By Ann Roosevelt

The Greater Houston Partnership finds BAE Systems‘ loss of the contract for the Army Family of Medium Tactical Vehicles (FMTV) could cost the region $1.8 billion annually if not reversed.

BAE Systems is protesting the Army’s award of the FMTV competitive rebuy contract to Oshkosh Corp. [OSK], and expects a decision from the Government Accountability Office by Dec. 14. BAE produces the vehicles in Sealy, Texas.

“The total impact to our economy is huge,” Jeff Moseley, president and CEO of the Greater Houston Partnership, the region’s business advocate, said in a Nov. 18 statement. “The region would lose 3,400 direct jobs and 6,766 indirect jobs based on a flawed process. The Partnership is joining other Task Force members in calling on the Army to put this out for a re-bid that will result in a fair contract award.”

BAE contends the Army’s bidding process was flawed, and the potential $3 billion contract is under protest by BAE and Navistar International, another bidder.

The contract bidding process failed to follow its own guidelines and awarded the contract to a vendor that underbid by at least 30 percent the current cost of FMTV built by BAE Systems, the Greater Houston Partnership said.

Lance LaCour, chair of the Sealy FMTV Task Force–a coalition of industry experts, public officials and economic developers, said, that after 17 years of BAE successfully building this vehicle for the Army and meeting stringent war-time requirements, the contract was awarded to a vendor with no experience manufacturing FMTVs.

Task Force Co-Chair Kim Meloneck, executive director of the Sealy Economic Development Corp. said,” This isn’t just a Sealy or Katy issue, although our communities stand to lose the majority of the jobs.”

LaCour, president and CEO of the Katy Area Economic Development Council, said: “This also has tremendous negative impact for the entire state of Texas from the suppliers right down to the local businesses that support the work force.”

Members of the Task Force–formed in the wake of the reversal of BAE’s long-term relationship of manufacturing the FMTVs–also are questioning the timing of the contract award. The FMTV contract came up for renewal two years beyond the traditional bid process schedule. Military analysts have called the winning bid financially unfeasible.

Task Force members supporting the effort to keep the FMTV work in Sealy include Republicans Gov. Rick Perry, U.S. Rep. Michael McCaul, Sens. Kay Bailey Hutchinson, John Cornyn and Texas State Rep. Lois Kolkhorst, Austin County.

The Greater Houston Partnership’s in-depth analysis found that BAE pays an estimated $5.1 million in state ales, franchise and unemployment taxes, and an estimated $1.9 million in local property taxes.

Employees at the BAE Sealy plant generate “significant” tax revenues for the region, the partnership said: BAE employees pay about $7.1 million in property taxes in the Houston region; an estimated $1.2 million in annual sales taxes in the region, and nearly $211,000 in vehicle registration fees each year.

Additionally, the partnership found BAE has been an “engine for growth” in Sealy and Austin Counties. “The plant supported 5630 direct and 1,495 indirect jobs when it opened in 1992. Both direct and indirect employment has nearly quintupled since then.”

BAE also has an economic impact on Texas ports. The partnership said the company is a major customer of the ports of Houston, Galveston, Freeport and Beaumont, shipping 1,000 or more trucks overseas each year.

Additionally, if the Sealy plant shuts down, the costs to the state of Texas for unemployment benefits for 43,400 unemployed FMTV workers could “exceed $26 million,” Greater Houston Partnership analysis found.