The U.S. Army announced Friday evening that it decided to uphold the contract it originally granted to the Wisconsin truck maker last August.
The initial deal -- for about 2,500 combat supply trucks known as FMTVs (or Family of Medium Tactical Vehicles) -- is worth $281 million. But the ultimate value of the five-year contract could reach more than $3 billion, Oshkosh has said, and cover as many as 23,000 trucks and trailers.
The Army also lifted a stop-work order on Oshkosh's manufacturing plants, in place since rival bidders first protested the award back in September.
The Army's decision is an important one for Oshkosh. Although FMTV trucks have much thinner profit margins than the
, any and all defense deals provide a much-needed financial buffer to Oshkosh at a time when its other businesses -- which largely provide heavy equipment for the construction industry -- are still reeling from the recession.
In hectic trading Tuesday afternoon, Oshkosh shares were changing hands at $40.15, up $1.86, or 4.9%, on volume of about 4.4 million shares, more than double the daily average turnover in the name.
Oshkosh's two rival bidders -- the British defense giant
, along with
-- appear to have capitulated. BAE, for its part, announced Tuesday that it would take a nearly $930 million charge to account for the costs of its failed FMTV bid. "We recognize the U.S. Army's decision," said BAE's chief executive, Ian King, according to
Both companies contested the award by filing protests with the Government Accountability Office, a congressional watchdog group meant to provide oversight and to investigate issues of government procurement and taxpayer spending.
BAE's Armor Holdings unit was the incumbent FMTV supplier; that Oshkosh took the contract out from under the Texas-based division rankled BAE. Essentially, it and Navistar argued that the Army hadn't conducted its due diligence on Oshkosh's ability to manufacture the trucks at cost and on time, and had awarded the contract simply based on the company's low-ball price.
Oshkosh underbid the previous Armor Holdings FMTV contract by 30%, according to some estimates. (BAE underbid its own earlier deal with the Army by 21%.)
On the surface,
it looked as though BAE and Navistar had won the momentum in the dispute when the GAO ruled in their favor in December
, ordering the Army to re-evaluate two parts of the bidding process. But the watchdog group also shot down several core criticisms made by the protesters, including that Oshkosh's cheap price risked causing production snags if Oshkosh couldn't afford to pay for parts or cover other manufacturing costs.
-- Written by Scott Eden in New York
>>Watchdog Puts Kibosh on Oshkosh Bid
Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.