Following two years of litigation that concluded and then produced a fresh lawsuit the week of Jan. 21, UH-72 Lakota manufacturer Airbus is accusing Leonardo DRS of using the courts to hold contracts hostage in a scheme to shutter its production line and strong-arm the Army into recompeting the program.
"I’ve never done a press call like this before,” Airbus Helicopters President Chris Emerson said Jan. 30 in a call with reporters in which he condemned Leonardo’s litigiousness as a fundamental threat to Army readiness and the health of the U.S. defense industrial base.
“But we’ve also never in our history faced a situation like this before,” he added. “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. If they succeed it will constitute a credible threat to every major player in the U.S. defense industry.”
What has Emerson so upset is that on Jan. 22, Leonardo filed a lawsuit to stop the Army from buying new Lakotas authorized in the fiscal 2017 Army budget. He said the new lawsuit is almost identical to one filed against a contract for 16 of the aircraft authorized in fiscal 2016.
Two days after the latest filing, on Jan. 24, a federal appeals court threw out the 2016 suit but that has not dissuaded Leonardo from pursuing the new lawsuit in federal court, which effectively places a halt on production and delivery of the aircraft the Army planned to buy and Congress authorized in fiscal 2017.
“We all assumed Leonardo would withdraw the lawsuit on the FY '17 aircraft,” Emerson. “Indeed, the court gave them every opportunity to do so.”
Leonardo met with court officials on Jan. 26 to discuss dropping the suit, but decided to continue with the new lawsuit. Leonardo declined to comment for this story.
“They are once again suing the Army over the same aircraft with the same reasoning, even though the appellate ruling makes it clear that they can have no possible chance of winning it.”
Emerson said he could see only one possible explanation for Leonardo’s decision: “Doing 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.”
Leonardo could eliminate Airbus as a competitor for at least five years if it was forced to shutter its Lakota production lines in Mississippi and Alabama, Emerson said. Should that strategy succeed, it would have profound impacts on the entire U.S. military acquisition system and defense industry, he said.
“If they can successfully exploit the legal system to tie up contracts and military requirements, they can do it to anyone,” he said, suggesting that Boeing [BA], Lockheed Martin [LMT], Bell Helicopter[TXT], Raytheon [RTN], Northrop Grumman [NOC] and General Dynamics [GD] all would be in Leonardo’s legal crosshairs. All of those companies have been awarded follow-on contracts for major defense systems.
The military regularly exercises sole-source follow-on contracts to replace legacy aircraft or add to their fleets. Ongoing programs to include Black Hawks by Sikorsky, a division of Lockheed Martin, Bell UH-1 helicopters, Boeing F-18 Hornets, Lockheed Martin C-130J “to missiles, tanks bullets, even desks pencils and notebooks” have been bought through similar deals, Emerson said.
“It was the kind of procurement that happens literally every day in the U.S., what I call follow-on contracts,” Emerson said. “A customer holds a competition for a new piece of equipment and years later, when they need more of the same equipment to do the same mission, they buy more on a follow-on sole-source contract.”
The federal appeals court agreed. In buying the 16 additional Lakotas in fiscal 2016, the Army was simply reinforcing its decision to use the UH-72 as its training platform by executing an order attached to an existing contract, the court found. That decision was made in 2006 after a competition in which Leonardo participated and lost.
“We conclude that Execution Order 109-14 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. Accordingly, we reverse the trial court’s decision and vacate the preliminary injunction,” the court ruling reads.
Airbus has delivered 420 Lakotas to the Army against a program of record of 427 aircraft. As part of the Aviation Restructure Initiative, the legacy TH-67 training helicopter was scrapped in favor of the Lakota, which was officially designated the Institutional Training Helicopter. Accordingly, the Army in 2013 decided to increase its UH-72 fleet by 110 airrcaft, from 317 to 427 helicopters.
Emerson accused Leonardo of strong-arming the Army into reconsidering its offering despite having lost the initial competition.
“What the Leonardo lawsuit did was … handcuff Army acquisition for more than two years – two-plus years in which they could not buy equipment to meet a readiness requirement,” Emerson said. “Did Leonardo think they would win? It’s hard to imagine, but in any case, they had nothing to lose.”
Dragging the Army back into court will hardly help Leonardo’s chances of securing contracts it is pursuing with other military services, including the Navy’s training helicopter or the Air Force T-X trainer, Emerson said.
“This is not the way to be a responsible member of the U.S. defense industrial base,” Emerson said. “This is not the way to treat any customer, let alone the military that defends us or the American taxpayers who fund them. … This is an Army problem today, but it may very well be an Air Force problem next and then a Navy problem afterwards.”