Bulgaria

Provisions do exist but they are not always complied with. The Bulgarian MoD publishes a long list of real estate and other assets for disposal which are handled according to internal procedures, available on the MoD website. There have been allegations that the authorities dealing with the disposal of MoD-owned real estate have experienced problems with setting prices, ensuring transparent auction procedures and transparent handling of the proceeds of the sale ( 4 and 5). The extensive set of non-combat assets for disposal are dealt with through regular auctions, carried out by the Sofia Stock Exchange in accordance with the Bulgarian Stock Exchange and Auction Act. Dual-use assets are traded by the MoD-owned “Supply and Trade” company with buyers who possess the required license. The list of assets and the procedures are publicly available on the company website. Lists of surplus assets, available online, are outdated with the latest list dating back to 2010.

While good provisions are in place, there is no evidence of how effective the control is, and the issue is rarely referred to in other MoD documents. Information is sometimes abbreviated and generic, while the main provisions of the tenders are publicly available (time-frames, bidding price, location and size of property in case of real estate).

Asset disposal is normally scrutinised and some reports are publicly available. Internal audits are performed by the Inspectorate, which could refer a case to the Prosecutor's Office if irregularities are uncovered. The National Audit Office provides external auditing. As mentioned in questions 14 and 15, the results of internal audits are transparent and public, while NATO reports are usually summarized, and the last available report is dated.

However, robust evidence and detailed information on the majority of deals and their proceeds is missing. Lists of surplus assets, available online, are outdated with the latest list dating back to 2010. There have been media allegations on asset disposal speculative prices and unclear procedures, particularly related to real estate disposal (3 and 4). In 2014 the structure of the MoD was amended to incorporate a new Directorate responsible for the control of the 12 MoD-owned companies, some of them responsible for the handling of assets and their disposal. Additionally, the Directorate General “Defence Infrastructure” will be the sole entity dealing with real estate establishments and their disposal, if necessary. There are still no indications of how effective the the new Directorate is.

The MoD budget is separated in to two main categories: Defence Capabilities and NATO and International Security. Neither the 2013 nor the 2014 Defence Budget make indications of secret items. At the same time the budget does not explicitly confirm that the spending on secret items is zero.

The 2014 budget of the National Intelligence Service is about 17,5 million BGN. While it is separate from the MoD budget, constituting 1,080 billion BGN, for comparison purposes the intelligence budget is less than 2% of it.

The specialised Parliamentary Committee on Control of the Security Services is tasked with reviewing the budget of the security services. The Committee is assured access to classified information. Its sessions are closed. The Committee participates in the approval of the intelligence budget as part of the overall State Budget. However, evidence of the Committee's effective control or access to all the relevant budget data is not publicly available. The situation is similar to the Committee on Defence, with no hard evidence of its controlling functions or access to all relevant information with regards to secret items of the defence budget.

RESPONSE TO GOVERNMENT REVIEWER: Noted. However, there was not quite enough independent evidence to justify a score of 4 in this question.

The security and intelligence services are tasked with producing annual audit reports (through internal inspectorates) and providing them to the respective parliamentary committee: the Committee on Control over the Special Services or the Defence Committee. Information is not publicly available, nor are the minutes of the sessions. There is no evidence of significant Parliamentary debate, even though the agendas of the Committee occasionally indicate debate on particular issues and input into budget decisions.

Score 2 has been selected to reflect uncertainty over the level of detail provided to the Committees.

Some off-budget expenditures for all the ministries, including the MoD, are allowed and regulated in the Composition of the State Budget Act, Chapter 7, and are controlled as per the normal procedure for the state budget. Additionally, the Law on Defence and the Armed Forces (article 13) mandates that all sources of revenue for the MOD - which are listed - are formalised either through the budget, other laws, or Council of Ministers decrees. Scrutiny is exercised, primarily through the National Audit Office, but there is no indication of its effectiveness (4). Any off-budget expenditure is accounted for in the quarterly report of the MoD under 'Budget Implementation', as indicated in the Rulebook on Financial Management in the MoD.

RESPONSE TO GOVERNMENT REVIEWER: Source 1 from 2004 indicates that off-budget expenditure exists and is audited by the National Audit Office, which goes against the assurance that off-budget expenditure has been discontinued in 2001. Internally, the 2014 Rulebook on the Structure and Activities of the Information Centre under the Ministry of Defence, postulated that the Administrative, Financial and HR Directorate supervises budget and off-budget expenditures. (6) Score maintained as it appears that some off-budget expenditures do occur and are officially acknowledged.

There are no indications of any off-budget expenditure in the MoD Report on the Implementation of the 2013 Budget. There have also been no media allegations in 2012 and 2013, unlike in previous years. Any such expense is rather sporadic and arguably well scrutinised. A statement by the the caretaker minister - that off-budget expenditures are currently not being spent towards armaments - indicates that they do exist.

RESPONSE TO GOVERNMENT REVIEWER: Internally, the 2014 Rulebook on the Structure and Activities of the Information Centre under the Ministry of Defence, postulated that the Administrative, Financial and HR Directorate supervises budget and off-budget expenditures. (6) Score maintained as it appears that some off-budget expenditures do occur and are officially acknowledged.

There is a robust regulatory framework for classification of information on the basis of national security, its protection and scrutiny. The body that implements and regulates the national Information Security Policy is the State Commission on Information Security. The Commission reports annually to the Council of Ministers (CoM). The official website of the State Commission on Information Security has all the relevant legislation, as well as its Rulebook on Implementation. It can also submit draft legislation to the CoM on classified information handling and protection.

The Commission issues an annual report of its activities. While the summary is publicly available, parts of the report are classified. Detailed information on the budget of the Commission is also available online and is effectively scrutinised by the National Audit Office. There is evidence that the classification of information and the respective public bodies are scrutinised by parliament, particularly the Parliamentary Committee on Control of the Security Services. However, the degree of success is not always evident and some shortcomings are possible. In August 2013, a new bill was adopted on the criteria and procedures for classification of information on the basis of national interest in the areas of security and defence.

RESPONSE TO GOVERNMENT REVIEWER: Due to lack of evidence of effective scrutiny, score 3 maintained.

The Bulgarian MoD owns commercial businesses. The Law on Defence (article 328) mandates that the MOD should publish the register of all companies it owns or exercises property rights in on behalf of the state. Thecompanies are publicly declared in the Commercial Register to the Registry Agency and their annual financial reports are published on the Agency’s website. The quarterly financial reports as well as the annual financial reports are provided and published on the website of the Ministry of Finance.

Some of the companies have been involved in various scandals in the past. The idea proposed in 2010 about the closure of all military-owned businesses has been abandoned (2 and 3). In 2013 the Defence Minister of the caretaker government initiated a merger of the commercial businesses owned by the MoD, 12 at the time, which he believed was far too many. This process was terminated by the previous government. The Minister at the time re-shuffled the MoD’s structure to establish a new Directorate called the “Commercial businesses and defence mobilization preparation”. The new Directorate will have control over the activities of all MoD-owned businesses with the rationale that this will improve their performance and management. While the MoD businesses are publicly declared and transparent to a certain extent, a big portion of their activities remain blurry. There is still no evidence of a significant change of the situation after the establishment of the new Directorate.

RESPONSE TO GOVERNMENT REVIEWER: Agree with some of those points and incorporated relevant information. However, it appears that lack of clarity still affects the governance of those businesses and some of the standards are not clear. Score 2 maintained.

The military-owned businesses are scrutinised by the newly established Directorate “Commercial Businesses” within the MoD, which is in turn scrutinised through the common procedures for the MoD structure (including scrutiny of the National Audit Office). The only mention of scrutiny of the commercial businesses in the Annual Report of the MoD Inspectorate is with regards to the submission of Conflict of Interest declarations by employees of the MoD, including the commercial businesses. No mention of further scrutiny could be found.

Traditionally, the publicly available details of any financial or anti-corruption scrutiny tend to be very abbreviated. There is no evidence of how objective or successful such controls are. According to a survey conducted by the previous Caretaker Cabinet in the MoD, there is a serious corruption risk in the management of the MoD commercial businesses and no robust mechanism exists to detect any conflict of interests (6). The current Minister of Defence has ordered an audit of all MoD enterprises but it is unclear what exactly will be audited, how findings will be followed up on and how successful implementation will be. In December 2014, the new minister of defence confirmed that there are sizeable illegal financial outflows from the MoD and the he would therefore order an external audit. (7)

Official national legislation (6) outlaws unauthorised private enterprises by military and defence officials. However, it is believed that the law is not fully respected. The last report of the MoD Inspectorate indicates that about 260 military or other MoD employees have failed to submit declarations on Conflict of Interest. According to a survey conducted by the previous Caretaker Cabinet in the MoD, there is a serious corruption risk in the management of the MoD commercial businesses and no robust mechanism exists to detect any conflict of interest of possible private unauthorised enterprises. Media allegations of unauthorised private enterprises or suspicious activities in MoD-owned companies are rarely fully investigated and it is even less frequent that offenders are punished (1,4,5). Recent findings of the MoD Inspectorate of suspicious activities have been taken up by the media but follow-up reports of actions and sanctions are missing.

RESPONSE TO GOVERNMENT REVIEWER: Agreed on many points. However, it is as of yet unclear whether the risks identified have been addressed and whether sanctions are applied when cases of unauthorised enterprise are detected. Score 2 maintained.

There is a vocal and clear commitment by senior MoD officials to tackling corruption in the defence sector (1). This tends to be the case among the most senior management and less so down the hierarchy - in particular when it comes to defence chiefs. This commitment seem to be significantly stronger in media interviews and public speeches than in day-to-day rhetoric and internal events (1). Given the persistence of the problem with corruption in public administration as a whole, there is the tendency that every new government (and minister) would come with a strong anti-corruption rhetoric. The current minister, for example, has publicly ordered an external audit in the MoD due to a number of irregularities and reports of sizeable illegal financial outflows from the armed forces.

Measures and penalties for employees taking part in bribery or other corruption activities are in place and regulations exist. The Bulgarian Criminal Code (Chapter 8, part IV) criminalises passive and active bribery of public officials and foresees fines and imprisonment (up to thirty years in 'particularly grave' cases) as sanctions. The Law on Defence additionally foresees disciplinary measures (for example suspension) for service persons convicted of crimes, which include bribery and corruption. (5, 6)

Traditionally, the bigger problem in Bulgaria is implementation of such sanctions (3). Some of the key anti-corruption scandals involving cabinet officials have remained unresolved. Often application of such sanctions is subjective and inconsistent (5). The 2013 EC Monitoring Report concludes that: “the general impression is of weak and uncoordinated reaction to the systematic corruption problem in all parts of the public administration. The weaknesses, assessed in the previous report, continue to exist….The lack of proved success in investigation of high-level corruption cases remains an obstacle for the Bulgarian public to see anti-corruption efforts as serious and consistent”.

The Administrative Procedure Code and the law on the conflict of interest both stipulate that whistleblowing signals can be made for corruption and abuse of power. They impose an obligation on relevant authorities (the department involved, the Military Police, the MOD Inspectorate or the Commission for Prevention and Ascertainment of Conflict of Interest) to investigate signals and issue decisions on them. They state that whistleblowers cannot be prosecuted to filing alerts, and impose obligations on investigating authorities to protect them from reprisals. The official MOD website clearly states the procedures to follow and the bodies to be contacted.

Thus whistle-blowers are protected by law, in theory. In reality, however, these provisions are not robustly implemented (2). According to the report of the caretaker Minister in 2013, whistle-blowers in the defence sector are not offered enough protection by the system, which discourages the practice. The claim is based on the questionnaire prepared by the Minister and the Standing (Permanent) Council on Corruption in the MoD and internally circulated and completed. This is a long-standing issue in Bulgaria for various forms and sectors of whistle-blowing, not just defence. Lack of trust that the identity and rights of persons reporting corruption cases will be robustly protected prevents the wide use of the practice (2 and 3).

Point 11 of the 2013 Anti-Corruption Policy implementation Plan reads: &quoute;At MoD level: to establish a list of “sensitive positions”, including employees dealing with military deliveries, contracts and public procurement contracts allocation, financial and commercial management; and to compose additional requirement for such employees’ job descriptions.” However, no evidence of the level of implementation is available. Rules of conduct for such positions or the list of positions itself are not made public. The report of the Interim Minister estimates that generally, insufficient attention is paid to HR issues related to corruption, with unqualified personnel dealing with procurement, commercial businesses of the MoD, and related issues.

The number of employees of the MoD is strictly regulated by acts of parliament and the Council of Ministers. In 2013 the Law on the Armed Forces was amended to downsize the MoD staff from 1660 to 1576, and the sizeof the administration is publicly stated in the Ordinance on the MoD Structure. These numbers are publicly available and debated. The number of additional contract agents is also determined by parliament and has been agreed at no more than 8% of the permanent staff. The number of employees of the security and intelligence services is a state secret and not disclosed. The number of personnel in the armed forces is also publicly known and decided upon by parliament, the mandated number currently being between 37,000-40,000. (4)

The basic pay rates and allowances for military and civilian personnel are openly published and are generally discussed in parliament and by the public, as are allowances. The Law on Defence states that military personnel shall be paid monthly and sets out the allowances they receive, including, for example, housing and annual leave travel. Particular levels of salaries and allowances are established by an Order of the Council of Ministers and the basic pay rate for military personnel is established annually, depending on their ranks, through the State Budget Act. The procedures are clearly regulated with only minor shortcomings possible. Information on annual bonuses is sometimes less transparent, becomes known through individual statements, and occasional media speculation appears. However, the funds in question are limited and the public has a general idea of the sums. The bonuses normally concern all military and civilian personnel of the MoD.

RESPONSE TO TI REVIEWER: The focus of the question is on pay and allowances, which are public. While transparency surrounding bonuses could be improved, score 4 was maintained as the main criteria of the scores are fulfilled.

The Law on Defence states that service personnel shall be paid monthly, establishes the way of calculating remuneration and lists allowances. Basic pay is non-discretionary and established by annual budgetary acts. (5) Salaries are normally received on time and the system is well-established and routine, particularly within the MoD where it is the responsibility of the Finance Directorate. Occasional delays are possible but this is the exception rather than the rule. A more significant problem occurs at MoD-owned commercial businesses that are heavily in debt. For example, no salaries were paid to sewers in “Supply Services” for two month. They were subsequently paid only after protests were organised. A large number of the MoD-owned businesses are indebted and this creates a significant problem with payments.

RESPONSE TO GOVERNMENT REVIEWER: Agreed that the payment system does work well in most cases, at least when it comes to military and civilian personnel. However, the problems which pertain to the MOD-owned businesses cannot be ignored and score 4 is not appropriate. Score changed to 3 to reflect these issues.

Established systems regarding appointment of military personnel at all levels exist. (5) Appointment of senior military officials is debated by the Council of Ministers and approved by the President, as Chief of the Bulgarian Armed Forces. While the provisions of the regulations are good enough (i.e. no systematic irregularities or violations have been observed) and there are established mechanisms for control and oversight (the MoD inspectorate is allowed to audit personnel contracts), implementation remains problematic. Appointments are widely seen as non-transparent and subjective both within and outside of the MoD (4). Additionally, the perception of high-level staff “purging” is widespread among the public and the MoD staff - it is common that any new Cabinet re-shuffles the MoD structure and top-level personnel and the rationale is often subjective and non-transparent, despite the official rhetoric of the Cabinet.

Formal processes of promotion do exist, including selection boards governed by appropriate directives of minister of defence. (3) However, there are indications that their objectivity is often compromised and a lack of transparency exist on issues relating to human resources. There is also limited evidence that promotion is based on objective criteria or competition. The Report of the Interim Minister, based on MoD-circulated self-assessment questionnaires, raises two points: promotion of employees for international secondment and long-term training abroad are based on personal and subjective judgement, as well as individual decisions of managers on hiring, promotion and dismissing of civilian staff. (see also 5)

RESPONSE TO GOVERNMENT REVIEWER: The issue appears not to be that of regulations being in place, but rather than of implementation. Score maintained.

Compulsory conscription ceased in 2008.

There is no voluntary or compulsory conscription in Bulgaria.

RESPONSE TO GOVERNMENT REVIEWER: Agreed. Since no voluntary conscription exists, score has been changed to N/A.

There is no evidence of “ghost soldiers” in the traditional sense of the term; the publicly available information on pay systems and the separation of chains of command and payment when it comes to basic salaries makes the likelihood of the phenomenon occurring quite low. However, Bulgarian public administration has had a problem with the so-called “hоllow positions.” These refer to the discrepancy between the official and the actual number of staff. This is a practice where the administration would require more positions that it would actually need/ utilise, so that those could be made redundant when layoffs are required by the government.(3, 5) In this way, the institutions could &quoute;protect&quoute; its actual staff. This relates to both civilian and military positions. According to the former minister of defence, these positions amount up to 5,000, i.e. 10-12% of the total number. (5) Even though no public evidence of corruption could be found with regards to &quoute;hollow positions&quoute;, the area is corruption prone and not transparent enough.

RESPONSE TO GOVERNMENT REVIEWER: Agreed. However, the risks posed by the 'hollow positions' cannot be disregarded and thus score 3 is maintained.

The chains of command and payment are separate to a certain extent. The Law on Defence states that the basic pay rate is determined in each budget law and the procedures surrounding payment of salaries and allowances are determined by a Council of Ministers Ordinance; additional bonuses are established by the MoD. Generally, payment procedures are well-established and complied with. Within the MOD, the Finance Directorate is responsible for payment of salaries and allowances, thus taking it outside the chain of command. In order for the payment established by the above-mentioned documents to be effected, an Order of the Commander is required but this is a procedural step. If a member of the military staff has been dismissed or expelled for a certain period of time, the cancellation or the subsequent restoration of his payment are subject to an order of the Commander as well. A Commander’s order is also necessary for the payment of any medical compensation. It is unclear to what extent this overlap of chains of command and payment can lead to subjectivity or lack of transparency in some cases.

RESPONSE TO GOVERNMENT REVIEWER: The Law has been verified but the sources already provided are more precise in terms of payment procedures. Score maintained.

There is a Code of Conduct for all military and civilian personnel of the MoD and the Code is publicly available. It details issues such as conflict of interest, private interest, bribery, public procurement and contracting clauses, measures and sanctions. Oversight mechanisms exist (i.e. the MOD Inspectorate) and procedures are normally followed, however, issues with enforcement of sanctions remain (1). This opinion is shared by a significant number of MoD employees, as indicated by the report of the Interim Defence Minister. The issue of enforcement is discussed further and scored in question 48.

While some information on breaches of the Code of Conduct is usually provided in the MoD Inspectorate reports, such information is highly abbreviated and does not go into any detail, usually mentioning only that some breaches were detected. Further details are not made public. There is also no information on follow-up measures or sanctions for the identified cases of breaches. (1, 3) The questionnaire circulated among the MoD employees during the time of the Caretaker Cabinet and the results received indicate that cases of corruption and breaches often remain unaddressed. There is widespread skepticism as to whether the Code of Conduct is a robustly enforced policy rather than a reference document only (2).

RESPONSE TO GOVERNMENT REVIEWER: The comment does not provide additional evidence of breaches being addressed and the results of these actions made public. Score 2 maintained.

Bulgaria has previously taken part in the NATO Building Integrity initiative and there is evidence that some high-level training has taken place (2). Bulgaria, as a lead nation in the initiative, has also provided training and seminars for foreign officials of about 20 countries on anti-corruption mechanisms in defence acquisition contracting and public procurement. However, the 2013 report of the Interim Minister indicates that level of expertise of officials dealing with project management and contracting is low. The 2013 Anti-Corruption Policy Implementation Plan foresees further training of project managers and team members who work on various defence projects and contacts, including on public procurement deals. There is no evidence on how frequent and how consistent such training will be. 'The Report on the Implementation of the MoD Programme of Work 2013' does not mention any anti-corruption training in 2013. The same stands true for 2014.

RESPONSE TO GOVERNMENT REVIEWER: Accepted that training does occur and that a relevant course is offered at the Military Academy. (5) However, it has not been possible to verify whether all relevant personnel are given training annually. Score 2 maintained.

Tackling high-level corruption is a major challenge in Bulgaria, as indicated by the EC monitoring reports. Few to none of the big scandals involving corrupt officials in recent years, primarily made public by the media, have been concluded in courts with effective verdicts. As a result, the public is highly skeptical of any proposed measures to investigate and prosecute corrupt officials as trust in the Bulgarian judiciary is extremely low (3). Policy to make outcomes of the prosecution of corrupt officials public does not form part of the 2013 Anti-Corruption Policy Implementation Plan. Petty corruption cases are rarely made public and in the rare cases that this happens, it tends to be through media allegations.(see 4)


 

Facilitation payments are strictly illegal, being outlawed by the Penal Code (Art. 301-307) and the Law on Defence, which cover both military and civilian personnel. There are legal provisions for punishing offenders, mostly fines and imprisonment (1, 6). However, petty corruption in the form of facilitation payments, among other types of corruption, is widespread in Bulgaria and there are indications that this is the case in the defence sector as well. Enforcement of penalty is only occasional with a vast majority of cases not even reported, which limits the provisions aiming at discouraging such payments (2,3,5). According to a recent estimation, about half of the Bulgarian population considers bribe-giving as a useful way to resolve one’s problems (4).

RESPONSE TO GOVERNMENT REVIEWER AND PEER REVIEWER 2: Yes, facilitation payments are outlawed and mechanisms exist, however as indicated in the sources box and by the Peer Reviewer, these are not applied successfully. Given the shortcomings, the score is maintained.

Corruption is viewed at the strategic level and transparency clauses feature in all the major strategic documents in the defence sector - the White Paper, the National Defence Strategy and the National Security Strategy. These documents are publicly available. However, they mostly reference corruption as a domestic issue and do not specifically address operations: the White Paper, for example, refers to tackling corruption and conflict of interest as one of the main priorities of the MOD management (p. 64), but the major focus is internal. The National Security Strategy takes a similar approach. (4, 5)

The 2013 Anti-Corruption Action Plan states that the military doctrines of the land, air and maritime forces should all tackle corruption at the strategic level, especially in operations: &quoute;In developing military doctrines for the various parts of the armed forces, corruption should be viewed as a matter of strategic importance during operations; subsequent study and implementation on the anti-corruption policy is to be organised.&quoute; The doctrines postulate that further implementation of the anti-corruption policies and the monitoring of progress should be done by the Armed Forces through programme documents. It is unclear if such documents have already been produced, as they are not available on the MoD's official website; the Minister's Order approving the National Military Doctrine does not address corruption on operations at all.

As there is no indication of the extent to which introduction of anti-corruption doctrine for operations has been achieved, score 2 was selected.

The 2013 Anti-Corruption Action Plan states that the military doctrines of the land, air and maritime forces should all tackle the issue of corruption at the strategic level, especially in operations. The doctrines should be followed by programme documents that further organise the implementation of the anti-corruption clauses and the monitoring of progress. It is unclear if such documents have already been produced, as they are not available on the MoD's official website.

Anti-corruption training of commanders forms part of the overall policy. However, this training might not be very regular or consistent, or it may not be given to all the commanders in operations. There is no evidence of whether or not the knowledge is applied in theater. There have been reported instances of misconduct of Bulgarian military personnel when in deployment, particularly in local contracting regarding food and fuel supplies (Interviewee 1).

There is no indication of trained anti-corruption officials deployed with missions in order to monitor the implementation of the military doctrines’ provisions on anti-corruption. The report of the Interim Cabinet in 2013 cites a survey done within the MoD claiming that the corruption risk during deployment is significant, particularly in local contracting, with contracts rarely monitored and with observable lack of competition in the field. Additionally, no monitoring on conflict of interest or linkages to organised crime groups is conducted regularly.

RESPONSE TO PEER REVIEWER 2: The source provided does not address the issue of monitors. Score maintained.

While some guidelines have been produced, particularly in the Methodology on Corruption Risk Assessment, the level of detail is not high and there is little to no evidence that officials have been properly trained to implement those guidelines, especially in theatre. Various reports, expert interviews and media allegations report that the level of anti-corruption expertise in contracting military and civilian personnel at the MoD or in missions is insufficient. While the need for training is addressed in the 2013 Anti-Corruption Action Plan, there is no indication that such training is regular or consistent, or provided to all the relevant staff officers. The situation is particularly problematic with deployed forces, where lack of local expertise and situational awareness prevent successful tendering, contracting and monitoring. The 2013 report of the Interim Cabinet cites a survey done within the MoD, claiming that the corruption risk during deployment is significant, particularly in local contracting, with contracts rarely monitored and with observable lack of competition in the field.

There is no legal prohibition on employing private security companies and they are contracted in particular to guard the MoD’s vast real estate complex, although their use on operations has not been noted. The level of internal scrutiny is low. A number of irregularities have been identified in the past by external audits, such as private companies with expired contracts that continued to be paid by the MoD for months; loopholes in the contracts allowed the companies with expired contracts to continue their duties until new contracts were signed (4 and 5). Questionable practices carrying some corruption risk in the defence sector have been identified with private companies reportedly using state infrastructure and defence complexes through unregulated passes. Utilisation of fake passes and documentation indicate significant corruption-related loopholes in defence contracting to private military companies (3).

Legislation on defence and security procurement has significantly improved in recent years so as to comply with best international practices and EU standards (6, 4). The Bulgarian Public Procurement Act lays out the procedures related to public procurement; Article 3 states that military equipment, as well as military-related works and services contracts, are subject to the Act. Article 13 provides an exemption for goverment-to-government contracts, items deemed to be essential to national security, and offset contracts, which are to be governed by separate ordinances issued by the Ministry of Defence. The Act contains provisions for the publication of procurement awards, unless prevented by national security concerns. The Law also contains some anti-corruption provisions, including the principle of open competition, publication of contracts, and exclusion from tenders of companies or individuals which had been convicted of bribery (although there is a possibility of rehabilitation).

The Council of Ministers decision on the modernisation of the Bulgarian armed forces for 2020 (8) stipulates amendments to directives governing defence and security procurement in order to streamline and improve the procurement process. Oversight is provided by the MOD's Internal Audit Directorate and the National Audit Office; some projects also appear to be discussed by the parliamentary Defence Committee, although the extent of oversight is not clear. (9)

Despite the fact that robust legislation is in place the implementation of this legislation remains problematic, with a significant number of procedures being circumvented (6). Some of the most important procurement projects such as the acquisition of new fighter jets are subject to inter-governmental negotiations instead of public tendering. (8)

RESPONSE TO GOVERNMENT REVIEWER: Since the degree of independent oversight over procurement processes exempt from the Public Procurement Act is unclear, score 2 is maintained.

Some information on the procurement cycle is publicly available.The Council of Ministers Decision on the National Programme 2020 makes life-cycle management the operating principle of procurement (enshrined in the Defence Acquisitions System) and mandates the use of the PRINCE project management cycle. (7) It also allocates the following responsibilities: the Programme Council and the Defence Capabilities Council, with support from the Project Management Office, are responsible for prioritisation of 'financing and implementation' of projects; the MOD, specifically the Defence Acquisitions Directorate (8), is responsible for the acquisitions phase; and particular military units are assigned responsibilities for maintenance. Information on asset disposal are limited; however, it is known that the Supply and Trade company, owned by the MOD, is responsible for the disposal of weapons and dual-use products. (9) Further details are available through internal directives of the Ministry.

In practice, however, key information (such as prices and timelines) is often missing both on major and smaller projects. Media speculations on public procurement corruption and conflict of interest are widespread (1-4).

RESPONSE TO GOVERNMENT REVIEWER: After verification of sources, score has been raised to 3.

A number of external and internal audit and oversight bodies have been established in recent years, with the MOD's Internal Audit Department, the Inspectorate and the external National Audit Office all involved in scrutinising procurement. While these bodies significantly increase transparency in the procurement sector, their reports are classified to a large extent and only summary information is available to the public (number of inspections and some examples of irregularities). There are indications that independent oversight is exercised, however, doubts about consistency remain. The regulatory framework is robust and legislation conforms with international standards, however, there is no hard evidence on implementation. Regular procurement scandals made public by the media indicate significant shortcomings in the oversight system.

The Law on Public Procurement mandates that procurement notices and awards should be published in the Public Procurement Register maintained by the Public Procurement Agency, with summarised information from the Register available online. However, procurement procedures in the field of defence and security can be excluded from this provision if the exclusion is justified to the Agency. (8) However, media speculations on corruption and conflict of interest with regards to purchases has been widespread. In 2013 the Chair of the Bulgarian Industrial Association sent a letter to the President insisting on more transparency with regards to defence-related contracts and offsets. The letter also outlines the very low level of return of investment in the defence and security sector. Security or confidentiality is often given as a reason for the secrecy, however, the public is very skeptical towards such justifications (7).

In 2014, amendments to the Public Procurement Act were adopted in order to increase transparency of public purchases. According to the amendments, all proceedings and contractor profiles should be available on the website of the respective contract-awarding institution. Additionally, all the reports of the tendering commission should be publicly available. The Ministry of Defence has also accepted and published an investment and modernisation plan for the armed forces - Plan 2020, which provides a list of 'core rearmament projects' including new acquisitions.(9) This, however, is a general plan, not a procurement notice. The MOD intends to increase transparency through publication of information even where the procedure is carried out without contract notices. However, it is still too early to fully assess the implementation of these changes.

RESPONSE TO GOVERNMENT REVIEWER: Agreed. Information incorporated and score changed to 3.

Companies bidding for government work are required to demonstrate a formal and public compliance programme (1). Some tenders are closed for companies with previous corruption convictions, as mandated by the Public Procurement Act. However, there is no evidence that this legislation has robustly improved implementation and that the ongoing practices of contract awarding have changed. Public tenders are still widely believed to be won by predetermined companies, with some tenders being often just a formality (1-4). There is also no evidence of robust oversight of contractors' or sub-contractors' compliance with their ethical programmes.

 

Procurement requirements are generally derived from the approved national defence and security strategy and framework documents which in turn are in compliance with Bulgaria’s NATO and EU membership requirements. This is particularly true for larger procurement projects; smaller projects are less publicly known and debated (Interviewee 2). In 2014, the Council of Ministers adopted a new 2020 modernisation plan, which provides a list of 'core rearmament projects' including new acquisitions and places the programme in the context of Bulgaria's NATO and EU membership. (7)

However, there is no evidence that the flow of specific procurement projects from more general strategies is audited.

The &quoute;National Programme 2020&quoute; (5) ties the Bulgarian acquisition programme to NATO requirements and states that definition of requirements is part of the integrated Defence Acquisition System; however, it does not provide specific procedures for defining technical requirements for particular purchases. The 2012 Public Procurement Act (Article 30) stipulates that technical standards should be in line with European standardization requirements, commonly accepted technical specifications and other requirements related to national defence. Finally, the Law on Defence stipulates that the Chief of Defence Staff is responsible for defining the requirements for the capacities of the armed forces.

However, there are indications that not all purchases are based on the clear technical and operational requirements that have been predetermined (3-4). Additionally, there are indications that requirements are sometimes set in a way as to arrive at predetermined solutions and contractors. Hard evidence that every purchase is based on strong quantified and identified requirements is missing.

The Public Procurement Act (Article 2) states that procurement decisions are to be based on principles of open competition, non-discrimination, and transparency. The PPA also envisages a limited procedure (minimum 5 candidates) and a procedure through negotiation (i.e. sole-sourcing). Indeed most of the procurement deals in the defence sector appear to be carried under one of these two procedures. (7) However, it has not been possible to establish a concrete percentage of procurement that was sole-sourced, as not all procurement awards are publicly known.

The majority of tenders for purchases are made public and new legislation has been adopted recently to make all these tenders available online. Among the measures to tackle corruption in such contracting is the new provision that tender documents will no longer be purchased (which makes the MoD aware of how many competitors are participating in the tender). Instead they will be free for download on the website. Procedures and requirements will be made public as well. However, there are some indications that these standards and requirements are not always complied with and that tenders are often held for particular contractors, meaning that the tender requirements are specifically prepared for the specific “winner”. A 2013 Eurobarometer poll in the Bulgarian business sector shows that about 58% of the interviewees point to corruption as the reason for not having won public tenders in the last three years. One of the biggest procurement deals in recent years, that of the acquisition of fighter jets, was not subject to tendering but rather inter-governmental negotiations; the reason provided was the fact that a decision had been made to procure second hand fighter-jets, for which no tendering is adequate.

RESPONSE TO GOVERNMENT REVIEWER: Following analysis of additional sources, the score has been revised to 3.

The Public Procurement Act establishes competitive procedures as the default in procurement. It appears that tender boards are set up to make decisions in competitive procedures, and that the Code of Conduct for public servants applies to them. Furthermore, the Law on Defence stipulates that members of tender boards need to declare lack of conflict of interest, and breaches can be sanctioned.

Recent media articles cite an expert at the Center for Prevention and Countering Corruption and Organised Crime (an analytical body with no prosecution or enforcement functions responsible for performing analyses and developing policies) within the CoM, saying that tendering commissions are often appointed based on nepotistic practices. Regulations and some oversight (by the MOD's Internal Audit Directorate and the National Audit Office) do exist. However, they are often inconsistent and the findings are rarely made public. The CPC reported that many of the relevant legislative clauses feature vague language, which allows mis-interpretation. Such loopholes are particularly the case when it comes to tender board members and their appointment. There is no robust implementation of the requirements for the tendering board members’ independence. Oversight bodies are allowed to work beforehand in order to prevent corruption but are banned from intervening in the award of the contract, although members of the Military Police reportedly oversee the contract award procedure.

New amendments to the Public Procurement Act, according to which all reports of the tendering boards and the respective decisions on contract awarding will be made available online, have the potential to make the situation better. However, overall effectiveness of implementation could not be assessed.

RESPONSE TO GOVERNMENT REVIEWER: Acknowledged and information added. However, it is not clear that tender board decisions are automatically audited and that loopholes identified have been closed. Therefore score 2 has been maintained.

Clauses to discourage and punish bidders’ collusion are included in the Public Procurement Act; collusion is also prohibited through the Competition Protection Act. However, these are national laws and there does not appear to be legislation specific to defence procurement - although at least some defence procurement procedures are covered under the Public Procurement Act. The laws enable sanctions such as fines and debarment, and a register of debarred companies has recently been created.

The Commission for Protection of Competition is designated to exercise control over public procurement contracts and tendering and to sanction any wrongdoers. However, control is not always exercised, with the Commission reportedly often neglecting corruption signals. According to the Center for Prevention and Countering Corruption and Organised Crime within the CoM, there is evidence of bidders’ collusion through fixing prices and solutions or even companies’ mergers a few days before the tender announcement (3). This information is not specific to the defence sector.

Score 1 has been selected to reflect reports of collusion and lack of evidence of sanctions being applied, although some of the legislation does apply to defence procurement.

Procurement staff are organised into the Defence Acquisitions Directorate. The &quoute;National Programme 2020&quoute; also establishes a new Project Management Office, whose task it is to monitor the management of contract and suggest corrective actions. The Public Procurement Act empowers the contracting authorities to demand evidence - including financial and personnel data and previous performance record - of the contractor's ability to fulfil the terms of the contract.

However, according to the Report of the Interim Minister and the survey done at the MoD, staff responsible for contract awarding and control are not sufficiently trained to ensure compliance with anti-corruption clauses. Some anti-corruption procurement training has been given in the past but it is not a systematic and consistent practice overall. Future training of such personnel has been included in the 2013 Anti-Corruption Action Plan of the MoD but there are no indications of implementation. There are indications that some training is planned for 2014 but there is no evidence that all relevant officials are scheduled to receive it. (2)

RESPONSE TO GOVERNMENT REVIEWER: Source 2 indicates otherwise. The report highlights particular problems with ensuring that procurement staff is trained or adequately staffed to tackle the issue. Score 2 maintained.

Formal mechanisms prescribed by the Public Procurement Act are in place and companies can direct their complaints about malpractice to the Commission for Protection of Competition, whose rulings can in turn be appealed to the Supreme Administrative Court. However, there is widespread fear in the Bulgarian society that corruption whistle-blowing could have negative consequences. The practice is rarely undertaken, since adequate protection is not ensured to such individuals or companies (Source 2 and 4). Discrimination towards whistle-blowers is possible. Additionally, it has been reported by the Center for Prevention and Countering Corruption and Organised Crime that even when such complaints and signals are received, they are not seriously addressed and followed-up on.

RESPONSE TO REVIEWERS: Criticism contained within source 2 - that available mechanisms are not frequently used - is sufficiently serious to warrant the score of 2. Score maintained.


 

The legal framework sets financial and material sanctions (fines and seizure of assets) on the activities of corrupt suppliers. These are investigated by the Commission for Protection of Competition and prosecuted. However, there are no indications of how consistently such sanctions are applied. Provisions for debarment of corrupt suppliers are also in place (through the Public Procurement Act) but effective implementation very rarely takes place. Recently a public register of corrupt companies participating in public procurement tenders has been created, but this has a rather preventative effect for future offenders, in terms of blacklisting, than a sanctioning one.

Offset contracts are a relatively new phenomenon in the Bulgarian defence sector, with the first set of contracts awarded in 2004. Significant legislative and regulatory progress has been made since.

Bulgaria is a signatory to the Code of Conduct on Offsets. Information exchange within the framework of the Code provides the possibility to compare national policies and practices to those of the other signatories. Specific legislation has been developed and adopted. There are indications that some training on offset contracting has been given in the past, however, the overall anti-corruption expertise of the MoD contracting staff is low (Source 4 and 5).

Currently, offsets are mandatory for procurement related to defence and security amounting to more than EUR 5 million. Offset contracts are regulated by the Public Procurement Act and the Ordnance on Assigning Special Public Procurement Contracts. The Ordinance was amended in June 2010 to introduce the requirements of the EDA Code of Conduct, including setting the ceiling of the value of offsets relative to the value of the procurement contract at 100%. The Ordnance outlines the procedures to be followed when negotiating an offset contract and lists mandatory provisions to be included in contracts. Some of those are the item and value of contracts, the programme and timeframe of contracts, and auditing and agreeing on the completion of contracts. While audits are conducted, tackling corruption is not the main aim. No transparency or anti-corruption clause is mandatory for contracts and there is no evidence that such is taken into account and included in existing contracts.

There are internal and external audits on some, but not all, parts of the offset contracts. Internal audits are conducted by the Inspectorate of the MoD and some reports are made public. External audits are conducted by the National Audit Office.

Offset contracts are regulated by the Public Procurement Act and the Ordnance on Assigning Special Public Procurement Contracts. The Ordnance postulates that classification of information related to offset contracts is decided upon by the Council of Ministers. Current legislation provides guidance on how to evaluate the need for classification of such contracts. However, it is doubtful that lack of information is always due to classification or that the classification of information in many of the cases is necessary at all. It should be noted that the MoD oversees only the direct offset contracts while the indirect offsets are under the auspices of the Ministry of Economy. Some highly abbreviated and summarised information on offset contracting can be found, for example in the Report on the State of Defence and the Armed Forces in 2010 or the MoD’s regular reports on its activities. Usually only the names of the subsets of offset projects and the state of implementation (finished/ ongoing) are publicly available. Overall offset practices are not transparent enough and reports on performance are not publicly available.

The Ordnance on Assigning Special Public Procurement Contracts postulates that the assigning of offset contracts follows the same negotiation procedures as main contracts. In this sense, offset contracts are part of the main contract so the same level of completion is naturally ensured. It should be noted, however, that the overall level of competition in defence contracts is insufficient.

Sub-contractors and intermediaries are used and there is some regulation governing their employment. The Public Procurement Act stipulates that they have to be be clearly declared; documents on their activities are required; and payment procedures need to be established. The contracting authority can also reject subcontractors which do not fulfil conditions that the main tenderer needs to fulfil, which could result in rejection of subcontractors convicted of bribery - however, it is unclear whether the law has been interpreted this way. In offset contracts, subcontractors have to be clearly stated in the contract itself.

Implementation and effective oversight remain problematic, particularly due to the lack of anti-corruption expertise of MoD contracting staff. Having in mind the shortcomings in contractors' oversight reported by a number of sources including the MoD Inspectorate, it could be assumed that the situation with sub-contractors is not any better. Additionally, it has been reported that the numerous loopholes in procurement legislation allows for wide interpretation of clauses and the process could be influenced by intermediaries.


RESPONSE TO PEER REVIEWER 2: Source 3 indicates that there is evidence that companies, implicated in corruption in the past, are nevertheless considered for contracting and sub-contracting. Score maintained.

The major details of the financial package are normally made public, but a lot of details are omitted. The technical specifications and the time-frame are made public at the time of announcing the IPO.
The MoD's Defence Investment directorate website publishes a list of the assigned contractors but the contracts themselves are not made public. There is also a list of IPOs on the website of the Public Procurement Agency, however no follow-ups on signed contracts seem to be available

The recently adopted amendments to the Public Procurement Act are supposed to remedy the situation with all draft contracts, contractors profile and offers made publicly available.

RESPONSE TO GOVERNMENT REVIEWER: Drafts of contracts are part of the IPO package of documents indeed, however these are just forms to be filled in once the deal is agreed between the parties- all the relevant financial fields in these drafts are left blank (6) At the same time, follow-up on these seems to be unavailable.

While upholding anti-corruption standards has been introduced into procurement contracts, these provisions do not apply to subcontractors to the same degree as main contractors. Robust control over subcontractors is not ensured (Interviewee 2).

RESPONSE TO GOVERNMENT REVIEWER: There is no evidence that this is enforced, so score 2 would not reflect the reality. Interviewee 2 has also confirmed that control over sub-contractors is not ensured. Stating that sub-contractors should &quoute;observe the law&quoute; constitutes encouragement at best. Score changed to 1.

While the majority of procurement contracts appear to be based on justifiable military needs and the Public Procurement Act stipulates a transparent, competitive procurement process, it seems possible for selling nations to influence the process, especially in large strategic projects. Wide media speculations exist that this is the case with the procurement of fighter-jets for the Bulgarian Air Force, where arguably better offers have been neglected in favour of politically influenced offers. This has sometimes (as the case with the fighter jets) led to single-sourcing and intergovernmental negotiations instead of tendering.

RESPONSE TO GOVERNMENT REVIEWER: Concerns over fighter jet procurement suggest that this possibility does exist. Score maintained.