Sofia, July 30 (BTA) - Checks underway since July 12, 2021 found
 breaches of financial discipline, a failure to comply with the
requirements of the Public Procurement Act and ineffective
controls over the performance of construction contracts at the
Defence Ministry unit in charge of defence infrastructure and
two state-owned ordnance factories. The findings were cited by
caretaker Defence Minister Georgi Panayotov when he addressed
Parliament on Friday, answering a question from Hristo Gadjev MP
 of GERB.

They concern the Directorate General for Defence Infrastructure,
 the Military Clubs and Military Recreation Executive Agency,
TEREM Holding EAD and TEREM-SHIPYARD Flotski Arsenal - Varna
EOOD.

Part of the reports on the checks has been referred to the
Public Financial Inspection Agency and the Sofia Military
District Prosecution Office.

Panayotov specified that 80 per cent of all public procurements
for infrastructure projects in 2020 were awarded directly to
particular contractors without market research. The
infrastructure contracts related to the acquisition of the F-16
jet fighters were concluded as engineering contracts covering
the preparation of a conceptual and a schematic design before
the award of the building and installation works, the Defence
Minister added.

Bulgaria's principal military airfield at Graf Ignatievo had to
be remodelled and upgraded at the cost of 300 million leva,
allocated by the previous government, in order to accommodate
the F-16 Block 70 jets that are expected to go into service
staring in late 2023.

"The contracts do not set a deadline for the completion of the
designs, including a deadline for their approval by the
contracting entity. The first design stage has yet to be
completed, i.e. a conceptual design has not been approved yet
under most of the contracts. This invites the conclusion that
performance is seven or eight months overdue," Panayotov pointed
 out.

In his words, 95 per cent of the contracts concluded for the
F-16 infrastructure were paid in advance, for which
approximately 184 million leva were remitted between late 2020
and early 2021. "While technically this did not constitute a
gross violation of the Public Procurement Act, the results are
negative and there are indications of corruption," the Defence
Minister said.

The Director General of the Directorate General for Defence
Infrastructure has been dismissed. The Disciplinary Board under
the Minister is identifying the individuals who are to blame,
and they will be disciplined, Panayotov reported.

"The check at TEREM Holding EAD found that the Board of
Directors had not adopted its rules of procedure and had not
considered a new business programme as a benchmark against which
 the company's performance could be judged. The subsidiaries
persistently tend to report operating losses, with operating
costs exceeding operating income," the Defence Minister said.
"The contracts concluded do not ensure the subsidiaries'
production for a longer period of time. Because of all this, the
 subsidiaries' financing has to be made up by 7,789,000 leva,"
Panayotov said.

"TEREM Holding EAD has lent its subsidiaries 41,664,000 leva,
including interest, and this money will practically never be
repaid," the Defence Minister commented. A provisional Board of
Directors has been appointed at the company, but the previous
management has blocked its registration using procedural
chicanery, Panayotov said. Competitive procedures have been
announced for nominating Board of Directors members.

TEREM is a state-owned company run by the Defence Ministry which
 specializes in repairs, modernization and logistical support of
 aviation equipment, ships and vessels, armoured vehicles, small
 arms, artillery and missile systems, ammunition, radar and
communication equipment. NV/LG