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Pandur in Czech Army

In late 2003, a center-left CSSD-led government approved a plan to replace Soviet-era vehicles with 240 new APCs. In 2004, PricewaterhouseCoopers (PwC) was hired to organize a tender for the contract, a signal that the MoD was seeking greater assurance of transparency. A tender for 199 APCs was let in 2005 under the new CSSD-led government of Prime Minister Stanislav Gross. General Dynamic's Austrian subsidiary, Steyr-Daimler-Puch Spezialfahrzeug GmbH Company, entered the APC competition, while its other subsidiary, Swiss firm Mowag, stayed out, allowing General Dynamics and the USG to advocate for Steyr.

For all parties interested in participation in the tender for wheeled armoured personnel carriers for the Czech military was the 20 July 2005 at noon the deadline for handover of filled pre-qualification questioners. There were the following seven parties that handed over their filled questioners:

1. BAE Systems Land & Armaments L.P. (United States);
2. BUMAR Sp. Z o.o. (Poland);
3. Globtrade Air s.r.o. (Czech Republic);
4. Iveco Fiat – OTO Melara, S.c.r.l. (Italy);
5. Patria Vehicles Oy (Finland);
6. Rheinmetall Landsysteme GmbH (Germany);
7. STEYR CONSORTIUM (Austria).

The pre-qualification questioners were evaluated by an inter-departmental commission, and the following four parties were informed that they had qualified to go forward to the second stage of the tender:

1. BAE Systems Land & Armaments L.P. (United States);
2. Patria Vehicles Oy (Finland);
3. Rheinmetall Landsysteme GmbH (Germany);
4. STEYR CONSORTIUM (Austria).

These companies were requested to present their offers to the Ministry of Defence not later than 14 November 2005 under the condition that the vehicles shall take part in this October's life demonstration, and they shall prove that all technical and tactical requirements are met.

Following a live performance test of vehicles offered by foreign manufacturers to replace the outdated wheeled armoured personnel carriers of the Czech military, only two companies are left in the tender process. Originally three companies were taking part in the test at the Brezina Military Training Area and at Prerov in the Czech Republic over the last three weeks. However, because a test vehicle of the Rheinmetall Landsysteme GmbH, Germany, did not prove to be satisfactory in crossing water obstacles, this company was disqualified from the tender. Two other companies, the Patria Vehicles Oy, of Finland, and the Steyr-Consortium, of Austria, are proceeding in the tender and are expected to submit their final offers by 14 November 2005.

Following the recommendation of the Interdepartmental Commission of the Czech Republic, the Czech government gave the nod on 25 January 2006 to an offer made by the Steyr-Daimler-Puch Spezialfahrzeug GmbH,to produce and deliver 234 wheeled armoured personnel carriers for the Czech military. The Austrian offer reached 23.6 billion Czech Crowns while the offer made by a Finnish company was a billion Czech Crowns higher.

The Czech Minister of Defence, Karel Kühnl, was tasked by the government to inform both competitors about the governmental decision, and to start talks with the winner aimed at concluding a contract before the end of April 2006. On 9 June 2006, Minister of Defence of the CR Karel Kühnl signed agreement with the Steyr Company, on supply of first 199 PANDUR wheeled armored personnel vehicles.

In June 2006, days after national elections, ODS announced it would cancel the tender once it formed the new government. Just before leaving office, then-Minister of Defense Karel Kuehnl (Freedom Union party) drew criticism from ODS for signing the contract with Steyr for 199 APCs, with an option for 35 more.

Late in 2006, in connection with competitor Patria's legal challenge of the contract award to Steyr, the Anti-Corruption and Financial Crimes Unit (AFCU) of the Czech National Police began an investigation of the APC tender. The investigation was transferred to the Special Department of the Czech Military Police at the end of 2006 when it was discovered that they too were looking into the tender. According to the Military Police, the tender was found to have been conducted "in accordance with the rules".

Through the course of 2007, the Ministry of Defense under the ODS-led government of PM Mirek Topolanek disputed the quality and timeliness of Steyr's Pandur deliveries. The government first eliminated the 35-vehicle "option" in May, and then unilaterally canceled the entire contract in December of 2007.

The government was informed that the contractor did not perform the contract duly and as scheduled. The view of the Czech MoD is that the contractor substantially violated the contract which is the reason for termination of the contract. Based on this fact, the government agreed to terminate the contract with the Defendia company on 10 December 2007.

In this context, the MoD has already taken legal measures in relation to the contractor, i.e. it sent the notice of one-sided termination of the contract including related sanctions. The MoD believes that there is no space for unsubstantiated concessions nor improvisations in such a project that is undoubtedly so crucial for the Armed Forces of the Czech Republic. As for the next steps of the MoD, it can be only said that the government tasked the Minister of Defence to present alternatives of further course of action before 31 January 2008.

General Dynamics lawyers responded by preparing to take the case to international arbitration. Intense negotiation (including US advocacy for Steyr) followed into early 2008, and the Topolanek government agreed in April 2008 to purchase 107 Pandurs, subject to successful field testing. Finally, in March, 2009, shortly before the fall of the Topolanek government, then-Deputy Minister of Defense Martin Bartak (ODS) signed a revised contract with Steyr for 107 Pandurs at a cost of 14.4 billion crowns (USD 692M at March 2009 rates). The Czech Army received the first 17 Pandurs in September 2009. The total number of vehicles would include six variants.

In 2010 allegations emerged of a major bribery scandal in which six percent of Steyr's Pandur contract was supposedly parceled out as payoffs to CSSD and ODS. Those implicated include: Stanislav Gross (no longer in politics), whose government let the tender; Karel Kuehnl (now Czech Ambassador in Croatia), who signed the 2006 contract with Steyr; Martin Bartak (current ODS Minister of Defense), who signed the renegotiated 2009 contract with Steyr as Deputy MoD; Jiri Paroubek (CSSD party chairman, and front runner for PM in the next government), whose government approved the 2006 deal with Steyr; and Lubomir Zaoralek (CSSD shadow FM, and front runner to head the MFA for Paroubek), who was allegedly lobbied by Steyr in 2003.

Under a confidential 2002 agreement between Czech consultant Jan Vlcek and Hans Malzacher, then CEO of Steyr, Vlcek was engaged by Steyr (before the company's acquisition by General Dynamics in 2003) to arrange meetings with Czech officials to advance Steyr's Pandur marketing efforts. Vlcek claimed to have withdrawn from the arrangement when he realized that bribery was involved. It was alleged that, after Vlcek's departure, the payoffs were funneled through PAMCO, a Czech consulting firm owned by entrepreneur Pavel Musela, a friend of former PM Stanislav Gross.