Corruption suspicions over Pandur contract puts spotlight on army tenders

Suspicion of corruption surrounding another large contract for the Czech army has focused attention on how the multi-billion deals are decided. Some politicians are calling for far reaching structural reforms against the background of European moves to foster a more transparent and competitive market.

The scandal over suspected corruption involving the 14.4 billion crown contract to buy armoured personnel carriers for the Czech army is just the latest of a series of suspect military deals.

This time round, current Minister of Defence Martin Barták, former prime minister and Civic Democrat leader Mirek Topolánek and former defence minister Vlasta Parkanová have been caught up in the crossfire of accusations. Newspaper reports suggest two to three percent of the tender total was earmarked as kickbacks for the main political parties. They deny the charge but Czech and Austrian police are investigating.

Jiří Komínek is a Czech-based journalist working for the specialist international defence weekly, Jane’s. He says the scandal over the Pandur carriers from Austrian company Steyer is no surprise.

“It is basically par for the course. It is just like any major procurement done by the Ministry of Defence. The fact that they have a tender is just a cosmetic device to keep the media and public at bay. It just provides the illusion that there is a fair competition process going on.”

Pandur, photo: CTK

Mr. Komínek says one of the main Czech problems is a law which funnels major contracts through a select handful of local companies who act as middlemen between politicians and political parties and foreign arms companies.

“These different lobbyists, such as Omnipol, managed to put through a law back in the mid-1990’s, which is called law number 38 which governs how the Ministry of Defence is required to procure defence equipment. Honestly, the Czech defence industry is in such a bad way that it is no longer in a position to do anything that is on a par with western products or western systems. So what they did, they became very clever, and Omnipol through its connections with Miroslav Kalousek ― who at the time in the mid-1990’s was first deputy defence minister ― they managed to legislate this law 38 which dictates that the Ministry of Defence must buy defence equipment from outside the country via Czech middle men. These companies are Omnipol, MPI or PAMCO, which in this case handled the Steyer deal.”

Civic Democrat leader Mirek Topolánek on Sunday said the Ministry of Defence was a state within a state when it came to contracts and called for systematic reform.

Mirek Topolánek

Such calls are being made at a time when Europe-wide efforts are being stepped up to make military tenders more transparent and competitive. Moves so far, mostly coordinated by the European Defence Agency, include advertising tenders online and agreeing a code of conduct for the so-called offset deals which accompany many tenders. It says the situation is improving.

The Czech Republic has signed up to both these initiatives but crucially, defence contracts are still not subject to normal European Union competition or procurement rules.