L3 Technologies [LLL] will protest its loss of a major aviation support contract and its ouster as the primary provider of training and support services to the Army Aviation Center of Excellence at Fort Rucker, Ala.
The company also warned investors that the loss will lead to a substantial hit to earnings when it reports third quarter financial results in October.
L3 filed a protest with the Government Accountability Office (GAO) on Sept. 25. The GAO now has 100 days to weigh the protest before either upholding or dismissing the protest.
L3 has served as the incumbent contractor at Fort Rucker since 2003 and the contract was the company’s largest, accounting for about 4 percent of revenue. The Army announced Sept. 15 the follow-on $387 million contract would go to privately held M1 Support Services, a Denton, Texas-based aviation training and support provider.
The deal is a “hybrid contract” that includes cost, cost-plus-fixed-fee, fixed-price-award-fee and fixed-price-incentives for maintenance services supporting Army entry level and advanced as well as Air Force advanced rotary aviation training mission at Fort Rucker.
In announcing L3’s protest, company executives insisted their bid to continue serving the Army aviation community is the best for the service.
“We are convinced our proposal represents the best value to both the military and the U.S. taxpayers,” said Christopher E. Kubasik, L3’s president and chief operating officer. “We look forward to the GAO’s review.”
L3’s Senior Vice President and President of its Aerospace Systems business segment, Mark Von Schwarz, echoed Mr. Kubasik’s comments, adding that “L3 remains fully committed to serving the U.S. Army and Air Force at Fort Rucker, and the protest will not affect current operations.”
As a result of the Fort Rucker recompetition loss, L3 expects its Vertex Aerospace business to take a $187 million charge against its earnings in the third quarter of 2017, which ends in September. The company is currently assessing the impact of the recompetition loss on the fair value of Vertex, which will ultimately determine the goodwill impairment charge.