Bulgaria’s plans to build two new Navy patrol ships have suffered a setback on December 20, when Defence Minister Krassimir Karakachanov announced that the only bidder for the 820 million leva (about 419 million euro) contract had pulled out.
The decision by Varna-based MTG Dolphin shipyard comes just days before the end-of-year deadline for finalising the contract.
Karakachanov said that the “real reason” for the decision was the decrease in the value of the contract – because of recent amendments to Bulgaria’s military procurement law, which mandated that such purchases would have to include value-added tax, the shipyard would effectively have to pay back 20 per cent of the 820 million leva in tax.
Nevertheless, the announcement came as a surprise, with Karakachanov saying as recently as last month he was confident that the contract would be signed on time and the two modular patrol ships would be built in 2020.
He said that the ministry would restart the acquisition proceedings by tabling new investment proposals in Parliament (all military acquisitions of more than 100 million leva require the National Assembly’s approval), but any future deal would likely carry a much higher price tag.
In 2016, media reports claimed that the tender for the new Navy ships was drafted to ensure that privately-held MTG Dolphin would be the only Bulgarian shipyard meeting the requirements. The company hit back saying that it could not be blamed for the fact that it was the only shipyard in Bulgaria capable of building specialised hulls.
The shipyard had announced last year that it signed framework agreements with a number of European defence contractors, including France’s Thales, Italy’s Leonardo and Germany’s Diehl Defence, to ensure the quality of project implementation. Thales was also picked to carry out the systems integration on the two ships.
(Defence Minister Krassimir Karakachanov)