UPDATE 1-US Air Force still sees helicopter award this fall
(Adds analyst comment)
WASHINGTON, Aug 19 (Reuters) - The U.S. Air Force said on Tuesday it learned important lessons from the sustained protest on its $35 billion contract for new aerial refueling tankers and is working hard to ensure a $15 billion award for new search and rescue helicopters runs more smoothly.
The Air Force initially awarded the helicopter contract to Boeing Co (BA.N) in November 2006, but was forced to redo the competition after the Government Accountability Office (GAO) twice upheld protests by the losing bidders, Lockheed Martin Corp (LMT.N) and United Technologies Corp (UTX.N).
All three companies submitted revised bids for the Combat Search and Rescue (CSAR-X) contest in May 2008 and the Air Force said it is on track to award a contract this fall. Officials declined to say whether the winner would be unveiled before the November presidential election.
Pentagon officials have closely reviewed the Air Force's handling of this competition and the Air Force itself has meticulously studied its process to ensure it does not make the same "significant errors" the GAO found in the tanker competition, Maj. Gen. David Gray, a senior Air Force acquisition official, told reporters.
"We're working hard to make sure that the i's are dotted and the t's are crossed this time," Gray said, saying it was clearly more important than ever to document the decision- making process in any acquisition.
Noting that the Air Force had been caught off guard by the political firestorm sparked by its tanker contract award to Northrop Grumman Corp (NOC.N), Gray said service officials would also have to do a better job to quickly explain to losing bidders why they lost and to brief lawmakers about their decision.
The internal Air Force review, which began after the GAO upheld Boeing's protest of the tanker contract to Northrop and its European partner EADS, had not revealed any problems that would have required changes to the helicopter competition, he said.
Pentagon officials did a thorough review in March and plan another careful examination of the Air Force source selection process next month, Gray said.
"If they find a few other things that we need to fix, that could slow it down," Gray said, when asked to narrow down the timetable for the contract award.
The service plans to buy 141 new search and rescue helicopters, plus at least three test aircraft, to replace the current fleet of aging HH-60 helicopters, which are rapidly approaching the end of their projected service life.
The protests have already delayed the program, pushing the expected fielding of the new helicopters back from fiscal 2012 to around the fourth quarter of 2013 or first quarter of 2014, Gray said, noting the delays had also cost the Air Force about $1 billion in lost opportunity costs.
He said the only "silver lining" in the protests would be if the companies would be able to accelerate work on the second batch of rescue helicopters, known as Block 10.
Defense consultant Jim McAleese said Gray's comments underscored the Air Force's commitment to actually awarding a contract this fall, possibly in October, but said a "darkening budget forecast" could reduce the total number of helicopters it would eventually buy from 141.
"It's clear that affordability is going to become a bigger issue for the Air Force going forward," he said.
The Air Force said it was also waiting for a draft report from the Pentagon's inspector general, which has been investigating whether the Air Force followed the rules when it changed military requirements for the aircraft.
Critics charge that some requirements were changed to allow Boeing to compete with its larger twin-rotor HH-47 helicopter. Others insist changes benefited Boeing's competitors.
Gray said the Air Force is working closely with the inspector general's office as it conducts the audit and nothing has emerged thus far to cause concern.
Col. Martha Meeker, who oversees Air Force mobility, special operations and search and rescue requirements, said no changes were made to the requirements for the new helicopters after they were finalized by the Joint Requirements Oversight Council, and none at all were made to "benefit one particular contractor over another." (Reporting by Andrea Shalal-Esa, editing by Gerald E. McCormick and Andre Grenon)
