Identifier
Created
Classification
Origin
05SOFIA187
2005-01-31 15:53:00
CONFIDENTIAL
Embassy Sofia
Cable title:  

BULGARIAN DEFENSE MINISTER SIGNS SUSPECT

Tags:  MASS PREL BEXP ETRD KCOR BU NATO 
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C O N F I D E N T I A L SOFIA 000187 

SIPDIS


E.O. 12958: DECL: 01/31/15
TAGS: MASS PREL BEXP ETRD KCOR BU NATO
SUBJECT: BULGARIAN DEFENSE MINISTER SIGNS SUSPECT
EUROCOPTER DEAL DESPITE EMBASSY PROTEST

REF: 04 SOFIA 2295

(U) CLASSIFIED BY AMBASSADOR JAMES PARDEW, FOR REASONS
1.4 (B) AND (D).

C O N F I D E N T I A L SOFIA 000187

SIPDIS


E.O. 12958: DECL: 01/31/15
TAGS: MASS PREL BEXP ETRD KCOR BU NATO
SUBJECT: BULGARIAN DEFENSE MINISTER SIGNS SUSPECT
EUROCOPTER DEAL DESPITE EMBASSY PROTEST

REF: 04 SOFIA 2295

(U) CLASSIFIED BY AMBASSADOR JAMES PARDEW, FOR REASONS
1.4 (B) AND (D).


1. (C) SUMMARY. Despite a letter from the Ambassador
questioning the adequacy of the process used to select
the winning bidder, Defense Minister Svinarov signed
January 28 a deal worth up to USD 400 million for the
purchase of 18 Cougar and Panther helicopters from
EADS. Sikorsky Helicopter was the runner-up in the
competition. We recommend that SecDef Rumsfeld raise
the lack of transparency in defense procurement when
he meets Svinarov in Washington later this week. End
summary.

2.(C) Svinarov and EADS Vice President Luc Berrier
signed the contract despite assurances to us by the
Ministry of Finance that funding had not been
authorized. The Eurocopter deal has been shadowed by
allegations of a predetermined outcome almost since
its inception. The MOD rushed the entire tender
through in just two months (reftel),leaving Sikorsky
to play catch-up in a competition that many believe
was decided in advance. The agreement with EADS
brings to three the number of multi-million dollar
procurement contracts completed in a hurried and non-
transparent manner over the last year, the other two
being for Pilatus aircraft and Daimler-Chrysler
vehicles. The next major procurement decision will
likely be for new transport aircraft. In this tender,
the Spanish firm CASA is competing against a
consortium of Lockheed Martin and the Italian firm
Alenia. Lockheed and Alenia co-produce the C-27. The
MOD is also negotiating to purchase four corvettes for
the Bulgarian navy.


3. (C) Bulgaria's Public Procurement Act allows the
MOD to award no-bid contracts for orders bearing on
national security. The law is an open invitation to
corruption, and is widely cited as a cover for
kickback schemes and sweetheart deals. In cases where
tenders are conducted, such as the helicopter deal
cited above, they are often pro forma exercises
designed only to give the impression of fair

competition.


4. (C) In a letter to Svinarov on December 14 (text
below),the Embassy protested the manner in which the
helicopter tender was handled. We ask SecDef Rumsfeld
to make a similar point regarding transparency in
procurement when he meets Svinarov later this week.
Suggested talking points follow:

-- We are concerned by the lack of transparency in
defense procurement.

-- Your recent decision to purchase the Eurocopter was
the result of a truncated and opaque tender process.

-- Tenders such as this one can only tarnish the
reputation of the Ministry of Defense and lead to
speculation that factors other than price and
capability led to the outcome.

-- It is important that your military procurement
process be subject to internationally recognized
standards of openness and transparency.


5. (U) Following is the text of the Ambassador's
December 14 letter to MOD Svinarov:

Dear Mr. Minister:

The modernization of the Bulgarian Armed Forces is a
vital component of Bulgaria's ability to become a
security contributor within NATO. The purchase of new
equipment for the Bulgarian military plays an important
part in that modernization process.

We are seriously concerned that the present mechanisms
for tenders to re-equip the Bulgarian Armed Forces do not
meet accepted international standards of open and fair
competition. The process to choose major equipment,
including the recent tender for new helicopters, is
unrealistically hasty and lacks the necessary
transparency to verify fairness.

Normally, a procurement process on the scale of the
recent helicopter purchase is an 18-24 month process;


however in this case, the entire process - from tender
offer to conclusion - lasted only two months. Below is a
timeline summary of this hasty tender process:

18 August 2004 - First contact between Sikorsky and
Government of Bulgaria officials
21 September - Letter of Interest received by Sikorsky
27 September - Official Sikorsky Presentation to the
Ministry of Defense
13 October - Document announcing Tender received
2-10 November - Technical Negotiations
11-12 NovemberQ- Price Negotiations
16 November - Committee recommendation to the Minister of
Defense
24 November 2004 - Minister Svinarov publicly announces
the conclusion of the deal

When technical negotiations began on November 2, Sikorsky
was required to translate 712 pages of technical
documentation within a 10 day-period, even though the
other company involved in the bid obviously had advance
notice of this procurement (Their pricing volume was as
large as the entire technical documentation package from
Sikorsky).

During this period, the Ministry of Defense sent no
personnel to inspect or fly Sikorsky's aircraft despite
numerous offers on behalf of the company. We find it
highly unusual that a major defense equipment expenditure
of up to $500 million was based on two-week technical and
price negotiations without even a physical evaluation of
Sikorsky's aircraft.

While we are always happy to see American products win a
tender; however, my interest in this case is less on who
won the tender than on how it was conducted. Such
tenders should be thorough, open, fair and transparent.
There are internationally recognized procedures for major
procurements that ensure transparency and guarantee
Bulgaria receives the best value for its procurement
money. This seems especially important as Bulgaria
begins its military modernization process with limited
resources.

A major procurement handled in such a rushed manner
inevitably leads to questions about the legitimacy of the
process and damages Bulgaria's reputation in the American
business community. We urge you to carefully review your
procurement policies as you move forward with your
modernization plans.

Please accept, Mr. Minister, the assurances of my highest
consideration.

Sincerely,


James W. Pardew
Ambassador