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Air Force delays $15B rescue helicopter program

The Air Force is delaying the award of a disputed $15 billion helicopter contract until the next administration.
/ Source: The Associated Press

The Air Force is delaying the award of a disputed $15 billion helicopter contract until the next administration.

The military service said Wednesday it needs more time to pick a contractor to replace an aging fleet of 141 combat search-and-rescue helicopters used to scoop up troops often stuck behind enemy lines.

Boeing Co. won the initial contract, but the program has been on hold for two years after Lockheed Martin Corp. and United Technologies Corp.'s Sikorsky Aircraft challenged the deal. The Government Accountability Office backed the losing bidders' protests, and called on the Air Force to reopen the competition.

The Air Force had planned to make a new award by December, but has notified the bidders it will be seeking more information from each before making a decision. Lt. Col. Ann Stefanek, an Air Force spokeswoman, said Wednesday that no new deadline has been set.

But industry officials, speaking on condition of anonymity because the service hadn't released details, said they don't expect a new award until spring.

"It's certain the next administration will decide who the winner is because we have run out of time in the Bush era," said Loren Thompson, a defense consultant with the Lexington Institute.

Paul Jackson, a spokesman for Stratford, Connecticut-based Sikorsky, lauded the Air Force's move to take additional time to make a selection. Boeing said it was disappointed over further delays to the program, but backed the service's choice to clarify its decision-making process, according to spokeswoman Jenna McMullin. Lockheed Martin spokesman Troy Scully said the company "eagerly awaits the next steps in the process."

The program has a tortured history, including the protests, several delays and an ongoing probe by the Pentagon inspector general's office over whether an earlier attempt to award the contract favored Boeing.

The inspector general's office has been investigating whether program requirements revised by the Air Force met both its and the service's guidelines — and did not benefit any particular competitor — which could have ultimately swayed the award to Chicago-based Boeing in 2006.

The Air Force said the delay was not related to the inspector general's ongoing audit of the program and expects a final report will be released later this year.

Representatives from the inspector general's office had no immediate comment.

The helicopter contract setback is the third large Air Force deal delayed in recent months, following a $35 billion contract for refueling planes and a satellite program worth roughly $6 billion.

The Pentagon last month canceled the service's $35 billion competition between Northrop Grumman Corp. and Boeing to build a 179 aerial refueling planes after repeated delays and failed attempts to pick a winner.

Earlier this week, defense industry officials indicated the Air Force had pushed back an award for a new high speed networking satellite that the Pentagon wanted to improve battlefield communications. Bethesda, Maryland-based Lockheed and Boeing were vying for that award.

In recent weeks, United Technologies and Lockheed Martin have appeared to insulate themselves from the global economic slowdown as both reported a modest rise in third-quarter earnings. However, Boeing's quarterly profit fell 38 percent as strike and supplier production problems hurt results at the world's No. 2 commercial airplane maker.

Shares of all three companies finished lower Wednesday amid a broad market decline.

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AP Business Writer Stephen Manning contributed to this report.