The US Army and Navy on November 17 announced the purchase of 102 Sikorsky UH-60 Black Hawk and MH-60R Seahawk helicopters at a total cost of more than $1.3 billion.
The Army, which oversees contracting for all H-60 variants out of Redstone Arsenal in Alabama, awarded Sikorsky $771.9 million for 41 UH-60M Black Hawks and 24 HH-60 Pave Hawks and for maintenance and support of the aircraft. The contract is scheduled for completion by 30 June 2015, according to government documents.
Sikorsky also was awarded a $535.3 million contract for the Navy’s fourth programme year orders for eight MH-60S and 29 MH-60R helicopters along with sustainment engineering, programme management, systems engineering, logistics support and advanced procurement for future contract years. That work is slated for completion by 31 December 2015.
The contract awards resurrect a multi-year contract between the services and Sikorsky that seemed doomed by cuts made in the Pentagon’s 2015 budget request. When introduced in early 2014, the budget included cancellation of orders for the 20 R-model Seahawks.
The contract in question calls for the USN, Army and foreign partners to acquire roughly 650 Black Hawks and Seahawks between fiscal years 2012 and 2016. In its FY2015 budget request, the navy proposes cancelling the last 29 aircraft to be purchased in FY2016.
The Army confirmed that the cancellations would reduce fiscal year 2016 orders to below minimum requirements stipulated in the contract, which would terminate the agreement. The navy was prepared to pay termination fees that would result from breaking the contract terms.
Multi-year contracts are designed to avoid the risk of cancellation and a mid-term termination of the MH-60 deal would have brought into question the validity of other ongoing multi-year deals companies have with the US Department of Defense, analysts said at the time. It also would likely have killed the army’s orders for UH-60 Black Hawks and foreign partners covered by the contract.
The Navy likely reversed course because it saw available funding in the near term, says Richard Aboulafia, vice president of consulting firm Teal Group.
“The Navy’s requirements are still present and the budget situation is stabilising for now,” he tells Flight Global.
Sikorsky also sells the aircraft at a 10% discount within a multi-year contract, which makes them “overwhelmingly advantageous” for the services, especially when funding is tight, he says.
“The main problem was that not buying these aircraft would have broken a multi-year contract and the whole point of a multi-year contract is you save money by not having the risk of cancellation.”
Source: FlightGlobal.com
