The Air Force today awarded an initial $376M firm fixed-price contract to Boeing to replace its UH-1Ns used for STRATCOM's ICBM and Continuity of Government transport missions with 84 MH-139s worth $2.4B. The helos will be built in partnership with Augusta Westland in Philadelphia.
Losers in the competition were LMT's Sikorsky which was offering new build customized HH-60Us and privately-held Sierra Nevada Corporation (SNC) which proposed rebuilding/remanufacturing older UH-60Ls.
Takeaways from this award:
- BA won with a completely new type/model/series to the American military inventory. This means that BA successfully convinced the Air Force that it could militarize the AW-139 and support it using Augusta's commercial supply chain and do it all for a firm fixed price lower than offered by the two competitors.
- LMT and SNC proposed variants of the best known and most reliable helicopter in the US military today and still lost. Bell Aircraft declined to bid for the USAF program in the face of this competition even though it has a hot production line for the USMC's H-1 replacement (UH-1Y, AH-1Z)
- BA is clearly hungry for military business and is consistently underbidding its arch rival Lockheed. On August 30, Boeing beat Lockheed for the Navy's $13B unmanned refueling program with a bid said to be much lower than LMT's. Last year Boeing and Northrop both beat Lockheed for the Ground Based Strategic Deterrent (ICBM replacement) program. Boeing's fourth generation F/A-18 E/F program was due to close in 2014 in favor of LMT's fifth generation F-35C but through lower costs and successful lobbying the company has managed to keep the line open through 2023.
- There is risk for BA in very low firm fixed price bids and the company seems willing to take that risk. Boeing has lost nearly $3B in costs and over two years in schedule on its KC-46A Air Force tanker contract. That contract was a very low firm fixed price bid over AirBus.
- Data rights of acquisitions are increasingly more important to the government or it isn't good to sue your potential customer. Ever since the competitors submitted their initial proposals nearly a year ago the government has come back with a series of questions (known as evaluation notices - ENs) focused on getting more data rights included in the proposals. This so unnerved Lockheed for its precedence risk for all DoD programs that the company made the highly unusual move of formally protesting to GAO during the competition phase. GAO denied Sikorsky's claim that the Air Force was demanding excessive intellectual property as part of its proposal evaluation process. DoD must now clearly feel emboldened by the GAO decision and this will be something to watch in upcoming competitions.
Given BA's pattern of very aggressive firm fixed price bids, a handicapper would have to improve Boeing's odds to win the much more significant $16B T-X Air Force contract due to be awarded Wednesday.
