The U.S. government has already spent nearly $1 billion to buy helicopters for Afghanistan, Iraq and Pakistan from its former Cold War rival since 2001, an initiative that has angered U.S. lawmakers who want the Pentagon to buy U.S.-made helicopters instead and prompted an unsuccessful protest by Sikorsky Aircraft, a unit of United Technologies Corp. (UTX.N)
Now, another U.S. broker for Russian equipment is challenging the U.S. plan to skip a competition and hand a Russian government agency a contract worth up to $400 million.
Former Pentagon chief arms buyer John Young told Reuters the Obama administration should stick to its goal of holding competitions whenever possible. Anything else, he says, "is bad for the taxpayer and the warfighter."
Defense Technology Inc (DTI), a privately held company with annual sales of around $70 million, plans to file a formal protest with the Government Accountability Office (GAO) or a lawsuit in federal claims court, if the Army proceeds with a sole-source deal, company president Mark Young told Reuters.
The DTI president is not related to John Young.
DTI supplied four of the Russian-built helicopters to the U.S. Navy for $43 million in late 2009 under a separate competition and last year bid to sell the Navy 21 more.
But the Navy abruptly canceled that competition last year, handing the reins to the U.S. Army, which announced in January that it did not plan a competition, but planned a sole-source deal with Russia's arms export agency Rosoboronexport.
The Army said it has explained to Congress why an exclusive deal with the Russian firm is justified, but it did not provide details to Reuters.
DTI says it has already bought four helicopters sitting in a hangar in Russia, ready to ship.
Mark Young said DTI could deliver the helicopters to Afghanistan in about two weeks for around $56 million, while Rosoboronexport's contract was likely to cost millions more and with deliveries likely to slip into 2012.
Young said the Russian helicopter manufacturer had notified DTI in writing that it would not be able to deliver any additional helicopters in 2011 beyond those already on order from DTI and other existing customers.
He said DTI could offer a lower price than Rosoboronexport since his company had far smaller profit margins.
Young also rejected the Army's argument that it was required to work through Rosoboronexport since this was a military sale, noting that earlier U.S. purchases of the Mi-17 helicopters were classified as civil.
"The Army says it wants to cut out the middle man and work directly with the Russian manufacturers, but Rosoboronexport is a sales company just like we are," Young said. "All the Army did was pick a bigger, Russian middle man."
Some observers have also questioned Washington's decision to work with Rosoboronexport, which was subject to State Department sanctions from 2006 through 2010 for selling equipment to Iran and Syria.