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PARIS --- The selection of the Lockheed Martin US101 as the future US Presidential helicopter is one of the most surprising, and potentially significant, acquisition decisions made by the Pentagon for decades.
It is the first instance, for example, that the Pentagon has selected a European-made system when a competitive, US-made alternative was available. In all previous European contract wins (the AV-8 Harrier, the T-45 jet trainer and the Roland surface-to-air missile immediately spring to mind), US industry either lacked what the Pentagon was looking for, or could not make it competitively.
Clearly, it also helped that the VXX decision came in the “post Boeing tanker” era, when even overly cozy relations between the Pentagon and its contractors are no longer tolerated by public opinion. Nowadays, it is not enough for contract awards to be unimpeachable; they must also be seen to be unimpeachable, and for this Lockheed and Agusta Westland, maker of the EH101 from which the US101 is derived, must thank Boeing.
Perhaps as a by-product, the US101’s victory also marks the first time that the Pentagon seems to have ignored the immediate interests of its defense industrial base when awarding such a high-profile acquisition contract. In the days leading up to the Jan. 28 announcement of the VXX decision, senior Sikorsky executives had been warning that winning the contract was a “make it or break it” event for the company, but their calls apparently went unheeded.
Is Sikorsky threatened? It is true that, after cancellation of the RAH-66 Comanche program, Sikorsky has no new products in the pipeline, and it can only look forward to producing Black Hawk or Seahawk helicopters – to a 30-year old design – for the foreseeable future. Even worse: now that it has been so visibly snubbed by its most famous potential customer, the export prospects of Sikorsky’s S-92 helicopter, the losing VXX contender, look decidedly dim.
For Lockheed, which will now be able to enter the helicopter market which it had been eyeing for quite a while, the VXX win is likely to lead to other Pentagon contracts. The $6.1 billion VXX contract funds development of new capabilities for the US101, including re-design of the tail rotor, increasing range to 350 nautical miles and other changes, which will make it even better suited to meet future Pentagon requirements. These include the PRV combat search and rescue program, which calls for 100 to 200 helicopters, and where range and cabin volume are dominant requirements.
Lockheed’s VXX win holds valuable lessons for non-US contractors. One is that, if enough care is taken to “Americanize” them, and to create local jobs in the process, selling European products to the Pentagon is no longer the “Mission Impossible” it has long been.
This must be heartening to both the company and to EADS, the European group with which Lockheed has teamed to offer Airbus tanker aircraft to the US Air Force. Pre-VXX, most observers felt the Pentagon would never buy a foreign aircraft for such a large program, but things clearly have now changed.
Is this a sign the two-way street in defense trade has finally opened up? It certainly is a larger and better road for Britain and Italy, steadfast US allies in Iraq and partners in other Pentagon programs, such as the Joint Strike Fighter. Britain, especially, has long been a significant Pentagon supplier through BAE System’s North American operations, but the VXX win moves it a few notches up the Pentagon acquisition ladder.
It does not necessarily mean that the United States will open up its domestic defense market to all European countries, especially as long as bitterness about Airbus-Boeing subsidies continues to poison bilateral trade ties between Washington and Berlin, Brussels and Paris. But it nonetheless sets a precedent.
Letting Lockheed enter the US helicopter market is not necessarily unalloyed good news for the Pentagon, however, as there is already a lot more capacity among Bell, Boeing and Sikorsky than there are contracts to keep them busy. Furthermore, Lockheed is already the Pentagon’s largest supplier, accounting for about 10% of all prime contracts awarded in 2004, so giving the company yet more clout could lead to uncomfortable supplier-buyer relationships down the line.
But whatever its long-term consequences, the US101’s victory in the VXX competition is an all-too-rare European success in the transatlantic defense trade, and should be celebrated as the large step forward it constitutes in this respect.
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