Order Code RS22103
April 1, 2005
CRS Report for Congress
Received through the CRS Web
VXX Presidential Helicopter: Background and
Issues for Congress
Christopher Bolkcom
Specialist in National Defense
Foreign Affairs, Defense, & Trade Division
Summary
On January 28, 2005, Navy officials announced the award of the VXX helicopter
contract to Lockheed Martin Corp. Critics of the award have raised concerns about the
effect on the U.S. defense industrial base, U.S. trade, and whether Buy American
statutes apply. Some question whether the competition was fair. Legislation has been
introduced regarding some of these issues. This report will be updated as warranted.
Background
On January 28, 2005, Assistant Secretary of the Navy John Young announced that
Lockheed Martin Corp. had won a competition against Sikorsky Aircraft Corp. to develop
the VXX presidential helicopter. Estimated at $6.1 billion, this program will replace the
today’s 13 VH-3A/D and eight VH-60N helicopters. Approximately $1.6 billion has been
budgeted since FY2004 to begin buying 23 helicopters. Initial operational capability is
planned for 2009. Some have criticized the award to purchase Lockheed’s US101, partly
because the winning team includes foreign companies (from the United Kingdom and
Italy). Sikorsky had stated it would build the VXX entirely in the United States. Others
say that Lockheed Martin won the competition despite Sikorsky’s higher performance
scores.1 Some say that Sikorsky’s S-92 was a superior aircraft, but that the Department
of Defense (DOD) awarded the contract to Lockheed Martin’s international team to
reward Italy and the UK for their support of the war in Iraq. DOD denies this claim.
Potential Issues for Congress
On February 1, 2005, Representative Rosa DeLauro introduced H.R. 459 “Marine
One Made in American Act.” On March 1, 2005 Sen Lieberman introduced a related bill,
S. 486. As Congress considers these bills, and potentially other legislation on the VXX
1 Michael Bruno, “After Heated Briefing, Lawmakers Vow to Challenge Navy Over VXX,”
Aerospace Daily & Defense Report, Feb. 11, 2005.
Congressional Research Service ˜ The Library of Congress

---

CRS-2
program, several issues are likely to be raised. First, whether the competition was held
fairly, as DOD asserts, or whether there were procedural irregularities, as critics contend.
Second, the possible impact the decision might have on the U.S. defense industrial base.
Third, and relatedly, the effect the decision could have on U.S. trade The final issue
pertains to compliance with existing Buy American statutes.
Fairness of the Competition. In a January 28 news briefing, Navy officials
stated that the VXX contract was awarded on a “best value” basis, and that consistent with
government rules, the proposals were evaluated solely on “technical, past performance,
experience, and cost factors.”2 Some have questioned, however, the relative weight
placed on these factors. A related question has been whether the VXX needs to be
procured on the time schedule DOD desires.
Urgency. Government officials have consistently maintained that principally owing
to post-September 11th security issues, replacing the current Marine One fleet is urgent.
It has been reported that White House officials urged DOD to accelerate the VXX
program, proposing an initial operational capability by 2007.3 Some argue that by
responding to this perceived urgency with an aggressive acquisition schedule, DOD has
pursued a strategy that is unnecessarily risky. Navy Assistant Secretary John Young
commented on the risk associated with pursuing the VXX on an urgent time line: “The
requirements of the program are very demanding. The volume of work to be completed
in this program is substantial....However, the need to improve the capability and security
level provided to the president is urgent and demands that we move expeditiously.”4
DOD’s Director of Operational Test and Evaluation reportedly disapproved of the VXX
schedule, calling it overly aggressive and inconsistent with “fly before buy principles.”
He reportedly found that the VXX test schedule was “not executable.”5
Some believe that one outcome of this schedule was to make the competition more
favorable to Lockheed Martin and less favorable to Sikorsky. A Navy spokesman was
quoted as saying “The Lockheed streamlining proposal was selected because it was
judged more likely to meet these government requirements on schedule, with lesser risk,
and at a lower cost....we can’t let the traditional acquisition process impede the need to
meet the President’s security requirements now.”6
Critics note that DOD has also invoked post-September 11th security concerns to
justify other programs that deviated from the traditional acquisition process, such as the
proposed lease of 100 KC-767 tankers. Opponents of the contract award also argue that
the vast majority of presidential helicopter flights are short (e.g. from the White House
to Andrews AFB, or to Camp David), and take place in very secure airspace. From their
perspective, regular combat air patrols by F-16 aircraft, and standard defensive
2 DOD News Briefing, John Young, Assistant Secretary of the Navy for Research, Development
and Acquisition and Thomas Laux, Program Executive Officer, Jan. 28, 2005 - 5:01 p.m.
3 Christopher Castelli, “Facing Criticism From Christie, Young Defends Rapid VXX Schedule,”
Inside the Navy, Feb. 7, 2005.
4 DOD News Briefing, op. cit.
5 Castelli, op.cit.
6 DOD News Briefing, op. cit.

---

CRS-3
countermeasures should provide the President with adequate security regardless of the
helicopter flown. If improvements to the President’s security are urgently needed, critics
ask, what is being done to improve security until the VXX is fielded?
Supporters of the Navy’s position are likely to argue that a key lesson of the terrorist
attacks of September 11th is that tomorrow’s security challenges are difficult to predict
and that the President urgently needs more capability to address scenarios outside the
norm. Also, some argue, the consequences of not providing the President with improved
capabilities are potentially dire; such as ineffective crisis response, or even a discontinuity
of government. Therefore, they maintain that an aggressive schedule is warranted.
Technical Factors. Critics have stated that the VXX acquisition team may have
placed too little emphasis on safety, and too much emphasis on the helicopter’s cabin area
features, which they believe may have biased the competition in Lockheed Martin’s favor.
Opponents of the contract award maintain that safety should be the highest priority
for the President’s helicopter. According to Sikorsky officials, safety considerations were
valued less in the competition however, than other factors, such as cabin size.7 According
to press reports, Lockheed Martin’s helicopter has experienced five “Class A” mishaps;
the most serious kind of aviation accident. Sikorsky’s helicopter has reportedly never
experienced a Class A mishap. Sikorsky’s S-92 has been FAA certified more recently
than the EH-101, and therefore has had to comply with higher safety standards. Sikorsky
officials tout S-92 safety features, such as fuel tanks external to the cabin area, that they
say the US101can’t match. Lockheed Martin disputes claims that the US101 is less safe
than the S-92. Unlike the S-92, they say, theirs is a battle tested helicopter designed to
military specifications. Further, they say, US101 is safer than the S-92 because it has
three engines rather than two. In the January 28 news briefing, however, Navy officials
said they had no data supporting the argument that helicopters with three engines are safer
than those with two. A helicopter with three engines will cost more to operate, however,
than a helicopter with two. Some estimate the H-92’s hourly direct maintenance cost at
$900.00 and the EH-101’s at $1,500.00.8
Industry sources agree that the US101’s larger cabin gave it a prominent advantage
over the S-92,9 but Sikorsky supporters say that too much weight was placed on cabin
size, (60% of the technical score), unfairly favoring Lockheed Martin. The S-92 met the
VXX program’s cabin size requirement, and will have a larger cabin than the helicopters
it will replace. Sikorsky supporters say that any volume in excess of the requirement is,
by definition, not required. Considering that the amount of time that the President will
spend in the helicopter is typically measured in minutes, rather than hours, some have
asked whether too much emphasis was placed on the cabin size decision criterion. At the
January 28 news briefing, Navy officials appear to have sent differing messages regarding
the importance of size in their decision. John Young said that “both cabins met the
requirements, so that wasn’t a total discriminating factor.” Program Executive Officer
7 Meeting with CRS, Feb. 17, 2005.
8 Conklin & de Decker, The Aircraft Cost Evaluator, Spring 2003. [http://www.conklindd.com/
cgi-bin/softcart.exe/?E+scstore]. (2005 figure for EH-101 $1,617. H-92 figure unavailable.)
9 Lockheed Martin and Sikorsky meetings with CRS, Sept. 28, 2004 and Feb. 17, 2005.

---

CRS-4
Thomas Laux, however, said that “the overall size of the 101 clearly was a factor in terms
of their capabilities.”10 Subsequent to the January 28 press conference, Navy officials
have denied that cabin size received any more weight in the VXX decision than other
technical factors, including safety.
U.S. Defense Industrial Base Issues.The VXX decision has raised concerns
among the critics related to the U.S. industrial base such as jobs, and competitiveness.
Jobs Created or Lost Within the United States. The net effect of the VXX award
on the number of jobs in the U.S. helicopter industry is currently unclear. Various
estimates put the number of new jobs created by the US101 program at approximately
1,050, in New York and Texas. If Sikorsky were to make the VXX, it may be that fewer
new jobs would be created in the United States because Sikorsky’s S-92 is already
primarily built in the United States. (The EH-101, upon which the US101 will be built,
is today primarily built in Europe.) However, a VXX award to Sikorsky may have created
additional U.S. jobs because Sikorsky said it planned to eliminate foreign suppliers and
build the VXX entirely in the United States. It is unclear how many U.S. jobs may be
affected, if any, due to reduced orders for the S-92 following the VXX decision. Some
challenge the quality of the jobs created by the US101 program. The US101 program will
send off-shore, S-92 supporters say, key aircraft design, manufacture and support
activities. The new jobs created by the US101, they say, will be assembly line jobs that
will do little to sustain or nurture the U.S. industrial base.11
Future Competitiveness. One VXX issue frequently discussed is the potential for
the award of this contract to influence other military helicopter competitions. Several
new military helicopter contracts are expected to be awarded in the near term —
potentially up to $40 billion in value. Prominent among these new programs is the Air
Force’s 132 Personnel Recovery Vehicles (PRV) which will replace its HH-60G combat
search and rescue helicopters. Sikorsky and its supporters say that the VXX contract could
harm the future competitiveness of the U.S. helicopter industry. S-92 supporters fear that
the VXX will form the basis for the next generation of U.S. medium helicopters; just as
H-60 helicopters formed the basis for the last generation. They also say that the S-92 is
better positioned than Lockheed’s helicopter to compete internationally, due in part to
lower costs. However, the VXX contract is a prestigious award. By choosing a helicopter
that was designed and engineered by Europeans, Sikorsky supporters argue, the U.S. Navy
is making a vote of “no confidence” in the U.S. helicopter industry.
Lockheed supporters dispute claims about the negative effects the VXX award will
have on the U.S. helicopter industry. In his January 28 briefing, US101 supporters note,
Assistant Secretary of the Navy John Young argued that the design and performance
demands of presidential transportation are “a fairly unique opportunity ... very different”
from other military requirements. There is no guarantee that the winner of the VXX
helicopter competition will win future military helicopter contracts, they say. Besides, it
is argued, DOD’s Industrial Capabilities Report to Congress found no major industrial
10 DOD News Briefing, op. cit.
11 Dave Ahearn, “Marine One and Buy American: A Debate,” Defense Today, Nov. 10, 1004.

---

CRS-5
base problems, and disputes claims that the U.S. is too dependent on foreign suppliers.12
S-92 supporters note, however, that requirements for military helicopters are fluid. The
requirements for the Personnel Recovery Vehicle, for instance, recently have grown.
Thus, it cannot be asserted that the VXX contract is unique, since future helicopter
requirements could grow to mirror VXX requirements. The VXX award will likely be a
boon for Lockheed’s future helicopter business, they argue. Others, argue that Sikorsky
is a “shoo in” to win the PRV award, because, after canceling the RAH-66 Comanche
helicopter, DOD would not risk Sikorsky’s future by denying it the PRV contract.13
“Winner Takes All” Contract. Like many other military procurements, only one
company was awarded a contract for Marine One. While funding two or more contracts
typically costs more than funding one, in some instances increased cost has been justified
to protect the industrial base. Some argue, for example, that the Joint Strike Fighter (JSF)
program should have been, and the and DDX destroyer program should be, awarded to
two contractors to maintain diversity and competition in these fields. Some have
suggested that awarding the VXX contract on a shared basis between the two competitors
would have helped preserve the U.S. defense industrial base. There may be, however, a
qualitative difference between the destroyer and tactical manned fighter markets and the
helicopter market. Where the JSF contract was seen as “the last manned fighter program,”
and the DDX occupies a unique niche in the shipbuilding industry, the helicopter industry
has several companies competing in a variety of markets. Sikorsky officials have noted
that they hold orders for the delivery of 59 S-92 helicopters with options for another 30.14
Trade Issues15.Some suggest that the VXX decision may signal growing
transatlantic industrial cooperation, and a more open DOD procurement policy concerning
foreign suppliers. Only 4.1% of DOD procurement went to foreign contractors in 2003.
On the other hand, this decision could spur some in Congress to support additional
restrictions on foreign defense suppliers. Some observers state that if European suppliers
are deemed good enough to make the President’s helicopter, then the rest of DOD may
be more inclined to consider foreign bids for a range of military contracts. Doing so, it
could be argued, may make economic sense as foreign contractors increase the supply of
contract bids, presenting opportunities to keep down procurement costs, and to take
advantage of technology found in a global marketplace. It has been asserted that a more
open sourcing policy for foreign suppliers could also make foreign governments more
willing to buy from U.S. defense suppliers.
Others suggest that the decision could foster a backlash against a more open policy
for defense procurement. Combined with the record U.S. trade deficit in 2004 and the
possible European Union’s lifting of its arms embargo on China, some worry that the
United States could become more dependent on foreign suppliers. Others argue that the
U.S. taxpayers who foot the bill for the strongest military in the world should have the
12 Sharon Weinberger, “Annual Report Paints Rosy Picture of Defense Industrial Base,” Defense
Daily, Mar. 28, 2005.
13 Robert Wall, “Sea Change,” Aviation Week & Space Technology, Feb. 7, 2005.
14 Andrew Doyle, “Sikorsky Shrugs Off VXX Shock,” Flight International, Feb. 8, 2005.
15 This section written by Raymond J. Ahearn, Specialist in Trade Relations, Foreign Affairs,
Defense, & Trade Division.

---

CRS-6
right to supply it. Still others raise concerns about the risk of losing proprietary
technology by shipping sensitive blueprints overseas and the need to assure tight security
for offshore manufacturing and assembly (e.g. “Yankee White” security clearances).
Buy American Issues16. The VXX procurement is subject to two domestic
content statutes, The Buy American Act17 and the Berry Amendment.18 The Buy
American Act attempts to protect domestic labor by providing a preference for American
goods in government purchases. In determining what are American goods, the place of
mining, production, or manufacture is controlling. The nationality of the contractor is not
considered.19 The domestic preference requirement of the act is broad in scope. The
federal government is required to buy domestic “articles, materials, and supplies” when
they are acquired for public use unless a specific exemption applies.20 The test of origin
is applied to supplies delivered to the government as “end products.”21 Manufactured
articles are considered domestic if they have been manufactured in the United States from
components, “substantially all” of which have been mined, produced, or manufactured
in the United States.22 Substantially all means that the cost of foreign components does
not exceed 50% of the cost of all components.23
There are exceptions to the Buy American Act. The act does not apply (1) where its
application would be inconsistent with the public interest or unreasonable in cost, (2) to
procurement of products for use outside the United States, (3) to products not produced
or manufactured in the United States in sufficient and reasonably available commercial
quantities and of satisfactory quality,24 or (4) to procurements under $2,500.25 The Berry
Amendment requires that 100% of food, clothing, fabrics, specialty metals, and hand or
measuring tools in a DOD procurement be of domestic origin.26 Any VXX fabrics or
specialty metals would have to be of 100% domestic origin. The cost of the fabric and
specialty metal components are used in the Buy American 50+% determination.
16 This section written by John R. Luckey, Legislative Attorney, American Law Division.
17 41 U.S.C. §§ 10a through 10d. For more on the Buy American Act, see CRS Report 97-765,
The Buy American Act: Requiring Government Procurements to Come from Domestic Sources.
18 10 U.S.C. § 2533a. For more on the Berry Amendment, see CRS Report RL31236, The Berry
Amendment: Requiring Defense Procurement To Come From Domestic Sources.
19 See, E-Systems, Inc., 61 Comp. Gen. 431 (1982); and Patterson Pump Co., B-200165, 80-2
CPD ¶ 453 (1980).
20 41 U.S.C. §§ 10a & 10b. The act applies to leases as well as purchases. National Office
Equipment Co., B-191003, 78-1 CPD ¶ 413 (1978).
21 FAR § 25.101.
22 41 U.S.C. §§ 10a & 10b. This test is only applied to end products or construction materials.
A component is of domestic origin if it was manufactured in the United States, regardless of
where its components were made. Hamilton Watch Co., B-179939, 74-1 CPD ¶ 306 (1974).
23 FAR § 25.101; and E.O. 10582, 19 Fed. Reg. 8723 (1954).
24 41 U.S.C. § 10a.
25 Pub. L. No. 103-355, 108 Stat. 3346-7, 103rd Cong., 2nd Sess. (1994) codified at 41 U.S.C. 10a.
26 10 U.S.C. § 2533a. Exceptions are contained in subsections (c) through (I).

---