U.S. Army AFFIRMS FMTV Contract AWARD to Oshkosh Corporation — Press Release

February 13, 2010 by
Filed under: Business Line, Companies, Events, logistics, Oshkosh Truck Corp, Press Releases, production program 

U.S. Army AFFIRMS FMTV Contract AWARD to Oshkosh Corporation

OSHKOSH, Wis. — Feb. 12, 2010 — Oshkosh Corporation (NYSE:OSK) today announced the U.S. Army has affirmed the contract award to the Company, originally received on Aug. 26, 2009, to produce the Family of Medium Tactical Vehicles (FMTV).

The bids of all three competitors for the FMTV program were re-evaluated by the U.S. Army in response to recommendations made by the Government Accountability Office (GAO) following a review of competitors’ protests of the original contract award to the Company. The Army undertook an exhaustive review during this FMTV bidding process and applied fairness and rigor to its decision. Upon completion of a thorough, in-depth re-evaluation, the Army determined the contract would remain with Oshkosh. Additionally, the Army canceled the September 4, 2009, stop-work order it had issued pursuant to the GAO’s protest procedures. The Oshkosh contract allows the Army and U.S. taxpayers to begin realizing significant cost savings for the FMTV program.

“We are very pleased the Army affirmed its original decision that Oshkosh Corporation’s FMTV bid clearly represents the best overall value for the Army, the taxpayers and the Warfighter,” said Robert G. Bohn, Oshkosh Corporation chairman and chief executive officer. “Oshkosh Corporation, our employees and our suppliers stand ready to serve our customer, and we are delighted that the Army has yet again concluded that Oshkosh was the right choice. Our focus has always been on the Warfighter and making sure we deliver high-quality, high-performing vehicles on time.”

The FMTV rebuy program is a five-year, firm fixed-price requirements contract for the production of up to 23,000 vehicles and trailers, as well as support services and engineering. Oshkosh received the contract from the U.S. Army Tank-automotive and Armaments Command Life Cycle Management Command (TACOM LCMC) with an initial delivery order valued at $280.9 million for the production and delivery of 2,568 trucks and trailers.

The FMTV is a series of vehicles consisting of up to 23 variants and 17 different models, ranging from 2.5-ton to 5-ton payloads. Oshkosh already produces the Army’s Family of Heavy Tactical Vehicles (FHTV) and works with nearly every one of the FMTV current component suppliers across the country as integral partners in other military programs.

Oshkosh is the only current manufacturer of both medium and heavy tactical wheeled vehicles in the U.S. defense industry, having produced more than 70,000 military-class vehicles in its manufacturing facilities. Oshkosh’s manufacturing facilities have ample production capacity for all current and pending military vehicle programs, including the FMTV and the MRAP All Terrain Vehicle (M-ATV), as well as any surges in production. The company’s advanced and integrated assembly line facilities allow for the simultaneous production of several different vehicle models and variations. Oshkosh Corporation’s proven production capabilities were recently recognized by the National Center for Advanced Technologies (NCAT), which awarded Oshkosh with a 2009 Defense Manufacturing Excellence Award for its M-ATV launch team, which has exceeded delivery requirements for seven consecutive months.

About Oshkosh Defense

Oshkosh Defense, a division of Oshkosh Corporation, is an industry-leading global designer and manufacturer of tactical military trucks and armored wheeled vehicles, delivering a full product line of conventional and hybrid vehicles, advanced armor options, proprietary suspensions and vehicles with payloads that can exceed 70 tons. Oshkosh Defense provides a global service and supply network including full life-cycle support and remanufacturing, and its vehicles are recognized the world over for superior performance, reliability and protection. For more information, visit www.oshkoshdefense.com.

About Oshkosh Corporation

Oshkosh Corporation is a leading designer, manufacturer and marketer of a broad range of specialty access equipment, commercial, fire & emergency and military vehicles and vehicle bodies. Oshkosh Corp. manufactures, distributes and services products under the brands of Oshkosh®, JLG®, Pierce®, McNeilus®, Medtec®, Jerr-Dan®, Oshkosh Specialty Vehicles, Frontline™, SMIT™, CON-E-CO®, London® and IMT®. Oshkosh products are valued worldwide in businesses where high quality, superior performance, rugged reliability and long-term value are paramount. For more information, log on to www.oshkoshcorporation.com.

®, ™ All brand names referred to in this news release are trademarks of Oshkosh Corporation or its subsidiary companies.

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Forward-Looking Statements

This press release contains statements that the Company believes to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including, without limitation, statements regarding the Company’s future financial position, business strategy, targets, projected sales, costs, earnings, capital expenditures, debt levels and cash flows, and plans and objectives of management for future operations, are forward-looking statements. When used in this press release, words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “should,” “project” or “plan” or the negative thereof or variations thereon or similar terminology are generally intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond the Company’s control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include risks related to sustaining the required rate of production for the M-ATV contract and the amount, if any, of additional orders for M-ATVs that the Company may receive; the cyclical nature of the Company’s access equipment, commercial and fire & emergency markets, especially during a global recession and tight credit markets; the duration of the global recession, which could lead to additional impairment charges related to many of the Company’s intangible assets; the expected level and timing of U.S. Department of Defense procurement of products and services and funding thereof, risks related to reductions in government expenditures, the potential for the government to competitively bid the Company’s Army and Marine contracts and the uncertainty of government contracts generally; the consequences of financial leverage associated with the JLG acquisition, which could limit the Company’s ability to pursue various opportunities; risks related to the collectability of receivables during a recession, particularly for those businesses with exposure to construction markets; risks related to production delays as a result of the economy’s impact on the Company’s suppliers; the potential for commodity costs to rise sharply, including in a future economic recovery; risks associated with international operations and sales, including foreign currency fluctuations; and the potential for increased costs relating to compliance with changes in laws and regulations. Additional information concerning these and other factors is contained in the Company’s filings with the Securities and Exchange Commission. All forward-looking statements speak only as of the date of this press release. The Company assumes no obligation, and disclaims any obligation, to update information contained in this press release. Investors should be aware that the Company may not update such information until the Company’s next quarterly earnings conference call, if at all.

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Comments

One Response to “U.S. Army AFFIRMS FMTV Contract AWARD to Oshkosh Corporation — Press Release”

  1. Angel Rosado on February 22nd, 2010 1:45 pm

    Posted by MAJ Angel Rosado, US Army, 22 February 2010

    This resolution finally put an end to this protest. A protest is one of the most lengthy and painful procedures especially during war when contracting for any material acquisition, as it can stop production and/or delivery of critical equipment. For the past few years, protests were rarely seen on defense contracts due to fact that most of the protests were never sustained. However, the basis for BAE Systems’ protest was strongly credible and deserving of revision as the Army gave a better technical evaluation score to Oshkosh than BAE. BAE Systems claimed that Oshkosh lacks the capacity, tools, facilities, and equipment to fulfill the production requirement for the Family of Medium Tactical Vehicles (FMTV) contract, and that the cab design does not meet the necessary requirements. Based on these accusations, BAE Systems also claimed that the Army discriminated against its proposal while believing that they could provide a superior product, on budget, and on schedule as done in the past. In addition, BAE Systems claimed that the price quote provided by Oshkosh was unrealistic. Oshkosh proposed a price quote on its contract bid that was 30% lower that BAE Systems’ proposal, this translates to about $400 million on savings to the government over the five-year contract.
    The following provides a little more information for those that have not been following this contract. BAE system is been the primary manufacturer of the FMTV since 2003. Their contract expired at the end of 2008 and by February 27, 2009, the Army issued a solicitation (an open bid) for a follow-on production proposal. In August 26, 2009, the Army awarded the contract to Oshkosh and in September 8, 2009, BAE Systems submitted a protest to dispute the Army’s decision. In December 14, 2009, the Government Accountability Office (GAO) sustained BAE’s protest on the conclusion that the Army’s evaluation of the technical and price proposal, and selection decision were flawed. The GAO gave the 60 days to re-evaluate the proposal and in February 12, 2010, the Army announced that would retain the contract with Oshkosh. At this point if BAE Systems wants to continue fighting for this contract it will have to go to Federal Court, but this is unlikely since BAE System would have to prove with clear and convicting evidence that the Army acted irrationally for its decision.
    Despite arguments that the reasons behind the Oshkosh contract award are plainly political, there are no politicians involve in the source selection process for defense acquisition contracts. It is a fact that BAE System has its main FMTV production plant in Texas (predominately a Republican State) and Oshkosh has its main production plant in Wisconsin (voted Democratic on 2008 elections). However, I hardly believe that this is the reason why Oshkosh received the contract. Therefore, it is important to clarify the defense acquisition contracting process for contract involving such a large amount of money like this one ($3 billion over five years). The FMTV is an acquisition category IC (ACAT IC) level program and because of its classification and the large amount of money, its progress needs to be reported to Congress. However, personnel from the Acquisition, Logistics & Technology workforce (AL&T), do the contract initiation and execution rather than politicians from Congress. I understand that it is the responsibility of each congressional representative to seek economic growth for their respective states but is erroneous to assume that they can leverage defense contracts.
    In addition, since the government owns the technical data package (TDP) for the FMTV that includes the technical designs (except for the vehicles cab, which is a BAE Systems’ proprietary design), once a contract expires, it has the liberty to give the next contract to the contractor that offers the best value. The Army can seek savings on the FMTV production by implementing short-term (5 years) firm-fixed price contracts. This type of contract allows open competition among the industry and allows it to be innovative and creative. Simultaneously, this type of contract provides the government with savings as it places the risk onto the contractor. In other words, the contractor will have to deliver at the contracted price and the contractor absorbs any cost overruns.
    Oshkosh had proved to be a reliable manufacturer of military vehicles, but I am concerned that the company is not fully resourced to produce the FMTV, however they will not start full production until 2011, providing them with time to expand their facilities and procure the equipment necessary. An additional issue is that since the FMTV cab is a proprietary right of BAE, Oshkosh will have to provide its own cab design and this could cause production delays. The last issue is the production price offered by Oshkosh. A unit price below production cost will cause cost overruns; although, it is Oshkosh’s strategy to get its profits from expected modifications and future improvements to the vehicles. Since most of the time modifications and upgrades are generally unilateral decisions made by the government that are outside the scope of the contract, under these circumstances the contractor has the liberty to price whatever they what to carry out the task.
    I am optimistic that Oshkosh will do well on this contract to provide the logistics force the high quality and reliable vehicles needed to enable them to continue being successful on their war-time missions.

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