GAO report takes issue with Forest Service, Neptune air tanker contracts

2014-04-13T11:35:00Z 2014-04-13T23:06:51Z GAO report takes issue with Forest Service, Neptune air tanker contractsBy ROB CHANEY Missoulian The Billings Gazette
April 13, 2014 11:35 am  • 

MISSOULA — Wildfire season officially begins April 28, and the U.S. Forest Service is heading into it with only three modern firefighting air tankers.

Missoula-based Neptune Aviation has one of those planes on contract. It's pushing to have two more, but competitors won a protest over Neptune’s no-competition award worth almost half a billion dollars over 10 years. By August, Neptune will have two more jets looking for work.

“We’re still cranking out air tankers,” Neptune CEO Ron Hooper said Friday. “But that’s the state of limbo we’re in. We’re waiting to see what the Forest Service will do.”

Meanwhile, one of Neptune’s six Korean War-vintage P2-V bombers saw seven hours of flying time on a wildfire in New Mexico last week. Of the five companies that received Forest Service “next-generation” contracts to provide seven new fire bombers last year, three have failed to deliver their planes.

Citing the lack of available planes and Neptune’s risk of going out of business, the Forest Service last June gave Neptune a sole-source contract for two of its jet-powered BAe-146 tankers.

But a Government Accountability Office decision released March 31 found numerous problems with those contracts. It recommended the Forest Service reassess its awards, and either make a stronger case or terminate them.

“They left the door open for the Forest Service to do something – either beef up their justification or take other actions,” Hooper said. “We’re moving forward as if we’ve got two next-generation contracts.”

That’s a far cry from the 24 to 28 planes capable of traveling faster than 350 mph and carrying 3,000 gallons of retardant the Forest Service wanted from its next-gen contract process. And it’s far below the 44 planes it had before fatal crashes forced the agency to reexamine its air force.

“Having less than 25 percent of the tankers we had in 2002 – that’s pretty significant,” said Bill Gabbert, who monitors the wildfire community at fireaviation.com. “It’s a pretty cutthroat business. The Forest Service has had three contracts protested in the last two years.”

***

The “air show,” as wildland firefighters call it, includes various sizes of helicopters and airplanes dropping various amounts of water and chemical slurry on forest fires. Helicopters typically carry water directly to flaming ground cover or trees. Air tankers, ranging from converted crop dusters to jumbo jets, lay strips of retardant across the landscape to slow or contain a fire’s progress.

After the fatal crashes in 2002 and an industrywide stand-down in 2004, Neptune and two other companies were the only private contractors left with planes deemed safe enough to fly on forest fires.

California-based Aero-Union lost its Forest Service contract in 2011 and went bankrupt shortly thereafter. Nevada-based Minden Air Corp. was down to a single P2-V after its other crashed in 2012. Neptune had 10 P2-Vs in 2012, but crashes and maintenance issues reduced that to six today.

In 2012, the Forest Service took offers from Neptune and eight other aircraft companies for next-generation tanker contracts. Winners of those contracts would have five years of guaranteed work on fires, with five one-year extension options. They would also be the only ones qualified to add additional planes to the fleet.

The Missoula company received two of the initial seven contracts for its BAe-146 jets. The contracts were worth between $350 million and $400 million per award over five years, according to the GAO report.

Two unsuccessful bidders, Coulson Aviation and 10 Tanker Air, challenged the awards. Those two companies were successful in their protest, and a new round of Forest Service contracts switched the Neptune awards to Coulson and 10 Tanker Air.

Neptune protested that decision last May, claiming “the company had made a significant investment in modern large air tankers and would go out of business without a NextGen contract award,” the GAO report stated.

In the meantime, the Forest Service awarded Neptune a “legacy contract,” paying for six of its aging P2-V bombers and one new BAe-146 jet for five years. It added a second BAe-146 on an “additional equipment” one-year contact. All those planes saw action in the 2013 fire season.

In June, Neptune agreed to drop its protest in return for a sole-source, noncompetitive contract for two more BAe-146 jets. Coulson, 10 Tanker Air and Minden all protested that award. The non-competitive bid award also triggered an independent audit, and that inspection found problems with Neptune’s accounting.

“In reaching its conclusions, (the auditor) found that Neptune had based its revenue projections for years 2-5 of the Legacy contract on the base-year rates instead of the higher, option-year rates set forth in the contract,” the report stated. “(The auditor) also found that Neptune had based its revenue projections for the same period on the use of seven P2-V aircraft, rather than six P2-V and one BAe-146 aircraft (and the higher BAe-146 rates). After also finding Neptune’s expected costs to be lower than the company’s projections, (the auditor) concluded that Neptune would have the financial capacity to operate and continue performing on its in-place legacy contract with the Forest Service through at a minimum calendar year 2016 without any further contract awards.”

Hooper said his bid included errors, but those were corrected during the review. He added the Forest Service misunderstood Neptune’s claim that only its jet business would fail without the next-gen contracts, while its older aircraft could still operate through 2017.

The GAO report noted Hooper was the Forest Service director of acquisition and management until his retirement in 2010 to join the Missoula company. Hooper “was quite familiar with the (Fire and Aviation Management) director and other agency officials” because of that experience, the report stated. It also stated Forest Service officials relied on “the verbal representations of Neptune’s CEO” to judge the company’s financial health.

Hooper responded that he met all ethical standards for government contracting, including staying out of the business for a year after leaving federal service.

“I think people were trying to raise any issue they could during the protest,” Hooper said. “I don’t want to debate that.”

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National Interagency Fire Center spokeswoman Jennifer Jones said the Forest Service has issued cure notices to the three contractors who haven’t produced their planes yet. They have until between April 25 and June 30 to deliver their tankers.

In addition, a fleet of Air National Guard C-130s fitted with removable retardant tanks should be ready for action no later than May 19. One of those planes crashed on fire duty in 2012, killing all four airmen aboard.

Another seven military surplus planes Congress gave the Forest Service last year won’t be ready for use before 2015 at the earliest, Jones said. The agency has options to lease eight propeller-powered CV-580 tankers from the state of Alaska, and similar planes from the Canadian government, if necessary.

And the agency has not made a decision about Neptune’s next-gen contracts.

“The U.S. Forest Service is committed to ensuring that we have all of the resources we need to fight wildland fire and protect the lives and property of the American people,” a Forest Service response to the GAO stated. “Air tankers are an important part of our efforts and we are currently reviewing the GAO recommendation.”

Jones said Friday that review is still underway.

Neptune has replaced the retardant tanks in its original two BAe-146 jets and installed the new versions in its latest pair. The new tanks are intended to fix delivery problems the earlier tanks displayed and meet Forest Service firefighting specifications. Its fifth jet should arrive in Missoula in June and be ready for firefighting by Aug. 1.

“It doesn’t make sense to have American aircraft sitting on the ramp and have to call the Canadians,” Hooper said.

Aviation watchdog Gabbert said part of the problem is the Forest Service’s lack of long-range planning for aviation needs.

“They only allowed vendors 90 days to get new air tankers up in the air (with the next-gen contracts), Gabbert said. “That’s asking a lot to have companies retrofit multi-million-dollar airplanes and then bid on contracts. They should have given them one or two years to build and deliver.”

There’s also confusion over how exclusive those next-gen contracts are. While initial rules stated only the winners would have opportunity to bring additional planes to the Forest Service, the GAO decision specifically mentioned “the agency plans to conduct additional competitions in the coming years under which Neptune would be eligible to compete and could receive awards.”

Both Hooper and Jones said they were unfamiliar with that possibility.

“We’re not sure about any future opportunities,” Hooper said. “We understood that if you didn’t get a next-gen, you’re out for the next 10 years.”

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