United Technologies Wins Potential $7.9 Billion Air Force Helicopter Award

U.S. Air Force gives United Tech the win in the Combat Rescue Helicopter competition.

Jun 27, 2014 at 1:33PM

The Department of Defense announced Thursday that it has picked United Technologies (NYSE:UTX) to conduct initial engineering, manufacturing, and development work on a new Combat Rescue Helicopter (CRH) for the U.S. Air Force.

Pave Hawk
HH-60G Pave Hawk, the U.S. Air Force's current combat rescue helicopter. Photo: Wikimedia Commons.

The contract awarded to UTC's Sikorsky Aircraft Corporation subsidiary will be worth $1.28 billion initially, and is described as a fixed-price-incentive-firm at target price/firm-fixed-price contract. Under its terms, Sikorsky will work toward developing a new CRH to replace the aging HH-60G Pave Hawk helicopters currently used in Air Force combat search-and-rescue missions. In addition to supplying the Air Force with new helicopters, Sikorsky will also supply training systems and product support for the vehicles. 

The Pentagon notes that the "most probable quantity" of helicopters to be ordered under for the CRH fleet is 112, built over the course of the next 15 years through June 2029. However, the contract now awarded to Sikorsky "has been structured to handle fluctuations of quantities," with incremental lots of helicopters being contracted for as options extending the base contract, as needed.

If all options are exercised, the Pentagon estimates that this contract could ultimately be worth $7.9 billion to Sikorsky. This sum would be $1.1 billion more than the cost ceiling set by the Air Force in 2012. However, by the time this award was finally confirmed this week, there were no other companies bidding on the work, offering the Air Force better terms. Former Sikorsky rivals Boeing (NYSE:BA), Textron (NYSE:TXT), Northrop Grumman (NYSE:NOC), and Italy's AgustaWestland had all already dropped out of the competition.

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Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Northrop Grumman and Textron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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