WASHINGTON — Two major defense companies, Lockheed Martin and BAE Systems, filed protests of major US Army contract awards with the Government Accountability Office on the same day last week.
Lockheed protested the Army's contract award to Oshkosh to build its Humvee replacement, the Joint Light Tactical Vehicle (JLTV), and BAE protested the Army's decision to award Northrop Grumman a contract to build the Common Infrared Countermeasure (CIRCM) system, intended to protect aircraft from infrared-guided missiles.
Oshkosh beat out both Humvee-maker AM General and Lockheed for the $6.7 billion low-rate initial production contract award to build 16,901 vehicles, but the entire contract is expected to be worth up to $30 billion.
"Lockheed Martin does not take protests lightly, but we are protesting to address our concerns regarding the evaluation of Lockheed Martin's offer," it said.
AM General, which submitted its Blast Resistant Vehicle-Offroad as its bid, has decided not to file a protest, saying: "We believe a protest would ultimately result in a distraction from our current growth business areas, including meeting the significant current and future needs of our customers in the United States and around the world."
Analysts were not surprised Lockheed protested the JLTV contract award.
"One, they are probably incensed they didn't get whatever they thought they were entitled to. Second, if they piss off the Army it just doesn't matter," said Jim Hasik, a nonresident senior fellow at the Atlantic Council's Brent Scowcroft Center on International Security.
James Tinsley, managing director at Avascent, echoed the sentiment. "They really have nothing to lose and everything to gain by filing a protest," he said. "They have to show their political backers they are doing everything they can to win the contract ... and they have a fiduciary responsibility to their shareholders to show that they did everything they could."
While AM General is a private, equity-owned business, a public company like Lockheed would be more driven to file a protest to show investors it tried, Tinsley explained.
Although there was widespread speculation that AM General would protest because the contract is so important to it, it's also not surprising the company decided against it.
AM General is not low on cash flow, Hasik noted. For example, the company announced Sept. 8 that it had secured a six-year, $428.3 million contract to provide the Army with M997A3 HMMWV-configured ambulances for domestic disaster relief by the Army, Army Reserve and Army National Guard. The company also builds Humvees for other countries around the world, including Mexico.
AM General also is looking toward the possibility of further US Army Humvee business as the service's Humvee fleet likely won't consist entirely of JLTVs at about $400,000 a piece, according to Hasik. The Army can't afford it, he added.
"I suspect the reason they are not protesting is because they have decided the best hope for the company to retain as much business as they can is to be a model corporate citizen and take care of their current customer and not piss off the Army with a protest," Hasik said.
AM General is likely to be a thorn in Oshkosh's side for a long time as the Army looks to recapitalize the rest of its Humvee fleet.
If the Army's acquisition strategy for JLTV is solid, Lockheed has little chance of overturning the contract award.
"I'll be floored and deeply saddened if they find something wrong, not for Oshkosh's sake, but for the Army's because then I'll be convinced that Army acquisition is hopeless," Hasik said, adding, the service "really, really took their time with this competition."
A statement from Oshkosh following Lockheed's protest shows confidence in the Army's decision.
"The U.S. Army conducted a thorough and highly-disciplined evaluation for the JLTV production program to reach a clear conclusion."
BAE's protest of the Army's CIRCM award came in under the radar, eclipsed by the JLTV protest.
BAE said in a statement it decided to protest the award after reviewing the Army's debrief because it had "identified some inconsistencies."
After a yearslong competition, Northrop Grumman was awarded a $35 million engineering and manufacturing development contract at the end of August to build 21 sets of the system to replace BAE's legacy Advanced Threat Infrared Countermeasure system.
While the initial order is small, the entire program with the Army could be worth more than $3 billion.
A Northrop Grumman spokesman confirmed an order to stop work during the protest period had been issued, but said, "We are confident the Army conducted a rigorous and fair evaluation and look forward to moving as rapidly as possible to get this critical mission capability integrated on Army Aviation platforms."
The Government Accountability Office will have 100 days to review the programs and issue a decision on the protests. Any work that would be performed under the contracts must stop during the review period.