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U.S. to continue helicopter purchase with only 1 bidder

By Andrea Shalal-Esa

WASHINGTON (Reuters) - The U.S. Air Force on Friday declined to confirm that it had received only one bid for a $6.8 billion helicopter competition, but said it had procedures in place that would allow the acquisition to continue regardless of the number of bidders.

All but one of the contractors expected to bid to build a new combat search and rescue helicopter for the Air Force announced last month that they would not compete, raising the prospect that the Air Force would have to adopt a different approach to the acquisition program.

Sikorsky Aircraft, a unit of United Technologies Corp , did submit a bid for the competition, based on its H-60 helicopter, according to a company spokesman. Other potential competitors confirmed that they had decided to skip the bidding, and at least one of the companies said it was exploring a possible legal challenge to the terms of the competition.

Air Force spokesman Ed Gulick said he could not say how many companies had submitted bids by the Thursday deadline because that was "source selection sensitive," but the Air Force had "acquisition procedures in place to proceed with this important acquisition regardless of the number of bidders."

Gulick said the Air Force remained "committed to a fair, open and transparent process" to pick a new, affordable Combat Rescue Helicopter (CRH) that met the military's requirements, but could only release details after selecting a winning bidder.

Lieutenant General Charles Davis, the top military official in charge of Air Force acquisition, told Reuters in an interview last month that the helicopter competition was structured to tell potential bidders exactly what capabilities the Air Force wanted and what it could afford.

He denied that the terms of the competition had been written to favor the Black Hawk helicopter built by Sikorsky, and said Sikorsky would be asked to submit certified cost and pricing data if it turned out to be the sole bidder for the program.

Sikorsky was aware that it could be asked to provide such data if no other bids came in, a spokesman said. Lockheed Martin Corp is a key subcontractor on the Sikorsky bid.

Boeing Co , Textron Inc's Bell Helicopter unit , EADS and Northrop Grumman Corp teamed with AgustaWestland, part of Italy's Finmeccanica SpA , announced last month that they would not bid for the work.

At the time, industry executives said the bidding rules were so narrowly framed that they effectively excluded all but Sikorsky's Black Hawk helicopter from the competition, and would not reward extra capability offered by other aircraft.

EADS North America Chief Executive Sean O'Keefe told Pentagon chief arms buyer Frank Kendall in a letter last month that the Air Force's detailed mandatory requirements list had derailed its plan to buy an "in-production, off-the-shelf" helicopter and would result in an unnecessarily costly program.

As written, the terms of the competition also did not call for an evaluation of the full life cycle costs of the bids, despite the Defense Department's emphasis on affordability and a new federal law which required such an evaluation, O'Keefe said.

No comment was immediately available from the Air Force or Kendall's office on the letter from the EADS executive, a copy of which was obtained by Reuters.

Davis last month said that the Air Force had already drawn up plans for how to handle the procurement if only one company submitted a bid, although he said the service would have preferred to have a competitive process with more bidders.

He said the Air Force's move away from more "nebulous" and "open-ended" procurements was positive for the industry, allowing companies to make more informed decisions about whether to spend money preparing a bid for a given competition.

He said the change toward more narrowly defined requirements for military equipment was a result of multiple protests filed by companies in recent years that challenged the more open and subjective way procurements were structured in the past.

Boeing won the Air Force's last rescue helicopter competition with its H-47 model, only to see the $15 billion contract canceled after several protests by losing bidders.

"This is clearly a result of all of the issues that have accumulated over the years of all of these high-visibility protests," Davis said. As a result, the Air Force was now being more diligent in the structuring of its acquisition programs.

(editing by Nick Zieminski and Matthew Lewis)

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