The Defense Ministry has decided to cancel a tender worth over one billion euros, which had been awarded to the French company Naval Group for corvettes back in 2019. What implications might this decision have?

The Ministry of Defense announced on Tuesday that it has canceled the tender for the construction and acquisition of four military corvettes, which was won by the French company Naval Group in 2019. Since then, the Romanian state and the French company have been unable to sign the contract for the construction and delivery of the military corvettes worth over one billion euros.

What is the effect of canceling the tender? The cancellation of the entire procedure means that the contract for the corvettes will not be awarded to the second-place Dutch firm Damen, as they had quoted a higher price. The Ministry of Defense stated in a press release that „the necessary funds to declare the next-ranked economic operator as the winner have not been identified.”

This implies that if the Romanian state decides to proceed with the purchase of such ships, a potential acquisition of military corvettes would need to start from scratch.

Why was the tender canceled? The Ministry of Defense announced in the press release that the French company Naval Group „did not sign the framework agreement within the deadlines requested by the contracting authority.” According to information from G4Media, the main obstacle was the fact that Naval Group and its Romanian partner, Şantierul Naval Constanţa, could no longer adhere to the price agreed upon in 2019. Production costs in the defense industry had increased due to factors like the pandemic, disruptions in supply chains, inflation, and the Russian invasion of Ukraine.

Issues between Naval Group and Şantierul Naval Constanţa emerged almost immediately after the 2019 tender.

Former Minister Vasile Dâncu acknowledged the problems in March 2022: „Unfortunately, for over four years, we’ve been dealing with legal proceedings, followed by a very long negotiation period. It’s a partnership between Romanians and the French, which, as I’ve observed recently, is not functioning very well. At the request of the two partners, we extended it by two months.”

Context: It should be noted that France is the framework nation for NATO’s battle group in Romania and has deployed over a thousand soldiers to bases like Cincu, with the mission of supporting Romania’s defense against Russia’s aggressive posture.

Naval Group (France), Damen (Netherlands), and Fincantieri (Italy) were competitors in the tender organized by the Romanian state. According to information from Newsweek Romania and partially confirmed by Minister Gabriel Leș, Naval Group submitted an offer of 1.2 billion euros, while the other offers were 1.25 billion euros (Damen) and 1.34 billion euros (Fincantieri).

The procedure was delayed for several months due to various administrative and legal procedures. In early 2019, the Ministry of National Defense suspended the procurement procedure for multifunctional corvettes and referred the matter to the Military Prosecutor’s Office, citing „reasonable suspicions regarding the legality of the procedure.” In the meantime, the case was referred to the National Anticorruption Directorate (DNA).

In early 2018, Romania initiated a program, allocating 1.6 billion euros, to purchase four multifunctional military corvettes. Instead of negotiating with the manufacturer that could provide the most advanced corvettes, the PSD government chose to hold a tender. One of the fundamental conditions for participation in the tender was that the winning company would build the four corvettes at a shipyard in Romania. This led to the final selection of the three European companies with shipyards or partnerships with shipyards in Romania: Naval Group (France), Damen (Netherlands), and Fincantieri (Italy).

In September 2021, the Ministry of National Defense expressed a „firm willingness to sign” the framework agreement for the four Gowind 2500 corvettes with the French company Naval Group, which was recently involved in the submarine crisis. However, the signing of the framework agreement has been delayed for over a year due to a legal dispute with the rival company Damen, which lost the tender.

The French group Naval Group was declared the winner of the tender started by the Romanian state in July 2019 for the construction of four Gowind 2500 corvettes.

In July 2020, the Bucharest Court of Appeals definitively rejected the request of the Dutch company Damen, competing with Naval Group, which had filed a lawsuit against the Ministry of National Defense seeking the annulment of the procedure for awarding the 1.6 billion euro contract for the acquisition of the four military corvettes.

In the tender race, the French outpaced the Dutch from Damen, who were planning to work at their shipyard in Galați, and the Italians from Fincantieri, who were planning to collaborate with the Tulcea naval shipyard.

After signing a partnership with the Naval Shipyard in Constanța in April 2018 to build the corvettes there, Naval Group entered the race for the contract, which the Ministry of National Defense had put up for bids with a value of 1.6 billion euros, using the Gowind 2500 corvette model.

The contract for the four new corvettes initially included the modernization of the two frigates already in the naval forces’ inventory. Among the countries to which Naval Group had previously sold the Gowind 2500 corvette model were the United Arab Emirates, Egypt, and Malaysia.

The corvette tender was blocked in January 2019 after the Secretary of State for Armaments, who was dismissed by Prime Minister Viorica Dăncilă in June, referred the matter to the Military Prosecutor’s Office, citing suspicions that the procedure had been conducted illegally.