Boeing wins first phase of US$2.38b Air Force helicopter contract in major upset for Lockheed Martin

Washington

THE US Air Force says that it will turn to Chicago-based defence giant Boeing to replace its ageing fleet of UH-1N Huey helicopters, which are used to protect the US military's ground-based ballistic missiles, in a stunning upset against its Bethesda, Maryland-based rival, Lockheed Martin.

The Air Force announced on Monday that it has awarded Boeing's Arlington, Virginia-based defence division the first phase of a US$2.38 billion contract to procure 84 of Boeing's MH-139 helicopters, the first of which is to be delivered in 2021.

Air Force Secretary Heather Wilson hailed the contract as a win for taxpayers, noting that initial estimates had pegged its total cost at US$4.1 billion.

"Strong competition drove down costs for the programme, resulting in US$1.7 billion in savings to the taxpayer," Ms Wilson said in a statement.

The UH-1N replacement is seen as an important procurement because the military uses them to protect US-based nuclear missile launch sites from attack and guard nuclear warheads as they are transported across the country.

They would also probably be used to transport top officials out of Washington, DC, in the event of a nuclear disaster.

Like much of the US nuclear infrastructure, however, the service's Huey models are getting old. The UH-1N helicopter dates to the 1970s, when thousands of them were deployed in Vietnam.

Loren Thompson, a defence consultant with the Lexington Institute, which is funded by defence contractors including Boeing, said the Air Force's language in the announcement suggests that it had focused closely on driving down prices rather than tacking on fancy new capabilities.

"The Air Force has become infamous among military contractors for driving bidders to the lowest possible price on major procurements," Mr Thompson said.

Boeing may have lowballed competing proposals from Lockheed Martin and Sierra Nevada, which had each pitched souped-up versions of the UH-60 Black Hawk.

It was the second major aircraft procurement in the past month to fall in Boeing's favour. Just weeks earlier, the company won an US$805 million contract to build the Navy's MQ-25 aerial-refuelling drone, which Lockheed had also competed for.

If Boeing is successful in its bid to build the Air Force's next fleet of pilot training aircraft - an estimated US$18 billion procurement that both companies are pursuing - it could tip the scales among the world's two biggest defence contractors for the first time in recent memory. The Air Force has said it will announce its decision on that programme by the end of September.

The Huey award is seen as a major upset for Lockheed Martin, which has become the world's largest defence contractor and the manufacturer of the F-35 Joint Strike Fighter.

Lockheed was widely expected to win the helicopter replacement, in part because the Air Force had at one point planned to pursue part of the replacement programme on a sole-source basis, turning to UH-60 Black Hawks made by Lockheed Martin subsidiary Sikorsky.

Lockheed spokeswoman Sharon Parsley declined to detail the company's next steps.

"We are disappointed in the US Air Force's decision but remain confident the HH-60U Black Hawk is the strongest, most capable solution for the UH-1N Huey Replacement Program's critical no-fail mission of protecting our nation's nuclear missile silos and supporting the continuity-of-government mission," she said in an e-mail.

"We remain committed to delivering superior helicopters to the Air Force in our existing and future contracts."

The competition has already been subject to one protest, with Lockheed seeking to overturn the award before bids were even submitted. The company took issue with an Air Force requirement that valuable software licences related to the helicopter be turned over to the Air Force.

Sierra Nevada, the third bidder, could also try to overturn the bid. Asked whether it would do so, a company spokesman said: "While we are disappointed by the announcement, (Sierra Nevada) and the Sierra Force helicopter team will review the Notification Letter and we will elaborate further on future options for rotary-wing aircraft capabilities once complete." WP