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U.S. GAO backs reopening helicopter contract
2007-02-26
The U.S. Air Force should reopen the competition for a $15 billion helicopter contract awarded to Boeing Co. (NYSE:BA) last year, the Government Accountability Office said on Monday, backing a protest by Lockheed Martin Corp. (NYSE:LMT) and Sikorsky Aircraft. In a summary of its decision, the GAO said it found the way the Air Force evaluated the life cycle costs of operating the new helicopters was "inconsistent" with the approach required under the terms of the competition. As a result, the GAO recommended the Air Force amend the final terms of the competition to make its intentions clear, reopen discussions with bidding companies, and then request revised proposals. If Boeing's new offer no longer represented the "best value to the government," then the Air Force should terminate its contract, the GAO said in a summary of its decision. The GAO is an arm of Congress that reviews federal bid protests. It rarely sustains protests. Lockheed and Sikorsky, a unit of United Technologies Corp. (NYSE:UTX), should be reimbursed for their costs in filing the protests, including reasonable attorneys' fees, GAO said. The adverse ruling is an embarrassment for the Air Force, which is still recovering from the Boeing aerial tanker lease scandal in which a former top weapons buyer was convicted of favoring Boeing in some weapons deals. The scandal saw the former Air Force official, Darleen Druyun, serve nine months in jail, and led to the resignation of then-Air Force Secretary James Roche and his top acquisition official. It also prompted intense congressional scrutiny of the aerial tanker program and other weapons deals. Lockheed welcomed the decision. It had teamed with AgustaWestland Inc., a unit of the Italian defense manufacturer Finmeccanica SpA (SIFI.MI), to pitch the 101 helicopter that has already been picked as the new presidential helicopter. Spokesman Greg Caires said Lockheed was confident that its helicopter would now be selected as the "best choice and best value" to satisfy the Air Force's requirements. Sikorsky said it was pleased by the ruling and its HH-92 helicopter had the lowest life cycle costs of any medium lift helicopter and could be loaded onto transport planes in minutes rather than the hours needed for other helicopters. Boeing spokeswoman Kerry Gildea said Boeing would "take some time to review this decision to decide what our next steps will be regarding this contract." She said Boeing's HH-47 helicopter, based on its CH-47 two-rotor Chinook, remained the most capable and "best value" platform for the Air Force. "In all likelihood, there will be a new competition and a winner will be selected again before the end of the year," said defense analyst Loren Thompson of the Virginia-based Lexington Institute. Thompson said the adverse ruling had been widely expected in the Air Force, where some top officials were surprised about the selection of Boeing's larger two-rotor Chinook CH-47 helicopter over the smaller Lockheed and Sikorsky entrants. Lockheed and Sikorsky filed formal protests last November after the Air Force picked Boeing to build 146 helicopters to replace its aging fleet of Sikorsky HH-60G Pave Hawk combat search-and-rescue helicopters. Thompson said the two smaller helicopters made less noise, generated less of a heat signature and kicked up less dust, all important factors that helped troops survive a combat and rescue operation in enemy territory. But those factors, he said, were not credited to the Lockheed and Sikorsky bids.
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