U.S. to amend Afghan plane bid terms, no full re-do

WASHINGTON Mon Apr 2, 2012 9:29pm EDT

Embraer's commercial jet model 195 sits next to a hangar at their factory in Gaviao Peixoto, 270 km (168 miles) northwest of Sao Paulo, January 18, 2008. REUTERS/Rickey Rogers

Embraer's commercial jet model 195 sits next to a hangar at their factory in Gaviao Peixoto, 270 km (168 miles) northwest of Sao Paulo, January 18, 2008.

Credit: Reuters/Rickey Rogers

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WASHINGTON (Reuters) - The U.S. Air Force said on Monday it would amend, rather than re-do, the terms of a potential $1 billion competition to supply light attack planes to Afghanistan.

Privately held Sierra Nevada Corp and Brazil's Embraer beat out Hawker Beechcraft to win the deal in December. But the Air Force canceled the initial contract award, valued at $355 million, when it discovered an error while preparing for a lawsuit filed by Hawker, challenging the decision in federal claims court.

The service gave no details of any proposed changes.

Air Force Lieutenant Colonel Wesley Miller said the service was still working out details, but expected to release the amendment this month. He added that a separate investigation into the acquisition process was ongoing.

Only Sierra Nevada and its rival for the contract, Hawker Beechcraft, would be allowed to submit bids, he said.

The Air Force last month abruptly terminated the contract with Sierra Nevada for 20 Super Tucano light attack planes, after it discovered inadequate documentation for the award while preparing for the Hawker lawsuit.

The service announced on March 23 that it was extending an investigation into the contracting error.

The incident has been big news in Brazil, where government officials were caught off guard by Washington's cancellation of the plane order. The issue may come up when Brazilian President Dilma Rousseff visits Washington next week.

Air Force officials have described the incident as embarrassing and disappointing, especially given a series of other acquisition problems over the last decade. They had hoped to investigate the matter quickly and move forward with a new competition to ensure that the Afghan government could still receive an initial order soon to build up its air force.

One defense official said the service was taking longer to complete because the Air Force wanted to be sure the substandard documentation was not a systemic problem across the service.

Sierra Nevada is seeking a quick re-do of the contest that would not lower the requirements set for the original bids, from which the Hawker Beechcraft's AT-6 was disqualified.

Sierra says the Embraer Super Ts are in use by six militaries around the globe.

Hawker has insisted that it's AT-6 plane is the most capable, affordable and sustainable light attack aircraft on the market. The company is urging the Air Force to revise its light attack plane requirements, arguing that not even front-line U.S. fighter jets could meet the requirements as written.

Hawker on Monday formally entered into forbearance requirements with several big lenders, giving it "time and flexibility to restructure the company's balance sheet and better position Hawker Beechcraft for the long term," said Steve Miller, chief executive of the company, which was acquired by Goldman Sachs in 2007.

Standard & Poor's Ratings Services on Monday lowered its corporate credit rating on Hawker Beechcraft to SD or "selective default," and lowered the rating on the company's secured credit facility to 'D', given its current financial straits.

(Reporting By Andrea Shalal-Esa; editing by Gunna Dickson)

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