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### Viewing cable 05SOFIA187, BULGARIAN DEFENSE MINISTER SIGNS SUSPECT

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05SOFIA187 | 2005-01-31 15:53 | 2011-05-05 19:00 | CONFIDENTIAL | Embassy Sofia

Appears in these articles:
http://www.bivol.bg/wlarmy.html
http://balkans.blog.lemonde.fr/2011/05/05/et-la-bulgarie-renonca-aux-corvettes-francaises/
http://www.capital.bg/politika_i_ikonomika/bulgaria/2011/05/05/1085393_kak_se_pileiat_pari_v_otbranata/

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    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

`