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.