MUP Orders Two Patrol Boats - Discrimination Against Croatian Shipyards?

By 1 February 2020

As Novac/Jozo Vrdoljak/ writes on the 1st of February, 2020, the Ministry of the Interior (MUP) has launched a public tender for the construction of two patrol vessels intended for border control worth 39.5 million kuna excluding VAT, but the conditions defined in the tender are such that no Croatian shipyards can fulfil them.

Some who know the business have claimed that according to their analysis, MUP's tender looks like it was done exactly according to the design of something an Italian shipyard could do.

''The tender evaluation criteria was deliberately set up to discriminate against Croatian shipyards. For example, a delivery period of fifteen months is scored with 0 points, while an eight-month delivery is scored with 10 points. This indicates that the contracting authority has the knowledge that the shipyard already has a finished project and therefore has an advantage over other shipyards that don't. Because such a delivery time can only be respected by a shipyard that has the project ready,'' says Tomislav Smirčić, CEO of the Croatian shipyard Tehnomont in Pula.

It is also discriminatory to evaluate how many similar ships a shipyard has built in the last five years: everyone knows, Tomislav claims, that Croatian shipyards haven't constructed more than one similar ship in the last five years because there was no demand for anything like that.

The Dubrovnik-based Global Group, which has taken over Montmontaza Greben shipyard from Vela Luka in its bankruptcy, said they already have two unfinished patrol ships that were to be delivered to the Greek Coast Guard and could be completed within two months.

''Unfortunately, neither of our ministries has shown any interest in these two ships being completed, despite the great need for these ships. These are the best ships of their kind in the Mediterranean,'' claims Milan Dragovic, the owner of Global Group. He adds that a job like this would mean a return to the market for the enfeebled Vela Luka shipyard.

Smircic states that a two-stage limited public procurement procedure has also been designed to benefit some shipyards and not others.

''This is because the first round [of the tender], published on December the 27th, 2019, just in time for the festive period, requires the complete design of the ship and the completion of all of the technical specification and the adjustment of all necessary designs and budgets. Such a job for a shipyard that doesn't have a ready-made project takes a very long time. And one month, over the festive period, is not enough to prepare all the documentation. The new deadline for the client is February the 14th, 2020, but that changes nothing because it still isn't enough time,'' he explains.

The estimated value of procurement isn't realistic either, they believe. Dragovic calculated that the real cost of building each individual ship, when the shipyard will not earn anything, is around three million euros per ship. So about six million euros excluding VAT or 7.5 million euros with VAT would be the real value of the tender.

''No Croatian shipyard has delivered ships worth 39.5 million kuna without VAT within the last five years, which is required by the tender. Namely, in Croatia, there has been no search for or contracting of similar vessels in the last five years,'' he stated.

''The shipyard needs to meet both the financial and the technical criteria, and neither of those things even come into it for Croatian shipbuilders. It's arguable that the two of the criteria are linked by the fact that the ships that would be built must be done within the prescribed budget, which Croatian shipyards cannot do.

In the last five years, no patrol boats have been built in Croatia. Only two were built here in Vela Luka for Greece and one at Tehnomont. The patrol vessels in our shipyard were worth 4.6 million euros, while the patrol boat built by Tehnomont was worth 2.7 million euros, and this tender is asking for a value of 5.3 million euros without VAT as a reference,'' Dragovic explains, believing MUP's tender should be scrapped and replaced with another, fairer one.

MUP: "Everything is being done according to the regulations"

The Ministry of Interior claims that the stated condition of technical and professional competence is defined in accordance with Article 268 of the Law on Public Procurement. They point out that a preliminary consultation was conducted for this procurement process on November the 19th, 2019, during which none of the potential bidders raised an objection, and that the financial framework and basic conditions that the vessel must satisfy were not arbitrarily defined.

''Under the Internal Security Fund (ISF), the European Commission has secured 123.6 million euros for the procurement of equipment to be made available to the European Border and Coast Guard Agency. Using the aforementioned funds, the Ministry of the Interior nominated the project of the construction of two vessels for state border surveillance. Funding is provided by the Fund in the amount of 90 percent, while the remaining 10 percent of the co-financing will be borne by Croatia,'' they explained.

To that end, they claim, the European Border and Coast Guard Agency has set the required minimum maritime requirements for the aforementioned ships, as well as the equipment requirements.

''According to the technical guidelines and requirements related to the characteristics of the vessel determined by the European Agency of the competent service, technical specifications have been drawn up,'' MUP clarified.

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