WASHINGTON — The U.S. Army has won its appeal of Italian defense company Leonardo’s successful lawsuit, which has held hostage for several years the procurement of 16 Airbus-made Lakota helicopters needed for the service’s training fleet.
The Army appealed in late 2016 a decision made by the U.S. Court of Federal Claims, which ruled the service must stop its procurement of Lakotas, arguing that the judge misinterpreted government procurement terms and requirements and improperly supplemented the record with outside information irrelevant to making a decision.
The appellate court concluded Jan. 23 that the Army’s plan to buy more Lakotas “was not a procurement decision subject to review, that the Sole Source Justification and Approval was not arbitrary and capricious and that it was an abuse of discretion to supplement the administrative record.”
“We reverse the trial court’s decision and vacate the preliminary injunction,” the court added.
How did it all begin?
The lawsuit sprouted from the Army’s decision to restructure its aviation assets — a move driven by major budget cuts under sequestration. In 2013, the service came up with the Aviation Restructure Initiative, or ARI, that retired the OH-58 Kiowa Warrior helicopter and the Army’s single-engine TH-67 basic rotary wing training helicopter.
As part of ARI, the Army decided to take dual-engine Lakotas already in the inventory and repurpose them as the new designated trainer.
Several companies like Bell Helicopter and AgustaWestland (now called Leonardo) were hoping at the time to sell military training helicopters to several services, including the Army.
The Army originally intended to use what was already in its inventory; part of the ARI plan was to move 100 Lakotas from the National Guard and into the training fleet. The Guard pushed back and the Army decided to let it keep its Lakotas and purchase more from Airbus for the training fleet.
AgustaWestland sued the Army in September 2014, filing a premature complaint over a standard sources-sought notice the Army issued seeking those capable of building Lakota helicopters in preparation to buy more of the aircraft for the training fleet.
The court paused the case until the Army filed a justification and approval document that explained why the service must sole-source the helicopter buy to Airbus.
AgustaWestland then filed a supplemental complaint over 16 Lakotas that the Army was unable to purchase under its original contract with the Army. The service would have had to procure them under a follow-on contract. The company argued the decision to sole-source those helicopters was unjustified and restricted competition.
The judge in the U.S. Court of Federal Claims ruled the Army had to conduct a competition, reissue a justification and approval document addressing deficiencies identified by the court, or not proceed with procurement.
What did the courts disagree on?
Most alarming about the lower court’s decision is that it suggested it could review the adequacy of an agency’s policy or operational decisions, typically viewed as outside the normal scope of a court’s jurisdiction.
The lower court judge also claimed there was a need to supplement the administrative record with outside information not previously admissible as evidence in order to make a ruling on the case. And based on that information, the lower court judge decided the sole-source justification was “arbitrary and capricious.”
But according to the appellate court decision, the federal claims court judge did not need to supplement the record in order to make a decision on the case, that there was enough information to decide using what was admitted.
The appellate judges noted that the lower court judge is required to explain why “the evidence omitted from the record frustrated judicial review,” but the judge did not provide an explanation other than “conclusory statements that it could not conduct effective judicial review without the supplemented material.”
The appellate court also determined the Army did provide a “coherent and reasonable” justification as to why it had to sole-source the helicopter buy. Primarily, the technical data package is owned by Airbus and is not for sale, and if the Army were to choose a different source for the helicopters, the cost would be prohibitive and the timeline to compete, build and produce the aircraft would be extended such that it would negatively affect Army and National Guard readiness.
The upper court determined that the justification and approval is a follow-on contract for the continued production of a major weapon system and the justification and approval document provided “detailed analysis” justifying the decision to sole-source, including an independent government estimate.
While the U.S. Court of Federal Claims found the independent government estimate was “insufficient” because it didn’t include what Airbus could charge for the technical data package, the upper court noted that because the package is not for sale, that consideration is “irrelevant.”
Airbus said in a Jan. 24 statement provided to Defense News: “We hope the appellate court’s ruling today will finally end a two-year saga of one contractor attempting to wrestle business from a customer by holding Army readiness hostage.”
The ruling “also removes the threat that Leonardo has held over the heads of our American workers in Mississippi ― more than 40 percent of whom are U.S. military veterans ― as it has tied up Army procurement long enough to nearly shut down our American production line,” the company stated.
Had Leonardo succeeded, Airbus said “it would have been a massively expensive step backward from the Army’s cost-saving Aviation Restructure Initiative.”
“No one could ever argue that it was in the best interests of Army aviators or the taxpaying public to force the Army to train its pilots with a fleet made up of 90 percent Lakotas and 10 percent something else,” Airbus said.
Meanwhile, the Army is already taking steps to buy more Lakota helicopters for the training fleet by issuing a sources-sought notice to industry earlier this month.
While the appeals court had yet to make a ruling at the time of the announcement, it could be interpreted that the injunction imposed by the lower court did not apply to other procurement years aside from fiscal 2016, leaving the Army to procure other Lakotas needed for the training fleet in later years, regardless of the court ruling.