A halt in Joint Light Tactical Vehicle production, should Oshkosh [OSK] have to stop work under a federal court order, will cost the Army $3 million per month and add a month to the time it takes to field the vehicle.
To ensure it hasn’t lost both time and money, the Army argues Lockheed Martin [LMT] should have to put up a $16 million security deposit to cover the five months of lost production expected if a federal judge orders a preliminary injunction against Oshkosh and Lockheed Martin is ultimately unsuccessful.
The three parties in Lockheed Martin’s bid protest appeared Jan. 20 before the Court of Federal Claims in Washington, D.C., to argue the merits of Lockheed Martin’s request for a preliminary injunction on Oshkosh JLTV production. That hearing was closed to the public, but the judge in the case is expected to rule any day, according to an industry source.
Redacted versions of both the Army’s and Oshkosh’s written responses to Lockheed Martin’s claims were filed with the court on Jan. 22. The Army says in its response, initially filed Jan. 6 by its Justice Department attorneys, that “an injunction will likely cost the Government approximately $3.24 million for every month of delay.”
Photo: Lockheed Martin
“If the Court enjoins Oshkosh’s contract, it should require Lockheed to post $16.2 million in security to account for a possible five-month delay,” the Army contends. “If Oshkosh’s contract is delayed, it is likely to delay the use of JLTVs by our Soldiers and Marines. Every month the contract is enjoined will likely result in at least an additional month our Soldiers and Marines will not have this necessary capability.”
JLTV Project Manager Col. Shane N. Fullmer is quoted in the Army’s response as saying delays in the JLTV program will “introduce unnecessary and untenable risks to Soldier and Marine safety and mission execution. This is because JLTVs are designed to fill a critical capability gap between the Army’s HMMWV fleet and the larger, less mobile MRAP fleets.””
“Although we would like a decision less than five months after the Court rules on the motion for preliminary injunction, the Court should ‘err on the high side’ when estimating the time to litigate this case…particularly in light of the anticipated size of the record in this case,” the Army says.
Oshkosh late last year won an initial contract to build up to 17,000 of a total 55,000 or so JLTVs for the Army and Marine Corps. The entire program is valued at $6.7 billion. It is to have the first seven vehicles completed by June, which both the Army and Oshkosh contend is a paltry amount that would not sway an ultimate decision on the merits of Lockheed Martin’s case.
Oshkosh bid that it could build the first 17,000 JLTVs for $2.7 billion, according to the Army’s response to Lockheed Martin’s complaint. Lockheed Martin’s total evaluated cost/price for the work was redacted, but is higher than the Oshkosh bid.
“The amount of work to be performed over the next several months is very small relative to the overall contract. In Oshkosh’s contract, as awarded, the deadline for delivery of the first seven vehicles (of up to nearly 17,000) are not due until June 20, 2016,” the Army says in its response. “There is no reason to believe that the Court will decline to enter a permanent injunction simply because of this relatively small amount of progress on the contract.”
Lockheed Martin in its 61-page complaint argues Oshkosh should halt production until the case is resolved. Lockheed Martin’s main complaint lies with the Army’s treatment of changes to the competing vehicles to increase heavily weighted reliability scores made between the engineering and manufacturing development (EMD) phase and the proposals for low-rate initial production. Oshkosh was allowed to make changes to its EMD vehicle without supporting documentation while Lockheed Martin was pressured to explain how its changes would impact its overall bid, especially in regard to overall reliability, Lockheed Martin alleges.
Photo: Oshkosh Defense
The Army in its response said the two companies took “markedly different approaches to reliability in their proposals.”
“The record demonstrates that Oshkosh was largely satisfied with the design of its vehicles at the end of the EMD phase,” the Army’s response says. “In contrast, the record demonstrates that Lockheed was not satisfied with its design at the end of the EMD phase…Lockheed made substantial post-EMD changes –the number of which is included but redacted–that “caused Lockheed’s vehicles to meaningfully vary from the designs assessed by government during EMD.”
The Army asked Lockheed Martin to account for these changes and explain how and whether the resultant vehicle was not significantly different than the one tested in EMD. The Army contends that Lockheed Martin did not respond with the necessary information and did not sufficiently answer its concerns, according to the document.
Oshkosh says it took a “conservative approach” making a redacted number of “non-complex changes” to its EMD vehicle. “In its proposal, Oshkosh identified and described in detail each proposed change and provided an analysis of its impact on reliability,” the Army’s response says.
Lockheed Martin also took issue with the discovery of a 9-gigbyte trove of “thousands” documents produced by the Army on Dec. 3, the 88th day of the GAO’s 100-day bid protest evaluation process. It was this massive disclosure, and the inability of the GAO to consider it before a decision, that led Lockheed Martin to file its suit in federal court.
“If Lockheed Martin had been provided the documents in a timely manner, it would have pursued different issues and lines of argument in the GAO protest,” the suit says.
Oshkosh waves off the suggestion that the documents would have made any difference.
“Though Lockheed makes much of ancillary documents produced shortly before GAO was to issue its merits decision, the documents are most notable for how little Lockheed relies on them,” Oshkosh says in its response.