WASHINGTON — It’s Groundhog Day in the U.S. Court of Federal Claims, where Leonardo has filed another lawsuit against the U.S. Army as the service moves to buy more Lakota helicopters from Airbus for its training fleet.
If this sounds familiar, it is. AgustaWestland, a Leonardo subsidiary, filed a lawsuit two years ago in the same court over a standard sources sought notice the Army issued seeking those capable of building a lot of 16 LUH-72A Lakota helicopters for the same fleet. The court ruled in favor of AgustaWestland but the U.S. Court of Appeals overturned the lower court’s decision last week.
And while the upper court decided in favor of the Army’s appeal Jan. 24, and the court system gave Leonardo ample time to withdraw its lawsuit filed Jan. 22, the company decided to keep its lawsuit active on Jan. 26, Chris Emerson, president of Airbus Helicopters, told a group of reporters in a call Jan. 30.
And Airbus isn’t taking Leonardo’s manuevers sitting down this time.
Emerson opened the call to reporters stating that he’s “never done a press call like this before,” but said, “we have never in our history faced a situation like this before.”
“The DoD acquisition system, with its own set of challenges is under attack by a company that seems to think it has nothing to lose and if they succeed, it will constitute a credible threat to every major player in the U.S. defense industry,” he said.
The dispute rose out of an Army decision, stemming from major budget cuts under sequestration, to restructure its aviation assets. In 2013 the service came up with the Aviation Restructure Initiative (ARI) that retired the OH-58 Kiowa Warrior helicopter and the Army’s TH-67 single-engine basic rotary wing training helicopter. As part of the ARI, the Army decided to take dual-engine Lakotas already in the inventory and repurpose them as the new designated trainer.
That meant the pool of possible services looking to buy new training helicopters had shrunk for competitors like AgustaWestland and Bell Helicopter.
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 the 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.
After waiting a painful two years, the Army decided Jan. 4 to proceed with buying 35 Lakota helicopters using fiscal year 2017 funding, issuing a sources sought notice to industry. While the appeals court had yet to make a ruling, the lawsuit only addressed the previous lot of 16 Lakota helicopters that would have been purchased using FY16 funding, so it could be interpreted that the injunction did not apply to other procurement years.
Emerson said he believed AgustaWestland’s new lawsuit uses the same legal arguments and reasoning as the previous case, now for the new buy using FY17 funding. “The appellate ruling makes it clear that they can have no possible chance of winning it, so why pursue the lawsuit? I’m sorry to say this, but there is only one possible explanation.”
“If they had won the lawsuit, they would have just prevented the Army from meeting its readiness needs, but it would not have forced the Army to have procured Leonardo products,” Emerson said.
“It can’t be to help their chances with other DoD program that they are attempting to pursue like the Navy trainer helicopter or the Air Force’s trainer aircraft. In fact, this can only possibly hurt them in those pursuits, showing the Navy and Air Force what they can expect from Leonardo, when it comes out, to how they treat a customer,” he said.
Step one in figuring out the rationale for the new lawsuit is dissecting the harm done by the first. The previous lawsuit prevented the Army from meeting its readiness goals within the basic rotary-wing training school at Fort Rucker, Alabama. The Army used a mix of Lakotas it could transfer from elsewhere in the service but could not complete the training fleet without buying additional Lakotas in a follow-on contract from Airbus.
And the lawsuit caused uncertainty for the future of Airbus’ production line in Columbus, Mississippi, leaving employees wondering if they would have a job in 2018 as the final Lakota on order rolls off the production line on Feb. 28.
“The only reason we can see for this lawsuit is to do what they nearly succeeded in doing with the last lawsuit, tie up Army acquisition in the court system for years, preventing the next Lakota contract long enough to strangle our U.S. production line and put our American workers out of a job,” Emerson said. “Why? If they can succeed in forcing us to issue the last pink slip on the Lakota line, they have just eliminated another competitor for the next half decade.”
Emerson continued: “If they can successfully exploit the legal system to tie up contracts and military requirements, they can do it to anyone. They can do it to Boeing, Lockheed, Bell, Raytheon, Northrop, General Dynamics and the list goes on and on. Every one of those companies is awarded follow-on, sole-source contracts,” just like the one Leonardo is going after now.
Leonardo declined to comment on the current or past lawsuits or on statements made by Airbus Helicopter’s president.
The fear, Emerson conveyed, lies within the implication Leonardo’s actions in court could have on procurement for any major weapon system.
Additionally, if Leonardo is successful in court, it could trigger a new trend to completely circumvent the short 90-day Government Accountability Office protest process and tie up disputes for much longer, according to Emerson.
Emerson questioned: “Can the Air Force afford to wait two or three years before it moves forward with the contract on T-X, can the Navy afford two years in court if it doesn’t choose a Leonardo product for its Navy trainer? And if Leonardo succeeds, why can’t someone else?”
Leonardo’s current modus operandi is “not the way to be a responsible member of the U.S. defense industrial base,” Emerson added. “We do business with good products at a fair price, not with legal arm twisting. You say you want competition, then compete according to the same rules that the rest of us play by here in the U.S.”
Now Airbus is facing the same fears it faced in December: what will happen to its production line if the Army isn’t able to finalize a contract to produce the 16 Lakotas it’s now allowed to build by February’s end?
And now that another lawsuit is pending in court, the Army can’t proceed to buy the 35 Lakotas it has planned to purchase when it issued a sources sought notice earlier this month.
Emerson said he does not know when the Army will be able go get under contract for the Lakotas it can build and it’s possible the court, with its full docket, won’t be able to decide whether to take up the case until around mid-April.
Airbus opted, with a certain level of risk, to keep its supply base hot last year, pre-ordering components and assembling those in anticipation of being able to proceed with more Lakota builds in 2018.
“We just need to run it through the final assembly line so the sooner we can get confirmation that we can start producing the follow-on contract the sooner it takes away the uncertainty from our employment base,” Emerson said.
Jen Judson is the land warfare reporter for Defense News. She has covered defense in the Washington area for 10 years. She was previously a reporter at Politico and Inside Defense. She won the National Press Club's best analytical reporting award in 2014 and was named the Defense Media Awards' best young defense journalist in 2018.