GAO sides with BAE Systems on protest of Army truck contract

The Government Accountability Office (GAO) on Monday upheld protests filed by BAE Systems and Navistar against the Army’s award of an estimated $3 billion armored truck contract to Oshkosh Corp.

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.

GAO’s decision could allow BAE Systems Land and Armaments in Sealy, Texas, to continue producing the Army’s Family of Medium Tactical Vehicles (FMTV). It could also help BAE avoid laying off about 3,000 workers at the plant.

BAE, which has been building the trucks for years, will continue to produce trucks under the previous contract until the end of next year.

BAE lost the contract in August to Wisconsin-based Oshkosh Corp., and filed a protest in September. Defense analysts consider it extremely rare for an incumbent company not to be awarded a renewed contract.

Navistar also competed for the lucrative contract, and filed a protest against the Army’s award at the same time. The GAO likewise upheld that protest.

While Navistar stayed quiet about its protest, BAE Systems and Oshkosh publicly fought in a battle that engulfed the Texas and Wisconsin delegations for months. Texas Sens. Kay Bailey Hutchison and John Cornyn, both Republicans, threatened to hold up the confirmation of the Army’s new acquisition chief over the truck contract.

Hutchison and Cornyn on Monday hailed GAO’s decision.

“GAO’s decision is welcome news for the town of Sealy and the employees of BAE, as well as for American taxpayers. I’m pleased to hear that the GAO has agreed with my assertion that the Army’s contracting process was flawed,” Hutchison, a defense appropriator, said in a statement.

She called on the Pentagon to “conduct a full and thorough inquiry and rebid this contract in which the Army truly obtains the best value for taxpayers and our soldiers.”

Meanwhile, Cornyn expressed optimism that once the Army re-evaluates the companies’ bids, BAE Systems will come out on top.

Sealy is in the district of Rep. Michael McCaul (R), who has been at the forefront of the fight.

“I want to thank the members of the Texas delegation who worked with me in a bipartisan way to make sure BAE’s appeal was heard,” McCaul said in a statement.

“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.

Oshkosh operates in GOP Rep. Tom Petri’s (R-Wis.) district. In a statement issued Monday, he did not challenge the GAO’s decision. He expressed confidence in Oshkosh, saying the company has “years of experience and a strong reputation.”

An Army spokesman said Army leaders were reviewing the GAO’s decision.

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 range from facilities, equipment, existing workforce, suppliers, production critical-path and quality assurance.

“Our review of the record led us to conclude that the Army’s evaluation was flawed with regard to the evaluation of Oshkosh’s proposal under the capability evaluation factor and the evaluation of Navistar’s past performance,” Michael Golden, GAO’s managing associate general counsel for procurement law, said in a statement.

After the Army re-evaluates based on GAO’s recommendations, it would have to issue a new solicitation decision. The GAO recommends that if at the conclusion of the re-evaluation the Army finds that Oshkosh does not “offer the best value,” the Army should terminate the current Oshkosh contract.

The Army has 60 days to inform the GAO of how it will proceed based on the recommendations provided.

The GAO denied BAE’s challenge regarding the evaluation of Oshkosh’s price.

BAE publicly called into question whether Oshkosh could fulfill its aggressive bid for the FMTV or carry the associated financial risk.

Under Oshkosh’s contract, the government pays a fixed price, and any cost overruns would be incurred by the firm. BAE officials said that Oshkosh’s bid on the fixed-price contract was too low to be workable.

BAE argued that Oshkosh’s proposed price for the FMTV came in almost $1 billion lower than the Army’s overall funding estimate of $3.9 billion, according to a supplement filed to its original protest.

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.” Chris Chambers, BAE’s vice president and general manager of its Sealy plant, said in an interview with The Hill last month that his company was “certain” Oshkosh’s bid for the FMTV was “unrealistic.”

Chambers said BAE bid more than 20 percent below the price it now receives from the Army on the FMTV, while Oshkosh came in 13 percent below BAE’s new bid.

BAE officials welcomed GAO’s decision Monday.

 “This ruling is potentially good news for our over 3,000 employees in Texas and Michigan, who have built more than 56,000 FMTV vehicles for our nation’s soldiers,” said Bob Murphy, president of BAE Systems’ Land & Armaments group.

Dennis Morris, president of BAE Systems’ Global Tactical Systems, expressed confidence that the “skilled and experienced workforce in Texas and Michigan” will put BAE “in the very best position to compete successfully for continued FMTV production.”

BAE hired the powerful law firm Wiley Rein LLP to help with the GAO protest. That’s the same company that worked with Boeing Co. on its successful protest of the Air Force’s $35 billion refueling tanker contract.

Oshkosh holds the contracts for the Army’s heavy mobility tactical trucks and for the Marine Corps’s medium tactical vehicles, as well as a large contract for all-terrain mine-reistant vehicles for Afghanistan. If the company loses out on the FMTV, the implications of that loss would only be felt in the outlook for 2011, when the ramp-up in production for the Army trucks is expected to happen.

This story was updated at 7:29 p.m.