Sierra Nevada, Embraer Win $427 Million U.S. Air Force Award

Sierra Nevada Corp. and Embraer SA (ERJ), its Brazilian subcontractor, have won a $427 million U.S. military contract to provide aircraft for the Afghan army after more than a year of delays and protests.

The Air Force award is for 20 light-attack planes, maintenance support and training, the Defense Department said today in a statement. The contract is valued at a maximum of $950 million over its lifetime.

The Pentagon originally awarded the work to Sierra Nevada in December 2011. It canceled the award about two months later after Beechcraft Corp., formerly Hawker Beechcraft Corp., sued the military over its exclusion. Today, Beechcraft lost out for the second time.

“The United States is trying its best to stand up the Afghan Air Force to function as we pull out,” Charles Tiefer, a former member of the U.S. Commission on Wartime Contracting, said in an interview. “This contract is at the heart of whether the Afghan Air Force can make a go of it on its own.”

Deputy Defense Secretary Ashton Carter called Brazilian Minister of Defense Celso Amorim today to inform him about the decision, according to George Little, a Pentagon spokesman.

Door Opener

Brazil’s Defense Minister Celso Amorim said in a statement that the decision was a “big victory” for the country’s national industry. “This will certainly open many new doors to a sound project that has already proven its success at home and in other parts of the world,” Amorim said, according to the statement posted on the ministry’s website.

For Embraer, a deal with the Air Force would be a “door opener” at the U.S. Department of Defense and in other countries, Chief Executive Officer Frederico Curado said in an interview in March 2012.

About 13 percent of Embraer’s $5.36 billion in revenue in fiscal 2010 came from the company’s defense and security category, according to data provided by the company in January 2012. At the time, Sao Jose dos Campos-based Embraer, Brazil’s biggest planemaker, hadn’t done any business with the U.S. government or military.

“I’m still trying to digest this myself,” Gary Spulak, president of Embraer’s U.S. unit, said in an interview. “We’re ready to get to work.”

‘Great Honor’

Taco Gilbert, a vice president at Sierra Nevada, said it’s a “great honor” to provide the aircraft and support for the contract.

“The Light Air Support program is essential to the United States’ objectives in Afghanistan and to our national security,” he said.

President Barack Obama has pledged to withdraw most U.S. troops from Afghanistan by the end of 2014. The turbo-prop aircraft are part of a plan to leave the Afghan army with the weapons and technology it needs to fight the Taliban.

The aircraft were originally set to be delivered in May 2013 and are now scheduled for May 2014, according to company documents provided to Bloomberg News. The contract will extend through Feb. 19, 2019, according to the Pentagon.

The Air Force award is lucrative because it includes training and maintenance in addition to aircraft.

The award would have boosted Beechcraft’s shrinking revenue from U.S. military contracts. The company’s prime, or direct, contracts with the Pentagon plunged 67 percent to $340 million in fiscal 2011, which ended Sept. 30, from $1.03 billion in fiscal 2009, according to data compiled by Bloomberg.

Beechcraft ‘Disappointed’

“We are disappointed that our proposal was not chosen,” Nicole Alexander, a spokeswoman for the company, said in a statement. She wouldn’t say whether Beechcraft would protest the award.

The company plans to meet with the Air Force “for a full debrief of the award and determine our next steps forward at that time,” Alexander said.

Beechcraft announced on Feb. 19 that it had emerged from Chapter 11 bankruptcy protection.

The loss of the contract makes it harder for Wichita, Kansas-based Beechcraft to turn around its business, Tiefer, a University of Baltimore law professor, said before the announcement.

Sierra Nevada provides electronics and engineering services to the Defense Department, the National Aeronautics and Space Administration, and the Department of Homeland Security. The value of the Sparks, Nevada-based company’s U.S. military contracts rose 39 percent to $1.3 billion in the fiscal year ended Sept. 30 from $938 million the previous year.

The award comes after an especially bumpy contracting process.

Award Protested

Beechcraft protested the original December 2011 award to the Government Accountability Office, which arbitrates contract disputes. The company claimed that the Air Force sent a notice of its exclusion to the wrong company address, causing it to miss key deadlines.

After reviewing both sides’ claims, the GAO dismissed the case. Beechcraft in January 2012 sued the government in the U.S. Court of Federal Claims in Washington. The next month, the Air Force terminated the award, issuing a revised request for proposals in May 2012.

To contact the reporters on this story: Danielle Ivory in Washington at divory@bloomberg.net; Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net

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