SAO audited acquisitions of the Armed Forces’ equipment

Press Release – May 24, 2011

From May 2010 to February 2011, auditors from the Supreme Audit Office were performing audit operation No. 10/10 – Funds earmarked for acquisition of selected equipment of the Armed Forces of the Czech Republic. The audit aimed at the acquisitions and the conformity with the existing policy of the Army, auditors also scrutinized whether the equipment met the technical criteria and how the acquired equipment was utilized within the audited period 2005–2009. In selected six business operations, auditors scrutinized the expenditures that amounted to CZK 18 milliard.

The Ministry of Defence lacks conceptual documents, which would outline the desired Army development. The conceptions approved in 2002 and 2003 defined the arming programmes in general without details concerning the quantity of needed equipment, financial resources, or acquirement terms. In some cases, it was not possible to determine, which technology was purchased. Such conceptions make it possible for the Ministry to acquire military technology that is not actually needed.

For example, when purchasing medium-sized all-terrain vehicles the Ministry defined the „well-founded number” of needed vehicles as 2 485 and later required only 976 vehicles. The given reason to purchase of the ARTHUR radar was “to ensure the adequate participation in operations outside the NATO member countries”, but since 2004, the radars have not been used in foreign missions.

Among the found shortcomings were following cases:

  • The Ministry proclaimed the need to purchasing large aircrafts for transporting passengers and cargo but the ordered aircrafts A-319CJ and CASA C-295M do not meet such requirements. The modernization terms of the transport aircrafts were not kept as the modernization took place 2–5 years earlier. The Ministry stated that L-159 aircrafts were useless and planned to exchange twelve L-159 for four CASA C-295M aircrafts. During the negotiations, the Ministry agreed to exchange five L-159 (including two L-159 that had been reconstructed into two-seat versions) for one CASA. The purchase price of three other CASA aircrafts reached over CZK 3.5 milliard. The Ministry realized the exchange in spite Chief of the General Staff had warned about the fact that those aircrafts lack the demanded flight range as well as the required transport capacity. The total cost of the four aircraft including the services amounted to CZK 4.8 milliard. (The Ministry did not include the cost of five L-159 acquired in 2003 into the total cost calculation as the total cost calculation only included the rebuilding of two aircrafts.) In addition, when realizing the exchange the Ministry got around the pre-set financial limit of programme No. 107 310. Although the documentation of the programme as well as the contractor’s offer included the service costs, some services (costing nearly CZK 1 milliard) were covered from the non-investment funds.
  • The Ministry used the exception given by Public Procurement Act and described some equipment acquisition as purchases of military technology so that it did not have to call for the competition proceedings.
  • The Ministry joined the Ministry of Defence of the Slovak Republic when purchasing the IVECO light armoured vehicles thus circumvent the EU outsourcing rules. The EU Commission has questioned such activity and is investigating the lawfulness of the action.

The Ministry integrated the equipment acquisitions into existing programmes, which were already in the implementation phases. Thus the objectives, terms, and financial parameters of the programmes were radically altered and in the end, documentations of the programmes significantly differed from those originally approved by the Ministry of Finance.

The audit operation was included into 2010 Audit Plan of the SAO under No. 10/10. Rudolf Němeček, Member of the SAO Board, controlled the operation and prepared the audit conclusion as well.

Communication Department
Supreme Audit Office

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