Defense firm eyes ‘bridge’ contract to prevent layoffs

BAE Systems and its congressional supporters are eyeing a new shorter-term contract for Army tactical trucks they say would keep about 3,000 people employed in Sealy, Texas.

In August, BAE Systems lost the long-term contract for the Army’s Family of Medium Tactical Vehicles (FMTV) to Oshkosh Corp.

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But BAE, which has been building the trucks for 17 years, successfully protested the Army’s award with the Government Accountability Office (GAO).

The fight for the estimated $3 billion contract has been intense, and tensions are not easing as the Army decides how to meet the GAO’s recommendation and move on with the contract.

The GAO decision is limited in scope and does not recommend that the Army reopen the competition for the truck contract, but does call on it to re-evaluate the bids the three companies originally submitted. The Army has 60 days from Dec. 14, 2009, to inform the GAO of how it will proceed based on GAO’s recommendations.

GAO also upheld a protest filed by a third competitor, Navistar, but the focus has been on BAE Systems and Oshkosh.

Rep. Michael McCaul (R-Texas), who represents Sealy, told The Hill he broached the issue of another so-called “bridge” contract in the event that the Army does not “overturn” its award to Oshkosh with Army Secretary John McHugh on Tuesday.

The bridge contract would be a short-term contract in effect until a longer-term arrangement is devised.

“We need to consider the idea of having another bridge [contract],” McCaul said in a phone interview. He added that he would “absolutely” take any congressional action necessary to ease the Army’s ability to enter another short-term contract.

McCaul indicated that he still expects the Army to award the new long-term contract to BAE.

The Texas lawmaker also said that he has been pressing the Army to re-bid the contract under new acquisition laws — meant to strengthen oversight and accountability in the weapons-buying process — that did not apply at the time the Army evaluated the new FMTV bids.

McCaul’s press secretary Mike Rosen said BAE asked McCaul to bring up the issue in his discussions with the Army. The company had tried to approach the Army on that issue for a while because it wanted to “cover all the bases” and was having a “hard time” getting the idea of another short-term contract through to the Army, Rosen said.

The discussions of another potential contract to incumbent BAE is a signal the defense contractor could fight the Army if it is not awarded the $3 billion contract and could drag out the process for several months, according to several defense insiders.

Apart from renewed protests with the GAO, the company could file suit with the Federal Court of Claims and file an injunction to stop any work by Oshkosh on the trucks until the issue is resolved.

BAE’s existing bridge contract for the FMTV will expire in October. The Army would have to determine whether to enter another bridge contract with BAE much earlier so that the company can order necessary manufacturing items for the trucks.

“We would be happy to discuss providing vehicles to the Army while things get sorted out,” said BAE spokesman Michael Teegardin. “We want to be a partner in ensuring that FMTV is getting to the field. We produce 800-plus vehicles a month.”

The fiscal 2010 defense appropriations bill contains about $1 billion for the new FMTV contract, which could be held up for several months. The Army has yet to figure out how to use those funds if the contract is delayed.

It is unclear at what price BAE would agree to build the trucks under a new bridge contract. The company declined to comment on the price issue.

Chris Chambers, BAE’s vice president and general manager of its Sealy plant, said in an interview with The Hill last year that his company’s bid for the new FMTV contract was 20 percent below the price it now receives from the Army on the FMTV contract, while Oshkosh came in 13 percent below BAE’s new bid. Chambers said at the time that his company was “certain” Oshkosh’s bid for the FMTV was “unrealistic.”

The GAO denied BAE’s challenge regarding the Army’s evaluation of Oshkosh’s price. Under Oshkosh’s contract, the government pays a fixed price, and any cost overruns would be incurred by the firm.

The GAO recommended that the Army re-evaluate the three bids based on the “capability factor” and that it conduct a new evaluation of Navistar’s past performance on contracts.

Defense consultant Jim McAleese said capability can cover facilities, equipment, existing workforce, suppliers, production critical-path and quality assurance.

“We believe that our FMTV offer was, and continues to be, the best value for the U.S. Army, our troops and the U.S. taxpayer,” Oshkosh CEO Robert Bohn said in a statement after the GAO issued its decision.

Bohn said his company welcomes the Army’s re-evaluation of the two “narrow issues” it recommended be reconsidered.

“We believe that when these narrow issues are reconsidered, the Army’s decision to award Oshkosh Corp. the FMTV contract will be maintained.”

As the FMTV contract is under review, Oshkosh is pressing the city of Oshkosh, Wis., to approve a $5 million direct financial assistance package necessary for the equipment and construction of a proposed electro-deposition, or E-coat, paint factory the company needed to compete for the FMTV contract.

“We talked to the city before we chose to bid and we took into account in our prices the written feedback from the city that they would support this,” said Andy Hove, Oshkosh’s defense division president, according to the Northwestern newspaper. “We have every belief city leadership will follow through in a way that’s consistent with our prior discussions.”

In total, $51.5 million in state, city and company money would pay for the facility.