Sierra Nevada files motion in Afghan aircraft competition

COLORADO SPRINGS, Colorado Tue Apr 17, 2012 1:47am EDT

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COLORADO SPRINGS, Colorado (Reuters) - Defense contractor Sierra Nevada Corp said on Monday it has filed a court motion to register concerns about the U.S. Air Force's plan to revise the rules of a bungled competition to supply 20 planes to Afghanistan and award a new contract in early 2013.

In the latest legal step stemming from a cancelled purchase that has embarrassed military officials, privately-held Sierra Nevada said the Air Force's corrective action was an overreaction.

An internal investigation found no deliberate misconduct by officials who awarded a $355 million contract to Sierra Nevada and its supplier, Brazilian plane maker Embraer (EMBR3.SA) in December.

The Air Force said on Friday it would issue revised rules for the contract, which was abruptly cancelled after its officials found problems with internal documents while preparing for a lawsuit filed by losing bidder Hawker Beechcraft.

The U.S. Air Force is handling the largely American-funded purchase of the light attack planes, which will be supplied to Afghanistan's fledging air force. Doubts are mounting about the overall readiness of the Afghan military to take charge of security in the country, which suffered heavy, coordinated insurgent attacks on Sunday.

Sierra Nevada said the judge and the companies' attorneys should have access to the Air Force's investigation to determine if the delay was really necessary, or if the air force could simply re-award the deal to Sierra Nevada.

"We need to make sure that the Air Force is not throwing the baby out with the bath water," said company spokeswoman Michelle Erlach, saying that the Air Force appeared determined to "lawsuit proof" the case.

The U.S. Air Force is due to brief both companies on Tuesday about the changes, which will delay the first deliveries of planes by 15 months, a move that has heightened concern about the ability of the Afghan air force to step in as the U.S. withdraws.

Neither U.S. Air Force officials nor Hawker Beechcraft representative could be reached immediately about Sierra Nevada's newest step in the case.

The Air Force has said it could not release the investigation publicly since it contains sensitive company data, but service officials told congressional aides that it found the contract award was decided by an inexperienced team which did not follow established procedures.

Hawker, which is in the middle of a major financial restructuring, has welcomed the chance of another opportunity to win the contract, which initially had options that could have expanded its value to $1 billion. Hawker argues that the air force should also revamp its requirements for the plane.

The case is being closely watched in Brazil, where officials were still smarting from the cancellation of an earlier contract with Lockheed Martin Corp for a reconnaissance plane based on Embraer's ERJ-145 regional jet.

The incident is a setback for Air Force officials who have tried to rebuild the service's procurement reputation after years of reforms triggered by a spate of botched contract decisions, including a deal for tens of billions of dollars for new refueling planes.

"Secretary of Defense Leon Panetta should take a personal interest in seeing that the program is promptly re-awarded to the best offeror," Lexington Institute analyst Loren Thompson wrote in a blog posting for Forbes magazine.

(Reporting By Andrea Shalal-Esa; Editing by Daniel Magnowski)

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