COMMERCIAL ADVOCACY FOR U.S. FIRM - DATACARD - UPDATE

UNCLAS PODGORICA 000072 SIPDIS SENSITIVE SIPDIS USDOC FOR 4332/ITA/MAC/OERRIS/SSAVICH USDOC ALSO FOR ADVOCACY CENTER/PNUGENT BELGRADE, PRAGUE FOR FCS E.O. 12958: N/A TAGS: EINV ECON PGOV MW SUBJECT: COMMERCIAL ADVOCACY FOR U.S. FIRM - DATACARD - UPDATE REF: PODGORICA 26 SENSITIVE BUT UNCLASSIFIED - Business Proprietary Information ¶1. (U) On March 7, the Montenegrin Ministry of Internal Affairs again awarded the contract for the production of passports and identification documents to DataCard Group (USA). The award came after a contentious second round of negotiations. The first award to DataCard in November had been cancelled after an appeal from Axalto (now merged globally into Gemalco),a France-based competitor (Ref). The new award was made upon the recommendation of the Interior Ministry's tender committee, which was reconstituted with all new members after the first round. Of the five committee members, four or five members (accounts vary) recommended DataCard. The offered price was just under Euros 8 million, the previously announced GoM budgetary limit and Euros 1.2 million more than the Axalto bid. ¶2. (SBU) The second award came after public reports of a letter from the German ambassador and French charge on behalf of Axalto to the Minister of the Interior, in which they alleged that DataCard had defaulted on technical grounds in a similar contract in the Czech Republic. The envoys confirmed sending such a letter to the U.S. charge. The German ambassador also mentioned his concern over rumors that DataCard's higher price (about Euros 1.2 million more than Axalto) was to fund kickbacks to Minister's Social Democratic Party (SDP). The Minister and DataCard flatly rejected such allegations in conversation with charge and econoff. DataCard's CEO confirmed to econoff that it had a dispute with the GoC, but it was in respect to billing terms and division of labor under a technical assistance contract, and not Datacard's technical ability to fulfill the contract, Data Card noting that its machinery was currently producing Czech passports. DataCard told post that it plans to take out advertisements in the local press March 16 to respond to Axalto's allegations. ¶3. (U) Axalto on March 14 appealed against the award of the tender to DataCard, claiming DataCard had failed to comply with the terms of the tender, and that DataCard was not technically able to fulfill the contract. Axalto additionally asked that Minister of Interior Kalamperovic and the Interior Ministry tender committee chair be disqualified from acting in respect of the tender decisions, alleging the Minister's non-competence, and bias on behalf of the chair. ¶4. (U) The administrative appeals process has a short timeline. The Ministry should rule on the appeal within a maximum of eight days. If Axalto wishes to appeal the Ministry decision, it has eight days to appeal to the State Procurement Commission, which has fifteen days to decide. No action on the tender can be taken while either of these appeals are pending. Finally, Axalto could file a court suit after exhausting administrative appeals; there is no deadline for action in such cases, and the Ministry could conclude a contract with DataCard while the court case was pending. ¶5. (SBU) Comment: Axalto has benefited from leaks of proprietary information about DataCard's offer, and engaged in an campaign of rumors alleging corrupt activities supposedly to the advantage of DataCard. The tender process, conducted under recently revised regulations, was also handled sloppily by the Ministry of Interior and GoM and allowed room for an aggressive campaign by Axalto to contest every adverse decision, multiple times. The stress is showing on the Interior Minister, who in Parliament on March 13 mused that perhaps the extensive engagement by embassies in Podgorica indicated a desire by an outside government "to control Montenegro's passports." End comment. BARNES