MILITARY CONTRACTS

Difficult Maneuvering Around Warship Deal

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Angela Merkel’s coalition government wants to finalize a deal to purchase five warships before federal elections in September. Source: Stefan Sauer / DPA

Shipyard manager Friedrich Lürssen is a man with striking determination. Together with his cousin, he turned Bremen-based Lürssen Werft into Germany’s leading shipbuilder, primarily by acquisitions. If a takeover target was unwilling and resisted, like Hamburg-based Blohm + Voss, he waited patiently and then achieved his goal after all.

And he can use this perseverance right now. The German Ministry of Defense wants to order five new K130 corvettes. They are supposed to be built by a consortium composed of Lürssen and Thyssen-Krupp Marine Systems (TKMS), the shipyard subsidiary of Thyssen-Krupp. Since these firms had already delivered five K130 in recent years, they were given the contract without a call for bids.

However, competitor German Naval Yards lodged a complaint with the federal cartel office and was able to chalk up a win. Last week, the authorities in Bonn didn’t go along with the defense ministry’s argument, according to which the deal was urgent and only the old consortium would be able to build the ships. Now the deal with a volume of around €2 billion ($2.25 billion) is on ice.

But the ministry has until the middle of next week to appeal the decision of the antitrust authority. “We are thoroughly reviewing the decisions of the federal public procurement chamber and will then make a decision on what action to take,” a ministry spokesperson said.

Sources within the government say an appeal is likely. Representatives of the shipbuilding industry are counting on the case going before a court of appeals – if no alternative solution is found. “The ministry could once again award the contract to Lürssen und TKMS, citing national security,” said one source in Berlin. This may not be in accordance with German practice with defense contracts, but it is possible according to EU law.

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