Oshkosh Recent Award Protested

Oshkosh was awarded a contract by the U.S. Army a contract to provide new Family of Medium Tactical Vehicles (FMTV) trucks and logistic support vehicles. If all options of the contract are executed over the next five years it could be worth upwards of $2.5 billion. This is part of a program to begin refitting and equipping the Army to replace losses from operations in Iraq and Afghanistan.

It has now been reported that both BAE Systems and Navistar are protesting the award. Losing bidders have thirty days after the award to file a formal protest. BAE Systems currently has the contract to build these sort of vehicles for the Army and without this contract will see work end and the company is predicting that it could lay off up to three thousand workers.

Both BAE Systems and Navistar were losers in the recent contest for the new lighter Mine Resistant Ambush Protected (MRAP) vehicle for use in Afghanistan. Oshkosh was the successful bidder for that contract as well and it could potentially be worth billions if the U.S. and other nations invest in the new MRAP-ATV.

BAE Systems is basing their protest on a poor evaluation of the risk of establishing a new manufacturing line for the vehicles. Even though it is a proven system there is still a chance that the cost and technical issues with Oshkosh taking over manufacture may prove more then the Army originally planned. BAE is also saying that the Army accepted an unrealistically low bid from Oshkosh. Protests are of two types either filed with the awarding agency which here would be the Army Material Command (AMC) or with the Government Accountability Office (GAO). If neither organization sides with the protester there is the ability to go to the U.S. Court of Appeals on the matter. In most cases protests are settled by the GAO.

The concern is that with the expected decline in defense spending and the loss of major programs there will be a further spate of protests. Protests delay the start of execution for the contract which means that the military’s needs are not being met to the original schedule. Protests also cost money for both the companies and the government as they must prepare responses and do analysis. This is an added burden to already stretched funding.

If there is a significant decline in the work available to be shared among the existing defense contractors then protests will be more common. They already have been in the last few years with aviation programs. The Air Force has tried to award two major programs since 2007 and had both thrown out on protest: the CSAR-X and KC-X. The CSAR-X program was ended by the Obama Administration before it could be re-competed and the KC-X is waiting for a new Request for Proposals (RFP) to come out. Now there seems to be greater chance of other types of programs facing the same challenges.

If there is to be a winnowing out of defense contractors this is the first step as they fight over available new work and try to prevent themselves from losing existing contracts. Protests may become the norm rather then the exception.