The Romanian Corvette Program Saga (Part Two)

*To read Part One, please click here.

Post-Communist Romania’s first national warship-building program—a multi-role corvette— resides in legal limbo since being launched in November 2016, with none of the four planned vessels having been laid yet. After an initial attempt by the authorities to directly award the program to the domestic shipyard Damen Galați (owned by the Dutch firm Damen Group), a change in government derailed the whole deal. More than a year passed before Romania restarted the corvette program, this time opening it up to a competitive process (see Part One in EDM, February 10).

Five shipyards showed interest in the government’s 2018 tender for the corvette program: Damen Galați again offered its SIGMA 10514 corvette; a joint venture between France’s Naval Group and the Romanian shipbuilder Șantierul Naval Constanța (SNC) bid the Gowind-class corvette; the Italian shipbuilder Fincantieri put forward, through its subsidiary in Romania (Vard Tulcea shipyard), an enlarged variant of the Abu Dhabi corvette; Turkey’s STM shipyard proposed its Ada-class corvette; and the final bid came from the German shipbuilder Lürssen, which offered a variant of its K130 Braunschweig–class corvette (ROEC, July 19, 2018). Only three offers moved on to the second phase of the tender: those from Damen, Fincantieri and Naval Group–SNC (ROEC, July 3, 2019). The result of the final phase of the tender should have been announced in October 2018. However, this is when the procurement process broke down and became bogged down in litigation.

The Ministry of Defense twice postponed the official announcement of the winner of the program. Defense Minister Gabriel Leș declared that the final deadline for revealing the winning bid would be January 12, 2019, more than three months after the initial deadline. However, on January 11, 2019, the state secretary in charge of the defense ministry’s Armaments Department, Andrei Ignat, issued a statement that he had lodged a complaint with the military prosecutor’s office for a number of irregularities and potential wrongdoings regarding the corvette program (Mediafax, January 11, 2019). To make matters worse, the values of the financial offers were soon leaked to the press. According to the leak, Naval Group and SNC had the least expensive offer, valued at approximately €1.2 billion ($1.45 billion), followed closely by Damen Galați, with a bid of €1.255 billion ($1.51 billion), and in last place was Fincantieri, whose proposal came it €1.34 billion ($1.61 billion) (Newsweek Romania, November 17, 2018).

After two months, the military prosecutor’s office referred the investigation to the National Anticorruption Directorate (DNA), signaling that they may have stumbled over evidence of corruption. In May 2020, after a year of investigations, the DNA closed the case for lack of evidence (Newsweek Romania, May 12, 2020).

In parallel with the criminal investigation, the main competitors started to contest the procurement process in administrative and civil courts. Fincantieri was the first to lodge a grievance with Romania’s public acquisitions watchdog—the National Council for Solving Complaints (CNSC). However, it soon withdrew its case (Newsweek Romania, June 27, 2019). Naval Group and SNC were the second to lodge a complaint with the CNSC (Profit.ro, June 7, 2019), but it was rejected for tardiness. Increasingly, the competitors began shifting their conflict from the courtroom to the pressroom. The Romanian and the French press accused the Romanian authorities of favoring Damen in the acquisition process (G4Media.ro, April 23, 2019; La Tribune, January 14, 2019). French journalists went further and accused Naval Group’s new European partner in the joint venture Naviris, Fincantieri, of trying to shortchange the French company in the Romanian tender (La Tribune, June 24, 2019).

On July 2, 2019, the Ministry of Defense finally announced the result of the tender: the winner was the joint venture between Naval Group and SNC (Agerpres, July 2, 2019). Soon after, on July 9, Damen Galați lodged a complaint with the CNSC and filed a number of lawsuits, contesting the entire procurement process (Știri.TVR.ro, July 10, 2019). The onset of the COVID-19 pandemic further prolonged this litigation. Nevertheless, on July 13, 2020, the Romanian courts ruled in favor of the government in the main lawsuit launched by Damen (Mapn.ro, July 14, 2020). Currently, there are at least three more lawsuits that need to be decided in order for any meaningful work on the corvette program to start.

If the Romanian courts find in favor of the government, the contract for building the four ships will probably be signed in the first half of 2021. In this case, Naval Group and SNC will have to deliver the first ship by the 2024 and the last in 2028, ten years after the start of the procurement process. If the courts find in favor of Damen, the entire acquisition process will have to restart; however, this has become increasingly unlikely.

Looking at the corvette program after more than four years of bureaucratic tussles, several points become clear. The decision taken in 2016 to award the program directly was justified because of the precarious security situation in the Black Sea region, the long military shipbuilding holiday taken by Romania in the past 25 years as well as the experience of Damen Galați in constructing military vessels for foreign customers. Switching to a competitive process, rather than relying on a single manufacturer, had the advantage of saving money and obtaining a better deal. However, it also increased the risk of delays from litigation and administrative issues. The way in which the Romanian authorities handled the competitive tender for the multi-role corvettes showed the limits of the military procurement apparatus. One of the consequences of the corvette program debacle has been a transformation of the previously autonomous Armaments Department into a simple ministerial department under the direct authority of the defense minister.

Finally, the decision to link the corvette program to the modernization and upgrade of the Type 22 frigates was a mistake. From an industrial point of view, it allowed one shipyard in Romania to work on six naval vessels, potentially giving it an unfair business advantage. It also meant that by merging the two programs into one, the Romanian government gave up on a potential offset program. The decision to link the corvette program with the frigate program was taken in order to save money. However, under a competitive procurement program, it opened the door to potential litigation-related delays for both programs. The Romanian Naval Forces never had a fallback option should the corvette program become postponed. And this has had a direct impact on the country’s naval capabilities in the Black Sea.