The Air Force this week canceled a $355 million contract awarded last year in which Embraer's Super Tucano light attack aircraft won over U.S. rivals. The Air Force said it decided to set aside the contract because of problems with documents used in the contract award.
Rival U.S. manufacturer Hawker Beechcraft challenged the contract in federal claims court but the Air Force announced the cancellation before the litigation could complete its course.
The decision means the Afghanistan Light Air Support program is back on the drawing board with the competition likely to include U.S. manufacturers, including Hawker Beechcraft.
Embraer said it regretted the Air Force's decision to set aside the contract.
"Along with its U.S. partner, Sierra Nevada Corp., Embraer participated in the LAS selection process providing, on time and without exceptions, all the required documentation," Embraer said in a statement.
"The decision in favor of the Super Tucano, announced on Dec. 30, 2011, by the U.S. Air Force, was a choice for the best product with proven performance in action and all the necessary capabilities to meet client demands," the aircraft manufacturer said.
"Embraer remains committed to offer the best solution to the U.S. Air Force and will await further clarification on the subject to decide next steps, in consultation with its partner, SNC," Embraer said.
U.S. Air Force Secretary Michael Donley in a statement left unclear the next direction of the troubled acquisition program.
"While we pursue perfection, we sometimes fall short and, when we do, we will take corrective action," Donley said.
"Since the acquisition is still in litigation, I can only say that the Air Force Senior Acquisition Executive, David Van Buren, is not satisfied with the quality of the documentation supporting the award decision."
An investigation was under way following orders from Air Force Materiel Command chief Gen. Donald Hoffman, officials said.
The controversy over the Afghanistan Light Air Support program follows years of wrangling over the U.S. military's refueling aircraft program, which pitted Boeing against European rival EADS.
The Super Tucano contract was a lucrative deal for Embraer and a major victory in its global marketing effort. Embraer partner Sierra Nevada hoped the contract would eventually triple and be worth up to $1 billion in value with additional training devices, support and future orders.
Both Sierra Neva and Embraer say they are confident they can win the bid again.
Hawker Beechcraft welcomed the Air Force's decision.
"We commend the Air Force for this decision and we believe strongly it is the right thing for the Air Force, the taxpayers and the people of Hawker Beechcraft," said Hawker Beechcraft Corp. Chairman Bill Boisture. "We look forward to competing for this contract as this important initiative moves forward.
"This LAS competition is about much more than 20 aircraft for Afghanistan or a billion-dollar contract," Boisture said.
"It is about the U.S. Air Force's ability to build relationships with U.S. partner nations around the world for a generation to come. We continue to believe the American manufactured AT-6 is the right aircraft for this critical United States mission," Boisture said, referring to the company's contender for the contract.