The Army took a major step on one of its biggest new weapons programs earlier this month, awarding nearly $900 million to two contractors to produce a next-generation combat vehicle.
The move comes at a particularly slow point for contractors that build big systems. Faced with declining budgets and increasingly steep price tags, the Pentagon has been cautious about launching new efforts, making companies nervous about whether programs will come to fruition.
“This is the least-favorable time in a decade to be starting a major weapons system,” said Loren Thompson, a defense industry consultant at the Lexington Institute. “You can feel the air of doubt hanging over the [Ground Combat Vehicle] program.”
Winning contractors BAE Systems, which headquarters its U.S. business in Arlington, and Falls Church-based General Dynamics, each took home nearly $450 million for a two-year technology development phase to build a new Ground Combat Vehicle. The equipment would replace decades-old Bradley Fighting Vehicles.
McLean-based Science Applications International Corp., which led a team with three other contractors, was not selected for the program. Citing “errors in the evaluation process,” the company said Friday that it has filed a bid protest with the Government Accountability Office.
The program is likely to be a test of how major weapons programs will proceed in the new budgetary climate. The winning contractors have to wrestle with how to best position for a win — but not over invest in case the program ultimately falls through.
At BAE Systems, Mark Signorelli, the company’s vice president and general manager of weapon systems, said the company proposed a flexible vehicle that can be easily upgraded or changed.
The company particularly focused on providing a clear rationale for its cost estimates, and has a list of trade-offs the Army could make to lower the cost, Signorelli said.
General Dynamics’s Robert Sorge, senior director of the program in GD’s land systems division, said the company’s proposal focused on making use of mature technologies, resulting in a more certain price.
Still, the program presents a conundrum for contractors. Mature technologies are generally cheaper and more certain, but Thompson said more cutting-edge technologies might help keep the Pentagon interested in buying a new vehicle, rather than just revamping what it already has.
Contractors “know the defense budget is going down, they know that the Army has a poor track record of executing weapons programs,” but they also know the program might be the only chance to put their employees to work on a new program, he said.
The Army declined to comment.