It is a common misconception that Department of Defense rules for purchasing weapons are impenetrably arcane. That’s only half true. Much of the time, the principles being applied trace back to basic constitutional guarantees such as due process and equal protection. So it is in the case of the Government Accountability Office decision Monday sustaining protests of a $3 billion truck contract. Two losing bidders — BAE Systems and Navistar — complained that they were not treated fairly in the August award of a contract to Oshkosh Corporation to build 23,000 vehicles under the Army’s Family of Medium Tactical Vehicles (FMTV) program.
GAO decided the losers were right, and recommended that the Army rethink how it rated the production capabilities and past performance of the three teams competing for the contract. The truck competition was originally conceived as a “best value” award in which cost and capability would each comprise 40% of the selection criteria, while past performance would comprise the remaining 20%. But the Army’s anonymous source-selection authority decided the offerors were all excellent and equal in the non-cost-features of their proposals, and on that basis made the award solely on the basis of cost.
The problem with that approach is that challenger Oshkosh bid a huge 30% below the current price for the trucks being charged by incumbent BAE Systems — even though it would have to use similar tools, skills and suppliers to build nearly identical trucks. Common sense suggests there is no way a company that has never built FMTV trucks could match the product-specific capabilities of the company that has built them successfully for the past 17 years. The Army could conceivably have argued that incumbent BAE was not doing a good job building the trucks, but when it rated all the offerors excellent, that line of reasoning was foreclosed. Instead, GAO was confronted with the improbable spectacle of a challenger being rated equal to an incumbent and then receiving the contract award by bidding a staggering 30% below the current price.
At the very least, the award should not have been made without rigorous analysis of whether the price that Oshkosh bid was realistic. In fact, recently passed acquisition-reform legislation requires such tests of cost realism. But where GAO says the Army really slipped up was in its incomplete assessment of contractor capabilities. It therefore says the service should “reevaluate the offerors’ proposals under the capability factor, in a manner consistent with the terms of the solicitation.” It also says the past performance of loser Navistar should be re-assessed.
The Army will probably try to do all this without conducting a full re-competition. But if it finds that the capabilities of the three teams competing to build FMTV trucks are not really equal — which in fact they are not — then doesn’t that raise renewed doubts about Oshkosh’s improbably low bid? Is it really possible that Oshkosh can build vehicles for 30% less than what the 17-year incumbent is charging if can’t even match that incumbent’s capabilities in terms of skills, tooling, suppliers and technical data? Oshkosh doesn’t even have a validated design for the truck’s armored cab (BAE does, and is building the cabs today). Bottom line: if the Army wants to avoid further frustration in buying medium trucks for Afghanistan and Iraq, it better take the time needed to fix its acquisition practices rather than rushing to make cosmetic changes to a flawed process.
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