Czech military overpaid for CASA planes, MoD docs show

The Czech state paid twice the price for CASA transport aircraft in 2006 than rival supplier EADS had sought

The cabinet of Mirek Topolánek (left) approved a proposal in April 2009 to trade five Czech L-159 fighters for a CASA transport plane, with another three bought above market price. Ex-Defense Minister Martin Barták’s (center) claim the cost would not exceed Kč 4 billion proved false; his predecessor Vlasta Parkanová (right) admits the CASAs were too costly. foto: © ČESKÁ POZICE, ČTKČeská pozice

The cabinet of Mirek Topolánek (left) approved a proposal in April 2009 to trade five Czech L-159 fighters for a CASA transport plane, with another three bought above market price. Ex-Defense Minister Martin Barták’s (center) claim the cost would not exc

Czechs have come to expect inflated prices in public procurement deals, but even the most cynical observers were taken aback by the Defense Ministry’s purchase of four CASA C-295M transport planes. Hiding behind nondisclosure clauses that prevent scrutiny of the real costs, officials and politicians responsible for such purchase routinely explain that state-of-the-art technology is expensive. However, Czech Position has obtained documents that confirm suspicions of grossly inflated prices on the CASA deal.

Back in 2006, a market study showed the Czech Republic could obtain four CASA transport planes from the EADS consortium for Kč 2.83 billion. Three years later, however, in May 2009, the Defense Ministry concluded a contract to buy three of the same aircraft through the Czech arms dealer Omnipol — under similar delivery conditions and without holding a tender — for Kč 3.577 billion. The final price per unit turned out to be even higher, as the Czech side had in fact traded five L-159 fighters for one of the planes.

The 2006 market study was prepared by the Defense Ministry’s own experts, who approached four global manufacturers of transport aircraft — Alenia Aeronautica (Italy), Antonov (Ukraine), EADS CASA (Spain) and Lockheed Martin (US) — about terms for the delivery of four comparable aircraft. During the negotiations, the Czechs ruled out the AN-74s from Ukraine planes (which weren’t designed according to Western standards or up to snuff as far as NATO regulations and compatibility) and the four-engine C-130s from the US (which were deemed too expensive).

Comparison of bids in 2006

Company/plane

Price per plane

Cost for delivery of four units

Alenia Aeronautica/C-27J

647.5

3,053

Antonov KSAMC/AN-74 TK300

527.8

2,111

EADS CASA/C-295M

638

2,833

Lockheed Martin/C-130J-30

1.747.5

8,575

Note: Prices are stated in the millions of crowns and based on an exchange rate of Kč 25/USD and Kč 29/EUR. The cost included the delivery of four aircraft, logistical support, documentation, the training of personnel (pilots and ground staff) and related services. VAT and margins for intermediaries’ fees not included.

In a hypothetical final contest between the Spanish Casa C-295M and the Italian C-27J Spartans, the final cost for the latter would have been some Kč 220 million higher (see table) and delivery would have come in two years rather than in one year. More important, however, are the technical capabilities of the respective aircraft, in which case the Spartans prevail.

“The C-295M does not meet (albeit only marginally) some importance tactical-technical requirements of the contractor, in particular the requirements for the maximum range, maximum payload and number of patients transported on a stretcher [editor’s note: recent Czech participation in NATO missions have entailed running field hospitals]. The C-27J fully met the contractor’s requirements,” the Defense Ministry said. According to the study, the sole advantage of the CASA aircraft was its longer operating lifespan.

Comparison of tactical-technical parameters

Requirements

C-27J Spartan

CASA C-295M

Take-off distance < 1,200 m

600 m

1,100 m

Landing distance < 900 m

390 m

390 m

Range (depending on payload)

1,850 – 5,500 km

10 000 kg - 1 852 km

6,000 kg – 2,300 km

flight - 5 920 km

9 250 kg - 1 275 km

5,620 kg – 3,900 km

flight- 4,625 km

Weight of payload

min. 10,000 kg

11,500 kg

9,250 kg

Number of transported soldiers

min. 44 soldiers/32 paratroopers/

30 patients lying down

68/46/36

70/45/24

According to the findings of the Czech Supreme Audit Office (NKÚ), which has examined past questionable military purchases, representatives of the Czech Army general staff didn’t want the CASA planes.

“Acquisition of the four tactical CASA aircraft is not the end solution for replenishing the Czech Army transport fleet, in light of operational and operational-tactical conditions, due to the range of the aircraft, and the load capacity does not adequately fully address the Czech Army’s requirements. It would be necessary to acquire another two planes to meet the higher load capacity requirements,” NKÚ experts said citing a review by General Vlastimil Pick from 2008. But despite the technical shortcomings (see table), the CASA purchase went ahead.

Painful price

Just how the total contract price was arrived at remains a mystery. The cabinet of Mirek Topolánek (Civic Democrats, ODS) approved a proposal in April 2009 to trade five Czech L-159 fighters, which the army had been trying to unload for years, for a CASA transport plane; however, the other three were bought well above market price. Whereas the original basic price per unit stood at Kč 638 million, suddenly it shot to nearly Kč 1.2 billion following the partial barter deal.

As it turns out, not included in the price were the service costs for the L-159s. According to military experts and NKÚ inspectors, the service contract is also nonstandard. Basic service is generally included in the contract, including the training of military personnel and arranging the necessary documentation. Furthermore, contract typically count on repair services for the operating life of the machine, which comes to dozens of years. This was not explicitly stipulated in the CASA contract.

“As of April 20, 2009, the government had adopted a resolution on the purchase of CASA planes, wherein it was clear that the investment would be Kč 3.577 billion for four planes, one of which was exchanged for five of our L-159s, and that service support worth Kč 500 million would follow,” former Defense Minister Martin Barták’s (ODS) told Czech public radio’s “Twenty minutes of Radiožurnál” program in January 2010. According to Barták (who could face criminal charges for alleged bribery relating to the Tatra trucks contract), the total investment should not exceed Kč 4 billion before 2013.

However, the NKÚ arrived at very different figures after examining the relevant Defense Ministry documentation. “The cost of acquiring four CASA aircraft is offsetting spending on repairing two-seat L-159 fighters to dual control systems at Kč 221.8 million including VAT ( (Editor’s note: The Spaniards had demanded that the L-159s be two-seat fighters) prices and service support Kč 982.3 million including VAT would by the end of November 2013 come to 4.7885 billion including VAT, but excluding the value of the five exchanged L-159s,” the NKÚ audit said. The exchange value of the five L-159s excluding VAT came to Kč 847.3 million.

Adding the above items, the final price comes to some Kč 5.6 billion for the four transport aircraft; for each unit, the Defense Ministry paid approximately Kč 1.4 billion.

Overpriced — and defective

Czech Position has tried to determine whether representatives of the Defense Ministry or the responsible ministers in the cabinet of then-Prime Minister Mirek Topolánek (ODS) knew about the ministry’s market study and the original proposal from EADS, under which the company offered four CASAs for Kč 2.8 billion. However, not one of the principals signing off on the deal — Topolánek, his then Defense Minister Vlasta Parkanová and Finance Minister Miroslav Kalousek (both then Christian Democrats (KDU-ČSL) and now with TOP 09) and Parkanová’s successor Martin Barták (ODS) — has responded to this publication’s enquiries.

However, Parkanová, now vice chairperson of the lower house of Parliament (Chamber of Deputies), did address the issue in a statement last September: “I do not dispute the claim that we could have bought the aircraft for less if we had had more time. The previous government, however, left us with its ill-considered decision on the purchase of [Steyr’s Pandur] armored personnel carriers, which for years precluded any major purchases of military equipment, a development that threatened to leave the Czech Army without air transport because the existing AN 26s, which the CASAs replaced, had reached the end of their operating life.”

The current leadership at the Defense Ministry turned to the current problems with the aircraft. “I do not wish to evaluate the price that the Czech Republic paid for the four CASA transport planes. With regard to the technical problems that have accompanied their delivery, the current management of the ministry has decided to obtain an independent legal opinion on the possibility of a variable contract extension. We are utilizing the services of a reputable international law firm,” Pavel Bulant, head of the ministry’s Department for Armaments told Czech Position. The Defense Ministry is now waiting to hear whether the manufacturer has resolved the technical defects that Czech pilots encountered and the results of field testing.

EC probe proceeding

The European Court of Justice (ECJ) in Luxembourg is looking into allegations of corruption related to the Czech Army’s purchase of the CASA planes. Earlier this month, however, the investigative weekly Respekt reported that a key investigator in the case, Jiří Mazánek, has gone on sick leave; he is apparently following the example of elite police detective František Zahálka, who was investigating the Pandur case.

The European Commission, meanwhile, has criticized the Czech Army’s purchase of the CASA planes without holding a tender. Officials in Brussels have accused the Czech Republic of having acted in breach of EU rules on public procurement. In October 2010, the ECJ began to look into the controversial contract. If the EU finds Prague guilty, the final cost of the CASA purchase will increase by hundreds of millions of crowns.