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IG Raps Army for Lax Cost Controls on Stryker Deal

Jul. 10, 2012 - 02:10PM   |  
By ADAM STONE   |   Comments
The Stryker is designed to allow soldiers to maneuver in close quarters and urban terrain while providing protection on open ground.
The Stryker is designed to allow soldiers to maneuver in close quarters and urban terrain while providing protection on open ground. (U.S. Army)
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A recent Pentagon Inspector General (IG) report takes the Army to task for failing to implement cost controls on a service contract with General Dynamics Land Systems. The contract covers logistics support for the Stryker vehicle family.

The IG cites numerous shortcomings in the Army’s procedures, which were meant to control costs on a contract valued at about $1.5 billion and covering work between March 2007 and February 2012.

Originally termed the “Interim Armored Vehicle,” the 19-ton, eight-wheeled Stryker armored vehicle is designed to allow soldiers to maneuver in close quarters and urban terrain while providing protection on open ground.

The IG found that the Project Management Office for Stryker Brigade Combat Team (PMO Stryker) “did not adequately define performance-based contract requirements in clear, specific and objective terms with measurable outcomes.”

While the contract included a metric for availability (90 percent operational readiness), it did not include essential metrics such as cost per miles driven or dollars in inventory.

Managers failed to establish effective means to tie the level of operational funding to the actual workload needed to sustain the Stryker. Instead, they relied on estimates made years earlier. Consequently, the logistics support contract “had no tangible deliverable; neither complied with nor met the intent of [Defense Department] performance-based logistics guidance; and did not meet Federal Acquisition Regulation requirements for a cost-reimbursable contract,” said the IG.

Further, the Army put in place “no means to measure the efficiency of the contractor’s cost performance or actual cost overruns or underruns in relation to the fixed fee.”

Such shortcomings allowed the contractor to accumulate significant excess inventory, the report found.

“The contractor was authorized to spend about $1.453 billion on the contract, but we calculated the operational support costs for Stryker vehicles at about $1.117 billion for the first 5 years, resulting in about $335.9 million used to accumulate inventory that could have been put to better use,” the report states.

The IG recommends PMO Stryker be required “to establish and monitor appropriate cost and inventory control metrics, define contract remedies that include both positive and negative fee measures related to inventory turns and inventory accuracy metrics … and define a tangible deliverable.”

Operational support costs for Stryker vehicles should be reviewed to determine whether current funding levels are appropriate. Some or all of the current contract should be converted to a lower risk, firm-fixed-price contract.

IG also recommends a multifunctional team be stood up to support PMO Stryker in negotiating the next Stryker logistics support contract, scheduled for award in June 2013. That group would include the director, Defense Procurement and Acquisition Policy; assistant secretary of defense for logistics and materiel readiness; and the assistant secretary of the Army for acquisition, logistics and technology.

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