New Infantry Fighting Vehicles for the Czech Armed Forces or an international discredit?
At its 45th meeting, the Defense Committee addressed current information on the order for tracked Infantry Figthing Vehicles again. This was a continuation of the discussion from the previous 43rd meeting. The deputies returned to the debate on the acquisition of tracked IFV at the moment when the remaining missing 5 billion crowns were transferred back to the budget of the Ministry of Defense. At the beginning of the week, dynamic tests of all three types, ie CV90, LYNX KF41 and ASCOD vehicles, were also launched at 8 locations in the Czech Republic. These will last until June 6. Infantry Fighting Vehicles will undergo a total of 29 tests and trials from ballistic protection to control of weight and dimensions.
At that time, Minister of Defense Metnar would like to have on the table the assent of the Government, which according to a press release from the Ministry will discuss material on the project to acquire 210 tracked Infantry Figthing Vehicles in the coming days (but not on May 3, 2021, when its regular meeting will take place). The main goal of the draft is to summarize the current situation and inform the Government about the change in the schedule of deliveries and payments. Deliveries should be extended by two years compared to the original plan and should take place in 2023-27. The modified financial model then extends the financing to 7 years, specifically the years 2022-28. The distribution of the originally planned payments over a longer period of time will reduce the burden of repayments of the Ministry of Defense budget in individual years.
Immediately after the approval of the material by the Government, the Ministry of Defense will send a call for a (final) bid to the Swedish company BAE Systems, the German company Rheinmetall Landsysteme and the Spanish company GDELS, according to a statement from the Ministry. The minister justified this increase in pace by trying to end the tender as soon as possible and sign a contract with the winning company in this election period.
However, the main obstacle to this happening is ultimately the lack of funding, the delays in the selection process, and the delay due to the coronavirus pandemic. The settlement of the inter-ministerial comment procedure turns out to be the most fundamental obstacle. This took place on 19 January this year and the ministries concerned were the Ministries of Finance, Interior and Industry and Trade (the material is available to the CZ Defense editorial office). While all 4 comments of the Ministry of Finance and 3 comments of the Ministry of the Interior were settled, the comment of the Ministry of Industry and Trade (MIT), despite the arguments of the Ministry of Defense, persists. The requirement is as follows: “..to the contracting authority to seek to maximize the share of domestic industry (above the minimum share of 40%) in an effort to maximize security of supply as much as possible. It is desirable to establish a production company in the Czech Republic, which will be involved in deliveries for other orders to third countries (for example, the Slovak Republic wants to acquire IFVs). It is also desirable to involve other Czech companies as suppliers of components in the programs of the tender winner and / or the establishment of a development center in our territory. Defense products bring high added value. The involvement of Czech industry will be associated with the transfer of advanced technologies and know-how, with an increase in employment and with a consequent increase in the export potential of the Czech Republic."
In practice, this means going the so-called Hungarian way. Hungary selected 218 LYNX IFVs. The first 46 vehicles and 9 Buffalo armored vehicles will be delivered from Germany, another 172 vehicles will already be produced in a new joint venture in Hungary.
This seemingly logical requirement, such as the construction of a new factory, which would completely take over the production of the IFV, create an "industrial product" according to the ideas of the Ministry of Industry and Trade and would certainly bring considerable resources not only to the state budget but also to support employment and competitiveness of Czech companies, has however, two major problems.
The first is the tender, which has been running for three years, when we still do not know the winners of the triumvirate of competitors (unlike Hungary, which directly chose LYNX) and then especially the bad timing of the request. The Government approved the tender on 17 December 2018, when the Ministry of Industry and Trade did not contradict the parameters of the contract. The contract was subsequently started on March 27, 2019 with an initial meeting with suppliers. The MIT had no comment on this either. On the contrary, 16 so-called insurmountable and still valid conditions were presented at this meeting. Three of them need to be noted in this context:
13. To ensure the maximum share of development, production, transfer of technologies, know-how and intellectual property to the state enterprise VOP CZ, s.p. Involvement of VOP CZ, s.p. as a system integrator of Czech industry (with priority given to the involvement of other state-owned enterprises). Involvement of VOP CZ, s.p. (including Czech industry) at least 40% of the acquisition price (taxed in the Czech Republic).
14. To ensure the life cycle of vehicles exclusively through the state enterprise VOP CZ, s.p. and its subcontractors with the support of the supplier (tenderer).
15. The Supplier undertakes to provide the Ministry of Defense of the Czech Republic with licenses for the development, production, servicing, modernization and modification of the acquired goods.
At Wednesday's (April 28, 2021) meeting of the Defense Committee, both Minister Metnar and the Army representatives clearly guaranteed that the state-owned company VOP is a guaranteed integrator and the share of 40% involvement of Czech producers in the total contract price is minimal. "That 40 percent is a real edge. If they offer more, it will be significantly appreciated in the evaluation process. If there are three offers - one for 40, the second for 45 and the third for 50 percent, then the one who offers 50 will probably win," Col. Ctirad Gazda, Head of the BVP SVA MO Acquisition Project Department, defended the ongoing project at the meeting. According to him, so-called offsets have also been banned in the European Union for 10 years and the Ministry would violate EU law by enforcing them. Gazda was then completed by the Deputy Minister for the Management of the Armaments and Acquisitions Section, Lubor Koudelka, who confirmed that he had warned several times that the new conditions required by the Ministry of Industry and Trade were leading to the cancellation of the contract.
In its unanimously adopted resolution, the Defense Committee stated that the project to acquire new tracked IFVs as one of the key programs for the modernization of the Army is significantly delayed. The consequence of this delay is with a high probability the impossibility of drawing the amount of 4.2 billion crowns from chapter 307 of the state budget. Therefore, it asks the Ministry of Defense of the Czech Republic to notify the Defense Committee by the end of May 2021 of other acquisitions for which it will use the money released this year, and also requests such acquisitions in which Czech industry participates wholly or significantly and is part of the plan of development of the capabilities of the Czech Army. Another requirement is that the transfer of these funds to other acquisitions does not reduce the total amount for the acquisition of tracked IFVs in the coming years and that the schedule of IFV deliveries in the years 2023-2027 is respected. The last point of the resolution is the requirement that the contract with the supplier include a guaranteed involvement of domestic industry, which will be quantified and enforceable.
To this can only be added that the above-mentioned resolution makes sense and relevance if Minister Metnar succeeds in enforcing finalization of this three-year tender for 210 tracked Infantry Fighting Vehicles in its current form at the Government meeting in May.
Two days ago, the Army of the Czech Republic commented on the above situation on its Facebook profile as follows: "Soldiers without new equipment, the Army without capabilities and discredit in the eyes of our Allies to whom Czechia promised to build a heavy brigade ..." I think there is nothing to add.