EMBASSY PRAGUE CONCERNS ABOUT PROPOSED CZECH TEXT

S E C R E T PRAGUE 000118

SIPDIS

MDA FOR GC - RON NEUBAUER;
DEFENSE FOR OSD/USD/OGC - S. RUSSELL;
DEFENSE FOR OSD/USD/ATL - E. CLARK
STATE FOR CE - J. BERGEMANN
STATE FOR ISN/MDSP - W. SHOBERT

E.O. 12958: DECL: 02/24/2020
TAGS: MARR PGOV PREL ECON TSPL EZ
SUBJECT: EMBASSY PRAGUE CONCERNS ABOUT PROPOSED CZECH TEXT
TO RDT&E AGREEMENT

REF: A. PRAGUE 91

B. NEUBAUER-ARKY E-MAIL 19 NOVEMBER 2009

Classified By: Charge d'Affaires Mary Thompson-Jones, reason 1.4 (b) an
d (d).


1. (C) Summary: On February 23, the Czech MoD proposed the
following text to the Research, Development, Testing and
Evaluation (RDT&E) Agreement: "If either Party determines
that Contracting is necessary to fulfill that Party's
obligations under Article III (Scope of Work) of this
Agreement, that Party shall contract in accordance with its
respective national laws, regulations and procedures."
Embassy Prague is concerned that the proposed text tacitly
accepts the Czech "direct call" procurement procedure, which
the USG considers non-transparent. Agreeing to this text
could hinder future transparency efforts and affect future
negotiations with the Czech Republic. End Summary.


2. (S/NF) Since Czech law allows for "direct call," this
proposed language still allows the Czech government to
contract by direct call under this Agreement, while the USG
would contract in accordance with USG sole source
regulations. In addition, Czechs may regard U.S. acceptance
of this language as tacit approval of direct call. Across
the USG, there is unanimous agreement that the Czech direct
call procedure is non-transparent and unfairly disadvantages
foreign companies. In discussions about this Agreement, the
USG has consistently signaled concerns about direct call to
the Czech government. We know that parts of the Czech
government itself have concerns about direct call (ref A).
This text does not help USG efforts to promote transparency.


3. (C) The proposed text also tacitly presents U.S. and
Czech procedures as equivalent. This is at a variance with
internal DoD assessments (ref B) that have concluded that the
Czech direct call procedure is not equivalent to DoD sole
source procedure. While DoD procedures contain tight
restrictions on sole sourcing (allowed in narrowly defined
specific circumstances and only with written justification
and analysis supporting a sole source decision),Czech direct
call contains none of these restrictions. It is our
understanding that this procedure allows/constitutes
unfettered sole source contracting.


4. (C) Agreeing to this text could hinder future
transparency efforts. In the near future, the USG will
negotiate a Reciprocal Defense Procurement (RDP) agreement
with the Czech Republic. In negotiating the RDP and other
future agreements, the Czech government could point to our
acceptance of the RDT&E Agreement language as precedent. As
well, within the Czech government, apparent USG acceptance of
the direct call procedure in this case would undermine those
who share our view and weaken any nascent initiative to
reform the process.


5. (C) DoD legal experts have been negotiating the RDT&E
Agreement for months, and we leave it to them to consider
what alternative language might be appropriate. Our concern
is that the present MoD proposal undercuts USG efforts to
promote transparency in the Czech Republic.
Thompson-Jones