Embraer, Hawker Beechcraft face off again over planes for Afghanistan

 

McClatchy Newspapers

After conducting an internal investigation, bringing in senior staff and briefing members of Congress, the U.S. Air Force expects this month to restart a contentious competition to purchase single-engine turboprop attack aircraft for Afghanistan that pits the Brazilian company Embraer and its A-29 Super Tucano against Wichita, Kan.,-based Hawker Beechcraft and its AT-6.

Embraer, however, is concerned about getting a fair shake in the new competition, the outcome of which will affect not only the two companies, but also possibly the future of growing Brazil-U.S. military cooperation as well as the prospects for U.S. defense companies seeking to do business in Brazil.

In March the Air Force abruptly canceled a $355 million contract it had just awarded Embraer to build 20 light air support aircraft for the Afghan air force after losing bidder Hawker Beechcraft sued the Pentagon. A subsequent internal Air Force investigation reportedly found internal administrative problems in the procurement process. The contract was rebid, with the final proposal due next Monday.

The U.S. Air Force expects to announce the new winner early next year, but the aircraft haven’t been requested for delivery until 18 months after that – as U.S. troops are supposed to be winding down their deployment in Afghanistan.

Unlike the original competition, the new one lacks a flight evaluation, in which the two planes would be flown under similar conditions. It also won’t accept data from the prior competition, a concern to Embraer. Hawker Beechcraft’s older planes, such as its T-6, are better known to U.S. military.

“They think that they are at a significant disadvantage because of a lack of a fly-off or use of prior data,” a senior staffer for a Florida member of Congress said, describing meetings with Embraer. The staffer, like several people interviewed for this story, spoke only on the condition of anonymity because of the sensitivity of the issue.

Officials on both sides acknowledge that the handling of the contract has hurt a bilateral defense relationship that “has advanced pretty dramatically,” said the U.S. ambassador to Brazil, Thomas Shannon.

Brazil has long harbored resentment over what it sees as slights in the way it’s treated in military matters. Past Brazilian officials thought the country never got the recognition it deserved for sending troops to fight alongside the Allies in World War II. Brazil also is still smarting over its abandonment of its nuclear weapons program under U.S. pressure, only to see India develop nuclear weapons and continue to resist signing the Nuclear Non-Proliferation Treaty while still receiving favorable treatment from Washington.

In recent years, U.S. officials have tried to improve defense relations with Brazil, the largest country in South America and the world’s sixth largest economy. A 2010 agreement that originated in the George W. Bush administration called for increased sharing of military systems and equipment.

The chairman of the Joint Chiefs of Staff, Army Gen. Martin Dempsey, visited the country in March and Defense Secretary Leon Panetta visited in April, launching the U.S.-Brazil Defense Cooperation Dialogue with Brazilian Defense Minister Celso Amorim.

Marco Aurelio Garcia, a foreign policy adviser to Brazilian President Dilma Rousseff, said: “We have a very good relation with the U.S. and we want to continue to develop it. But a decision like this creates problems not only in military relations but in economic and commercial relations.”

Embraer officials declined to comment. The company’s U.S. headquarters are in Florida, where the planes for Afghanistan would be assembled.

Embraer still questions why it was stripped of the contract in the first place, according to another person who has direct knowledge of the company’s deliberations on the contract. If the problems were mainly administrative, rebidding the contract “is disproportionate” as a resolution, the person said, adding that suspicions in Brazil are high that the new competition “is tilted in favor of Hawker Beechcraft.”

Hawker Beechcraft hasn’t objected to the absence of a fly-off, but it has other concerns about the bidding process. For one, it thinks the Pentagon has lowered the standards for the aircraft’s ejection-seat system, said Derek Hess, the company’s vice president for light attack programs. That shaves an edge, he said, because Hawker Beechcraft seats accommodate a wider variety of pilots, something the Air Force told congressional staffers in April was unnecessary because only Afghans would pilot the planes.

On Tuesday, Embraer’s partner in the competition, Nevada-based Sierra Nevada Corp., said it had sued the Air Force to have the original contract reinstated. Observers described it as a significant move as the U.S. government is a major Sierra Nevada customer, but the corporation said it planned to continue the competition.

Taco Gilbert, a vice president at Sierra Nevada Corp., said in a recent interview that, “We remain concerned that there is no fly-off. All we have ever asked for is integrity in the process and a fair and open competition.”

Buying planes for the U.S. military and the nascent Afghan air force has been subject to political interference from the beginning. Embraer initially had the support of Army Gen. Stanley McChrystal when he was the commander of international forces in Afghanistan, according to a second congressional staffer. But the program was killed in Congress under pressure from Kansas legislators.

Brazilian politicians also are concerned about the handling of the contract. In an interview at the presidential palace in Brasilia, Garcia said he thought that the initial award of the contract to Embraer “was made strictly under technical criteria” but subsequent developments were the result of “political interference” and “protectionist and political intervention.”

Peter Hakim, the president emeritus of the Inter-American Dialogue, a Washington research center, was also critical. “Not only was it insulting to cancel the contract at the last minute, but the explanation was so thin,” he said. “It made it look like the U.S. can act arbitrarily.”

Shannon, the U.S. ambassador, said that for Brazil, the cancellation of the contract “provoked latent concerns about the confidence we have in them and the confidence they have in us as a long-term partner. So we have been trying to reassure them that we are looking for a defense partnership that can be enduring.”

The U.S., which for decades had assumed the sole responsibility for the Western Hemisphere’s defense, now wants Brazil to assume a greater share of the burden. Brazil, where a military dictatorship reigned until the 1980s, is modernizing its once-discredited military, a process that began during the administration of President Luiz Inacio Lula da Silva.

That modernization has potential benefits for American companies. Brazil bought UH-60L Black Hawk helicopters from Sikorsky Aircraft Corp. of Stratford, Conn. Esterline Corp. of Bellevue, Wash., has a contract to provide equipment to Embraer’s KC-390 military tankers.

While in Rio de Janeiro, Panetta said the U.S. had approved nearly 4,000 licenses a year to export technology to Brazil, “ranging from weapons and aircraft to integrated combat systems for navy ships and submarines.”

“This is on a par with the U.S. government’s license approval rate for treaty allies, for our closest partners,” he said.

A U.S. concern is whether the outcome of the bidding for the Afghan planes will affect a $4.4 billion contract to sell Brazil 36 fighter jets. Boeing is competing with France’s Dassault Aviation and Sweden’s Saab for the deal. It’s unclear whether that contract could be affected if Brazil continues to harbor doubts about the Pentagon’s process for deciding on the Super Tucano A-29 – the pride of the Brazilian air force – for Afghanistan.

“They are humans with sentiments and they have long memories,” a Brazilian official said, referring to the Brazilian military. “I recently met a military official complaining about some slight from 15 years ago.”

Sreeharsha is a McClatchy special correspondent.

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