Washington – The Navy has lauded Connecticut’s effort to help Lockheed Martin cut the cost of the CH53K King Stallion, a new heavy-lift helicopter for the Marines, but the Navy and the company are still negotiating the contract.
“The Department of the Navy is continuing its discussions with Lockheed Martin regarding the CH53K,” said Navy spokeswoman Capt. Thurraya Kent. “We are making critical progress towards the affordability targets we have established for this program and greatly appreciate the measures taken by the state and Sikorsky towards this end.”
The Navy and Lockheed Martin, which bought helicopter-maker Sikorsky last year, are negotiating the terms of a contract months before the first opportunity for defense contractors to bid on the King Stallion contract.
But a major problem in negotiations was the price the Navy would pay for the King Stallion, Sean Stackley, assistant secretary of the Navy in charge of acquisitions, told the Connecticut Mirror.
At issue was the “rate projection,” an estimate of the cost of labor and overhead. After Lockheed Martin purchased Sikorsky, that projection increased.
“When we were looking at where we were heading in terms of cost, we were very concerned,” Stackely said.
The cost of the King Stallion had increased in large part because the drop in the price of oil led to drops in oil exploration and production and the purchase of commercial helicopters from Sikorsky.
Stackley said Sikorsky’s production of commercial helicopters helped keep the price of those sold to the Pentagon down through synergies in engineering and manufacturing.
“When the downturn in the price of oil came, that put a lot of pressure on our side of the equation,” Stackley said.
To help lower the cost of the King Stallion, Lockheed Martin looked at ways to construct the helicopters at lower cost, including moving production to company facilities in South Carolina, Florida, Georgia or Texas.
The issue of where the helicopters would be built was raised at a meeting between the Navy’s Defense Acquisition Board and representatives of Sikorsky and Lockheed Martin in the spring, Stackley said.
“One of the unknowns was where production would be,” Stackley said.
The Navy asked Lockheed Martin and Sikorsky to come up with a new rate projection in October, which put pressure on the defense contractors to look for ways to cut labor costs and overhead. Those efforts included talks with Gov. Dannel P. Malloy.
Long road to production
Malloy eventually cut a deal with Lockheed Martin that persuaded the company to produce the new line of helicopters in Connecticut in return for $220 million in state financial incentives. Sikorsky also won wage and benefit concessions from Teamsters Local 1150, which represents Sikorsky workers.
“The agreements reached with the state of Connecticut and Teamsters Local 1150 were a vital and necessary part of moving into negotiations with the Navy for low-rate initial production,” said Sikorsky spokesman Paul Jackson. “That process is now moving forward.”
But, the Navy’s Kent said, “We have much remaining detail to work through to reach our final goal” on the King Stallion contract.
Jackson confirmed negotiations continue over the price of the helicopter and other aspects of the contract.
The General Assembly approved the deal between Malloy and Lockheed Martin in a special session eight days after the agreement was announced.
On Oct. 9, the Teamsters voted to cut the salaries and benefits of future Sikorsky workers.
Stackley said he is pleased production of the helicopter will stay in Connecticut, because of its skilled and experienced workforce.
“We have set a foundation for success,” he said.
Meanwhile, production of the first King Stallions must still clear other hurdles, and the program will roll out slowly. Eventually, however, the program is expected to cost $25 billion over the next couple of decades and result in the construction of 200 helicopters.
Four prototypes are being tested at Sikorsky’s plant in West Palm Beach, Fla., and the Navy awarded Sikorsky a $232 million contract last month to build two more. All six must operate in ways the Navy expects before the next phase of the program is reached, said Kelly Burdick, spokeswoman for the Navy’s CH53K program.
“We have to do everything that is on the list and say everything is fine,” Burdick said.
She hopes the Navy will be able to reach “Milestone C,” the production phase of the federal acquisition process, in February. That would allow the Navy to put out a contract for “low-rate initial production,” in this case just two of the behemoth ‘copters.
That is, of course, if Congress approves the money for the first lot of helicopters. The House and Senate defense appropriations and defense authorization bills contain about $400 million to begin production of the King Stallion, but those bills are a victim of gridlock in Congress over total defense spending.
Senate Majority Leader Bob Duff, who like all but one of his Senate colleagues voted to give Lockheed Martin incentives to produce the King Stallion in Connecticut, said the defense contractor had a sense of urgency about winning approval of the deal.
In meetings with state legislators before the vote, Duff said a representative from Lockheed Martin said there was a “hard deadline” of Oct. 7 for the company to decide where to produce the King Stallions.
“When a global company like Lockheed Martin looks you right in the eye and says there’s a hard deadline, it’s something that you can take to the bank,” Duff said.
Sikorsky began building CH53 heavy-lift helicopters in the early 1960s. The fleets are aging and in need of replacement.
The King Stallion program has experienced some delay. The first test flight, initially expected in 2014, was made in October of 2015 because of technical issues, mainly with the helicopter’s main gearbox. That problem has been fixed.