were also investigated. "In the control group, there was no evidence of compliance with the obligation under the collective agreement to publish the jobs created. For two of the three newly created positions, the subject matter of the job included the work reported. For one position this was not the case and only a report for one month of the worker's activity was created," Kopecká said. In the course of the audit, changes were made to the company's organisational and personnel policy and corrective measures were taken in the area of company management by the director in charge, and all three positions were terminated and the redundant posts were abolished by organisational change. In an anonymous questionnaire survey of employees, it was found that almost half of the respondents had experienced, either as a witness or a victim, various types of workplace bullying, some of which were investigated by the company's ethics committee. According to the employees and the trade union, the situation in interpersonal relations in the company has calmed down after the personnel and human resources management changes.

The third separate area of the audit was the business policy of VOP CZ, where the costing of the contracts was checked in the context of contracting, with the result that only one contract from the original complex contract for the CV90 project was a loss. The overall contract, i.e. both contracts together, remains profitable for the company. "The value of the current loss-making contract for service workshop vehicles is not even ten percent of the value of the second sub-contract for the CV90 project. The execution of this currently loss-making contract has not yet started and, according to the state enterprise, its conclusion was essential for business cooperation," Kopecká said. Not only in the case of this contract, the Supervisory Board, which is responsible for this activity under the State Enterprise Act, will continue to be intensively involved in the commercial policy strategy of the state enterprise. As regards the result of the state enterprise's economic activity, the estimated loss is just under CZK 58 million, according to the information received from the state enterprise. "At present, the enterprise already has a qualified and valid business plan for this year, as the Supervisory Board returned it for revision and it was approved in March this year. VOP CZ envisages a planned positive economic result with just under CZK 25 million," said Chief Executive Officer Kopecká from the report, according to which at the same time the civil production in the pricing area was stabilised, when there was a threat of a significant outflow of customers.

Chief Executive Kopecká also responded to a parliamentary question concerning the alleged sale of a tank, which the previous director of VOP CZ had used to cover a business deficit: "The opinion of the Department of Disposal of Unnecessary Assets still stands, as the tank, which was provided to the state enterprise for development and research purposes for combat at an expert price, cannot currently be further transferred or sold for any purpose other than development, as the contract concluded between the Ministry of Defence and the state enterprise states that the tank is to be destroyed after the research and development work. Currently, a legal analysis is underway and at the same time the supervisory board is dealing with what to do with the work that was done on the tank without the consent of the disposal of the state enterprise's property, thus incurring a loss for the state enterprise," Kopecká said.

Modernization of the tank troops of the Czech Armed Forces 

The Committee also discussed the modernisation of the tank army. Deputy Minister Šulc informed the Committee that in the area of tank modernisation the Army had successfully commissioned 14 Leopard 2A4 tanks in the last year, which it had received as a gift from the Government of the Federal Republic of Germany, which had subsequently extended its offer of donation to include further vehicles and the possibility of purchasing additional tanks. "If we take advantage of all these opportunities, our army could have a completely re-equipped tank battalion by the end of 2025 according to NATO standards," Šulc said. The Leopard 2A4 tanks are proven and established in the armament of a number of North Atlantic Treaty Organisation armies and can also be further upgraded to higher types.

Foto: V rámci modernizačních procesů poslanci řešili zejména pořízení tanků Leopard 2 | Jan Zilvar / CZ DEFENCE
Picture: The planned major acquisition of up to 80 Leopard 2A8 tanks will complete the renewal of the 73rd Tank Battalion and thus the 7th Mechanised Brigade. | KMW

"There is an opportunity to create ideal conditions for the smooth integration of the Leopard 2A8 tanks, which are currently under negotiation with the German side and are expected to be delivered between 2027 and 2030. The possibility of simultaneous use of the Leopard 2A4 and 2A8 tanks provides the possibility of covering the needs of the active reserve of the tank troops in the future, as well as the creation of the necessary mobilisation reserves," said Deputy Minister Šulc, who was then complemented by the Chief of the General Staff of the Czech Armed Forces, Lieutenant General Karel Řehka, adding that the modernisation and replacement of tanks is also a fulfilment of the commitment of the Czech Armed Forces to the Alliance for a heavy brigade. "The brigade must be capable of deploying organic, tank and mechanised task forces in high tempo ground tactical operations to defeat enemy forces through a combination of fire, sustainability and tank utilisation. In other words, a heavy brigade must have at least four new battalions, one of which must be a tank battalion, General Rehka said. Changes to the battalion's structure related to the new tanks will require an increase of nearly 200 personnel, according to Rehka, which will place additional demands on the battalion's increased implementation effort given the understaffing of the battalion and ground force units in general. This problem will obviously require a long-term solution.

First Deputy Minister František Šulc, responding to questions from MPs, said that the takeover of Leopard 2A4 tanks does not change the number of 2A8 tanks at all. "The numbers are unchanged, that is 76 2A8 tanks in all versions," Šulc confirmed. "We would have a situated tank army, including the support of not only the heavy brigade but also the medium brigade, i.e. around 2030 to 2032 about 120 tanks of all types, that means also the special ones," Deputy Minister Šulc noted.

Grenades for the Czech Armed Forces

First Deputy Minister Šulc reiterated the genesis of the supplier selection process, which dates back to 2017, when the Ministry of Defence approached an unlimited number of suppliers through a transparent competition, and spoke about the intention to gradually localize the production of these grenades on the territory of the Czech Republic. Subsequently, on 17 February 2023, following the completion of the procurement procedure, the Ministry of Defence concluded a framework agreement for the supply of hand grenades with Colt CZ Defence Solutions from the Colt CZ Group holding company, with the agreement valid until 15 October 2027 and performance up to a maximum financial limit of CZK 500 million, including VAT. Specific deliveries of hand grenades are carried out on the basis of concluded partial orders. To date, a total of 281 250 hand grenades have been ordered for a total value of CZK 342,5 million including VAT.

Foto: Obranný granát SplHGr 85 | Michal Pivoňka / CZ DEFENCE
Picture: SplHGr 85 defence grenade made for the Czech Armed Forces | Michal Pivoňka / CZ DEFENCE

The first partial call for fifty thousand grenades is to be fulfilled by the seller by 31 August 2024 at the latest. The Ministry of Defence required a minimum of fifty percent of local production in the Czech Republic, however, according to information, the involvement of the Czech defence industry will be higher, namely 60%. General Rehka added that the army is trying to speed up the orders of the framework contract. "As an army in the field of hand grenades, we are in a situation where we do not have the required stocks that we need to have. And even in terms of alliance standards, this is one of the types of ammunition that we need to replenish," the Chief of General Staff said. "At the same time, I want to say that we clearly requested that it be this particular type of grenade and we insisted on it for the reason that the grenade is established. There are all the methodologies, manuals for it. We cannot change the type of grenades every year, if only for security reasons. Therefore, both in terms of standards of satisfaction with this type of grenade and in terms of introduction, it is already a standard grenade for the Czech Army," explained General Rehka. After subsequent discussion, the committee noted this agenda item.

Rental of JAS-39 Gripen aircraft

The last publicly discussed item on yesterday's Defence Committee agenda was information on the lease of JAS-39 Gripen supersonic aircraft. In this case too, MEPs recalled the historical milestones of the acquisition of these aircraft, in particular the year 2003, when the Government of the Czech Republic decided to secure the tasks of the army by acquiring fourteen of these tactical supersonic aircraft. At that time, it was a temporary and provisional solution. Initially, 24 aircraft were to be purchased to cover the Czech airspace, but due to the limited budget, the number was eventually reduced to 14 and they were leased or operationally leased from the Kingdom of Sweden. Subsequently, this contract was extended from the originally planned assumption of an increase to twenty-four aircraft, in the same volume, for the period from 2015 to 2027. During this period, the Ministry of Defence is then dealing with a new contractual relationship which, after thirty years of operation, will ensure a smooth transition from the 4th generation system in use to the 5th generation F-35 aircraft. The Gripen C, D aircraft are expected to be in service until 2035, when their life cycle is expected to end. A new contractual relationship with the Kingdom of Sweden until 2035 is now being negotiated, with the key point being to ensure the renewal of the aircraft's existing systems in order to maintain its operational capability at the required level, while keeping the aircraft's capabilities up to date with current North Atlantic Treaty Organisation requirements. This will require, among other things, a number of necessary upgrades, the content and scope of which are under negotiation. The Department expects to conclude the relevant contract by the end of this year.

Again, we asked the committee members survey questions:

1. What do you think the January audit of the Ministry of Defence in the state enterprise VOP CZ showed?

2. In your opinion, is the state-owned enterprise VOP CZ ready to fulfil its commitment to production and repair for the Czech Armed Forces?

Lubomír Metnar (ANO), Chairman of the Committee

1. Even after today's meeting of the Defence Committee, I am unable to form a relevant opinion on the state of the company, as representatives of the Ministry of Defence have not informed us of the specific findings of the audit. The information on the results of the inspection was only general, which I find alarming. It was the Minister of Defence who appointed Marek Špok to the management of the company despite his poor results, which led me to remove him from the management of the company in 2019, and I warned against his reappointment. The debate was stormy and MPs disagreed over the final resolution.

2. I am really not convinced that this is the case and I am led to believe it is by the following facts. The Ministry of Defence said that there had been a change in the business plan, but then contradicted itself because the discussion suggested that we should wait for a new Director to present the new plan. Given that the company is supposed to cover strategic armament projects for the Ministry of Defence, such as the CZK 70 billion PBVP project, it is impossible for us not to know the overall state of the company, such as its business plan, financial plan, staffing situation and a clear outlook for the next few years.

Jan Hofmann (ODS), Vice-Chairman of the Committee

We received information on the state enterprise VOP CZ at the Defence Committee on 26 March, where the result of this audit was presented. Director Kopecká stated that the audit had revealed some irregularities, but that the Acting Director was already working on correcting them. We are now in the process of preparing the selection process for a new Director, so I suggested that we approach him with any questions on the audit findings and also get relevant information from him on how he will address the situation in this company. However, the Committee was assured that the situation in the company was stable and any contracts were not at risk. This included the largest contract for PBVP. At the same time, I am pleased that the Ministry informed us immediately at the first Defence Committee after the completion of the investigation into the VOP CZ enterprise and that it commented on this report to the Committee in such a way that it did not give rise to any theories.

Josef Bělica (ANO), Member of the Committee

1. Unfortunately, the results of the audit were not provided to me. I have to say that the information that was given to the Committee concerned me because it suggests that the letter from the disgruntled employees stated facts that were confirmed by the Ministry's audit. Indeed, I can hardly comment further on this matter unless I have had the opportunity to study the document.
2. I am satisfied that, under good management, it has. It should be remembered that there are many capable people working there, specialists in fields that are already difficult to find on the labour market (metalworkers, welders.......). I believe that the company will manage to operate without political reins and the people in that company will be able to lift it up and prove their abilities.

Karel Krejza (ODS), Member of the Committee

The audit confirmed that the former director was not successful in his position. My view on the GOC is still the same, even if it does not coincide with that of the Ministry of Defence, namely to seek cooperation with the private sector at the managerial level.

Petr Liška (STAN), Member of the Committee

The information provided by the Ministry of Defence at the last meeting of the Defence Committee showed that VOP CZ is ready to fulfil the obligations for which it was established, including the key contract for the Czech Armed Forces, which concerns the acquisition of BVP. It is clear from previous events that managerial misconduct was primarily responsible for the problems VOP faced in the recent past and which are still reverberating. This is an enterprise based in a region where there is no shortage of the professionals that such an enterprise needs. Similarly, it appears that finding a truly capable manager is not easy for the state, in competition with the private sector. I do not share the opinion of my colleagues from the opposition that it must be in the interest of the MoD to make VOP CZ profitable at all costs, because it also performs specific tasks. However, it must be functional and stable, which is the responsibility of the Director. This assumption is also the motivation for me to take a closer look at the audit report on the MoD's inspection of this enterprise, the conclusions of which we have been informed of in detail.

Radovan Vích (SPD), Member of the Committee

1. The MoD audit showed that the state enterprise VOP CZ, which is subordinated to the MoD, had long been involved in cases that are part of the criminal proceedings. The SOE cannot afford to run at a loss and in the current situation the culprits need to be identified and measures taken to prevent such a situation from recurring.  

2. According to all available information, the state enterprise VOP CZ is not able to fully fulfil its obligations in terms of production and repairs for the Czech Armed Forces.

Lubomír Wenzl (ANO), Member of the Committee

I will say one thing in response to your questions. If you have been following the Committee's proceedings, the issue of the VOP CZ has in fact been postponed to the next Committee meeting. When we have had a chance to look at the material now commented on, only then will it be appropriate to comment. At today's meeting, we did not have the relevant materials in hand.

 Author: Jan Zilvar

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