Graft watchdog calls for shelving of Czech eco-tender

Corruption watchdog Transparency International (TI) is calling for a massive Czech public pollution clean-up tender to be halted

The site of a future forest — in a couple generations, maybe. Under Geosan Group, the Ostramo lagoon in Northern Moravia remains a toxic mess. foto: © ČTKČeská pozice

The site of a future forest — in a couple generations, maybe. Under Geosan Group, the Ostramo lagoon in Northern Moravia remains a toxic mess.

The Czech branch of global corruption watchdog Transparency International  (TI) has called for the government to shelve a massive pollution clean-up tender in its tracks because of the high graft risks involved.

“This is clearly the biggest single corruption deal in the history of this country with an enormous risk of billions or even tens of billions of crowns flowing out of the state budget,” declared TI’s Czech director, David Ondráčka.

Bids to clean up all the Czech Republic’s major pollution, originally expected to total Kč 120 billion but now put at around half that amount according to Czech media reports, were filed by three companies by the Monday afternoon deadline. The predicted threesome for one of the biggest Czech government tenders ever staged are Marius Pedersen Engineering, Environmental Services, and Geosan Group.

Transparency International wants the government to open the offers but declare no winner.

TI wants the government to open the offers but declare no winner. Such a step would, says TI’s Jan Spáčil, prevent the bidding companies from launching arbitration proceedings against the Czech state for loss of earnings.

The anti-corruption group says the long and fiercely contested eco-tender risks being decided according to pressure brought by powerful lobby groups on government coalition parties rather than the merits of the offers themselves.

“This is clearly a political tender in which the decisive factor will be the political influence within the government of the prime minister and finance minister, and, in all practice, that is more important today than the details of the tender itself,” TI said in a statement accompanying a news conference held on Tuesday. “There is a real risk of a cartel deal between the bidders,” Ondráčka warned. 

The winning bidder would be given what amounted to sole supervision of how the contract is fulfilled with little room for the State Environmental Inspectorate (ČIŽP) to oversee what was happening, he added. “There is a real risk that the tender will not happen in a quality way,” Ondráčka said.

He recalled that the pollution tender had originally been sold as an opportunity to open the doors for some of the biggest and most experienced European companies with long-experience of such clean-ups to tackle the Czech Republic’s serious pollution heritage in one sweep. That ambition had not been realized, the TI director warned.

‘What we have is three local companies, most of whom do not have much experience of this kind of work.’

“What we have is three local companies, most of which do not have much experience with this kind of work,” Ondráčka said.  The whole way the eco-tender has been structured means that there is a high risk that the work will not be carried out properly and have to be halted, sparking another arbitration between the Czech state and contractor, he warned.

Kalousek’s baby

The biggest champion of the eco-tender had been Czech Finance Minister and deputy leader of the TOP 09 party, Miroslav Kalousek, whose ministry has piloted the problematic tender through the storms that have confronted it over the last years. Kalousek was already pushing for the massive tender to proceed under the previous center-right government headed by former Civic Democrats (ODS) prime minister Mirek Topolánek.

But Topolánek’s successor at the head of the ODS and current Prime Minister Petr Nečas is reported to have deep-seated reservations about the tender. The Public Affairs (VV) party, which traditionally lines up against TOP 09 in any coalition conflict, is reported by Czech media to be ready to back Nečas if he chooses to fight a battle with Kalousek — regarded as the second-most powerful man in the government — over the eco-tender. Czech newspapers suggested Tuesday that Nečas will plumb for TI’s formula of opening the bids but not declaring a tender winner.

Two of the companies bidding for the tender are offshoots of bigger companies and created with the express goal of landing the massive contract. One consortium is headed by Marius Pedersen Engineering, a unit of what was originally a Danish company now part of the France-based international utilities company Veolia Environment. Environmental Services, formerly Karob, was tailor-made for the tender in 2009 with its sole shareholder the influential Czech-Slovak company J&T Finance Group. 

Geosan Group has a bit more history behind it. Its sole visible and active shareholder is Luděk Kostka, with 35.4 percent of shares, who also appears to act for the biggest shareholder, Cyprus-based Dupless Investment Limited with a 49.9 percent stake. An unnamed remaining shareholder in London appears to be a sleeping and invisible partner.

Cooperation among competitors

While some of the three bidders lack much of a past, there are traces of past cooperation between them that raise worries that the “competitive” eco-tender might end up as a share-out of work and profits between them.

Annual reports from recent years reveal cooperation between Geosan on one hand and Marius Pedersen and one of its Czech sub-contractors, Česká inženýrská on the other. For example, in 2005 Geosan bought part of a contract to clean up some of the pollution legacy at Czech engineering giant Škoda Plzeň from Marius Pedersen. Česká inženýrská was brought on board as project leader and technical advisor when the work was being done. Geosan and Česká inženýrská cooperated on a series of building contracts in the following years.

The watchdog would like to see the massive clean-up broken down into smaller, local contracts which could be shared out more widely and supervised easier.

The Czech spending watchdog, the Supreme Audit Office (NKÚ), later found that the Škoda Plzeň clean-up originally estimated at Kč 780 million had cost Kč 7.0 billion by 2006.

Geosan, Marius Pedersen, and Česká inženýrská also cooperated over construction of the Kolín-Ovčáry industrial zone and TPCA car plant on the outskirts of the central Czech town.

TI’s Ondráčka says his organization has no proof of corruption or foul play by the three final tender bidders, but he warns that that the history of the contract — and the way its structured — means there is a high risk of it.

The anti-corruption watchdog would like to see the massive clean-up broken down into smaller, local contracts that could be shared out more widely and supervised easier. Work would be handed out after a real investigation of the pollution risks and work required.  

— Czech Position’s Čestmír Klos contributed to this article.