Lockheed Martin Corp. LMT announced that it is filing a complaint in the court against the Pentagon to fight the latter's decision of awarding a $6.75 billion contract for next-generation Humvees to Oshkosh Corporation OSK.
The Complaint
On Dec 16, 2015, Lockheed Martin filed the lawsuit in the Court of Federal Claims. The company, however, made no comments on whether it wants an injunction on Oshkosh to stop the production of the first of around 17,000 new Joint Light Tactical Vehicles (“JLTV”) for the Army and the Marines yet again.
A hearing is scheduled for Dec 18, 2015 before Judge Charles Lettow. The Pentagon is expected to provide an answer by Feb 16, 2016.
Why is Lockheed Suing Pentagon?
In Aug 2015, the Pentagon had awarded an initial order of nearly 17,000 vehicles for an anticipated fleet of 55,000 JLTV to Oshkosh. Lockheed Martin, however, believed that it had “offered the most capable and affordable solution for the program”. As a result, the company filed a protest with the Government Accountability Office (“GAO”) against the Pentagon’s decision.
On Dec 15, the GAO decided to dismiss the protest and allowed Oshkosh to recommence work on the project. The GAO’s dismissal led Lockheed Martin to file the lawsuit.
However, Lockheed Martin is concerned about the disclosure of new documents related to the awarding of the contract by the U.S Army right before the GAO’s dismissal, which was after the conclusion of the hearing process. The company firmly believes that had these data been produced during the hearing, it could have materially affected the case.
Oshkosh’s Reaction
Oshkosh believes that the federal court will support the Army’s selection of itself for the JLTV contract. The company also has faith in the Army’s procurement process, which includes “exhaustive testing and evaluation to ensure that troops get the best vehicle”.
Moreover, Oshkosh expects that the latest protest filing will not be allowed to delay the JLTV program any further. According to the company, the JLTV vehicles are capable of providing better protection for the country’s troops in their upcoming missions.
Reaction of the GAO
The GAO stated that it followed the statute and felt that Lockheed Martin should have filed a supplement protest with the watchdog agency if it had desired additional materials to be considered, instead of going to court.
Another Protest by Lockheed Martin
In Nov 2015, Lockheed Martin, along with The Boeing Co BA, filed a protest with the GAO against the U.S. Air Force's contract with Northrop Grumman Corp NOC to build the new Long Range Strike Bomber (“LRS-B”), which has a potential value of about $100 billion, alleging that the selection process was “fundamentally flawed”.
The two defense majors claimed that the U.S. Air Force had not evaluated the costs and risks associated with the LRS-B program properly. They alleged that the Pentagon had used historical cost data associated with the development and production of the B-2 bomber built by Northrop 20 years ago, instead of the actual projections supplied by the companies. Lockheed and Boeing are now awaiting results.
Zacks Rank
Lockheed Martin currently has a Zacks Rank #3 (Hold).
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