(This October 26 story corrects spelling of name of air base in 7th paragraph to Hanscom not Hanscomb)
By Andrea Shalal
WASHINGTON (Reuters) - A federal appeals court has denied a lawsuit by Raytheon Co that sought to halt the U.S. Air Force's reevaluation of bids submitted for a new $1 billion long-range radar by Raytheon, Northrop Grumman Corp and Lockheed Martin Corp.
Raytheon in May appealed a decision in the U.S. Court of Federal Claims that had cleared the way for the review. Raytheon first won the contract in October, but the matter was quickly protested by both losing bidders, prompting the Air Force to take a fresh look at the bids.
In her decision, Judge Margaret Sweeney said the Air Force's decision to reopen the competition was justified since the agency had violated rules on equal communications with bidders about whether they could recover internal research and development spending (IR&D) linked to the bid.
The Air Force initially told bidders such costs were not allowable, but later told Raytheon it could recover certain IR&D costs, which allowed it to lower its pricing. It did not relay that change in approach to Northrop.
"That disparity in information favored Raytheon over Northrop," said the decision, which was dated Friday and posted on the court's website on Monday.
The Air Force said the court's decision would allow it to "continue source selection and take corrective action."
Justin Oakes, spokesman for Hanscom Air Force Base in Massachusetts, which is overseeing the process, declined comment on when a new contract award could be announced.
The companies submitted final program revisions at the beginning of October. The court's ruling came sooner than expected, which means the Air Force could announce a new contract award before the end of the year, said one source familiar with the matter.
Raytheon said it was disappointed by the decision, but remained confident in its proposal to develop and build 30 Three Dimensional Expeditionary Long-Range Radar (3DELRR) systems to replace the Air Force's current TPS-75 radar, which has been in service since the late 1960s.
The existing system can be torn down and transported via trucks or C-130 transport planes. The next-generation system must be able to perform a similar function.
Lockheed said it was pleased with the decision, and stood ready to support the Air Force on the program.
Northrop spokesman Randy Belote welcomed the news and said his company was "looking to further direction from the Air Force on how the program will move forward."
Reporting by Andrea Shalal; Editing by Alan Crosby and Grant McCool