It’s encouraging to see European nations stepping as much as arm Ukraine, however their flagship effort at a coordinated technique is faltering badly. In accordance with a report launched Monday by the Czech Senate, the Czech Munitions Initiative—a key element of this technique—is falling in need of its objectives.
The Czech Munitions Initiative was conceived to leverage the Czech Republic’s historic strengths within the arms trade, pooling allied assets to obtain munitions for Ukraine. The initiative had two major targets: first, to buy arms from jurisdictions that will not promote on to Ukraine, and, second, to create a single purchaser, avoiding twenty allied nations competing for a similar restricted provides. Germany, Denmark, Norway, and several other different nations supported the trouble, contributing between €1.4 billion and €1.6 billion. Nevertheless, France, Britain, and Italy refused to take part, a choice that now seems prudent in mild of this week’s report.
Czech opposition chief Andrej Babiš was among the many first to criticize the initiative, accusing arms firms of worth gouging and the federal government of favoritism or corruption in awarding contracts. Babiš broke a political taboo by alleging {that a} contractor beforehand using the initiative’s coordinator, Tomáš Pojar, was making exorbitant earnings of €1,000 per shell. His criticism was met with private assaults accusations he was a Russia sympathizer, overshadowing the substance of his claims.
A living proof is the procurement of 180,000 models of 155mm M107 artillery shells, funded by Germany. These shells have been offered to Ukraine at €3,200 per unit, regardless of another Turkish provider providing them for €2,500 per unit. This transaction alone price Ukraine over $110 million—cash that might have bought as much as a further 40,000 shells.
This overpricing just isn’t an remoted incident. The Czech authorities has repeatedly bypassed aggressive bidding processes, as a substitute counting on a non-transparent system with a slim choice of suppliers. This observe not solely inflates prices but additionally stifles competitors and innovation, depriving Ukraine’s army of doubtless higher and less expensive options.
Throughout my army profession I managed U.S. authorities Overseas Army Gross sales (FMS) circumstances, and later was on the skilled employees of the Fee on Wartime Contracting in Iraq and Afghanistan. Drawing on that have, I consider the Senator’s estimates within the report have been overly conservative relating to components like logistics and spare elements pricing. Any purchaser buying 180,000 models ought to have important leverage to demand a lower cost. In my opinion, Ukraine was shortchanged by roughly 250,000 shells in whole, together with 75,000 within the Turkish instance. Czech claims that Turkish provider Makine ve Kimya Endüstrisi (MKE) offers subpar high quality are unfounded. MKE is globally acknowledged for producing high-quality munitions and elements.
However the failings of the Czech Munitions Initiative lengthen past overpriced contracts. All the course of is shrouded in secrecy, with important choices made with out correct oversight or accountability. The Czech interdepartmental oversight fee, which ought to set the usual for transparency, has solely met as soon as since its inception. This evident lack of scrutiny permits inefficiencies and potential corruption to thrive, undermining the initiative’s credibility and eroding belief amongst worldwide companions. The Czech Republic’s refusal to undertake a clear strategy—like that adopted by the UK—raises critical considerations concerning the competence and intentions of these managing the initiative.
Furthermore, the Czech authorities’s mismanagement has tangible, adverse penalties for Ukraine’s warfare effort. The preliminary promise to ship 800,000 artillery shells to Ukraine was later revised right down to 500,000, a discount instantly attributable to inflated procurement prices. This shortfall has had extreme penalties, costing lives and territory for Ukraine. The discrepancy between the promised and delivered munitions not solely weakens Ukraine’s defensive capabilities but additionally damages the Czech Republic’s popularity as a dependable ally.
The Senate report means that this systemic failure might transcend mere misjudgment, indicating a possible disregard for the efficient use of public funds. The Czech authorities’s failure to conduct correct market analysis or open bidding processes is a transparent violation of its obligation to guard public assets from fraud and waste. This strategy has positioned an pointless monetary burden on worldwide companions and shortchanged Ukraine in its protection in opposition to Russian aggression.
The report criticizes Germany for failing to correctly consider the deal offered by the Czechs. Whereas it stops in need of alleging corruption, the likelihood just isn’t fully dominated out. Whether or not that is one other Volkswagen scandal or a case of straightforward negligence stays to be seen. Germany has a historical past of overseas coverage missteps that favor Russia, including one other layer of concern.
Moreover, the Senator’s report misses a important level. The unique justification for the Munitions Initiative was to buy from jurisdictions that don’t promote to Ukraine instantly. However Turkey has been promoting to Ukraine each earlier than and after the beginning of the warfare, making the bidding in such a jurisdiction counterproductive at greatest.
The implications of those findings are profound. As a substitute of being a mannequin of worldwide cooperation and assist, the Czech Munitions Initiative stands as a cautionary story of what occurs when there may be neither transparency nor accountability. The Czech authorities’s mismanagement has not solely squandered invaluable assets but additionally weakened the very trigger it sought to bolster—Ukraine’s protection in opposition to Russian aggression.
To revive belief and effectiveness in its Munitions Initiative, the Czech authorities should undertake rapid reforms. These ought to embody renegotiating present contracts to mirror honest market costs, implementing rigorous oversight mechanisms, and opening the procurement course of to competitors. With out these modifications, the Czech Republic dangers additional monetary waste, potential corruption, and the erosion of its credibility as a dedicated companion in Ukraine’s protection. As a substitute, the ruling coalition has chosen to silence the Senator by blocking oversight hearings — an motion that reeks of corruption and the abuse of political energy.
James Durso (@james_durso) is an everyday commentator on overseas coverage and nationwide safety issues. Mr. Durso served within the U.S. Navy for 20 years and has labored in Kuwait, Saudi Arabia, and Iraq.
What follows is an English translation of the Czech report talked about in para one.
Standing Fee of the Senate for Oversight of Public Funds
Reporter: Ing. Lukáš Wagenknecht
Fee Assembly: August 13, 2024
Report
Czech Ammunition initiative
Introduction
In accordance with info accessible on the web site of the Ministry of Protection of the Czech Republic, the Czech Republic, by way of the Ministry of Protection (hereinafter additionally known as “MoD”), the Intergovernmental Protection Cooperation Company (hereinafter additionally known as “AMOS”), and different establishments and state representatives, assists Ukraine in securing weapons and ammunition.
One of many pillars of this help is the Czech Ammunition Initiative, aimed toward securing primarily 155 mm M107 artillery ammunition, presumably 152 mm Soviet caliber, and different varieties of ammunition. As a part of this initiative, a challenge for the supply of ammunition financed by Germany was applied. It contains the supply of 180,000 rounds of ammunition, which is predicted to be delivered to Ukraine by the top of this 12 months. The supply consists of 100,000 rounds of stockpiled ammunition and 80,000 rounds of latest ammunition. In accordance with the director of AMOS, the contract with Germany was signed in a short time, and the pace of the settlement corresponded to the urgency that Ukraine assigns to the supply of artillery ammunition. The primary deliveries of ammunition beneath the Czech Ammunition Initiative, within the order of tens of hundreds of rounds, have been delivered to Ukraine in June.
As a part of the assist for the supply of weapons and ammunition from the Czech Republic, a number of different processes (or procedures) are used. The reporter will additional give attention to the processes beneath the so-called Czech Ammunition Initiative, beneath which the supply of ammunition talked about within the earlier paragraph has been repeatedly realized and which have been used since 2024. The verification doesn’t embody totally different procurement procedures for arms deliveries which were working in parallel since 2022/2023.
In accordance with info supplied by the MoD on its web site on June 27, 2024, “beneath the Czech Ammunition Initiative, the acquisition of roughly half 1,000,000 rounds of artillery ammunition for Ukraine is now lined, to be delivered by the top of 2024. Thus far, 18 international locations have joined the initiative. With every state, the Ministry of Protection indicators a Memorandum of Understanding, the latest of which was concluded with Iceland. The same doc is already in place with Lithuania, Denmark, the Netherlands, Canada, Portugal, Belgium, Latvia, Norway, Luxembourg, and Slovenia.”
On the proposal of the Minister of Protection, the federal government authorised the Czech Republic’s involvement within the initiative with an quantity of CZK 865,775,000. The allotted funds might be spent on the acquisition of ammunition from a home provider, particularly the Czech firm STV GROUP.
In accordance with info offered by the MoD on April 22, 2024: “The ambition is to ship 800,000 rounds by the top of 2024.”
The entire publicly communicated quantity at present supplied/agreed upon by donors (overseas international locations and the Czech Republic) is EUR 1.6 billion (roughly CZK 40.37 billion).
Abstract of Key Findings
The facilitation of ammunition by the Czech Republic (AMOS and MoD) beneath the Czech Ammunition Initiative, with none type of competitors, resulted in an unjustified improve within the worth of the supply of 100,000 rounds of ammunition by CZK 1.48 billion, representing a proportion improve of 22.4%.
For the second a part of the brand new ammunition supply of 80,000 rounds, there’s a danger of attainable overpricing within the quantity of CZK 504.6 million.
Contemplating the monetary quantity of particular person findings, the conclusion is obvious that there’s a systemic failure of the Czech Ammunition Initiative by way of the economic system and effectivity of ammunition deliveries to Ukraine.
For 20% of the funds spent by way of the Czech Ammunition Initiative, the value is considerably overvalued in comparison with the value in place and time customary. The overvaluation itself accounts for 3.66% of the overall quantity of the Czech Ammunition Initiative. The constructive facet is that the wastefully used funds aren’t financed by Czech taxpayers.
The management mechanisms in place are insufficient. The primary elementary factor is that the Czech Republic has no decision-making authority within the course of. It’s merely an middleman that transparently presents the supply to donor international locations. The state that decides to assist Ukraine then determines what corresponds to its imaginative and prescient and the way the ammunition might be bought. They will select from a number of choices.
In different phrases, the Federal Republic of Germany knowingly and intentionally funds the provision of Turkish ammunition to Ukraine based mostly on presents intermediated by the Czech Republic, which is a management mechanism for verifying the effectiveness and economic system of procurement beneath the Czech Ammunition Initiative. Such a management mechanism implies three attainable conclusions within the case of an uneconomical buy of ammunition.
The primary conclusion is the incompetence of the authorities of the Federal Republic of Germany in assessing the value of ammunition deliveries to Ukraine. The second conclusion is reliance on the economic system of the presents offered to the donor by the Czech Republic, particularly AMOS and the MoD. The third and, based on the reporter, least possible conclusion is the deliberate buy of overpriced ammunition by the Federal Republic of Germany, or an organization managed by it, which might be unlawful in each the Czech Republic and Germany.
Transparency assurance ought to be supplied by an interministerial oversight fee based on info from the MoD. This fee has to this point met as soon as at its inaugural assembly. The subsequent assembly is scheduled for September. It’s not anticipated that the topic of this fee or working group might be verifying the economic system of particular person ammunition initiative deliveries.
The Ammunition Initiative is essential and important for army success in Ukraine, primarily as a result of artillery fireplace prevents the necessity for shut fight and may thus scale back casualties in Ukraine.
As a result of uneconomical procurement course of, the attainable quantity of ammunition that the Ukrainian military might use in fight has been lowered by at the very least 22,371 rounds.
Advantages and Potential Dangers of the Czech Ammunition Initiative
The reporter appreciates the long-term effort and contribution of the Czech administration in elevating consciousness of the necessity and significance of helping Ukraine. The Czech authorities has additionally completed important work in securing companions and monetary assets not solely from the Czech price range but additionally from the budgets of worldwide allies.
One of many important advantages of the Czech Ammunition Initiative ought to be decreasing competitors amongst donor states, which, when buying ammunition independently with out mutual coordination, creates aggressive strain to extend the value of overseas deliveries.
The Ammunition Initiative is essential and important for army success in Ukraine, primarily as a result of artillery fireplace prevents the necessity for shut fight and may thus scale back casualties in Ukraine.
Public belief, nonetheless, is conditioned on adequate assurance of the transparency of the processes related to the ammunition deliveries funded by overseas companions and the Czech price range.
Additionally it is essential to offer satisfactory assurance of the environment friendly and financial use of public funds by all donors.
The chance of potential inefficient use of public funds by overseas donors and the Czech state price range was assessed by the reporter as important.
Causes and Particular Targets for a Detailed Verification of the Procurement Course of inside the Czech Ammunition Initiative
The explanation for the verification was info from a Czech administration worker who knowledgeable the reporter of a process the place a attainable supply of ammunition for Ukraine was rejected by AMOS representatives, and the worker was referred to one of many suppliers of the Czech Ammunition Initiative. Given the sensitivity of the data and previous experiences with the process of Czech authorities in defending whistleblowers, the reporter won’t disclose the title of the whistleblower.
Another excuse for verifying potential inefficiencies was inquiries from worldwide media, that are regularly addressing the Czech Ammunition Initiative.
In the course of the verification course of, the reporter repeatedly encountered a query/argument from Czech administration representatives relating to the explanation for investigating the procurement processes of ammunition for Ukraine. That is financed by overseas donors (within the case of the acquisition of 180,000 rounds of ammunition by Germany), and due to this fact doesn’t contain Czech public funds.
This query is irrelevant as a result of, if the processes of the Czech Ammunition Initiative result in inefficient and uneconomic dealing with of public funds by overseas donors, it nonetheless constitutes a breach of the precept of correct monetary administration, the place it’s unreasonable to pay Czech officers to hold out processes as a part of their job duties that result in potential important monetary losses for overseas companions and in the end for Ukraine. The reporter is unaware of any authorized authorization that will impose inefficient and uneconomical mediation of purchases on staff of the Czech state.
Furthermore, related procurement processes beneath the Czech Ammunition Initiative are utilized within the case of funds supplied from the Czech state price range.
The reporter has set the principle objectives, based mostly on preliminary consultations, accessible documentation, and publicly accessible sources:
Aim 1: Verification of the economic system and effectivity of the partial procurement beneath the Czech Ammunition Initiative of 180,000 rounds of 155 M107 ammunition financed by Germany.
Aim 2: Evaluation of the transparency, economic system, and effectivity of the provider choice course of and its affect on the procurement system by way of the Czech Ammunition Initiative.
Course of Verification of Info by the Reporter
Given the dearth of readability and adequacy of publicly accessible info relating to the Czech Ammunition Initiative, the reporter performed a number of structured interviews with representatives of:
- AMOS
- MoD
- Consultants with particular expertise in ammunition deliveries
- Parliamentary Committee for Nationwide Safety, Protection, and Intelligence of the Ukrainian Folks’s Republic (because of the present scenario in Ukraine, the assembly was held on-line)
- Worldwide media
- Different entities
The reporter want to specific gratitude and appreciation for the cooperation and proactive strategy of all of the above through the info verification course of.
Description of the Verified Course of
Implementation inside the Czech Ammunition Initiative
The Czech Ammunition Initiative is ready up in such a approach that an unspecified variety of suppliers (a small variety of suppliers), chosen with out a tender, submit their ammunition supply presents to donors anonymously by way of AMOS. The donors then determine, based mostly on the data offered relating to the kind of ammunition, amount, and worth, which supply to pick out. They’re then knowledgeable of the supply particulars and independently conclude contracts with the provider. The standards for choosing suppliers embody their expertise with earlier deliveries.
The choice of suppliers and different unspecified info relating to the Czech Ammunition Initiative are categorized as confidential. Moreover, the process for public procurement beneath Act No. 134/2016 Coll., on Public Procurement, just isn’t utilized, or an unspecified exemption is utilized.
Nevertheless, many of the key details about:
- the quantitative quantity of deliveries (800,000 rounds or 500,000 rounds of ammunition),
- the overall quantity of funds thought of for the acquisition of ammunition (EUR 1.6 billion),
- the anticipated time of supply of the ammunition by the top of this 12 months,
is repeatedly offered by the MoD, authorities representatives, the President of the Republic, and different entities.
In accordance with info from AMOS and the MoD, the economic system of the supply itself is fully inside the competence of the donor, who can confirm the supply worth themselves. This was additionally the case with the ammunition supply by the donor (Germany). The donor has adequate expertise and knowledge relating to the value, guaranteeing effectivity and economic system. If the donor was conscious of any inefficiency within the supply, they’d not have supported it. Subsequently, AMOS and the MoD don’t confirm the value, nor have they got the instruments to take action.
Involvement of Different Potential Suppliers within the Czech Ammunition Initiative
Most Czech and overseas suppliers would not have the chance to take part instantly in submitting their ammunition supply presents as a part of the Czech Ammunition Initiative. In the event that they want to submit a proposal to AMOS, AMOS evaluations potential suppliers and directs them to one of many few chosen suppliers concerned within the Czech Ammunition Initiative. The supply can also be forwarded to the Ukrainian facet for verification. In observe, such a process has not but been utilized. Details about the potential for submitting presents by way of this channel just isn’t publicly accessible.
The exclusion of primarily small and medium-sized enterprises contradicts the rules of business coverage on the EU stage, which generally focuses on selling competitors and innovation by together with a various vary of suppliers. By sidelining small and medium-sized enterprises within the provider choice course of, their potential contributions are undermined, and innovation and competitiveness inside the protection sector are stifled.
Small and medium-sized enterprises usually supply distinctive options and efficiencies that bigger firms would possibly overlook, and their exclusion from the method can result in a lack of invaluable experience and innovation. Moreover, selling a aggressive surroundings typically lowers prices and will increase high quality by way of market dynamics.
Comparable initiatives overseas
The Czech Republic just isn’t the one nation that has initiated actions in ammunition provide to assist Ukraine. For instance, the UK and Estonia have undertaken related initiatives.
The UK’s Worldwide Fund for Ukraine is a financing mechanism that makes use of monetary contributions from worldwide companions to shortly procure precedence army gear for Ukraine. The fund is managed by the UK Ministry of Protection on behalf of an govt panel composed of the UK, Norway, the Netherlands, Denmark, Sweden, and Lithuania. These companions, together with Iceland, Australia, and New Zealand, have to this point contributed over GBP 925 million to the fund.
The strategy of the British administration differs from that of the Czech Republic by way of public info and the provider choice course of for arms deliveries to Ukraine. Info for the general public and potential suppliers is publicly accessible on the web site of the UK Ministry of Protection. After the completion of every procurement course of, info on the amount of provides awarded is subsequently revealed.
Detailed details about the fund and the procurement course of will be discovered on the UK Ministry of Protection’s web site.
The fund makes use of speedy procurement processes to offer important capabilities that align with Ukraine’s precedence army gear necessities.
Thus far, the initiative has introduced eight packages to offer Ukraine with important capabilities. These packages embody:
- Artillery ammunition
- Drones
- Small boats
- Intelligence, surveillance, and reconnaissance methods
- Digital warfare methods
- Unmanned underwater automobiles
- Air protection methods
- Demining gear
- Spare elements for fight automobiles
The method works by issuing a particular assist package deal with an anticipated quantity of funds to be spent. The Ministry then accepts bids from particular suppliers based mostly on the revealed details about the package deal. Subsequently, a panel of consultants, in cooperation with Ukrainian representatives, selects the precise suppliers who will take part in fulfilling the package deal.
For the primary package deal, presents have been acquired from each British and worldwide trade suppliers, with greater than 40 international locations submitting over 1,500 bids.
On July 11, 2024, a big ammunition package deal price GBP 300 million was introduced. This package deal will present as much as 120,000 rounds of 152mm artillery ammunition. The ammunition might be newly manufactured by a European provider, which can assist new industrial capacities to make sure Ukraine receives extremely prioritized ammunition.
Variations in Procurement Processes between the UK and the Czech Republic
Procurement processes beneath the Czech Ammunition Initiative aren’t clear. Most potential licensed ammunition merchants are unaware of the circumstances and standards for qualification or provider choice.
| Worldwide Fund for Ukraine | Czech Ammunition Initiative | |
| Official web site with details about the initiative and knowledge for suppliers | YES | NO |
| On-line registration of potential suppliers | YES | NO |
| Publication of circumstances for suppliers | YES | NO |
| Announcement of particular calls (packages) | YES | NO |
| Info on accomplished deliveries after they’re concluded | YES | PARTIALLY (normal info is communicated for some deliveries by way of political statements) |
Identifed Findings within the Financial system and Effectivity of the Partial Buy beneath the Czech ammunition Initiative for 155 M107 Ammunition Financed by Germany
Based mostly on the obtained paperwork, whose relevance the reporter verified with Ukrainian authorities, the next was discovered.
Unjustified Value Improve for Ammunition Deliveries
The M107 155 mm ammunition delivered by way of the Czech Republic (AMOS and the MoD) beneath the Czech Ammunition Initiative is considerably overpriced in comparison with the value that’s customary within the place and time. The markup financed by the donor (Germany) is EUR 585 per spherical larger than if the acquisition had been made by the Ukrainian Ministry of Protection (contemplating obligatory prices). In observe, this quantities to CZK 1.48 billion for the supply of 100,000 rounds of stockpiled ammunition.
For the second a part of the brand new ammunition deliveries, there’s a important danger of unjustified worth improve amounting to CZK 504.6 million, with Ukraine buying new ammunition from the identical provider nation at EUR 250 per spherical much less.
In accordance with info confirmed by AMOS and the Ukrainian Ministry of Protection (by way of a consultant of the Parliamentary Committee for Nationwide Safety, Protection, and Intelligence of the Ukrainian Folks’s Republic), the present deliveries beneath the Czech Ammunition Initiative quantity to EUR 3,200 per spherical of ammunition for a complete of 180,000 rounds. These deliveries encompass 100,000 rounds of stockpiled ammunition and 80,000 rounds of latest ammunition. These deliveries are bought by way of one of many buying and selling firms concerned within the Czech Ammunition Initiative from suppliers in Turkey. The funds for this ammunition buy are financed by a donor, which is Germany.
These assurances verify the accuracy of the data within the documentation, which was the impetus for verification:
- The supply from the Turkish producer MKE to the provider of the Czech Ammunition Initiative for the sale of 155 mm M107 ammunition at USD 2,700 (equal to EUR 2,500) per spherical.
- Affords from the provider of the Czech Ammunition Initiative for ammunition despatched to AMOS with an supplied worth of EUR 3,200 per spherical.
Subsequently, the reporter obtained a proposal to buy the identical M107 155 mm ammunition that was additionally acquired by the Ukrainian Ministry of Protection from the identical Turkish provider, MKE, on the identical time for a worth of USD 2,700 (equal to EUR 2,500) per spherical. The authenticity of the supply was confirmed by representatives of the Parliamentary Committee for Nationwide Safety, Protection, and Intelligence of the Ukrainian Folks’s Republic, after prior assurance from the Ukrainian Ministry of Protection.
In accordance with publicly accessible info from the media confirmed by AMOS representatives, the value improve for the aforementioned stockpiled ammunition deliveries to Ukraine contains EUR 700 (distinction between EUR 3,200 and EUR 2,500) to cowl the prices of:
- Insurance coverage
- Transport, together with transport, trucking, and rail transport
- Involvement of a neighborhood companion within the nation of ammunition procurement
- Monetary reserve for potential claims
- Restore/refitting of ammunition
Additional particulars concerning the native companion aren’t accessible to AMOS, as it’s a commerce secret of the Czech provider of Turkish ammunition concerned within the Czech Ammunition Initiative.
The presents from the Czech provider of Turkish ammunition to AMOS, which the reporter has, don’t embody the prices of transport from the Czech Republic to Ukraine (solely from Turkey to the Czech Republic). It’s, due to this fact, unclear whether or not these prices are included within the total worth of EUR 3,200 per spherical of ammunition. If not included, the value per spherical of delivered ammunition could be additional elevated past the EUR 3,200 worth. The MoD representatives assured that these prices weren’t lined by the Czech price range.
Info on 155mm Ammunition from Ukrainian Authorities
The MoD declared to the Ukrainian facet the supply of 800,000 rounds of ammunition beneath the Czech Ammunition Initiative. Later, this quantity was modified to 500,000 rounds of ammunition. This adjustment within the month-to-month plan from 80,000 rounds of ammunition per 30 days to 50,000 per 30 days has a extremely antagonistic affect on Ukrainian army planning. The numerous discount in quantity is probably going because of the excessively excessive worth at which the Czech Ammunition Initiative is buying the ammunition. You will need to observe that almost all of deliveries beneath the Czech Ammunition Initiative are anticipated to encompass 155mm M107 shells. There are additionally different varieties of 155mm ammunition which might be offered at a lot larger costs.
Reference Most Costs for 155mm Ammunition In the course of the Verified Interval
| Ammunition sort 155mm | Value (EUR) |
| M107 | 2.700 |
| HE ERFB BT 3 BMCS 6 | 4.200 |
| Ofd MKM SD (HE ER BT) | 5.900 |
Within the first quarter of 2024, the indicative costs set by the Ukrainian Ministry of Protection established a worth cap for buying 155mm M107 shells at EUR 2,700 per spherical. Within the first half of 2024, Ukraine signed contracts on the following costs:
Purchases by the Ministry of Protection of Ukraine
| Date | Provider nation | Value (EUR) | Supply Phrases |
| 03.2024 | Czech Republic | 2.300 | DAP Ukraine +600km |
| 03.2024 | Czech Republic | 2.300 | DAP Ukraine +600km |
| 12.2023 | Poland | 2.650 | DAP Ukraine +600km |
| 02.2024 | Poland | 2.750 | DAP Ukraine +600km |
| 05.2024 | Poland | 2.750 | DAP Ukraine +600km |
| 01.2024 | Turkey | 2.950 | DAP Ukraine +600km |
| 02.2024 | Turkey | 2.500 | EXW |
(Notice: DAP – Delivered At Place, EXW – Ex Works, the supply at EUR 2,950 is new ammunition)
The Czech provider (see the desk above) is identical provider delivering Turkish ammunition beneath the Czech Ammunition Initiative at a worth of EUR 3,200 (delivered to the Czech Republic). It is a worth improve of EUR 900 per spherical of 155mm M107 ammunition and certain extra, as transportation inside Ukraine and its inside is extra demanding. Not one of the stockpiled ammunition deliveries exceed the value that the reporter, based mostly on verification, has decided as the utmost market worth.
The supply at EUR 2,950 is for brand spanking new ammunition, which is EUR 250 per spherical lower than the supply beneath the Czech Ammunition Initiative.
The unjustified worth improve for stockpiled ammunition deliveries has a big affect on the discount of the ammunition quantity. For example, the impacts are quantified beneath.
| Value per Spherical in EUR | Amount for 800,000 Rounds | Amount for 500,000 Rounds | Amount for 100,000 Rounds |
| 2300 | 1113043 | 695652 | 139130 |
| 2615 | 978967 | 611855 | 122371 |
| 2650 | 966038 | 603774 | 120755 |
| 2750 | 930909 | 581818 | 116364 |
| 3200 | 800000 | 500000 | 100000 |
| Value per Spherical in EUR | Distinction in Amount In comparison with EUR 3,200 for 800,000 Rounds | Distinction in Amount In comparison with EUR 3,200 for 500,000 Rounds | Distinction in Amount In comparison with EUR 3,200 for 100,000 Rounds |
| 2300 | 313043 | 195652 | 39130 |
| 2615 | 178967 | 111855 | 22371 |
| 2650 | 166038 | 103774 | 20755 |
| 2750 | 130909 | 81818 | 16364 |
| 3200 | 0 | 0 | 0 |
In different phrases, if AMOS had facilitated the supply of the identical stockpiled ammunition beneath the Czech Ammunition Initiative on the costs at which the identical Czech provider delivered on to Ukraine on the identical time, the Ukrainian armed forces would have acquired 39,130 extra rounds of ammunition beneath the Czech Ammunition Initiative. If delivered on the worth Ukraine obtained from the Turkish provider, the Ukrainian military would have acquired 22,371 extra rounds of ammunition.
Given the market worth on the time, the promise to ship ammunition beneath the Czech Ammunition Initiative based mostly on publicly declared info from Czech authorities, together with info on the MoD’s web site, to ship 800,000 rounds to Ukraine, is inexplicable and unreasonable. Assuming a funding quantity from donors of CZK 1.6 billion, this might end in a tough calculation of the unit price per spherical at EUR 2,000, which was and stays an unrealistic worth.
Czech authorities, beneath the Ammunition Initiative, declared an unrealistic variety of rounds after which delivered lower than they might have. This affect was brought on not solely by an unrealistic calculation of market ammunition costs but additionally by deliveries which might be overpriced in comparison with market costs.
The above signifies inadequate and correct market analysis when promising 800,000 rounds of ammunition and demonstrates the acquisition of overpriced ammunition at EUR 3,200.
Reason for Findings
Within the case of the 180,000 rounds of M107 155 mm ammunition and different varieties of ammunition, based on publicly accessible sources and knowledge from representatives of the arms trade and AMOS, there was no open name for bids or a young course of. The method just isn’t clear, and there’s no competitors for ammunition deliveries. The supply from just a few vaguely chosen firms is just accepted and offered to the donor by AMOS.
Involvement of different potential suppliers interested by submitting bids is virtually unfeasible. It’s unlikely that forwarding a proposal from a provider not allowed to take part within the Czech Ammunition Initiative to a different buying and selling firm permitted to take part would end in a cheap buy. Proof of that is that no ammunition supply has occurred by way of such a course of in observe, based on AMOS.
Ammunition purchases beneath the Czech Ammunition Initiative have been performed solely not directly. Within the case of overseas ammunition purchases, these have been successfully presents of reselling and delivering ammunition from overseas, with AMOS and the MoD performing as intermediaries. In another international locations, purchases are performed instantly by the Ministry of Protection or a state-controlled buying and selling firm.
It’s unclear why deliveries aren’t performed by way of direct buy by AMOS, the MoD, or a state-controlled buying and selling firm or enterprise, which has a license to buy ammunition and will, due to this fact, execute deliveries with out an unjustified markup.
Even when awarding contracts instantly with out a clear public tender in a categorized mode, Czech authorities are obligated to guard public funds in opposition to dangers, irregularities, or different shortcomings attributable to uneconomical, ineffective, and inefficient use of public assets. They’re additionally obligated to make sure the economical, efficient, and environment friendly efficiency of public administration. The correctness of any monetary and property operation is its compliance with authorized rules and reaching an optimum relationship between its economic system, effectiveness, and effectivity. Financial system refers to using public funds to make sure the set duties with the bottom attainable expenditure of those funds whereas sustaining the suitable high quality of the duties carried out. Effectivity refers to using public funds that obtain the very best attainable scope, high quality, and advantages of the duties carried out in comparison with the quantity of funds spent on their execution.
The chosen provider choice course of beneath the Czech Ammunition Initiative, at the very least within the verified case, failed to forestall the potential inefficient and uneconomical use of public funds.
The management mechanisms in place are insufficient. The primary elementary challenge is that the Czech Republic has no decision-making authority within the course of. It’s merely an middleman that transparently presents the supply to donor international locations. The state that decides to assist Ukraine then determines what corresponds to its imaginative and prescient and the way the ammunition might be bought. They will select from a number of choices.
In different phrases, the Federal Republic of Germany knowingly and intentionally funds the provision of Turkish ammunition to Ukraine based mostly on presents intermediated by the Czech Republic, which is a management mechanism for verifying the effectiveness and economic system of procurement beneath the Czech Ammunition Initiative. Such a management mechanism implies three attainable conclusions within the case of an uneconomical buy of ammunition.
The primary conclusion is the incompetence of the authorities of the Federal Republic of Germany in assessing the value of ammunition deliveries to Ukraine. The second conclusion is reliance on the economic system of the presents offered to the donor by the Czech Republic, particularly AMOS and the MoD. The third and least possible conclusion, based on the reporter, is the deliberate buy of overpriced ammunition by the Federal Republic of Germany or an organization managed by it, which might be unlawful in each the Czech Republic and Germany.
Transparency assurance ought to be supplied by an interministerial oversight fee based on info from the MoD. This fee has to this point met solely as soon as at its inaugural assembly. The subsequent assembly is scheduled for September. It’s not anticipated that the main target of this fee, or the working group, will embody verifying the economic system of particular person ammunition deliveries beneath the initiative.
Influence of Findings
The affect of the Czech Republic’s (AMOS and the MoD) facilitation of ammunition beneath the Czech Ammunition Initiative, with none type of competitors, is an unjustified worth improve. On this particular case, the value improve quantities to CZK 1.48 billion, representing a minimal proportion improve of 22.4%. The constructive facet is that the wastefully utilized funds aren’t lined by Czech taxpayers’ cash.
As a result of uneconomical procurement course of, the potential quantity of ammunition that the Ukrainian military might make the most of within the combat in opposition to Russia is lowered by at the very least 22,371 rounds.
One of many important impacts within the context of the findings of the Czech Ammunition Initiative’s course of verification is the importance of the findings outlined on this report. Whereas formulating the partial conclusions, the reporter assumed that the findings have been solely partial and couldn’t independently display systemic failure.
Nevertheless, when contemplating the monetary quantity of particular person findings, the conclusion is obvious that there’s systemic failure within the Czech Ammunition Initiative relating to the economic system and effectivity of ammunition deliveries to Ukraine.
In accordance with frequent observe and worldwide auditing requirements (INTOSAI), the utmost allowable error charge in dealing with public funds, not solely within the Czech Republic but additionally overseas (e.g., in Germany), is 2%.
The materiality of the supply of 100,000 rounds of Turkish stockpiled ammunition is critical within the context of the monetary quantity of your entire ammunition initiative.
Contemplating the overall monetary quantity of EUR 1.6 billion, roughly CZK 40.368 billion, the supply of Turkish stockpiled ammunition price CZK 8.073 billion constitutes 20%. Subsequently, for 20% of the funds spent by way of the Czech Ammunition Initiative, the value is considerably overvalued in comparison with the value that’s customary in place and time. The overpricing itself accounts for 3.66% of the overall quantity of the Czech Ammunition Initiative.
The affect of such important overpricing of ammunition might have an effect on or improve the value of ammunition on the present market.
Conclusion and Reporter’s Suggestions
Based mostly on the important findings, the reporter recommends adopting a decision that considers the necessity to set up a clear, efficient, and economical administration of public funds inside the Czech Ammunition Initiative.
Moreover, the reporter recommends a right away renegotiation of the unfavorable pricing phrases by way of the MoD or the AMOS company to make sure that deliveries are made at market costs, or that the agreed worth contains an acceptable amount of ammunition adjusted for the worth of the present worth overvaluation.
Moreover, the reporter recommends verifying different purchases made inside the ammunition initiative to substantiate or refute that ammunition purchases at costs larger than market costs aren’t a systemic strategy however fairly a partial failure in a single particular supply.
The reporter additionally emphasizes the significance of establishing acceptable preventive mechanisms to forestall the submission of overpriced ammunition deliveries beneath the Czech Ammunition Initiative.
In Prague, August 12, 2024
Ing. Lukáš Wagenknecht
