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Pentagon backs Air Force approach in helicopter competition: source

By Andrea Shalal-Esa

WASHINGTON (Reuters) - The Pentagon on Wednesday backed the Air Force's handling of a $6.8 billion helicopter competition but said it may have to use other tools to ensure a good price, after five of the six potential bidders pulled out, according to a senior defense official.

A senior defense official, speaking on condition of anonymity, said the Pentagon helped shape the terms of the competition because it insisted that the Air Force clearly spell out the requirements for the new helicopters and let potential bidders know how they would value any additional capabilities.

This new approach was also aimed at ensuring military officials are forced to think about the cost of the requirements they set for military equipment, the official said.

"They did the right thing," the official said, when asked whether the Air Force had mishandled the competition. "If we let industry know ahead of time how much we're willing to pay for enhanced performance, industry can bid more intelligently. They can decide whether they can bid and get within our affordability constraints or not."

In this case, the companies that pulled out appeared to have made those calculations and decided they could not compete, the official said, noting that spelling out the terms so clearly had prevented the companies from wasting their time.

It was the second time the Pentagon had tried to move away from more subjective evaluations used in earlier procurements, the official said, citing its first use in a refueling tanker competition won by Boeing Co in 2011.

The alternative would have resulted in companies spending money to prepare a bid, only to lose the contract in the end.

"I don't want to have pretend competitions," said the official. "I want to have real competitions."

Five big contractors on Tuesday withdrew from an Air Force competition to buy 112 new rescue helicopters, with industry officials saying the terms of the competition favored Sikorsky's Black Hawk helicopter and would not reward extra capabilities offered by their aircraft.

Northrop Grumman Corp, which was teamed with Italy's Finmeccanica SpA; Boeing Co; Textron's Bell Helicopter unit; and the U.S. unit of Europe's EADS all said on Tuesday that they would not compete to build 112 new helicopters for the Air Force, raising questions about whether the contest can proceed as planned.

The official denied that either the tanker or helicopter competitions were structured to preference one bidder.

"That is absolutely not the case, period. Absolutely not," said the official. "We try to write source selections that reflect our requirements and define our requirements as clearly as we can ... It has nothing whatsoever to do with pre-selection of a specific candidate."

The official said the Pentagon had guidelines for how to handle a sole-source competition to ensure it still got the best deal possible, although no decision had been made yet to change the Air Force's approach in this case.

"I'm not sure how it's going to play out at this point ... It may end up with one bidder," said the official.

(Reporting By Andrea Shalal-Esa; editing by Carol Bishopric)

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