Procurement: A Perfect Storm Of Incompetence, Corruption And Pressure From Above


July 30, 2011: Russian leaders, especially the president (Dmitry Medvedev) are determined to eliminate the corruption that has delayed procurement of new weapons, and driven prices up at the same time. The presidential move is ordering a criminal investigation into the management of the Severnaya Verf shipyard. This yard builds Steregushchy class corvettes and Admiral Gorshkov class frigates. But the yard management isn't being investigated for these ship building projects being late, but for taking $212 million received for building the ships, and using it, instead, to shore up a bank that the yard management owned a piece of. The bank went under anyway, taking the $212 million with it. Now the yard has insufficient funds to complete ships the government contracted it to build.

All this year, Russian president Dmitry Medvedev has been increasingly critical of the Defense Ministry for delays in spending money for new weapons and equipment. This set off all sorts of finger pointing and accusations. For example, one of the leading ballistic missile designers (Yuri Solomonov, who created the Topol M and Bulava) told a reporter that missiles could not be built as fast as the government wanted, because the Defense Ministry would not sign purchase orders on time. Solomonov explained to the procurement bureaucrats that some missile components took longer to manufacture, and had to be ordered earlier in order to assemble finished missiles on schedule. But the bureaucrats either didn't comprehend that, or didn't care.

Solomonov is sticking his neck out going public with this sort of thing, but that's what president Medvedev has been calling for. When Medvedev heard of Solomonov's accusations, he ordered an investigation. But the Defense Minister, Anatoly Serdyukov responded that the purchase orders had not been signed because the prices had gone up sharply, and the suppliers would not explain why. Serdyukov had been ordered to root out corruption in the Defense Ministry, and now he may be confronted with a perfect storm of incompetence, corruption and pressure from above to "make things happen." This is not the first time Medvedev has had problems with the Defense Ministry leadership, and the senior officers who came up during the Soviet days. The message does not appear to be getting through. So Medvedev ordered prosecutors to investigate the finances of defense manufacturers, and much dirt is being found.





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