United States General Accounting Office

GAO Report to the Honorable

Tom Harkin, U.S. Senate

January 1999 ARMY MEDIUM

TRUCKS

Information on

Delivery Delays and

Corrosion Problems

GAO/NSIAD-99-26

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-281385 

January 13, 1999

The Honorable Tom Harkin

United States Senate

Dear Senator Harkin:

As you requested, we reviewed the Army’s Family of Medium Tactical

Vehicles (FMTV) program. On November 19, 1998, we reported on the

vehicle’s production problems and recommended safeguards needed to

preclude such problems in future contracts. We also reported on the

Army’s plan to develop a second source producer without conducting a

cost and benefit analysis or examining alternatives. 1

 This report responds

to your request for historical FMTV program information. Specifically, it

addresses (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.

Results in Brief A combination of factors caused lengthy delays in delivering FMTV trucks.

First, the Army did not execute a low-risk acquisition strategy. It selected

an FMTV contractor that was not experienced in producing trucks and was

no longer affiliated with an experienced truck producer. Second, the

contract contained an aggressive schedule for truck production

considering the contractor’s inexperience. The inexperienced contractor

had difficulty in both establishing a production line and producing trucks

that could meet qualification and operational testing requirements. Despite

the difficulties, the Army allowed production to continue and increase

during testing. As a result, many trucks were produced that required

modification or repair.

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. The Army requested only enough funding for fiscal

year 1996 to terminate the program. 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. As a result, the

Army and the contractor agreed to extend the contract and spread the

final year’s quantities over 3 years. The agreement included a repricing of

the trucks. The project office has not determined the exact cost of the

contract extension but has an estimate that it will add $85 million to the

1

Army Medium Trucks: Acquisition Plans Need Safeguards (GAO/NSIAD-99-28, Nov. 19, 1998).

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Army’s contract cost. Also, we estimate that delays in delivering trucks

may cost the Army an additional $22 million to operate and support older

trucks that the FMTV trucks were expected to replace.

The Army determined that the first 4,955 trucks produced did not meet the

FMTV’s corrosion protection requirements. The contract specified that the

trucks were to be designed to prevent corrosion from perforating or

causing other damage requiring repair or replacement of parts during the

initial 10 years of service. Corrosion was found on the cabs of trucks less

than 3 years old that were still awaiting modification at the contractor’s

plant. Rather than making the contractor replace all 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. This dollar limitation, in effect,

relieved the contractor of a potential $21 million liability.

The Army also subjected one of the 4,955 trucks to a contract-specified

corrosion test. It failed with corrosion being detected in 60 areas.

Following these events, the Army and the contractor agreed on modified

production procedures to address the corrosion problem on subsequently

produced trucks. The contractor produced 2,491 trucks under these

procedures. 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. The contract’s final 3,751 trucks were produced with

galvanized steel cabs. The Army agreed to pay up to $7 million for the cabs

and other corrosion improvements. It 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.

Background At a projected cost of $15.7 billion, the FMTV program is one of the Army’s

largest acquisition programs. From fiscal year 1991 through fiscal

year 2022—a 32-year period—the Army plans to purchase 85,488 FMTV

trucks to replace its aging medium truck fleet. Under the program, the

Army will purchase a family of 2.5- and 5-ton trucks based on a common

truck cab and chassis. The 2.5-ton trucks, called light medium tactical

vehicles, consist of cargo and van variants and a 2.5-ton trailer. The 5-ton

trucks, called medium tactical vehicles, consist of seven variants—cargo,

long wheel base cargo, dump, fuel tanker, tractor, van, and wrecker—and

a 5-ton trailer.

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The FMTV acquisition strategy has two phases—prototype and production.

In the prototype phase, three companies were awarded contracts to

develop and produce prototype trucks for evaluation and testing. The

contracts were awarded on October 21, 1988, and the prototypes were

tested from January to December 1990. On October 11, 1991, the Army

awarded the winning contractor—Stewart & Stevenson Services, Inc.,

Houston, Texas—a $1.2 billion, 5-year fixed-price production contract for

the first 10,843 FMTV trucks. The contract contained options for additional

trucks. The fifth year of the contract was subsequently restructured and

the contract was extended 2 years. Stewart & Stevenson completed

production under the contract in November 1998. The initial production

contract does not include the 5-ton fuel tanker, 5-ton van, and both

trailers. These vehicles will be included in future production contracts.

In our November 1998 report, we found that the Army had not

(1) instituted safeguards to ensure that existing production problems did

not occur in follow-on production contracts and (2) performed a cost and

benefit analysis of its plan to develop a second source for the trucks or

compared its plan with other alternatives. We recommended that the Army

include safeguards in follow-on production contracts so that it does not

repeat errors and does perform a cost and benefit analysis of its second

source plans before continuing with them.

Factors Contributing

to FMTV Delivery

Delays

The Army did not execute a low-risk acquisition strategy. To reduce the

time to develop and field FMTV trucks, the Army streamlined its acquisition

strategy. Rather than a lengthy development phase, the Army decided to

conduct a prototype competition and use the results as part of the

evaluation of proposals for a production contract. The Army believed this

strategy would be low-risk partly because the contractors participating in

the prototype competition were experienced in producing military trucks

or affiliated with an experienced truck producer. However, the Army did

not include experience or affiliation with an experienced truck producer

as a requirement in the production contract solicitation and subsequently

awarded the FMTV multiyear production contract to a contractor that was

neither experienced in truck production nor affiliated with an experienced

truck producer. The contractor had been affiliated with an experienced

truck producer during the prototype phase but did not maintain its

affiliation. Further, the contract contained an aggressive production

schedule that did not take into account the contractor’s inexperience. The

inexperienced contractor had problems establishing a production line and

producing trucks that met testing requirements. These problems resulted

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in substantial delays in delivering the trucks. In response to the schedule

delays, the Army and contractor agreed to accelerate truck production

during testing even though the trucks were not meeting test requirements.

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. The reduction in time was to be

achieved by combining the demonstration and validation phase2

 and the

engineering and manufacturing development phase into a single prototype

competition phase and by conducting concurrent tests. The Army believed

its streamlined acquisition strategy was achievable and low risk because

(1) FMTV trucks would be designed using state-of-the-art commercial

components that did not push the manufacturing and production process

beyond the current capability of truck manufacturers, (2) FMTV truck

configurations would be established and subjected to prototype testing

prior to the production contract award, and (3) contractors participating

in the prototype competition either had produced military trucks in the

past or were affiliated with an experienced military truck producer.

The production contract solicitation did not require the contractor to be

experienced in truck production or affiliated with an experienced truck

producer. The Army awarded the production contract to Stewart &

Stevenson, which was not experienced in manufacturing trucks. Stewart &

Stevenson was a distribution and service company for various products

and was experienced in producing gas turbine generators and aircraft

ground support equipment. Nevertheless, the production contract called

for the delivery of the first FMTV trucks for testing within 11 months of

award and the Army planned to have enough trucks to fully equip its first

unit with FMTV trucks by October 1993—about 24 months after contract

award.

During the prototype competition phase of the program, Stewart &

Stevenson was affiliated with an experienced military truck producer

(Steyr-Daimler-Puch, AG. of Austria). Stewart & Stevenson subcontracted

with Steyr to design and develop FMTV prototypes based on the design of a

truck Steyr produced for the Austrian army. Steyr designed and built the

FMTV prototypes in Austria, supported the FMTV prototype testing, and

delivered an FMTV technical data package. According to a Stewart &

Stevenson official, Steyr completed its subcontract work before Stewart &

Stevenson submitted its production proposal and was not included in the

production phase of the program.

2

Now called the program definition and risk reduction phase.

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When the Army issued the solicitation for the production contract, it

established a source selection board, which evaluated the proposals of the

three competing contractors. The Army gave highest consideration to the

technical and cost factors of the proposals. Stewart & Stevenson was

selected because its proposal offered the best value for meeting the

Army’s overall requirements and receives the highest score for the

technical factor and was the lowest cost. The board considered the

government’s previous experience with the prototype contractors as part

of the Army’s overall production readiness evaluation. This evaluation

noted that Stewart & Stevenson (1) had no prior experience in high

volume production of combat or tactical vehicles, (2) needed to convert

European engineering drawings to U.S. specifications and standards, and

(3) had unsatisfactory delivery performance on past low dollar purchase

orders.

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. To acquire FMTV truck production

capability, Stewart & Stevenson purchased a plant from an oil-drilling

equipment manufacturer, configured the plant for truck production, and

established a tactical truck division. According to Defense officials,

Stewart & Stevenson immediately experienced problems in producing

trucks that were capable of meeting FMTV requirements. For example, the

FMTV data package provided by Steyr was in German and used metric

measurements. Stewart & Stevenson did not accurately translate the

instructions or convert the measurements. Production disruptions

occurred when instructions did not work as intended and when

subcontractor parts, produced using drawings furnished by the contractor,

did not fit. As a result, the contractor was late in delivering trucks for

testing.

The contract required the contractor to deliver a minimum of 85 trucks by

October 1992 for production qualification testing, initial operational

testing, and technical manual verification. The contractor delivered its first

truck in March 1993 and did not deliver 85 trucks until March 1994. As a

result, the start of the production qualification and operational testing was

delayed.

Delays in Passing Tests The contractor took much longer than expected to deliver trucks capable

of passing production qualification and operational tests. Production

qualification testing was originally scheduled to be completed in

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August 1993; the test was not completed until December 1994. The test

was designed to determine whether the FMTV truck variants fulfilled the

Army’s technical performance and reliability, availability, and

maintainability requirements. The trucks failed the test because they did

not meet reliability and some performance requirements. The Army

identified over 90 problems that the contractor was required to correct.

Initial operational testing was originally scheduled to be completed in

June 1993. However, because of production problems, the Army did not

begin operational testing until October 1993. The test was designed to

determine whether and to what degree the FMTV truck variants could

accomplish missions when operated and maintained by soldiers in the

expected operational environment. The test was suspended in December

1993 because the trucks did not meet operational reliability, availability,

and maintainability requirements. In August 1994, the Army started a

second operational test, but in September 1994, the test was suspended

because test personnel were deployed on a peacekeeping mission in Haiti.

However, according to Army test assessment officials, the test was about

to be suspended because the trucks were not meeting reliability

requirements.

In February 1995, the Army started a second production qualification test

of newly produced trucks that incorporated changes to address problems

identified during earlier testing. Operational testing of the new trucks

began in April 1995. The Army completed both tests in June 1995. The

trucks were assessed as having met the FMTV requirements in both tests.

However, because of difficulties in producing trucks that passed the tests,

the contractor did not receive approval to begin full-rate production until

August 1995, 23 months later than planned, and the first unit was not

equipped with FMTV trucks until January 1996, 2 years and 3 months later

than planned.

Continued Production

Increased Trucks Needing

Repair

According to a project official, the Army believed that increasing monthly

delivery quantities during testing would allow the contractor to catch up

on its scheduled deliveries. The production contract allowed the

contractor to deliver up to 150 trucks a month until the testing phase was

completed. The Army modified the contract to increase the monthly

delivery limit to 200 trucks. Because the higher monthly delivery limit

exceeded the contractor’s production capability, the contractor was able

to produce as many trucks as it could.

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The trucks that were produced could not meet FMTV technical and

operational requirements. By the time the production qualification and

operational tests were successfully completed in June 1995, the contractor

had produced about 3,000 trucks, all needing varying levels of work to

conform to the specifications of those that had passed testing. About 1,474

trucks had to be disassembled to their frames and remanufactured. This

additional work delayed the production of new trucks during 9 months

while the contractor modified the 3,000 trucks. The contractor had to stop

new production for 5 months and produced only 175 new trucks during

the other 4 months. The contract required the contractor to pay for the

modifications needed to make the trucks meet FMTV requirements.

Extension of the

Production Contract

In 1994, the Army, in response to FMTV production problems and other

competing funding priorities, decided to terminate the final year of the

FMTV production contract. 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. As part of

the termination plans, the Army planned to recompete a new multiyear

FMTV production contract in fiscal year 1998.

The Congress, in reviewing the Army’s fiscal year 1996 budget request, did

not support the termination. The Congress, citing truck modernization as

vital to the Army and the need to avoid a production break, added

$110 million to the Army’s request for a total appropriation of

$149.7 million for the program. 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

agreement increased the price of the FMTV trucks. The Army requested

additional funding for the remaining 2 years in its fiscal years 1997 and

1998 budget requests. The project office has not determined the exact cost

of the contract extension but has an estimate that it will add $85 million to

the Army’s contract cost.

Cost of the Delivery Delay The Army postponed the delivery dates five times during the contract to

account for the delays. These delays in delivering and fielding the trucks

caused the Army to incur additional costs to operate and support its

current fleet of older, less reliable trucks. We estimate that as of

December 31, 1997, the Army may have incurred an additional $22 million

to operate the older trucks that the FMTV trucks were to replace. We

estimated this potential cost by subtracting the projected annual cost to

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operate the new 2.5- and 5-ton FMTV trucks from the annual cost of

operating the 2.5- and 5-ton trucks the Army plans to replace. The scope

and methodology section of this report contains a more detailed

discussion of this calculation.

Corrosion Problems

With FMTV Trucks

The first 4,955 trucks produced did not meet the FMTV corrosion protection

requirements. The FMTV production contract specifies that FMTV trucks be

designed so that corrosion will not perforate or cause other damage

requiring repair or replacement of parts during the initial 10 years of their

service lives. The contract also specifies the procedures to be used to test

the 10-year corrosion protection.

The FMTV project office first became aware that FMTV trucks had corrosion

problems in late 1995, when a truck was found corroded through the sheet

metal of its cab. The truck was less than 3 years old and was among those

stored at the plant awaiting modification. The contractor and the Army

surveyed all of the trucks in storage and discovered corrosion on other

truck cabs. They determined that the main causes of the corrosion were

inadequate cleaning and painting procedures by the cab subcontractor,

McLaughlin Body Company. McLaughlin subsequently improved its

procedures at no cost to the Army. These improvements would be

reflected in trucks produced after February 28, 1997.

On January 19, 1996, the Army agreed to accept trucks with cabs produced

before McLaughlin improved its procedures if Stewart & Stevenson

(1) repaired or replaced cabs that showed corrosion, (2) agreed to a

corrosion test of two repaired cabs to verify the repairs, and (3) agreed to

repair or replace the older cabs if corrosion appeared on them within 

5 years. Pending its approval of the contractor’s corrective action plan, the

Army withheld $1,000 or $2,000 per truck, depending on type. Both

contractor and Army project officials said that the Army had not accepted

these trucks and therefore could have required the contractor to replace

all the cabs on all the trucks already produced or in various stages of

production before McLaughlin improved its processes—a total of 4,955

trucks. We estimated that this could have cost the contractor $31 million.

In addition, the Army and the contractor subsequently discovered that

corrosion had also penetrated the beds of FMTV cargo trucks stored at the

plant. Under terms similar to the cab agreement, the Army agreed to

accept trucks with corrosion repairs of their cargo beds.

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The Army later tested the corrosion repairs made on two cabs and found

the repairs unacceptable. On September 25, 1996, the Army informed the

contractor that it would no longer accept trucks with repaired cabs. The

contractor offered to provide a 10-year corrosion protection warranty on

the cabs, cargo beds, frame rails, and crossmembers on all trucks

produced through February 28, 1997, if the Army would continue

accepting trucks with corrosion repairs. Trucks produced after

February 28, 1997, would be produced with cabs assembled by McLaughlin

after it improved its procedures and would not be covered by the

corrosion warranty. Under the warranty, the contractor agreed to pay for

any repair caused by corrosion perforation or corrosion damage that

requires repair or replacement of parts. The warranty limited the

contractor’s liability for these repairs to $10 million—$21 million less than

the contractor’s estimated $31 million liability for cab replacement.

On November 13, 1996, the Army agreed to the warranty and again began

accepting trucks with corrosion repairs. At the same time, the Army

agreed to release to the contractor all funding previously withheld because

of corrosion problems. The corrosion warranty was in addition to the

contract’s warranty provision that covers defects in materials and

workmanship for 18 months or 12,000 miles.

The Army also ran a contract-specified corrosion test on an FMTV cargo

truck with a cab produced before McLaughlin improved its

procedures—one of the first 4,955 trucks produced under the contract.

The truck failed the test. By the end of the test, the truck was corroded in

60 areas. Army officials said that since the Army had specified the material

to be used in 20 of the areas, it agreed to pay for necessary changes in

these areas to improve the FMTV trucks’ corrosion protection. 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 Army was unable to disprove the contractor’s

claim.

The Army and the contractor concluded that using galvanized (zinc

coated) steel to produce the cabs may be the only way to meet the 10-year

corrosion protection requirement. They also believed that galvanization

would likely provide more than 10 years of corrosion protection. Because

the galvanized cab has the potential to protect against corrosion beyond

the contract requirement, the Army agreed to share the cost of the cabs.

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The Army and the contractor modified the FMTV contract to specify the use

of galvanized steel for FMTV cabs and of other materials to correct the

corrosion problems discovered in the contract-specified corrosion test.

The modifications set a ceiling of $7 million on the Army’s share of costs.

The contractor produced 3,751 trucks with galvanized cabs under the first

production contract. Army project officials said that the Army is designing

a new corrosion test to determine the number of years of protection the

new design will provide. They also said that the corrosion protection

enhancements and the corrosion test of these enhancements will be

included as requirements in future FMTV truck production contracts.

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. These 2,491

trucks have not been tested for corrosion and are not covered under the

agreed upon corrosion warranty covering the first 4,955 trucks produced.

Conclusions The Army’s decision to award a $1.2-billion FMTV contract to a company

that was not experienced in truck production, did not have truck

production facilities, and was not affiliated with an experienced producer,

was not consistent with its plans for a low-risk acquisition strategy.

Further, the Army contract contained an aggressive production schedule,

considering an inexperienced contractor, that further added to the risks.

The combination of inexperience and an aggressive production schedule

were major contributors to the contractor’s production problems and

schedule delays. 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. Instead of terminating the

final year, the contract was extended 2 additional years with the original

final year’s production quantities spread over the 3-year period. The

contract extension added an estimated $85 million to the original contract

price.

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. The contractor produced 2,491 trucks under these new

procedures. 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

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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.

Agency Comments

and Our Evaluation

In commenting on a draft of this report, DOD generally agreed that it

identified lessons learned from a historical perspective. DOD included with

its written comments an enclosure providing additional contextual

information for some of the issues in the report. In the enclosure, DOD

stated that it believed the acquisition strategy for the FMTV program has

been appropriate. According to DOD, the competitive source selection took

into account a balance of factors, including the contractor’s assessed

production capabilities. As noted in the report, we did not find the

combination of awarding a contract with an aggressive production

schedule to an inexperienced truck producer, who had no affiliation with

an experienced truck producer, consistent with a low-risk acquisition

strategy.

In response to the report’s statement that production problems and higher

funding priorities contributed to the decision to terminate the final year of

the FMTV contract, DOD noted that the decision was based on funding

demands from higher priority programs. We agree that the decision was

based on funding priorities; however, as a DOD official familiar with the

decision stated, the FMTV program’s schedule and production problems

weakened its ability to compete with other programs for funds.

DOD also states that improving corrosion protection on tactical vehicles is

an ongoing, high priority, effort and the contractor continues to be

required to meet corrosion protection requirements. Based on the FMTV

corrosion problems cited in this report, we agree that improving corrosion

protection should be an ongoing high priority effort and the contractor

should be required to meet the corrosion protection requirements. DOD’s

comments are reprinted in appendix I.

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. For early historical data, we

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had to rely mainly on oral testimony because many documents dealing

with the early program were unavailable. We were able to obtain some of

the earlier documents, mostly those dealing with FMTV truck testing, by

reviewing our workpapers from previous reviews of the program.

To determine the impact of delays in delivering FMTV trucks, we calculated

additional operating and support costs the Army might have incurred as of

December 31, 1997. To accomplish this, we first determined operating

tempo for the older M35 2.5-ton and M809 5-ton trucks. We selected the

M35 and M809 trucks because, according to project office officials, they

were the trucks the FMTV trucks would be replacing and the trucks the

project office used in its update of the FMTV program baseline cost

estimate. The FMTV project office provided a 3-year average operating and

support cost per mile for the older trucks and an estimated operating and

support costs per mile for FMTV trucks. A project office official said that

the older truck average was based on the trucks used in three Army major

commands. We determined an average operating tempo for each truck

using the operating tempo reported by the same three Army major

commands. This information was reported by the U.S. Cost and Economic

Analysis Center in its fiscal year 1996 tactical systems cost report, which

was updated as of October 27, 1997. We computed monthly operating and

support costs for the older trucks and FMTV trucks using the operating

tempo for the older trucks. We then computed the difference between the

cost for the older and the FMTV trucks. This provided the monthly

additional operating and support costs to operate the older 2.5- and 5-ton

trucks.

To determine the delay in delivering FMTV trucks to the government and

the number of vehicles involved, we first identified the number of 2.5- and

5-ton FMTV trucks accepted by the government on a monthly basis from

material receiving and shipping report data provided by the Defense

Finance and Accounting Service. We compared the original FMTV delivery

schedules to actual delivery dates to compute the number of each type of

truck that was delayed and the duration of the delay.

To compute the total additional operating and support costs that may have

been incurred by the Army, we multiplied the delay in months by the

number of FMTV trucks delivered late. We then multiplied that product by

the monthly additional operating and support costs for the older trucks.

This gave us an estimate of the additional costs that the Army might have

incurred as of December 31, 1997, because of delayed FMTV truck

deliveries.

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We did not independently verify the accuracy of material receiving and

shipping report data obtained from the Defense Finance and Accounting

Service; however, we corroborated its accuracy with another database

that used the same original source documentation. The Defense Finance

and Accounting Service also relies on its database to make payments to

the contractor for delivered vehicles. We also did not verify the accuracy

of operating and support cost factors and operating tempo for the older

2.5- and 5-ton trucks and FMTV trucks provided by the U.S. Army Cost and

Economic Analysis Center. This data is part of the operating and support

management information system managed by the U.S. Army Cost and

Economic Analysis Center and is the Army’s source of historical operating

and support cost information for more than 400 systems deployed in

tactical units.

We based our estimate of the potential cost of replacing all of the cabs on

trucks covered by the corrosion warranty on an Army estimate. The Army

estimated that it would cost $18.5 million to replace all of the cabs on

trucks covered by the warranty. However, it bases its estimate on 2,864

trucks that it thought would be covered, not 4,955 trucks that actually are

covered by the warranty. The Army used a replacement cost of $8,000 per

air drop cab and $6,000 per standard cab to develop its estimate. We were

not able to determine the number of air drop and standard trucks in the

2,091 trucks not included in the Army’s estimate. To produce a

conservative estimate of the potential total cost to replace all the cabs, we

multiplied the standard cab cost of $6,000 per truck by 2,091 trucks to

increase the Army’s estimate by $12.5 million to $31 million.

We performed our work at Defense and Army Headquarters, Washington,

D.C.; Defense Contract Management Command Headquarters, Fort

Belvoir, Virginia; Medium Tactical Vehicle Project Office, U.S. Army

Tank-automotive and Armaments Command, Warren, Michigan; U.S. Army

Cost and Economic Analysis Center, Arlington, Virginia; Defense Contract

Management Command—Stewart & Stevenson Office, Sealy, Texas;

Tactical Vehicle Systems, Stewart & Stevenson Services, Inc., Sealy, Texas;

and Defense Finance and Accounting Service, Columbus, Ohio.

We conducted our review between July 1997 and November 1998 in

accordance with generally accepted government auditing standards.

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We plan no further distribution of this report until 30 days from its issue

date, unless you publicly announce its contents earlier. At that time, we

will send copies of the report to the Chairmen and Ranking Minority

Members of the Senate Committees on Governmental Affairs, Armed

Services, and Appropriations and of the House Committees on

Government Reform, Armed Services, and Appropriations; the Secretaries

of Defense and the Army; and the Director of the Office of Management

and Budget. We will also make copies available to others on request.

Please contact me on (202) 512-4841 if you or your staff have any

questions concerning this report. Major contributors to this report are

listed in appendix II.

Sincerely yours,

Louis J. Rodrigues

Director, Defense Acquisitions Issues

Page 14 GAO/NSIAD-99-26 Army Medium Trucks
Page 15 GAO/NSIAD-99-26 Army Medium Trucks
Appendix I 

Comments From the Department of Defense

Page 16 GAO/NSIAD-99-26 Army Medium Trucks
Appendix I 

Comments From the Department of Defense

See p. 10.

See pp. 10-11.

See p. 11.

Page 17 GAO/NSIAD-99-26 Army Medium Trucks
Appendix II 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Robert J. Stolba

Lawrence D. Gaston, Jr.

Kansas City Field

Office

Robert D. Spence

Office of the General

Counsel, Washington,

D.C.

William T. Woods

Stephanie J. May

(707380) Page 18 GAO/NSIAD-99-26 Army Medium Trucks
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