Auditors revealed problems in reconstructions of military quarters

PRESS RELEASE on Audit No. 13/30 – July 14, 2014

The Supreme Audit Office (SAO) audited sales of unnecessary properties owned by the Ministry of Defence as well as investment ventures undertaken within the period 2010–2013. In total, 13 investment operations worth CZK 1,200 million were scrutinized as well as nine sales of unused properties worth CZK 566 million. Audited bodies were the Ministry of Defence and the allowance organisation “Armádní Servisní” (Army Services), which manages the Ministry’s housing facilities, rooming houses and other movables and immovable assets.

The audit revealed that the Army Services made errors in the total amount of CZK 45.5 million during investment operations undertaken within the period 2009–2010. Most errors were related to reconstructions of housing facilities in Tábor and Chotusice and to the weatherizing projects in Kozlov. All of the three above mentioned public works included below-the-threshold contracts. During the procedures, the Army Services would notify five competitors and in the end, two companies were selected, which had received the trade licences shortly before the selection procedures. When fulfilling the contracts, the selected companies hired sub-contractors to perform the ordered works.

For example, a contract aimed at reconstruction of the housing facility in Chotusice was concluded in November 2009. According to the contract, the works should have been finished by July 2010 and would have cost over CZK 18 million. In July 2010, the new construction supervisor revealed that CZK 3 million had been wrongfully paid for unfinished works. The amount was not returned, nor the supplier continued with the works. By then, the supplier had been paid CZK 17.4 million in total. The Army Services withdrew from the contract and called for a new competition to finish the reconstruction. But in the end, the reconstruction remains unfinished and the building is not used by the military forces. In July 2010, the Ministry of Defence ordered the Army Services to place all public contracts through the Ministry’s acquisition centre.

Auditors also scrutinized eight investment operations under the Ministry of Defence’s supervision. Pre-estimated values of the contracts were exceeded with five projects – by as much as CZK 19.4 million in one case. Four operations took longer than presupposed – mainly because of additional works, which had been caused by insufficient preparation of the projects. Auditors revealed that in 2010, the Ministry awarded public contracts after limited procedure with only five competitors. If there were more competitors, the Ministry selected five of them by drawing lots, which limited the competition and made it impossible to get better prices.

The Ministry needs approximately CZK 3,000 million to implement all planned investment operations, particularly including construction works. To get the needed amounts, the Ministry intended to sell unused properties. However, auditors revealed that the buyers lacked interest in the offered properties. For example, among the properties for sale were housing residences, airfields, military barracks, a recreational cabin, and a villa. The estimated value of the properties (excluding the housing residences) was CZK 390 million, but the Ministry only succeeded to obtain CZK 218 million through several-round selection processes (i. e. some 55 % of the properties’ total estimated value).

Communication Department
Supreme Audit Office

print the page