Arizona space component company sues Sierra Space over contract

LOUISVILLE — An Arizona space payload-building company is suing Lousville-based Sierra Space Corp. for fraud and breach of contract after the companies parted ways in the middle of a multi-million government job.

Geost LLC has filed a complaint in U.S. District Court in Colorado claiming that Sierra Space committed fraud by using the company to secure a government contract worth more than $700 million for the design and deployment of a “threat-driven constellation of small satellites” for the Space Development Agency, then giving the work to another company almost a year later.

Geost is suing for breach of an oral contract, breach of a letter agreement, and is claiming it was fraudulently induced to do work on behalf of the Space Development Agency contract.

“On September 29, 2023, Geost Chief Executive Officer Bill Gattle met with Sierra Space Chief Executive Officer Tom Vice,” the complaint stated. “In this meeting, the parties orally agreed that Geost would be part of Sierra Space’s proposal to SDA in return for Sierra Space subcontracting to Geost for Geost’s proposed scope and price, if SDA were to award the … prime contract to Sierra Space.”

The complaint states that Geost performed more than $35 million worth of work on the contract, hitting three major spelled-out milestones, when Sierra Space suddenly terminated it and gave the work to a competing company called Leidos.

The scope of work included providing payload development for 16 Mercury missile warning and missile tracking payloads and two Phoenix fire control payloads, the complaint states.

Geost claims Sierra Space won the award in 2023, used Geost to get the materials it needed for the project, then abruptly ended their agreement, having already been in negotiations with Leidos.

The complaint alleges Sierra also owes the company more than $17 million on the project, for unpaid work and costs associated with completing its work.

But the companies didn’t have a formal contract in writing. 

According to the complaint, leaders from Sierra Space and Geost verbally agreed to the work, and when it won the contract, Sierra Space mentioned Geost specifically as its partner in the project in its press release announcing the award, and in February 2024, it also authored a “letter agreement” that spelled out the terms on their deal.

The complaint also notes that the “letter agreement confirmed that ‘the parties agree to engage in good faith negotiations to definitize towards the firm subcontract.’” Sierra Space added to the letter agreement twice through May 2024, stating a new scope of work and costs associated with it, up to more than $35 million.

“Geost accepted the letter agreement amendments, again based on the understanding that Sierra Space intended to fulfill, not repudiate, the binding commitments it had made in September 2023,” the complaint states. “In retrospect, it appears that Sierra Space used the letter agreements as a way to delay definitization of the subcontract while it negotiated with Leidos to replace Geost.”

The lawsuit claims that Sierra was in negotiations with Leidos on the same scope of work that Geost was to perform. On June 14, 2024, Sierra Space terminated its relationship with Geost.

“Discussions with individuals at Sierra Space have led Geost to believe that Sierra Space simply used Geost for its supplier relationships for the long-lead items and its customer relationship with SDA, intending to switch out Geost for Leidos to perform the remainder of the scope of work,” the lawsuit states. “This understanding was seemingly confirmed when Sierra Space asked Geost to hand over the materials and orders for the long-lead items to Sierra Space or Leidos.”

On Sept. 19, 2024, Geost submitted its costs to Sierra Space pursuant to the termination clause in the letter agreement. Geost stated that it had spent nearly $42.5 million on the SDA contract effort and, to date, had received only about $25.3 million in payments from Sierra Space. Geost reported in the complaint they’ve received nothing more, and is owed more than $10 million on the project and another $6+ million on the work until the termination letter.

A representative from Sierra Space did not return a call seeking comment on Tuesday Jan. 7. 

The lawsuit is case number 25CV27, Geost LLC v. Sierra Space, filed Jan. 4, 2025, in U.S. District Court, District of Colorado.

This article was first published by BizWest, an independent news organization, and is published under a license agreement. © 2024 BizWest Media LLC.

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