Navistar’s challenge against US Army over vehicle buys hangs in the balance

WASHINGTON — For over a decade, the U.S. Army has used one source — Oshkosh Defense — to build its Family of Medium Tactical Vehicles, choosing to sole source to the company beyond its initial five year contract rather than reopen competition.

Defense company Navistar is challenging the Army’s choice to forgo competition and filed a lawsuit with the U.S. Court of Federal Claims in early August.

Nov. 26 was to be the day a judge would decide whether the U.S. Army violated the law by continuing to order vehicles from Oshkosh outside of the scope of the contract while avoiding competition.

And while a bench trial happened, the judge hearing the case did not make a decision. It is unclear what’s next or when a ruling could happen.

Navistar decided to sue the Army after it was getting nowhere in its quest to get the Army to produce documents — through a protest filed with the Government Accountability Office — that would show the service’s reasoning to continue to order more vehicles from Oshkosh without competition and without proper legal justification.

The company contended that the Army did not justify and improperly awarded its most recent sole source FMTV procurement to Oshkosh, and failed to provide proper notice to possible competitors in accordance with federal acquisition regulations and the Competition in Contracting Act (CICA), according to an extensive review of court documents by Defense News.

In addition, the Army also ignored a stop work order, which automatically went into effect when a GAO protest was filed.

Navistar filed two complaints: One that claims the Army violated the law when it continued to buy Oshkosh vehicles outside of the scope of its contract without holding a competition and another that claims the Army illegally continued to work on production of those vehicles despite a required stop work order that must go into affect once a protest is filed with the GAO.

Since 2009, the Army has spent over $6 billion on FMTVs from Oshkosh. FMTVs are used for a wide variety of missions to include transporting capabilities that extend from cargo to missile defense radars.

Navistar contends the Army had ample time to compete for follow-on FMTV orders, and the pool was deep with companies ready to provide vehicles that met the service’s requirement, but the Army never did.

A long saga

The saga goes much further back than just the 2019 GAO protest and lawsuit.

Navistar successfully protested the Army’s initial award to Oshkosh back in August 26, 2009. As a result, the Army reviewed its decision, reaffirmed its selection of Oshkosh and awarded it a contract with a performance period of less than five years, set to expire at the end of 2013.

The request for proposals ahead of the original contract award estimated 23,341 vehicles to be delivered over a five-year period. Following that, it was Navistar’s belief that the Army would reopen the competition to deliver more FMTVs.

Through a series of justification and approvals — five of them — the Army continued to extend the contract through August 25, 2019, arguing each time that it did not have the time to conduct a new competition to meet the service’s needs.

In its latest J&A in September 2016, the Army justified it needed another 1,744 FMTVs at an estimated cost of $575 million for total contract duration of 10 years.

The Army argued that it needed to sole source FMTVs to Oshkosh because it didn’t have 24 months that it would take to conduct a full competition to meet urgent requirements, while it acknowledged there were other companies to include Navistar that could build FMTVs.

The service also justified the sole source award due to its plans to stop procuring the current version of the FMTV as it prepared to take delivery of a new FMTV variant, which was also competitively awarded to Oshkosh in 2018.

Navistar chose not to compete for the new variant, according to court documents.

The order in 2016 was to fulfill the Army’s remaining needs between the end of the current variant and the future variant expected to be delivered in fiscal year 2020.

Navistar again protested with the GAO the 2016 sole source award to Oshkosh for more FMTVs and ended up dropping the protest when it settled with the Army to supply some vehicles to Iraq.

Without a J&A or any other documents justifying another order of vehicles, the Army, on June 28, 2019, announced what it described as the award of a $320 million contract modification for domestic purposes and for foreign military sales for the countries of Argentina, Djibouti, Iraq, Lebanon and Romania. The order was for an estimated 1,916 vehicles and extended the performance period of the contract out to 2021, 12 years past the original contract award.

The announcement, according to Navistar, never disclosed that the Army had actually already ordered roughly 1,000 vehicles in excess of what was justified in the 2016 J&A.

Navistar again filed a protest with the GAO over the orders made without a new J&A, but withdrew its protest in favor of filing a lawsuit in the U.S. Court of Federal Claims when the GAO refused to require the Army to produce relevant documentation justifying the additional FMTVs.

It wasn’t until the company filed its complaint in federal court, that it was informed by the Department of Justice that the Army had never stopped work to produce the FMTVs ordered in 2019, Navistar reveals in court documents.

Beyond the scope

When the Army announced a new sole source procurement for FMTVs to Oshkosh in June, it caught Navistar by surprise because the service hadn’t issued a J&A, which had been its practice after the original contract period of performance had ended, and is also required by law, the company argues in the court documents.

The June announcement came on the heels of the five J&As that had included an extra 4,875 vehicles and $1.4 billion more to Oshkosh outside of the scope of the original 2009 contract and procured without competition, Navistar notes.

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Navistar also learned that the Army, months prior to June 28, had already placed tens of millions of dollars in sole source orders for hundreds of FMTVs beyond the scope of the 2016 J&A.

Navistar argued a new J&A to cover the 2019 orders was needed because the previous J&As only provided enough authority to solve the Army’s claimed immediate needs and were very specific in number and delivery time frame and laid out what trucks were needed by which units and where.

The company contended that the original contract and subsequent J&As didn’t and shouldn’t provide the Army with “a blank check” to continue buying more vehicles without justifying competition. And it argues that the Army, three years beyond 2016, had ample time to prepare to compete for remaining FMTV orders.

A contract or a blank check?

While the Army’s arguments are sealed under a protective order and not available for public review, Oshkosh argued in a response to Navistar’s complaint, that the original 2009 contract was a “requirements” contract considered valid through August 25, 2019, for any orders placed. The J&As were essentially just amendments to the original contract.

Navistar disagreed and argued that each subsequent J&A should be considered the binding contract and that previous contracts are expired.

“CICA does not contain an exception to competition simply because a contract extension involves a requirements contract. To conclude otherwise would gut CICA’s requirements," Navistar added.

Oshkosh argued that the Army was required to fulfill all of its needs for the FMTV A1P2 through the Oshkosh contract in whatever quantity became necessary until the contract expires. The company also argued that the contract ceiling value had not been exceeded even with the 2019 orders.

Oshkosh also argued that Navistar misinterpreted the difference between the ordering period under a contract and the delivery period. The company claims the contract covers the ordering period and not the delivery period, which can extend beyond.

Navistar argued that the September 2016 J&A timeline covers the entirety of the contract to include delivery of the vehicles.

Oshkosh also contends that the Army alerted all offerors in the original competition that except for monthly and annual limits there is no minimum quantity and no maximum of vehicles that the Army can order.

And Oshkosh stated that the number of vehicles laid out in the Army’s contract and subsequent J&As were just “estimates” and not a ceiling for orders. Additionally, any maximum ceiling just means a company isn’t obligated to honor any orders placed above that level.

For Navistar, Oshkosh’s interpretation goes against the core of the Competition in Contracting Act.

“These J&As do not contain any rationale that would enable the Army to procure an indefinite quantity of Oshkosh vehicles for years into the future - they only provide enough authority to solve the Army’s claimed immediate problem of requiring vehicles quickly before a competition can be performed,” Navistar argues.

The amendment

Deviating from its normal course, the Army retroactively revised or amended the September 2016 J&A in early June instead of issuing a new J&A, scratching out original numbers and costs and replacing them with new numbers and new cost estimates.

The amendment was made at the request of the Army’s director of policy only after orders earlier in 2019 were discovered to have gone beyond the scope of the 2016 J&A.

According to CICA, agencies are not allowed to avoid competition requirements by using the device of a contract modification.

The Army did not notify potential offerors of the amendment and claimed, according to Navistar in its response to the court, that the only reason for the amendment was to alert Army leadership of the change.

“There is no requirement for the Army to amend a J&A as a method of notifying its own leadership about procurement actions,” Navistar notes.

Additionally, Oshkosh argued in its response to Navistar, that the director of policy’s request in an email to amend the J&A because orders had fallen out of the scope, was just “the author’s view.”

Navistar writes, “The Army’s attempt to authorize its prior illegal actions along with the Army’s official position at the time the amendment was executed (that its sole source actions were “beyond the scope” of its earlier J&As) are damning indicators that the Army failed to justify its 2019 sole source contract action and that it knew its actions were wrong."

Army didn’t hit pause

It’s commonly known in defense acquisition that when a GAO protest is filed, work must stop on any contract award at issue until the GAO renders a decision roughly 90 days later.

But the Army didn’t stop Oshkosh from ordering parts and beginning work to build vehicles wrapped up in the Navistar protest filed July 8.

The service doesn’t dispute this fact, according to court documents.

Navistar was not made aware the Army had continued to execute the disputed sole source orders until it filed its lawsuit at the court. Once alerted by a DOJ attorney that the Army had not stopped working, the company issued a separate complaint addressing the Army’s failure to stop working on the contract in accordance with the law.

The Navistar complaint states the Army continued to work in secret and did not alert the GAO or Navistar that it was proceeding with the performance of the protested contract. The Army didn’t take any action to override the requirement to stop working on roughly 1,365 vehicles covered under the protest.

The Army did stop work on 75 vehicles destined for Iraq and Djibouti, but that did not happen for days after the protest was filed with the GAO.

The service “inexplicably”, according to Navistar’s response to the Army’s sealed arguments, believed in “good faith” that the only vehicles in dispute were the 75 vehicles that were bound for Iraq and Djibouti.

Navistar states that the administrative record “contains no explanation, documentation or reasoning” as to why the Army failed to stop work.

“The Army cannot claim ignorance of its legal obligations (as it appears to be doing) in order to avoid the consequences of its statutory violations,” Navistar argues in its response.

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The service’s argument, according to Navistar’s response, focuses on a July 12 phone call it had with Navistar’s defense counsel where it claims that the focus of the call was on Iraq and Djibouti requirements, but includes nothing related to it in the administrative record provided to the court.

Navistar lays out that the stop work order for the 75 vehicles came at 10:15 a.m. on July 12 before the 10:30 a.m. call with Navistar’s counsel.

The call was scheduled at the request of the Army’s counsel and Navistar’s lawyers were advised to come prepared to address the number of FMTV vehicles that it could produce on an expedited basis and the schedule under which it could deliver.

According to a declaration submitted to the court, Navistar’s lawyers said the Army’s counsel offered to try to resolve the protest by giving Navistar contracts to provide vehicles for Iraq and Djibouti.

Navistar said it would not agree to a resolution unless the Army agreed to have Navistar provide a more substantial volume of both domestic and foreign military sales vehicles.

The Army’s lawyers said they couldn’t agree with that and indicated they would have to proceed with the protest.

And while Iraq and Djibouti were discussed, “the Army could not have reasonably come away from that telephone conference with such a belief,” that the protest only covered those 75 vehicles, according to Navistar’s response.

To Navistar, it was clear from the beginning that its protest covered all orders in 2019 made beyond the scope of the 2016 J&A.