L-3 Communications [LLL] is suing the Air Force over a unilateral price determination made in a contract for support of Australian C-27s that the company argues cost it roughly $3.6 million.

In a complaint filed Oct. 4 in the U.S. Court for Federal Claims, L-3 argues Air Force Contracting Officer Ricky Harris in October 2015 concluded negotiations regarding an undefinitized contracting action by making a unilateral price determination for two line items. L-3 said the contracting officer’s price determination was unreasonable, arbitrary and capricious, since the determination establishes contract prices which constitute an ongoing financial loss to the company in violation of the Contract Disputes Act. L-3 said it also violated applicable provisions of the Federal Acquisition Regulation (FAR).

C-27J in U.S. Coast Guard colors. Photo: Leonardo.
C-27J in U.S. Coast Guard colors. Photo: Leonardo.

L-3 said it entered into a foreign military sale (FMS) contract in September 2014 with the Air Force to provide certain training services to the Royal Australian Air Force (RAAF) in support of 10 C-27Js it is acquiring under a separate FMS contract. The training to be provided is for a unique version of the Leonardo-developed C-27J aircraft, modified to meet the special requirements of the Air Force and its RAAF allies.

L-3 said due to the urgency of the Air Force’s and RAAF’s training requirements, the contract was initially entered into as a UCA (undefinitized contract action), which allowed L-3 to proceed with contract performance while the contractor and the Air Force negotiated certain terms of the contract, including price.

L-3’s investment in the C-27J simulator was $38 million. L-3 said while it was initially expected that the C-27J aircraft would be widely used both by the Pentagon as well as internationally by many other users, this ultimately was not the case and the C-27J aircraft did not see the anticipated widespread deployment. Only 31 C-27Js have been ordered to date, L-3 said, thus severely limiting the demand for aircrew training and the number of training hours over which L-3 is able to amortize its $38 million fixed C-27J simulator costs.

After unsuccessful negotiations, L-3 said in unilaterally determining the C-27J simulator rates for contract line item numbers (CLIN) X031, RAAF aircrew operational flight trainer training; and X032, C-27J simulator; the Air Force failed to take into account the need for L-3 to amoritize over the finite customer base the $38 million fixed cost for the C-287 simulator used in performance of the contract. L-3 also argues that the C-27J simulator is quickly becoming obsolete as there have been no additional sales of the Air Force and RAAF configured aircraft, leaving L-3 no other customer base or viable means to amortize the fixed costs through the sale of additional simulator training services under this contract or other contracts.

L-3 argues the C-27J simulator usage rates the Air Force established are less than L-3’s actual costs and have resulted in L-3 incurring substantial losses. L-3 said its losses as of July 31 were roughly $1 million and are expected to total $3.6 million by the conclusion of the contract. The formal L-3 division in the lawsuit is L-3 Communications Integrated Systems LP.