Sikorsky Awarded $1.24 Billion Presidential Copter Deal

United Technologies Corp. (UTX)’s Sikorsky Aircraft unit received a $1.24 billion Pentagon contract for helicopters to ferry the president and executive branch officials.

A team led by Sikorsky was the only bidder on the contract that was announced yesterday on a Defense Department website. The contract for engineering and an initial six aircraft will increase in value as production options for more helicopters are negotiated.

The Pentagon has spent years trying to develop a replacement for the executive helicopter, known as Marine One when it carries the president. An earlier program managed by Lockheed Martin Corp. (LMT) was canceled in 2009 by Defense Secretary Robert Gates after what started as a $6.1 billion project for as many as 28 copters grew to a projected $13 billion.

About $3.1 billion had been spent by then on a program that President Barack Obama cited in February 2009 as “an example of the procurement process gone amok.”

This time, Sikorsky will lead a team of Bethesda, Maryland-based Lockheed, Rockwell Collins Inc. (COL), Honeywell International Inc., United Technologies Aerospace Systems and L-3 Communications Holdings Inc. (LLL)

General Electric Co., based in Fairfield, Connecticut, will supply engines for the aircraft, a modified version of Sikorsky’s S-92 helicopter.

The Naval Air Systems Command will manage the program. Sikorsky, which also built the aging helicopters now in use, was awarded a fixed-price-incentive type contract, which sets a ceiling while rewarding a contractor for keeping costs less than targets.

Sikorsky’s Comment

“For 57 years, our company has been trusted with the critical responsibility of building and supporting a safe and reliable helicopter fleet for the president of the United States,” Sikorsky President Mick Maurer said in a statement.

Sikorsky’s parent company, United Technologies, is based in Hartford, Connecticut.

The first six copters are expected to be delivered in 2019 and fielded the next year, according to Navy documents submitted for the fiscal 2015 budget.

The new aircraft are intended to replace 11 Marine Corps VH-3D helicopters that first entered service in 1974 and eight VH-60s initially used in the 1980s.

Helicopters have transported American presidents since 1957, when “President Dwight D. Eisenhower -- away on vacation -- was urgently needed back at the White House,” according to a Marine Corps website. “ What would have been a two-hour motorcade trip was reduced to a seven-minute helicopter ride.”

Falling Behind

At the time of the 2009 cancellation, the first version of the new aircraft was supposed to be operational by September 2010 and was running at least 18 months late. A second, more capable version -- originally due by December 2017 -- was at least 24 months late.

The program’s demise was blamed on a combination of unrealistic and changing requirements, optimistic scheduling and inadequate contractor performance.

Sikorsky emerged as the sole bidder in the latest round after other companies considered and then dropped plans to compete.

Boeing Co. (BA) and Northrop Grumman Corp. (NOC) had separately considered bidding, each in partnership with AgustaWestland, a unit of Finmeccanica SpA. (FNC) Both companies had planned to offer AgustaWestland’s AW101 helicopter -- the same model Lockheed had proposed to build before its version was canceled.

The U.S. Government Accountability Office last month said the Navy was starting the latest version with a more realistic understanding of requirements and readiness of the technology “that generally aligned with acquisition ‘best practices.’”

Defense officials sought “to make sure we did as careful a job on this acquisition as we could” after the 2009 cancellation, Frank Kendall, the Pentagon’s chief weapons buyer, told the Senate Armed Services Committee on April 30.

The requirements for the new copter “are firm in this case,” Kendall said, unlike the shifting criteria under the previous effort.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editors responsible for this story: John Walcott at jwalcott9@bloomberg.net Larry Liebert, Stephanie Stoughton

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