US embassy cable - 05SOFIA187

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