No announcement yet...
AP
Pentagon nears decision on Humvee replacement deal
Monday October 27, 3:59 pm ET
By Donna Borak, AP Business Writer
7 teams await Pentagon's decision on multibillion-dollar contract to build Humvee replacements
WASHINGTON (AP) -- The Pentagon is days away from awarding the first phase of a contract for a lightweight tactical vehicle to replace the once mighty Humvee that has been beaten up in Iraq.
Several Wall Street analysts expect teams led by Lockheed Martin Corp., General Dynamics Corp. and Northrop Grumman Corp. to beat out four others competing for an initial award estimated to be worth $180 million. Army and Marines Corps officials confirmed Monday a decision on the first round of deals is expected this week. Future contracts could bring the program's value to $20 billion or more.
Both services are seeking a lighter, more agile tactical vehicle that can withstand roadside bombs and explosive devices. They have pressed industry to bring an array of technology that will allow the Joint Light Tactical Vehicle, or JLTV, to do everything from providing reconnaissance capabilities to serving as a field ambulance.
But analysts caution that the road ahead for replacing the military's favorite truck is loaded with obstacles.
"The vehicle has yet to replace the Humvee," said Garrick Ngai, a senior defense and aerospace analyst with Frost & Sullivan. "It's going to be quite some time before that happens."
The expected awards will start the clock on a 27-month testing period. The Pentagon will then pick two contractors to go forward. It's unclear whether the government will make a final award to a single company or use multiple vendors.
Ngai is skeptical of the program's ability to survive beyond the first phase, saying new technology likely would be spun off to other vehicle programs.
Another potential stumbling block for the JLTV is its attachment to the Army's controversial Future Combat Systems modernization program being led by Boeing Co. and SAIC Inc. Analysts suspect that program's budget, which has ballooned to $200 billion by some estimates, likely will be cut by the next president.
"Future Combat Systems' vehicles have always been at risk," said Ngai.
Any setback on the tactical vehicle would follow recent missteps among other major defense programs. The Air Force alone has seen three high-profile programs delayed in recent weeks: a $15 billion rescue helicopter deal, a $35 billion pact for refueling planes and a communications satellite worth roughly $6 billion.
"These are developmental programs that have experienced significant delays, cost overruns, or a combination of both," said Scott Ellison, an analyst for Friedman, Billings, Ramsey & Co. Having funding in place and the relatively small investment by industry are positive signs for the tactical vehicle program, he added.
While a new vehicle program could be a boom for the defense industry, the ongoing global financial crisis and the U.S. government's response to it could diminish future Pentagon budgets, especially on programs in development, analysts said.
Even with approved dollars for the JLTV program, a potential protest by losing bidders could stall the Pentagon's plans. A protest would push a decision until the next administration, which could kill the program, analysts warned.
Among the teams competing for a stake in the deal are: Northrop Grumman and Oshkosh Truck Corp.; General Dynamics and Humvee maker AM General; and Lockheed Martin and BAE subsidiary Armor Holdings.
Others teams include Boeing, SAIC and Textron Inc.; Force Protection Inc. and DRS Technologies Inc.; the U.S. subsidiary of British defense conglomerate BAE Systems PLC and Navistar International Corp.; and Blackwater USA and Raytheon Co.
Each team is being asked to build a family that will include an infantry vehicle, a general purpose vehicle and a utility vehicle to support various Army and Marine Corps missions.
The services are expected to order 65,000 vehicles, which will not enter initial production until 2013. Each vehicle is estimated to cost $400,000, according to Merrill Lynch analyst Ronald Epstein.
