Sikorsky Helicopters Win and Lose in 2015 Budget (UPDATED)
When the Defense Department unveiled its 2015 fiscal year budget last week, Sikorsky Aircraft received a couple of huge surprises, both good and bad.
The Air Force announced it would award the company a contract this year to build up to 122 combat rescue helicopters to replace the Pave Hawk fleet. The decision to move forward with the program had been made only hours before the budget was unveiled, service officials said.
But the company suffered a huge blow when the Navy reversed its plan to buy 29 MH-60S Seahawk helicopters in fiscal year 2016. The service had already contracted to buy those aircraft — a maritime version of the UH-60 Black Hawk utility helicopter — from Sikorsky under a multi-year procurement contract.
“We’re very disappointed. We have a multiyear contract which includes the Army and the Navy,” said Samir Mehta, president of Sikorsky’s defense systems and services. “The extremely competitive pricing that our customers received on that program was based around specific quantities.”
“When you start to erode those quantities, and especially when it is a breach of the minimum quantities of the multiyear, which this would be, there’s a few things that happen,” including an impact on pricing, he told reporters March 11.
Such decisions undermine industry’s confidence in multiyear contracts, he said. “Something like this could lead us back to the days of single year pricing, which doesn’t always offer the best value to the government.”
The Navy will incur a financial penalty for breaching its contract. That cost has not been determined, he said.
Meanwhile, a contract for the Air Force's combat rescue helicopter will likely be awarded in June, Mehta said.
The service plans to set aside $430 million over the next five years for the program. Funding for 2015 will include some of the $330 million appropriated by Congress in fiscal year 2014 for the program.
Funding for the rescue helicopter had been in question. Eric Fanning, then the acting Air Force Secretary, said in November that it was unlikely the service would have enough money to start the program.
Sikorsky’s proposed helicopter is a modified version of the Black Hawk. The combat rescue variant will likely have updated avionics and mission systems to detect threats on the battlefield, as well as composite blades that give it more lift, Mehta said.
In order to strike a balance between new capabilities and affordability, the company conducted exercises where employees tried to devise strategies on how other companies could try to beat the Black Hawk, he said.
"It relies upon much of the same industrial base as the Black Hawk,” he said. “We knew that affordability was going to be a discriminating factor in this particular competition, and we think that's one of the main reasons why the Air Force ultimately chose the Black Hawk.”
The company plans to kick off development of specialized mission equipment and begin to design the interior aircraft configuration, he said.
“This is not just an amalgamation of existing components. There’s a nice balance between existing technology and also some development and integration work that needs to be done,” he said.
Sikorsky believes several foreign countries also are in the market for new combat rescue helicopters, Mehta said.
“Any additional quantities we can add to the program through [foreign military sales] or by other means benefits the industrial base. It also benefits our customer as another potential source of funding for this program,” he said.
Despite restructuring in the Army that would move some UH-60M Black Hawks from the active component to the Army National Guard, the Black Hawk program of record remains unchanged, Mehta said.
The war drawdown, meanwhile, has reduced the demand for maintenance work. “Quite frankly, a lot of our struggles have been around … declining op tempo and declining requirements for support in the aftermarket, so we’ll have to wait and see” what the overall impact of the shift is, he said.
The company is anticipating the first flight of its CH-53K cargo helicopter later this year. The Marine Corps is expected to ultimately procure 200 aircraft at a cost of about $20 billion, Mehta said. “It’s on solid footing. ... It’s the only major DoD rotorcraft development program” for the next few years.
The company is also awaiting contracts for smaller programs, such as the presidential helicopter, for which a Sikorsky-Lockheed Martin team was the only bidder. Mehta said he expects an award this year to produce 21 aircraft.
Correction: A previous version of this article misstated the cost of procuring 200 CH-53K cargo helicopters.