AAI set back in bid to run Calif. base Md. company seeks landmark deal for Air Force operation; Partner drops off team; Congress threatening to keep such work within the military


A series of blows have rocked the efforts of Hunt Valley's AAI Corp. to win a landmark contract running an Air Force maintenance base in California.

AAI's biggest partner in the venture -- Tracor Inc. of Austin, Texas -- has dropped off the team.

That development came shortly after another ominous sign: The Pentagon recently snubbed private companies on a similar contract and awarded it to an Air Force base, raising fears that the California job also might stay within the Air Force.

And Congress continues to threaten to stop the competition and give the work to the military.

"We're just trying to work through each challenge and kind of focus on the award," AAI spokesman Paul Guse said yesterday, adding that the company is in talks with several firms interested in replacing Tracor on its team.

AAI's Engineering and Maintenance Services Inc. subsidiary has set up a field office in Sacramento, Calif., to oversee its drive to win management of McClellan Air Force Base, a contract that could be worth $250 million a year. The scope of the job dwarfs anything else on deck at AAI, which has annual revenue of about $170 million.

The competition dwarfs AAI as well: The other commercial team selected to vie for the job is headed by Boeing Co., whose revenue of $48 billion a year makes it the biggest aerospace company in the world.

Hill Air Force Base in Utah is also competing for the work.

McClellan and Hill are among five Air Force depots that provide periodic maintenance to particular types of aircraft -- in McClellan's case, A-10 attack jets and KC-135 tankers. All the bases have been operating at less than half-capacity, so in 1995 the federal Base Realignment and Closure Commission, or BRAC, recommended closing two of them: McClellan and Kelly Air Force Base in Texas.

During last year's elections, President Clinton promised to preserve jobs in the vote-rich states of Texas and California through a unique effort to privatize the air bases instead of simply shutting them down.

Defense companies jumped at the chance to win the work. Privatization is expected to sweep through the military during the coming years, saving enough money to help pay for new weapons systems and offering what some experts say could be $20 billion a year in business opportunities.

But several members of Congress say Clinton had no place stepping into the BRAC process. The House of Representatives passed a defense authorization bill this year that would effectively stop the competition at Kelly and McClellan and award the work to other Air Force bases.

The Senate included no such provision, so this week a conference committee has been struggling to find a compromise. Sources say that House conferees are insisting on the language stopping the depot competition, even though Clinton has threatened to veto such a bill.

With Senate conferees resisting, the issue is one of two or three provisions holding up the entire defense measure, sources said.

"At this point, I'm not sure anybody knows what will happen," said Stan Soloway, who, as a member of the Depot Industry Coalition, is fighting to preserve the competition.

Tracor, meanwhile, decided last week that McClellan no longer offered a good business opportunity. Spokeswoman Marian Kelley said a number of factors went into the decision. One was that Tracor felt that whoever won, McClellan would have to bring in more work to make it profitable, and it had been hoping to do that with a contract maintaining C-130 transport planes. That contract was awarded to another bidder in April.

This month, the Pentagon bypassed Boeing and Lockheed Martin Corp. to give the Kelly Air Force Base contract to Warner Robins Air Force Base in Georgia.

That sent a shudder through the defense industry, Soloway said. Private companies worried they might be at a disadvantage in bidding on such work because they do not have the same leeway in figuring overhead and labor costs as a government facility, he said.

Tracor spokeswoman Kelley said that her company was "certainly aware" of the Texas decision, and that it was concerned about the simultaneous announcement the Pentagon would delay awarding the McClellan job until sometime next year. The award had been expected by the end of this year.

The delay means more expense, Kelley said. But, she added, Tracor also felt that the delay was a good time to pull out because it would give AAI and teammate GEC-Marconi Avionics Inc. time to find a replacement.

Guse, the AAI spokesman, said several other companies had wanted to get in on the effort since the beginning and will now have the chance. He played down the impact of Tracor's decision to leave.

"Their departure was based on their own independent business decision," Guse said. "It's not a show-stopper."

He said company officials are waiting to see what Congress does about the privatization issue. The officials also are scrutinizing the decision on the Texas air base to see if it could affect McClellan.

But AAI remains enthusiastic about the work, he said, adding, "We're optimistic we'll overcome the hurdles and finally get down the road to the contract."

Pub Date: 9/20/97

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