Further, the contract contained an aggressive production schedule that did not take into account the contractor’s inexperience. Army Did Not Execute a Low-Risk Acquisition Strategy

The Army used a streamlined acquisition strategy to reduce the time required to develop and field FMTV trucks. Contractor Inexperience Contributed to Delays

The contractor, which was inexperienced in truck production, had difficulties in both establishing a production line and producing trucks that would pass test requirements. As a result, the contractor was late in delivering trucks for testing. The trucks that were produced could not meet FMTV technical and operational requirements. Accordingly, for fiscal year 1996, the Army only requested $39.7 million for FMTV termination costs rather than the $384 million needed to complete the final year of the contract. Since this was not enough to fully fund the final year of the contract, the Army and the contractor agreed to extend the FMTV production contract 2 years, ending in December 1998. The truck was less than 3 years old and was among those stored at the plant awaiting modification. The Army also agreed to pay a portion of the cost of correcting the corrosion problems in the remaining 40 areas because the contractor maintained that the test specified in the contract indicated the effects of 15 years of corrosion even though the contract only required trucks with 10 years of corrosion protection. The contractor produced 2,491 trucks after McLaughlin improved its procedures to address corrosion problems found on the first 4,955 trucks and before trucks with galvanized steel cabs were produced. The Army changed its plans to terminate the final year of the 5-year FMTV production contract when the Congress provided additional funding to continue the program. When the Army found that the first 4,955 trucks produced did not meet the corrosion protection requirements, the contractor agreed to repair the corroded trucks, provide a 10-year corrosion warranty on those trucks, and make changes in its production process and procedures to correct the corrosion problem. However, the Army and the contractor ultimately concluded that galvanized steel cabs may be needed to fully meet the truck’s 10-year corrosion prevention requirement. The contract was subsequently modified to require the galvanized steel cabs. The Army did not test or require the contractor to provide a corrosion warranty on the 2,491 trucks produced prior to the switch to galvanized steel. Scope and Methodology

To determine the contractor’s delay in delivering acceptable FMTV trucks, including the Army’s decision to restructure the current contract and the Army’s handling of corrosion problems, we interviewed Defense, Army, and contractor officials and reviewed various FMTV program documents, including the acquisition strategy and plan, the production contract, budget documents, selected acquisition reports, and the production contract’s source selection board evaluation.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Army's Family of Medium Tactical Vehicles (FMTV) program, focusing on: (1) the causes and effects of the contractor's delays in delivering acceptable trucks; and (2) the Army's actions to mitigate corrosion problems on FMTV trucks.

What GAO Found

GAO noted that: (1) a combination of factors caused lengthy delays in delivering FMTV trucks; (2) the Army did not execute a low-risk acquisition strategy; (3) the contract contained an aggressive schedule for truck production considering the contractor's inexperience; (4) the inexperienced contractor had difficulty in both establishing a production line and producing trucks that could meet qualification and operational testing requirements; (5) despite the difficulties, the Army allowed production to continue and increase during testing; (6) as a result, many trucks were produced that required modification or repair; (7) because of production problems and competing funding requirements, the Army decided in 1994 to terminate the final year of the original 5-year FMTV production contract; (8) the Army requested only enough funding for fiscal year 1996 to terminate the program; (9) Congress, not wanting a break in the program, provided additional funding for that year, but not enough to fully fund the production quantities called for in the contract; (10) the Army and the contractor agreed to extend the contract and spread the final year's quantities over 3 years; (11) the Army determined that the first 4,955 trucks produced did not meet the FMTV's corrosion protection requirements; (12) corrosion was found on the cabs of trucks less than 3 years old that were still awaiting modification at the contractor's plant; (13) rather than making the contractor replace all the 4,955 truck cabs at a cost of $31 million, the Army accepted the contractor's proposal to repair the corrosion damage and to provide a 10-year warranty, not to exceed $10 million, against any future corrosion; (14) the Army also subjected one of the 4,955 trucks to a contract-specified corrosion test; (15) it failed with corrosion being detected in 60 areas; (16) following these events, the Army and the contractor agreed on modified production procedures to address the corrosion problem on subsequently produced trucks; (17) however, the Army and the contractor ultimately concluded that galvanized steel cabs may be required to meet the 10-year corrosion prevention requirement and the contract was modified to require galvanized steel cabs; (18) the contract's final 3,751 trucks were produced with galvanized steel cabs; (19) the Army agreed to pay up to $7 million for the galvanized steel cabs and other corrosion improvements; and (20) the Army did not test or require the contractor to provide a corrosion warranty on the 2,491 trucks produced prior to the switch to galvanized steel cabs.