Bulgaria cancels helicopter upgrade contract with Elbit Israeli manufacturer surprised at ministry’s decision following protest by Russia

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Israeli manufacturer surprised at ministry's decision following protest by Russia

Bulgarian defence minister Nikolay Svinarov has formally terminated a controversial €57 million ($77 million) helicopter modernisation programme despite entering final contract negotiations only a month ago.

The defence ministry had been negotiating with Israel's Elbit Systems over upgrades and airworthiness restoration for six Mil Mi-17 tactical transport helicopters and 12 Mil Mi-24D/V attack helicopters.

The ministry attributed the cancellation to an "inability to fulfil the pre-set requirements for awarding the public procurement tender".

Elbit Systems had been announced winner of the tender in December, proposing a package price and a 300% offset for upgrade, overhaul and airframe life extension. The second-ranked bidder was Israel Aircraft Industries' AI Lahav division, which submitted a bid worth €103 million and an offset package. Third was France's Sagem with an €84 million bid. BAE Systems was ranked fourth, with a bid priced at €128 million.

Bulgarian MoD sources say Elbit has not been able to provide a valid licence for doing the upgrade work issued by Mil Moscow Helicopter Plant, the design authority for the Mi-17 and Mi-24.

It was initially suggested that Elbit had submitted such a document during the tender procedure, but Russian government officials denied having provided such a licence to the Israeli company relating to the Bulgarian tender.

All the losing bidders in the tender had obtained such a licence in advance and protested to the Bulgarian MoD, requesting the tender to be relaunched and to be allowed to submit updated proposals.

Elbit says it is surprised by the termination decision, but is still in discussions with Bulgarian authorities about restarting talks and concluding the contract in the near term.

The upgrade programme sparked controversy in early February, when Russian defence minister Sergey Ivanov claimed that Bulgaria's selection of Elbit was an illegal licensing deal.

Ivanov said such deals were not supported through licensing by the original equipment manufacturer.

Mil Moscow Helicopter Plant is known to have presented an independent bid for Mi-17 and Mi-24 upgrades to the Bulgarian MoD in 2003 and 2005, which was said to have been based mainly on new Russian-made avionics, night vision equipment and weapons – but it was deemed unsuitable.

As a new NATO member, Bulgaria is seeking to buy only NATO-compatible weapon systems.