Politicians addressed the simplification of the acquisition process, the degree of involvement of Czech companies in tenders and the amount of the defense budget

 06. 09. 2021      category: Events
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The participants of the Round Table, recently organized by the Czech Chamber of Commerce headed by the Minister of Defense Lubomír Metnar, addressed issues related to the defense industry. The debate in the pre-election atmosphere sought answers to the state of financing of the Ministry of Defense, the concept of development, acquisition processes and related problems. In essence, it could be divided into four parts: Defense industry and economy, securing 2% of GDP for the budget of the Ministry of Defense, greater involvement of the domestic security industry in the security and defense framework and Czech security interests and promotion of the Czech defense industry and acquisition processes.

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Picture: The debate conducted in the pre-election atmosphere sought answers to the state of financing of the Ministry of Defense, the concept of development, acquisition processes and related problems. (illustration photo) | Ministry of Defense of the Czech Republic

In addition to representatives of the Chamber and experts, the above-mentioned debate was attended mainly by politicians, to whom we asked the following questions:

1. In your opinion, is the proposed budget of the Ministry of Defense (MoD) for 2022 sufficient and will the modernization process of the Czech Army’s equipment not be slowed down?
 

2. In your opinion, how can Czech companies become more significantly involved in MoD tenders?
 

3. In your opinion, are the acquisition processes of the Ministry of Defense capable of action?

Below are their answers:

Lubomír Metnar (ANO), Minister of Defense of the Czech Republic

1. It corresponds to the current situation where the economy and the whole state have to deal with the consequences of a pandemic. Unlike others, we have managed to maintain a positive trend and defense spending is still rising. Over the last seven years, the defense budget has increased by more than one hundred percent. We negotiated the maximum possible for next year at the Ministry of Finance. With almost 93 billion in the budget, we can continue to modernize and implement planned and largely already prepared projects.

2. Czech companies are involved and I dare say that in abundance and successfully. I have been in office for 38 months. During that time, 38,000 various contracts were concluded in the Ministry of Defense. And 97 percent of them were with Czech companies. I think these numbers speak for themselves. I am glad for that and I believe that this trend will continue. The domestic defense industry is our strategic partner and we are counting on it.

3. I am not saying that the situation is ideal. There is definitely still room for improvement. But the answer to your question is clear. They are. The 38,000 signed contracts for more than 115 billion crowns are proof of that. And in the coming weeks we want to sign a contract for new cannons and we are doing our best to complete the purchase of SHORAD anti-aircraft missile systems as soon as possible. We have picked up a pace in the field of acquisitions that has never been seen before.

Jana Černochová (ODS), Chairwoman of the Defense Committee

1. It is definitely not, if it is approved according to the agreement of Minister Schillerová with Minister Metnar, it will still be almost CZK 3 billion lower than planned in last year's medium-term outlook, and about CZK 10 billion than the amount with which for next year calculates the Concept of the build-up of the Czech Army 2030. And this, of course, must be reflected somewhere. I understand that no contract will be signed for the new IFV, which was already to be financed from the 2022 budget. But this is a constant problem with the ability or rather the inability of the Ministry of Defense to plan acquisitions and meet their schedule. Even so, we still have a huge internal debt of the Army that needs to be resolved, and every penny is needed in this. Constant juggling of numbers in relation to the Army is very irresponsible. The Army needs its budget to be predictable and what is said in one year to apply in another. Otherwise, large modernization processes are unfundable and we can say goodbye to some stability in our defenses.

2. I also say it repeatedly, what can be bought at home in the appropriate quality, let's buy it at home. I understand the legislative boundaries, but if they bind us in this, we must adjust them, because our defense industry needs the opportunity to point out that it has a place to work in the domestic field in order to develop its business. And if we shop from abroad, we must strive for maximum participation of domestic companies. Much has already been done in this regard, we must continue to do so and be uncompromising in our negotiations.

3. Unfortunately, we still encounter the same problems as a poor estimate of the acquisition schedule, its delays, poorly chosen procurement methods, procedural mistakes that unsuccessful bidders subsequently challenge and lead to fines, and last but not least, pricing based on old marketing surveys , which lead to unpleasant surprises in the final pricing. I don't want to be critical at all costs, many items have been bought, but there is still room for improvement. And I am convinced that we need to further professionalize the acquisition process, renew the National Armaments Office and simplify legislation with regard to the specifics of military contracts. Defense contracts are not public contracts of the classic type, where you choose from a wide range of products. The Army usually knows what it wants. That is why I would not be afraid to simplify competitions.

Radovan Vích (SPD), Deputy Chairman of the Defense Committee

1. The budget of the Ministry of Defense for next year is increased by only about 2 billion crowns, which basically means covering inflation. If we add to this the fact that steel has become more expensive worldwide by 300%, and also that the Ministry of Defense does not use 2-4 billion crowns every year, then it is even less. The ANO government and the CSSD are proud of the soldiers, but if it is to provide them with sufficient funds, it acts the opposite.

2. If these products are manufactured, then within the framework of tenders, which are and will be advertised, as well as for service services within individual tenders throughout the entire life cycle.

3. Everything is late, then it is usually shifted in time again, the price is questioned due to various other functionalities or it is challenged at the Office for the Protection of Competition. There is a need to adopt a systemic legislative solution that would speed up and reduce the cost of individual military tenders.

Jan Lipavský (Pirates), Deputy Chairman of the Defense Committee

1. I consider it right that the Ministry of Defense should receive the full 95 billion that it had been promised in the medium term from the state budget for 2021.

2. By submitting tenders.

3. In recent years, I perceive significantly better, compared to the era of Minister Stropnický.

Zdeněk Ondráček (KSČM), Deputy Chairman of the Security Committee

1. The modernization of the Czech Army has been talked about for the last 20 years. In order to be implemented, at least to the extent necessary, the budget would have to be at least sixfold. It's not so much about the amount of money as such, but about what it's spent on. If it's just for a pile of iron, we have a problem with it and we are the only ones not afraid to say it in public.

2. By clearly setting the condition for the participation of Czech companies in the volume of 60% when making purchases. Czech companies can not only produce it, but also invent it, they just have to get the opportunity. But this would not meet the requirements of our so-called NATO partners, who also need to sell. Unfortunately, often the iron scrap for non-Christian money.

3. It depends, small orders yes, but large ones no. We last saw it when buying helicopters. A fine of 550 million speaks for itself.

Jan Birke (CSSD), Deputy Chairman of the Security Committee

1. Given that the basic priority of the CSSD was not to fulfill two percent of GDP as the Czech Republic's commitment was, but to try to get off the bottom of those coalition allies, ie. get to the Ministry of Defense min. proposal of 1.45% of GDP, which represents roughly less than CZK 91 billion, with the proviso that it would be an increase for virtually every year. For the year 2023, this is an increase of another approximately 5 billion CZK, which is actually a 1/10 increase in GDP, ie. for the year 2023 - it would be 1.46% of GDP, for the year 2024 - 1.47 billion CZK, ... From my point of view, this budget is sufficient, because only to be able to imagine it, if it was 2% of GDP, so it is about 60 billion crowns, and I believe that in the current state of both acquisitions or the law on public procurement, the Ministry of Defense would not be able to spend these funds.

2. They can, but according to the current form of the Public Procurement Act (ZZVZ) it is very difficult for them. This is because today companies (and it is, I would say, a national discipline, a national holiday, a national hobby) that fail and are second or third in the tender, so they take it as a national sport that all proposals immediately go to the Office for the Protection of Competition and get into a situation where, in essence, the Ministry of Defense, as the contracting authority, is unable to compete for anything. This is what I mentioned at the end of my first answer. Even if we "stuffed" 2% of GDP there, until the law on public procurement changes, it will be very difficult in terms of competition for individual companies.

Of course, I prefer Czech companies, I think that Česká zbrojovka is the TOP among weapon manufacturers in the world, it is a global player and it is clearly about helping Czech manufacturers not only for the foreign market, but especially for the domestic one. It is the unification of individual components, whether it is the Army of the Czech Republic or the Police of the Czech Republic, simply all those who use armaments.
So I say yes again, but without a change in the ZZVZ it is not possible at the moment, so its change is necessary.

3. They are not very capable of action, and I am not saying this because I would like to criticize Minister Metnar or anyone else in the MoD. I want to say that under the former Minister Mr. Stropnický, not a single contract has won in 4 years. On behalf of Minister Metnar, we managed to manage min. 4 large tenders, such as helicopters, are now somewhat struggling with the problem of radars. However, I admit that we should focus primarily on what the delivery of these weapons or these things will bring to us for the Ministry of Defense, what it will bring to us for our industry, for our people, employees, factories, just what synergy it will have. effects. That's for A). And for B) in order to be able to support it more, I would focus mainly on two things - the first - economic diplomacy, ie strengthening our trade councils in countries of interest where there is the possibility of arms exports, where there are of course no embargoes on their exports, and, last but not least, unequivocal support for agreements and agreements directly between governments, because this is the platform where things can be influenced for the benefit of the country.

Jan Bartošek (KDU-ČSL), member of the Defense Committee

1. I can say that the budget of the Ministry of Defense for next year is definitely not in order. And if it were not for the efforts of the members of the SPOLU coalition (ODS, KDU-ČSL and TOP09), the army budget would be even smaller and our army would be in bigger problems. Unfortunately, security and defense is not a priority for the current government, and I have been able to see this countless times in committee meetings, where the government has not responded to repeated questions about the modernization process and key military contracts. We can talk about an adequate budget only if we at least approach the fulfillment of our alliance commitments, the modernization of the army and 2% of GDP.

2. First and foremost, Czech companies maintain their quality and prestige. At this point, the ball is on the side of the state and it is necessary to move from speech to action. The state must have an overview of what companies, what processes and capacities it has "at home" and how it wants to use them. The involvement of domestic industry is talked about everywhere, but the whole process is very slow. In the future, it is crucial that our legislation is not an obstacle to the effective use of Czech companies. It is also necessary that the domestic defense industry be involved in the award of contracts, not only at least 40%, but that the acquisition of production licenses is also a condition. What's the point of assembling everything, as in the case of the first Pandurs, but that's the end of it? This is bad practice. We need to further develop these projects and at the same time support the science, research and export of these products.

3. The acquisition process is a long and complex chain and is backed by a large number of people. If you stop this process for any reason, you will lose years of work for the people who did it. It is an unnecessary luxury to waste the work of many experts in this way. An example is the current largest military contracts, which the government does not manage to sign and thus reach a dead end. Perhaps they will be able to sign by the end of the election period. And the government can answer for itself whether it is unable to sign the largest contracts due to insufficient legislation or politicking. For example, when the KSČM took CZK 10 billion from the army budget for this year and then blackmailed the government and thus stopped the key process of army modernization.

Karel Krejza (ODS), member of the Defense Committee

1. The budget is always a matter of compromise and always insufficient. However, even with the budget proposed in this way, strategic acquisitions can be completed. Much more important, however, is the stability of the budget and its outlook for the coming years.

2. In order for Czech companies to be more involved, it is necessary to simplify the acquisition process, namely the internal mechanisms at the MoD, including digitization and information superstructure over various types of software used by the MoD and data from them are rewritten manually and further amend Act 134 on public procurement. contracts, or a special law for trade in military material.

3. The acquisition process needs to be accelerated. Unfortunately, concerns remain about the criminalization of politicians and the negative effects of the competition between those interested in supplies for the Ministry of Defense, often abusing unclear or bad legislation in the field of ZZVZ for defense and security of the Czech Republic, which often ends after many years for example with an action of the Office for the Protection of Competition.

Pavel Růžička (ANO), member of the Defense Committee

1. It will definitely not slow down, the budget is still growing.

2. It is essential that the MoD persists in pressure on foreign suppliers to involve domestic suppliers in supplies, in large shares of the total project price. In these large acquisitions, the transfer of production capacities, the transfer of very advanced know-how, is at stake. And then Czech companies can build on that. In my opinion, the Section of Industrial Cooperation in conjunction with the Section of Armaments and Acquisitions has been doing excellent work for a long time, the fruit of which we are now beginning to reap. But we must be consistent. We need foreign partners to have clear timetables, clear commitments - not political proclamations to help them in the procurement process. And then it is also necessary that we as the Czech Republic maintain and develop the capacity of companies to supply basic needs for crisis situations - ammunition, repair capabilities, equipment, protective equipment against weapons of mass destruction, etc. The preference of domestic companies should be clear in these areas, because what is at home counts - as the covid and the blocking of protective equipment in Germany, for example, showed us. I think that the MoD understands this and is trying to gradually build this self-sufficiency.

3. In Act 134/2016 Coll. on Public Procurement is a major instrument for flexible public procurement. The question is whether the MoD can always use the legal provisions to their extent. I still see a challenge for the Ministry of Defense in this, maybe a little more courage would sometimes be enough. The second thing is that the MoD and especially the Army should work on realistic planning. A substantial part of large acquisition projects have significant delays, which is not only due to the covid, but often also very optimistic prospects. There is also a relatively large transfer of funds within the individual annual budgets, which is also not a good signal for the MoD's business partners.

I would also like to mention one neglected topic. Recently, the army has been coining the slogan #vimecochceme (we know what we want) on social networks. I believe they really know what they want. However, it is not possible for them to state precise technical parameters and specific products in their specifications, which is the basic document for MoD officials for the purchase itself. It is then difficult to compete when the future supplier has actually been selected by the Army in advance. It is common practice in developed countries for the user to specify the required skills and leave it to the acquisition team to compete for the right solution.

 Author: Jan Zilvar