Last summer, the U.S. Army awarded a contract for 23,000 trucks and trailers to a company that has never made the vehicles before, because it bid below the price proposed by a competing company that has made them for 17 years. Not only was the challenger’s bid lower than the price bid by the incumbent, but it was 30% below the price currently being charged for the same trucks — even though the winner would be required to produce identical trucks using many of the same suppliers. The Army officials making the award concluded that the competing companies offered equal capability and equal risk, and therefore let price become the sole determinant of who won.
If you knew nothing else about the current controversy surrounding the Family of Medium Tactical Vehicles, or FMTV, program, that first paragraph should be enough to alert you that here were the makings of a procurement fiasco. If I now add the fact that the trucks will be equipped with armored cabs for use in Iraq and Afghanistan, then a mere fiasco becomes a scandal. You wouldn’t really know that from reading the Government Accountability Office’s December 14 report on protests lodged by the losing companies, even though GAO agreed that the protests raised legitimate issues. GAO said that the Army failed to apply its selection criteria as stated in the original solicitation, and wrongly equated actual possession and use of necessary production equipment with mere plans to acquire it. But it declined to question other mistakes made by the Army, stating that those decisions were with the “discretion” of the agency running the competition.
Well fine. GAO shouldn’t exceed its jurisdiction. But policymakers need ask themselves what it says about an acquisition agency when it accepts bids 30% below what an incumbent producer is charging from a challenger that has never made the product before. When it rates an incumbent and challenger as equal in risk even though the challenger concedes it lacks over a hundred separate items of tooling needed to build the same product the incumbent is already manufacturing. When it sees no problem in the fact that the challenger lacks an armored cab design like the one the incumbent has already developed even though the first delivery of trucks under the awarded contract will have to be made in a few months (May of 2010 to be exact).
What these facts reveal is that the agency making the award did not act competently, and violated basic standards of professionalism. In particular, its actions were inconsistent with the letter and spirit of recently passed acquisition reform legislation, which calls for greater rigor and analytic depth than the Army exhibited in this case. I haven’t mentioned the names of the winning and losing companies here, because this isn’t about them. They are all fine companies, and they bid according to their business interests. The challenger bid too optimistically, but in a fixed-price competition, that’s their prerogative. What is not acceptable is for the Army to accept excessive cost, schedule and performance risks and then not even recognize the danger to which it is potentially exposing troops.
The Army will act like any other bureaucracy in this matter. It will try to accomplish a quick fix of the issues that were within GAO’s purview to criticize, and then it will endeavor to again award the contract to the same company it has already selected. That’s a great way of saving face, but it fails to address the risks inherent in the service’s inept selection of an inferior source. The Obama Administration says it is committed to improving the quality of acquisition management; doing an independent review of the FMTV award would be a good place to start.
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