Estonia-Norway combat vehicle deal triggers war of words

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The recent decision to purchase 37 combat vehicle hulls from Norway has turned acrimonious as the enterprise beaten at procurement accuses defence ministry of large scale waste of taxpayer money. To refute the accusations, ministry agreed to disclose details. 

«This was no decent procurement, this was wasting of state money,» says former serviceman Raivo Tamm (41), up until 2008 in charge of logistics department at Defence Forces HQ.

These past weeks, it is the very Mr Tamm who has launched criticism towards the Norwegian deal, ranging from social media to back rooks et parliament. «I might as well shrug it all off but as the past decade I was fighting against such deals based on wishful thinking, as a matter of principle  I do not think this is right.»

We are talking about the agreement signed two weeks ago by defence ministry to buy 37 hulls of support combat vehicles from Norway for €635,000 thereafter to undergo modification and serve as assistant forces to the existing CV9035 machines bought earlier from Holland.

Mr Tamm, let it be said, is not impartial regarding the buy, as one working as representative in Estonia for the Swiss military technology maker RUAG. He is the man who wrote the procurement that placed second after CV90, one the public knows nothing about: to buy from Germany the armoured vehicles M577 over 40 years old, and have RUAG modify these for Estonian Defence Forces.

«The German defence ministry offered spare parts, equipment for repairs, and training, but they never even entered negotiations with them,» claimed Mr Tamm. To his knowledge, Germany was willing to sell the old M577 vehicles to Estonia at €1 apiece.

The way Mr Tamm sees it, at the beginning stages of the process and for no reason, the defence ministry was inclined to favour the Norwegian CV90 offer. Formally, it seemed to be explained by the state assuming it would save money as both battle machines and support vehicles would stand on the same CV90 platform. 

According to calculations by Mr Tamm, the state would have ended up saving €15m with the German option.

On top of that, Mr Tamm sees risks in playing all cards to one company to which our entire armoured capacity would be chained, figuratively speaking. Namely, for modification procurement the CV90 platform will grant price advantage to the producer of the machine, BAE Systems of Sweden.

Should the latter win the procurement, Estonia’s future 44 battle machines CV9035 and the 37 support vehicles CV9030 would for years on end be serviced by a «monopoly». The latter would develop the right to dictate to Estonia the price of stare parts etc being, as opposed to M577, their sole producer.

«We are not talking about small money here,» warned Mr Tamm. The long-term state development programme for national defence prescribes €180m for the building of manoeuvrability capacity till 2022. To the knowledge of Mr Tamm, however, the budget is almost exhausted by now, it not exceeded.

Ministry rejects claims

To understand the events as they unfolded, let’s take a step back in time.

In June 2014, defence ministry sent information query to eight chosen international enterprises and to the USA. On less than two A4 pages, rather briefly they described what they wanted: we are buying a minimum of 24 armoured support vehicles able to follow the battle machines CV90.

In a few months, four offers were sent regarding vehicles on wheels and tracks, all by private companies. Most also showed up to see what Estonia actually wanted. US said they had nothing on offer.

As admitted Lieutenant Colonel Kalle Teras responsible for armoured manoeuvrability capacity at Defence Forces HQ, the cheapest would have been modifying the existing armoured vehicles SISU.

However, as the SISUs were tested with CV90s on a Latvian polygon, the Scoutsbattalion chief on his six-wheeled vehicle was soon stuck on the terrain and all he could do was watch the units on tracks vanish from his sight.

Which meant that wheels were out.

Of the four offers remaining, the two new ones – Swedish BvS10 and Singapore’s Bronco 3 – were excluded by the high price.

From there, the parties radically differ in views: considering the price, Mr Tamm said the M577 is a good option. The defence ministry says these are essentially trash.

«These are so old – made in 1960–1970. Had these lasted the 30 years we plan, by the end they’d be almost a century old!» notes Mr Teras. Also, for a year the Germans have kept these out in the open, waiting to be demolished.

Furthermore, the armour of the M577 failed to meet the requirements, while with this complemented the carriage capacity and drivability would have suffered. As M577 is built as command vehicle where the officers are able to stand, most would have had to be cut 60 centimetres lower. Otherwise, they’d be too easy a target.

On the other hand, the Norwegians had preserved the CV90 hulls in a dry air hangars. The defence forces were able to pick our out one by one. The price did not have to be bargained as Norway agreed to the €635,000 offered by Estonia.

Vice chancellor for defence investments at defence ministry, Ingvar Pärnamäe said the claims by Mr Tamm of modification dearer by €15m is not substantiated.

The initial price offered for modifications of CV90 by BAE Systems is not to be disclosed by agreement with the private company. «I can tell you that the modification price category would be about the same with CV90 and M577,» said Mr Pärnamäe.

At least in two aspects the observations by Mr Tamm are right. As warned by Mr Tamm, the defence ministry is also hoping the monopoly-like situation can be avoided. Mr Pärnamäe says it is almost certain that at the modification procurement proclaimed this fall, competition will arise with RUAG participating among the rest.

«It cannot be excluded that in the future some monopoly situations will emerge, but price rise can be tamed by contractual conditions and by organising procurements from time to time,» said Mr Pärnamäe.

The vice chancellor is not predicting going over the €180m prescribed for armoured capacity. «The calculations were according to the prices back then. I maintain we have operated within the framework,» he said.

True: meanwhile the military crises have lifted the prices of military equipment far faster that inflation would dictate. As the Swiss franc was allowed to float at the beginning of 2015, military equipment prices rise by 10 percent in a year. Switzerland hosts lots of ammunition plants for defence forces, and the very ammunition id what is a main cost article with the CV90. Thus, nobody knows if extra manoeuvring money will have to be applied near term.

To sum it up, Mr Tamm says he is not convinced the defence ministry is making the best choices with use of taxpayer money. He would like the Riigikogu national defence committee to take a closer look.

The recent armoured vehicle procurements have made defence ministry an easy target for those claiming that battle machines are no good without tanks.

Mr Pärnamäe says the military capacity development strategy was chosen years ago.

«Our approach has been: from the simple towards the more sophisticated; from the cheap towards the more expensive. Perhaps, by going through the support vehicle project right now will help us avoid some major mistake with tank project some day. We need tanks, these are planned,» said Mr Pärnamäe.

Comparing the vehicles

The deal entered                 Main competitor

CV9030N hull (Norway)          M577 support vehicle (Germany)

Produced                                1994–2000      1960–1970

Height                                    1.9 m    2.2 m

Length                                    6.5 m    4.86 m

Battle weight                          27 t       14.4 t

Speed on terrain                    70 km/h            64 km/h

Ditch crossing capacity           2.6 m    up to 1.8 m

Obstacle climbing                  up to 1 m           up to 0.61 m

Purchasing price for Estonia  €17,162 apiece       €1 apiece*

Cost of modification into armoured support vehicle**  €47.7m            €32.1m


*Assumption by defence ministry and RUAG

**Calculation by RUAG who lost the procurement, totally wrong according to defence ministry