ACF: the Ministry of Interior have ordered sub-standard off-road vehicles in at least two procurement orders in 2017

The Anti-corruption Fund (ACF) urges the Ministry of Interior (MoI) and The European Anti-Fraud Office (OLAF) to publish the entire documentation regarding the emergency financial assistance provided by the European Commission (EC) and the public procurement orders connected with it.

Both procurement orders for the purchase of vehicles that took place in 2017 under the EC’s Emergency Support package aimed at protecting the borders of the European Union (EU) reveal lowered criteria and serious indicators for violations of the Public Procurement Act. The first order, which is being investigated by OLAF,  is of 2 March 2017 and is for the purchase of 290 off-road vehicles for the needs of the police. The second order was initiated immediately after — on 27 March 2017 — and is for the purchase of another 121 off-road vehicles. The problems were identified following an overall review of the documentation on the procurement orders for the purchase of off-road vehicles, funded by the emergency financial assistance provided by the EC in 2016.

ACF submitted the analyses, including the identified indicators for violations, to the Director of OLAF. On 1 February 2021, an official letter was received from OLAF that contained recommendations for financial sanctions against the MoI as a response to the application of sub-standard specifications for the vehicles and following allegations of abuse of power in the context of the conducted procurement orders.

A total of 420 off-road vehicles were purchased using the emergency financial assistance provided by the EC in 2016 – 2017, for a total price of BGN 23 million. “Although in the last days the attention of the public has been mostly fixed on the procurement order investigated by OLAF, our analysis of relevant documentation reveals indicators of issues with a similar procurement order for the purchase of vehicles for the MoI,” ACF’s legal team comment.

The legal analysis of the public documentation — which includes the agreement between the MoI and the EC (with all related reports and amendments) — as well as the information published by the MoI regarding procurement orders conducted under this agreement, reveal serious problems, irregularities, and indicators for violations that we consider to be of interest not only for the Bulgarian public, but also for the European institutions.

AMBIGUOUS TERMINOLOGY IN THE AGREEMENT BETWEEN THE EC AND THE MOI

The agreement between the MoI and the EC (for the so-called “Emergency Support”) is only signed in English. Two paragraphs of the agreement concern the supply of a total of 420 all-terrain vehicles, of which 350 are for the needs of the police departments in border areas, and 70 are for the border patrol. The minimum technical specifications only for the latter 70 vehicles conform to what is typical for off-road vehicles: minimum 2000 cubic centimeters engine capacity, 4×4 drive system, and a differential locking mechanism. As the letter from OLAF explicitly mentions violations of the signed agreement during the ensuing conduct of the procurement orders, the precise terminology can prove to be very important. The term “all-terrain vehicle” used in the agreement is not in harmony with the directives and regulations of the EC related to the categorization of vehicles where the English term used is “off-road vehicle.” Despite the inaccuracy in the terminology of the agreement, its overall content suggests that the MoI is to receive precisely off-road vehicles (the agreement contains a list of such vehicles owned by the MoI at the time — Ladas and Land Rovers, with their exact models and their year of manufacture). The same conclusion can be drawn on the basis of the agreed price that corresponds to the typical price of off-road vehicles.

(Note: An all-terrain vehicle (ATV) is in fact a different type of motor vehicle, typically used for movement through rough terrains. Later on, 10 ATVs were purchased under the same programme and given to the border patrols in Yambol and Dragoman.)

The Great Wall vehicles (290 units) of Lot 1 of procurement order 00752-2017-0018/02 March 2017 upon their handing over to the MoI by the supplier Bulgarian Automobile Industry EAD. The photo was taken by the Ministry.

 The VW Tiguan vehicles (51 units) of Lot 1 of procurement order 00752-2017-0030/27 March 2017 upon their handing over to the MoI by the supplier Asebo EOOD. The photo was taken by the Ministry .                                                                                                                                                                                                                                                    However, the unambiguous conclusion is that the agreement with the EC does not contain specific parameters and requirements regarding the vehicles to be purchased (except for the 70 vehicles intended for the Border Patrol), nor does it contain any references to relevant legislation.

In addition, there is no requirement regarding the year of manufacture which would prevent the supply of old vehicles — this has been explicitly identified as a problem by OLAF in their investigation, as can be seen from their press release on the topic.

DISCREPANCY BETWEEN THE TERMS USED AND THE SPECIFICATIONS IN THE PROCUREMENT ORDERS

Despite the problems with terminology, the two procurement orders of March 2017 contain the correct legal definition of “off-road vehicle” within their titles and within the titles of the separate lots.

In European law, the definition of this type of vehicle is provided in Directive 2007/46/EC of 5 September 2007 establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles. The definition of “off-road vehicle” laid out in the Directive is the following:

4.1.   Vehicles in category N₁ with a maximum mass not exceeding two tonnes and vehicles in category M₁ are considered to be off-road vehicles if they have:

In addition, they must satisfy at least five of the following six requirements:

However, two of the four lots in the two procurement orders do not satisfy the indicated specifications and requirements:

*According to the published information

Just like the agreement, the procurement orders published by the MoI lack requirements regarding the year of manufacture of the vehicles which would prevent the supply of old vehicles.

SERIOUS DIFFERENCES BETWEEN THE PROJECTED AND ACTUAL PRICES

The analysis of the relevant documentation shows a significant discrepancy between the announced price for Lot 1 of the procurement order of March 2017 — just over BGN 28 mil. excluding VAT — and the agreed price in the final contract published on the MoI website — just under BGN 12 mil. excluding VAT (link). “The considerable 60% difference between the two prices is an indicator that somewhere along the chain from Brussels to the submission of the offers in the MoI arose a serious discrepancy between the vehicle specifications and the envisaged budget for their purchase,” ACF’s legal team comment. In other words, it was clear what type of vehicles the financing party (the EC) intended to be supplied, and the provided budget corresponded with the price of these vehicles.

The “saving” of nearly BGN 16 million could not have been left unnoticed by the MoI officials who initiated the procurement orders, or by the officials who signed the contracts; therefore, their statements that they did not know about the purchased lower-class vehicles are at best questionable. The stark discrepancy between the projected and agreed price of a procurement order is a classic indicator of violations which requires detailed auditing, however such has not been carried out so far.

A WINNING BID FROM A PARTICIPANT WITH NO EXPERIENCE AND WITHOUT SPECIFICATION OF VEHICLE MAKES AND MODELS

The analysis of the relevant documentation shows that the first lot of the procurement order of 27 March 2017 for 51 vehicles (link) was won by a bidder with no experience in the field (a firm specializing in the supply of banking software). It would be difficult for such a bidder to win a regular procurement order (as opposed to an urgent one), but in this case the MoI have omitted to include the typical requirement for past experience in the supply of similar vehicles.

Another indicator for potential violations is that the price of the supplied vehicles is considerably higher than that of a procurement order with similar parameters initiated by the Bulgarian Food Safety Agency (BFSA) the same year (link).

In addition, the entire communication between the MoI and the winning firm in the context of the conducted procedure and the text of the agreement do not contain any information regarding the makes and models of the vehicles to be supplied to the MoI; there is only a description of technical specifications and their compliance with the announced parameters. “We have rarely seen a procurement order in which the supplier does not specify either the make, or the model of the vehicles to be supplied,” the ACF team comment.

The agreement for the supply of these 51 vehicles was signed on 14 February 2018 by Georgi Balabanov, Director of the Public Procurement Directorate in the MoI. He was authorized to lead the procedure with an explicit order of the minister Valentin Radev dated 16 August 2017 and accompanied by the signatures of another four representatives of the MoI, including that of Chief Commissioner Hristo Terziyski (see Attachments 3 and 4 to the e-mail) in his capacity of Director of the National Police General Directorate (link to the agreement and annex with specifications).

THE QUESTIONS THAT WE WOULD LIKE THE MOI TO RESPOND TO IN ORDER TO CLARIFY THE SITUATION ARE THE FOLLOWING:

Who and in what manner planned and established the specifications in the two procurement orders and their lots, and were the specifications coordinated with the end beneficiaries?

Were there any statements, objections, or dissenting opinions from officials of the NPGD and the BPGD in the commissions that approved the technical specifications and took part in the selection of executors?

Were any reports submitted to the minister Valentin Radev or to the deputy ministers by the NPGD, the BPGD, the administrative secretary of the MoI, the International Projects Directorate, or the Public Procurement Directorate that contained information regarding an amendment to the technical specifications during the rule of the caretaker government?

If minister Radev or one of the deputy ministers was informed about the specified irregularities, then why did the MoI sign the final agreements for the supply of 290 + 51 vehicles that are not in harmony with the agreement with the EC?

In the summer of 2017 when the MoI obtained a 12-month extension of the time period for acquiring the emergency assistance, why did minister Radev not exercise his powers under Art. 110 of the PPA to terminate and reopen the public procurement order?

Was the OLAF team or the European Commission informed about the amendment of the technical specifications of these 290 + 51 vehicles carried out by the caretaker government in contradiction with the spirit of the agreement with the EC? Is there any documentation in this regard?

Were the supplied vehicles tested in any way in order to ascertain whether they satisfy the off-road movement requirement contained in Ordinance 60 of 2009 for approving the type of new vehicles?

“We see a high public interest, but also strong politization of the topic in the election campaigning. It is undeniable that the purchase of lower-class vehicles does not ensure the protection of the Bulgarian and European interests in a reliable defence of the EU’s external borders. The speculations and the attempts to escape responsibility that we witness at the moment can only be put to an end once the entire relevant documentation has been reviewed and the specific violations have been identified. We believe that transparency is in the interest of both Bulgarian and European taxpayers,” ACF’s legal team comment.

For this reason and in view of the speculative political talk on the topic, ACF is sending this statement to the Bulgarian media and to the Director of OLAF.